WEEK 5 Group Case

BUOL 533 – Marketing Management.

1) Is the soft drink market competitive?

Coca-Cola and PepsiCo, Inc. have dominated the non-alcoholic beverage industry
for ages. Carbonated soft drinks dominated the market with a share of 40% during 2014. During
April 2015, PepsiCo entered a marketing partnership with NBA, making it the official partner of
the NBA, Women’s National Basketball Association, NBA Development League, and USA
Basketball. The Coca-Cola and PepsiCo have been around from a very long time and we can
confidently say that they are the pioneers in the soft drink industry with an aggregate market
share of 70%.
As we apply the Porters five forces on the soft drink industry has very low threat from the new
entrants since these two tyrants have already occupied a humongous market share and it’s hard
for new emerging companies to make any significant effect in the market. The threat from the
substitutes is moderate to high since the cost of switching from a consumer point is very low and
there are many caffeine or other carbonated alternatives which can be easily substituted in place
of the Pepsi or Coca-Cola products. Threat from the suppliers is very low since there are many
companies who are willing to supply the raw material where the cost of switching between the
suppliers is almost nothing. Customers are highly sensitive to the price of soft drinks and are
willing to change brands if one becomes much more expensive than the other. Soft drinks are
not a need and people won’t pay any price for it. When it comes to rivalry among existing players
there is a huge competition between Coca-Cola and PepsiCo. The Coca-Cola has 41% and PepsiCo
has 31% of market share which makes them the biggest rivalries of all time.

2) Should PepsiCo launch organic Gatorade? What is the first-mover advantage?

Rising health awareness among consumers across the globe is moving them toward better
options including ready-to-drink tea, bottled water, and low-calorie products this lead to the
advent of zero calorie soft drinks. Gatorade which is an official sport drink and on its 50 years of
celebrations PepsiCo has come up with the news that the Gatorade is going to be offered Organic.
PepsiCo is trying to tap into the healthy drinks trend, which is grabbing big sales and will continue
to do so, as consumers in developed economies also choose healthy beverages. As first mover,
the launch of organic Gatorade this year can lead to increased customer interest as an increasing
number of consumers prefer more natural foods. Availability of this beverage in the Hello
Goodness vending machines can also lure more consumers, leading to a higher market share
since the healthy foods is a niche market. The product could also prove incremental for the sports
drinks category, bringing in customers new to the segment. Despite the first mover advantages,
competitors like PowerAde, Lucozade etc. would soon adopt the same methodology which would
eventually make that healthy food market most competitive. So, despite the first mover
advantage it must constantly innovate and come up with various consumer centric programs to
excel the market and retain customer base.
3. Why do consumers buy Gatorade and sports drinks? What are the emerging trends in the
market? What is a functional drink?
Answer: Per the study that was made in 2016, people drink sports drinks a lot that includes
Gatorade and other brand products. The main pull of beverage industry is because people getting
health and fitness conscious. Gatorade was rated as one of the top 10 beverage brand in the
United States. Many people love to drink Gatorade is because it contains enough amount of
carbohydrates and energy that boosts the metabolism which contains several different flavors.
(Beer, J. 2016) Also people consume this most because they work out every day and need
something that kick their body with energy and sports drinks are the best options.

Some consumers have energy drinks in the evening replacing any coffee or tea that contains huge
amount of sugar. Also, lot of energy drinks contain protein that is highly required for anyone after
their workout. Also, Gatorade and other energy drinks those were in the market currently are
non-carbonated which means it does not or contains very minimal amount of fat and finally
considering the price, these are very affordable compared to having a bagel or anything else in
the morning.

Emerging trends in the market: The growth of low calorie drinks have dramatically increased
over a period since 2015 and records show that many consumers like to check the ingredients
within the beverage to make sure that does not contain any carbonated chemicals. (Beer, J. 2016)
By assuming this, we can say that beverage industry is going to emerge in the future drastically
and there are new brands in the market those were coming up with different energy drinks which
contains different flavors. All the firms were trying to launch beverages that is high in protein and
most companies are allowing consumers to vote for their own flavor which hints the companies
to prepare products accordingly.

Functional Drink: A functional drink or a beverage can be defined as a drink that contains
necessary vitamins, proteins, minerals those were good for your body. It can also contain natural
flavors of fruits and vegetables and enhanced water. (Roberts, D. 2015) These functional
beverages are very popular in the United States and Canada where people use these as drinks to
enhance their metabolism and can replace a meal in their day. Also, consumers use functional
drinks as one of their elements during their pre-and post workouts. Beverage Company like
Gatorade produces these drinks which are high in vitamin B3, B5, E and C.
4. is organic food healthier? Why does this matter?

Answer: Yes, organic food is healthier in terms of calories, fat and carbohydrates intake into the
body. Many consumers prefer organic food over artificial food is because of the health concern
with artificial food or flavored food. This industry is growing heights by achieving turnover of
close to $40 billion within United States which is almost equal with Canada. (Beer, J. 2016)
Research suggests that close to 58% of people within United States and Canada bought organic
food every week as they believe that the United States and Canadian food market will grow
further in 2018.

