Nestle Danone Bottled Water Industry

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Nestlé-Danone and the bottled water sector

M34

Table of contents

|Introduction 3 | |I. Presentation of the structural features of the bottled water industry 4 | |I.1. Strategic segmentation (market segmentation) 4 | |I.2. Macro Environment 5 | |I.3. Analysis of the competitive Industry 6 | |I.4. Assessment of the attractiveness of this industry using competitive forces analysis 8 | |II. Assessment of Danone and Nestlé's current situation 10 | |II.1. Growth options and methods of the two companies 10 | |A. GROWTH OPTION AND METHODS FOR NESTLE 10 | |B. GROWTH OPTION AND METHODS FOR DANONE 11 | |C. Competitive strategy 11 | |II.2. Analysis of their strengths and weaknesses 14 | |II.3. Evaluation of the situation of the two firms taking into account that of the new entrants 20 | |III. Recommendations 21 | | |

Introduction

Water is something that anyone around the world could get from the tap for free, but now it is a huge part of the beverage industry. Bottled water has become the industry's fastest growing segment, both in volume and value.

DANONE and NESTLE represent the main leaders of this market. The attractiveness of this market and the exponential growth in consumption of bottled water (138 billion litres consumed in 2003) now pushes competitors such as Pepsi and Coca-Cola to put a foothold in this market.

The bottled water industry is divided into three segments (purified water constitutes a separate segment):

       - Spring Water

       - Natural Mineral water

       - Table water

Because of this diversification, but also because of the legislation effective on water, (which is very specific in some countries), the leaders had to struggle hard to gain maximum market share in this area.

The consumption of bottled water has grown in recent years and the explosion of emerging markets allows new players to enter this market. To ensure sustainability, DANONE and Nestle are now constantly trying to do better in all strategic areas (communication, distribution...).

I. Presentation of the structural features of the bottled water industry

Bottled water industry is becoming the world’s most attractive beverage categories. A heightened emphasis on healthy lifestyles and improved consumer awareness of the need for proper hydration led many consumers to shift traditional beverage preferences for bottled water.

I.1. Strategic segmentation (market segmentation)

The market is divided...
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