University of Economics and Business, Prague
Bachelor’s Thesis
2021 Valeriia Malakhovskaia
University of Economics and Business, Prague
Faculty of Business Administration
Bachelor’s Field: Corporate Finance and Management
Title of the Bachelor´s Thesis:
Strategic Analysis of Mattoni 1873 on the Czech Market
Author: Valeriia Malakhovskaia
Supervisor: Ing. Ladislav Tyll, MBA, Ph.D.
D e c l a r a t i o n o f A u t h e n t i c i t y
I hereby declare that the Bachelor´s Thesis presented herein is my own work, or fully and specifically acknowledged wherever adapted from
other sources. This work has not been published or submitted elsewhere for the requirement of a degree program.
Prague, May 10, 2020 Valeriia Malakhovskaia
Acknowledgement.
I would like to express my gratitude to my supervisor Ing. Ladislav Tyll, MBA,
Ph.D. for helping and guiding me through the process of writing of this bachelor’s
thesis.
Title of the Bachelor´s Thesis:
Strategic analysis of Mattoni 1873 in the Czech Republic
Abstract:
This bachelor thesis aims to conduct a strategic analysis of Mattoni 1873 on the Czech market by analyzing its internal and external environment to indicate the future strategic direction. The theoretical part explains the typical methodological tools used in the practical part. The findings of the practical part are highlighted in the SWOT analysis. The external environment brings opportunities to new target groups and emerging markets and threats in the form of fast automation by competitors, or substitution products. The internal one focuses on strengths such as market share, brand image, and sustainable business, but financial indicators have to be improved. Scenario Planning with two main uncertainties – product development and changes in preferences demonstrates four possible outcomes. Conclusions in the form of Management Suggestions, such as reduction of sugar, diversification of the portfolio towards new trends, geographic expansion by acquisitions, new market vector, and launch of countertop appliances, were proposed in the very last part of this bachelor thesis.
Key words:
Mattoni 1873, analysis, trends, strategy
Table of Content
1 Theoretical part ... 1
1.1 The strategy of the company (mission, vision and values) ... 1
1.1.1 Mission statement ... 1
1.1.2 Vision statement ... 1
1.1.3 Statements of corporate values ... 1
1.1.4 Strategic analysis ... 1
1.2 Stakeholders analysis ... 2
1.3 Macroenvironment analysis ... 2
1.3.1 PEST analysis... 3
1.4 Microenvironment analysis ... 3
1.4.1 Porter’s Five Forces analysis ... 3
1.4.2 Competitive life cycle analysis ... 4
1.4.3 Market segmentation... 5
1.5 Analysis of internal resources ... 6
1.5.1 VRIO analysis ... 6
1.5.2 Benchmarking ... 7
1.6 SWOT analysis ... 7
1.7 Scenario Planning ... 8
Practical Part ... 8
2.1 Company description ... 8
2.2 Modern History ... 9
2.3 Portfolio ... 9
2.4 The strategy of the company ...10
2.4.1 Mission ...10
2.4.2 Vision ...10
2.4.3 Mantra...10
2.4.4 Values ...10
2.5 Stakeholders’ analysis ...11
2.6 Analysis of Macroenvironment ...14
2.6.1 PEST analysis...14
2.7 Analysis of Microenvironment ...21
2.7.1 Porter's Five forces model ...21
2.7.2 Competitive life cycle ...26
2.7.3 Market Segmentation ...26
2.8 Analysis of internal resources ...29
2.8.1 VRIO/N Analysis: ...29
2.8.2 Benchmarking ...32
2.9 SWOT Analysis ...41
2.10 Scenario planning ...42
Top management suggestions ... 44
References ... 45
Table of Figures
Figure 1: Stakeholder Map... 2
Figure 2: Stages of the industry life cycle ... 5
Figure 3: VRIO framework ... 7
Figure 4: Stakeholders map of Mattoni 1873 ... 13
Figure 5: Overweight/Obese Population and Soft Drinks Consumption per capita 2018 ... 15
Figure 6: Zero Waste Hierarchy ... 16
Figure 7: European Union Wage Growth, Forecast... 17
Figure 8: Czech Republic Consumer Spending, Forecast ... 18
Figure 9: Digital Market Outlook: Revenue ... 20
Figure 10: Radar Chart... 25
Figure 11: Demographics in Czechia, users by age, in percent ... 27
Figure 12: Quick and Current ratios of the companies ... 34
Figure 13: Asset and Inventory turnover ratios of the companies ... 34
Figure 14: Debt ratio and Financial Leverage of the companies ... 35
Figure 15: Returns on Asset, Equity of the companies ... 36
Figure 16: Return on Sales of the companies ... 36
Figure 17: Scenario planning for Mattoni 1873 ... 43
List of Tables
Table 1: Interest and power of stakeholders of Mattoni 1873 ... 12Table 2: Issue Matrix ... 13
Table 3: Forecast Off-trade vs On-trade Sales of Soft Drinks by Channel: Value 2020-2025 ... 18
Table 4: VRIO matrix of Mattoni 1873 ... 29
Table 5: Financial indicators of Kofola, Coca Cola HBC Česko a Slovensko, and Mattoni 1873, for 2019, in thousands of CZK ... 32
Table 6: Financial ratios of Kofola, Coca Cola HBC Česko a Slovensko, and Mattoni 1873, for 2019... 33
Table 7: Portfolios of Mattoni 1873, Kofola, Coca Cola HBC Cesko a Slovensko ... 37
Table 8: Benchmarking comprehensive table ... 41
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1.1 The strategy of the company (mission, vision and values)
With the increased competition in different industries over the last few years, companies face changes and therefore have to adapt fast to stay on the market. The main aim of any company is to make a profit and to sustain it over the years, that is why it is important to keep an eye on the business, corporate and operational-level strategies.
According to the Alfred D. Chandler strategy is “the determination of the long-run goals and objectives of an enterprise and adoption of courses of action and allocation of resource necessary for carrying out these goals” (1963). Overall, three points should be always kept in mind to be successful – long-term vision, direction of the activities, and an organization’s managing.
1.1.1 Mission statement
Mission is about the purpose of the business and answers the questions ‘Why do we exist?’, ‘What do we want to achieve?’, and usually an inspiring and striving statement for all stakeholders.
Mission relates to goals and purposes the business strives to achieve and can be described with the help of the question ‘what business are we in?’, thus helps managers to focus on what is fundamental to their strategy (Johnson et al., 2011, p. 8). The management shows the employees the path for work toward the main goal and ensures the unity of the organization.
1.1.2 Vision statement
Since long-term plans are crucial, the vision statement focuses on the future and desirable achievements, the heading of the current activities. It also relates to future goals. The aspirational statement gives the motivation, energy, and passion for the members of the organization and answers the question ‘what do we want to achieve?’ (Johnson et al., 2011, p.
