Snack and Nonalcoholic Beverage BarsAtiqur ChowdhuryMonroe CollegeStage I:Introduction Snack and Nonalcoholic Beverage Bars are a very common business in the United States.
Across the U.S, there are more than 40,000 Snack and Nonalcoholic Beverage Bars. That means that each one of those Snack and Nonalcoholic Beverage Bars serves about 7,500 citizens on average. According to the business employment data, Snack and Nonalcoholic Beverage Bars will typically employ 1 to 4 employees. So, it’s safe to say that Snack and Nonalcoholic Beverage Bars account for substantial employment of workers across the country. (Resources for Entrepreneurs, 2018) The Definition of NAICS Code 722515: Snack and Nonalcoholic Beverage Bars.
This U.S. industry comprises establishments primarily engaged in the following: Preparing and/or serving a specialty snack, such as ice cream, frozen yogurt, cookies, or popcorn or Serving nonalcoholic beverages, such as coffee, juices, or sodas for consumption on or near the premises. These establishments may carry and sell a combination of snack, nonalcoholic beverage, and other related products (e.g., coffee beans, mugs, coffee makers) but generally promote and sell a unique snack or nonalcoholic beverage. (Classcodes, 2018) According to the national restaurant Association 2017 Restaurants industry outlook, the commercial restaurant industry posted sales of $705.
74 billion in 2016. Snack and nonalcoholic beverage bars accounted for $38.43 billion of that amount. The U.S. Bureau of labor statistics reported that there was an estimated 55,973 establishment in the snack and non-alcoholic beverage bar industry in 2016. More than 22,000 of these were coffee shops with combined annual revenue of around $12 billion.
(National Restaurant Association, 2012) The Purpose of this research paper is to see how this tremendous industry has been performing and will continue to perform going forward. I will collect my data through internet searches. The Snack and Nonalcoholic Beverage industry caters to the local and foreign markets. As Coca-Cola is one of the biggest non-alcoholic beverages company in the world, we will see how the Coca-Cola Company and other non-alcoholic beverages companies such as PepsiCo is performing in this industry. I will incorporate Porter Five Forces to view this industry as well. Entry Conditions – Moderate A new comer in this industry can expect retaliation from current companies. Companies such as Coca-Cola and PepsiCo each have an extensive bottling and distribution network and controls a large portion of the market, therfore does not face any major threats from new competition. The soft drink industry is an oligopoly with existing firms having strong distribution channels, relationships with suppliers, retailers, and brand value to customers.
The industry leaders have the tools necessary to force out new competitors. Brand identities define soft drink flavors such as “Sprite means lemon-lime, or Coke means cola.” The majority of soft drinks have well known brand identities, with the exception of generic brands. At a localized level, small coffee shops can compete with the likes of Starbucks and Dunkin Brands because there are no switching costs for the consumers. Even though it’s a competitive industry, the possibility of new entrants to be successful in the industry is moderate. (Soft Drink Industry, 2018)Power of Buyer – Moderate There are many different buyers in this industry and no single buyer can demand price concession. It offers vertically differentiated products with a diverse consumer base, which make relatively low volume purchases, which erodes the buyer’s power.
Even though there are no switching costs with high availability of substitute products, industry leaders like Starbucks prices its product mix in relation to rivals stores with prevailing market price elasticity and competitive premium pricing. (Soft Drink Industry, 2018)Power of Supplier – Low to Moderate The main ingredients in soft drinks include caffeine, carbonated water, and sugar. The suppliers are not concentrated or differentiated. Coca-Cola, PepsiCo, Starbucks likely has the largest customers of any of these suppliers. These suppliers in the industry also pose a low threat of competing against Coca-Cola by forwarding vertical integration, which lowers their power. Coca-Cola also forms a highly important part of the suppliers business, due its size and scope, which make the power of the supplier low. Given these factors, suppliers pose a moderately low bargaining power.
