The beverage industry comprises both, hot and cold beverages that are consumed by people of varying ages across the globe. The PESTLE analysis of Beverage Industry includes discussion on the macro-economic factors from the environment that have the potential to help the industry to grow or create hindrance in the development.
Beverage Industry Factors and Figures
Here are some facts and figures about the beverage industry:
- The global beverage market size was valued at $1.45 trillion in 2020, and is projected to grow at a CAGR of 6.6% from 2021 to 2028.
- The alcoholic beverage segment accounted for the largest share of the market in 2020, with beer being the most consumed alcoholic beverage worldwide.
- Non-alcoholic beverages, including carbonated soft drinks, bottled water, and sports drinks, are also popular and growing in popularity, with bottled water being the most consumed non-alcoholic beverage.
- The Asia-Pacific region is the largest market for beverages, followed by Europe and North America.
- The COVID-19 pandemic has had a significant impact on the beverage industry, with changes in consumer behavior and supply chain disruptions leading to changes in sales and distribution channels.
- The industry is increasingly focused on sustainability, with companies implementing initiatives to reduce their environmental impact, including reducing plastic packaging, increasing the use of recycled materials, and implementing sustainable sourcing practices.
- The industry is also facing regulatory challenges, including sugar taxes and restrictions on advertising to children.
- Major players in the industry include Coca-Cola, PepsiCo, Anheuser-Busch InBev, Heineken, and Nestle, among others.
- The industry is expected to continue to grow, with increasing demand for healthy and functional beverages, as well as the emergence of new trends and technologies.
Political Factors
The political instability arising out of violence, conflict and war can affect the supply chain processes of the beverage industry. The war in Ukraine as an example shows that the raising prices of raw material such as aluminum exerts pressure on the manufacturing cost as the beverage industry requires it for making canned products (Souza, 2022).
Moreover, the sales being made in the war inflicted Ukraine also declined, causing lower revenues for the cold beverage companies. On the other hand, the beverage industry performed significantly better in countries that experience low political volatility. Likewise, the hot beverage segment had limited sales amidst Russia and Ukraine conflict.
Trading regulation is another factor in the political domain that effects the decisions related to supply chain. The countries with favorable trading policies enable the beverage companies to engage in procuring the required raw materials and distribute their products. The Philippines provides positive business environment to US beverage manufacturers, thus being the top buyer (Singian, 2022).
Economic Factors
Country GDP, inflation and overall economic growth has a significant influence on the way beverage industry in a country performs. Rising inflation results in increased cost of manufacturing as the whole supply chain pricing has to be adjusted. One of the ways inflation affects the industry is through price changes of raw material such as aluminum (Telford, 2022).
Besides the rising cost of aluminum for can manufacturing another way through which inflation leads to higher cost of operations is the fuel price hike. This results in an increase in the transportation cost, making the delivery of the finished product more costly. The companies in the beverage industry have to revise their pricing keeping in view the economic changes.
Social Factors
The consumer demographic features determine their taste and preference for the choice of beverage they are likely to purchase. Individuals belong to lower socio-economic strata have a higher chances of preferring the soft drinks, while the people with higher socio-economic status are more inclined towards healthy beverages.
Age is also a factor that determines the consumer choice for beverage, as younger consumers have shown a preference for drinks with nutrients and zero-calorie. In addition, there has been a development in the niche of healthy beverages, new flavors and ready to drink hot beverages which has created growth opportunities for the companies in the industry (Telford, 2021).
The beverage industry is also affected by the seasonal changes, specifically in regions where the seasonal shifts are significant. The hot beverages depict higher consumption in areas that are marked by colder climate, while soft drinks are associated with warmer climate. Holiday season and major sports events are drivers of growth for higher sales of different beverages.
COVID has influenced the beverage industry as well and the consumer spending patterns have changed as people have spent less on purchase of beverages. There was no significant change in the buying pattern of consumers during the holiday season though (Moquin, 2022). This scenario indicates that during holidays beverages are seen as a necessity.
Technological Factors
Artificial Intelligence holds a central position in strengthening the supply chain operations of this industry. Such technology facilitates the beverage manufacturers to keep track of the changes occurring in the market and also to forecast the changing consumer behavior. The companies are able to adjust their production schedules according to this changing demand patterns.
The use of robotics is another way technology has illustrated usefulness for the industry. The integration of robots as a part of the manufacturing and packaging process helps the beverage companies to efficiently perform these activities (Viejo et al., 2019). In addition, machine learning has enabled the beverage companies to monitor and maintain product quality.
Along with the technological advancements, the platform of e-commerce has helped the beverage industry to enhance its market reach. The rising trend of online shopping has been a favorable development for the beverage industry. During the pandemic people found online purchase more convenient and safe, thus increasing the sales made through online presence.
Legal Factors
The food safety standards have to be followed by the companies in the beverage industry and they are required to produce quality products that do not cause harm to the consumer. In addition, the beverage companies have to mention the ingredients and other details about the product on the packaging as a legal requirement.
The beverage industry is also regulated by the copyright laws in case of packaging as well as the use of promotional content. Organizations have to make sure that they are not violating the copyright and trademark. Furthermore, employment laws are relevant for the sector and the company also has to maintain compliance with health and safety standards.
Environmental Factors
Sustainability has become central to the operations of different industries, including the beverage industry. The companies have to use plastic bottles which add to the environmental degradation. Even though recycling has been adopted as a means to minimize the waste material, the high volume of bottles and cans produced every year add to the litter.
Greenhouse gas emissions are also a challenge being faced by the beverage companies as the production and recycling leads to emissions. The large scale organizations have invested in making their operations more eco-friendly, however the smaller firms need to adopt a similar commitment to protect the environment (Burstein, 2021).
Conclusion
The beverage industry has been able to handle the political and economic challenges from the external environment. The social factors are a driving force behind the business decisions as the production and supply is managed according to the consumer demand, while sustainability concerns have also effected business operations for the organizations. Technology has contributed in making the beverage segment more efficient.
References
Burstein, M. (2021). Environmental Sustainability Is Serious Business For The Food And Beverage Industry. Forbes. Retrieved from: https://www.forbes.com/sites/forbestechcouncil/2021/10/15/environmental-sustainability-is-serious-business-for-the-food-and-beverage-industry/?sh=3f10712e2ddc
Singian, R. (2022). Non-Alcoholic Beverages Market Brief. United States Department of Agriculture. Retrieved from: https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Non-Alcoholic%20Beverages%20Market%20Brief_Manila_Philippines_RP2022-0066.pdf
Souza, K. (2022). The Supply Side: Retail supply chain braces for volatility amid Ukrainian conflict. Talk Business. Retrieved from: https://talkbusiness.net/2022/03/the-supply-side-retail-supply-chain-braces-for-volatility-amid-ukrainian-conflict/
Telford, H. (2021). Healthy Beverages in 2021: Functional Benefits and the Importance of Better-For-You Drinks. Euromonitor. Retrieved from: https://www.euromonitor.com/article/healthy-beverages-in-2021-functional-benefits-and-the-importance-of-better-for-you-drinks
Telford, H. (2022). How is the Soft Drinks Industry Responding to the Challenges of Inflation? Euromonitor. Retrieved from: https://www.euromonitor.com/article/how-is-the-soft-drinks-industry-responding-to-the-challenges-of-inflation
Viejo, G. C., Torrico, D. D., Dunshea, F. R., & Fuentes, S. (2019). Emerging technologies based on artificial intelligence to assess the quality and consumer preference of beverages. Beverages, 5(4), 62.