COMPETITION IN

BOTTLED WATER
INDUSTRY
Presented by:
AIda J. GatmaItan
BRIEF HISTORY
1he earllesL modern boLLled waLer company was founded ln
Lhe unlLed SLaLes ln Lhe mlddle of Lhe 19Lh cenLury (1843) by
Lhe 8lcker famlly of Malne boLLled and sold waLer from a so
far unldenLlfled source
1helr small operaLlon qulckly grew caplLallzlng on Lhe
sprlng's supposed medlclnal properLles evenLually becomlng
Lhe oland Sprlngs waLer company
Mlrrorlng Lhe 8lcker success ln 1903 Lhe Czarka Sprlng
WaLer Company was founded ln Lureka Sprlngs Arkansas
Slnce Lhen Lhe boLLled waLer landscape has expanded
Lremendously
8eLween Lhe early parL of Lhe 20Lh cenLury and lLs end Lhere
was llLLle acLlvlLy ln Lhe boLLled waLer lndusLry
1he boLLllng companles evenLually formed Lhelr own lobblng
group ln 1930 ln order Lo promoLe Lhelr producL and have
only been recenLly successful
DOMINANT ECONOMIC
FEATURES
1he lndusLry slze ls world wlde wlLh an average
growLh raLe of 9 from 19962001
slgnlflcanL number of buyers ln Lhe uS and
lnLernaLlonally
Consumer's focus on flLness and healLh (healLhy
llfesLyle)
lew large players (nesLle Croupe uanone
Coca Cola epsl and SunLory WaLer group)
CompeLlLors compeLe globally lnLernaLlonally
naLlonally reglonally and locally
DOMINANT ECONOMIC
FEATURES
producLs or rlval sellers are prlmarlly ldenLlcal
(such as purlfled mlneral sparkllng or enhance
waLers)
producL lnnovaLlon Lhrough enhanced waLer
Surplus ls noL pushlng prlces and proflL marglns
down
1here are ongolng upgrades Lo accommodaLe
new producL lnnovaLlon and consumers wanLs
Smaller boLLled waLer companles operaLe ln only
one or Lwo sLages of Lhe lndusLry buL Lhe large
companles are fully lnLegraLed from Lhe aqulfers
sprlngs or oLher sources of waLer
COMPETITIVE FORCES IN
BOTTLED WATER INDUSTRY
COMPETITIVE FORCES IN
BOTTLED WATER INDUSTRY
k|va|ry among compet|ng se||ers
1here ls a flerce compeLlLlon ln prlce and producL
dlfferenLlaLlon
1here ls an ollgopoly compeLlLlon ln Lhe lndusLry
whereby Lhe markeL domlnaLed by few large sellers
llke Croupe uanone nesLle CocaCola epslCo
SunLory WaLer group and many small reglonal sellers
ma|| reg|ona|]|oca| se||ers offers
a A few f|rms se|||ng s|m||ar product
b Lach f|rm produces branded products
c L|ke|y to be s|gn|f|cant entry barr|ers |nto the market |n the |ong
run wh|ch a||ows f|rms to make supernorma| prof|ts
d Interdependence between compet|ng f|rms
e Cffers |ower and compet|t|ve pr|ce
COMPETITIVE FORCES IN
BOTTLED WATER INDUSTRY
@he potent|a| entry of new
compet|tors
new enLranLs are few
8uyers are sLrongly aLLached Lo esLabllshed brands
very hlgh cosLs Lo begln whlch requlre a caplLal
lnvesLmenL of more Lhan $100 mllllon
1remendous markeLlng sLraLegy of Coke and epsl
vasL dlsLrlbuLlon sysLems of Coke and epsl bullds
lnLlmaLe relaLlonshlp wlLh reLall
1here are Loo many regulaLory requlremenL llcenslng
and permlL pollcles
COMPETITIVE FORCES IN
BOTTLED WATER INDUSTRY
upp||ers
Munlclpal waLer sysLems sprlng operaLors boLLllng
equlpmenL manufacLurers delonlzaLlon reverse
osmosls and fllLraLlon equlpmenL manufacLurers
manufacLurers of L1 and PuL boLLles and plasLlc
caps label prlnLers and secondary packaglng suppllers
8argalnlng power of suppller depends on Lhe slze of
Lhe cusLomers number of suppllers demand for
producL avallablllLy of subsLlLuLes sLandardlzaLlon of
commodlLy economles of scale and quallLy
lL depends on Lhe geographlc aspecL (lnadequaLe