(Soft Drink Industry, 2018)Substitute/Complements – Medium to High There are substitutes for carbonated beverages, like water, tea, sports drinks and many more. Bars and pubs with non alcoholic beverages could also substitute for the social experience of Starbucks and dunkin donuts. There are many different kind of soft drinks in the market and Consumers could also make their own home produced coffee with household premium coffee makes at a fraction of the cost of buying from apremium coffee retailer like Starbucks.
There are no switching costs for the consumers for switching to substitutes, which makes the threat high. Rivalry – High The industry is not growing rapidly. The growth rate for the industry is not rapid; it is in fact relatively small. This makes it very difficult for new entrants to compete with the already thriving firms in the industry. There are other brands also popular in the market. Coca-Cola and PepsiCo having the largest markets share, creating significant pressure for its competitors. Consumers do have any cost of switching to other competitors, which creates high intensity in the rivalry. (Soft Drink Industry, 2018) Perfect Competition Monopolistic Competition Oligopoly MonopolyEntry Condition Easy Medium Medium Restricted Number of Sellers Multiple Multiple Multiple MultiplePrice Determination Limited Some Control More control ( if price change occurs to another firm) ControlRequirement for Entry Less Capital (Low) Low Low to Moderate Low to HighProduct: Soft drinks, Tea, Coffee, Juice, Ice-cream, Snacks, Baked goods, etc Same basic food i.
e. similar products Same but not Identical Differentiated or Homogenous UniqueCompetition No Yes Limited Difficult For the industry of Snack and Nonalcoholic Beverage Bars, I will look at the industry revenue which is my dependent variable and the sales per employee during that time as my independent variable. I will try to find out how the two variables are connected to eachother using statistical data. Stage II:Industry Performance The North American non-alcoholic beverage market recorded strong growth rate in recent years.
Multinational players like Coca-Cola and PepsiCo dominates the global non-alcoholic market. These players together generate more than 40% of the total market. Private labels also greatly influence the environment. The global non-alcoholic beverage market is recording a compound annual growth rate of 4.
7% during 2018 through 2023. It is estimated to generate revenues of USD 1189.10 billion in 2023. The Asian-Pacific region is displaying the highest growth among all other regions, owing to the increased availability of packaged cola drink based products in the remote regions. The innovative marketing strategies being introduced by major vendors is also driving the market growth around the world as well.
(Wallace, 2018) Revenue As of 2018, “Coca-Cola net revenues declined 20% to $7.5 billion for the quarter and declined 15% to $35.4 billion for the year. Organic revenues (non-GAAP) grew 6% for the quarter, driven by price/mix growth of 4% and concentrate sales growth of 1%. The quarter included one additional day, which equated to an approximate one point benefit to organic revenue (non-GAAP) growth. For the year, organic revenues (non-GAAP) grew 3%, driven by price/mix growth of 3%.” (The Coca-Cola Company, 2018) As of 2018, “the food and beverage giant on PepsiCo reported quarterly financial results that showed once again how its snacks business, which includes items like Cheetos and Doritos, is bolstering its performance at a challenging time for much of its beverage business, specifically its carbonated drinks.
PepsiCo’s fourth-quarter revenue was unchanged at $19.5 billion from a year earlier, a hair above Wall Street forecasts for $19.4 billion. This year, PepsiCo expects revenue growth similar to last year.” (Wahba, 2018)Sales of Snack and Non-alcoholic Beverage BarsThis shows the food and drink sales of snack and non-alcoholic beverage bars in the United States from 2009 to 2017.
(Statista, 2018)Industry Analysis Industry Revenue is my Dependent variable Sales per employee is my Independent variableYearIndustry Revenue (Dependent Variable) Number of employees during this time Number of existing companies during this time Sales per employee during this time (Independent Variable) 2000 $3,495,400,000.00 58,069 12 $60,194 2001 $11,819,200,000.00 65,359 18 $180,835 2002 $3,804,700,000.
