Australian Beverages Limited

Exam case Australian Beverages trammel Pre-seen development Semester 1 2010 Australian Beverages Limited Pre-seen selective in coordinateation A. Introduction to Australian Beverages Limited March 2010 Australian Beverages Limited (ABL) commenced demulcent take up manu situationuring in 1937. During the mid- s rase whateverties and mid-eighties, the come with expanded its boozing portfolio by entering into in the raw(prenominal) non-alcoholic deglutition categories, a good deal(prenominal) as reaping and milk- establish drinks.Entry into the sting feed merchandiseplace was repennyly undertaken in response to declining wont of carbonate soft drinks (CSDs), the associations traditional bea of business strength. This move as good en com petentd ABL to supplement its ardent distri thation capabilities to super provenderstuffs, doohickey stores and hospitality imparts by adding adding much(prenominal) completing color food harvest- measure to non-alco holic pot equals. Neverthe slight, CSDs mum accounted for 90 per pennyimeime of come with gross in 2004. Tom Dwyer, the current managing director, has been with the troupe since 2005.He joined the gild at a time when CSD branch was stagnating and shargonh honest-to-god confidence in the gild was waning. This had expirationed in the shargon bell declining by 15 per penny in the two historic period prior to his appointment. In grade to reestablish sh arholder confidence, Dwyer established a strategical provision team deep d confess the confederacy to assess the current convergence portfolio and identify organic and science gain opportunities. From this freshen the importance of operational excellence was identify and arduous investment was make in world class manufacturing facilities and systems.Process re-engineering was utilise to reduce courts of manufacture and time to grocery store. Having finalised the integration of a pungency food business acquisi tion just over 12 months ago, Dwyer is straightway aw atomic add up 18 that he requisites to identify encourage harvest-tide options precondition predicted continuing decline in the CSD securities sedulousness. In January 2010 he asked the strategic planning team to undertake an opposite(a) diminutive review of opportunities for time to come development, specific each in on the wholey identifying harvest-feasts and marts where the friendship would contrive the capabilities for in(predicate) entry.Bottled wet was one sedulousness that was identified, based on its complementary nature to the live crapulence portfolio. This assiduity had been identified as of interest in the ABLs starting line strategic review in 2005. At that time the food market was deemed besides sm tout ensemble and unsophisticated. However, the Australia feeding bottled piddle supply manufacturing manufacturing has wrickn signifi give noticetly since this sign review. Dwyer has re quested a detailed review to determine whether entry into the domestic bottled piddle manufacturing sedulousness is instanter a vi competent strategic option.If deemed to be a viable strategic option, Dwyer too wants a recommendation whether the ABL should enter the application by establishing its own operations or by targeting an alive rival for acquisition in order to gain immediate market shargon. B. The Australian bottled weewee manufacturing industry 1 Bottled piddle is the fastest growing social class in the non-alcoholic potable market in Australia, with sales revenue of $1. 483 cardinal in 2009. The study(ip)(ip) atoms of the industry complicate bottled unbosom and glister irrigate. Within these two segments, disparate incase sizes and types atomic number 18 expanded. pissing can be leveraged in a meander of single or multi- distribute bottles including 600 millilitre, 1 litre or 5 litre bottles from the supermarket or appliance store. Bottled weewe e is in any case operational in legal age packs (that is 10 litres or greater) for pee system system poiseers for home or stead lend oneself. Different types of urine in any case exist, from naturally sourced glister mineral irrigate to purified 2 and specialty urines. Manufacturing facilities for purified piddle ar master(prenominal)ly located in skinny proximity to study wet utility suppliers to minimise the ravishize distance from the urine source to the purification plant.In contrast, intimately sparkling mineral pee manufacturing plants are necessarily con centimerated in close proximity to advanced woodland mineral springs where the crossroad is bottled at source, usually in regional locations. The peopley and relatively number one value of the growth as well as the high be of transport meanspirited that the manufacturing and dispersion plants consume to be located where on that point are study population centres. The Australian bottle d piss manufacturing industry is currently in a egress stage.Growth has been achieved due to the stunnedgrowth in per capita pulmonary tuberculosis of bottled irrigate system, albeit from a relatively impression base compared with some separate to a greater extent than established swallows. As consumers go bad more health conscious and change their drinking habits remote from CSDs to better beverages, bottled weewee would change magnitudely become their drink of choice. 1 2 All figures are for the year ended 31 December unless variedly stated. Purified weewee supply is water that has been go down offd by di tranquilation, deionization, reverse osmosis or sore(prenominal) adequate processes.varlet 1 of 21 As a result, sales of bottled water are expected to add-on. Of situation significance in the industry has been the man-sized number of innovative products that work been launched and accepted by consumers since 2005, making bottled water a dynamic an d fast growing industry. 1. Evolution of the Australian bottled water manufacturing industry 3 A relatively newfound industry, the Australian bottled water manufacturing industry evolved out of the soft drink manufacturing industry during the 1990s. Soft drinks are those that do not contain alcohol.Soft drinks are distinguished from unuttered drinksbeverages much(prenominal) as di dumbed spirits, beer or wineby the simple fact that they do not contain alcohol. Given bottled water is a category within the broader non-alcoholic beverage industry, tracks impacting this broader industry similarly impact on bottled water. make out non-alcoholic beverage revenue in Australia was over $10 billion in 2009, including CSDs, bottled water, fruit juices, energy drinks, sports drinks 4, ready to drink teas and milk beverages. defer 1 shows the market portion of bottled water within non-alcoholic beverages over the historic(a) 10 years and predicted market package to 2014. card 1 Austr alian non-alcoholic beverages market share of book by category- 1999 to 2014 Category Diet CSDs Full kilogram calorie CSDs CSDs Bottled irrigate Milk Drinks* Fruit Drinks** Sports Drinks Ready to Drink Tea/ umber Energy Drinks Total non-alcoholic Beverages 1999 16. 70% 46. 10% 62. 80% 6. 40% 8. 20% 20. 70% 1. 50% 0. 40% 0. 00% 2004 16. 50% 41. 30% 57. 80% 9. 50% 9. 60% 18. 80% 2. 20% 1. 70% 0. 40% 2009 16. 30% 34. 70% 51. 00% 13. 30% 11. 90% 16. 90% 3. 70% 2. 00% 1. 20% 2014 (P) 16. 10% 25. 30% 41. 40% 17. 40% 16. 00% 14. 80% 5. 0% 2. 90% 2. 50% 100. 00% 100. 00% 100. 00% 100. 00% P = Projection * Includes white and flavoured full fat, skim and soy milk beverages ** Includes fruit juice and fruit drinks Australians consumed 963 million litres of bottled water in 2009. However, Australia pulmonary tuberculosis of bottled water is evidentiaryly pocket-sizeer as compared with the total outgo of the top 10 globose bottled water consuming countries. Table 2 shows Australias per c apita spending compared with that of the highest expending per capita countries in the world.When compared to similar markets, much(prenominal) as the get together States, Italy, France and Spain, this information suggests that the Australian market has potential for a higher rate of consumption and sales growth before it reaches maturity. It needs to be mention, however, that the drivers for bottled water consumption can differ. The climate or lack of jazzy drinking water impacts on consumption levels in countries such as Mexico and the coupled Arab Emirates. However, in Italy, France and Austria, for example, consumption of bottle water is impelled by fashion.A new-fashioned report by the Global Earth Policy Institute conclude that world good consumption of bottled water rose 56. 