Analyzing

Bottled Water
Industry
Presented by:
Heddy
Sahil
Essaid
 Share of Stomach

ource: Beverage Marketing Corporation

 Share of Stomach (Cont.)

ource: Beverage Marketing Corporation

 Bottled Water Overview
• Two Primary Market Segments
– Retail
– Home and Office Delivery (HOD)
• On a global level, sparkling water accounts for
an estimated 10 percent of the total volume,
with still water accounting for the remaining
90 percent
• With regard to packaging trends, PET dominates
over glass in almost every country, with the
exception of Germany (one can assume
because of Germany’s recycling laws)
• At about one-third of global volume, home and
office delivery (HOD), or bulk water, still
accounts for a minority of global bottled
water sales.


Source: Beverage
 Marketing Corporation 2006
 Packaging Mix- 2008

% Market Share

Source: Canadean intelligence

 Bottled Water Industry
Analysis
§ Dimensions of Bottled Water Industry:
‒ The bottled water industry enjoyed substantial
growth in the last decade, especially in the
United States.
‒ Global consumption of bottled water more than
doubled between 1997 and 2005, and
different customers were able to be targeted.
‒ The different customer groups included those
concerned about:
• Water safety
• Fitness
• Convenience
‒ Customers either purchased bottled water in
bulk (the home and office ), or in single serve
bottles.
 Still Vs Sparkling Water-
2008

ource: Canadean liquid intelligence

Still Water is growing faster than sparkling water in
most regions
Bottled Water Industry
Analysis (Cont.)
‒ Bottled water is sold in a worldwide market
and it is showing inclusive presence in the
United States
• Nearly every location where food is sold now
sells bottled water
‒ Several manufacturers control the bottling
process from raw material to end
distributor, otherwise, licensing
agreements must be purchased.
• Companies such as Coca-Cola and Pepsi enjoy
an advantage because they can use their
established channels of distribution to
include bottled water.
‒ It is very important in the industry to have
distribution access to supermarkets,
wholesale clubs and convenience stores
 Bottled Water Industry
Analysis (Cont.)
United States


‒ U.S. is the world's

largest market
and the bottled
water has
grown, and is
projected to
grow, faster
Consolidation in the
than any other
Industrybeverage on its
‒Butmarket.
now bottled water is reaching the mature
stage of the product life cycle and a few large
‒firms dominate the industry.
 ‒There are some small regional sellers, but the
top five sellers have 75 percent of industry
sales.
 Leading Country Markets for
Bottled Water between 2003 and
2008 (in millions of gallons*)

: Beverage Marketing Corporation as reported by the International Bottled Water Association, 2008 *1 gallon= 3.8543 liter
 CAGR: 2003-2008

: Beverage Marketing Corporation as reported by the International Bottled Water Association, 2008
 Q1. What are the strategy-shaping
business and economic
characteristics of the bottled water
industry? What is the industry like?
§ The global bottled water industry forecast
is growing by 30% through 2010 to
reach approximately $82 billion in
revenue.
§ Bottled water is thought to be safer than
municipal tap water and an alternative
choice to high calorie carbonated
beverages.
§ United States are the largest market for
bottled water in the world based on
fitness, health, and the go-go lifestyle.
Q1. What are the strategy-shaping
business and economic
characteristics of the bottled
water industry? What is the
industry like? (Cont.)
§ The global and U.S. markets are
controlled by a few food and
beverage companies that sell the
top 10 brands.
§ 46.2% of all bottled water revenues
are generated through
supermarkets and hypermarkets.
§
 The Top 10 Bottled Water Brands
in the US
Bottled Water Brands in wholesale sales in
the
DasaniUS
(Coca-Cola) 2007
$1 . 6bn
Aquafina (PepsiCo) $1 . 5bn
Poland Spring (Nestle Waters) $878m
Arrowhead (Nestle Waters) $586m
Nestle Pure Life (Nestle Waters) $545m
Crystal Geyser (CGWC) $529m
Deer Park (Nestle Waters) $500m
Ozarka (Nestle Waters) $352m
Ice Mountain (Nestle Waters) $292m
Zephyrhills (Nestle Waters) $272m