The reason behind this is because most consumers making healthier choices like staying fit, losing
weight and to achieve that, organic food is only the way. Most people still don’t know the
meaning of organic, per American health association, organic food can be defined as beverage or
food that does not contain any pesticides or anti-biotics & artificial sweeteners within them. That
is the reason we see “Organic food available” or “Every product is organic” within the restaurants
or grocery stores.

Impact: By consuming organic products, some of the advantages are:

 Reduces Fat intake: Organic products are completely natural made and does not contain
any artificial chemicals or sweeteners within them which eventually reduces the amount
of fat that is going into the body. (Roberts, D. 2015)

 Decreases risk of Cancer: By consuming organic food, one can reduce the risk of having
cancer as artificial food directly effects the cells in the human body.

 Boosts the Metabolism: Organic food always helps the body to grow in the normal way
it should grow and boosts the human body metabolism and takes care of nervous system.

 Organic Products are without GMO: Genetically Modified Organisms (GMOs) or

hereditarily built (GE) nourishments are plants whose DNA has been adjusted in ways that
can't happen in nature or in conventional crossbreeding, most generally keeping in mind
the end goal to be impervious to pesticides or deliver a bug spray.
 Organic meat and drain are wealthier in specific supplements: Consequences of a 2016
European review demonstrate that levels of specific supplements, including omega-3
unsaturated fats, were up to 50 percent higher in natural meat and drain than in ordinarily
raised variants

5) Why do many consumers fail to follow through on their good intentions with respect to
diets and money?
Monitoring and maintaining eating and spending habits is typically a very difficult thing to do
despite having good intentions, as these tend to be personal addictions. And to understand
why consumers primarily fail to follow through on their good intentions with respect to diet
and money, it is important to understand the concept of Hyperbolic Discounting. In simple
terms, Hyperbolic Discounting is an individual’s preference towards a reward that occurs
sooner versus one that occurs later despite the sooner award being smaller. In simple terms,
if a person would rather receive $50 today rather than $100 in a year, the phenomenon is
referred to hyperbolic discounting. Hyperbolic discounting varies depending on the time
between the rewards. If the time gap is shorter, hyperbolic discounting is less likely to occur.
Further, people are more likely to engage in hyperbolic discounting if they are physically close
to the reward. Human beings are naturally inclined to hyperbolic discounting as “the true
objective of the human brain is to maximize the rate of reward” (Smith, 2015). This exactly
why it is hard for people to deny themselves a reward now to enjoy a reward later. We are
simply not built that way. Hyperbolic Discounting is also why consumers fail to follow through
on their good intentions with respect to diet and money as they would rather receive instant
gratification from eating a piece of cake or spending on something trivial now versus gaining
health and savings in the long term.

6) Is it moral for marketers to nudge consumers? If it is not moral, what is the preferable
alternative?
We think it is important for marketers to work on developing products which are appealing
to the long-term goals of consumers like health, financial savings etc. But it is also important
to remember that human beings are wired for instant gratification therefore the product
must also be a source of short-term gratification. For example, snacks that are healthy as well
as tasty etc. We do not believe that it is immoral for marketers to nudge customers are the
“nudging” we’re talking about here is very subtle. If nudging were considered immoral, that
would make most aspects of everyday marketing and advertising immoral as well. As far as
Pepsi is concerned, we believe that they should launch the organic Gatorade as the world has
been significantly shifting towards healthier lifestyles for a while now. It’s only natural for
Pepsi to adapt to this change as well. As despite wanting to be healthy, since consumers find
 to difficult to stick to healthy lifestyles due to hyperbolic discounting, it’s fair for Pepsi to
nudge customers to make healthier choices.

References:
1. PepsiCo Launching Organic Gatorade Lauren R. Hartman, Product Development Editor -
http://www.foodprocessing.com/industrynews/2016/pepsico-launching-organic-
gatorade/
2. Global Soft Drinks Market 2015-2019 - Leading Vendors are Coca-Cola, PepsiCo, Red Bull,
Nestle Waters, Dr Pepper Snapple, Danone & Tingyi - Research and Markets
3. Smith, J. (2015, February 25). Six Advantages of Hyperbolic Discounting…And What The
Heck Is It Anyway? [Web log post]. Retrieved April 06, 2017, from
https://blog.kissmetrics.com/hyperbolic-discounting/
4. George, R. (2016). Pepsico: The Launch of Organic Gatorade. Ontario, Canada:
Harvard Business School Publishing.
5. Roberts, D. (2015). The history of an iconic sports beverage: Gatorade turns 50.
Fortune.Com, N.PAG.
6. Beer, J. (2016). Gatorade gets in the game. Fast Company, (202), 48-50.
7. Should Soda Have a Warning Label? (2017). Scholastic Choices, 32(7), 2.
8. Özen, A. E., Bibiloni, M. M., Pons, A., & Tur, J. A. (2015). Fluid intake from beverages across
age groups: a systematic review. Journal of Human Nutrition and Dietetics: The Official
Journal of the British Dietetic Association, 28(5), 417-442. doi:10.1111/jhn.12250
9. Christopher Weber, “Coke Vs Pepsi – A Duel between Giants”, Accessed April 6th, 2017.