8).
It must be feasible and go in line with the mission statement. The idea of describing a desired future gives freedom for employees to show originality in everyday work.
1.1.3 Statements of corporate values
The values could be perceived as core ‘principles’ if the answer for the question ‘would these values change with circumstances” is no, because values communicate an organization’s strategy and define the way of operations (Johnson et al., 2011, p. 121). They help employees prioritize everyday tasks, behave in a certain ethical way, and understand why and for what they are working and contributing their time.
1.1.4 Strategic analysis
It is a process of identifying and evaluating data, analyzing internal and external environments using various analytical methods in order to conduct research on a company’s operations to formulate a strategy. It is needed to achieve the goals and determine the success answering the question ‘Where do you want to play and how are you going to win?’ (Corporate Finance Institute, n.d).
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1.2 Stakeholders analysis
Stakeholders are groups or individuals who are interested in the wealth of a company and can influence its mission, vision, and values. Company’s statements should be developed based on the interests of who are carrying them out – managers and employees; and those who are getting the outcome – shareholders, suppliers, government, and other parties. Stakeholders have different expectations and can be divided into external: customers, suppliers, creditors, governments, the general public; and internal: stockholders, employees, managers, board members. The issue is to satisfy everyone. For instance, owners can be more interested in maximizing profits and the company’s growth while managers in a company’s size.
Stakeholder power needs to be analyzed to resolve which stakeholders have priority and what they expect. The study of power covers six stages:
1. Identification of stakeholders
2. Identification of stakeholders’ interests and concerns 3. Estimation of their degree of power
4. Development of mission based on the prioritization 5. Negotiations with groups
6. Sanctions application if relevant
With the help of the power/interest matrix, which is presented below, the company can understand the priorities better, set the purpose and strategy, reposition some of them if needed, and maintain the level of interest (Lynch, 2006, p. 419-422).
Figure 1: Stakeholder Map
Source 1: Adjusted by the author based on Johnson et al,, 2011
1.3 Macroenvironment analysis
The environment is what gives an overview of potential opportunities and threats and helps sustain business in the future. Analysis of macro-environment describes the factors which can affect the company to a greater or lesser extent, even though the forecast can never be done perfectly. The macroenvironment is the highest-level layer because it has a broad scope of impacts (Johnson et al., 2011, p. 49).
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1.3.1 PEST analysis
The PEST analysis is a widely used tool that stands for Political, Economic, Social, and Technological factors. These change the company’s environment and meanwhile are interconnected – technological development can affect the economic factor – creating or decimating jobs. It helps to have an overall picture and then use it for the construction of alternative possible scenarios in the future. PEST provides opportunities arising and threats warning by changes around.
Political factors – these are related to regulations and laws, which influence the business activities, such as taxation and employment law. Relations between the government of the country the business is in and the organization, which can shape the company’s strategy.
Economic factors – these refer to macroeconomics and predict factors such as economic growth, exchange rate, poverty level, income of the population. It helps to get an overview of the economic situation in the country now and in the future and shape the strategy.
Social factors – influence of cultural and demographic shifts, including changes in lifestyle, attitude to educations, ‘green’ issues, income distribution. These can shape the demand for some goods, and provide ideas for businesses.
Technological factors – constant innovative and technological development lately is affecting nearly every industry and thus gives new opportunities for fast growth and competitive advantage on the market. On one hand, the technological factor is influencing most innovative industries, such as automotive and pharmaceutical. On the other hand, industries such as art are not implementing technologies and still sustain the market.
Overall, these factors are crucial to understanding to link macro changes with the organization and switch or adjust the strategy (Lynch, 2006, p. 84-86).
1.4 Microenvironment analysis
The relationship with customers, suppliers, and competitors are building the core of the firm’s business environment, and this is called an industry analysis. An industry is various firms that produce essentially the same products or services. The question to answer in this case is ‘what determines the level of profit?’. Therefore the profits earned in an industry are related to the three factors: the concentration of the competition, the created value for customers of goods and services, the bargaining power of suppliers and buyers. Understanding of these factors gives valuable information about the strong and weak sides of the company, competitive forces, and attractiveness of the industry (Grant, 2016, p. 65-66).
1.4.1 Porter’s Five Forces analysis
“The model most often used to assess the forces that are molding competition in an industry is the Five Forces Model of Competition. Strategists use this model as an analytical tool to unravel the complexities of industry competition by examining suppliers, buyers, product substitutes, rivalry among firms that make up the current industry, and the threat of new entrants into the industry. Each of the five factors should be assessed as to how strongly or weakly the competitive force influences the nature of competition in that particular industry.
The stronger forces are the industry factors that require greater attention when the tool is used to help determine industry key success factors and choices of strategic alternatives” (Blackwell
& Eppler, 2014).
4 The threat of substitutes – substitutes are the products that give a similar offer but by different processes. They can significantly reduce demand if there are many substitutes in the industry and thus customers can switch to the alternatives. The absence of close substitutes means that customers have no other option, but to be insensitive to price.
The threat of entry – the greater the threat, the worse it is for the existing companies because new competitors can enter the market. That is why the attractive industries should have high barriers to entry to reduce the potential new competitors. Typical barriers to overcome and compete are: scale and experience, access to distribution channels, expected retaliation, government action and differentiation.
The power of suppliers – suppliers are those who provide a company with what it needs to produce the goods or services. Its power is high where there are concentrated suppliers, high switching costs, and supplier competition threats, suppliers try to get directly to the final customer. If the supplier is strong enough, the possibility of increasing the prices is likely to occur. Most of the companies have many suppliers, so concentration within the analysis should be based on the main ones.
The power of buyers – buyers are the organization’s customers, not necessarily end- user because retailers usually exist in this chain and are considered as an immediate customer.
The condition for the high power of buyers is usually concentrated buyers, low switching costs and buyers competition threat, retailers often produce substitutes of certain products with their own resources, and are converse to the supplier’s power.
Competitive rivalry – rivals are companies that target the same clientele and produce similar products (not substitutes). Some factors can influence rivalry in an industry, such as high exit barriers or fixed costs, low differentiation, industry growth rate, competitor balance (Johnson et al., 2011, p. 55-60).
1.4.2 Competitive life cycle analysis
The corporate strategy of a company is changing through time. It depends on what stage of the life cycle the company is in. Analyzing the development of the organization at a specific time gives an understanding of what kind of strategic implications to use. Since every company wants to maximize profits, two crucial points should be taken into consideration for strategy development. The first one is an advantage of early entry since the company is a pioneer and is more likely to be well-known and reliable as well as having the biggest market share. The second one is an industry market share fragmentation, by the cause of many companies in a growth stage, fighting for market share, and the need for differentiation and proper segmentation.
