Risk Assessment Assignment: Threats Encounter by Beverage Industry

Question

Task

Develop a risk assessment assignment identifying the different risks that are faced by the beverage company and what do such risks mean to the companies globally.

Answer

Executive Summary
The report has focussed on the various risks that are associated with the beverage industry globally and the strategies that can help mitigate such risks and ensure that this sector can make significant development.

The study has the chief aim of identifying the different risks that are faced by the beverage company and what do such risks mean to the companies globally. A literature review has been carried out to review the previous journals and articles regarding the global beverage industry and their associated risks.

A qualitative research has been used by selecting the annual as well as sustainability report of different beverage brands and the findings show that the each of the brands has been able to identify the risks and even discuss about the mitigation strategies.

The conclusion has summarised all the points and have even provided valid recommendations for further progression in the sector.

1. Introduction

1.1 Background of the research
The beverage industry has been growing enormously all across the world. The global beverage industry is thus supposed to reach the mark of $ 1.9 billion by the year 2020. This industry has always been challenged to meet the needs and wants of the consumers especially in this modern age when people have become more and more conscious about their health.

One of the major risks that are being faced by the beverage companies has been the sustainability of the products as well as the processes (Bresciani, 2017).The organisations all over the globe have thus becomemore and more aware of such risks and are even trying to mitigate such challenges. This study will thus identify the risks that are faced by the beverage companies globally and will even identify how does this sector operates globally.

In consideration to this, the study has the chief aim of identifying the different risks that are faced by the beverage company and what do such risks mean to the companies globally. The study has the following objectives mentioned below:

• To investigate the meaning of risk for the beverage industry
• To make an evaluation of the risks faced by the beverage companies.

1.2 Problem Statement
The beverage sector globally has to face various challenges such as alterations in the statutory and national policies and regulations, continuous change in trends related to the preferences and choices of the consumers as well as sustainability of the process and the products. There have been other issues such as acceptance of the advanced and newer technologies, safety of the consumers and so on (Weber & Saunders-Hogberg,2018). All these have been developing issues within the sector and the study will thus identify these threats within.

1.3 Research question(s)
The following are the research questions:

• What are the different types of risks by the beverage company?
• What does risk actually mean to the beverage sector?

2. Critical literature review

2.1 Introduction
This section will focus on the scholarly articles and journals of the past that will help in presenting various knowledge associated with the research topic and will thus ensure that this review will not only address the research questions and objectives but also will enumerate, summarize, describe as well as objectively evaluate the researches of the past.

2.2 Global Beverage Company
As opined by Bresciani (2017), beverages are the liquids that are intended for consumption ofthe human and hence this sector plays a predominant role in the food industry. Beverages are being commonly divided into non-alcoholic as well as alcoholic drinks. The global beverage as well as food sector has been one of the chief contributors for the development of the worldwide economy and have even historically witnessed a severe growth. The worldwide beverage market size has been valued at US$1550 billion for 2018 and this industry is even growing at a CAGR of 4%. The value estimations for this industry has been US$1676.48 billion as on 2020 and US$1885billion for 2023. Thus, the value of the beverage market has been estimated in the below figure:

Figure 1: Value of the beverage market (2009-2018)

(Source: Statista,2020).

2.3 Risks within the beverage companies
As stated by Chia-Jen, H. U. N. G. (2018),The beverage sector like many other sectors have been subjected to number of risks and challenges. Right from continuous policy changes, changes in drinking trends and the difficulties in adapting to the continuous progression of modern technology, this sector has to deal with number of threats that deserves a deeper attention. The food and beverage industry are highly susceptible to the changing consumer preferences and thus in order to generate profit and revenues, it is essential to have product offerings that can be appealing to the consumers.

As stated by Weber & Saunders?Hogberg (2020),one of the most prevalent risks in the energy sector has been the changes in the regulations and policies of the government that can adversely impact the operational results and financial positions too. In U.S for an instance, a legislation has been proposed and /or being adopted in specific foreign jurisdictions to curb the sale of the energy drinks and even limit the content of caffeine as well as other ingredients in the beverages that has been in need of certain labelling warnings and discourses imposing higher amount of taxes on the business.Moreover, the public health advocates and officials are more and more focused on the public health and consequences related to obesity, the way it impacts the children for which there are number of restrictions and limitation on the beverage business. Since, the focus has been made on the caffeine content, the beverage companies have to seek for alternatives which are often expensive (Brants, 2020).

