Mgmt 4650 Case Project

Bottled water is one of the world’s attractive beverage industries with sales exceeding 32 billion gallons world wide. The industry’s annual growth was 9% between 1996 and 2001. Due to the rising popularity of water in the U.S. and other parts of the world, the industry is estimated to continue growing in the foreseeable future. The aim of this paper is to highlight the key success factors that have seen the industry grow, how the industry has been changing and describe the strategies used by Nestle, Coca Cola, Pepsi in sale of bottled water. 

Key Success Factors for the Water Industry

Bottled water industry did not enjoy brand loyalty that was associated with beer, soft drinks or other beverages. According to Gamble (2006), 10-20% of customers look for a brand they are loyal to and this number is increasing. Global companies like Coca Cola, Pepsi and Nestle that have gigantic global brand images became the best and main sellers. These companies embarked on maximizing the number of deliveries per drive and the on time delivery with a responsive customer service gave them an edge over the others. These companies also made good use of high utilization of their large scale productions plants to ensure that the market has enough and there is no shortage. Another key factor is offering discounts to lure more customers to their brands (Gamble, 2007).

The bottled water industry is one of the most growing industry and into the foreseeable future. Bottled water is most attractive beverage due to its characteristics that shape the industry strategically. Some of the key success factors include that companies need strong technological capability concerning production and delivery factors. According to Gamble (2006), bottled water is among the world’s most attractive beverages category hence the reason for exceeding $62 billion in revenues (Gamble, 2007).

How the Water Industry is changing

Indeed the water industry is changing in the U.S. and elsewhere in the world. Due to an increase in the per capita consumption of bottled water in the 2001 in the U.S., analysts thought that the industry growth rate could slow. The growth is attributed to people’s awareness to their health because of advertisements and due to a changing lifestyle of people who are now focused on health and fitness. And this has seen people switching from tap water to using bottled water (Khiani).  

Bottled water industry is among the world’s most attractive beverage categories and its growing popularity is attributable to concerns over the safety of drinking municipal water from our taps. With an increased focus on health, fitness and a hectic lifestyle for the American consumer, the popularity of bottled water is just but increasing. Although bottled water is dominated by companies like Coca Cola, Pepsi and Nestle, the competitive rivalry since 2006 has been ratcheting upwards. This is due to sellers launching innovative product with different variations, lower prices and using strategic agreements that sees them strengthen positions in established markets. Some have gone into acquiring smaller sellers in order to gain foothold in some of the world’s emerging markets.

However, analysts believe that the world’s bottled water sellers have jockeyed for market share whose future impact will mean a continued fierce competition on a global scale attributable to price and quality.  Technology is also expected to play a big role in online interaction with retailers, wholesalers and consumers. Use of tracking devices will help locate where trucks are from wholesalers. Equipment of water purification or for filling bottles will also use technological advancements in distillation, washing and packaging of water (Khiani).

Strategies of the “Big 3” Companies in the U.S. Market (Nestle, Pepsi and Coca Cola)

These “big 3” companies are one of the best and leading marketer, manufacturer and distributor of non-alcoholic beverages. The companies’ vast global distribution system makes them almost unstoppable brands. For example, Coca Cola brand aided it in gaining a sizeable market share while leveraging on Coke’s appeal to consumers to gain access to retail distribution channels. Pepsi is also the world 5^th largest beverage company and its Aquafina brand was best selling bottled water company in 2002 aided by Pepsi’s wide network and the same case replicated with Nestle water’s different brands (Gamble, 2007).  

Bottled water was previously distributed by large grocers and clubs whilst they used 3rd parties to make deliveries and sales. With the entry of such giants like Nestle, Pepsi and Coca Cola into the water business, they enjoyed their vast distribution channels. Therefore, it was easy say for Coca Cola to distribute Dasani or Aquafina by Pepsi. The “3 big” companies thus had to offer their products at lower prices or could pay a rebate of some few cents to secure convenient spaces in the supermarket (Gamble, 2007).  

These big companies also use a strategic group map. This is a technique that is used in displaying competitive position the rival industry firms occupy in the market. Thus, Coca Cola or Pepsi were able to dominate channels in the market as they were able to make deliveries of Dasani or Aquafina with their already established channels. Product innovation: the bottled water industry has gone through product innovation and especially by the “big 3.” The degree of product differentiation from tap water has been great. An example is by adding ozone gas to prevent growth of bacteria by Pepsi or by placing different association like FDA or EPA that require bottled water to test presence of bacteria (Gamble, 2007)..

The “3 big” companies were thus the most successful companies in building consumer loyalty. For example loyal consumer accounted for 77% of Aquafina consumers while Dasani was at 62%. Other brands by other bottled water companies attained a much lower market share of brand loyalty (Gamble, 2007).