There are four stages of the product competitive life cycle:
1. Introduction – the product is entering the market, small number of customers and low sales, the company is trying to attract the clientele using marketing campaigns.
2. Growth – rapid market penetration, customers are aware of the product and might have repetitive purchases, sales and competition grows, investments in products.
3. Maturity – the market is becoming fragmented, although the competition might remain the same, companies should be differentiative to keep the market share and loyal customers are appearing. The growth of sales is not rapid anymore.
5 4. Decline – sales are falling due to extreme rivalry, some companies might exit the
industry or drastically cut costs to remain profitable (Lynch, 2006, p. 87-88).
Figure 2: Stages of the industry life cycle
Source 2: Lynch, 2006
1.4.3 Market segmentation
In order to satisfy customers’ needs and understand the company’s position within the industry, market segmentation analysis can be used. Market segmentation is the specific group of consumers who have similar needs but which are different from other market groups. It helps to identify current and potential customers, target them with an exact product and pricing, and to promote the most profitable ones. The advantages of market segmentation are as following:
strength in a group, even in a huge market, getting a sustainable competitive advantage due to better matching of customer needs and the company’s resources, more effective employment of organization’s resources because of narrowing on a smaller area.
There are three prescriptive approaches:
1. Identification of market segments to get the needs and find out customers profiles 2. Evaluation of segments gives an idea about more attractive ones and the need of
targeting them first.
3. Positioning within the market segments to verify the right development strategy to be different from competitors (Lynch, 2006, p. 104-105).
It is also important to have a look at typical bases for segmentation, according to which reasons for consumer variation are seen more appropriate. Those help to create a long-term strategy.
1. Geographic – to do a better marketing campaign, segmentation by countries, districts, cities, or population density can be useful.
2. Demographic – this can include age, gender, education, race, family size, life-cycle stage, religion. Based on this segmentation the loyalty of customers is retainable since a company is focusing on needs and wants.
6 3. Psychographic - is based on the consumer’s beliefs, values, interests, lifestyle. It helps to make sub-groups and be more targeted, and choose the specific message through correct channels.
4. Behavioral – some of the customers follow the same purchase/use situation in terms of size of purchase, choice criteria and thus gives a company a prediction of the future consumption (Johnson et al., 2011, p. 71-72).
1.5 Analysis of internal resources
The internal resources of the company are making it exceptional and deliver a competitive advantage on the market. It can bring additional profitability if the company is able to find the key resources and make them an ultimate advantages, and work on the weak parts of those elements. Usually, those resources include financial, physical, human, technological, and organizational factors, and can be divided into tangible and intangible (Hill et al., 2012, p.
108).
1.5.1 VRIO analysis
The VRIO framework is used to analyze the organization’s competitive resources and identify which are giving sustainable competitive advantage. It is possible to test with the questioning about the value of the resources and then continuing with an examination of rarity, imitation, and organization capability. These factors can be described as follows:
V – Value: answers the question if the recourse is considered valuable, provides a competitive advantage, and neutralizes threats.
R – Rareness: gives an idea if the resource is unique or is used by many competitors, and in this case cannot be a competitive advantage.
I – Inimitability: the resource should be costly to imitate for competitors, and correctly deployed so the rivals cannot copy it.
O – Organizing capability: to make the resource with an appropriate value for the company, the organization should arrange the internal structure on all levels.
The figure below shows the VRIO framework with a sequential decision-making way of thinking and assessment of the resources possessed by an organization (Lynch, 2006, p. 220- 221).
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Figure 3: VRIO framework
Source 3: Lynch, 2006
1.5.2 Benchmarking
Benchmarking is a process of comparing the company’s performance with other companies that operate in the same industry. Comparing the performance with market leaders helps to see how much more they need to improve, change the manager’s mindset, and reconsider fundamental competencies. It can focus on outputs or organization’s capabilities and then try to overcome those limitations. The most challenging part is not to find out which capability is worse, but what is the reason behind that and seek out how to develop it (Johnson et al., 2011, p. 96-97).
1.6 SWOT analysis
The most often used approach to strategic analysis, which distinguishes between internal and external environment is the SWOT framework. The influences are divided into four categories: Strengths, Weaknesses, Opportunities, and Threats. The first two are related to the internal environment and exploring the resources and capabilities of an organization. The last two are driven by the external environment and are coupled with internal factors. Overall, they summarize all the analyses listed above. Some of the factors might be arbitrary, depending on the point of view of various stakeholders, and thus the main goal is to realize how the forces impact the firm and analyze their implications. The purpose is to align the internal capabilities of the company to the demand from the external environment (Grant, 2016, p. 10-11).
In order to understand these factors, companies should answer the questions such as:
S – strength: what resources does the company possess? What is unique about the organization? What are the advantages over competitors?
W – weaknesses: what should be improved internally? Are there enough investments?
What part of the business the competitors are more advantageous to?
O – opportunities: what are external changes that bring opportunities? What are the future market trends? What do the competitors lack, but available for us?
8 T – threats: are there any adverse changes in consumer behavior? Is there an increase in competition? Are there negative conditions in the market?
1.7 Scenario Planning
Considering that the future is unpredictable, scenario planning is the best option to plan the alternatives of the business’s strategic plan variations. The ‘what if’ approach helps a lot for the long-term vision. Businesses can turn to a range of paths, depending on the external and internal environment, which do consider different main variables or uncertainties, and therefore can be pessimistic or optimistic. Most often there are four scenarios to cope with. These help develop specific strategies. The idea is to have track points and stick to a concrete scenario.
When possible futures are identified, the first step is to come up with some plans on how to deal with the futures. Choosing the most likely one and investing in it is the second step, but managers should also keep in mind that something can go differently and the need to be prepared for other scenarios is arising. Afterward, if the track points show an alternative scenario, a rapid switch in a strategy is a must in order to stay on board (Hill et al., 2012, p. 15- 16).
To be more aware of how to build the scenarios, some steps help to keep eyes open on important points:
1. Identification of the scope refers to the time and a subject of analysis. It is crucial to define if the analysis is carried out for any industry as a whole in the world or just for the concrete geographical market.
2. Identification of key factors for change. To verify the main issues which have the largest impact on the industry’s future, the PEST analysis should be used.
3. Identification of trends and uncertainties. This is a crucial point because at this stage managers should find out opposing key drivers and develop a range of various and feasible scenarios. At this time the first is a need to distinguish between trends and uncertainties. Then, a prioritization takes place, when among all the possible key drivers only two are chosen, which have the biggest impact. As a result, there are two drives with high uncertainty and respectively which have the power for generating significant opposing results.
