37360363 Competition in the Bottled Water Industry in 2006[1]

8/8/2019 37360363 Competition in the Bottled Water Industry in 2006[1]

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Pooja dwarkani ²Roll no 12

Rajmohan- Roll no-10 Jins ²Roll no-11

Competition in the Bottled water

Industry in 2006



Objective

y This Case analysis basically shows the emergence of

bottled water industry, different strategies being taken

by three main competitors (Pepsi,cocoacola,nestle )and

other sellers to sustain in market during period from2000 to 2006.Here we have also explained the Porter·s

five force model



Introduction

y $62 billion business in 2005 & additional 30% b/w 2005 and

2010

y United states the world largest market(from 1999-2004

..increased by 8%) Other in top rank are united states andMexico

y Controlled by a few food and beverage companies .Three

giant competitors ²Coca-cola, Pepsico, Nestle..

yStrategies : innovative product variation, lowered prices instructured markets, acquiring of smaller sellers ,use of

strategic agreement



Emergence of bottled water industry

y Increased focus on fitness and health

y Safety concerns of municipal drinking water

y Hectic on-the-go lifestyles of American consumers.

y Convenience, purity and portability of bottled watery Improved consumer awareness of need for proper hydration

y Improved the appearance of skin and give more energy

y Chemical taste of tap water including chlorine and fluroide

that was a great problem to US people



SWOT Analysis of Bottled water

Industry

ySTRENGTHS

The lifestyle of people is changing

Demand is increasing day by day in the bottle Water.

Convenience, purity and portability can be the strengths of bottled water

yWEAKNESSES

² The lack of awareness and the poverty

The lack of availability in the remote areas is also the strong reason



yOPPORTUNITIES

² People are becoming more health conscious

-

yTHREATS

² Low Entry Barrier

² Economical Uncertainty



Porter·s Five Force Model

BottledWater Industry

Fierce

Low Average

NumerousHard to enter



Five Forces Analysis

y Threat of substitute product:

Healthier and innovative products, such as flavored water, non

calories water, and vitamin added water.

Other substitute products are tea, coffee, milk, and beer, softdrink.

Substitute products become more popular and can be

considered as a threat



y Threat of the new entrants :

y Profitable markets that yield high returns will draw firms.But in this case, the biggest competitors have the majority of the global market,

y A few small competitor are capable of maintain theirconsumers.

y Just a competitor who is able to offer big quantities of bottled water at a low price is going to enter this industry

y Vast beverage distribution systems of Coke and Pepsi enablesthem to have intimate relationships with retail channels andwould be able to defend their positions effectively



The bargaining power of suppliers:

y The suppliers to the bottled water industry include municipal

water systems; spring operators; bottling equipment

manufactures; deionization, reverse osmosis, and filtrationequipment manufactures.

y Manufactures of PET and HDPE bottles . Large bottlers

- able to purchase bottles as little as 5 cents per bottle.

y Due to large number of existing Suppliers ,bargaining

power of suppliers is low.



y The bargaining power of customers :

y The price sensitivity of buyers around the globe is bigconcern for the leading sellers of the industry

y Principle Channels :

- Convenience store, Food stores, Mass merchandisers,Vending machine

y Consumers will not stop buying bottled water just because ahigh price, they may only change from one brand to another

or in the best scenario form one flavor to another, because bottled water today is considered as a basic product. So bargaining power of buyers is medium



y Intense of competition:

There are a few global competitors in the industry, such as Nestlé Waters,Group Danone, coco-cola,pepsico.

y Fierce competition

- Compete aggressively on price- Making differentiation in developing products (focusing on health andfitness)

Bottled waters sellers also needed to have efficient distribution systems tosuper market

Maximize the number of deliveries and on-time deliveries per driver sincedistribution includes high fixed costs

The competitors in the industry have not only bottled water but enhancedwaters or functional waters available in every single market.



water operations of Nestle,pepsico,and

coca-cola

NESTLE PEPSICO COCA-COLA

RETAILER PRICE

PER CASE

$8.44 $8.52 $8.65

Retailer·s margin 35% 17.5% 17.6%

TOTLE

BOTTLER

REVENUE

$5.49 $7.03 $7.13

EXPENSES $2.63 $4.52 $4.62

GROSS PROFIT $2.86 $2.92 $3.03

EBITA MARGIN 10.4% 9.0% 6.5%



WORLD MARKET SHARE OF BOTTLED

WATER INDUSTRY IN 2006Pepsico Aquafina $936 million

Coca-cola Dasani $834 million

Nestle water ²Poland spring $649 million

Nestle-Arrow head $546 million

Nestle Deer Park $356 million

Crystal geyser $335 million

Ozarka(Nestle water) $236 million

Ice mountain $208 million

Evian(coco-cola) $145 million



Top four USA bottled water marketers

2003-2004RANK COMPANY LEADING

BRANDS

2004 MARKET

SHARE

2003 MARKET

SHARE

1 NESTLE

WATERS

POLAND

SPRING,DEER

PARK,ICE

MOUNTAIN

42.1 39.1

2 COCA-COLA DASANI,EVIA

N,DANNON

21.9 24.1

3 PEPSI CO AQUAFINA 13.6 14.5

4 CG CRYSTAL

GEYSER

7.4 7

OTHERS/PRIV

ATE

15 15.3



Strategies of nestle

y World ¶s leading seller with market share of 18.3 %in2005

y 42% market share in USA and 20% in EUROPE

y

Low-cost leader in United States.y High speed, efficient and vertically-integrated

manufacturing capabilities

y 75 brands in 130 countries in 2004

yStrategy was, to be positioned by purchasing smallerregional brands, acquiring bottled water producers andentering into joint ventures.