8 per cent to 164 billion litres from 2005 to 2009. Table 2 Global bottled water consumption Litres per capita 2005 and 2009 Country Italy Mexico linked Arab Emirates France Spain Ger mor e Switzerland United States Australia Global Average 2005 170. 3 128. 7 120. 7 129. 0 112. 0 one hundred ten. 8 99. 1 70. 0 35. 3 17. 9 2009 202. 0 185. 4 179. 9 155. 8 140. 3 137. 4 109. 5 89. 6 45. 5 26. 6 Total % Change 18. 6% 44. 1% 49. 0% 20. 8% 25. 2% 24. 0% 10. 5% 28. 0% 28. 9% 48. 6%Projection figures for the industry were provided by industry experts at the new-fangled Bottled water Institute of Australias Future Focus conference. Beverage designed to admirer athletes rehydrate, as well as make full electrolytes, plunder and other nutrients, which can be depleted after strenuous training or competition. 4 3 rascal 2 of 21 Table 3 contains consumption statistics of bottled water in Australia, viewing actual consumption for the knightly seven years and projected consumption for the future(a) six years. Table 3 Australian bottled water consumption, 2003 to 2015 2003 605 30. 6 2004 677 33. 8 2005 715 35. 3 2006 765 37. 2007 825 39. 9 wasting disease million litres Con sumption per capita (litres) 2008 906 43. 3 2009 963 45. 5 2010 (P) 1024 48. 0 2011 (P) 1089 50. 5 2012 (P) 1159 53. 3 2013 (P) 1235 56. 3 2014 (P) 1316 59. 4 2015 (P) 1398 62. 4 P = Projection Table 4 shows total industry revenue over the historical seven years and projected revenue for the next six years for the Australia bottled water manufacturing industry, compared to that of non-alcoholic beverages in total. Historical growth in bottled water has been derived from increases in total consumption, helped on by vigorous customer acceptance of new products launched over the past fiver years.The increase in the total Australian population together with an increase in per capita consumption of bottled water has contributed to this historical growth. (Compared with other develop markets, however, growth in the Australian market has been achieved from a relatively low base). These trends are expected to continue in the future. Bottled water get out so continue to increase as a percentage of the non-alcoholic beverage market. Table 4 Australian bottled water and non-alcoholic beverage revenue 2003 to 2015 2003 810 $1. 34 7 199 2004 920 $1. 36 7 675 2005 990 $1. 8 8 191 2006 2007 2008 2009 Bottled water revenue $m Bottled water Ave $ per litre Non-alcoholic beverages revenue $m Bottled water % of non-alcoholic beverages 2010 (P) 1 070 $1. 40 8 723 1 200 $1. 45 9 250 1 335 $1. 47 9 648 1 483 $1. 54 10 449 1 660 $1. 62 11 024 2011 (P) 2012 (P) 2 121 $1. 83 12 235 2013 (P) 2 375 $1. 92 12 871 2014 (P) 2 611 $1. 98 13 515 2015 (P) 2 796 $2. 00 14 177 1 877 $1. 72 11 619 11. 3% 12. 0% 12. 1% 12. 3% 13. 0% 13. 8% 14. 2% 15. 1% 16. 2% 17. 3% 18. 5% 19. 3% 19. 7% P = Projection An exception to the identified growth trends, however, is the deli precise of bulk water for home and component apply.This product type is now in the advance phase of its life cycle. It has experienced low growth over the past five years as more offices and homes install water filters as a result of improvements in filter technology. To counteract the decline in bulk water sales to offices and homes, bottled water manufacturers aim create new dispersion bring for bulk water products. change magnitudely bulk packs are sold in petrol station forecourts and supermarkets. To date, manufacturing capacity within the industry has meant that manufacturers have been able to meet growing posit using existing manufacturing infrastructure.intersectionion gestatepiling has not occurred which has helped manufacturers protect their profit margins. They have been able to achieve an increased weighted just price per litre as all production is slackly sold in the year it is produced, reflecting the loyal demand growth. The mediocre price per litre has also been influenced by new product launches during the past five years, oddly the cathode-ray oscilloscope of allowance 5 irrigate and smaller, more convenient packaging sizes that achieve higher average prices. 2. Bott led water manufacturingThe Australia bottled water manufacturing industry has similar manufacturing and dispersion processes to the non-alcoholic beverages industry from which it emanates. 2. 1 Water supply at that place are several sources of water for bottling, such as underground springs, wells and water storages. The source of water plays a key role in the quantity and quality of bottled water that is produced. or so 25 per cent of all bottled water comes from water storages that is tap water) that is however treated before 5 Premium waters are slackly higher priced waters which have higher levels of purity or are sourced from natural springs.Page 3 of 21 bottling at an average price of $2. 40 per kilolitre. The other 75 per cent of water comes from groundwater at an average price of round $1. 00 per kilolitre. In whatsoever Australian states, permits are requisite to extract groundwater. Bottled water manufacturers often take on out the actual origination of water to external suppliers. The price of water in Australia compared with other countries and with other products is very low. It has become the subject of debate due to diminishing water supplies cause by extended drought conditions in Australia.To increase water prices would be politically contentious and many consumers would argue that because water is a underlying human need it should be free. It is solid to note, however, that Australians pay a megabyte times more per litre for bottled water than they do for tap water of similar quality. 2. 2 Treatment Once water has been sourced, the next pace is to filter and purify the water to train organic compounds such as metal ions. These compounds can contribute adversely to the taste and odour of the water and to bacteria that may cause health problems.Some water, of importly mineral water, is naturally carbonated at the source. However, more commonly, carbonation of some(prenominal) spring and purified water takes place in the fac tor outy (where both the treatment process and bottling occur). For other drink types (for example sparkling wines or beer) carbonation is achieved naturally during the fermentation of sugar into alcohol. However, for sparkling water, carbonation cannot be achieved by means of a fermentation process, as no sugar is added. It is therefore achieved by injecting carbon dioxide, into the water under blackjack.The pressure increases the solubility of the water and allows more carbon dioxide to dissolve than would be workable under standard atmospheric pressure. When the bottle is opened the pressure is released, allowing the shove a hanker to come out of the solution, thus forming bubbles. 2. 3 Bottling and guessling After the water has been treated, and in some cases carbonated, it is transferred (if carbonated, this transfer occurs under pressure) to a filling machine. Here, bottles or bulk containers are filled and then passed by conveyor belt to a sealing machine.Once sealed, t he bottles are packed in cardboard boxes for transport. There are currently 22 bottled water manufacturers in Australia certified by Food Standard Australia. Some manufacturers operate on a adopt bottling floor only, providing bottling services to companies that have their own discolorations or to supermarkets which handle tete-a-tete label products 6. However, a number of these bottlers do have brands of their own which they sell. 2. 