Bottled water-Victor&Adriana

Victor Beleña Moreno BUSINESS STRATEGY AND STRATEGIC CONTROLLING
Adriana Boixareu Martos 15.09.2022
QUESTIONS BOTTLED WATER CASE

1. What are the defining business and economic characteristics of the bottled water
industry? What is the industry like?
Before 1990, the industry of bottled water was not as attractive as it became once
the 90s started. Since that year, it didn’t stop increasing, specially between 2003 and
2010. Also, in the United States, bottled water industry reached a popularity that led the
American market to the first worldwide position. This had an impact that made emerging
countries in Asia and America replicate the growth of this industry.
This bottled water market was characterized by a strong rivalry between competitors
who fought for the highest market share possible and volume gains. It ended up
dominated by big companies such as Danone, Coca-Cola, PepsiCo, or Nestlé; but there
were small regional sellers as well that offered low-cost products and used differentiation
strategies.
From 2006 on, bottled water industry had variations since rivalry didn’t stop increasing
due to the appearance of innovative products and decreasing prices in developed
markets in which positions were being strengthened. To maintain their positions, some
companies preferred to enhance their strategies to adapt better to that time market
conditions.
The growth in this industry was characterized by a concerned society over the quality
of tap water, inadequate treatment of water, convenience and portability, healthy
lifestyle and shifting from other beverages to bottled water.
2. 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?
Competition in bottled water industry is fierce. As said in the question above, the
industry ended up dominated by big competitors, but here were also small competitors
with their own market share and strategies to be differentiated. These characteristics
made companies keep innovating constantly and adapting their strategies to the
market situation.
On the one hand, we would say the weakest force in this industry is the entrance of
new competitors, since this industry has huge entry barriers according to market
conditions: developed market where big companies have already been stablished and
it’s difficult to take a seat and the need of a huge investment to start the company and
its infrastructures.
On the other hand, the strongest force in this case would be rivalry among
competitive sellers. This is intensified since we are talking about an industry in which
1
customers are not loyal to a specific brand, which is the reason why many companies
are working on their brand-building skills.
When talking about industry’s attractiveness, we should focus on how people is
becoming more concerned nowadays about healthy lifestyle and the need of drinking
water. This makes the product of this industry totally necessary for population. Also, the
low rate of new entrants could make this industry attractive since the number of
competitors is fewer than in other industries.
3. How is the bottled water industry changing? What are the underlying drivers of
change and how might those driving forces individually or collectively change
competition in the industry?
As said before, since 2006 bottled water industry suffered some changes that forced
companies make some decisions like adapting their strategies to the new situation.
Since the annual growth in the industry surpassed the 10%, it started to slow down leading
to flat or declining revenues. This forced big companies to offer discounts, acquiring
smaller brands, establishing strategic alliances, and creating joint ventures.
These alliances drove to a more competitive global market where big sellers were
together, intensifying rivalry.
These changes were due to some driving forces already mentioned: the change
in the growth-rate and the increase of globalization inside the market; but we can also
find more drivers such as product innovation, when enhanced or functional waters were
introduced and expanded the market; regulatory influences that made water fulfill some
requirements, for example, in the United Kingdom; changes in lifestyle according to the
increase of healthy habits in society. In this case, the mentioned forces would increase
market demand, competition and would rise the industry’s profitability.
4. What does your strategic group map of the bottled water industry look like? Which
strategic groups do you think are in the best positions? The worst positions?
Price / Perceived Quality & Image
High
NESTLÉ
PEPSICO
COCA-COLA
Low
Narrow Broad
Geographic Market Scope
2
This is how our strategic group map looks like. Pepsico´s geographic market scope
is the narrowest because they only own Aquafina. It is followed by Coca-cola with
Dasani, Evian and Dannon. Finally, Nestlé is thebroadest with Poland Spring, Deer Park,
Arrowhead, Zephyrhills, Ozarka and Ice Mountain. Nestlé is the one with the highest
prices, followed by Pepsico and Coca-cola.
We believe Coca-cola is in the best position, since it has a good variety of
products and the lowest prices. That is reflected on the size of the circle, because it has
the highest revenues.
On the other hand, the group in the worst position would be Nestlé, prices are so
high, so despite having a big variety of products, costumers prefer buying cheaper water
from Coca-cola or Pepsico.
5. What key factors determine the success of bottled water producers?

There are some key factors which determine the success of bottled water
producers. For example, in the United States were required to meet the standards of both
the Environmental Protection Agency (EPA) and the U.S Food and Drug Administration
(FDA).
Bottled water producers could also voluntarily become members of the
International Bottled Water Association (IBWA) and agree to comply with its model Code,
which goes beyond the standards of the EPA, FDAor state agencies.
Other key factor is the water distribution. Producers directly distribute the water to
large grocersand wholesale clubs or use third parties like beer, wine, or food distributors
to make sales and deliveries to convenience stores, restaurants, and delis.
The last key factor is price war. Since most supermarkets, supercenters, and food
stores usuallycarry fewer than seven branded bottled waters plus a private-label brand,
bottled water producers are required to compete aggressively on price to gain access
to shelf space.
6. What recommendations would you make to PepsiCo to improve its competitiveness

in the globalbottled water industry? to Group Danone? to Suntory Water Group?
Firstly, we would recommend PepsiCo to continue expanding to more countries and
markets to increase the company’s wealth.
To Group Danone, we would recommend trying to decrease its price a bit to reach
more consumers. Consumers will buy more quantity of bottles and new customers will
appear.
Our last recommendation is to Suntory Water Group. It could continue consolidating
itself in the American market so that it is impossible to be dominated by any other brand.

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Victor Beleña Moreno BUSINESS STRATEGY AND STRATEGIC CONTROLLING

Adriana Boixareu Martos 15.09.2022

QUESTIONS BOTTLED WATER CASE

5. What key factors determine the success of bottled water producers?

6. What recommendations would you make to PepsiCo to improve its competitiveness

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