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Executive Summary
The bottled water industry has grown substantially in the last few years, the global bottled water market grew 6.4% from 2001 to 2005; and is projected to grow another 28.1% by
2010. It is clearly evident that companies are not complaining about their profits. However, there are aggressive steps that can be taken to increase the ten year growth rate.
These aggressive steps involve marketing plans that promote the health benefits of drinking non carbonated bottled water. The industry needs to aggressively advertise its product to its current market, and expand its advertising to include targeting school children
(Kindergartens to 12 th
grade). The marketing plan should be well financed, proper budgets will boost sales, create attachment from consumers, increase market share, and enhance brand recognition. Large soda-pop distributors including Coca-Cola and Pepsi, currently promote their soft drinks by sponsoring school events (including high school football games). With the push from school districts, board of educations, and parents to eliminate all soda vending machines from school campuses (pre-school – 12 th
grades), bottled water companies must move now to replace the sugar filled drinks with bottled water. The opportunity to push products is also available on sport fields; soccer is watched around the world; the bottled water industry should target this audience. The industry should also partner with companies, such as Lunchables, giving parents the option of providing healthier lunches for their children.
Currently cell phone companies, soft drinks companies, and technological corporations aggressively create products specifically targeting younger consumers, currently the bottled water industry is benefiting financially from large profits. These funds need to be reinvested in the form of Marketing to ensure that profits remain high. Companies that currently distribute both bottled water and soda have an increased advantage. The bottom line is: the drinking Water
Industry is doing well enough to do more with its marketing strategy.
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Situation Analysis
Drinking water is one of the most sought-after goods, and it is one of the few items that doesn’t taste much differently from other waters (water after all IS tasteless), so demand is fairly high.
Many companies are providing the same good, so it’s difficult for any of these firms to differentiate their product. When consumers are thirsty, they care about availability of product and price. Unflavored water sales account for 61.2% of the market’s value. Europe is the world’s largest market and generates 56.7% of the global market’s revenues. In terms of market share, Nestle S.A. is the global market leader. In addition, two of the world’s biggest corporations (The Coca-Cola Corporation and PepsiCo) have their own drinking water brands
Dasani and Aquafina. In addition, there are at least 200 brands registered with the IBWA
(International Bottled Water Association).
Bargaining Power of Buyers
Water is, for the most part, is undifferentiated. Consumers have to choose between a pricy name brand water and a cheaper store brand water such as generic Albertson’s water, consumers will go with the latter. The reasoning is simple, water is generally viewed to be of equal quality across the board.
Bargaining Power of Suppliers
As far as water is concerned, there is not a shortage of clean reliable in developed countries.
Water filtration systems single jug or home purification systems are easily available in developed countries. Suppliers that build and produce these systems are competing against one another in terms of effectiveness, sophistication, and cost.
In terms of plastic bottles that surround the drinking water, that’s a different matter entirely.
There is nothing that is as durable, light weight, or clear as plastic, the bottled water industry needs plastic. Health risks have been discovered and brought to the attention of the public at large, one such risk is cancer. Until another product can be developed and produced as efficiently and cost effectively as plastic, the industry has no choice but to continue its current use.
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Capacity
There is never a danger of unused capacity, bottled water companies package, store, and ship their products around the world. The United States is the largest market for bottled water, consuming 26 Billion liters in 2004 alone. Worldwide sales of bottled water are estimated to be between $50 and $100 billion (US) annually and increasing approximately 7 to 10 percent annually. In 2004, total sales were approximately 154 Billion liters (41 Billion gallons).
According to the increases in sales annually at 10%, 2006 should experience sales of $60.5B and
$121B. In terms of value, the global bottled water market grew by 6.4% in from 2001 to 2005 to reach a value of $62.9 billion. In 2010, the Market is forecasted to have a value of $81.9 billion, an increase of 30.3%. In terms of volume, the market grew by 5.7% to reach between 2001-
2005 to 119.7 billion liters. The forecast in 2010 is at 153.4 billion liters, an increase of 28.1% since 2005.