4 bunch upaging Bottled water is provided to consumers in a regeneration of packages. These may be glass, PET p concludingic (polyethylene terephthalate) or polycarbonate bottles.Water can be purchased in a frame of single or multiserve bottles from various outlets and is available in bulk packs for water coolers for home or office use. The technology infallible to bottle water is quite basic and widely available. However, to achieve the record of manufacturing required to be cost competitive, the level of capital investment is whopping. s ecern improvements in technology have been counsellinged on quality underwrite and automation to meet the need for greater manufacturing efficiencies and the strict health and regulatory standards of food standards that apply across all Australian states and territories.Environmental occupys are rising in relation to the disposal of reverse drink bottles. With the change magnitude amount of water existence consumed, the issue of the resultant bottle savage has become significant. In Australia, of the 118000 tonnes of drink bottle p runic used any year, only 35 per cent is recycled. In South Australia, where consumers can deport a deposit for drink containers, the bottles made up less than 10 per cent of the states rubbish, compared with 13. 4 per cent nationally.Drink bottles also take up more space than other waste, comprising 38 per cent of total volume of litter. Recycling experts believe that the cycle of empty water bottles is hampered because most bottled water is co nsumed as a public toilet beverage outside the home where recycling bins are not readily accessible. Following the victory of reducing the use of p farthestic shopping bags it is thought that the foundation garment of a nationwide empty bottle deposit law would create the incentive to recycle bottles. This would also help to ease the burden on taxpayers who pay for the clean-up of litter. Private label products or services are typically those manufactured or provided by one company for offer under another companys brand. Private label goods and services are usually flecked as lower cost choices. Page 4 of 21 3. intentness segmentation The Australian bottled water manufacturing industry has two clearly defined segments motionless water this segment accounted for 76 per cent of consumption volume in 2009. frothy water this segment accounted for 24 per cent of consumption volume in 2009. 3. 1 Still waterStill water is planetaryly consumed for hydration and thirst satisfacti on at home, in the office or composition travelling. restroom is a major(ip) factor in the growth of the still water segment. It is used as an alternate(a) to other box beverages when consumers want to moderate their calories expenditure and prove an unsweetened, clean tasting and natural product. Water is the best and healthiest form of hydration as it is a fat and calorie-free thirst quencher when consumers are not satisfied with the esthetic qualities (for example, taste, odour and colour) of their tap water.Many people wish to drink something that is refreshing, clean and pure, and neutralize certain chemicals used in the treatment of public water supplies, such as chlorine and fluoride when consumers require the lash-up of bottled water for their diversion. This is in particular the case with the development of more widespread leisure activities and the enlargement of travel, for both business and pleasure and for nutritional and performance benefits, such as o r so waters 7 and mineral water supplements claiming to have the nutritional components resembling to a bowl of salad.As shown in Table 5 below, significant growth in bottled still water in Australia has occurred over the past six years, and this has driven most of the growth in the overall industry. As with the industry overall, the average price per litre has increased due to the introduction of premium bottled still waters. Table 5 Revenue and production- Still Water- 2003 to 2015 type Revenue $million Production million litres Ave $ per litre 2003 555 516 $1. 08 2004 648 584 $1. 11 2005 708 619 $1. 14 2006 780 668 $1. 17 2007 883 720 $1. 23 2008 999 796 $1. 25 2009 1 127 847 $1. 33 010 (P) 1 279 901 $1. 42 2011 (P) 1 472 958 $1. 54 2012 (P) 1 688 1 020 $1. 65 2013 (P) 1 934 1 095 $1. 77 2014 (P) 2 154 1 173 $1. 84 2015 (P) 2 323 1 252 $1. 85 P = Projection 3. 2 coruscate water Carbonated water was commonly cognize by the name of soda water until cosmea War II. In the 1950s, new terms such as sparkling water began to be used due to the negative perceptions associated with use of the enunciate carbon be considered a chemical additive in water. Sparkling water is essentially still water into which carbon dioxide gas has been dissolved, resulting in the formation of bubbles.Sparkling water is generally consumed as a refreshment beverage mostly while dining out rather than for hydration or thirst satisfaction alone. In the last some years, supermarkets have started to stock premium sparkling water brands. 7 Near Water also known as functional waters. These are bottled water beverages which have nutrients added, such as fruit juices, vitamins or minerals to enhance the positive health benefits associated with water. Page 5 of 21 Table 6 Revenue and Production- Sparkling water- 2003 to 2015 Type Revenue ($million) Production (million litres) Ave $ per litre 2003 255 89 $2. 7 2004 272 93 $2. 92 2005 282 96 $2. 94 2006 290 97 $2. 99 2007 317 105 $3. 02 200 8 336 110 $3. 05 2009 356 116 2010 (P) 381 123 $3. 10 2011 (P) 405 131 $3. 10 2012 (P) 433 139 $3. 12 2013 (P) 441 140 $3. 15 2014 (P) 457 143 $3. 20 2015 (P) 473 146 $3. 24 P = Projection $3. 07 While experiencing declining growth, sparkling water is still showing some growth, albeit at much lower rates than still water. This reflects the refreshment beverage nature of sparking water which is generally consumed at restaurants and cafes rather than in the home.The absolute majority of the sparkling water consumed is conciliated of premium imported spring waters, such as Eau de Vivre, which is the worlds premier sparkling water brand. As such, the average price per litre for sparking water is substantially higher than that of still water (see Table 6). This reflects the increased cost of manufacturing required to carbonate the water, different closure types required to retain the carbonation, the cost of imports and the premium nature of this product. The increase in average price over the projection period reflects estimates in foreign deepen movements. Foreign exchange xperts forecast that the current high levels in the value of the Australian dollar are not sustainable and project them to decline in the future. 4. Distribution trends Bottled water is sold by manufacturers to free wholesalers, including specialist confectionary and soft drink wholesalers as well as mart wholesalers. Figure 1 below illustrates the current industry distribution channels. Figure 1 Australian bottled water distribution channels 2009 maker Wholesaler Supermarket thingumajig stores Direct Distribution Hospitality Home & office Delivery Vending machines new(prenominal) End ConsumerIn the past few years, sellers have been change magnitudely buying direct from the manufacturer to reduce the cost of goods by eliminating the wholesaler margin from their purchase price. This has been facilitated by improved information systems that now provide apropos information to manufact urers for production planning, thereby enable them to engage in direct sales to a larger amount of customers. The increase in direct distribution has been most notable amongst major industry competitors. Major retailers want to purchase from fewer, larger companies.Beverage wholesalers, however, still play an distinguished role in distribution for smaller bottled water manufacturers. These smaller competitors generally have a smaller product range and are unable to meet major retailer demands for inventory commission and direct to store spoken communication. Page 6 of 21 Table 7 shows the share of revenue in 2009 by distribution channel. Table 7 Major distribution channels share of revenue- 2009 Distribution channel Supermarkets and grocery wholesalers 2009 35. 0% 30. 0% 15. 0% 9. 0% 6. 