This Case analysis basically shows the emergence of bottled water industry, different strategies being taken by the

main competitors (PepsiCo , coca-cola, Nestle ) and other sellers to sustain in market during period from 1998 to 2003.

Till 1990 was a prestige product in US. Booming business with 38 billions gallons of annual sales in 2003 & 10% growth between 1998 and 2003 United states the world largest market(from 19982003 ..increased by 9%) Other in the top rank are western Europe and Mexico. In 2003- 2004 Asia and South America became the emerging markets . In 2004 became the second largest market in beverages in US. Controlled by a few food and beverage companies .Three giant competitors Coca-cola, PepsiCo, Nestle..

Increased focus on fitness and health Safety concerns of municipal drinking water Convenience, purity and portability of bottled water Improved consumer awareness of need for proper hydration Chemical taste of tap water including chlorine and fluoride that was a great problem to US people.

EASY AVAILABILITY DISTRIBUTION VARIED DEPENDING ON THE PRODUCER EASY DISTRIBUTION FOR COCA COLA AND PEPSI NEGOTIATED CONTRACT

Four dominant players were COCACOLA, DANONE, NESTLE AND PEPSICO PepsiCo and coca cola became global. Introduction of functional mineral water(very profitable innovation),PepsiCo was the first among the competitors Nestle became largest food company

STRENGTHS

The lifestyle of people is changing Demand is increasing day by day in the bottle Water. Convenience, purity and portability can be the strengths of bottled water Better

distribution for integrated softdrink makers ..

WEAKNESSES

The lack of awareness and the poverty The lack of availability in the remote areas is also the strong reason

OPPORTUNITIES People are becoming more health conscious _Degradation of the quality of water day by day.
_

increasing epidemic and disease rate.

THREATS Low Entry Barrier Economical Uncertainty Small regional sellors making available the product at a lower cost.

Bottled Water Industry

Hard to enter

Numerous

Fierce High Average

Threat of substitute product: Healthier and innovative products, such as flavored water, non calories water, and vitamin added water. Other substitute products are tea, coffee, milk, and beer, soft drink. Substitute products become more popular and can be considered as a threat

Threat of the new entrants : Profitable markets that yield high returns will draw firms. But in this case, the biggest competitors have the majority of the global market, A few small competitor are capable of maintain their consumers. Just a competitor who is able to offer big quantities of bottled water at a low price is going to enter this industry 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

The bargaining power of suppliers: The suppliers to the bottled water industry include municipal water systems; spring operators; bottling equipment manufactures; deionization, reverse osmosis, and filtration equipment manufactures. Manufactures of PET and HDPE bottles . Large bottlers - able to purchase bottles as little as 5 cents per bottle. Due to large number of existing Suppliers ,bargaining power of suppliers is low.

The bargaining power of customers : The price sensitivity of buyers around the globe is big concern for the leading sellers of the industry Principle Channels : - Convenience store, Food stores, Mass merchandisers, Vending machine Consumers will not stop buying bottled water just because a high price, they may only change from one brand to another or in the best scenario form one flavor to another, because bottled water today is considered as a basic product. So bargaining power of buyers is medium

Intense of competition: There are a few global competitors in the industry, such as Nestl Waters, Group Danone, cococola,pepsico. Fierce competition - Compete aggressively on price - 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.

NESTLE

PEPSICO

COCA-COLA

RETAILER PRICE PER CASE

$8.44

$8.52

$8.65

Retailer s margin 35% TOTLE BOTTLER REVENUE EXPENSES GROSS PROFIT EBITA MARGIN $5.49

17.5% $7.03

17.6% $7.13

$2.63 $2.86 10.4%

$4.52 $2.92 9.0%

$4.62 $3.03 6.5%

Pepsico Aquafina Coca-cola Dasani Nestle water Poland 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

RANK 1

COMPANY NESTLE WATERS

LEADING BRANDS POLAND SPRING,DEER PARK,ICE MOUNTAIN DASANI,EVIAN, DANNON AQUAFINA CRYSTAL GEYSER

2004 MARKET SHARE 42.1

2003 MARKET SHARE 39.1

2 3 4

COCA-COLA PEPSI CO CG OTHERS/PRIVAT E

21.9 13.6 7.4 15

24.1 14.5 7 15.3

World s leading seller with market share of 18.3 %in 2005 In 2003 went for diversification. 42% market share in USA and 20% in EUROPE Low-cost leader in United States. High speed, efficient and vertically-integrated manufacturing capabilities 77 brands in 130 countries in 2004 Strategy was, to be positioned by purchasing smaller regional brands, acquiring bottled water producers

and entering into joint ventures.

In 2006-two global brands(Nestle pure life and aquarrel),five international premium brands and 68 local brands Enhanced waters such as fruit flavoured, Strawberry melba, contrex lemon meringue were innovative calorie-free flavors introduced in 2006. Packaging innovations to differentiate its bottled water brands such as spill-proof cap for child-sized bottles, bubble shaped bottle for children,

New PET container was part of strategy to revitalize the brand intended to better match the on the go lifestyles of young consumers Home and office delivery which nearly 30%of sales in US and 8 Acquisitions help it to grow from no presence to leading position. Loyal consumer base Nestle is very trusted brand and its product is considered of high quality world-wide.

Dasani (create a recognizable brand by inventing an name that sounds refreshing, soothing, and crispness)introduced in 1999 Dasani is purified water includes combination of magnesium sulphate, potassium chloride, and salt best attributes of spring water. Supported by $20 million advertising budget in 2005 and was distributed through all retail channels where coke available. Vast distribution systems and negotiated contracts with universities, sports, made it easy to make Dasani available anywhere coke be purchased

Coca-cola s marketing expertise, vast US distribution channels allowed dasani to become second largest brand of water in US With vast global distribution they also have bottlers partially owned and completely owned by coca-cola that gives them cost -effectivness Coca-cola extended Dasani line in 2006-fruit flavoured(successful), flavored water with light carbonations with no calories, powerade(unsucessful)

Joint venture with Danone in 2002 provided coke with bottled water products at all price points. Dasani-upper mid priced water, Evian-premium and Dannon-discount-priced. This joint venture would allow the company to protect Dasani s near premium pricing. But the three tier 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

In early 2004, 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 In 2006 coca-cola acquired the Italian and German mineral water company and two HOD water producers in 2006 Coca-Cola supports nearly 70 public water projects in 40 countries, in partnership with such groups as CARE and the World Wildlife Fund Using recycled resin to make plastic bottles and reducing the bottle's weight try to minimize the environmental impact of bottled water

Best selling brand in United states Aquafina Key strength-Utilization of same water purification facilities that were used to produce soft drinks. Stripped out all chlorine and unpleasant smell of tap water which was a great problem in US Other brands-gatrorade propel fitness, sobe life water ,and functional versions developed around customer type and lifestyles
Propel flavor and vitamin enriched water-physically active consumers life water for image-driven consumers Aquafina sparkling(a zero-calorie, lightly carbonated citrus ), Aquafina alive(vitamins and flavoured

In 2006, aquafina was the number one brand of bottled water in Russia and Vietnam Offered discounts on 12 and 24 multipacks to boost unit volume.. 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.

Crystal geyser fourth largest seller in USA in 2004lower price points and was bottled from springs in California at very low cost Penta penetrate in market through distribution based on removing 100 % of impurities from tap water, sponsored large number of athletes, brand promotion through motion pictures, music videos Fizi-super premium water-exposure through motion pictures EON achieved its differentiation through anti-aging claims..each brand with unique characteristic

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, having large market share with low cost of production and large number of brands. 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. 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