4. Visualization and development of scenarios. After opposing key drivers are chosen, it is necessary to connect the possible scenarios that cover both key factors and other aspects comprehensible whole.
5. Identification of the robustness of alternative scenarios is a final step. So, the impact on the organization should be analyzed for each of the plausible scenarios in case of a reconsideration of a strategic decision. Also, the development of the contingency plans if they are meant to happen (Johnson et al., 2011, p. 52).
Practical Part
2.1 Company description
Mattoni 1873 a.s (meaning joint-stock company) was registered on 28.03.1991 in Horova 1361/3, 360 01 Karlovy Vary with the identification number 147 06 725. Till 01.01.2020 it was
9 named Karlovarske Miniralni Vody (KMV). Thus, the brand of the main product of the company finally got directly into the name of the company (Verejny rejstrik, 2021).
The Mattoni 1873 group first appeared back in 1873 in the Czech Republic, in the spa municipality of Kyselska. It has made a significant way from just one bottle of unique mineral water to a well-known international family company. Mattoni 1873 is the largest nonalcoholic soft-drinks producer and distributor in Central Europe.
The company has expanded to 8 countries from the Czech Republic through Slovakia, Austria, Hungary, then to Southern Europe. Nevertheless, the products are distributed to 19 countries globally. 11 plants produce not only mineral and spring waters but ice teas, lemonades, juices (Mattoni 1873, 2021).
2.2 Modern History
The successful management of the company by the founder Heinrich Mattoni was overtaken to continue by the Pasquale family. Thereby, the modern history of the company began in 1991 by Antonio Pasquale who has used his foundations to build the company from Kyselka’s plant. Mattoni has become more famous, with the statement that success is thanks to the people who care about the future.
In 1991-1994 the Pasquale family massively invested in the company’s modernization and fully privatized it.
By the year 2015, they managed to enter Hungary, and at that time the owner of the family company Levente Balogh’s added bottles of their mineral waters into the group.
In 2017, Mattoni expanded to Bulgaria. Quadrant Beverages, the local producer, joined the group.
2018-2019 were the years of acquisitions in the Czech Republic, Hungary, and Slovakia of license and assets of PepsiCo. Due to this acquisition, the largest Serbian drink producer got into the span of control by Mattoni 1873 (Mattoni 1873, 2021).
2.3 Portfolio
As it was just mentioned above, Mattoni 1873 produces natural spring and mineral waters, juices, soft drinks of world-renowned brands, and even snacks. Overall, the company includes 56 brands.
Besides the mineral waters Mattoni, Aquila, Magnesia, Podebradska, Dobra Voda, Hanacka Kyselka, the portfolio of the company consists of the Austrian Waldquelle, Hungarian brand Szentkiralyi Asvanyviz and Kekkuti Asvanyviz, and Swiss St.Moritz Mineralwasser.
Among the bottled juices are Granini and syrup Yo. The licensed brands are the famous Schweppes and Dr Pepper.
Mattoni has become an official manufacturer and seller of PepsiCo in Bulgaria and later in 2018 has signed an agreement to purchase subsidiaries of PepsiCo that are operating in the Czech Republic, Slovakia, and Hungary. Therefore the portfolio was expanded significantly and now includes Pepsi, 7Up, Mirinda, Gatorade, Lipton, Mountain Dew, Evervess, Rockstar, and Toma juices (Mattoni 1873, 2021).
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2.4 The strategy of the company
To be successful on the market, stand out among the competitors, and be clear and specific to the primary stakeholders, the strategy of the company should be developed. It is an essential step for any company, either a start-up, a local organization, or a world-wide company. The main three statements are Mission, Vision, and Values. Although they have to be formulated right from the begging of the foundation of the business, they might change through the years. Considering the fact that the environment is changing rapidly, some business, corporation, and operation-level strategies might change along with the mentioned three statements.
2.4.1 Mission
“To refresh people’s life” is the mission statement of Mattoni 1873.
This statement literally describes the aim of the nonalcoholic beverage industry – to get refreshment with every sip. Thus, it emphasizes that the business organization’s mission is to satisfy the essential need of customers when they buy a product. Overall, the statement specifies the industry, so it is possible to define the scope of activities of Mattoni just by reading the mission statement. It incorporates the core goal and reflects an organization’s personality.
2.4.2 Vision
Mattoni 1873 does not have a vision statement. However, there are quite a lot of propositions oriented to future operations and desires. Based on them, the vision statement might be “To maintain our traditional sources and springs in all their crystal clarity in order to pass them on to future generations. We strive to ensure the long-term sustainability of the whole beverage industry, keep innovating, and run responsible business”. Such vision incorporates the company’s values and sets concrete goals for future development. Moreover, it gives a sense of the company’s priorities and what to do in order to achieve them. Both external and internal stakeholders must understand the purpose of the business.
2.4.3 Mantra
The company’s mantra is “Sources and Tastes of Europe.”
This mantra is simple and powerful at the same time. It shows the respective company’s meaning, purpose, and direction. The word ‘sources’ gives a unique offer to stakeholders since Mattoni 1873 is making some of its soft drinks from natural mineral and spring waters located in the Czech Republic. Therefore, these minerals in the waters give an exclusive taste that brings diversity to the company. Since customers are the main drivers of the business and bring profit, their satisfaction is fundamental, so even the mantra states that they sell the product you should enjoy.
2.4.4 Values
Core values, or core principles, are essential for the prioritization of everyday activities.
The fundamental beliefs guide employees to work together toward a common business goal. In view of the fact that Mattoni 1873 is a family company, the values have stayed faithful for 150 years.
There are three primary values:
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— Courage. Back in 1873, Heinrich Mattoni turned a great dream into reality.
Nowadays the company is keen on being courageous to change routines, do business differently, and even provoke something.
— Respect. This refers to natural springs and sources, that in the best case scenarios might be passed to future generations, respect to the environment and sustainable industry.
— Resourcefulness. An idea that it keeps on growing over the last 150 years is based on swiftness, creativity, and striving for perfection (Mattoni 1873, 2021).
2.5 Stakeholders’ analysis
Stakeholders are all the persons that are related to the company, might slightly or substantially affect its operations. Therefore, the need for constant satisfaction of stakeholders, as well as accurate feedback from them, is an essential activity that can lead either to success or failure. To get the support from all stakeholders, and avoid any conflicts, it is necessary to verify their needs, expectations, and even obligations that should be properly managed from the business’s side. The stakeholders for Mattoni are shareholders, employees, consumers, customers, suppliers, and government, and media. By the power and interest is it possible to divide them into four groups.
