Economic and Management Accounting Plan for Sparklejuice, Inc.

Economic and Management Accounting Plan for SparkleJuice, Inc.

SparkleJuice, Inc. has become a popular alternative to conventional sodas and sparkling waters over the past two years in Florida.  The sales have been described as phenomenal, and the appeal of an all-natural, low-calorie beverage these days has great promise, with a well-conceived marketing campaign.  As in the case of the Independent Beverage Company, it could go from a regional to a national brand, if the circumstances are right.  This study will look at the microeconomic state of the soft drinks industry, to determine if there are factors and opportunities in the current market that would be favorable to such an expansion.  Next, there is an analysis of the current microeconomic state of the country and how that would impact such an expansion.  Finally, such an expansion, if feasible, would necessitate a robust management accounting plan to ensure that this expansion is successful.  The requirements of such a plan will be discussed, along with the need for outside financing, and the possible choices for obtaining such support.

Microeconomic Analysis of the Soft Drink Industry

Since 2013, the market for soft drinks has seen a decided recovery, with several trends easily discernible within that market.  Carbonated Soft Drinks (CSD), like Coke or Pepsi, showed a decline during that period, as customers concerns about High Fructose Sweetener (HFS) and the massive amounts of sugar present in non-diet CSD, has fueled the popularity of sparkling waters, such as La Croix, Sparkling Ice, etc.  Niche categories, like value-added water, outdo national brands.  One recent analysis noted that "Some of the prominent trends that the market is witnessing include shifting alignment from carbonated soft drinks containing artificial sweeteners to natural, sweet-laden and low-calorie beverages, introduction of new product lines and flavors, increase in adoption of gourmet food as well as wellness food and growth opportunities/investment opportunities."  While this analysis was made on a global level, it is in line with other considerations of the American soft-drink market.  "Innovation will be a key driver for the beverage marketplace." (Hemphill, 2017).  One CEO of a company that makes flavored sparkling water stated:" “I don’t see it as a fad,” Klock said of flavored sparkling water, noting that the trend in all beverages, including liquor and beer, is toward more variety and flavor." (Berman, 2017)  Reading SWOT analysis for conventional CSD companies, the same trend is mentioned as an opportunity for such companies, and Pepsi has bubly as their sparkling water brand to target this growing market segment.

So, the current environment for expanding a regional brand that isn't a CSD into a national brand is favorable, given the continuing concern about calories and the appeal that comes from not using artificial ingredients or coloring.  LaCroix, mentioned above, is using social media to market their brand, and a similar campaign should be included in the rollout to a national level.  "Flavored sparkling water brand LaCroix has become a social media darling and propelled itself into mainstream pop culture in a relatively short time.  The trendy seltzer in colorful cans has also seen major sales growth and helped boost the entire sparkling water market." (Sweeny, 2018).  The demand is there, and the question then is, will it be enough for a successful expansion in the current and future American economy?

Microeconomic Analysis of The American Economy for 2018 and Beyond

The next consideration is that of the American microeconomy.  According to a recent analysis, the GDP is expected to grow in 2019 and 2020, although not as much as in the current year.  Interest rates are expected to rise slowly due to action by the Federal Reserve: "The Federal Open Market Committee raised the current fed funds rate to 2.0 percent in June 2018.  It expects to increase this interest rate to 2.4 percent in 2018, 2.9 percent in 2019, and 3.4 percent in 2020.

The fed funds rate controls short-term interest rates.  These include banks' prime rate, the Libor, most adjustable-rate and interest-only loans, and credit card rates.  You can protect yourself from the Fed's rate hikes by choosing fixed-rate loans wherever possible.

The Fed began reducing its $4 trillion in Treasurys' in October 2017.  It initially said it would do so only after the fed funds rate has normalized to 2 percent.  But the FOMC decided it would be better to normalize its balance sheet now.  The Fed acquired these securities during quantitative easing, which ended in 2014.  Since the Fed is no longer replacing the securities it owns, it will create more supply in the Treasurys' market.  That’s helping to raise the yield on the 10-year Treasury note.  This will drive up long-term interest rates, such as those on fixed-rate mortgages and corporate bonds." (Amadeo, 2018)