Threat of new entrants

The food and beverage are one of the industries that can obtain a higher profit, and it will lead
many new entrants want to enter the market. This threat of new entrants will cause decrease in
profits due to many new markets. The seriousness of this threat depends on the barriers that
exist in this industry. Since food and beverage have do not have high barrier, so it easy to new
entrants enter the industry. Thus, it will give a bigger threat for existing players.

For F&N, even though they are one of the popular producers for food and beverages, they
cannot prevent other new entrants to enter the market. For an example, F&N are competing
with other new small competitors such as Fresh and Farm because F&N also produce dairies
products such as UHT milk. The new firm surely can threat the F&N due to the switching cost
of consumer is low. However, its not easy for new entrants compete because F&N are one of
the strongest brands in the industry so it quite difficult for the new firms defeat the customer
loyalty.

Rivalry among existing competitors

This force indicates the current competition between the existing competitors in the market. In
food and beverage industry, F&N need to compete with many competitors such as Coca Cola,
PepsiCo, Nestle and Red Bull. The higher rivalry among competitors lead these company
actively engage in advertising. Most of the companies in this industry tend to aggressive in
innovating, and marketing in order to sustain their customer loyalty. Therefore, this force
shows that F&N have a strong competition among their competitors.

In 2019, F&N is more focusing on growing sales of both beverages and milk-based products.
Thus, their aim is to launch more innovative beverage products, increased their promotional
activities and launch more packaging variants in order to suit the different lifestyle that needs
by consumer.
Threat of substitute product

It’s hard for companies that have close substitute to increase their price because customer might
be willing to switch to the substitute product if they feel price increasing are too much. The
factors that can be consider in this force are number of substitutes, performance of substitutes
and also cost of changing. This force can consider and give a strong force to the company.
When there are too many numbers of substitute product, customer will have many options to
choose or shift to another substitute that they afford.

In order to the F&N able become customer choice, the company need to come out with the
variant products and maintain the quality. Recently, when the government enforce the sugar
tax on sugar sweetened drinks, about 90% of F&N beverage products will be impacted by this
implementation. Thus, F&N decided to reformulate their existing beverage products to lower
sugar content while improving the taste.

It’s not easy for F&N make their products quite different compare with other brands. For an
example, Coca Cola also have launched a sugar-free beverage in the form of Coca-Cola Zero
Sugar, in its bid to appeal to a more health-conscious public. Thus, F&N need to concern more
about this force on how to sustain their products in market and become customer choice.

Bargaining power of supplier

This force examines how much supplier have power in order to raise the price of materials that
can lead to the lower of profitability for the company. The availability of substitute suppliers
is one of the main factors that determine the bargaining power of supplier. If fewer there are,
the supplier has more power. The bargaining power of suppliers in food and beverages can be
considered very low because there are many suppliers that can provide the materials such as
sugar.

Sugar is one of the main ingredients in food and beverage industry. Since there are many
suppliers, the company’s suppliers have less power and the switching cost between the
suppliers is low. Therefore, company can keep its input costs lower and enhance its profit
because suppliers cannot easily to take advantage to increase the price. For F&N company, the
number of suppliers that can provide the raw material is important to the company. They have
multiple of suppliers to ensure that the switching costs between rival suppliers is lower and
company can keep its input costs lower to enhance its profits.
Bargaining power of buyers

This force deals with the ability of customer to drive price lower. The factors that can contribute
to the strong bargaining power of buyers is the lower of switching costs and also availability
of substitute in market. The bargaining power is strong when the buyers have power to demand
lower price or higher product quality from industry producers. In food and beverage industry,
the bargaining power of buyers is strong due to lower switching cost.

Nowadays, the existing of Internet allowed customers to make comparison between prices
among the companies that sold the same products. If F&N increase too high the price of the
products, the customer easily changes to other firms that sold the substitute products such as
Coca Cola, Dutch Lady and others. Therefore, F&N need to ensure the customer satisfaction
to maximize their profits.
References
Chappelow, J. (2019, October 18). Porter's 5 Forces. Retrieved from Investopedia:
https://www.investopedia.com/terms/p/porter.asp

F&N believes strong pricing competition may be dissipating. (2019, May). Retrieved from The Edge
Market: https://www.theedgemarkets.com/article/fn-believes-strong-pricing-competition-
may-be-dissipating

Jurevicius, O. (2013, May 27). Porter's Five Forces. Retrieved from Strategic Management Insight:
https://www.strategicmanagementinsight.com/tools/porters-five-forces.html

Porter’s Five Forces. (2016, August 3). Retrieved from Business To You: https://www.business-to-
you.com/porters-five-forces/

Smithson, N. (2017, February 6). PepsiCo Five Forces Analysis (Porter’s Model). Retrieved from
Panmore Institute: http://panmore.com/pepsico-five-forces-analysis-porters-model

Yusof, T. A. (2017, May 1). New Coca-Cola launched.