Bottled Water Industry (1)
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Transcript of Bottled Water Industry (1)
BOTTLED WATER INDUSTRYTEAM 4(PEPSICO)
Shin, Hyun-jung , Shraddha, Raghu
Contents
What is the industry like? Porter’s 5 force model and its
analysis Driving factors and its impact Market positions (Group map) Key factors for future competi-
tive forces Recommendation for Pepsi
What is the industry like?
Growing by 30% through 2010 to reach approximately $82 billion in revenue
Thought to be safer than municipal tap water and an alternative choice to high calorie carbonated beverages
PET container helps customers satisfied with its convenience and portability
Controlled by a few food and beverage companies
What is the industry like?
Fierce competition among producers (they have a similar “scale and scope” of op-
eration) Focus on fitness, health, and the go-go life-
style has made the industry booming Leaving the growth stage, and entering the
mature stage Competitors are looking to defend and in-
crease market share Given the amount of competitors, industry
members are forced to protect market share
Porter’s Five Force Model
Bottled Water Industry
Fierce
Low Aver-age
Numer-ous
Hard to enter
1. Rivalry
4 major industry players ( Danone, Coca-cola, Pepsi, Nestle) Fierce competition - Compete aggressively on price - Making differentiation in develop-
ing products (focusing on health and fitness)
Attacking each other (tough competi-tion)
Hampered profitability
2. Substitute Products
Existence of substitute products - teas -beers -pow-
ered drink - coffee -wine -milk - Juice -Sport drink -Soft drink
This occurred due to the declining pricesSubstitute products become more popular
and can be considered as a threat
3. New entrants
Barriers to entry Establish brand names of global industry members New entrants need to overcome the
tremendous marketing muscle and market presence of Coke, Pepsi and others
Vast beverage distribution systems of Coke and Pepsi enables them to have intimate re-lationships with retail channels and would be able to defend their positions effectively
4. Power of suppliers
Suppliers to the industry - municipal water systems, spring operators, bottling
equipment manufacturers, deionization, etc. Large bottlers - able to purchase bottles as little as 5 cents per bottle Regional bottlers - have to purchase bottles as much as 15 cents per
bottle Secondary packaging suppliers - Numerous and aggressively competed for the busi-
ness Power of suppliers might be low
5. Buyer Power
Principle Channels : - Convenience store, Food stores, Foun-
tain, Mass merchandisers, Vending ma-chine
Bargaining power of buyer is high for convenience store and supermarketRequired to compete aggressively on price to
gain access to shelf space for low prices and slotting fees
Bargaining power of buyer is none for vending
Industry Key Trends
Social increasing health concerns Concerns about the quality of the water Increase in demand for convenient Economic World becoming a global economy,
increasing the market competitors need to cul-tivate international markets and make the most of a global economy
The industry is still a profitable industryHowever, difficult industry to enter, given the
large number of competitors already in the market
Recent trends in Bottled water Industry
Underlying drivers of change
Following are the un-derlying drivers of change in the Bottled water Industry.
1. Environmental Con-cerns
2. Taste and Conve-nience
3. Increase in number of local players
4. Marketing innovation
5. M&As and Strategic Alliances.
6. Functional Waters
Increase in Environmental concerns
Increase in Envi-ronmental con-cerns is a potential driving force to stall the growth of bottled water in-dustry.
People have started realizing the ill effects of us-ing pet bottles.
Aquafina has launched a rela-tively environment friendly bottle which is thinner and leaves lesser car-bon footprint than its earlier bottles to attract environment cautious customers.
Taste and Convenience
Many reports suggest the major reason for use of bottled water was
1. Taste 2. Convenience
Some other sited reasons were perceived health benefits, but people are not sure about “what” health benefits they receive!
Increase in number of Lo-cal Players The profit margins in the industry are very
lucrative. The sales price may be even 125 times the cost of the contents and packag-ing of the product.
This has attracted many local players into the industry.
Though they do not establish internation-ally but do well locally especially in coun-tries where the distribution infrastructure is not well developed and consumer is very price cautious.
Marketing Innovation
Pepsi Co’s Aqua-fina is not just a bottled water brand but has ex-tended its brand to Skincare Products which associates health and beauty with Aquafina. This can be a wise marketing tactic to attract more users.
M&As and Strategic Alliances
To facilitate entry into various parts of the globe many companies enter into Strategic Alliances. For example Danone and Coca Cola.
Also many companies acquire local players to facilitate production and reduce competition.
Functional Waters
Functional waters provide health benefits.
They are enriched with vitamins, minerals etc. and available in differ-ent flavors to attract health con-scious and physically active con-sumers.
Some of the Pepsi CO’s brands with functional benefits are SoBe Life, Flavor Splash, Aquafina Sparkling etc.
Strategic Group Map
Pepsi Co’s global presence extends to 200 countries and its price for a 24 bottle pack is about $5.01.
Coca Cola is in a bet-ter position in terms of both Global pres-ence (300 Countries) and price (4.35$ for 24 bottle pack)
Pri
ce
Geographic Cov-erage
Coca ColaPepsi Co.
Nes-tle
Reasons why people prefer bottled wa-ter
Recommendations
Lower prices to gain market share Investing in innovation to find alter-
natives to plastic bottles is important – people are becoming more con-scious about the environment.
Be more transparent & honest re-garding the source of water