Barriers to Entry in the Soft Drink Industry?
Posted by Jerri Hart on July 16, 2008
China Market
I recently traveled to asia and found that they have hundreds of products that we don’t have here in the US. The thing that I found the most interesting was the number of soft drink choices available. I was amazed that you could get so many types of juices, teas, and sodas and the avaiability of them through vending machines found everywhere was awesome.
Is this industry difficult to get into here in the states? Does anyone have any knowledge about the barriers to entry?
toranosuke said
I wonder the same thing every time I go to Japan and am exposed anew to the wide variety of choices – many of them being produced and sold by the very same companies (e.g. Coca-Cola) that we have back here in the US.
I don’t have any serious informed economics/business answer for you, but I think that one of the key barriers to our getting cool Asian soft drinks, just as is the case with so many other products, is the assumption on the part of the megacorporations that X won’t sell in the US; to put it another way, that Americans wouldn’t like it, wouldn’t want to buy it, couldn’t be persuaded to buy it.
Of course, with the recent anime boom, and the gradual growth & mainstreaming of Asian (primarily Japanese) pop culture -related shops and goods in the big cities, who knows? Maybe someday soon we will be able to get Calpis at the local supermarket, stocked right next to the Coke, Pepsi, Mott’s Apple Juice, Gogo no Koucha Milk Tea, and Qoo.
jhart77 said
So true. Japan has so many wonderful drink choices and distribution methods.
It would be interesting to find out how many bottlers that they have…
Yvette De said
Never been to Asia, but look forward to teh opportunity one day in order to experience the rich culture. However, while doing my MAOM, we researched this topic. The main reason we came up with was the extreme moratoriums placed on bringing products into the US. Although marketability was a factor it was not the primary factor.
One of the companies specifically looked at was Nestle (huge distributor of drinks and candy). The difficulty was getting the US food Agencies to approve some of the foreign products because of “red tape” as it relates essentially to 1. Approved ingredients, 2. Proper labeling.
So although there has been an increase of the meshing of culturally influenced foods with recent years in the US, we are behind/slow when it comes to shelving a lot of these products we see in the marketplaces around the world. Many of these very effective and marketable products have been sold for years in Japan, Europe etc., before it can break into the US market.
jRenee said
Additional comments from Linkedin:
http://www.linkedin.com/answers/startups-small-businesses/starting-up/STR_STP/275221-10625208
Jerri Hart said
Linkedin Comments – I moved the comments as everyone may not be able to access them from the link above.
Crystal Williams
Owner/Founder at BambuSky
Hi Jerri!
I have written several business plans for beverage-related start-ups (energy drink and home brewed beer). First it’s important to mention that barriers to entry largely depend of the market you are seeking to enter (i.e. North America, Asia, London, Maine and so on). However, here are some of the barriers you will find when it comes to the soft drink industry:
1) Existing players, particularly those with well-established distribution channels and brand awareness (Pepsico, Coca-Cola, etc).
2) Production costs which are substantial.
3) Access to distribution channels.
4) Creating brand awareness and achieving market acceptance (local tastes and preferences).
5) Government regulations and licensing (if required).
Hope this helps!
Hamlet Azarian
Senior Buyer
Hamlet Azarian suggests this expert on this topic:
Stephanie Holland
I would contact Steph, she might be able to help you out.
Todd Comins
Founder and CTO, FluidVoice Inc.
You might find the Venture Voice podcast with Sharelle Klaus of Dry Soda interesting.
Links:
http://www.venturevoice.com/2006/06/vv_show_35_sharelle_klaus_of_d.html
http://www.venturevoice.com/2006/04/steve_hindy-brooklyn_brewery.html
Clarification added 25 days ago:
While not a soda, this was an interesting podcast with Steve Hindy of the Brooklyn Brewery. He goes into interesting detail about how what it took to get into distribution. Parallel industry experience might apply…
See the new link I added…
Can you tell I am a fan of Venture Voice?
Good luck!
Lalit Saraswat – lalit@sancoale.net
Management Consulting, Design, Marketing, Real Estate
from a newcomers perspective:
the strength of the distribution channel of the giants will easily be your single biggest barrier. the next big barriers are marketing budgets and investments in production facilities. the large retailers have significant leverage.
if you are an existing player, and want to expand your product line, then there will be different challenges. say from soft drinks to health drinks. then the key challenge will be in communicating the shift to your consumers, and realigning your distribution to focus.
if you are a new entrant, you may as well want to study the recent trends in soft drink consumption and its contribution to profitability for the market where you plan to enter, before deciding whether its worth entering that market. this data is publicly available in different forms, including annual reports of the giants like pepsi, coca cola, etc.
spot the niche. the opportunity that a product designed for a niche market, say a particular age group, or cultural type, or specific location may be tremendous, and tougher for a giant to spot.
shireen said
i am looking to launch a new range of soft drinks into the USA market however i need a distributor to handle the logistics anyone know of any good large ones.
thanks
ps you might want to take a look for when it hits the street http://www.X35energy.com