There are often somelitigations regarding the different products that expose the businesses to several liabilities and even restricts the demand of the products. For an example, Monster Beverage Corporation that chiefly sells energy drinks have faced some unnecessary media attention that has been ruining their brand image (Monster Beverage Corporation ,2018).

Another very prominent risk can be the growing competition within the sector.According to Chaib & Barone (2020),the beverage industry is extremely competitive and packaging, pricing, flavours, innovativeness are some of the aspects that put higher pressure on the businesses especially the SME’s. Due to such higher competitions, there can be as such no assurance for encountering difficulties in order to maintain the market share, current revenues in the industry.

The global economic uncertainties which incorporates the fluctuation of the foreign exchange rates even affect the business and poses threats. As opined by Tse et al. (2016),The severity and duration of the economic calamities often cannot be predicted and often the beverage companies that tend to expand outside their countries faces the economic turbulence of the international market.

For an example, Brexit in the UK has brought various uncertainties and unfavourable condition for this sector and it had put the sector under greater jeopardy. In Australia too, for theprotection of their unique environment from the diseases and pests, the Department of Agriculture puts regulation on some products in order to reduce the biosecurity risk associated which in turn makes the beverage industry face various complications (Chaib & Barone, 2020).

Apart from all these, there have been a continuous upgradation and advancement of technology with newer equipment being used making the older ones obsolete. Moreover, there are higher risks of cybersecurity too that makes the business face number of threats such as loss of crucial data and so on. The use of technology although makes the works easier and faster, but due to this the equipment become much expensive putting an extra burden on the businesses (Park & Park,2016).

2.4 Literature Gap
The literature review has given an overview of the global beverage market and the market share of this sector and has even focussed on the risks associated with the global beverage industry to certain extent. However, the way such risks can be mitigated and the riskssuch as sustainability that impacts the business heavily are not been properly addressed. This research will address these loopholes and thus will try to identify the mitigation strategies and some other risks that are also posing a threat.

3. Research methodology

3.1 Introduction
In order to address the research questions: What are the different types of risks by the beverage company? and What does risk actually mean to the beverage sector? the study has chosen certain tools and methods so that the research can be carried out in the most comprehensive manner. The study has selected the qualitative secondary research method in order to address the research topic.

3.2 Data Collection
In order to carry out this research, the secondary data has been used from the various sustainability as well as financial reports of the popular beverage companies. With the help of the search term:” Risks in the global beverage market” and “Global beverage companies”, 10 sustainability and annual reports of various brands have been searched and found for the study. Thus, the data collection has been done mainly from the reports of this branded organisations. Out of all the 10 reports, 7 reports from brands such as Coca Cola, Suntory Beverage and Food, Monster Beverage Corporation and so on have been chosen based on their relevance and accuracy to the chosen topic.

The annual report was being downloaded from their official websites and all the links associated with the report are given in (Appendix A) along with the page numbers.

The use of the secondary qualitative data has been not only cost effective and time saving but it even helps in collection of the data that are not biased and thereby help in better understanding of the problem (Hamilton & Finley, 2019).

3.3 Data Analysis
The study has used the thematic data analysis since it is theoretically flexible and thus can help in the identification of the different relationship and patterns to build up the theories. The data collected have been arranged in tables and based on the similarity of the reports in context of mitigation strategies, risks associated and so on colour codes were being assigned in order to identify the patterns from the collected data. After finalising the colour codes, all the same colour codes were grouped and used to develop themes.

4. Findings from secondary data analysis

4.1 The global beverage industry and sustainability
Out of all the reports, the sustainability report on the Coca-Cola company has detailed their approach to climate resilience and sustainability. Sustainability and the growing demand of the consumers to make the businesses socially and environmentally responsible has been taken care of by the bigger brands such as Coca Cola.If the businesses fail to keep up their sustainability goals, it can be devastating especially in this age wherein carbon transparency and corporate governance has become so strict (colacompany.com,2019).

However, greater sustainability and environmental approaches comes with greater price and there can be number of challenges associated with transition to low carbon economy such as enhanced cost of packaging materials, enhanced cost of distribution, equipment and manufacturing. Although these proves to be beneficial for the business in future, but for the small-scale businesses it becomes really a challenge to cope up with such sustainability procedures.