Technological Factors
There isn’t a perceived technological development in terms of drinking water. Consumers only care that the water they are consuming is good for them and better than regular tap water. There isn’t data indicating that packaged drinking water is better or worse than it has been in the past.
Political Factors
Middle East conflicts are usually tied into religion or war by the media. Water has become a major factor in recent disputes. In prominent watersheds such as the Jordan River Basin and the
Tigris-Euphrates Basin, water supplies can be critical, especially when they are being shared among multiple countries. These rivers play a very important role in the agriculture and economic development of these countries, and control over the water has received little international attention.
The Mountain Aquifer underneath the West Bank is a point of contention between Israelis and
Palestinians. Issues include the domination of groundwater supplies by the Israeli state and
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settlers, and the walling off of Palestinian access to water supplies. Compared to Israeli settlers,
Palestinians are charged three times the cost for water that comes from under the West Bank.
Economic Factors
In many parts of the world especially in third world countries, clean, healthy municipal water is unavailable. The United Nations “estimates that in 2005, 1.1 billion people lacked access to safe, affordable drinking water, and two to five million people die every year from preventable water-related diseases”.
PRODUCT LIFE CYCLE - MATURITY
Currently the bottled water is in the Maturity phase of the Product Life Cycle. The Category
Size is Large, Category growth is Low, and Category attractiveness can be both high and low.
The reason that the Category Size is large is due to the fact that the market continues to grow. As more consumers rely less on carbonated drinks such as carbonated waters and soft drinks, the demand for a substitute will continue to grow. The Category growth is Low, there is only so much packaging differentiation that companies can give their products, again water is water.
The Category attractiveness is both High and Low because of the size of the industry. For small companies and entrepreneurs, the attractiveness is low, although the capital necessary to produce the bottled water is low; the costs to distribute are higher. The Category attractiveness is High for well established firms that already have distribution routes established with other products.
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2005 MARKET GROWTH ($B)
During the past five years, the bottled water industry has seen a growth from less than $50B in
2001 to over $60B in 2005. A four year time horizon, profits continuing to climb with an expected 10% increase for the next five years.
Category Attractiveness Analysis
The Category Attractiveness Analysis heavily relies on the PLC; currently the bottled water industry finds it self in the Maturity Stage. The Category Attractiveness is terms of Technology are attractive; the products needed to produce bottled water are not technically sensitive.
Political and Regulatory factors do not hinder profitability; the United States has the highest regulations for any country, and it still is extremely profitable. The economic issues remain constant, the product, in this case water, is free, the only costs associated are overhead, bottles,
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labels, and the distribution costs. The social factors vary by country, the trends of countries vary greatly, yet bottled water is accepted as socially acceptable around the globe.
Capital Requirements
Access to plastic plants for the bottles, printing plants for labels, and working water filters/purification system is all that’s needed to produce bottled water. Major water bottle distributors, such as PepsiCo, have been exposed as using mere tap water in its “Aquafina” beverages (Commondreams.org).
Switching Costs
Switching Costs do not exist in the water bottle industry. Again, water is water. Consumers would be the least loyal brand wise compared to other goods and services, due to the fact that water tastes the same, with only minor subtle differences in terms of taste.
Threat Of New Entrants
The threat of new entrants into the bottled water market is both high and low. The capital requirements for water bottling companies are relativity inexpensive, with large amount of profits to be made; many established companies are joining the market appealing to the masses.
Entrepreneurs on the other hand are entering the market, appealing to the nitch market.
Seasonality
While water is always in demand, its highest stage of demand occurs, naturally, in the hottest months of the year, summertime. There is less demand for it in the wintertime, but it’s not a profit-loss for the season. In the middle of the current temperatures, water has become one of the fastest growing commercial "brands" in the world.
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Brand Choice Data
Mineral water
Sports
Drink
Orange
Juice
Source
Water
Crystal water
Carbonated
Water
Flavored
Fruit Drink
Flavored water
Consumers have a need when they purchase a product, they need to hydrate themselves. First choice to consumers would be Source Water, if source water was not available, they would either choose Crystal Water or Mineral Water. If neither of these options were available to them, they would choose a substitute for Mineral Water in the forms of Cola Drinks, Sports Drinks, or
Carbonated Water. If these products were not available, the consumer would then choose
Orange Juice. If Crystal Water was not available to the consumer, the consumer would choose a substitute of either a flavored fruit drink or flavored water.