Key players:
Shareholders. Mattoni 1873 is a private family company. According to Verejny Rejstrik (2021) the only shareholder of the company is Trentop Investments B.V. The rebirth of the company was in 1991, and subsequently with new investments and owner Mattoni 1873 has become the leader on the Czech Market and managed to expand to Eastern Europe. As well as a shareholder is interested in returns on investment, dividends, and long-term sustainability of a business.
Customers. These are considered as retailers/distributors, restaurants/cafes, hotels, vending machines. Customers want to get the best correlation between price and quality, the brand name, which is preferable by final consumers, and bring more sales, therefore have a moderate interest. At the same time, customers have low power, because first of all, they simply have to distribute the demanded products, and according to Passport (2020), store-based retailing is still the main source of purchasing groceries and soft drinks.
Keep satisfied:
Government. Governmental regulations, laws, and any related adjustments, such as sugar tax or waste management, should be properly monitored and implemented. Breaching the law or avoiding it can result in significant financial losses and brand damage. Forasmuch as Mattoni 1873 operates in various countries, laws differ and must be satisfied. Mattoni 1873 is a leading soft drink company with a solid revenue, and therefore the government benefits from obliged taxes. According to Lu (2020), soft drink sales in Europe will increase at a compound annual growth rate of 2.4% in the next 4 years, which is good for the governmental treasury. Moreover, the company adopted the circular economy, which increases the overall state’s sustainability rate.
Keep informed:
Suppliers. Mattoni 1873 has its own sources and spring of waters, and this is basically the main element for the soft drinks industry. Other components or ingredients, such as sugar,
12 flavor, carbon dioxide are not rare, and the price range among suppliers is not great. As for equipment and machines, these are lasting longer and in case their working life is satisfactory, the relationship could remain longer. For these reasons, suppliers do not have a strong influence. Nevertheless, suppliers have the interest to be partners with a company on a constant basis to retain a constant buyer.
Employees. Jan Behounek (2021) says, that working in a family company is differ significantly from other types; people are enthusiastic, seek solutions, not excuses. Employees are surely the fundamental stakeholders, as they are in charge of running the business efficiently on an everyday basis. In order for employees to work to the fullest, the management of the company made some priorities started 2019, such as a new salary policy – 5% yearly corporate bonus, individual bonuses, increased contribution to benefit portal, etc., implementation of a Success Factor system for better performance evaluation (Annual Report, 2019).
Minimal effort:
Final consumer. Consumers are always choosing affordable prices and good quality, although it partly depends on a retailer, and so the interest is low, only if they are really dedicated to a specific brand flavor. Also, they do not have any power to affect the company.
Media. Having a good brand image and positive representation of the company overall is crucial. The achievements or breakdowns are usually published by the media and as such, reach any stakeholder. Still, they do not have any specific interest or real power to affect the company.
To make a stakeholder map based on the power and interest of stakeholders, the below table is done:
Table 1: Interest and power of stakeholders of Mattoni 1873
Stakeholders Interest (1 to 5) Power (1 to 5)
Shareholder 5 5
Government 3 4
Customers 1 5
Suppliers 4 1
Employees 4 1
Final consumer 1,5 1
Media 1 1,5
Source 4: author
1. Shareholder. Interested the most in the company’s well-being to earn money and have the highest power as is the main investor.
2. Government. Has lower interest, but constantly receives tax payments and has the power to affect the business in terms of regulations.
3. Customers. Interested in the distribution of the product that the final consumer buys, and therefore has the power of buying less or request a lower price for bigger orders.
4. Suppliers. These are interested to keep providing raw materials, as the company is growing and expanding, but do not possess any power because of wide offers on the market.
13 5. Employees. Sales and competitive advantage of the company are interrelated with employees’ compensation and benefits, so they are interested in a high performance, but have no power except for bad performance in case of internal conflicts.
6. Final Consumer. If the final consumer is loyal to a concrete brand, then there is an interest to keep buying it, but they cannot change the pricing or company’s operations.
7. Media. They are publishing outstanding news about well-known/local companies, and if there is some negative or extremely positive article, the brand image might be improved or worsening in some way.
The stakeholder map below is a visional representation of everything mentioned above:
Figure 4: Stakeholders map of Mattoni 1873
Source 5: author
Issue Matrix
Table 2 encompasses the main possible issues that can affect stakeholders by actions of the company and therefore crucial for both sides. The scale is from 1 to 5, where 1 is the lowest interest and 5 is the highest.
Table 2: Issue Matrix
Shareholder Government Customers Suppliers Employees Final Consumer
Media
Product’s quality
5 3 5 2 4 3,5 2
Sustainabil ity
4 5 2 1 3 2,5 3,5
Brand image
5 2 2 2 4 3 2
Product’s price
5 2 5 2 3 5 1
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Source 6: author
Shareholders are mostly interested in every aspect of the before mentioned list since all the issues are important for successful operation on the market, a correlation between quality and price gives a competitive advantage and brings sales, giving a positive brand image, although sustainability is a necessary but costly part.
Government is highly interested in a sustainable operation from the company’s side, and thus a good “green” product, since it affects the overall country sustainability rate but does not care about the brand and pricing.
Customers are ready to buy the best deal of a good product for good price, and are only slightly interested in a brand image, but it is very negative.
Suppliers are not directly affected by any issue from Mattoni’s side, only if they cut their operations and buy less from them.
Employees, especially in a family business, associate themselves with the reputation of the company, and thus it is crucial for them, and thus producing a quality product is a part of a good brand image.
The final consumer is neutral until the price is too high, and the brand is the ultimate choice on the market for specific reasons.
Media is neutral as well but with new tendencies towards sustainability, it is more likely to keep an eye on improvements or failures in any industry.
Overall, it correlates with the stakeholder map which is represented above, which explains what issues are the most crucial for each stakeholder. This information gives an understanding of what stakeholders are interested the most in the company’s operations, and thus Mattoni 1873 has to take into consideration these factors to satisfy all of them.
2.6 Analysis of Macroenvironment
For an understanding of how the external factors might influence the company, an analysis of the macroenvironment exists. To verify the potential threats and opportunities, which are going to be used in the SWOT analysis, a few factors of each environment – political, economic, social, and technological have to be considered.
2.6.1 PEST analysis
2.6.1.1 Political factors
Governmental restrictions on sugar consumption
The worldwide trend is moving toward adopting sugar taxes. The year 2016 was officially named “the year of the sugar tax” after a report by the Health World Organization that had stated the negative impacts of sugar consumption. Since that more than 50 countries have implemented sugar or nutritional taxation to discourage sugar consumption. In 2021, Spain and Poland have joined taxation approaches to fight obesity-related illness. Other European countries were among early adopters yet in 2011, such as Hungary, UK, France, Ireland, Portugal. All around the world, regular soft drink purchases have decreased, while diet soda purchases increased. The ultimate future of sugar reduction and taxation is moving towards changes in consumer preferences, non-sugary sweeteners, and special technologies to be able to produce drinks based on a new recipe (Emmet, 2021).
