Soda Stream Case Study
Number of words: 1127
This case study review analyses the carbonated soft drink (CSD) industry based on its attractiveness, various key industry forces, and its life cycle. The report also discusses the role of SodaStream corporation in the CSD industry and its reactiveness towards the external environment.
The CSD is made up of Carbonated water, corn syrup (sweetener), chemicals, and other flavoring ingredients mixed according to the recipe. The recipe for each CSD is different from each other; giant players in this field, such as Coca Cola and Pepsi, keep their recipe in secured volt, making the industry even more attractive to the consumer and new entrants in the business. From a business perspective, the CSD generates approximately 45% of the soft drink industry revenue, which is enormous. This industry includes huge names Coca-Cola, Pepsi, and Dr. Pepper, along with privately labelled CSD players. The competition in the soft drink industry, especially the CSD industry, is fierce. Different factors drive the CSD industry, such as dominant economic factors, trends in the industry, and critical factors in the industry. The first industry factor in the CSD is the microenvironment trends.
Mostly, continuous product innovation is significant; in addition, the company must understand consumer needs. The company must adapt to the continuously changing market as well as the trends. Another critical factor is marketing and distribution; the company must recognize its size and enhance the distribution channels accordingly to gain a competitive position. For example, selecting and developing the distributor can negotiate with organizations, universities, and stadiums to win them as an exclusive supplier. These institutions have the capital as well as the ability to purchase in mass quantity. A continuous advertising campaign and regular event sponsorships are also necessary to enhance the market share. The price is also a driving key factor to be successful in the CSD business. A consumer is always looking for a good product at a competitive price. Therefore, selecting a competitive price by analyzing the competition and market trends is also required. Finally, the taste of the CSD product, if all the above conditions are fulfilled, but the taste is not as per the consumer’s expectation, the whole idea of CSD business would be unsuccessful. Therefore, to enhance the market share, the product’s taste should be specific to the consumer needs as consumers stick to the specific product due to its taste (Barney & Hesterly) (Williams, and Goldsworthy).
The case study presented by Barney & Hesterly shows the data for the top three CSD corporations and the SodaStream. The financial statement is highly competitive and depicts minute growth. The net profit margin as compared to the previous year increased by a low rate. The current and quick ratios are not enough for these corporations; however, they are within an acceptable industry average range. After analyzing the case facts shown in the financial statement and the data presented CSD industry is in the mature stage of its life cycle. The growth in the CSD industry seems to be stagnant, and the sales and the income of these giant corporations are following the market trend. The financial statement shows that these corporations are in good financial conditions, let it be small, but gross and net profit margins are increasing every year. However, these corporations need to enhance their liquid ratios. The current statement shows weak current and quick ratios; it needed improvement to address short-term requirements (Barney & Hesterly). The market saturation in the CSD industry forced few analysts to forecast low growth in the sector, especially in the USA, even though the profitability in the CSD sector is still undamaged. Although these companies are establishing the business in other sectors, and recent example is PepsiCo, under the leadership of Indra Nooyi, diversifying their product range in snacks, confectionaries, and bottled water. However, to improve the profitability and capture more market share, CSD has to come in diverse flavors other than cola, orange, and pepper; only then the CSD market might observe movement from the stagnant situation.
The SodaStream business model reveals that the corporation’s management was proactive in understanding the product’s latest trends and consumer expectations. SodaStream, therefore, employed three drivers to take advantage of the significant market trend. First, increasing awareness of the environmental impacts of cans and plastic bottles. Second, increasing health consciousness, specifically from obesity, and the third, the inclination of people towards frugality. Finally, the SodaStream management created the company’s reputation as an environmentally friendly and healthy product that can be a good alternative from existing prepared CSD products (Barney & Hesterly).
Technological change is one of the most dynamic elements for the CSD industry. The communities are being formed on social networking sites such as Facebook and Twitter. This strengthens brand loyalty and provides opportunities for the CSD manufacturer to reach its customer directly, especially for marketing purposes. Social networking has also reduced the cost of marketing compared to traditional advertising methods such as billboards, radio, and TV. Data mining is straightforward due to higher computational powers and the latest database technology. They are getting accurate data to help the companies analyze the situation in the market and forecast the market situation. This eventually helps to create a targeted marketing strategy to improve market share domestically as well as internationally.
Furthermore, the CSD industry is getting environmentally friendly as the recycling technology has been improved tremendously. The recycling industry offers raw materials for cans and bottles at very cheap rates; in addition, the associated environmental impacts due to these wastes have been reduced. The environmentally friendly marketing strategy has also helped many companies to attract customers. Overall, technology change in recent years has played an essential role in the CSD industry and provided many opportunities to reduce costs through efficient marketing and recycling (Williams and Goldsworthy).
Specifically, for the SodaStream industry, cultural trends seem to be most dynamic and essential. Therefore, the company adopted the strategy to address three societal changes to improve the sale of a product. First, the company marketed SodaStream as an environmentally friendly product that does not use cans and bottles to satisfy ‘Green’ expectations of customers. In addition, the company proclaimed that the SodaStream is healthy compared to prepared carbonated drink as it only contains tap water and flavor as opposed to chemicals in the CSD. The change in strategy by SodaStream has helped them to capture more market share. However, they were unable to compete with giant players like Coca-Cola, Pepsi, and Dr. Pepper.
Barney, Jay B, and William S Hesterly. Strategic Management and Competitive Advantage. Pearson, 2019.
Williams, Jerome, and Paul Goldsworthy. Breaking Down the Chain A Guide to The Soft Drink Industry. Public Health Law & Policy, 2012.