Executive Summary

The project report focuses on the Food and Beverage Industry which is a vital industry for one and all, at a global level. It has been written taking into account the prevailing structure existing in the sector. Since the industry involves various number of sub-activities there are a large number of players involved in different activities. It is important to understand the strategic plans adopted to face the opportunities and deal with the hurdles that come along the way while working in this industry. 

The report includes the present state of the food and beverage industry and the scope it has in the ever changing business scenario. Porter’s five force analysis has been included in the report to give the readers a better understanding of the competitive external environment of the industry. The plans and strategies adopted in the industry have been reflected upon in this report.

Based on the five force analysis conducted the readers can understand the present financial health and the future profitability of the industry as a whole.

Present state of Food and Beverage Industry

The Food and Beverage industry refers to the global collection of various businesses involved in the supply of food consumed by the world population. It involves activities like agriculture, manufacturing, marketing, grocery, farmer’s market, public market and other retail chains. It also includes the regulation and R&D involved in the particular industry (Bell, et al., 2013).

The industry includes the entire chain of farmers and the various other participants and industries that are linked to them.

According to Fleming-Milici, et al, the Food and Beverage industry is one which is ever-changing depending on the needs and preferences of the consumers. With different trends being introduced and evolved regularly it becomes very important for the players to stay up to date with the latest demands of the end users (Fleming-Milici, et al., 2013). 

Today consumer is very health conscious so they are opting for healthier foods, similarly the urban population is willing to try exotic flavors. The finished food products and partially prepared instant food also form part of this industry. Thus it is vital for the industry to operate by taking into consideration the general market preference.

It is also important for the industry to remain updated in the technological aspect by spending a significant amount on R&D so that the final products that are being offered to the end consumers pass all the relevant food tests.

Proposed Analysis – Porter’s Five Force Analysis

Michael Porter’s five forces framework has been used to study and analyse the level of competition within the industry. The model takes into account five forces that influence the competitive intensity of the industry.

This analysis has been considered to grasp the attractiveness of the industry for existing and new participants.

As per Galbraith‐Emami & Lobstein, Porter’s model considers three forces from the horizontal competition – Threat from substitutes, competition, and new entrants, and two forces from vertical competition – bargaining power of suppliers and buyers (Galbraith‐Emami & Lobstein, 2013). 

Major Activities involved in Food and Beverage Industry

Since the industry is highly diverse and covers a chain of industrial activities which are responsible for processing, converting, preparing preserving, packing of food and beverages, it involves a large number of sub-activities as mentioned below:

Agriculture – It basically means to produce food and other desired dairy products by the cultivation of plants and raising of livestock. It also involves the latest techniques adopted to produce better products by using improved farming methods.

Food Processing – It refers to the methods adopted to convert raw ingredients into food which can be consumed by people. It takes hygienic and clean components and uses them to create final marketable food. There are different methods of producing food like batch production, customizes production, etc (Goode, et al. 2013).

Distribution Network – IT forms a vital part since it connects multiple parts of the industry. It includes suppliers, wholesalers, retailers, etc. Gradually the significance of wholesale setup has reduced due to introduction of supermarkets, malls, etc.

The steady flow of food through distribution channels to final store is a key link in the operations of food and beverage industry.

Technologies – Latest and modern production of food is defined by advanced technology. The use of latest knowledge can be introduced in many areas like farming equipments, food processing. With its help the entire infrastructure can be improved.

Marketing and Labour – The importance of marketing cannot be ignored irrespective of the industry type. With increase in processed and finished food and beverage, there is lot of scope to market a product by using both ATL and BTL techniques (Ha, et al., 2014).

The industry involved huge number of people with wide range of skills. Today the automation processes are on the rise but millions of people who are involved in the industry worldwide cannot be ignored.

The involvement of diverse activities has led to the involvement of major players. Some of the top fast-food franchises are Dominos, Pizza Hut, etc. Some big corporate are Cadbury, Nestle, etc. Due to the increase in agricultural commodities, there is a rise in price of food.