ource: Beverage Marketing Corporation

Q1. What are the strategy-shaping
business and economic
characteristics of the bottled
water industry? What is the
industry like? (Cont.)
§ There is fierce competition among these
producers and they all have a similar
“scale and scope” of operation.
ØFor instance, Pepsi and Coca Cola have
developed a strategy and infrastructure
that makes it hard for regional sellers to
complete with them.
§ There are many small producers that try to
access the market with low price and
differentiation strategies, but these
businesses do not have the scale and
scope of the huge bottled water
production companies (Pepsi, Coca Cola,
 Q2.What is competition like in the bottled water
industry? Which of the five competitive forces is
strongest? Which is weakest? What competitive forces
seem to have the greatest effect on industry
attractiveness and the potential profitability of new
entrants?
• While much of the world’s bottled water market
is still highly fragmented and controlled by
local brands, consolidation is rapidly
occurring.
• Key players dominating the global Bottled
Water market include Aqua Gold International
Inc, Boreal Water Collection Inc, China Water
& Drinks Inc, Group Danone, Danone Naya
Waters Inc, Isbre Holding Corp, Nestle SA,
PepsiCo, Quilmes Industrials Sa-Adr, Saint
Elie, San Miguel Corporation and The Coca-
Cola Company.
• Four companies have come to be looked as
market leaders- Nestle, Danone, Pepsico, and
Coca Cola.
• Swiss food and beverage company Nestlé and
  
Competitive Analysis  
SUPPLIER POWER 
Low
- High vertical integration
Diagram of - Many suppliers for
Porter's 5 packaging
-Water sources already
Forces owned companies.

BARRIERS DEGREE THREAT OF

OF
TO ENTRY RIVALRY
SUBSTITUTES   
Moderate High High
- Threat of takeover by Multinationals with good

Tap water amidst ethical

companies/ risk of survival for distribution consumerism

small player Local brands competing on price

- Economies of Scale essential
- Strong financial background

BUYER POWER 
-High bargaining power
-Very low brand loyalty

17
Q3. Driving Forces and
Changes
- Geographic market shifts
- Home and Office Delivery
- Going Beyond Hydration
- Ethical Consumerism and the
Carbon footprint
-
 Changing Consumption
Volumes
• The value of the bottled water
market in Europe, the US
and Japan is forecast to
grow at an annual average
rate of 5.3% between 2006
and 2012 and will be worth
almost $76.4bn by the end
of that period.

•
• Bottled water growth in the US
market is expected to be
double that in Europe, such
that the US market will
account for 32% of market
revenue by value.

•
• However, Europe will remain
the leading region, and will
Volume-driven growth, especially in undifferentiated stillfor
account water
61% , is likely to
of total
put prices under pressure market share by 2012.
Within Europe, along with
 Shifting Growth
Canadean's recently
published Global
Bottled Water Report
suggests that despite
the economic downturn,
final year figures for
2009 may see the
worldwide market for
bottled water increase
by around 2%

The biggest market for

waters, West Europe,
which accounts for
nearly 30% of world
volumes, is also set for
North America, dropped from double digit growth the negative 2009 results.
year before into decline. In 2009, without North Spain and France, two of
America the global water market was forecast to the heavyweight markets,
increase by a healthier 4%. are responsible for
Canadean anticipates every region in the much of these losses.
world to be registering water growth in 2010 .
 Hydration or more?
 In the developing world, bottled water
serves at least a partial solution to the
problem of often-unsafe water found in many
countries.


 In developed countries—such as the

United States and Canada—bottled water has
become the fastest growing and most
dynamic major commercial beverage
category.


 By tapping into a growing health and

well-being consciousness on the part of
consumers, the increased health awareness
has helped position bottled water as an
alternative to carbonated soft drinks and juice
drinks.

Some of the most common functional propositions appearing in innovative
bottled
 water
Manyproducts are:
in the developed world see bottled
water -asWeight management
not only a way of achieving
- Improvement
hydration, ina mental
but also as function;
functional
- SkinFunctional
beverage. hydration waters
and anti -ageing.to be a
continue
Weight and Watch
O ve r h a lf o f th e
E u ro p e a n a n d
A m e rica n p o p u la tio n s
a re o ve rw e ig h t

Marketdataprojects 6
percent annual growth
for the total U.S.
weight loss market, to
$68.7 billion by 2010.

Of this, diet soft

drinks get the largest
share at 29.6 % and
was estimated to be
valued at $19 billion
in 2006.
Michelle Obama’s anti-
obesity campaign Let’s
Move has received
assurances from the
beverage industry
 Environmental
Consciousness

 According to Food and

Water Watch, “bottled water
production and transport
uses as much as 2,000 times
more energy than it takes to
produce tap water.”


Additionally, it takes “more than

Of the 13 billion plastic bottles of
all type sold in the UK in 2009, only a
17 million barrels of oil —
enough to fuel 1 million cars for
a year” to produce the plastic
water bottles sold annually in
the United States.
 Packaging Trends
Eliminating the plastic bottles
would be like taking 100,000 cars
off the road and 1 billion pounds
of C02 out of the atmosphere.
-FWW

 Concerns over plastic

bottle waste, the emission of
greenhouse gases and
wasted natural resources are
continuing to impact New
Product Development in the
bottled water market.