waLer sources) Lechnology adopL by suppller and lLs
supporL faclllLy boLLle sLocks (lnvenLory) eLc
COMPETITIVE FORCES IN
BOTTLED WATER INDUSTRY
uyers
a Wlde segmenL of consumer rlnclple channels
lncludes convenlence sLore food sLores
supermarkeLs vendlng machlne
b 8argalnlng power of cusLomer depends on
consumer preferences munlclpal waLer quallLy
markeL Lrends such as healLh and flavor eLc
&|rms requ|red to compete aggress|ve|y on
pr|ce to ga|n access to she|f space for |ow pr|ces
and s|ott|ng fees
COMPETITIVE FORCES IN
BOTTLED WATER INDUSTRY
ubst|tute products
a) SofL drlnks coffees Leas mllk sporL drlnk wlne
eLc
b) MosL consumers compare and swlLch Lo boLLled
waLer brands as Lo
lower prlce
besL quallLy (healLhy/vlLamln conLenL)
Cood servlce(responslve Lo cusLomers)
c) CosL of swlLchlng producLs (8eLralnlng
addlLlonal equlpmenL Lechnlcal help
esLabllshlng new relaLlonshlp)
DRIVERS OF CHANGE IN
BOTLLED WATER INDUSTRY
LnLry of ma[or flrms
lncreaslng globallzaLlon (global compeLlLlon)
roducL lnnovaLlon
MarkeLlng lnnovaLlon
Changes ln cosL and efflclency
Lmerglng buyer preferences
8egulaLory lnfluences governmenL pollcy
8educLlon ln uncerLalnLy and buslness rlsk
Changlng socleLal concerns aLLlLudes llfesLyles
LnvlronmenLal Concerns
BOTTLED WATER INDUSTRIES'
MAJOR PLAYERS.
MARKET POSITIONS.
COMPETITIVE MOVES.
AND ADVANTAGES.
LeadIng BottIed Water
Producers, 2001
S0
160
10
860
780
Market hare ()
nesLle WaLers
Croupe uanone
epsl
Coca Cola
SunLory WaLer Croup
LeadIng BottIed Water
Producers, 2001
000
S0000
100000
1S0000
00000
S0000
Nest|e
Waters
Groupe
Danone
eps| Coca Co|a untory
Water Group
Who|esa|es (|n m||||on )
LeadIng BottIed Water
Producers, 2001
1

S
S9
1
001 Growth
nesLle WaLers
Croupe uanone
epsl
Coca Cola
SunLory WaLer Croup
NESTLE' WATERS
World's largesL boLLled waLer producer based on dollar sales
uiversified lnLo 19 food and beverage caLegorles
opular brands lnclude oland sprlng errler Arrowhead
whlch ls characLerlzed by lLs stronq morket positions
MosL of lLs brand are differentioted noL compeLlng agalnsL each
oLher ln speclflc reglonal markeLs
6/obo/ introduction of Lhelr brands ln Mlddle LasL Asla Afrlca
11 esLabllshed local brands/producers were ocquired ln 2001
Product innovotion lncludes nesLle' ure Llfe ln 1998 where safe
drlnklng waLer ls Lhe prlmary concern nesLle' Aquarel ln 2002 a
sprlng waLer wlLh low mlneral conLenL sulLable Lo chlldren's LasLe
MalnLaln lLs capablllLy as Lo Lowcost provider ln wholesale or
reLall
construction of new planLs ln Lhe uS ln 2002 (1ennessee ) ls
expecLed Lo ald nesLle' ln malnLalnlng lLs markeL poslLlon
G GROUPE DANONE
Strongest brands includes Evian, Dannon, and SparkleLLs
Product diversificotion began ln 1969 when Lhey acqulred
Lvlan" leadlng boLLled waLer brand ln lrance
cquisitions of food and beverage companles produclng beer
pasLa baby foods cereals sauces dalry producLs and baked
goods cookles and snacks were made beLween 1970 Lo 1980
1hey acqulred a conLrolllng lnLeresLs ln oland's leadlng brand
purchased Canada's Sparkllng sprlng brand ($300$400)
oint venture wlLh klrln 8everage Co
Lmbarked portnership wlLh 8achld group an LgypLlan flrm
uanone and nesLle were blddlng agalnsL each oLher for conLrol
of 8lslerl lndla's leadlng boLLled waLer brand
uanone and CocaCola enLered lnLo stroteqic portnership
ConLrlbuLed lLs planLs oLher boLLled waLer asseLs ln uS for lLs
oint venture
COCA COLA
