3. Porter’s 5 Forces Analysis
3.1. Competitive Rivalry
Competitive Rivalry is considered HIGH for 100Plus in the Isotonic / Energy drinks industry. This would mean that lesser profits for 100Plus and FNN.
This is due to the numerous brands of isotonic drinks in Singapore, where one can find brands like H-Two-O, Aquarius, Pocari Sweat, Gatorade, Lucozade and You-C1000 easily as you enter into supermarkets. With the numerous brands / competitors, it would be very easy for a consumer to switch to alternatives.
Exit barriers are high as well, as it would take time to divest of the manufacturing equipment, plant and business relationships that is used for producing and selling the product – FNN took 2 years to complete its disengagement with Coca-Cola Singapore when they announced this in 2009 and only completed it in 2011 .
3.2. Threat of New Entry
Threat of New Entrants is considered LOW for 100Plus in the Isotonic / Energy drinks industry. This would mean that increased profit potential for the existing brands like 100Plus.
The barriers of entry for a beverage business in Singapore is high due the huge investment of startup capital required. It will be quite challenging for new companies entering into the Singapore market as there are already 7 main beverage manufacturers – Coca-Cola, FNN Foods, Malaysia Dairy Industries, Nestle, PepsiCo, Pokka and Yeo Hiap Seng – who can out muscle a new entrant with their established brands and deep commercial links within the distribution network.
In addition, the new entrant would have to meet stringent government regulations. According to the recent announcement from the MOH, under “The Diabetes Prevention” direction, the Ministry has set that the 7 main drinks manufacturers to reduce the sugar content for all their beverages by 2020 (Channel news asia, 2018). Moving ahead, the beverages must be labelled as a healthier choice option to attract the consumers of the day after much influence by MOH and this can only benefit 100Plus as it has been certified as a ‘healthier choice’.
3.3. Threat of Substitute Products
Threat of substitute products is considered MODERATE for 100Plus in the Isotonic / Energy drinks industry. This would mean that 100Plus has to work harder, potentially coming out with new formulations / products, to stay 1 step ahead of its competitors.
There are numerous products and brands in Singapore (Dbscomsg, 2018) when it comes to quenching one’s thirst. Even within the Isotonic / Energy drinks sector, there are several choices available. It is easy for a consumer to purchase another drink apart from 100Plus, making the cost of switching low.
All Isotonic / Energy drinks like 100Plus are generally made up of water, sodium, sugar and vitamin – the functions, attributes, performance are all fairly similar. Even if there is addition of vitamin minerals into the formulation, the perception of the benefit gained is negligible
However, the 1 thing that is in the favour of 100Plus is the brand equity of FNN, which is ranked 15 in Singapore in 2017, ahead of any local F&B brand . This should explain why FNN ET6 FH7 FH8 was the leading player in Isotonic / Energy drinks segment in 2013, accounting for an off-trade volume sales share of 65%. This was entirely driven by the performance of its 100Plus (Euromonitorcom, 2018).
3.4. Bargaining Power of Supplier
Bargaining power of suppliers is considered LOW for 100Plus. This would mean that 100Plus would have a lower cost of production, which allows it to maintain at its desired profit margin
A quick google check for label printing, plastic bottle and can producer in Singapore and Malaysia easily throws up the names of 10 companies. Given that there are plenty of options, 100Plus has the competitive advantage to set and maintain the desired prices. Any advantage to keep its production costs low is welcomed for Singapore produced 100Plus as Singapore imports majority of its products.
3.5. Bargaining of Buyer
(Graph retrieved Source: Euromonitor, DBS Bank)
Bargaining power of buyers (from a consumer’s perspective) is considered HIGH for 100Plus. This would mean that 100Plus would have to think out-of-the box to be competitive.
Referencing the graph above, from the CAGR value for Sports / Energy drinks from 2010 to 2020, one could infer that the cost of a 100Plus beverage has remained the same. In a situation where switching cost is low, players within the industry will set the product at a price that will not ‘antagonise’ a consumer to switch to another brand, even when production costs would have grown over the years, as they are price sensitive. Hence the need to maintain the price as status quo while 100Plus uses other marketing initiatives to differentiate itself.
Bargaining power of buyers (from a retailer’s perspective) is considered MODERATE – HIGH for 100Plus. This would mean that 100Plus would have a lower profit margin.
The Singapore modern grocery retail landscape is led by supermarkets, with 54% share