The rising success of the bottled water industry can be attributed to many reasons.
One of the main reasons is the creative marketing behind it. Companies like Perrier have created an illusion of water as being a part of a modern and sophisticated life style. High end water brands are seen in expensive restaurants and hotels as well as health spas. Through time, water has gone from being a necessity to a trendy and healthy choice of beverage. Aside from brilliant marketing strategies, another significant reason for the popularity of bottled water is the increasing number of Americans who are physically active and health conscious.Though the bottle water industry has enjoyed enormous success, recent change in economic times reflect the fact that people are less willing to buy branded water and instead prefer small private labels. Hence, for big water companies to survive they would have to rethink their business model and make changes to compete with smaller brands. Introduction Water is the essential element to maintain life and is critical for the proper functioning of the human body.
In addition to its role in the daily maintenance of our body, water is also known to prevent disease.It is recommended by nutritionists to drink at least six to eight medium glasses per day (BBC Health, 2001). At this rate, water supply has to be enormous to match the needs of water consumption. The success of the bottle water is a marvel of our times. Billions of bottles are consumed each week and the U. S population has spent nearly $16 billion dollars in 2007 on this luxury (Fishman, 2007). As it became more popular, bottled water naturally became a more competitive market and forced companies to come up with more creative and vast marketing strategies.
Examples of this include partnerships with regional brands and forming new produces such as flavored water and vitamin water. Accessing new markets is one of the major growth strategies companies in the bottled water industry have used to increase their sales. Both Coca-Cola and Pepsi Co have used their wide partnerships with bottlers to break into the water industry. Currently Coca-Cola markets Dasani water and similarly PepsiCo markets Aquafina (McWilliams, 2010). This growth method has proven to be a success and Aquafina has launched Pepsi into one of the 10 sellers of bottled water in the U.
S. (Olson, 1999). Another important growth strategy is to develop new products. For the bottled water industry new products in the recent years include flavored water, vitamin water, and athletic drinks.
An example of this includes Coca-Cola’s Dasani lemon and strawberry flavored waters and Propel’s line of fitness, vitamin, and flavored waters (Coca-Cola, 2009). Finally, another method of growth is to expand the brand by creating other products. This is most notably seen in Evian’s skin care products such as its facial spray (Evian, 2010). Problem and OpportunityDespite the enormous success of bottled water, the industry has its shares of external factors that have an impact on its growth. One of these factors is the environment. The environment plays a huge role in the water industry from many angles. One perspective is the protection of the natural springs and to help preserve the overall quality, purity, and freshness of the water. The Florida Springs Initiate has an ongoing relationship with the Department of Environmental Protection to draw a regulation for spring protection (Florida DEP, 2009).
Furthermore, the recycling and waste management of the bottles also has an environmental impact. There is also the need of transporting the bottled water which brings about the issues the massive use of fuel and its toll on the environment. This mainly depends upon the fact that there is tremendous fuel combustion which leads to pollution. Finally, the choice of packaging materials also plays a role. The use of the plastic water bottles in the industry has received negative associations with phthalate chemicles and its impact on health (Hartman Group, 2008).In addition to environmental factors that are raising a concern to the bottled water industry, another rising threat is the recent recession. Just three years ago, the industry was at its peak and Coca-Cola even spent $4.
1 billion to purchase Glaceau (McWilliams, 2010). Today however, Coca-Cola and PepsiCo are influenced by the economy and consumers are being more conscious of their spending. To reflect the recent times, cheaper private label water has been increasing in sales whereas Coca-Cola’s Dasani and PepsiCo’s Aquafina water has been on a decline this year (McWilliams, 2010).Despite their sharp marketing tactics, the main dilemma for Coca-Cola and Pepsi is the huge price gap between their branded water and the private labels. It is expected that consumers will continue to purchase private labels during the recession.
The industry should be fearful that consumers may be so satisfied with these cheaper private label brands that they may not even go back to more expensive water even when the economy is uplifted. It is found that one fifth of household are now buying private label bottled water and more than 60 percent are happy with their decision (McWilliams, 2010).Therefore, among all the obstacles that the bottled water industry is facing, the current problem with the recession overrides environmental concerns at the moment. If customers continue to purchase private label brands instead of branded labels at the same rate, soon or later branded water sales will continue to decrease and become obsolete. As a result, it is important to put the recession issue at the forefront and make it a priority to improve sales of branded water before further environmental issues can be considered.Alternative Solutions A solution to solving the current problem is to decrease the price gap between branded water and private labels. There are many methods in which this can be done and essentially involves making adjustments to their business model to make them more competitive with private labels. A proposed solution is to change the method in which companies distribute their water.
Currently, Coca-Cola trucks 24 packs of water to stores and this option has been an expensive task from a labor and fuel perspective (McWilliams, 2010).Therefore, they must change the way in which water is shipped to stores. Another strategy is to do away with products that are not selling such as 24 packs of Dasani and Aquafina. These case packages of water have not been making profit for Coca-Cola and Pepsi recently (McWilliams, 2010). The companies should not continue to produce and sell unprofitable case pack water. The bottom line is to increase sales, not to simply increase volume of product. Selected Solution and ImplementationThe big picture is to decrease production costs of these companies so that they can sell their branded water at a cheaper price and be competitive with the private labels.
Decreasing production costs can be done in many ways. Of the two proposed suggestions, one is to alter the method of product distribution and the other is to decrease production of non profitable products. Among these two solutions, it is more efficient to change product distribution.By changing the way water is delivered to individual stores, the company is decreasing productivity cost by saving on man power and maximizing on efficiency in saving resources and fuel. This can be done by having water delivered to the warehouses instead of stores individually.
This idea is effective and efficient because it also helps conserve fuel by bringing all the water to central warehouse distribution. This distribution model will help lower Dasani’s prices and make it competitive with the private labels.Another method of distribution change can be for large water companies to invest in local bottling facilities who provide to local markets. By reducing the transport of bottled water it will help decrease the negative environmental consequences. By taking on the main issue as well as helping out the environment, the method of changing distribution has the potential to bring down prices of branded water significantly to be comparable to the cheaper brands. It is possible that after the price gap is decreased through distribution change that the 24 pack case packaging will be a profitable commodity again.Hence, the first solution can not only resolve the main problem but has an influence on the other issues as well.
Conclusion Bottle water is essentially the result of a successful marketing scheme. Through the years, the extensive marketing and colorful advertising has make helped to establish different brands who are essentially selling the same thing. Because of this, two-thirds of consumers purchase water on a monthly basis making it one of the top five in regular beverage sales (Hartman Group, 2007).Water is indeed a fundamental element to sustain human life.
Better taste, fitness, and perceived cleanliness are some of the many reasons that people will continue to buy bottled water. Despite the economic outcome, the need for bottled water will always exist. Branded water consumption will continue to represent a certain type of lifestyle. Therefore, it is a matter for branded water companies to come up with new production schemes to make it more cost effective during the time of recession if these companies are to survive in the years to come.References:BBC. (2001). Nutrion health living: water/fluid. Retrieved from http://www.
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