Seminar #4 Aditi | Aswathy | Alby | Cyril | Palak

OVERVIEW
Bottled Water Industry - Trends and Competition Supply Chains in the Industry Strategies adopted by major players Learning from the case

INTRODUCTION
This case analysis is to show the emergence of bottled water industry, different strategies being taken by the three main competitors (Pepsi,Cocacola,Nestle) and other sellers to sustain in market during the period from 2000 to 2006.

About the Industry

INDUSTRY CONDITIONS
$ 62 billion business and additional 30% between 2005-2010 US-world s largest market per capita consumption is 25 gallons and in European market it is 40 gallons Controlled by few competitors Strategies: Innovate product variation, lowered prices in structured markets, acquiring of smaller sellers, use of strategic agreement

Emergence of bottled water industry:

Increased focus on health and fitness Safety concerns of municipal drinking water Hectic on the go lifestyle of American consumers Convenience, purity and portability of bottled water Increased consumer awareness Improved the appearance of skin and give more energy Chemical taste of tap water including chlorine and fluoride that was a great problem to use

Distribution and Sale of Bottled Water

Distribution of bottled water varied depending on producer and distribution channel Bottled water was distribution can be
Direct store delivery Delivery by third parties

Coca-Cola s Dasani and PepsiCo s Aquafina was done through companies vast beverage distribution system

Distribution and Sale of Bottled Water

Bottled water producers other than Coke and Pepsi were required to compete aggressively on price to gain access to shelf space Supermarkets and discount stores accounted for 43.5 percent of U.S. industry sales Convenience stores were aggressive in pressing bottled water producers and food distributors for low prices and slotting fees Delis and restaurants accounted for only 6.5 percent of U.S. industry sales

Suppliers to the Industry

It includes
Municipal water systems Spring operators Bottling equipment manufacturers Deionization Filtration equipment manufacturers Manufacturers of PET and HDPE bottles, plastic caps Label printers Secondary packaging suppliers

Key Competitive Capabilities in the Bottled Water Industry

Did not enjoy the brand loyalty of other food and beverage products Since there was growing importance of brand recognition, successful sellers required to possess well-developed brand-building skills Need to have efficient distribution systems to
Supermarket Wholesale club Convenience store channels

Key Competitive Capabilities in the Bottled Water Industry

It is critical for distributors and bottlers to
Provide on-time deliveries Offer responsive customer service

Price competition mandated high utility of large-scale plants Volume and market share were key factors in keeping marketing expenses at an acceptable per-unit level

Nestl Waters
Good Life, Good Food Number 1 bottle water company in the world 99 production sites in 36 countries 67(75) brands Aggressive in building market by introducing new brands and acquiring local brands. Acquired nearly 20 bottled water producers between 2001-2003

Nestl Waters
Two global brands, five international premium brands and local brands
Purified water products Spring water Sparkling water Mineral water

4.8% Global growth in 2010

Nestl Waters
Functional Water
Fortified with vitamins and plant extracts Calorie Free flavors

Packaging innovations
Spill proof cap

Aiming at on the go life style of young One litter glass container for traditional consumers Home and office delivery
30% share Acquired existing players

Low cost leader strategy

Groupe Danone
Bringing Health through food to as many people as possible Presence in
Diary products [#1] Bottled Water [#2] :China , Euorop Baked goods [#2]

Number 2 in bottled waters Strategies of Danone is based on drink more water because it s the only drink the body really needs Acquisition of companies 6.9% growth in net sales in 2010

Groupe Danone
Suffered due to the distribution agreement with Coca-Cola [ -20% in USA]
Responsible for production, marketing and distribution

HOD agreement with Suntory Waters

Sold to a private investment fund

Functional and Flavored water

Coca-Cola
In 1999, it created a new brand called DASANI It included a combination of magnesium sulfate, potassium chloride and salt which the company believed were the best attributes of spring water. Coca-Cola s marketing expertise and vast distribution system allowed Dasani to became 2nd largest brand. Joint venture with Danone Waters provided Coke with products at all price points.
Evian premium priced Dasani upper-mid priced Dannon discount priced

Coca-Cola
But the three-tier strategy failed as three brands collectivelly lost 2.2 marker share points berween 2003 and 2004. In 2006, Coca-Cola extended Dasani line
Fruit-flavored Dasani Sensation: a flavored water with light carbonation powerade : in two flavor

Coca-Cola produced and marketed bottled water In foreign countries under local brand names.

Coca-Cola
It began efforts to make Dasani an international brand in 2004 with expansion in Africa, Brazil and the UK. They supported the launch in UK with $3.2 million advertising budget and a 4-million bottle sampling campaign. But it had to withdraw its entire stock of Dasani from UK market after unacceptable levels of bromate was detected in water. This was viewed as one of the all-time great marketing disasters. In 2006, the company acquired an Italian and a German mineral water company and two HOD water producers in Australia.

PepsiCo
Best selling brand in United States Aquafina Utilisation of the same water purification facilities that were used to produce soft drinks Stripped out all chlorine and other parts that might impart unpleasant smell or taste. Then ozone gas was added to prevent bacteria growth. The product lines were developed around customer type and life style.
Propel : flavor and vitamin enriched water for physically active customers Gatorade: nutrient-rich water

PepsiCo
In 2006, Gatorade, Propel and Acuafina were all number one in their categories, with market shares of 80%, 34% and 14%. In 2002, it acquired Mexico s largest Pepsi bottler, wich was the number one producer of purified water in Mexico. PepsiCo expanded into international market by allowing foreign bottling facilities to lience the Aquafina brand. Aquafina was also number one brand in Russia and Vietnam.

Others
Low Price Strategy [CG Roxane] Differentiation Strategy [Trinity Springs, Penta, Voss]
Based on water source [Trinity Springs] Proprietary Purification System [Penta] Distinctive Glass bottle and limited channels of distribution [Voss]

CONCLUSION
Convenience and portability are two features that makes the bottled water industry sustaining Bottlers use varied supply chains and integrated at different levels Companies leveraged on an existing brand or adopted a low price strategy by enhancing operational efficiency or differentiated the products

CONCLUSION
Growth Strategy: Mainly inorganic and brand extension [Nestl] Stiff competition existed in the industry [Palomer]

"Thousands have lived without love, not one without water." W.H. Auden