Analysis of Smoothies

2424 WordsOct 28, 201010 Pages
Assignment: EC180 Assignment Analysis of Smoothies THEO FRANKLINOS SMOOTHIES Introduction This review is based on an economic analysis of the ‘Smoothie’ product market. Smoothies are chilled beverages made of pureed fresh fruit or vegetables often mixed with ice cream, yoghurt or milk. There is no main recipe for a Smoothie and the different manufacturers produce differentiated products with respect to the ingredients and texture of the drink. They may also add sugar and vitamins to the mix. Alternatives to this drink, and therefore also potential competitors, include milkshakes, carbonated soft drinks, fruit juices, energy drinks and water. The growth of smoothies in the chilled juice market has created an opportunity to…show more content…
Therefore, the product may be presumed to be price inelastic as there are relatively few competitors and it is perceived as a specialist product. However, Smoothies are just one member of the vast drinks market and therefore there are numerous substitutes for the product. Cross price elasticity will also affect demand of the product. Cross price elasticity is where a change in price of other products, such as substitutes and complements, affect demand for the product. If the substitute’s price is lowered then more people may choose to buy a cheaper alternative to a Smoothie. The more necessary a good is, the lower the elasticity, as people will attempt to buy it no matter the price. Smoothies have been marketed as highly nutritious, beneficial to health and providing consumers with an easy way of achieving their 5-a-day fruit target. Therefore, customers may be willing to buy the product even if the price is increased. The broader the market definition is of a product, the lower is the elasticity. Therefore, Smoothies will have a relatively high elasticity as there are few companies that manufacture the beverage. However, Smoothies are part of the vast drinks’ market which will have an extremely low elasticity. The demand for a particular brand of smoothie is likely to be price responsive. This is because all of the separate brands are competitive substitutes. So, if one brand becomes more expensive it is likely that consumers will switch to
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