FYI | Dec 13 2006
A new paradigm shift.
How often have we heard and read the term over the past few years? It’s probably sufficient to say the world has changed since the turn of the millennium.
Here in Australia most people will make an instant connection with the mining sector and what has been dubbed the Commodities Super Cycle driven by accelerated developments in China. India, Russia and Brazil will be the next ones to add more changes to the sector.
How about the internet? Remember it used to be all but young and enthusiastic entrepreneurs with big plans and no revenues?
The thing I find most intriguing is that major changes such as the now second phase of the internet can take place while more than half the world is still ignorant of it. I am not referring to hundreds of millions of Chinese citizens or to the lost generations in Africa but to the fact that one Wall Street broker recently held a survey among media proprietors and directors in Europe and almost none of them transmitted the message that the internet, or its threat, was high on the agenda.
Do we tend to oversize the importance of the internet revolution? Or does this merely illustrate why Rupert Murdoch is called a visionary and so many others not?
Telecom analysts at Citigroup discovered previously that even the CEOs who are leading Europe’s major telecom operators did not come to realise the sector had fallen into a new paradigm, in this case one of low to very low market growth, until it had become an undeniable fact.
Do we only see what we want to see? Do we only find what we are looking for?
What conclusions should we draw from the fact that most car manufacturers, but especially the three major ones on US soil, have so badly misread the changing market dynamics that their future existence is now at stake?
Sometimes it simply requires someone else pointing in the right direction to see the changes happening.
Wall Street analysts at Morgan Stanley called the new paradigm for carbonated soft drinks in December 2005. They might have been a little early but their update on the sector this week leaves little room for guesswork: tomorrow’s world will no longer offer a simple choice between Coke or Pepsi.
Say goodbye to an era that once was.
What has happened? In one sentence: we’ve become more health conscience and as a result the world is turning away from carbonated soft drinks (regardless if they’re diet or green).
What struck me most is that the major losses are occurring amongst today’s youngsters who rather grab a sports drink or flavoured water than the good old fashioned Fanta or Coke. Of course, it’s going to take a while still before this trend will become visible in places like the Australian outback. However, if the research report is anywhere near today’s reality in the US the world is about to experience a genuine revolution.
In short: the three big dominant forces in the global carbonated soft drinks industry (Coca-Cola, PepsiCo and Cadbury Schweppes) have lost their iron stronghold on today’s teen girls and boys. And as their parents are increasingly turning health conscience as well, industry dynamics are shifting. Morgan Stanley analysts currently believe the changes are in “acceleration mode”.
Soon, the analysts argue, we could be witnessing some quantum changes with fastfood giants considering opening up their current closed shop alliances with the three CSD juggernauts.
In fact, all you’ve just read is already old news because company’s such us Nestle, Unilever and Danone have already jumped on the opportunity with an increasing range of alternative drinks. Think flavoured teas, yoghurt drinks, waters, milk based drinks etcetera. All these alternatives are growing their own piece of the pie.
Changing market dynamics tends to open up new opportunities and so the world is seeing an increasing amount of young, new, enthusiastic entrepreneurs entering the sector as well. No doubt all inspired by the success of Red Bull.
What had escaped my attention is that a new sort of competitor has stood up to challenge the CSD trio on their home turf as well. These are cashed up consumer oriented global conglomerates such as L’Oreal, Procter and Gamble, Estee Lauder, Colgate, Clorox and Kimberley.
As pointed out in the report, several of the new competitors have access to a complete range of in-house specialists in Science & Technology, nutritionists, physicians, biochemists, etcetera. They have well regarded consumer brands, access to distribution channels, experience with supply chain management (how to take out costs) and are actively exploring new sales channels.
Meanwhile, costs for producing CSDs are running up, and fast, as key ingredients such as corn, sugar and aluminium are experiencing their own “new paradigm”.
Suddenly, I also realise why most of all this had escaped my attention thus far: I cannot even remember the last time I drank a Coke or a Fanta. I do, however, thoroughly enjoy the variety of teas in my kitchen.
In fact, I am enjoying my latest discovery –green tea with natural jasmine petals- as I finish this week’s editorial. We all better get used to the term “paradigm shift” – we are going to hear it a lot still over the next few years.
And I haven’t even mentioned global climate change yet…
Till next week!
Your happy to observe the world changing editor,
Rudi Filapek-Vandyck
(steadfastly supported by the Magnificent Three: Greg, Terry and Chris)