00 55,723 14 $68,279 2003 $4,651,400,000.00 47,876 19 $97,155 2004 $4,912,100,000.00 48,336 14 $101,624 2005 $7,317,100,000.
00 64,702 21 $113,089 2006 $5,582,400,000.00 54,184 15 $103,027 2007 $6,241,400,000.00 53,640 23 $116,357 2008 $9,184,700,000.00 98,529 24 $93,218 2009 $7,323,870,000.00 93,901 25 $77,996 2010 $7,877,500,000.00 107,814 24 $73,066 2011 $5,145,400,000.
00 73,241 10 $70,253 2012 $3,441,610,000.00 56,570 6 $60,838 2013 $4,191,390,000.00 79,697 5 $52,592 2014 $4,373,420,000.00 84,088 8 $52,010 2015 $4,455,290,000.00 18,525 10 $240,501 The coefficient tells us the increase in the industry revenue when the independent variable is increased by 1 unit while the other variable is unchanged.
If the number of employees increases by 1, the industry revenue increases by 77792.94 units. If the number of existing companies increases by 1, the industry revenue increases by 100 million units.
If the sales per employee increase by 1, the industry revenue increases by 34888 units. The intercept tells us the industry revenue is the independent variable takes the value as 0 or there are no employees and companies during that time. R2 is the Coefficient of Determination. It tells you how many points fall on the regression line.
In this case R2 is about 79%. What that means is that these three variables Number of employees, Number of existing companies and Sales per employee explains about 4/5 of the variation in the Dependent Variable which is the Revenue in this case. Standard error measures how accurate are your predictions by the regression model. It tells us how close the predictions are.Stage III:Summary Some of the key finding I have found in regards to the Snack and Nonalcoholic Beverage industry is that it is a very competitive market. The two major players that control majority of the market are Coca-Cola and PepsiCo. Therefore it is very difficult for new players to enter the market. Also the sales of the snack and nonalcoholic beverage bars in the United States from 2009 to 2017 have been increasing year to year and there is a great growth potential in the Asian market moving forward.
Conclusion In conclusion, based on my research I can conclude that if any new company does try to enter the market that they would need a lot of capital to start. I also learned that in this industry, the industry’s revenue is mainly influenced by the sales per employee during that time period. ReferencesClasscodes. (2018). Retrieved July 14, 2018, from https://classcodes.com/lookup/naics-code- 722515/National Restaurant Association. (2012).
Retrieved July 14, 2018, from https://www. restaurant. org/HomeResources for Entrepreneurs. (2018). Retrieved July 14, 2018, from http://www.gaebler.com/ Snack and Nonalcoholic Beverage Bars-Business-Information 722213Soft Drink Industry. (2018).
Retrieved July 15, 2018, from https://sites.google.com/site/ softdrinkindustrysaranalysis/porter-s-five-forcesStatista. (2018). Food and drink sales of snack and non-alcoholic beverage bars in the United States from 2009 to 2017.
Retrieved July 16, 2018, from https://www.statista.com/ statistics/218847/us-non-alcoholic-beverage-bars-food-and-drink-sales/The Coca-Cola Company Reports Strong Operating Results for Fourth Quarter and Full Year 2017; Achieves or Exceeds the Company’s Full Year Guidance. (2018, February 16).
Retrieved July 15, 2018, from https://www.coca-colacompany.com/press-center/press- releases/the-coca-cola-company-reports-strong-operating-results-for-fourth-quarter-2017Wahba, P. (2018, February 13). PepsiCo’s Snacks Help It Overcome Weak Soda Sales. Retrieved July 16, 2018, from http://fortune.com/2018/02/13/pepsico-snacks/Wallace, B.
(2018, July 04). Global Non – Alcoholic Beverage Market – Growth, Trends, and Forecast 2018 to 2023. Retrieved July 15, 2018, from http://marketnewsaccess.com/ 2018/07/04/global-non-alcoholic-beverage-market-growth-trends-and-forecast-2018-to- 2023/