Level Of Competition
Bottled water only directly competes against other bottled water, in the benefit that consumers are looking for. If bottled water is not available, consumers will purchase products from the
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category level including soft drinks, substitute waters such as power water or vitamin water, carbonated waters, sports drinks, or artificially flavored fruit drinks. If items from the category level are not available, consumers will move on to the generic competition level including liquor, coffee, tea, milk, wine, natural juice, or beer. If items from the generic competition level are not available, consumers will purchase items in the budget level including soup, ice cream, yogurt, muffins, candy, or salads.
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FEATURES
Bottle size
Calories
Calcium
Sodium
Competitor Feature/ Strategy Matrix
Perrier Poland
Spring
20 oz
1 liter
20 oz
1.5 liter
0
0.10
0.20
0
0.10
0.20
Arrowhead Evian
20oz
1.5 liter
5 gallon
0
6-53
2.1-20.0
20 oz
1.5 liter
0
0.10
0.20
Potassium
Fluoride
Magnesium
Mineral
Carbonated
Product claim
Distribution
Brand positioning
Parent company
Total sales
Management
Latest product
Sponsorship
Employment
Others
0.10
0.100
0.10
0.10
0.100
0.10
0.7-4.4
0.050-1.2
1.5-20.0
460mg/L natural natural
7g/L No No
0.20
0.100
0.10 natural
No
Aquafina
20 oz
1.5 liter
0
0.10
0.20
0.010
0.100 add
No
2.0(1.4-2.4
Dasani
20 oz
1.5 liter
0
0.10
0.120
0.10
0.100
2.0(1.4-2.4 add
No
Refreshing like no others
Bar grocery restaurant
Carbonated water
Nestle
Spring
Natural water
Spring Natural water grocery Office
Home water
Nestle water
Nestle
Natural water Mineral water Make your mouth water
Grocery
Bar
Restaurant
Water
Danone
School
Restaurant grocery water
Pepsi-co
Grocery
Bar
Restaurant water
Coca-cola
Not disclose Not disclose
Not disclose 317M Euro Not disclose
Kim Jeffery Kim
Jeffery
Kim Jeffery No name found Craig E.
Weatherup
Perrier lime- unknown Child size bottle Evian women
Plastic bottle bottle
Marathon Art
Music
Pepsi lime
Mountain Dew
Frappuccino
School
Music
Sport
2.5 million 2.5 million 2.5 million
well known carbonated water
89,449
Not disclose
Nevill
Isdell
Coca-cola black
World soccer
Olympic
100 countries 200(countries)
100 languages
Most known coke brand
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Distribution
Competition for self space is intense, well established brands including Dasani, Aquafina,
Arrowhead, and Evian are brands that are guaranteed shelf space. New entrants must compete with these brands at convenience stores including 7-Elevens and AMPM, grocery stores such as
Albertsons, Von’s, Ralph’s, and Pavilions, as well as with large chain drugstores like Sav-On and Rite Aid. In addition, store chains generally have their own brand of water in each of their stores that are guaranteed shelf space.
Soft Drink Industry Market Share
DRINK
Carbonated water
MARKET SHARE (%)
36.3
Bottled water
Beer
Milk
Fruit beverage
17.9
14.8
14.6
9.8
Sport drink
Wine
Tea
Spirits
Energy Drink
2.4
1.5
1.3
1
0.4
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Soft Drink Industry Market Share globally has bottled water as only occupying 18% of the market share. With the largest market share being occupied by carbonated water with a 36%, double that of bottled water. As the world population grows and as more consumers turn away from carbonated water, the chance for non carbonated bottled water market share will continue to increase. Socially accepted forms of drinks including alcohol and dairy consumption will have an impact on the bottled water market share.
