A survey of the nature of competition in the soft drink industry in Kenya

Abstract

This study was conducted between July and October, 2003 the population of interest was made up of soft drink marketing organizations in Kenya. The focus was more on the formal soft drink industry which was described as consisting of carbonated soft drink bottlers, juices, cordials and bottled water. The study had two main objectives 1. To determine the nature of competition in the industry. 2. To determine the relative importance of Porter's competitive forces m the industry and therefore the key drivers of industry competitiveness. A semi-structured questionnaire was used to collect data (Appendix 1) and the key findings were as follows:- The nature of competition is such that players in the various sectors do consider themselves to be in competition with each other either directly or as close substitutes of each other. There is intense rivalry among the various industry players with the only way for growing being through market share in a stagnated economic environment. Many of the firms in the industry have over the past three years introduced new products outside the stable of their core product range. This has in effect increased the amount of competition and driven down margins. An interesting finding was that government has a greater impact on the firms' success than suppliers. Rivalry among competitors (Impact of existing competitors) was found to be the most influential of Porter's forces on the industry with the least influential factor being the bargaining power of suppliers. Success in the industry can be achieved by a firm through protecting itself from the adverse effects of intense rivalry by differentiating itself in the hope that its products can demand price premiums in the market. It would also need to ensure that the buyers of the products (retailers) support its products by extending supenor margins.