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					Drinking Water Industry




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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 12th 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 – 12th 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

                                              Source
                                              Water


                       Mineral                                     Crystal
                        water                                       water


      Cola              Sports         Carbonated          Flavored       Flavored
      Drink             Drink            Water            Fruit Drink       water


             Orange
              Juice


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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               Competitor Feature/ Strategy Matrix

FEATURES                     Perrier       Poland      Arrowhead       Evian          Aquafina        Dasani
                                           Spring
Bottle size                  20 oz         20 oz       20oz            20 oz          20 oz           20 oz
                             1 liter       1.5 liter   1.5 liter       1.5 liter      1.5 liter       1.5 liter
                                                       5 gallon
Calories                     0             0           0               0              0               0
Calcium                      0.10          0.10        6-53            0.10           0.10            0.10
Sodium                       0.20          0.20        2.1-20.0        0.20           0.20            0.120

Potassium                    0.10          0.10        0.7-4.4         0.20           0.010           0.10
Fluoride                     0.100         0.100       0.050-1.2       0.100          0.100           0.100
Magnesium                    0.10          0.10        1.5-20.0        0.10           2.0(1.4-2.4     2.0(1.4-2.4

Mineral                      460mg/L       natural     natural         natural        add             add

Carbonated                   7g/L          No          No              No             No              No

Product claim                Refreshing    Spring      Spring Natural Natural water   Mineral water   Make your
                             like no       Natural     water                                          mouth water
                             others        water
Distribution                 Bar           grocery     Office          Grocery        School          Grocery
                             grocery                   Home            Bar            Restaurant      Bar
                             restaurant                                Restaurant     grocery         Restaurant
Brand positioning            Carbonated    water       water           Water          water           water
                             water
Parent company               Nestle        Nestle      Nestle          Danone         Pepsi-co        Coca-cola

Total sales                  Not disclose Not          Not disclose    317M Euro      Not disclose    Not disclose
                                           disclose
Management                   Kim Jeffery Kim           Kim Jeffery       No name found Craig E.       Nevill
                                           Jeffery                                     Weatherup      Isdell
Latest product               Perrier lime- unknown     Child size bottle Evian women Pepsi lime       Coca-cola
                             Plastic                                     bottle        Mountain Dew   black
                             bottle                                                    Frappuccino
Sponsorship                  Art                       Marathon                        School         World soccer
                             Music                                                     Music          Olympic
                                                                                       Sport
Employment                   2.5 million 2.5 million 2.5 million       89,449         100 countries   200(countries)
                                                                                                      100 languages
Others                        well known                                                              Most known
                             carbonated                                                               coke brand
                             water




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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                          MARKET SHARE (%)

          Carbonated water                                        36.3

          Bottled water                                           17.9

          Beer                                                    14.8

          Milk                                                    14.6

          Fruit beverage                                           9.8

          Sport drink                                              2.4

          Wine                                                     1.5

          Tea                                                      1.3

          Spirits                                                   1

          Energy Drink                                             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, lower-

upper, 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.


                                           Page 14 of 15
                                             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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