Bottled Water Industry and Competitive Environment Analysis


Valid until 31 January 2015 (unless noted)
Bottled water industry was among the world’s most attractive beverage categories. Industry revenues were forecast to grow between 2005 to 2010. Bottled water’s convenience, purity, and profitability are important for this concern. A heightened emphasis on healthy lifestyles and improved consumer awareness of the need for proper hydration led many consumers to shift traditional beverage preferences toward bottled water.

Suppliers
The suppliers to the bottled water industry included municipal water systems; spring operators; bottling equipment manufacturers; deionization; reverse osmosis and filtration equipment manufacturers; manufacturers of PET and HDPE bottles and plastic caps; label printers and secondary packaging suppliers.

Distribution channels
Typically, bottled water was distributed directly to large grocers and wholesale club. Whereas most producers used third parties to make sales and delivers to convenience stores, restaurant and delis. One of key successful for bottled water producer is domination of distribution channels.

Bottled water market were dominated by several player : Coca-cola, PepsiCo and Nestle – who develop strategies such as low cost production, distribution capabilities, differentiation (Innovative product variations enhanced waters or functional waters), lowered prices in developed markets, and strategic agreements (strategic alliances, joint ventures, franchise and acquisitions) to strengthen positions in established market, and acquired smaller sellers. Industry largest sellers appeared to be positioning for industry maturity by purchasing smaller regional brands.

About industry and competitive environment I guess it most likely similar with 5 forces – Porter as exhibit below depict (left click to enlarge).



1. Supplier
Municipal water systems; spring operators; bottling equipment manufacturers; deionization; reverse osmosis and filtration equipment manufacturers; manufacturers of PET and HDPE bottles and plastic caps; label printers and secondary packaging suppliers.
Bargaining power of supplier :
It depends on the geographic aspect (inadequate water sources), technology adopt by supplier and its support facility, bottle stocks (inventory), etc.

2. Substitute Product
Soft drinks: very appreciated in most country
Other substitute product: Coffee, tea, etc.

3. Buyer
Wide segment of consumer, both urban and rural populations.All age consumers, young to old consumer.
Bargaining power of customer :
It depends on consumer preferences, municipal water quality, market trends such as health and flavor, etc.

4. New Entrants
Market in maturity, so little new entrants.
Barriers from the outset: high costs to begin (require a capital investment of more than $100 million)

5. Rival Firms
Danone, Nestlé, Coca-Cola, PepsiCo and many small regional sellers.
Because of the market in maturity so that this industry refer to oligopoly competition. It dominate by only several big players like Danone, Nestle, Coca-cola and PepsiCo. Several companies will struggle down to increase market share and try to survive with new strategies.

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Source :
My strategic management paper at MM UGM Yogyakarta

Thompson, Jr., A.A., Strickland III, A.J., and Gamble, J.E. (2008), Crafting and Executing Strategy – The Quest for Competitive Advantage: Concepts and Cases, 16th ed. New York, NY: McGraw-Hill/Irwin

5 comments:

e-je said...

very nice analysis...
two thumbs up for the writer..

kang dede said...

dunia perbotolan... nggak ngerti...

wh said...

nice post....but im not understand....

angga said...

@ e-je, thanks for your comment

@ Kang dede & wh, terima kasih komentnya.
Artikel ini tentang industri air minum kemasan botol (bottled water industry). Industri ini saat ini didominasi coca-cola,pepsi dll. Pengembangan industri jenis ini trennya adalah memproduksi air minum kemasan botol yang lebih sehat. Kita dapat melihat inovasi coca-cola yang meluncurkan coca-cola / sprite zero sugar.

Artikel diatas juga menggambarkan kondisi kompetitif ditinjau dari lingkungan eksternal perusahaan separti supplier, buyer (pembeli), produk pengganti, dll.

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