Nestlé-Danone and the Bottled Water Sector

Topics: Bottled water, Water, Mineral water Pages: 8 (2460 words) Published: November 29, 2011
Nestlé-Danone and the bottled water sector
1) Presentation of the structural features of the bottled water industry. a) strategic segmentation.
There are four different family of product in the bottled water market : * mineral water ; they are spring waters with specific properties such as medical treatment. They cannot be processed. * spring water ; they are naturally pure and from groundwater as mineral water. No treatment shall be given to them. They are on average three times less expensive than natural mineral waters. * Table water ; they designate tap water bottling. The treatments are tolerated here especially for gasification and of course to ensure its potability. * Home and office delivery (HOD); the Home and Office Delivery is a growing segment, accounting for 28% of the volume of bottled water. Strategic segmentation of bottled water is relatively simple even if the difference between spring water and natural mineral water is insignificant. Indeed it is distinguished only through particular virtues granted to it. b) key success factors.

Global consumption of bottled water has exploded in recent years, rising from 83 billion liters in 2001 to 138 billion in 2003, representing a 66% increase in just two years. Several factors are responsible for this tremendous growth. The first reason for this success is linked to the consumption habits of buyers of bottled water in developed countries. In fact,consumers has a bad image of tap water, they prefer to turn to bottled water to which they trust. In fact, tap water is a victim of the mistrust of consumers in developed countries, because tap water is considered as not being pure and natural. The second reason is the ever increasing demand for bottled water in emerging markets, the only alternative to polluted water which is present in these countries. In addition, the sale of bottled water is often less expensive than the rehabilitation of the sanitation network, so the sale of bottled water is often preferred. c) environmental analysis.

PESTEL analysis is a tool to assess different aspects of the external environment. Political factors: The state controls the sources, in order to exploit on them, a right of exploitation which must be paid. Each country has its political and its mode of operation, Nestle and Danone have to adapt in order to exploit the groundwater sources in the different countries. Economic factors: Sharp increase in demand for bottled water in recent years. 66% increase in sales between 2001 and 2003. Reasons: Habits developed countries focusing on bottled water and the growth of emerging countries. Two major groups competing in the market for bottled water : Danone and Nestlé. Two other groups threaten their hegemony, Coca Cola and PepsiCo, corresponding to new entrants in this market. Regarding the area of Home and Office Delivery, the latter two do not take part in the competition and let the two major players such as Nestle and Danone in oligopolistic situation. Social factors : Consumers in developed countries have a poor image and a distrust of tap water, this being due to too many pollutants. The same goes for soft drinks that are considered too sweet by those consumers. In Europe, consumers prefer the qualitative aspect of the product, including through quality labels. In contrast, consumers in North America do not care about the quality of water but are looking for ever lower prices. The Latin American consumers on the other hand, prefer carboy of water. Technological factors : The Research and Development is considered the engine of business growth. for examples: flavored water,or innovative and adapted packaging for each situation of daily life. Research and development represents 11% of the turnover of Nestle. The change in packaging has enabled large groups to achieve significant logistical savings. Thus the cost of a bottle is reduce and the margins are more important. Environmental Factors : Replacing the...
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