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IMPORTANT FACTORS THAT DETERMINE THE VARIOUS DEMANDS OF SOFT DRINKS

A number of factors determine demand for soft drinks. The first determinant is price, as the demand for soft drinks is relatively price-elastic. Thismeans that as the price of soft drinks increases, the demand decreases to a greater degree, relative to the price change. Demand for soft drinks is also relatively income-elastic, meaning that as consumers’ incomes decrease, the demand for soft drinks decreases to a greater degree, relative to the income change, and vice versa.

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Consumer lifestyles and tastes also affect demand for soft drinks. The reduced emphasis on family meals and the increased desire for convenience food and takeaway products may increase demand for soft drinks, especially RTD products, as they are packaged to meet this grab-and-go lifestyle. Along the same lines, as people become busier, they look for soft drinks to provide energy and rejuvenation, thereby spurring growth in the functional beverage categories. While this presents an opportunity, it is not expected to override the other factors

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that are negatively impacting demand for soft drinks at this time. The soft drink industry is affected by macro environmental factors of the industry that will lead to change. First, the entry or exit of major firms is a trend in the industry that will likely lead to change. More specifically, merger and consolidation has been prevalent in the soft drinks market. Several leading companies have been looking to drive revenue growth and improve market share through the increased economies of scale found through mergers and acquisitions.