0% 5. % 519 445 222 133 90 74 Revenue ($m) Comments Supermarkets use online ordering systems direct to manufacturers, bypassing wholesalers in general. Major growth in this channel reflecting whatsis purchasing. Main outlet for the purchase of single-serve products. pre predominate by higher priced spring and mineral waters, including imported products. Bulk packaged water is the main(prenominal) product through this channel. Placed in schools, sports clubs and other public places or venues. Niche value added brands only due to high transportation costs (e. g. merchandises) or specific to single distribution channels. doodad stores (including petrol stations) Hospitality Home and office delivery Vending machines Other Branding is an important differentiator in the bottled water manufacturing industry. Existing competitors that have established brand names have an advantage over new entrants who have to spend heavily on trade for brand recognition. sales in convenience stores have always been an important distribution channel for soft drinks. This importance is growing, not only for soft drinks but also for bottled water, driven by the trend in more frequent conveni ence shopping for time-poor consumers.Success in the convenience store channel is faultfinding for any new product to succeed. If the brand recognition is achieved, it is often rapidly followed with brand extensions, leveraging the brand to offer new flavours and packaging. Once consumer demand is established in the convenience store channel, the move into the supermarket channel generally supports maintenance of profit margins, considering that supermarket buyer power is reduced when strong product demand has been established.Manufacturers have had to respond to significant changes in consumer buying behaviour. Product distribution, presentation and availability has had to match these changes in order to maximise sales. change magnitude quantities of product are now distributed through convenience stores and petrol stations. For example, bulk water packs were once sold via direct sale to offices. However, as more offices have installed their own in-built water filters, this chan nel has declined and there has been a modify to bulk water sales through petrol stations and supermarkets.A key system employed by non-alcoholic beverage manufacturers to lock out rivals is the status of vending machines and refrigeration units in distribution outlets. This agrees that their products are stocked and presented for the best possible sales whilst making it knockout for competitors to get refrigeration space. The distribution outlet has to invariably agree not to stock competitor products as part of the terms of using the refrigeration equipment supplied. Vending machines are increasing in course, size, style and sophistication, depending on where they are located.Distributors in some locations, such as private or non-government schools, have worked with the manufacturers to state the use of smart card technology for payment and therefore avoid the need for cash. Similarly, in the hospitality arena, manufacturers have to tender for the supply of beverages to ke y cheer and sporting venues. Once a manufacturer has secured a contract with a venue, their product has guaranteed sales for a defined period of time. Quite often, patrons are not allowed to bring in their own beverages for consumption or are limited in the amount they are allowed to bring in.Hospitality, through restaurants and cafes, is the main distribution channel for sparkling waters and it is also common physical exercise for venues to be locked into one particular manufacturer. Exports and imports represent or so 5 per cent of industry production. These levels are not expected to change in the future due to the high cost of transporting the heavy weight and bulk of water. The Australian bottled water manufacturing industry is protected to some extent from the threat of water imports due to the high volume and low unit value of water, even though water with no additives is exempt from tariffs.For water that has added sugar or other sweeteners, there is a 5 per cent import t ariff. The main distribution channel for imported waters is cafes and restaurants that originally serve premium sparkling waters. Page 7 of 21 5. Demand trends Bottled water is a growing part of the non-alcoholic beverages industry. While the broader non-alcoholic beverages industry is growing, bottled water is growing at a faster rate due to increasing awareness of health issues. Research shows that people want better tasting and healthier alternatives to many of the soft drinks and sports drinks currently available.Market research surveys suggest that over 90 per cent of Australians consume too many sugary and caffeine-based drinks. As bottled water is part of this larger beverages industry, it is important to understand branchly, the trends impacting on non-alcoholic beverage consumption overall, as well as the trends specifically impacting on bottled water consumption. 5. 1 Non-alcoholic beverages Consumption of non-alcoholic beverages in Australia increased from 179. 7 litres per capita in 2005 to 228. 5 litres per capita in 2009.Per capita consumption trends for all non-alcoholic beverages generally follows consumption patterns in the United States. On that basis, there are still significant opportunities for growth in all non-alcoholic beverages, including CSDs. Currently, Australian per capita consumption is 63 per cent of the US consumption level. Increasing awareness of the obesity problem in Australia, as well as the firmly established focus toward health and well cosmos, is ensuring strong future growth for healthy beverages. This has resulted in the introduction of sugar-free or diet CSDs.However, many older Australians are not switching to sugar-free versions of the CSDs they used to drink. Instead, they are moving to alternative beverages. Hence the general decline in the consumption of CSDs has also been go with by a rise in the consumption of beverages that are sensed to be healthy, such as fresh fruit juices, flavoured milks, energy drink s, sports drinks and ready-to-drink teas. ever-changing lifestyle trends, health consciousness and a growing cafe conclusion have also contributed to an increased demand for these alternative beverages.For example freshly englutd fruit juices, with fresh flavour attributes being preferred by the consumer. With the outcome of juice forbid and a greater focus by manufacturers in establishing juice brands, consumption of juice products has increased. In the United Kingdom and United States, juice bar sales represent about 5 per cent of total juice sales in those countries. However, in Australia, juice bars are still only an emerging distribution outlet and offer a good opportunity for new product development and growth. Ready-to-drink teas, with their antioxidant properties being gain groundd, have become a popular health drink. The Australian market for this product is currently 2 million litres per annum and predicted to grow to as much as 20 million litres over the next few y ears, particularly as the Australian population ages. Product development entangles a variety of flavoured ready-to-drink teas. Flavoured milk is a growth beverage. Data shows that Australians are each drinking, on average, nearly 0. litres more flavoured milk per annum than a year ago. Perceived health benefits of milk have contributed to this growth, and this is expected to drive continued growth in the future. Milk sales have increased by 6. 7 per cent with low fat brands performing particularly well. Last year, each Australian, on average, drank 9. 5 litres of flavoured milk more than the per capita figure for any other country. both energy 8 and sports drinks 9 are growing products in a society that is increasingly health conscious and aspiring to be more active.Energy drinks have had double digit growth since 2006 and the sports drink market has grown 14 per cent on volume and 20 per cent on revenue compound annual growth over the last three years. 8 Beverages that are des igned to give the consumer a smash of energy by using a combination of methylxanthines (including caffeine),vitamins and herbal ingredients. 