On the other hand, if the environment is not taken care of it also can pose a threat such as due to ever-growing climatic changes, there are issues like scarcity of water that restricts the production process(Kearns & Bero, 2019). Moreover, the emission of greenhouse gas even leads towards the reputational risks of the brands. Thus, being sustainable has its own pros and cons from the business perspective.

Figure 2: Risks and Impacts aligned with recommendations in Coca Cola

(Source:colacompany.com,2019).

On the other hand, Britvic, a British producer of soft drinks have even focused on the viable sustainable risks and have detailed about the risks associated with climate changes that can generate risk for their ability to manufacture, source and market the drinks(britvic.com,2019).

On the contrary if the focus on sustainability from all the stakeholders is increased, there will be higher risks of regulation on packaging as well increased requirements for sourcing sustainably as well appropriately reporting on the influence of the climatic changes (National Beverage Corp,2019).

4.2 Changing consumer preference
Although the companies ensure to effectively monitor the changes within the market for the various products however there is as such no assurance that they can develop products that can actually appeal to the consumers. For an example, the soft drinks giant, Coca Cola has been facing issues related to the sugar content in their drinks for which the sugar level of the consumer goes up very rapidly posing greater threat to the health(colacompany.com,2019). In this age, where consumers are becoming more and more conscious about their health, the business has to think about various innovative ways by which they can market their products keeping intact the health factors and nutrients. Thus, the changing consumer behaviour has been one such risk which means a loss of revenue and sales for the beverage business. In this context, the sociological model for consumer behaviour can be considered well. This model is closely related to the society as well as the versatile groups involved and there are groups such as the friends, relatives, acquaintances who influences the buyer’s behaviour and thus this model focuses on the product requirements of all the consumers within the society. A change in the preferences can thus be well understood with this model (Raimo et al., 2020).

On the other hand, the annual report of Britvic have even discussed about the risks associated with the health and inability to react to the changing consumer preferences can pose a greater threat to the very existence of the business and even lead towards an erosion of competitiveness impacting the financial position and operating results.

4.3 Mitigation strategies
As per the mitigation strategies given in the annual report of Sunitory, mention has been made about compliances to the various legal and regulatory aspects and the various risks associated to management that can be mitigated by various long term and midterm growth management plans(suntory.com,2017). Use of derivative financial instruments play a major role in mitigating the foreign exchange rate fluctuations whereas risks related to procurement of raw materials can be mitigated by maintaining a smooth and engaging relationship with the stakeholders. This has been even detailed in the annual report of The General Soft Drinks Company Limited too(The-General-Soft-Drinks-Co-Ltd ,2014).

On the other hand, Britvic has adopted the mitigation activities such as annual performance management, annual survey that can help mitigate the risks related to the limited skills and capacities of the employees and this survey thus helps in obtaining feedback on a wider range(britvic.com,2019).

5. Discussion of findings in comparison to your previously reviewed literature
Thus, from the findings it can be understood that the risks associated with sustainability and the preferences of the consumers play a predominant role. Other than this, there are even risks related to the management strategies, lack of skills among the employees and so on. However, the literature review has chiefly focused on the changing legislation and regulations and the ever-growing amount of taxes paid by the companies(Kearns & Bero, 2019).It has even focused on the growing technological advancement with which often the businesses are unable to cope up with but the way sustainability has been acting as a catalyst in today’s world and how lack of sustainability can ruin the business and even focusing more on sustainability can elevate the operating costs of the business, have not been covered in the literature review section. This has posed a greater gap in the review section which has been however been address in the analysis section. The mitigation strategies have been even been discussed which helps different businesses cope up with the different risks associated. The quantitative analysis has been able to focus on the mitigation strategies unlike the review section which has unable to bridge the gap between the identified risks and the strategies that can help diminish the risks.

6. Conclusion
The study has thus addressed the research questions that involves the various identified risks associated with the beverage industry and what does risks actually mean to this sector. There have been number of risks mentioned such as changing consumer preferences, risks related to legislation, sustainability issues and so on. Moreover, the qualitative analysis has even focused on the mitigation strategies and the way such risks can be handled.

Based on the study few of the recommendations has been given:

• The beverage sectors need to make a thorough market research on the consumer buying pattern and ensure that they do not launch a product without proper promotion or campaigning.
• The health factors need to be well concentrated since people have become more and more conscious about it and sustainability challenges such as carbon footprint and GHG emissions needs to be taken care of.
• The businesses should have more and more skilled employees who can take care of any form of risks and challenges
• As far as research is concerned, more focus could be laid upon the statistics present in different government websites and even on articles and journals other than the annual and sustainability report.