 Colorado-based Biota
sells bottled water in
biodegradable bottles that
are produced using corn in
order to attract consumers
 Return of the Tap water
• According to US govt.
estimates, about 1/4th of the
bottled water is bottled tap
water- sometimes additionally
treated, sometimes not.
(Source)
• Tap water is reported to be 500
times cheaper and produces
300 times less CO2 than
bottled water. (Bottled water
sold in most industrial
countries costs $500–$1,000 Drinking fountains replace shop-bought
per cubic meter) mineral water in environmental
initiative
• Bottled water sales may
The Evening Standard has
launched a campaign be
to make
threatened bytapcampaigns
London's water freely and
available in restaurants and
Government
bars. initiatives to
increase the consumption of
tap water.

•

 Branded Bulk Water
• It is a vital
segment in
many countries,
such as Mexico,
where it
accounts for
more than 70
percent of the
volume.
• Interest from the
major water
players has
grown recently
as HOD water
becomes
increasingly
branded.
• A hotly contested
race for HOD
Q 4. Strategic Group Map

- The Competition
- The Mapping
 Strategies of the Market
Leaders
• Global bottled water consumption is
estimated to have approached 53 billion
gallons in 2008
• Nestle and Danone centered their
operations around the core markets of
Western Europe and the United States,
but are now focusing on emerging
markets
• Following their strong showings in the
United States, both Pepsi and Coca-Cola
have increasingly devoted resources and
energy to developing their global bottled
water businesses
Larg
e
Nestle
Pr
od
uc Groupe
t
Po Danone
rt
fo Coca Cola
li
o

PepsiCo

Other
Brands
Smal
l
Low High
Established
Distribution / Geographical Reach
Per Capita Consumption
Regional average does diverge
dramatically from the global
average.

Several Western European countries

have per capita consumption levels
far above 25 gallons, and two
national markets exceeded 50
gallons per person in 2008. 13 of
the top 20 bottled water consumers
on a per person basis are European
countries

Brazil, China, and India have

doubled or even tripled consumption
between 2000 and 2005, though per
capita intake in China and India is
still far below the global average.

Bottled water’s persistent global

growth indicates demand for it in
diverse markets.
Water growth is expected to
increasingly come from the
 Q5. Key Success Factors
• Reach and Display – Distribution of bottle
water is highly important as most sales
are through the retail sector. Additionally,
display space plays a prominent role as in
any other beverage.
• Purity and Provenance – Increasingly
health aware and source conscious
customers demand quality water.
• Positioning and Innovation– Developed
markets offer scope for valuable growth in
niche segments consisting of functionality
and flavor.
• Low Costs and Economies of Scale –
Volume driven growth and intense
 Q6. Nestlé 2006-2007
Performance at a Glance
Sales by Region

Source: Nestlé
 Q6. Nestlé 2006-2007
Performance at a Glance
(Cont.)

Sales by Channel

Source: Nestlé
 Q6. Nestlé 2006-2007
Performance at a Glance
(Cont.)

Sales by Brand

Source: Nestlé
 Nestlé Key Positions in
2006*

Source: Nestlé
 Nestle Water
• Worldwide market share of bottled
water market was 18.3 % in 2006
• Operates 75 bottled water brands in
130 countries
• In 2006, company portfolio included two
global brands (Nestle Pure Life and
Nestle Aquarel) and five international
premium brands and 68 local brands.
• Key Resource Strength: Broad
portfolio of local water brands and a
low cost leadership.
 Q6. What recommendations would
you make to Nestlé improve its
competitiveness in the global
bottled water industry?
• S a le s b y R e g io n : N e stle sh o u ld
in v e st a little m o re to co n q u e r
e m e rg in g m a rk e ts w o rld w id e
w h e re o p p o rtu n itie s to e x p a n d
a b o u n d . N e stlé 's m a rk e t is
cu rre n tly co n ce n tra te d in th e U S
m a rk e t w h ich a cco u n ts fo r a b o u t
5 0 % o f its sa le s ( p rice p re ssu re
a n d C o la g ia n ts ’ co m p e titio n ) .
•

• S a le s b y C h a n n e l: E x p a n d H O D
b u sin e ss in e m e rg in g m a rk e ts .
• Innovate and Reposition: For the
A large pile of Nestle Poland
Spring bottles
Thanks