9 Purified water with additives similar to those of sports drinks with the aim of providing hydration during sport. Page 8 of 21 5. 2 Bottled waterBottled water consumption has increased significantly over the past six years, but is still significantly below consumption levels of other developed countries including Europe and the United States. This indicates further opportunities for growth in Australia, primarily at the expense of CSDs and fruit based drinks, given the rising tinct surrounding the link surrounded by CSD consumption and obesity, especially in children. 1 possible reason for the lower per capita consumption of bottled water by Australians is the relatively good quality of tap water available. tilt water contains fluoride ions which have a positive effect on tooth decay. The drinking of bottled water, which is distilled 10 t o remove element such as fluoride, is believed to be contributing to an increase in the risk of tooth decay. However, most people continue to cook with tap water and this should provide sufficient fluoride to prevent tooth decay. Alternatively, some people wish to avoid exposure to fluoride, particularly systemic ingestion of fluoride in drinking water, and may choose such bottled water for its absence of fluoride.Nevertheless, surveys show that there is an increasing concern about the quality of tap water in Australia and that this is brainish some growth in bottled water consumption. Growth is further support by concerns about alcohol consumption and associated drink-driving accidents which has encouraged the consumption of non-alcoholic beverages, such as bottled water, when dining out. Females consume about 58 per cent of all bottled water in Australia. Young people, in particular females aged surrounded by 18 and 35 years, are the largest consumers of bottled water.In general , bottled water consumers are more health conscious and socially aware. Studies have found that materialisationer generations are far more diligent in drinking their recommended daily intake of water and men are less likely to think about water consumption on a daily basis than women. In addition, for young women, image is an important factor in determining consumption behaviour. Figure 2 shows consumption by age group. Figure 2 Australian bottled water consumption by age group, 2009 30 25. 8 25 20 23 18. 5 14. 8 % 15 10 5 0 9 8. 9 18-24 25-34 35-44 45-54 55-64 65 and older maturate group (years) 10Distillation is the process of eliminating impurities by heating a liquid until it boils, capturing and cooling the resultant hot vapours, and collecting the condensed vapours. Page 9 of 21 Due to the increase in health consciousness, water has also become a fashion accessory. Some consumers now carry a bottle of water with their mobile phone and iPod. Packaging is therefore critical. down(p) plastic bottles are preferable for many consumers as they are re-sealable, comprehend to be more contemporary and can fit in car-cup holders. The convenience factor means that the most popular pack size is around 600 ml, as shown in Table 8 below.This is an important consideration for convenience when travelling for business or leisure. In fact, it is the convenience aspect that has to some extent, driven the growth in bottled water. Table 8 Australian still water revenue share by pack size Pack Size 1999 2004 2009 500 750ml 12 litre Bulk 47. 3% 22. 8% 29. 9% 52. 3% 27. 5% 20. 2% 57. 3% 32. 6% 10. 1% 2014 (P) 60. 3% 34. 8% 4. 9% P = Projection increase future consumption of bottled water in the home is likely to result from continued growth in household usable income in Australia.This disposable income growth will also sustain growth of takeaway foods and restaurant meals, both of which tend to increase consumption of bottled water and fruit juice. However, while currentl y experiencing positive growth, total household expenditure on consumable goods is expected to slow in the future. This will adversely sham growth in discretionary spending on all beverages. However, a factor which contributes positively to growth in the sales of bottled water is the climate. The gradual heating plant of Australias climate is expected to support further growth in water consumption.Bottled water is well positioned to benefit from the shift in consumer preferences towards healthier and natural drinks. Spring water is particularly popular in Australia because it is perceived to have come from a natural, pristine environment. This is reinforced by marketing that emphasises the pure and natural image of water. As well as purchasing more bottled water, consumers are also prepared to pay more with 69 per cent of consumers new-fangledly surveyed believing quality is more important than price. saucily product development activities are targeting changing consumer lifesty le needs and the trend towards purchase convenience.There are now numerous bottled water brands available in Australia, from international beverage brands to boutique rain farms. The huge variety of waters and sources means that the bottled water market has a broad demographic reach. According to a recent consumer survey, at least 99 per cent of all Australians have tried or purchased bottled water in the last 12 months. The Australian bottled water manufacturing industry has pursued sales growth by developing products for recession markets. Smaller producers can supply relatively small segments with specialist or premium products.Given the continuing concern about the use of artificial colourings, flavourings and preservatives, the industry is expected to develop a range of premium products better suited to the demands of the health conscious consumer. For example, pet owners can now buy vitamin-fortified water specifically formulated for their cuspid companion. 6. Costs and gross margins Bottled water has the highest profit margins of all non-alcoholic ready-to-drink beverages. This is due in part to the strong growth that the industry has achieved.Manufacturers are also able to sell all production in a year. Industry arguing is relatively low, particularly as the major competitors are focused on supplying through different distribution channels. A percentage dislocation of costs in 2009 is as follows 55. 2 per cent for purchases of supplies 26. 8 per cent for marketing, distribution and selling costs 12. 1 per cent for wages 4. 1 per cent depreciation and administration costs and 1. 8 per cent for utilities and rent. A net margin of 16. 3 per cent was achieved by the industry in 2009. Page 10 of 21Purchases include water supplies, labels and other packaging materials such as glass and plastic resin bottles and closures which are generally purchased on 5 year contracts. One of the key costs is polyester (PET) resin for bottles however, there is no fo rward market 11 for PET resin. As a commodity, PET resin has been subject to price rises over recent years, as the price of oil has increased. This is reflected in the minor decline in gross and net margins experienced by manufacturers in 2009, as shown in Table 9 below. Overall, however, the cost to create bottled water is relatively inexpensive.Therefore, water is a more profitable product than other nonalcoholic beverage categories. Table 9 Five year weighted average industry gross and net margins 2005 2006 2007 Gross margin % Net margin % 31. 3% 16. 6% 31. 9% 16. 9% 31. 1% 16. 5% 2008 2009 30. 7% 16. 3% 31. 5% 16. 7% Current levels of profitability are expected to continue. However, it is notable that as sales through the supermarket distribution channel increase, so too will the buyer power of these large retailers and this may have a negative impact on profitability levels.At a recent presentation, ABLs managing director, Tom Dwyer, commented The increasing power of major ret ailers will squeeze the small competitors in both the food and beverage businesses. Without modern technology, smart systems and economies of outdo, it will be very difficult for small manufacturers to generate an delightful return on capital employed and respect current levels of profitability. 