Limitations
The research had contracted time and monetary budget and due to COVID 19, a primary data analysis could not be conducted. The primary analysis develops scoped for receiving much more realistic and inground information and the experiences shared by the respondents becomes more valid and relatable to the chosen topic.

Reference list
britvic.com (2019). Enjoying life’s everyday moments Annual Report and Accounts 2019. Retrieved 2 October 2020, from https://www.britvic.com/~/media/Files/B/Britvic-V3/documents/pdf/presentation/2019/2019-annual-report.pdf

colacompany.com (2019).2019 BUSINESS & SUSTAINABILITY REPORT. Retrieved 2 October 2020, from https://www.coca-colacompany.com/content/dam/journey/us/en/reports/coca-cola-business-and-sustainability-report-2019.pdf

Monster Beverage Corporation (2018).Annual reports. Retrieved 2 October 2020, from https://www.annualreports.com/HostedData/AnnualReportArchive/m/NASDAQ_MNST_2018.pdf

The-General-Soft-Drinks-Co-Ltd (2014).THE GENERAL SOFT DRINKS COMPANY LIMITED Annual Report and Consolidated Financial Statements. Retrieved 2 October 2020, from https://www.mfsa.mt/wp-content/uploads/2019/01/The-General-Soft-Drinks-Co-Ltd.pdf

suntory.com (2017).A Source of Enjoyable Wellness Annual Report 2017. Retrieved 2 October 2020, from https://www.suntory.com/softdrink/ir/library/pdf/2017_00_Full.pdf

National Beverage Corp(2019).National Beverage Corp,2019 ANNUAL REPORT. Retrieved 2 October 2020, from https://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_FIZZ_2019.pdf

Bresciani, S. (2017). Open, networked and dynamic innovation in the food and beverage industry. British Food Journal.

Weber, O., & Saunders-Hogberg, G. (2018). Water management and corporate social performance in the food and beverage industry. Journal of cleaner production, 195, 963-977.

Bresciani, S. (2017). Open, networked and dynamic innovation in the food and beverage industry. British Food Journal.

Weber, O., & Saunders?Hogberg, G. (2020). Corporate social responsibility, water management, and financial performance in the food and beverage industry. Corporate Social Responsibility and Environmental Management, 27(4), 1937-1946.

Brants, J. (2020). Reduction of Work Environment Risks in Beverage Company.

Chaib, R., & Barone, M. (2020). Chemicals in the Food and Beverage Industry: An Introduction. In Chemicals in the Food Industry (pp. 1-33). Springer, Cham.

Chia-Jen, H. U. N. G. (2018). A Study on the Correlation among Brand Image, Perceived Risk, and Purchase Intention in Food and Beverage Industry. Revista de Cercetare ?i Interven?ie Social?, (61), 122-133.

Tse, Y. K., Matthews, R. L., Tan, K. H., Sato, Y., & Pongpanich, C. (2016). Unlocking supply chain disruption risk within the Thai beverage industry. Industrial Management & Data Systems.

Raimo, N., de Nuccio, E., Giakoumelou, A., Petruzzella, F., & Vitolla, F. (2020). Non-financial information and cost of equity capital: an empirical analysis in the food and beverage industry. British Food Journal.

Kearns, C. E., & Bero, L. A. (2019). Conflicts of interest between the sugary food and beverage industry and dental research organisations: time for reform. The Lancet, 394(10194), 194-196.

Hamilton, A. B., & Finley, E. P. (2019). Qualitative methods in implementation research: an introduction. Psychiatry research, 280, 112516.

Park, J., & Park, M. (2016). Qualitative versus quantitative research methods: Discovery or justification?. Journal of Marketing Thought, 3(1), 1-8.

Statista. (2020). Global beverage sales value 2009-2018 | Retrieved 2 October 2020, from https://www.statista.com/statistics/232750/global-beverage-sales/ Retrieved 2 October 2020, from https://www.britvic.com/~/media/Files/B/Britvic-V3/documents/pdf/presentation/2019/2019-annual-report.pdf

Retrieved 2 October 2020, from https://www.coca-colacompany.com/content/dam/journey/us/en/reports/coca-cola-business-and-sustainability-report-2019.pdf

AppendicesA

Appendix B
Colour coding for Thematic Analysis

Figure : Colour coding for developing themes

Source: By the learner