2004 World Consumption Billions Of Liters
European countries including Spain, France, Germany, and Italy, but not including the United
Kingdom, make up 22.7% or 35 Billion liters consumed in 2004. The United States consumed
25.8 Billion liters.
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United States Brand Market Share
In the United States, Private Label brands only make up 14% of the market share, while
Aquafina (PepsiCo) makes up 24%. Dasani (Coke-Cola Corporation) makes up 18% of the market share in the United States.
Consumer Analysis
The Psycho-graphic before 1990, included mainly men and women, of upper-middle, lowerupper, upper-upper, class segment of the society. Their incomes were high with higher education and rank in the society. Today, these segments have been added to the list, the lower upper, the middle upper, and the working class. Behavior of consumers that drink bottled water has changed over the time. Consumers are not drinking bottled water on special occasion, but on regular basis and are becoming heavy users. Consumers live mainly in heavily populated metropolitan areas and have access to disposable income, consumed by both sexes of all ages.
Other bottled water such as Aquafina, Dasani, and Arrowhead waters are consumed by mostly all age and all both sex, live in suburban and rural areas, are students, professionals, Clerics and sometimes well educated. Their social status starts from the upper lower to the middle class, and they drink bottled water on a regular basis, being light, medium and heavy users. Consumers are likely to switch brands depending on availability and price.
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Supporting Marketing Programs
Promotion and market share penetration for a long term growth are optimal for any company in the bottled water industry. Cutting prices would only reflect in short term profits and short term growth, for long term penetration into the market and reflecting profits, competitor customer stealing would be optimal. Distribution of coupons that allow for a purchase of 1 free product, with the purchase of two products would be cost effective. Sponsoring events such as trade shows, health shows, and entertainment venues such as the X-Games and NASCAR would create brand attachment and long term profits.
Recommendations
Consumer which would be interested in purchasing bottled water would include health conscious, educated, of both male and female sexes, fall into all age ranges, socio-economic status would begin at upper lower. The optimal places to distribute and sell bottled water would include middle class supermarkets such as Vons, Ralph’s, Albertsons, and Stater Brothers,
Health Fitness Centers such as Curves and main stream gyms such as 24 Hour Fitness, LA
Fitness, and Bally’s, Campus including elementary, middle school, high schools, and universities, and local convenient stores. Direct competition would included other bottled water companies that already have name brand recognition and new entrants to the market, after direct competitors. On the Category level carbonated water, Soft Drinks, Sports Drinks, Flavored Fruit
Drinks, would be competitors. New companies interested in joining the market would best penetrate niche markets, consumers who are looking for specific attributes to their product, after all water is still water however it is packaged. Products that are not made from plastic such as bottles that are environmentally friendly to the environment for example bottles that biodegrade at faster rates than competitors, bottled water is bottled in glass containers opposed to plastic would be beneficial to the market. These types of entrants to the market would have better success compared to bottled water without an added feature.
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Work Cited
Beverage world: Global carbonated soft drink report. 15 May. 2006
<http://www.beverageworld.com/carbonated/>.
Brian, Howard. The environmental magazine. 9 December 2003.
The water you drink. Retrieved June 2006 from
CNN market report.
Bottled Water Industry Profile: Global; Dec2005, p1, 20p http://www.commondreams.org/headlines04/0304-04.htm).
David, F. Beverage Market. Retrieved 15 May.2006, from ABI/inform
Academic Education database.
Rodwan, Jr., John G., Bottled Water 2004: U.S. and International Statics and Developments.
April/May 2005
Shultz, Jim. The Politics Of Water In Bolivia. January 28, 2005
Water balance key for athletes during heat waves. CBC News. July 25, 2006
<http://www.cbc.ca/story/science/national/2006/07/24/hydration.html?ref=rss>
Water Wars and International Conflict. Abigail Ofori-Amoah.
<http://academic.evergreen.edu/g/grossmaz/OFORIAA/>
Weiss, Philip. Beyond carbonated, the future of Healthy
Functional and Indulgent drink. Retrieved 15 May.2006, from ABI/inform
Academic Education database. http://en.wikipedia.org/wiki/Bottled_water
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