Competition in the Bottled water Industry in 2006
y This Case analysis basically shows the emergence of
bottled water industry, different strategies being taken by three main competitors (Pepsi, coca cola, nestle )and other sellers to sustain in market during period from 2000 to 2006.Here we have also explained the Porter·s five force model
acquiring of smaller sellers .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 and Mexico y Controlled by a few food and beverage companies . y Strategies : innovative product variation.Three giant competitors ²Coca-cola. lowered prices in structured markets.use of strategic agreement
. Nestle. Pepsi co.
y Convenience. purity and portability of bottled water y 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 fluoride
that was a great problem to US people
.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.
SWOT Analysis of Bottled water Industry
The lifestyle of people is changing Demand is increasing day by day in the bottle Water. purity and portability can be the strengths of bottled water
WEAKNESSES ² The lack of awareness and the poverty
The lack of availability in the remote areas is also the strong reason
² People are becoming more health conscious
² Low Entry Barrier
² Economical Uncertainty
Porter·s Five Force Model
Bottled Water Industry
Hard to enter
Fierce Low Average
Other substitute products are tea. milk. and beer. non calories water. such as flavored water.Five Forces Analysis
y Threat of substitute product:
Healthier and innovative products. and vitamin added water. soft drink. coffee. 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. 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 enables them to have intimate relationships with retail channels and would be able to defend their positions effectively
. y A few small competitor are capable of maintain their consumers. the biggest competitors have the majority of the global market.
But in this case.
bottling equipment manufactures. reverse osmosis.The bargaining power of suppliers: y The suppliers to the bottled water industry include municipal water systems. Large bottlers .able to purchase bottles as little as 5 cents per bottle. y Manufactures of PET and HDPE bottles . deionization. spring operators. and filtration equipment manufactures.bargaining
power of suppliers is low.
y Due to large number of existing Suppliers .
So bargaining power of buyers is medium
. Vending machine y Consumers will not stop buying bottled water just because a high price. because bottled water today is considered as a basic product.Convenience store. Mass merchandisers. they may only change from one brand to another or in the best scenario form one flavor to another.y The bargaining power of customers : y The price sensitivity of buyers around the globe is big
concern for the leading sellers of the industry y Principle Channels : . Food stores.
coca-cola .y Intense of competition:
There are a few global competitors in the industry.Compete aggressively on price . Group Danone.pepsico. such as Nestlé Waters.Making differentiation in developing products (focusing on health and fitness) Bottled waters sellers also needed to have efficient distribution systems to super market Maximize the number of deliveries and on-time deliveries per driver since distribution includes high fixed costs The competitors in the industry have not only bottled water but enhanced waters or functional waters available in every single market. y Fierce competition .
.6% $7.5% $7.Value chain comparison for the bottled water operations of Nestle.49
17.62 $3.92 9.13
$4.86 10. and coca-cola
NESTLE PEPSI CO COCA-COLA
RETAILER PRICE $8. pepsi co.44 PER CASE Retailer·s margin TOTLE BOTTLER REVENUE EXPENSES GROSS PROFIT EBITA MARGIN 35% $5.52
$8.63 $2.03 6.65
WORLD MARKET SHARE OF BOTTLED WATER INDUSTRY IN 2006
Pepsico Aquafina Coca-cola Dasani Nestle water ²Poland spring Nestle-Arrow head Nestle Deer Park Crystal geyser Ozarka(Nestle water) Ice mountain Evian(coco-cola) $936 million $834 million $649 million $546 million $356 million $335 million $236 million $208 million $145 million
2 3 4
COCA-COLA PEPSI CO CG OTHERS/PRIV ATE
21.EVIA N.4 15
24.6 7.1 39.Top four USA bottled water marketers 2003-2004
RANK 1 COMPANY NESTLE WATERS LEADING BRANDS POLAND SPRING.DEER PARK.DANNON AQUAFINA CRYSTAL GEYSER 2004 MARKET 2003 MARKET SHARE SHARE 42.ICE MOUNTAIN DASANI.1 14.9 13.3
.5 7 15.
High speed. to be positioned by purchasing smaller regional brands.3 %in y y y y y
2005 42% market share in USA and 20% in EUROPE Low-cost leader in United States.Strategies of nestle
y World ¶s leading seller with market share of 18. acquiring bottled water producers and
entering into joint ventures.
. efficient and vertically-integrated manufacturing capabilities 75 brands in 130 countries in 2004 Strategy was.
Strawberry melba.y In 2006-two global brands(Nestle pure life and aquarrel). bubble shaped bottle for children. contrex lemon meringue were innovative calorie-free flavors introduced in 2006.
international premium brands and 68 local brands y Enhanced waters such as fruit flavored. y Packaging innovations to differentiate its bottled water brands such as spill-proof cap for child-sized bottles.
y New PET container was part of strategy to revitalize the brand
intended to better match the on the go lifestyles of young consumers 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 high quality world-wide.
sports. y Supported by $20 million advertising budget in 2005 and was distributed through all retail channels where coke available.Strategies by Coca-cola
y Dasani (create a recognizable brand by inventing an name
that sounds refreshing. made it easy to make Dasani available anywhere coke be purchased
. soothing. and salt ²best attributes of spring water. potassium chloride. and crispness)introduced in 1999 y Dasani is purified water includes combination of magnesium sulfate. y Vast distribution systems and negotiated contracts with universities.
. flavored water with light carbonations with no calories. vast US distribution
channels allowed dasani to become second largest brand of water in US y With vast global distribution they also have bottlers partially owned and completely owned by coca-cola that gives them cost -effectiveness y Coca-cola extended Dasani line in 2006-fruit flavored(successful).y Coca-cola·s marketing expertise.
This joint venture would allow the company to protect Dasani·s near premium pricing. Evian-premium and Dannon-discount-priced. 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 Joint venture with Danone in 2002 provided coke with
bottled water products at all price points. y Dasani-upper mid priced water.
Coke had to withdraw its entire stock of Dasani
from the market after unacceptable levels of bromate was detected in the water and they faced abandonment of Dasani brand in Europe y In 2006 coca-cola acquired the Italian and German mineral water company and two HOD water producers in 2006 y Coca-Cola supports nearly 70 public water projects in 40 countries.y In early 2004. in partnership with such groups as CARE and the World Wildlife Fund y Using recycled resin to make plastic bottles and reducing the bottle's weight try to minimize the environmental impact of bottled water
Aquafina alive(vitamins and flavored juices).nutrient rich Gatorade.
.and functional versions developed around customer type and lifestyles
y Propel ²flavor and vitamin enriched water-physically active
consumers life water for image-driven consumers y Aquafina sparkling(a zero-calorie. y Stripped out all chlorine and unpleasant smell of tap water which was a great problem in US y Other brands-gatorade propel fitness. lightly carbonated citrus ). sobe life water .Strategies by Pepsi-co
y Best ²selling brand in United states ²Aquafina y Key strength-Utilization of same water purification facilities that
were used to produce soft drinks.
. aquafina was the number one brand of bottled water in y y y y
Russia and Vietnam Offered discounts on 12 and 24 multipacks to boost unit volume.
.y In 2006. Pepsico expanded into international markets by allowing foreign bottling franchises to license the aquafina brand Aggressive distribution system of Pepsi is key strength for its bottled water 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.
brand promotion through motion pictures.each brand with unique characteristic
. music videos y Fizi-super premium water-exposure through motion pictures y EON achieved its differentiation through anti-aging claims. sponsored large number of athletes.Other suppliers
y 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..
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. 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. having large market share with low cost of production and large number of brands. 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.