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Shin, Hyun-jung, Shraddha, Raghu

BOTTLED WATER
INDUSTRY
TEAM 4(PEPSICO)
Contents

 What is the industry like?


 Porter’s 5 force model and its
analysis
 Driving factors and its impact
 Market positions (Group map)
 Key factors for future
competitive forces
 Recommendation for Pepsi


What is the industry like?

 Growing by 30% through 2010 to reach


approximately $82 billion in revenue
 Thought to be safer than municipal tap
water and an alternative choice to
high calorie carbonated beverages
 PET container helps customers satisfied
with its convenience and portability
 Controlled by a few food and beverage
companies
What is the industry like?
 Fierce competition among producers
 (they have a similar “scale and scope” of
operation)
 Focus on fitness, health, and the go-go
lifestyle has made the industry booming
 Leaving the growth stage, and entering
the mature stage
 Competitors are looking to defend and
increase market share
 Given the amount of competitors, industry
members are forced to protect market
share
Porter’s Five Force Model
B o ttle d W a te r In d u stry

Hard to Numerou
enter s

Fierce
Low Averag
e
1. Rivalry

 4 major industry players


 ( Danone, Coca-cola, Pepsi, Nestle)
 Fierce competition
 - Compete aggressively on price
 - Making differentiation in developing
products (focusing on health and
fitness)
 Attacking each other (tough
competition)
  Hampered profitability
2. Substitute Products

 Existence of substitute products


 - teas -beers
-powered drink
 - coffee -wine -milk
 - Juice -Sport drink -Soft
drink

àThis occurred due to the declining


prices
àSubstitute products become more
popular and can be considered as a
3. New entrants
 Barriers to entry
ü Establish brand names of global industry

 members
ü New entrants need to overcome the
tremendous marketing muscle and
market presence of Coke, Pepsi and
others
ü Vast beverage distribution systems of
Coke and Pepsi enables them to have
intimate relationships with retail
4. Power of suppliers
 Suppliers to the industry
 - municipal water systems, spring operators,
bottling equipment manufacturers, deionization
etc.
 Large bottlers
 - able to purchase bottles as little as 5 cents pe

bottle
 Regional bottlers
 - have to purchase bottles as much as 15 cents

per bottle
 Secondary packaging suppliers
5. Buyer Power
 Principle Channels :
 - Convenience store, Food stores,
Fountain, Mass merchandisers,
Vending machine
 Bargaining power of buyer is high for
convenience store and supermarket
ü Required to compete aggressively on
price to gain access to shelf space for
low prices and slotting fees
 Bargaining power of buyer is none for
vending
Industry Key Trends
 Social increasing health concerns
 Concerns about the quality of the water
 Increase in demand for convenient
 Economic World becoming a global
economy, increasing the market
competitors need to cultivate
international markets and make the most
of a global economy

èThe industry is still a profitable industry


èHowever, difficult industry to enter, given
the large number of competitors already
Recent trends in Bottled water
Industry
Underlying drivers of change

 Following are the 1.Environmental


underlying drivers Concerns
of change in the 2.Taste and
Bottled water Convenience
Industry. 3.Increase in number of
local players
4.Marketing innovation
5.M&As and Strategic
Alliances.
6.Functional Waters
7.
Increase in Environmental
concerns
 Increase in  Aquafina has
Environmental launched a
concerns is a relatively
potential driving environment
force to stall the friendly bottle
growth of bottled which is thinner
water industry. and leaves lesser
 People have started carbon footprint
realizing the ill than its earlier
effects of using bottles to attract
pet bottles. environment
cautious
Taste and Convenience

 Many reports suggest the major reason


for use of bottled water was
1.Taste
2.Convenience
 Some other sited reasons were
perceived health benefits, but
people are not sure about “what”
health benefits they receive!
Increase in number of Local
Players
 The profit margins in the industry are
very lucrative. The sales price may
be even 125 times the cost of the
contents and packaging of the
product.
 This has attracted many local players
into the industry.
 Though they do not establish
internationally but do well locally
especially in countries where the
distribution infrastructure is not well
developed and consumer is very
Marketing Innovation

 Pepsi Co’s Aquafina


is not just a
bottled water
brand but has
extended its
brand to Skincare
Products which
associates health
and beauty with
Aquafina. This
can be a wise
marketing tactic
M&As and Strategic Alliances

 To facilitate entry into various parts of


the globe many companies enter
into Strategic Alliances. For
example Danone and Coca Cola.
 Also many companies acquire local
players to facilitate production and
reduce competition.
Functional Waters

 Functional waters provide health


benefits.
 They are enriched with vitamins,
minerals etc. and available in
different flavors to attract health
conscious and physically active
consumers.
 Some of the Pepsi CO’s brands with
functional benefits are SoBe Life,
Flavor Splash, Aquafina Sparkling
etc.
Strategic Group Map

 Pepsi Co’s global


presence extends
P rice

to 200 countries
Nestl
and its price for a
e 24 bottle pack is
Pepsi about $5.01.
Coca Cola
Co.  Coca Cola is in a
better position in
G e o g ra p h ic terms of both
C o v e ra g e
Global presence
(300 Countries)
and price (4.35$
Reasons why people prefer
bottled water
Recommendations

 Lower prices to gain market share


 Investing in innovation to find
alternatives to plastic bottles is
important – people are becoming
more conscious about the
environment.
 Be more transparent & honest
regarding the source of water

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