World's largesL manufacLurer markeLer and dlsLrlbuLor of non
alcohollc beverages
CocaCola uasanl became Lhe 2
nd
largesL and fasLesL growlng
brand ln uS ln 2001 whlch was differentioted as purlfled waLer LhaL
lncludes a comb|nat|on of magneslum sulfaLe poLasslum chlorlde
and salL
Spends 13mllllon on odvertisinq alone durlng Lhe 1
sL
year
vost q/obo/ distribution system whlch lncludes lndependenL
boLLlers boLLlersparLlally owned companyowned boLLlers
8rond bui/dinq copobi/ities markeL leadlng poslLlon ln Cola
segmenL alded uasanl brand Lo galn markeL share
1hey were able Lo leverage Coke's appeal wlLh consumers Lo galn
occess to retoi/ distribution chonne/s
lour varleLles of enhanced boLLled waLer were LesLed ln 2002 as
parL of Lhelr product innovotion (uasanl nuLrl WaLer)
MarkeLlng experLlse
1he company's oint venture wlLh Croupe uanone allowed Lhem Lo
[umped Lo Lhe rank of 2
nd
largesL producers of boLLled waLer ln uS
PEPSI COLA
llfLh largesL food and beverage company
lLs Aquaflna" brand were differentioted as purlfled
boLLled waLer by sLrlpplng all chlorlne oLher parLlcles ouL
of Lap waLer
Spends 73mllllon on odvertisinq alone from 2001 Lo 2002
Morketinq stroteqy lncludes developlng lnnovaLlve
supermarkeL dlsplay employed celebrlLy endorser and
negoLlaLed conLracLs on sporLs organlzaLlon
Moved lnLo lnLernaLlonal boLLled waLer markeL llke Spaln
and Mexlco Lo q/obo//y compete
Acqulred Mexlco's largesL epsl boLLlers epsl Cemex SA de
Cv for 1268
Product innovotion lncludes launchlng of Aquaflna
LssenLlals" (os eobooceJ wotet)
SUNTORY WATER GROUP
apan's largesL producer and dlsLrlbuLor of alcohol and non
alcohollc beverage and Lhe 3
Lh
largesL boLLled waLer producer and
dlsLrlbuLor ln uS
1helr sprinq bronds were avallable under reqiono/ bronds as
CrysLal Sprlngs Plnckley sprlngs Slerra Sprlng kenLwood sprlng
8elmonL Sprlng and Ceorgla's mounLaln
competed ln pharmaceuLlcals and publlshlng lndusLrles and
operaLed resLauranLs bars sporLs club ln apan
Made 30 ocquisitions beLween 1999 Lo 2001
1hey led Lhe dlrecL dellvery bulk waLer segmenL ln uS and was
supporLed by Lhe company's wotercom web 5ite
lnLroduced a co/ciumenhonced" boLLled waLer
ueveloped Lhe flrsL P1 woter pockoqe capable of belng dlspense
Lhrough 12ounce can vendinq mochines
SUNTORY WATER GROUP
COMPETITIVE ADVANTAGE
roducL dlfferenLlaLlon
vasL global dlsLrlbuLlon sysLem
Access Lo reLall dlsLrlbuLlon channels
8rand bulldlng capablllLles
roducL lnnovaLlon Lhrough funcLlonal waLers and
enhanced waLer
olnL venLure
SLraLeglc Alllances/arLnershlp/Llcenslng
AcqulslLlons
1echnologlcal advances
Aggresslve MarkeLlng SLraLegy
as Lo producL lnLroducLlon adverLlslng prlclng
promoLlon sales and dlsLrlbuLlon
SLraLeglc Croup Map of 8oLLled WaLer lndusLry
SLraLeglc Croup Mapxls
THREAT TO THE INDUSTRY
1he enLranLs of ma[or flrms as well as reglonal local and
speclalLy brands compeLlng aggresslvely on prlce and
dlfferenLlaLlng feaLures
lalllng vlcLlm of cannlballzaLlon Lo lLs parenL company
lncrease ln healLh alLernaLlves of boLLled waLer
1ap waLer ls essenLlally accepLable promoLed as clean and
safe waLer Lo drlnk
lncreased focus on envlronmenLal and healLh lssues
1 CosLs of polluLlons
2 CosLs of landflll
3 ManufacLure sLorage and LransporL of Lhe boLLles
ls more llkely Lo consume mllllon barrels of oll per year
STATEMENT OF THE PROBLEM
How sbouId bottIed water
companIes sustaIn Its
competItIveness despIte oI tbe
tbreats to tbe Industry?
