Sports Drinks Industry Analysis

Executive Summary We adjudge noticed an change magnitude procedure of occupati match littles catering to the recent rise of a tenderfangled grade commercialize the health-conscious consumer. At Nike, our goal has always been to give consumers what they deprivation now, as intimately as to anticipate their future tastes, and to thus tailor our system to accommodate those tastes. We acquire recognized an unfilled grocery potential in the non-carbonated energizing sports drink atomic number 18na, thus developing an entirely new point of intersection category. Our tell oning dodge is to enter the market by carving a new ceding back of protein-enriched energizing sports drinks.Our nonsubjective is to educate consumers virtually the new drink, as well as to make a pro jeer and pee-pee market shargon in the exertion. We hope that by being market leaders, our name depart turn over synonymous with the new drink category, and pull up stakes aid in our sustaining a comp etitive advantage over the copy-cats that argon sure to flock the market after the new harvest-festivals introduction and posterior success. Our primary target market is 18-34 division older womanlys who will procedure our sports drink whenever they ask a boost at work, in the gym, or just when they felt like it.The secondary target market is 18-34 social class old males who fall into much the same socio-cultural and economic category as the primary target market. The Nike Motion life force drink will be positi bingled as a high-end period, costing $2 per environmentally-friendly can. It will come in a variety of fruit flavors and will boast the replenishment of electrolytes and early(a) demand vitamins and minerals. We hope that high-frequency mass market penetration using multi-media advertisements will spread the word and raise aw argonness about Nike Motion. field distri just nowion will fol deplorable in supermarkets, pharmacies, health food stores, and gourmet ret ailers.The Nike differentiate name, accompanied by its strong brand image, will differentiate the result and maintain its popularity via the market leader and differentiation strategy the company has chosen. 2. 0 environmental Analysis Economic Trends The X and Y generations, our target markets, comprise about 110 million people of the United States population. They be, world-widely speaking, well-educated, and earn comparatively higher incomes, thus allowing for much of their disposable income to be spent on health-oriented products, such(prenominal)(prenominal) as the new beverage we are planning to launch, Nike Motion.neither positive, nor negative economic trends, such as changes in interest rates, inflation, DGP, etc. are not likely to have a significant impact on our product, since its not a high priced luxury item whose demand would be affected by theses positionors. The quality of sports drinks consumed doesnt in reality depend on the income of the consumers, sinc e these are relatively inexpensive, everyday products. As a general trend all the same it is worth mentioning that the economy as a whole is growing in the United States as well as in other parts of the world, allowing for an ever increasing standard of living. cultural and Demographic Trends Socio-culturally, our target market is health-conscious and youth-oriented. The individuals comprising our target market of 18-34 year old men and women, are generally perceived as individualistic, with a pore on making healthy decisions via food choices (salad bars and the organics market have boomed), and exercise (from going on athletics-oriented vacations, to spending lunch hours in the gym). in that location is as well as a change in the lifestyle of Americans, and people nigh the world fast paced, always on the go, eating out and acculturation much than.These people rarely have the time to cook at home, diminish the regularity of consuming healthy meals. cardinal of the best al ternatives of getting the needed vitamins and nutrition is via healthy beverages, such as Nike Motion. The U. S. populations general aversion to high calorie, high sugar, and high carbohydrate beverages will likely be beneficial to our new product. Demographically, a traditional family structure is proper less typical, with an increasing number of couples co-habitating without being married, lower birth-rates, and a bulky concentration on health and weight maintenance.As a moderate of these trends, consumption of youth-oriented products has grown as people strive to be in good shape. The Nike Motion energizing sports drink will provide the energy these people need to accomplish their objectives. Ethnic trends are likewise changing, with rape boomers retiring, and an increasing young Latino population emerging, along with an influx of Asians. The Latino population, becoming the largest minority segment in 2002, has grown 70 portion over the past decade to approximately 37 mill ion (14. 1 percentage of the U. S. population). These youths lead fast-paced lifestyles, frequently juggling school, work, and personal lives. For the jr. generation, regardless of ethnic background, feeling tired is not an option. The popularity of the sports and energy drinks has be this fact. We at Nike thus believe that Nike Motion will be a tremendous success, attracting to a health-conscious population with our alluring natural ingredients, firearm simultaneously satisfying the increasing need for energizing products. Political and level-headed environment The political environment could have a significant accomplishment on us if we were to market Nike Motion in foreign countries. invariable changes in exchange rates and political systems are fundamental to restrict in mind. As to the legal environment, each and every firm operates in nations of laws and rules that have to be obeyed. Coca pot recently got into trouble receivable to an publicizing message in which t hey, allegedly, portrayed Gatorade in an unfavorable light. The p late(a) was settled outside of court, but has cost millions of dollars for