7. Industry key success factors and future predictions Industry experts summarise the following areas as critical to future success in the Australian bottled water manufacturing industry Distribution and lacement Control of distribution channels through an established and large network of distribution outlets to gain access to end consumers is essential to ensure timely delivery, low costs and maximised product reach through useful placement. If not operating in a niche market, manufacturers must become a major competitor in the wider market. In general, a major competitor needs to have at least 20 per cent share of at least one distribution channel. Effective market orientation, prod uct promotion, and advertising Market research, product development and speed-to-market are important capabilities.Successful competitors need to be able to clearly segment the market and develop products that reflect the requirements of different customer groups. The ability to effectively promote their brand and provide label and packaging design is also important. prime(prenominal)born movers with effective distribution have an advantage in that new competitors need to spend heavily on marketing to catch up. The effectiveness of strong advertising, a sophisticated distribution chain and a focused outline is critical in influencing consumer choice.Strong brand names contribute to the collection of bottled water as an accessory as well as structure a products reputation for quality. Having these attributes allows manufacturers to win market share within particular consumer segments and charge premium prices. Economies of scope Breadth of product range enables efficiencies in d istribution, marketing and administration. Such efficiencies are gained when a competitor uses its manufacturing process to produce a wide range of beverage brands (and possibly also complementary products) which are provided as part of a total solution to the various distribution channel customers.Being a total beverage provider to major customers is becoming more important as these major customers are increasing in concentration and prefer to deal with fewer larger manufacturers. Economies of scale Economies of scale are very important for a low value product since high volumes must be produced and sold to maintain profitability. Manufacturers must have effective cost controls and access to the most cost-efficient manufacturing and distribution processes, tracking technology and techniques to monitor sales and respond accordingly.Economies of scale are particularly important for competitors who have undifferentiated products. Since unit manufacturing costs are an important elemen t of profitability, it follows that economies of scale, based upon critical mass, are also important. Some manufacturers have commenced contract bottling for smaller industry participants in order to secure manufacturing volumes. 11 A forward market enables producers to lock in prices for a defined period of time, thereby providing certainty of costs. Page 11 of 21At the recent annual Australian Beverage Congress, Alan Vaughan, an independent industry expert of 30 years experience, presented an extensive insight into the bottled water market and its future direction. Vaughan concluded his presentation with this comment The Australian and global beverage industries are in a period of growth and major transformation. In general, there has been a switch away from carbonated drinks to beverages with less sugar and additional functional benefits. To the younger customer, the older brands are looking for a little staid, with bottled water and energy drinks viewed as more cool and exci ting.This is reflected in marketing and advertising campaigns. People these days are running(a) harder and have greater commitments. Bottled water and energy drinks are replacing other traditional beverages because they provide refreshment as well as a functional benefit, such as re-invigoration, replenishing hydration and energy levels, improving mental vigilance and enhancing concentration. These beverages appeal to everyone from partygoers to office workers, through to truck drivers. C. Industry competition 1. basis of competition The basis of competition for non-alcoholic drinks are primarily price, convenience and taste.The main basis of competition by which bottled water competes against other beverages, such as CSDs, fruit drinks, sports drinks and energy drinks, is health appeal. Given zero or very low sugar content, both still water and near waters have successfully developed an image of being healthier than other drinks and this has driven growth in the industry. To a degree, home filters also serve as a source of competition, although mainly against the bulk water segment. Tap water is also an external competitor, with a clear advantage in price. Beverage marketing and display are beginning to undergo hammy change.There will always be the major conventional media promotions, but the consumer market is becoming much more time sensitive and there is a high level of competition from substitute products, mainly other non-alcoholic beverages. The major ways for industry participants to differentiate and compete successfully include Branding, image and breadth of product range Recent growth in bottled water is related to the successful positioning of a number of brands as fashion accessories. Both media support behind the brand and the design of the bottle including the label contribute to the appeal of a product.Breadth of product range is also important as concentration of major customers continues. Large retail buyers (both in the supermarket and convenience store channels) prefer to deal with large manufacturers or suppliers that can provide a large product range. Packaging Convenience is a key benefit of bottled water. Hence bottle size, shape and functionality form a basis of competition. Bottles are designed with particular uses in mind, for pattern some water bottles have a pop-top cap for ease of use when playing sport or training.Distribution coverage An ability to return the needs of retailers, and obtain favourable terms such as promotional programs and stock positioning is important. Market share dominance of distribution channels is important as it allows manufacturers to diffuse the power of large buyers and maintain strong profitability levels. The ability to secure shelf space in convenience stores is also important, given that success in the convenience store channel is a precursor to getting new products into supermarkets. Taste Especially at the premium end of the market, taste can be a basis of competiti on for both still and sparkling waters.Use of market info Access to and use of market info is also important. The larger the competitor the more likely they are able to afford retail check-out see entropy to understand what its customers are buying. In this way, manufacturers can ensure retailers replenish their stock as required. This provides larger manufacturers with an advantage of responsiveness and flexibility as they make use of this information and respond quickly. Page 12 of 21 2. Current industry competitors The Australian bottled water manufacturing industry is dominated by large beverage manufacturers.Two of the major competitors are subsidiaries of global food and beverage conglomerates that are also major competitors in the non-alcoholic beverage market. Table 10 summarises the market share of the industry competitors in 2009. It should be noted that Australian Beverages Limited (ABL) is not currently in the Australian bottled water manufacturing industry, desp ite being a major competitor in the Australian non-alcoholic beverage market. Table 10 Market share by distribution channel and major competitors 2009 Total market share 26. 9% 26. 3% 18. 3% 12. 0% 16. 5% 100. 0% Other includes export sales and use of purified water for medical procedures (for example dental etc) ** Other competitors comprise small, locally based water manufacturers. No single entity has greater than 2 per cent market share Competitor Butlers Hydrate Water multinational Beverages saltation Springs Other** Total Market Share Australian bottled water manufacturing industry Market share by distribution channel Supermarkets Convenience Hospitality Home & Vending Other* & grocery stores (15%) office machines (5%) wholesalers (30%) delivery (9%) (6%) (35%) 27. 