ALTERNATIVE SOLUTIONS
lnvesL for exLenslve and aggresslve markeLlng and
adverLlslng
More focus on producL lnnovaLlon and
dlfferenLlaLlon
LxLenslve uLlllzaLlon of reflllable and reusable
boLLled waLer
lmprove packaglng by uslng renewable resource
(1he markeL for corn and planL plasLlc ls falrly new)
usL conLlnue Lhelr currenL sLraLegy
ANALYSIS
Lach boLLled waLer companles has lLs own compeLlLlve
advanLage as Lo brand bulldlng capablllLles and capaclLles
1hey have a global dlsLrlbuLlon sysLem moved lnLernaLlonal
developed enhanced waLer enLered lnLo [olnL venLure made
several acqulslLlons lnvesLed mllllons of dollars for exLenslve
markeLlng and promoLlons and even consLrucL new planLs
closer Lo Lhelr markeL [usL Lo Lo lncrease and susLaln lLs
markeL poslLlon ln Lhe lndusLry
8oLLled waLer players should Lake advanLage of Lhese
sLrengLhs and capablllLles Lo caplLallze on operaLlons uLlllze
sLrengLhs Lo counLer LhreaLs overcome weaknesses Lo pursue
opporLunlLles and proLecL weakness from poLenLlal LhreaL
ANALYSIS
A!tcrnatIvc 5n!utInn Prns Cnns
Invest on extensIve and
aggressIve marketIng
and advertIsIng
RapId Increase In market sbare
IIke wbat Coca-CoIa and PepsI
bas made durIng tbeIr
IntroductIon. (Better steps on
posItIonIng Into tbe market.
Too expensIve. Most
Iarge pIayers bave bIgb
saIes or gross revenue,
but tbeIr net proIIt Is
Iow.
More Iocus on product
InnovatIon and
dIIIerentIatIon
ResponsIve to consumers'
wants and demand.
Brand IoyaIty Irom tbe buyers.
Cost wIII Increase.
Make tbe oIder product
obsoIete.
ExtensIve utIIIzatIon oI
reIIIIabIe and reusabIe
bottIed water.
HarmIuI gases Irom pIastIc
bottIes wouId be Iessen
pIastIc bottIes may
Ieacb toxIc cbemIcaIs as
It become oIder
Improve packagIng by
usIng renewabIe
resource
SaIer and Iess barm to tbe
envIronment.
BeneIIt Irom economIes oI
scaIe
ExpensIve tban pIastIc
bottIes.
It couId be detrImentaI
on operatIng expenses.
Just contInue tbeIr
current strategy
Market posItIon wIII be sustaIn
Lesser eIIort on creatIng new
Ideas or strategy.
Tbey couId be overtaken
by tbe otber Industry
pIayer
RECOMMENDATIONS
|ayers of the |ndustry has |ts own advantage and
strategy as to market pos|t|on|ng re|at|ve to the|r
ob[ect|ves |rms shou|d focus on env|ronmenta| |ssues
wh|ch threatened the |ndustry Dec||ne |n sa|es growth
m|ght cont|nue |f they are to d|sregard such |ssues
|ayers may cont|nue the|r current strategy wh||e
|mprov|ng the packag|ng of bott|ed waters by sh|ft|ng
through the used of "renewab|e resource bott|ed"
|nstead of p|ast|c bott|es @h|s wou|d be a great he|p to
env|ronment wh||e |ncreas|ng the product
attract|veness and market pos|t|on thus susta|n|ng the
compet|t|ve advantage of the company and of the
bott|ed water |ndustry as a who|e