1. What are the Key Success Factors (Ch. 3, Pgs. 87-89) for the industry?
The key success factors responsible for the success of bottled water industry include its convenience and availability in many places including small stores. Wherever you go you can always buy bottled water. It is also purer than municipal drinking water and does not have chemical taste like chlorine that is normally found in tap water. The increasing emphasis on fitness and health is also one of the key factors for this industry’s success including the need to proper hydration. People who drink water all the time are known to have sparkling healthy skin. If you are seen drinking from bottled water, you are tagged as who takes good care of your health. The active lifestyles of consumers also contributed to the success of bottled water industry. People who have hectic schedules and are always on-the-go prefer to drink from bottled water because they don’t have to carry them from home. They can have it anywhere they go and feel refreshed.
2. How is the industry changing?
The industry changed in various ways beginning with the packaging where they used to be 5-gallon containers delivered to homes and offices. Later, the single-serving polyethylene terephthalate (PET) bottles debuted and in the 1900’s consumers began to enjoy the convenience and portability of chilled water bottles.
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Before 1993, many people in the United States still drink from tap water. However, since the epidemic occurred in Wisconsin where thousands of people became ill and hundreds of them died from waterborne bacterial infections, the Safe Drinking Water Act Amendments of 2001 came to the picture.
Bottled water producers had to meet the safety standards of different agencies in their countries in order to ensure good sanitation. There are so many requirements that bottled water have to comply, many licenses to pass, and many government agencies go through before they can market the products. It only means that what we enjoy these days as product of these efforts in the past are safe and had passed so many kinds of tests before it was allowed to get to our system.
As the bottled water flourished in the market and producers’ revenue was growing annually, price competition began to appear. However, big companies like Nestle, Coca-Cola and PepsiCo avoided the competition by giving considerable discounts to their products. Additionally, they positioned their industry by purchasing smaller regional brands.
With the twist and turn, successes and losses of the companies in bottled water, they decided to produce variations by adding flavors to bottled water. This was a promising business opportunity in this industry.
3. Describe and evaluate the strategies of the “Big 3” companies in the U.S. market:
Nestle, Coca Cola, Pepsi.
Nestle Waters led the bottled water market globally in 2006. They created global products and established local brands which became very successful and made them the world’s largest seller of bottled water. Nestle products can be found in almost all countries in the world and their bottled water, which was created in 1843, has 75 brands in 130 countries. They also used packaging innovations when they experienced a slight decline of their annual sales. Their packaging innovations include the bubble-shaped bottle and the new plastic bottle which was designed to appeal the children and the active people respectively. Another strategy that Nestle used was home and office delivery (HOD) which operated in 30 countries. Nestle had also made acquisitions and entered into joint ventures to develop leading positions in the Middle East, Northern Africa and the Far East. HOD also led Nestle to earn the status of low-cost leader in the United States because of its leading positions in the country as well as in Europe. They further appeared positioning for maturity by purchasing smaller regional brands and joint ventures with several countries.
Nestle Waters was using the positioning theory in marketing their products. They went to places that many entrepreneurs would not dare to go. Branding their products locally made them closer to the hearts of the local people because those were something they can call their own, thus they became number one because they sell to where the buyers are. They even take the products to the buyers’ places through HOD. Becoming number one is advantageous because other companies will use their name (Nestle) in their campaigns for comparison purposes, thus helping this said company with advertising.
Coca-Cola Company was the world’s leading manufacturer, marketer, and distributor of nonalcoholic beverage concentrates. The company has 300 brands in the different parts of the words and most of them are considered as the world’s most valuable brand and made Coca-Cola very special in the hearts of the global consumers. One of the company’s strategies was global distribution system using power plants where they provide for the concentrated ingredients and the bottlers whether independent, partially owned by Coca-Cola, or company-owned package them and sell the finished products to the local community. They did the same strategy with the bottled water adding a special name to it which was created by linguists, spent around $15 million in advertising and marketed it to where Coke can be found. They had joint ventures with other companies like Danone Waters to increase its bottled water product line and acquired established brands in Europe and Australia to continually build strength in the international markets.
Coca-Cola’s power plants are great marketing distribution strategies where the company sells concentrates to power stations in different countries. Their focus shifted from marketing their products to powerful advertising campaigns where they entice people to buy Coke. This campaign was so successful in such a way that many people in various countries name their beverages as Coke even when they mean Pepsi or Mountain Dew, etc. Their joint venture style is equally effective in a sense that it helps their company’s influence to become stronger as their name holds a solid ground in the global market. Although they experienced a disaster when their bottled water was tainted with bromate, they were not shaken. They continued to expand by acquiring more companies that continue to make them powerful.
PepsiCo was fourth in line when it comes to the largest food and beverage companies in 2006. The company’s various products can be found in 200 countries. Their bottled water, Aquafina started in 1997. They developed their product lines of water business on customers’ types and lifestyles. The company targeted mainstream water consumers and their strategy involved offering a continuum of healthy beverages from unflavored Aquafina to nutrient-rich Gatorade. PepsiCo went international by acquisition in Mexico where it further expanded the marketing of Aquafina to Eastern Europe, the Middle East, and Asia markets. PepsiCo allowed foreign bottling franchises to license the Aquafina brand creating more competitive environment through this strategic maneuvering.
PepsiCo’s bottled water had a slow but sure way of marketing and going international. Further, they initially ensured its pureness before creating variations by mixing flavors to the bottled water and made it more in demand in the market.