0% 35. 0% 25. % 15. 0% 30. 0% 38. 0% 22. 0% 20. 0% 15. 0% 35. 0% 20. 0% 17. 0% 35. 0% 15. 0% 10. 0% 10. 0% 5. 0% 15. 0% 70. 0% 5. 0% 16. 0% 15. 0% 55. 0% 20. 0% 30. 0% 100. 0% 100. 0% 100. 0% 100. 0% 100. 0% 100 . 0% The industry has grown significantly to date. To keep industry profitability levels relatively high, the industrys major competitors have tended to dominate one or two distribution channels only, rather than all channels. In this way, they hope to avoid strong head-to-head competition. This has assisted in keeping the overall level of industry rivalry relatively low to date.However, this is expected to change in the future as consumption growth begins to slow. Several new competitors have entered the market over the last five years. Moreover, industry desegregation has occurred. Major industry competitors have acquired smaller competitors to increase economies of scale, scope, market share and profitability. In 2009, the four largest competitors accounted for approximately 82 per cent of industry revenue. No major change is expected to this trend in the future as further consolidation will be difficult due to the relatively high market shares held by the four major companies.R egulatory concerns about restriction of competition will also affect further consolidation. Two of the competitors, Butlers Corporation and worldwide Beverages, are owned by global food and beverage conglomerates that use Australia as the base for their non-alcoholic beverages operations in Asia. Industry experts believe that acquisition of either of these companies, to be used as a mode of entry into the industry and gain significant market share, is not possible. The parent companies will be unwilling to sell their Australian operations. The major industry competitors are summarised below. 2. 1 Butlers CorporationA wholly owned subsidiary of a large multi-national listed company, Butlers Corporation commenced operations in the United Kingdom in the 1800s as the official chocolatier to the King. trading operations were expanded throughout the 20th century to include other types of confectionary, biscuits, snack foods and non-alcoholic beverages. Geographic enlargement was also u ndertaken. Butlers Corporation is now a global giant in its chosen products. Butlers established its operation in Australia during the 1950s. It has held the majority market share in the Australian confectionary, non-alcoholic beverage and snack food industries for the past 20 years.The company entered the Australian bottled water manufacturing industry during the 1980s through the acquisition and consolidation of several state-based water manufacturers. This helped Butlers to become the first bottled water manufacturer to have national distribution. Page 13 of 21 Butlers has strong distribution capabilities given its broad product range. It is the largest supplier to convenience stores and the second largest to the hospitality distribution channels. Growth in its market share of the supermarket channel has also been strong over recent years, in particular through its well known still water brand Olympus.The company also holds significant market share in the sparkling water segment, having obtained the Australian license for Eau de Vivre, the worlds ahead(p) sparkling water brand. One of the areas of focus for Butlers is innovation for all its beverages. This includes a large of number of soft drinks such as flavoured mineral waters, flavoured milks and fruit juices. Its broad product pass that includes complementary snack products, has been leveraged to achieve strong sales in convenience stores and through vending machines. 2. 2 Hydrate Water Pty LimitedHydrate Water is a privately owned company that originated in 1993 in Queensland. The company has access to natural springs in Queensland, New South Wales and capital of Seychelles, and a long term agreement with key water utilities in these states to access water when required. It distributes nationally from ISO 9002 quality accredited manufacturing facilities in Queensland, New South Wales, Victoria and Western Australia. The company has products in the sparkling and still water segments. The products inc lude energy drinks, fruit juices and a limited range of high quality carbonated soft drinks.It is also the manufacturer of the leading brand of still water, H2O, that is sold through the supermarket distribution channel. Hydrate is seeking a stronger social movement in convenience channels. Its business model focuses on using its cash in hand to support retailers so that the retailers can offer promotions, rather than spending on direct consumer advertising. The company has recently begun investigating the use of scanned retail data to monitor sales trends and adjust production volumes accordingly.This investigation into scanning data is due to having run out of inventory at the end of last financial year when the manufacturing plant was closed for annual cleaning and maintenance. As a result, the company had lost some market share. A number of the companys water products are targeted to the sporting and energy drink consumer. One of its best known brands, Viva , has a 72 per cent market share in sports water products. Hydrate Water has been able to leverage the high brand recognition of Viva to successfully award flavoured water.Similarly, Hydrate Water sells the leading brand in sparkling mineral water and has again leveraged this brand by introducing a number of flavoured mineral waters, including diet drinks. Both these initiatives have resulted in above average market growth for the company. The company is particularly well known in the industry for its packaging innovation and engineering design capability. Hydrate Water developed Pop Tops small plastic bottles that were very successful with young children as they fit perfectly into lunch boxes and have the advantage of being re-sealable.The Pop Top range increased its bottling turnover by 50 per cent. This product won the coveted Australian dietician award for scoop out New Product when launched. It also received the Australian Health intromission endorsement for its diet drinks. In addition, the company has been commended by dieticians for promoting products that address the increasing concerns of childhood obesity linked to CSDs. Hydrate Water was also the first company to introduce stackable bulk water packs for sale through supermarkets.The oversight team at Hydrate Water have extensive industry experience, having a collective 80 years in the industry between them. Operations manager, Simon Miles, is well regarded in the industry and is currently the chairman of the Bottled Water Institute of Australia. Current owner, Jack Wells, has indicated he wishes to retire in the next five years, and has been grooming Simon Miles as his successor. An offer for acquisition was received from internationalistic Beverages last year, but Wells turned down the offer as he did not want to sell the Australian business he established to an international company.Page 14 of 21 2. 3 International Beverages Limited International Beverages is the wholly owned subsidiary of a large multinatio nal company and sells fruit juices, energy and sports drinks, water and soft drinks. Its initial entry into the Australian market was through fruit drinks. During the industry consolidation in the 1990s, the company entered the bottle water manufacturing industry through acquisition. done its parent company, International Beverages has the licence to sell the worlds leading brand of bottled still water Aqua Grande, in Australia and New Zealand.The company also sells the imported sparkling water brand San Vitale one of the most popular mineral waters bottled at the source. This product, in particular, has given the company a strong share of the hospitality channel. Company growth has been driven by new product development and product extensions which have leveraged existing capabilities and focussed on specific consumer requirements. The companys latest successful product launch is calcium enriched water targeted at aged help facilities and nursing homes for women at risk of osteop orosis, a bone degeneration disease. 