15 The Czech Republic, as well as other European countries, were included in a list with an obesity epidemic turn to SSB (sugar-sweetened beverage) taxes as a solution, and unsurprisingly, all the countries represented below in Figure 5, are among the leaders of packages soft-drinks consumption. Thus, the problem is not fast to solve, and the SSB taxes strategy is aimed at a long-term stay (Euromonitor International, 2020a).
Figure 5: Overweight/Obese Population and Soft Drinks Consumption per capita 2018
Source 7: Euromonitor International
Based on the reasons above, by 2020 Europe’s industry of soft drinks got a reduction of added sugars by an average of 14.6% and forecasted to reduce more. Moreover, Europe’s sector of soft drinks has prohibited advertising to children under 12, as well as a ban on sales of soft drinks in primary schools, and only low- or no-calorie drinks in secondary schools (Rachel, 2020). Taking into consideration such trends, it is possible that the Czech Republic can adopt the sugar tax, as well as other European countries. Moreover, Mattoni 1873 is exporting to approximately 20 countries, so they should keep an eye on restrictions in those countries for soda drinks. Mattoni 1873 has already launched some drinks without sugar, so it is a good opportunity for the future to shift the whole production sugarless.
European waste legislation and targets
In 2018, European Union has adopted new legislative proposals of waste packages that should help move from a lean to a circular economy, recycle more, and be more sustainable.
There are four of them:
— The Waste Framework Directive. Businesses and households are obliged to recycle at least 55% of their waste by 2025, which leads to 65% in 2035. By 2023, stricter rules will be applied for the separation of additional waste streams, as well as bio-waste.
— The Packaging Waste Directive. Governments are required to ensure that by 2030 it is being recycled 70% of product packaging. The figure differs based on the individual packaging: 55% for plastic, 30% for wood, 75% for glass, and 85% for paper. The interim result should be 65% by the end of 2025.
— The Landfill Directive. By 2035, the maximum amount of waste that may go to landfills should be 10%. Is it most probably that by 2024 will be set a quantitative target per capita on landfilling by the Commission.
16
— New EU harmonized methodology to count recycling rates for municipal waste. The new recycling rates are now based on the amount of waste that is actually entering the processes of recycling as a secondary raw material, although it used to be just the amounts of collected waste for recycling. These take back some percentage points and makes countries increase recycling performance, achieving higher targets (Varbova et al., 2020).
Basically, a Zero Waste hierarchy for Europe was made, which proposes new tools for better times. It says “from waste management to resource management” (Simon, 2019). It encompasses the possible ways of waste management without any damage to health and the environment. The figure below shows the hierarchy:
Figure 6: Zero Waste Hierarchy
Source 8: Zero Waste Europe by J.M.Simon
These legislations give both threat and opportunity for the company. The threat is to get considerable fines or shutting down the company. The opportunity is to adopt a circular economy and sustainable approach, which Mattoni 1873 has already implemented in their operations, faster than competitors, and continue on the market.
2.6.1.2 Economic factors
European Union Wage Growth
Mattoni 1873 is a manufacturing company, and in the nearest future the number of employees working in the factories will not decline, but possibly increase, if the company will grow and expand within the Czech Republic and abroad. Moreover, they are already having production plants in other European countries, and therefore the Wage Growth is an important indicator that influences the company’s costs.
Wage Growth in the EU is expected to be 1.20 percent by the end of March, according to Trading Economics (2020b). Looking forward, the estimation is that the rate in the Czech Republic will stand at 1.40 in a year. In the long-term, the Wage Growth in the European Union
17 is forecasted to be approximately 1.60 percent in 2021, and in 2022 it can increase up to 1.80%.
Figure 6 below shows the nearest forecast.
Figure 7: European Union Wage Growth, Forecast
Source 3: TradingEconomincs.com | Eurostat
In the second quarter of 2020, due to strict measures against the pandemic, in the EU, labor costs increased to 4.1%, compared to the year before, but at the same time hours worked decreased (Eurostat, 2020). Nevertheless, the future Wage Growth is projected to be less than pre-pandemic, and therefore it might be a good opportunity to expand, considering decent labor costs.
Czech Republic Consumer Spending and Current Recession
Disposable income has a direct correlation to consumption, and therefore sales of the company. With the impact of Covid-19, a few years of recession are expected in many economic terms, and Consumer Spending is not an exception. According to TradingEconomics (2020a), it has decreased to 571.30 CZK Billion in the fourth quarter of the previous year. To compare, in the third quarter of 2020, it was nearly 24,75 CZK Billion, standing at 596.05 CZK Billion. Figure 7 below shows that it is expected to get 597.16 CZK Billion by the end of the first quarter of 2021. In the nearest future, in 12 months’ time, it is forecasted for Consumer Spending to be 623.82. In the long-term, there is a projection to trend approximately at 639.41 CZK Billion in 2022, and in 2023 is 655.40 CZK Billion, which is basically even more than the previous three years.
18
Figure 8: Czech Republic Consumer Spending, Forecast
Source 9: TradingEconomics | Czech Statistical Office
Taking into consideration the current situation – people’s concerns over the economic situation, prolonged restrictive measures, their financial situation, etc., the confidence index is very unstable and tends to decrease. This significantly affects the sales. In 2021 in the Czech Republic, the volume of retail soft drinks is projected to decline, although slower than in the previous year. Total sales might slightly start growing in 2021, in case that on-trade channels will be available, and people will migrate from off-trade. Since consumers are more likely to hold an unstable purchasing power for some time and reduce expenses on the consumption of some soft drinks, such as carbonate, flavored bottled water, choosing more cheap alternatives.
Moreover, based on the reasons above, the negative impact on the demand for premium soft drinks is expected in the Czech Republic, albeit the demand was strongly growing before the pandemic. On-trade sales might get a positive growth in 2022 if the weather during the summer will be hot, and by 2023 it is possible to expect pre-pandemic sales (Euromonitor International, 2020b).
Table 2 below shows the sales in CZK million for the Czech Republic for the next four years. Although 2021 and 2022 are not going to have a rapid increase, based on the reasons above, further it will reach 3.3% volume growth 2020/25 for off-trade and 58.6% volume growth 2020/25 total, states Euromonitor International. Considering the market growth, there is an opportunity to attract more on-premises customers, invest in and support it, and thus proportionally obtain the biggest percentage of sales in monetary terms.
