ISM INTERNATIONAL ACADEMY

(SWOT ANALYSIS)
(SOFT DRINKS COMPANY)
Martin Zurita
Business and Management
1 Bach B
15/04/15

Strengths
Wide range of presentations, products and prices: The sector has a wide range of products
and presentations that meet the demands of the local market in different socioeconomic
strata, which limits the possibility of entry of new competitors.
High participation in the basket
As mentioned, soft drinks have a high stake in the basket. This decreases the likelihood of
sharp declines in consumption of these products, since they have a high "custom"
consumption. Additionally, to maintain a competitive price level, the level of substitution
for other goods is relatively low. In any case, as explained above, the substitution occurs
between different brands of the same products.
Flavors acquired
The soft drink industry has developed certain specific flavors to match the tastes and
preferences of the market. This strength hinders the entry of competitors offering new
flavors. In this sense, the new brands that want to enter the market have to mimic the
existing flavors, since introducing a new one would be very difficult, expensive and take
a long time.
Long duration
Gaseous have a duration of 3 to 6 months, depending on the type of packaging, allowing
these products to be brought to remote parts of the country, expanding sales.

Weaknesses
Reduced profit margins
The fierce competition within the industry has led companies to obtain reduced profit
margins and even losses.
High tax burden
Soft drinks in Peru are also subject to a tax burden greater than that of most countries in
the region. Currently, the excise tax is 17%.

Ease of imitation flavors

The flavors of soft drinks can be easily imitated. This has become evident in recent years,
in which various bottlers have imitated the flavors of black and yellow tails and have
captured a significant market share.
Volatility in the price of sugar
Sugar, as mentioned above, is a major component of the cost of soda (approximately 30%
of total). Although international prices have remained relatively stable, high tariffs (20%)
levied on sugar imports, increase the price of the drinks.

Opportunities
Increase in personal income and consumption of soft drinks
As explained above, soda consumption is highly elastic. An increase in the income level
of people significantly increase the consumption of soft drinks.
Expand operations abroad
Exports of soft drinks have shown a rising trend in recent years, especially in the last
year, when they were increased by approximately 120%.
Increase the added value and diversify their products
As discussed above, soft drinks have a reduced value added. In this sense, the beverage
industry could increase the value of its production with new presentations or other locally
produced drinks (such as nutritional drinks) to fit different types of economies and
preferences.

Threats
Reducing local sugar production, price volatility
The sugar industry is in the middle of a modernization process, which actually froze
some years after.
Continued price war
Continuing the price war, companies continue to show low profit margins or loss, which
obviously weakens their financial position and prevents them from making investments
to meet future growth.
New entry
Despite the current market situation and margins offered, there is always the possibility
that new companies, foreign or domestic capital and more technology to enter the market.
However, we believe that this situation would be through acquisition or partnership with
an existing company, which mostly have adequate technology and have already gained
market share with brands.

Increasing the tax burden

One of the most important problems of the Peruvian economy is the fiscal deficit. For this
year the government has pledged a target of a deficit of 1.9% of GDP or 2.2% where an
amount is achieved by over US $ 700 million.