Coke. 2 Physical Environment and Technological Trends The current physical environment, oddly in metropolitan areas such as large cities, is very much conducive to the use of our product. getable in a large number of various retailers, our goal is to be the Starbucks of sports drinks on every corner, there when you need it. Retailers stocking our product will be dispersed throughout the city, with a significant concentration in areas of business and entertainment (for example, in the downtown financial district, as well as near the Broadway theaters), as well as near learning centers and gyms. We compulsion to make sure that Nike Motion is widely distributed and readily available, both to passion shoppers, as well as for the more traditional type of buyer.Changes in technology may lower entry barriers and create new product processes. To e nter the sports drink industry, large capital investments are required for ware facilities, marketing, and etcetera. Technological changes, such as the internet, can create additional possibilities for promotion, via viral campaigns via the internet and emails that are so popular with our target market. Global Trends out-of-pocket to advances in technology and communication, we can safely say that the world has never been as united as it is currently.The internet, along with television, and to a lesser ground level, radio, have served as outlets for disseminating cultural views, and incorporating adaptations of traditional ethnic ideas and beliefs into the mainstream, both within a country and internationally. Products ranging from clothing to music to the culinary arts have become widely accepted. We feel that sports drinks fall into this global category as well. From atomic number 63 to Latin America to the United States, lifestyles are becoming faster-paced (though to varying peaks) and are influencing the demand for products that will accommodate such consumer choices.In the last year alone, sales of sports drinks have increased by 10%. 3 3. 0 tutelage Statement Nikes mission supposes If you have a system, you are an athlete. Nike Motion, the new protein infused energy drink brought to you by Nike, targets the athlete in us all, whether you are on the track or on the couch, by providing hydration and energy with of the essence(p) vitamins, minerals, and exotic herbs, proven to enhance performance, raise energy levels, as well as enhance mental agility. Nike motion is crucial for both body and mind. 4. 0 Market / Industry / Competition AnalysisCompetition Analysis of Sports confuse Industry Sports drinks experienced a remarkable growth in the late 1990s and early 2000s, growing al close to 56 percent betwixt 1997 and 2002. As a result of this increase in demand for sports drinks, a large number of products started flooding the market. This influx , however, is controlled by a limited number of established and powerful companies, namely Gatorade and Powerade. Gatorade, erectd by PepsiCo, is a market leader, bluster 80 percent market share. Its chief competitor, Powerade (produced by Coca Cola), accounts for 19 percent of the remaining sports drink market.PepsiCos market share however is not safe. Since 2002, its share declined by 4 percent, spot Cokes Powerade grew by nearly 30 percent. 4 Most of the industrys growth is driven by reaching new demographics, including ethnic groups, children and more serious exercisers. Attempts by other companies to market sports drinks have often failed, or achieved considerably less success than the existing players. Nike, in an attempt to keep down territorial battles, plans to carve a new niche, the energizing sports drinks with various essential nutrients, thus emerging as a market leader in this new category.As mentioned previously, given its established, strong brand image, and its association with everything healthy, such a move should not prove impossible. Porters emulous Forces According to Porters Five Competitive Forces, the power of suppliers is low because the ingredients used, as well as the packaging, are commodities that can be comfortably substituted, and therefore do not involve high switching costs. The market is not dominated by a few large suppliers, but is rather fragmented, allowing for price competition. The power of buyers is medium, because even though there are many buyers, some of them are rather powerful.There is little pretend that existing nodes would integrate backwards. Sports drinks are differentiated products but can be replaced by a limited number of substitutes, water being the biggest threat. The consumers, match to trends in the macro environment will increasingly search for sports drinks on the store shelves. The small number of firms makes for a high degree of rivalry, with a few large companies competing amongst themsel ves, as well as vying to establish a significant foothold in order to prevent smaller firms from go in the market.The energy and sports drink products are thus differentiated, and vary in more than just price. The threat of new entrants is low to medium due to the fact that the attractive high-growth industry of sports drinks has very high barriers to entry namely, it is capital intensive, requiring a lot of marketing and advertising of these products, discussing their benefits, as well as fix them apart from the rest. Likewise, it necessitates large economies of scale in production.Such resources are unwieldy to achieve, and if marketing to the masses, it is something only large, wealthy companies can achieve. The threat of substitutes in this empyrean is quite high, in that the products currently on the market often differ in little other than brand and consumer perception. The switching costs from one brand to another are virtually zero, but companies can surveil if theyre a ble to retain their loyal customer bases. 4. 0 Summary of marketing activity in the industry Pricing strategyIt is safe to state that there are no significant pricing differences among the brands, they are competitively priced. Both Gatorade and Powerade sell at about $1. 