Analyzing Bottled
Water Industry
Presented by:
Heddy
Sahil
Essaid
Share of Stomach
2000
Fruit Wine Tea
Beverages 1% 5%
9% Beer
14%
Coffee
13%
Milk
14%
Bottled water
10%
Distilled Carbonated
Spirits Soft Drinks
1% 33%
Source: Beverage Marketing Corporation
Share of Stomach (Cont.)
2007
Wine
Fruit
2% Tea
Beverag 5.6%
es Beer
10.4% 13.3%
Coffee
11.3% Milk
12.1%
Bottled
water
17.4%
Distilled Carbona
Spirits ted Soft
1.6% Drinks
26.3%
Source: 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
Source: 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 and
also necessary for competitors in the bottled water industry
to manufacture in large volumes to obtain higher margins.
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
than any other beverage on
its market.
Consolidation in the Industry
‒ But 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*)
16000
14000
12000
10000
8000
Sales 2003
6000 Sales 2008
4000
2000
0
na il ly sia y ce d in s
US
A ico hi az Ita e an n n a er
ex Br n ra ia la Sp h
M C o rm F Th Ot
I nd G e
Al
l
Source: Beverage Marketing Corporation as reported by the International Bottled Water Association, 2008 *1 gallon= 3.8543 liters
CAGR: 2003-2008
Coumpound annual growth rate(CAGR)
15.6%
9.6%
8.3% 7.8%
6.7%
5.8% 5.5%
2.8%
1.7%
-0.8%
USA Me C Br I Indon... Ger -1.2%
Fr Thai... S All Ot...
Source: 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 the US wholesale sales in 2007
Dasani (Coca-Cola) $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
Source: 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.
For 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, Nestle Waters, and Group Danone).
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 French entity
Danone are the traditional leaders of the bottled water pack.
Competitive Analysis
SUPPLIER POWER
Low
- High vertical integration
Diagram of
- Many suppliers for
Porter's 5 Forces packaging
-Water sources already
owned companies.
DEGREE
BARRIERS 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
small player -Local brands competing on price consumerism
- 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 account for 61% of total
market share by 2012. Within Europe,
along with Italy, Germany is the most
valuable market to target
Volume-driven growth, especially in undifferentiated still water, is likely to put prices under
pressure
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 year before negative 2009 results. Spain
into decline. In 2009, without North America the global water and France, two of the
market was forecast to increase by a healthier 4%. heavyweight markets, are
responsible for much of
Canadean anticipates every region in the world to be these losses.
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.
Many in the developed world see bottled water as not only a way of
achieving hydration, but also as a functional beverage. Functional
waters continue to be a key area of growth in the bottled water
market with a focus on how to offer functional health benefits and
greater flavor without being seen to impair product purity and
naturalness
Some of the most common functional propositions appearing in innovative bottled water products
are:
- Weight management
- Improvement in mental function;
Weight and Watch
Over half of the European
and American populations
are overweight
Marketdata projects 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 17
million barrels of oil — enough to fuel 1
million cars for a year” to produce the
plastic water bottles sold annually in the
Of the 13 billion plastic bottles of all type sold in
United States.
the UK in 2009, only a third were recycled.
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 who are ecologically
conscious.
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 per cubic meter)
• Bottled water sales may be threatened by
campaigns and Government initiatives to Drinking fountains replace shop-bought mineral
increase the consumption of tap water. water in environmental initiative
The Evening Standard has
launched a campaign to make
London's tap water freely available
in restaurants and bars.
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 leadership will likely
occur in the next few
years.
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
• Nestle enjoyed a low cost leadership position in the US
while Coca Cola leveraged its already well established
distribution system across the globe.
Large
Nestle
Product Portfolio
Groupe
Danone
Coca Cola
PepsiCo
Other
Brands
Small
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 developing world.
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 competition likely to put pressure on prices
Q6. Nestlé 2006-2007 Performance at
a Glance
Sales by Region
Jan-Sept. 2007
2006 Other Regions
Other Regions 9%
7% Europe
Europe 42%
43%
North America North America
50% 49%
Source: Nestlé
Q6. Nestlé 2006-2007 Performance at a
Glance (Cont.)
Sales by Channel
2006 Jan-Sept. 2007
Out of Home
Out of Home
25.2% 25%
Take Home
HOD 59.7% Take Home
HOD 61%
15.1%
14%
Source: Nestlé
Q6. Nestlé 2006-2007 Performance at a
Glance (Cont.)
Sales by Brand
2006 Jan-Sept. 2007
Nestlé
Nestlé
14.5% 17%
International
22.4%
Local International
63.1% 22%
Local
61%
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?
• Sales by Region: Nestle should invest a little more to
conquer emerging markets worldwide where opportunities
to expand abound. Nestlé's market is currently
concentrated in the US market which accounts for about
50% of its sales (price pressure and Cola giants’
competition).
• Sales by Channel: Expand HOD business in emerging
markets.
• Innovate and Reposition: For the developed markets facing
a backlash, it is essential to adapt itself to changing
consumer concerns.
A large pile of Nestle Poland Spring bottles
Thanks
