Sumol + Compal is a Portuguese company, formed from the merger between soft drink maker Sumol and juice producer Compal. The company faces a mature domestic market, and while it has competitive advantages in Portugal that have prevented share erosion by the major soft drink companies, it also faces intense competition anywhere else in Europe. Sumol + Compal's main advantage lies with new product development. Despite being an older company in a mature industry, it launches around 20 new products per year, and continues to have a strong innovation pipeline. New products can be a source of competitive advantage and way to gain access to foreign markets.

Sumol + Compal also draws upon its domestic strength. There are unique conditions to the Portuguese market, especially in distribution, that have allowed Sumol in particular to have an unusually high market share, and that have reduced the influence of major soft drink companies in the country. This gives Sumol a fairly large, stable revenue base on which to build future business. The cash flow can be plowed into growth, or used as security for debt to facilitate more ambitious expansion projects.

Another asset for the company is that it has two factories in Africa, in former Portuguese colonies, and has been able to experience growth by building out these markets, which have substantial...

For instance, Portugal is a relatively small market within the EU. As a small market, a company that competes domestically will end up being one of the smaller competitors in Europe, and that is the situation with Sumol + Compal today. This makes expansion out of Portugal more difficult, especially if the company cannot generate true differentiation of its products.
Another weakness that the company has is that the domestic market may be becoming more challenging. While it is strong in small stores, more Portuguese are starting to shop in supermarkets, where major beverage competitors like Coca-Cola have competitive advantage. This could reduce the size of the domestic market right at the point where Sumol + Compal needs stable domestic cash flow to finance expansion. The strategic window for the company might be closing.

Small domestic market

Share is being threatened

Company is not big enough to truly challenge in…