Table 3: Forecast Off-trade vs On-trade Sales of Soft Drinks by Channel: Value 2020-2025
2020 2021 2022 2023 2024 2025
Off-trade 28,569.1 28,574.2 28,963.8 29,483.9 29,923.3 30,304.1 On-trade 14,191.7 19,164.4 21,216.6 22,346.6 22,816.6 23,175.4 Total 42,760.7 47,738.6 47,738.6 51,830.5 52,739.9 53,479.5
Source 10: Euromonitor International, adjusted by the author
2.6.1.3 Social factors
New Trends: Change in Attitudes
19 No doubt that the pandemic has brought significant changes to the soft drinks industry.
The world market for soft drinks has changed since people had to stay at home and could not have impulse purchases in cafes and spent time in on-trade premises, which used to be the main sales channel. Therefore, there are four new trends, based on the redefined attitudes and mindset of consumers:
1. Need for rebuilding on-premises trade of soft drinks. On-premises drinks in packages, fountain sales, outside dining, and consumption is the major source of sales and value for the brand owners. Therefore, the vital thing is to keep promoting and supporting on-trade sales. In the long-run, such support could involve more storage options and outdoor seating, some cleaning equipment that is supplied to bottling partners, or some cooling equipment for food service.
Moreover, changes in preferences should be satisfied – consumers might take the preferences of self-service fountains, packaged options over poured beverages, and handled behind a bar counter (Euromonitor International, 2021).
2. Touch-free vending and fountain machines. In the short-term, sales of coolers in a convenience store and vending machine will experience challenges, since people shifted toward less profitable, but larger family pack type drinks for a longer at-home consumption during the lockdown. In the long-term, touch-free vending and automated fountains, which work via a special app on the phone, with just scanning a QR code, are more likely to be expanded by big brands. A greater emphasis on touch-free and self-serve options is here to stay, predicts Euromonitor International.
3. The ‘new wellbeing’ changed preferences across soft drinks. Euromonitor International forecasts that in the short-term, consumers will choose drinks, that are good for the immune system and thus contain the necessary vitamins, such as vitamins C and D and micronutrients like zinc, which support the demand for natural juices and health drinks like kombucha. Further, health drinks are likely to include more accessible products such as fermented juice, water kefir, and fiber-rich drinks with prebiotics. The next step is relaxation beverages, with formulations that include amino acid L-theanine and such to bring functional benefit state.
4. Possible lift to countertop commerce. A long-term increase in inside staying time and shifts in general routines, such as the morning visit of a coffee shop or impulse buying of drinks from forecourt retailers, will need an investment in special convenient appliances that allow making beverages at home. This is another way to bring the soft drink brand inside consumer’s houses. Moreover, it is packaging-free, which is a great step towards sustainability targets and cuts back on the waste of PET (polyethylene terephthalate) plastic. The forecast by Euromonitor International is that such countertops will be as normal as coffee countertops, and in the future, they can capture the preferences of the consumer, while giving feedback for more customized product development.
Be aware of these new trends and taking some steps to implement them, to spare part of the budget to invest in special counterparts and new formulas of drinks is a great opportunity to be leaders on the market, especially in Europe. At the same time, some
20 giants, like Coca-Cola are already pushing ahead of these trends and can promote new products to Europe as well.
2.6.1.4 Technological factors
Omnichannel distribution | E-Commerce
Grocery retailers, especially hypermarkets and discounters, play a vital role in soft drinks’ distribution, and during the Covid-19 these channels were visibly rising, since it was the only option, people were buying less frequent and larger packages to avoid person-to- person contact. Nevertheless, e-commerce experienced a boost. With significantly strict rules in the Czech Republic, the chained hypermarket Kaufland was one of the most popular for online purchases of goods. Online supermarkets like Kosic.cz and Rohlik.cz were also among the most demanded (Euromonitor International, 2020).
Although the food and beverage industry is always dependent upon retailers, new trends are a promising shift to omnichannel distribution. Creating B2C commerce decreases dependence on existing distributors and addresses consumers’ needs. Globally, by 2022, it is feasible that 20% of all grocery transactions may happen online. Therefore, the sales of food and beverages could be worth $100 billion themselves. Another channel of the future is D2C, or “direct to the community”. An e-commerce presence gives the next solutions: cutting on intermediaries and shipping directly to the final consumer, and reducing overhead costs by marketing; the second one is encouraging impulse purchases but in online word by leveraging a digital “footprint”, gaining another stream of revenues. Customers would get the products in as few steps as possible, and thus supply channels might shorten for a company (Sykes, 2019).
Figure 9 depicts the forecast that the European market in the food and beverage sector is going to increase by 11.2% at a compound annual growth rate from 2019 to 2023. The revenues that are above the columns are in billion euros (Shlumbohm et al., 2020).
Figure 9: Digital Market Outlook: Revenue
Source 11: Statista Digital Market Outlook, 2020
Considering the facts, e-commerce in the beverage industry is not going to have a dramatic boost, but this can be an opportunity for the company to sell directly to final consumers and get another revenue stream.
21 Artificial Intelligence
Artificial Intelligence, or AI, encompasses a lot of potential in various perspectives of the food and beverage industry. The global AI in the food and beverage market was valued at
$3.07 billion in 2020 and is forecasted to increase up to $29.94 billion by 2026 at a compound annual growth rate of over 45.77%. A supply chain is bringing a large amount of information, and AI helps to analyze it, better understand the variables for scenario planning, and therefore by using AI, companies could much faster verify consumers’ preferences and create new recipes, and then by using historical and current data to predict sales cycles. Basically, the first companies to adopt are the first on the market (Mordon Intelligence, 2021).
According to a report by McKinsey’s Global Institute, manufacturing industries, that invest in AI are forecasted to get 18% annual revenue growth. Thus, the future opportunities are:
1. The most precise data and fast access to it. AI gives insights in a few hours, while constantly collecting new data.
2. Track consumers’ preferences and getting immediate feedback in real-time. Knowing the future demand for flavor is a game-changer.
3. Virtualization of testing of concepts with personas created by AI before launching the product.
4. Less interaction with sensitive data by people.
5. Increase in revenue by maximizing the budget and increase brand profitability in the long-term (Mast, 2020).
The problem here is the high cost of deployment of new technologies. However, in the long-run, the implementation of AI reduces labor costs, increasing speed and agility. Moreover, it is an ultimate shift in the future for all manufacturing companies.
2.7 Analysis of Microenvironment
Analysis of microenvironment helps to have a closer look on factors, that directly influence the industry, and thus organizations’ processes and success. It helps to identify strengths and weaknesses of a company.
