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Three ways entrepreneurs can benefit from ‘power in numbers’

Jane Priest, Teaching Fellow

Faculty Blog

Soccer Balls Net 7-22-09 1

Soccer Balls Net 7-22-09 1 (Photo credit: stevendepolo)

New sports drink Golazo recently caught my attention because it appears to be scoring in the US. What can we learn from this shrewd attack on big brands?

On first impressions, the US soft drinks industry might not seem very attractive for new starts. Manufacturing a beverage is likely to involve relatively high initial investment and overhead expenses (premises, machinery, power) while established competitors happily enjoy economies of scale. Meanwhile, industry giants like Coca-Cola and Pepsi loom over a plethora of smaller brands jostling for a place on supermarket shelves, as the soft drinks market becomes increasingly fragmented.

However, it’s this fragmentation which presents entrepreneurs like the owners of Golazo, with an opportunity. Alongside growing concerns about health and obesity, per capita soda consumption has actually been declining in the US for over a decade. To quench people’s thirst for alternative beverages (bottled water, sports and energy drinks, smoothies…) many new brands have arisen, including Golazo. So how has ‘power in numbers’ helped brands like Golzo compete against each other, as well as industry leaders?

  1. The market

First, Golazo saw a gap in the market. Golazo is all about football (soccer) and its drinks aim to boost energy and performance on the pitch by using all natural ingredients. Golazo’s ‘Latin-inspired’ branding and flavours are designed to particularly appeal to the US Hispanic or Latino population.

This is a classic ‘niche’ strategy but, it neatly highlights that a niche doesn’t have to be small. What’s more, spotting growing niches can mean a brand quickly becomes the next mainstream.

The Hispanic or Latino population accounts for almost 17% of the US population, making it the largest ethnic minority group, and growing. A large proportion of this target market can be found in western states where Golazo has initiated its guerrilla attack (see US Census Bureau data here). In addition, football is a passion for millions globally. The 2010 FIFA World Cup in-home television coverage reached over 3.2 billion people – almost half of the global population.

  1. The consumer

New brands like Golazo have a vital resource that they should never underestimate: their customers. While industry leaders spend millions on promotional campaigns, Golazo focuses on encouraging its customers to do the promotion. Whether generated through online social media or fun promotional events on the ground, word of mouth is free, and persuasive. The more people you can get talking, the better.

  1. The industry

Although many small firms competing against each other in an industry can increase rivalry and make an industry less attractive, there’s a flip side to this. As sales of energy drinks in the US have grown in recent years, the industry has attracted increased scrutiny from critics about health concerns, and consumers have become more demanding, but also more adventurous. Healthy competition in response to emerging consumer wants helps create prime opportunities for brands like Golazo.

So, a considerable, and growing target market; a substantial group of free brand ambassadors in the form of customers; and a lively industry encouraging more adventurous tastes are three conditions which may help Golazo live up to its name.

Will Golazo succeed, and what will be the reaction of big brands like Red Bull, Coca-Cola and Pepsi?