y In 2006-two global brands(Nestle pure life and aquarrel),five

international premium brands and 68 local brands

y

Enhanced waters such as fruit flavoured, Strawberry melba,contrex lemon meringue were innovative calorie-free flavors

introduced in 2006.

y Packaging innovations to differentiate its bottled water

brands such as spill-proof cap for child-sized bottles, bubbleshaped bottle for children,



y New PET container was part of strategy to revitalize the brandintended to better match the on the go lifestyles of youngconsumers

y Home and office delivery which nearly 30%of sales in US and 8

Acquisitions help it to grow from no presence to leading position.y Loyal consumer base

y Nestle is very trusted brand and its product is considered of highquality world-wide.



Strategies by Coca-colay Dasani (create a recognizable brand by inventing an name

that sounds refreshing, soothing, and crispness)introduced in1999

y Dasani is purified water includes combination of magnesium

sulphate, potassium chloride, and salt ²best attributes of spring water.

y Supported by $20 million advertising budget in 2005 and wasdistributed through all retail channels where coke available.

yVast distribution systems and negotiated contracts withuniversities, sports, made it easy to make Dasani availableanywhere coke be purchased



y Coca-cola·s marketing expertise, vast US distribution

channels allowed dasani to become second largest brand of

water in USy With vast global distribution they also have bottlers partially

owned and completely owned by coca-cola that gives them

cost -effectivness

y

Coca-cola extended Dasani line in 2006-fruitflavoured(successful), flavored water with light carbonations

with no calories, powerade(unsucessful)



y Joint venture with Danone in 2002 provided coke with

bottled water products at all price points.

y Dasani-upper mid priced water, Evian-premium and

Dannon-discount-priced.T

his joint venture would allow thecompany to protect Dasani·s near premium pricing.

y But the three ²tier strategy failed in some regards. Coke·s

three water brands had collectively lost 2.2 market share

points which lead to growth of nestle and some private label



y In early 2004, Coke had to withdraw its entire stock of Dasanifrom the market after unacceptable levels of bromate was detectedin the water and they faced abandonment of Dasani brand inEurope

y In 2006 coca-cola acquired the Italian and German mineral watercompany and two HOD water producers in 2006

y Coca-Cola supports nearly 70 public water projects in 40countries, in partnership with such groups as CARE and the WorldWildlife Fund

y Using recycled resin to make plastic bottles and reducing the bottle's weight try to minimize the environmental impact of bottled water



Pepsi waters



Strategies by Pepsi-coy Best ²selling brand in United states ²Aquafina

y Key strength-Utilization of same water purification facilities that

were used to produce soft drinks.

y Stripped out all chlorine and unpleasant smell of tap water which

was a great problem in US

y Other brands-gatrorade propel fitness, sobe life water ,and

functional versions developed around customer type and lifestyles

y Propel ²flavor and vitamin enriched water-physically active

consumers life water for image-driven consumersy Aquafina sparkling(a zero-calorie, lightly carbonated citrus ),

Aquafina alive(vitamins and flavoured juices),nutrient rich Gatorade.



y In 2006, aquafina was the number one brand of bottled water in

Russia and Vietnam

y Offered discounts on 12 and 24 multipacks to boost unit volume..

y Pepsico expanded into international markets by allowing foreign

bottling franchises to license the aquafina brand

y Aggressive distribution system of Pepsi is key strength for its

bottled water

y Aquafina had launched a relatively environment friendly bottle

which is thinner and leaves lesser carbon footprint than its earlier bottles to attract environment cautious customers.



Other suppliersy Crystal geyser ²fourth largest seller in USA in 2004-lower price

points and was bottled from springs in California at very low cost

y Penta penetrate in market through distribution based on removing

100 % of impurities from tap water, sponsored large number of

athletes, brand promotion through motion pictures, music videos

y Fizi-super premium water-exposure through motion pictures

y EON achieved its differentiation through anti-aging claims..each

brand with unique characteristic



Learning

y Although there is not much difference in the price level and

strategies opted by all the three brands Nestle remains the

biggest player in the market, having large market share with

low cost of production and large number of brands.

y Pepsico having one single brand of bottled water(aquafina) is

still able to compete with other two established brand

because of its vast distribution network.

y Coca Cola has not been able to maintain a consistent position

in the market as it failed in its three tier strategy and because

of its abandonment in Europe and US in 2006.

37360363 Competition in the Bottled Water Industry in 2006[1]

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