U.S. consumers have been making big changes when selecting their beverage of choice. Over the past decade, more consumers have shifted their purchases away from carbonated soft drinks (CSD), which once commanded 85% of the non-alcoholic RTD beverage market, to options such as ready-to-drink (RTD) teas and energy drinks. In addition, beverage manufacturers have experienced profit pressures because of the recession. These market forces have resulted in what Rabobank analysts call convergence.
To stay competitive, more beverage companies are seeking to merge with or acquire other companies. In the CSD sector, Coca-Cola and Pepsi now control nearly 2/3’s of the non-alcoholic beverage market. (Note that this does not include dairy, coffee and tea categories.) A similar trend is occurring in the alcoholic beverage industry. Rabobank analysts point out that 80% of the whiskey market is controlled by 3 suppliers.
The rapid consolidation means that the large marketers may no longer have good options left when it comes to purchasing the competition. Additional mergers could lead to cannibalization or anti-trust problems. As a result, the big operators in this sector will begin establishing joint agreements with or purchasing companies with alternate product lines.
"A full range of products gives a beverage company a key advantage over competitors that can only supply a limited range of products,” says Steven Rannekleiv, Executive Director of Rabobank’s Food & Agribusiness Research and Advisory (FAR). As these mergers continue, marketing campaigns will likely be in the hands of fewer people.
[Source: Convergence trend likely to intensify in beverage industry. Rabobank Group. 1 Jun. 2010. Web. 15 Jun. 2010]