Food Value Chain

It refers to the web of stakeholders involved in growing, processing and marketing and delivering of food to the consumers. It includes producers, processors, distributors, consumers, and other government and non-government bodies.

As per Ha, et al, the alliance among all participants is vital due to their interdependent relationship. Due to global supply chain, food safety standards, it is necessary that each stakeholder should be accountable for sourcing and quality control involving food. Certain food safety regulations have to be followed and it requires the involvement of all stakeholders. There should be transparent data and knowledge sharing in the chain (Ha, et al., 2014).

The end customer of the sector is one and all, i.e. people who need food to eat.

Profitability – Future prospective of Food and Beverage Industry

Since the food industry concerns everyone, it is significant in nature. It just has to change or update its activities based on the changing inclination of consumers. There is stiff competition within the industry and it involves strategic planning from the relevant participants. The sector is insensitive to business fluctuations since people need food to survive. Thus this industry forms an attractive option for prospective players since it involves customer staples.

Porter’s five forces analysis:

The application of Michael Porter’s five forces for analysis of competitive scenarios in a particular industry has been significantly noticed since its introduction in 1979. The five forces assumed in the model refer to the outcomes for explaining the potential of an industry on the basis of which entry strategies can be planned. The requirement of porter’s five forces model is imperatively observed in the present environment where it is essential to determine strategic approaches and deal with dynamic scenarios emerging in the existing business applications (Martinez, 2013). 

The five forces highlighted in Porter’s model refer to the understanding of positioning of power in a particular situation, comparative reflection with respect to competitors and increasing probabilities for improving business profitability. The use of five forces analysis is prominently required by new entrepreneurs with promising plans for entry into new industry or through the institution of corporations alongside comparing their sustainability in a specific sector (Sliwinska, et al., 2014). 

The generic template which could be noticed in Porter’s five forces analysis reflects on the five distinct forces such as bargaining power of suppliers, bargaining power of consumers, threat of new entrants, competitive rivalry, and substitutes. The impact of porter’s five forces analysis refers to a comprehensive review of the competitive advantage of an organization from an industrial as well as corporate perspective. 

The distinct applications of the model could be observed in the realization of the organization’s strategic position as compared to the industrial and business environment (Souza-Silva, Gionfriddo & Pawliszyn, 2015). 

The model predicts the attractiveness of the market for a food and beverage organization which also refers to the profitability of the industry and the moderation between the individual market forces could enable an organization to pursue the desired competitive advantage. 

The massive scale of the food and beverage industry alongside the presence of prominent brand names such as McDonald’s, Burger King and KFC indicate the requirement of Porter’s five forces analysis in order to determine strategic direction of enterprises. 

Customer power:

Bargaining power of customers in the food and beverage industry is considered to be high and it impinges drastic impact on the strategic advantage of an organization in the industry. The high bargaining power of customers can be attributed to the presence of numerous fast food chains and restaurants which is accountable for higher number of suppliers as compared to buyers (Valta, et al., 2015). 

Therefore buyers have the privilege for influencing prices of the products of organizations in food and beverage industry. The strong intensity of the market force of customer bargaining power could be considered responsible for the improvement in product and service quality alongside reduction of prices. The minimal switching costs could be assumed as promising contributors to the development of buyer power in the food and beverage industry (Galbraith‐Emami & Lobstein, 2013).

Supplier power:

Bargaining power of suppliers is limited by the presence of numerous suppliers in the food and beverage industry. The bargaining power of suppliers could be higher in specific scenarios where the suppliers operate as a cartel, high power, probabilities of forward supplier integration and fragmentation of customers. Apart from these factors, the major share of suppliers in the food and beverage industry has to face low intensity in the market forces of supplier bargaining power (Goode, et al. 2013). 

The minimal differentiation of products facilitated by suppliers as well as the lower switching costs for organizations in the industry create profound implications for reducing the bargaining power of suppliers. The requirement of supplies in case of beverage manufacturing organizations would be vested in acquisition of generic ingredients such as caffeine, phosphoric acid and carbonated water (Ha, et al., 2014).

