Competition in the Bottled Water Industry
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COMPETITION IN THE BOTTLED WATER INDUSTRY
I. CASE BACKGROUND
Bottled water was among the worlds most attractive beverage categories, with global sales in 2001 exceeding 32 billion gallons and annual growth averaging nearly 9 percent between 1996 and 2001. Both the global and U.S bottled water markets had become dominated by a few international food and beverage producers like Coca-Cola, Pepsi, Nestle, Groupe Danone and Suntory Group, but they also included many small regional sellers that required to develop either low-cost production and distribution capabilities of differentiation strategies keyed to some unique product attributes.
At the U.S. per capita consumption of bottled water grew nearly 20 gallons in 2001, industry analysts believe the annual growth rate might set off stronger price competition in the industry. Industry consolidation created a more globally competitive environment in which top sellers met each other in almost all of the worlds market.
II. PROBLEM
What should the company do to improve its competitiveness in the global bottled water industry?
Issues
Strategic Approaches in the Industry
1. Industry rivals were entering new distribution channels like third party food and beverage distributors, and vending machines.
2. Developing innovative product variations
Like, in late 2002, Coca-cola was testing four variations of enhanced bottled waters in New York, Cincinnati and Charleston. The Dasani Nutirater line included lemon-tangerine flavor, pear cucumber, mandarin orange and multi vitamin wild berry variety.
During the summer of 2002, PepsiCo Aquafina essentials enhanced water line in US included four varieties. Multi-V was a watermelon-flavored beverage, Daily-C was a citrus blend portified, B-Power had a wild berry flavoring, and Aquafina essentials Calcium+filled out of the line and had a tangy tangerine-pineapple flavoring.
3. Entering into strategic agreement to penetrate new market
Like, Groupe Danone and Coca-Cola entered into two new strategic partnerships in mid-2002 that made Coca-cola the exclusive distributor of Evian, Dannon, and Sparkletts in the US and Canada.
4. Acquiring smaller sellers that might hold positions in certain US regional market and emerging market.
Group Danone acquiring Naya and McKesson in 2000, Suntory acquiring Great Pines Water in 1999, and Nestle acquiring Aberfoyle Springs in 2000 and Black Mountain and Aqua Cool in 2001.
Dominant Economic Features
Market Share and Growth rate
Bottled water was among the worlds most attractive beverage categories, with global sales in 2001 exceeding 32 billion gallons and annual growth averaging nearly 9 percent between 1996 and 2001.
Bottled water industry is on its maturity stage.
Scope of Competitive Rivalry
Regional sellers have a little amount of scope and scale as compare to international food and beverage producers like Coca-Cola, Pepsi, Nestle, Groupe Danone and Suntory Group.
Number of rivals
Industry consolidation created more globally competitive environment in which top sellers met each other in almost all of the worlds market.
The company is dominated by few large companies, however, there were still many producers including new entrants that try to access the market and compete seriously with low price and differentiation- strategies among rivals.
Buyer needs and requirements
Consumers need for convenience,