2.7.1 Porter's Five forces model
Bargaining Power of Buyers
In Europe the overall volume in million liters for both carbonated soft drinks and non- carbonated soft drinks (CSD) comprises 63,396.3 in 2020 and expected to grow up to 68,754.9 million liters in 2024, which gives an average volume per capita of 52.1 for CSD and 22.7 for non-CSD in 2020 and forecasted to be respectively 56.9 and 24.5 in 2025 (Statista, 2020).
These indicators clearly show that there is a demand for soft drinks, and people are willing to buy.
During the pandemic, consumer preferences have changed, people are diving into buying healthier drinks rather than sugary carbonates, as was described in the Social Factor in PEST. Therefore, buyers are shaping the demand from one type of drink, to another – healthy, sugar-free, and calories-free. Diet Soft Drinks Market is projected to reach USD 5.2 billion by 2025 worldwide, which will boost demand significantly comparing with the current year says Million Insights’ report (2020). This will make companies increase the production of health or
22 diet drinks with a new formula based on natural components, and possibly demand new supplied areas.
Off-trade that encompasses various retailers – grocery shops, convenient shops, hyper- and supermarkets, vending, e-commerce, and other types, accounts for 28,569.1 CZK million in 2020, as stated by Euromonitor International (2020b). There was a 1% increase, despite the pandemic compared with 2019. By 2025, off-trade forecasted to increase only by 1.2%, which is more or less durable, considering that soft drinks were not increasing fast ten years prior, and with the economic crisis people tend to save. Bottled waters will remain the product that sells more of all.
On-trade is basically the HoReCa sector, which stands for hotels, restaurants, and cafes.
During 2020 there was a significant drop of 34.9% resulting in 14,191.7 CZK million due to massive shut down of all on-site premises. The forecast by Euromonitor International (2020b) predicts an increase by 2025 in this segment is approximately 10.3% since most of the countries keep having restrictions for the opening of bars and restaurants. Moreover, closed borders and restriction of tourism significantly affect this sector and result in lower on-premises demand. Bottles water and carbonates will keep rising in demand for the HoReCa segment within a few years. Fast food players remain popular among the population, specifically teenagers, thus the demand for local carbonated producers will stay.
Overall, final consumers will buy various soft drinks in the nearest future and even can overpay for healthier options, thereby shaping the demand. Therefore, customers will buy from manufacturers and distribute the most selling brands, since the demand is about to grow.
Customer is more intermediary between a producer and an end-user, and considering future trends, they should get the best deals with soft-drinks companies regarding new products. Thus the bargaining power of buyers is low.
Bargaining Power of Suppliers
The main suppliers for the beverage industry are bottling equipment and packaging suppliers. Equipment is something, that lasts long, and the product is always the same, besides some significant innovations. This equipment is widely available on the market, and thus companies are able to easily change suppliers. The costs are mainly differ based on the location of the supplier, and therefore the logistics tax, etc. costs added up to the products might be higher or lower.
The barriers to entry to become a supplier are very low, so there is always a vast amount of suppliers currently and possibly in the future, that can offer the better deal or service for the best price on the market. It is obvious, that any company would choose the supplier that does an excellent job cheaper than others, which leads to high suppliers’ concentration in the industry and low switching costs (Kasi, 2017).
In terms of raw materials, the basic ones are most common not only for manufacturing firms but for citizens (sugar, coloring, syrups) and this is another evidence that there are a lot of suppliers even locally. Moreover, connection with soft drink producers is extremely crucial for suppliers, as it is a profitable market and to grow opportunities, so they can obtain revenues from delivering beverages and equipment to the customers for the firms (Lucas et al., n.d.).
The bargaining power of suppliers is weak.
Barriers to Entry
23 The main players on the market are having a cost and performance advantage, in the case of the Czech Republic, there are three of them with the follow-up company’s shares, by volume off-trade – Mattoni 1873 a.s. – 30,6% (considering 10,2% of owned Podebradka a.s.), Kofola a.s. – 19,4%, Coca Cola HBC Česko a Slovensko s.r.o. – 12.1%, based on Euromonitor International (2020c). These companies obtain the greatest capital expenditures and have established economies of scale. Moreover, it is clear that throughout the years of operation in the industry, they have a wide setup distributional channels, such as grocery shops, small Vietnamese shops, gas stations, vending machines, restaurants, e-shops, etc., and direct supply.
New start-ups or small companies might only try to match the opt pricing on a large scale, which on contrary to big firms will lower their profit margin.
Another important factor that complicates the possibility of new entrants is a well- established brand image, advertisements, and campaigns associated with concrete brands.
Mattoni’s logo – eagle, Coca Cola’s famous Christmas truck, and red color, Kofola’s exclusive taste all give a unique advantage to these companies, building strong business relationships and competitive pricing. Thus, they will always be on the top of mind while purchasing decisions.
Since the soft drinks industry is including a manufacturing process, initial capital is rather considerable, it encompasses bottling, storage, distribution, innovative activities to be able to enter, and more costs for advertisement, marketing, creating a unique offer, and building a strong differentiating brand.
Legal factor is another crucial point to keep in mind when entering the industry. There are insurances (e.g. accidents, faulty products), patents (e.g. brand, new flavors), licensing (e.g.
for production, distribution), and policies that are necessary to operate in the industry. Special papers and documents firstly should be made to demonstrate the legality aimed of the business and only after approval of some institutions will be issued (Pincvision, n.d.).
According to the percentages that were mentioned in the first paragraph, it is fair to say that the soft drink industry is an oligopoly. Altogether the three companies control 62,1% of the market share. Therefore, the newcomer can experience retaliation from key players with strongly settled distribution channels, brand value, awareness to customers, relationships with retailers, suppliers.
The threat of new entrants is low.
Substitution products
Substitutes for soft drinks might be either in the same pricing segment, such as ice coffee, fruit infused water, iced herbal tea (homemade), homemade lemonade, sports drinks, or in a higher pricing segment: fresh-squeezed juices or smoothies, coffee. Although normally substitutes are the products, that have similar pricing, with the current trend toward a healthy lifestyle, 71% of people are willing to overpay for more natural and ‘clean’ food and drinks, according to Ingredient Communications’ research. The switching cost is higher, but in the long-run it might be a core product for manufacturers of beverages. Moreover, consumers perceive local ingredients as more fresh and sustainable, thus the locally manufactured product is likely to be proffered (Mastroberte, 2019). Mattoni 1873 has already introduced Mattoni Essence without any sugar or sweetener, following the trends.
Substitutes are widely available on the market. Brands like UGO, Fruitismo, Woodoo.
People are possible to buy not only in their café-shops but in most of the retail shops, such as Tesco, Kaufland, Albert. Within the last seven years, demand for fresh juices has increased by