Since the suppliers are neither concentrated nor do they provide any explicit differentiation, their bargaining powers depreciate subsequently. Therefore organizations could accomplish substantial strategic advantage from the low bargaining power of suppliers especially by fast food chains. 

Intensity of competition:

The concerns for competitive rivalry are included as a prolific element in the Porter’s five forces model and they reflect on the higher intensity of competitive rivalry. The mandatory competition observed from large brands such as KFC, McDonald’s and Burger King accounted for prominent competitive rivalry which is further complemented by the strategic approach of the organizations, brand identity and marketing proficiency (Kregiel, 2014).

The competitive rivalry noticed in the food and beverage industry reflects on the increasing competition from small eateries and restaurants which provide quality food products and services. 

Therefore the situation of competitive rivalry in the food and beverage industry could be considered as particularly disadvantageous for a fast food chain owing to the proliferation of competition that facilitates quality products characterized by health (Martinez, 2013). Other facets in the food and beverage industry which dictate the competitive rivalry refer to the rationale for reducing profit of other organizations in the industry. 

Some of the credible initiatives which could be used by organizations for addressing the competitive rivalry refer to improvement of product differentiation, creative utilization of distribution channels and price fluctuations.

Threat of substitutes: 

Threat of substitutes is a high intensity market force in context of the food and beverages industry. Availability of substitutes such as fast food could regulate the strategic performance of existing organizations such as eateries and restaurants (Sliwinska, et al., 2014).

The external threats of substitutes could also impact the strategic direction of an enterprise in the food and beverage industry since example of the replacement of glass bottles by aluminium cans for packaging of beverages was a major substitute observed in the industry. 

The high threat of substitutes can be addressed with the help of inducing promising levels of product differentiation.

Barriers to entry:

The final element to be discussed in the Porter’s five forces model is the threat of new entrants or the specific barriers for entry of new firms. The formidable threat for new entrants is the investment of a substantial amount of capital for developing a brand image at par with prominent names such as McDonald’s and the marketing initiatives for addressing a new market (Souza-Silva, Gionfriddo & Pawliszyn, 2015). 

The threat of entrants is low in the food and beverage industry which could be validated on the grounds of the numerous permissions and authentication processes required for entry into the food and beverage industry.

Conclusion:

The report illustrated considerable interpretation of the food and beverage industry alongside profound references to the key players involved in the industry. The analysis of market forces in the industry through the use of Porter’s five forces was also presented in the report.      

References

Bell, A. F., Walton, K., Chevis, J. S., Davies, K., Manson, C., Wypych, A., … & Alexander, N. (2013). Accessing packaged food and beverages in hospital. Exploring experiences of patients and staff. Appetite, 60, 231-238.

Fleming-Milici, F., Harris, J. L., Sarda, V., & Schwartz, M. B. (2013). Amount of Hispanic youth exposure to food and beverage advertising on Spanish-and English-language television. JAMA pediatrics, 167(8), 723-730.

Galbraith‐Emami, S., & Lobstein, T. (2013). The impact of initiatives to limit the advertising of food and beverage products to children: a systematic review. Obesity Reviews, 14(12), 960-974.

Kregiel, D. (2014). Advances in biofilm control for food and beverage industry using organo-silane technology: a review. Food control, 40, 32-40.

Martinez, M. G. (Ed.). (2013). Open innovation in the food and beverage industry. Elsevier.

Sliwinska, M., Wisniewska, P., Dymerski, T., Namiesnik, J., & Wardencki, W. (2014). Food analysis using artificial senses. Journal of agricultural and food chemistry, 62(7), 1423-1448.

Souza-Silva, É. A., Gionfriddo, E., & Pawliszyn, J. (2015). A critical review of the state of the art of solid-phase microextraction of complex matrices II. Food analysis. TrAC Trends in Analytical Chemistry, 71, 236-248.

Valta, K., Kosanovic, T., Malamis, D., Moustakas, K., & Loizidou, M. (2015). Overview of water usage and wastewater management in the food and beverage industry. Desalination and Water Treatment, 53(12), 3335-3347.