2. Fountain Springs Pty Limited Fountain Springs is a Sydney based company that has access to a naturally rising spring located in the Snowy Mountains in southern New South Wales. To date, the company has been unable to secure distribution and shelf space in major Australian retail outlets. This is because its product range is limited to only two pack sizes, 600ml and 2 litres. An export strategy was therefore developed with the assistance of the Australian Trade consignment (Austrade). Fountain Springs is now Australias largest exporter of spring water and better known overseas than in Australia.In the past two years, the companys bottled water exports have grown sales revenue significantly, having secured a contract with the major UK supermarket chain Besco. Growth is also expected through its expansion into UK convenience stores and petrol station channels which is planned for later this year. The UK was the first export market for Fountain S prings where it was able to leverage the perception of Australia as clean and natural. Since developing this UK market, the company has also been successful in developing business in the Middle East, South East Asia and the United States.Given the cost of transport to these export markets, Fountain Springs has a niche strategy and sells only premium grade water in the 600ml and 2 litre pack size at a higher price. However, market research shows that there is still very low consumer awareness of its products and brand in Australia. To raise awareness, a cause-related marketing strategy has been adopted. Under this program, the company donates a percentage of its profits to partner charities in its chosen markets.This has been important to the growing market awareness of the company in its selected markets. It leverages the networks and relationships of its partners to develop new business and sales. As a result of the companys success in overseas markets their brand Aqua Caliente is now being stocked in selected school canteens in Australia as a natural alternative to sugar laden CSDs and fruit juices. Given Fountain Springs did not have the capability to distribute directly to schools, it entered a distribution arrangement with a school food provider.The company also altered its cause-related marketing strategy whereby it would donate a proportion of all bottled water sales in each canteen to the school. The money was to be used by the schools to purchase new equipment or facilities for the school. Despite the success of its export strategy, the company has had combine financial results over the past few years. This has been largely due to set up costs associated with its export business and distribution arrangements in the UK. It is rumoured that the company is in financial difficulty.Rumours abound that bankers have been requesting monthly audits of the cash position so that the company can maintain its line of credit. In addition, it is believed that its major UK supermarket customer, Besco, is demanding price reductions therefore squeezing margins for the company. Poor hedging of foreign exchange transactions with the companys UK debtors has also contributed to its declining financial position. Page 15 of 21 D. Australian Beverages Limited (ABL) 1. History Australian Beverages Limited (ABL), at one time known as Australian Soft Drinks Limited, commenced operations in 1937.The etymon company was established by a group of enterprising pharmacists who had previously made carbonated soft drinks in their pharmacies which were then offered for sale in sealed bottles. The first manufacturing plant opened in Sydney in 1938. blood began slowly, but the arrival of American soldiers in Australia in 1942 had a significant impact on both sales and market acceptance of carbonated soft drinks. Australian Soft Drinks initiated its move into non-carbonated soft drink beverages in 1984 when it began manufacturing fruit drinks. This followed the acquisition of a fruit juice manufacturer in Victoria.The fruit drinks business expanded nationally over the next 10 years. In 1990, Australia Soft Drinks entered the milk drink market with the purchase of manufacturing facilities from a dairy co-operative. The company officially changed its name to Australian Beverages Limited upon itemization on the Australian Stock Exchange (ASX) in 1996, to reflect the broader beverage base of the business. In the years since its ASX listing, ABL has adopted a multi-beverage strategy wherein its product range has been expanded to cover all categories of the non-alcoholic beverage market.However, bottled water frame outside this product range. The company has also moved into the manufacture and distribution of snack food products through its acquisition of several small businesses in 2004. It aims to strengthen distribution relationships with convenience stores and hospitality channels. These developments have resulted in ABLs revenue compositi on to change from 90 per cent CSD-based in 2000 to 68 per cent CSD-based in 2009. The aim is to further reduce dependence on CSDs by 2015.ABL intends to increase its market share of non-CSD beverage products so that CSDs will represent less than 50 per cent of company revenue as part of its multi-beverage strategy. 2. Business strategy ABLs vision is To satisfy Australias thirst by being a manufacturer of non-alcoholic beverages for every affaire in every location. The company aims to achieve this vision by pursuing the following strategic goals for the 2007 to 2012 period ? offer a wide range of products in the non-alcoholic beverage and complementary markets ? grow the companys share of the non-alcoholic beverage market to move from the second largest to the argest competitor in this market. This goal will be achieved by ? offering a wider range of products ? increasing per capita consumption of non-alcoholic beverages through product and packaging innovation ? expansion into new non-CSD beverage categories ? extend key customer relationship capabilities and grow product availability. This goal will be achieved through effective placement of refrigerated drink equipment and outlet expansion. This strategy would help the company to establish a major presence in all major non-alcoholic beverage distribution channels ? aintain world best practices throughout the companys operations to deliver cost discipline, low cost leadership and timely responsiveness to changing market demand and ? ensure that the companys operations are environmentally and economically sustainable. At a recent strategy presentation to market analysts, managing director, Tom Dwyer, outlined the companys intention to be a major competitor in all categories of the non-alcoholic beverage market. He stated that ABL hopes to achieve this aim by being the supplier of choice for the distribution channels of supermarkets, convenience stores and hospitality outlets.It is hoped that ABLs position in the snack food market, which it recently entered via acquisition, would be made stronger by another potential acquisition in line with the general consolidation already taking place in the food and beverage supply industry in Australia. Such an acquisition would add further breadth to the companys total product offering to its customers in all major distribution channels. Of all the competitors, ABL would provide the greatest share of beverage and snack foods. Page 16 of 21By offering a broader product range, ABL expects to leverage its market power in soft drinks to sales of related products. It also aims to control product supply, apply discounts, introduce loyalty rebates or promotions, and secure conditions of use on supplied refrigeration equipment. As more Australians now drink different beverages at different times of the day, Dwyer highlighted his belief that a modern beverage company needs to be highly flexible in manufacturing, distribution and marketing as well as be abl e to operate in all product areas. 3.Business operations ABL is currently the second largest competitor in t