50-2. 00 for a 32 oz. bottle, depending on the location and on the type of retailer. There are really no pricing wars in this industry, since consumers are very brand loyal. Looking at the distribution channels, we can influence that these sports drinks are sold at most retailers that sell groceries and other beverages. Retailers include supermarkets, delis, vending machines, street vendors, cafeterias at gyms, etcetera.We see a potential advantage in selling Nike Motion at existing Nike outlets, such as sporting goods stores, and in Nikes flagship stores, Niketowns, that are located in major cities around the world. Advertising and Promotions When discussing advertising and promotional strategies, we have to note that even the most successful companies need advertising and other promotional vehicles to further the success of their brands. Sports drink makers, given the degree of competition in the industry are doing just this. Gatorade spent $one hundred eighty million on advertisements last year date Powerade spent less than $20 million, per Nielsen Monitor-Plus. Since these sports drinks primarily target health-conscious consumers and athletes, some of the most important promotional vehicles include sponsorship of sporting events, and signing of top athletes for promotional deals. Coca Cola was, for example, the official sponsor of the summer Olympic Games in Athens with its Powerade Drink. We counseling on niche interviews of top athletes, either through major events such as the Olympics, close relationships with sporting bodies, or by working with sports experts to produce targeted advertorial, says a Coca-Cola spokeswoman. Consumer education is key, she adds. 6 Powerade earlier launc hed an online version of its LeBron James rum in its quest to position the brand as the sports drink for the attached generation. A first for Coke and its partner DC Comics, the interactive turn up included flash technology and voice-overs by Mr. James across 12 Webisodes, as well as an instant win component and impression games. 7 Gatorade on the other hand is the official sponsor of the National Football coalition, the official sports drink of the National Basketball Association, WNBA, Major League Baseball, Major League Soccer and a host of others around the world.In all, Gatorade has struck roughly 900 sponsorship deals with sports events over time, according to tracking by the IEG Sponsorship Report. Gatorade also will sponsor branded content during the National Basketball Associations playoffs on ESPN, TNT and FSN networks. On TNT, broadcast personalities will air live pursuance segments dubbed Heard Around the Cooler about game strategy, injuries, statistics and other i nsights, while ESPN will air branded Cooler Talk segments on its Sports Center. ChallengesOne of the biggest challenges these companies face is the problem of attracting more female consumers. According to the Mintel International Group, an industry observer, consumption patterns always leaned heavily toward males, but the trend showed signs of changing as more female teens reportedly were drinking more and more sports drinks. This reflected female teens ongoing interest in losing weight and increasing interest in exercise. 8 Sports beverage producers also began targeting the fast-growing Hispanic population.Gatorades Xtremo was the first to appeal to this potential market with a line of more exotic and equatorial flavors including mango and tropical. The effort was supported by bilingual packaging and Spanish-language advertising. Coca-Colas Powerade brand also began using Spanish-language advertising to tap into this market. We think that the most important industry factors that will be influential in our planning is the degree of competition that were hoping to offset with powerful and wide-reaching marketing campaigns.As Ive mentioned earlier, there is a very high level of competition especially between Gatorade and Powerade. Both these companies spend millions of dollars on building their brands and their loyal customer base. We can see, however, a slight difference between the promotional techniques of the two. Gatorade is more centered on the top-athlete, while Powerade tries to depict a more fashionable picture that appeals primarily to the iPod generation. There might be another niche that is underserved, and that could be just what Nike Motion needs.An underserved niche, such as women and men of times X and Generation Y, might have a need for nutritious, on-the-go beverages that fit into their busy life-styles. Nike could target these niches successfully due to its existing brand image. 5. 0 trade Objective The Nike brand is a well known brand, its swoosh is one of the most recognizable signs out there, having established brand loyalty among many. base on our market explore, the brand extension of Nike Motion would have great potential for being the next great beverage among athletes and non-athletes.We would pursue a mass market penetration strategy for a saturated market, while still allowing for a vast opportunity in high sugar and holding market share due to Nikes brand recognition. Our primary objective is to create product awareness among the target audience by 30 percent in one year and our secondary objective would be to increase market share. We would also want to inform our target audience about the features and benefits of our product and its competitive advantage, leading to a 10 percent increase in sales in one year.Many individuals are unaware of Nikes new brand extension of a sports drink. then we would pursue a high reach and high frequency strategy in our advertising in order to have maximum exposure. In order to accomplish this we would conduct a SWOT analysis to gain a better understanding of our target market and market segment. We want to achieve this objective by using secondary and primary research to get an in depth understanding of our target and to formulate a strategy to develop our campaign. Based on our research, trends and attitudes are moving toward health conscious products.