4. bottled water
TRANSCRIPT
-
7/27/2019 4. Bottled Water
1/25
WWW.SBS.OXFORD.EDU
EDUCATING LEADERS FOR 800 YEARSWater Wars
DipSI
Dr Pegram Harrison
University of Oxford
27 Jan 2011
-
7/27/2019 4. Bottled Water
2/25
Dr Pegram Harrison DipSI 2
-
7/27/2019 4. Bottled Water
3/25
Dr Pegram Harrison DipSI 3
-
7/27/2019 4. Bottled Water
4/25
Dr Pegram Harrison DipSI 4
-
7/27/2019 4. Bottled Water
5/25
Exercise 20 minutes
Gather data on bottled water business Danone (one half of room) Nestl (other half)
Revenues 09 Market Share (Bottled Water) general
indication
Product Characteristics Process of Production Supply Chain Cost to bring to customer
Dr Pegram Harrison DipSI 5
-
7/27/2019 4. Bottled Water
6/25
Dr Pegram Harrison DipSI 6
-
7/27/2019 4. Bottled Water
7/25
Danone - Evian
Dr Pegram Harrison DipSI 7
http://www.youtube.com/watch?v=IGv3lZciiCQ&NR=1 -
7/27/2019 4. Bottled Water
8/25
Danone - Evian
Revenues 09: 20 billionShare: Leader for decadesProduct: Purity: utterly untreatedProcess: Natural: mountain springs
Supply: Unique, defensible comparative advantageCost: Production and distribution
You have to believe that water from France is better than
what youve got in Kentucky.
Purity with a cost
Strategy: demand advantage
Dr Pegram Harrison DipSI 8
-
7/27/2019 4. Bottled Water
9/25
Dr Pegram Harrison DipSI 9
-
7/27/2019 4. Bottled Water
10/25
Nestl Pure Life
Revenues 09: 100 billion - Worlds largest food companyShare: Entered market in mid-1990sProduct: Technology: totally treatedProcess: Industrial: reverse osmosis
Supply: Produced around the worldCost: Minimal production and distribution
7 to 8years after introduction, Pure Life became the #1
global brand in any established category.
Purity at a great price
Strategy: cost advantage
Dr Pegram Harrison DipSI 10
-
7/27/2019 4. Bottled Water
11/25
Perrier Defining the Industry
Dr Pegram Harrison DipSI 11
-
7/27/2019 4. Bottled Water
12/25
How did this all start?
Perrier: first entrant, defined industryBreaking into Britain: eau advertising campaign + privitization of water
utilities
price difference between tap water and bottled waterwas narrowed
price sensitivity for a premium-ised commodity eroded (note: not a resource element, a positioning element) Age of the Foodie UN report recommending 2 litres per day (8 glasses) That story about tap water going through 7 people
prior to you
Dr Pegram Harrison DipSI 12
-
7/27/2019 4. Bottled Water
13/25
Bump in Road 10 Feb 1990
Benzene Crisis
w/in 48 hours, 78% of all bottled water disappearedfor 8 weeks2 month window for competitors to enter market
Strength (purity) flipped into weakness (poison)
Live by sword, die by sword.
Dr Pegram Harrison DipSI 13
-
7/27/2019 4. Bottled Water
14/25
Ach, eh'd link tae bevvy a bottle ay Heelain Sprin'
Local British product, with ready market demand
Gained 20% share in first year on Buy Britishpolicy from Thatcher govt
Marketing strategy. Product placement along withBritish icons (BA, F1, etc)
Dr Pegram Harrison DipSI 14
-
7/27/2019 4. Bottled Water
15/25
Dynamics of Competition
Product? No real difference
Price? Yes and no
Positioning? Yes
People? Sort of
Packaging! Almost entirely!
Dr Pegram Harrison DipSI 15
-
7/27/2019 4. Bottled Water
16/25
Strategic response
How do incumbents react to new entrants?
Pepsi: Aquafina http://www.tvclip.biz/video/vNhP6007UUI/aquafina-commercial-
baseball.html All-American product + formidable distribution Became US #1 brand rapidly
Coke: Dasani Busy, 29-35 y/o urban women What life takes out, Dasani puts back UK strategy backfires
Dr Pegram Harrison DipSI 16
http://www.tvclip.biz/video/vNhP6007UUI/aquafina-commercial-baseball.htmlhttp://www.tvclip.biz/video/vNhP6007UUI/aquafina-commercial-baseball.htmlhttp://www.tvclip.biz/video/vNhP6007UUI/aquafina-commercial-baseball.htmlhttp://www.tvclip.biz/video/vNhP6007UUI/aquafina-commercial-baseball.htmlhttp://www.tvclip.biz/video/vNhP6007UUI/aquafina-commercial-baseball.htmlhttp://www.tvclip.biz/video/vNhP6007UUI/aquafina-commercial-baseball.htmlhttp://www.tvclip.biz/video/vNhP6007UUI/aquafina-commercial-baseball.htmlhttp://www.tvclip.biz/video/vNhP6007UUI/aquafina-commercial-baseball.htmlhttp://www.tvclip.biz/video/vNhP6007UUI/aquafina-commercial-baseball.html -
7/27/2019 4. Bottled Water
17/25
The real competition?
Tap Water?
Why? Why not?
Dr Pegram Harrison DipSI 17
-
7/27/2019 4. Bottled Water
18/25
Dasani Whoops!
Dr Pegram Harrison DipSI 18
Bad press about tap water- from Sidcup!- 3,000% mark-up
Bromate in bottles, a by-product of the added minerals
500 million bottles yanked off market 5 weeks after launch
-
7/27/2019 4. Bottled Water
19/25
One Water
Same price - No shares - No dividends
Less than 5m (vs Danone 13b)
100% profits to African water projects water to 10 African school kids per day Play Pumps: powered by kids playing Clean water to over 1.4 million people When you drink One, Africa drinks two
Positive brand choice
Provides British retailers with CSR stories, at no costAffecting industry. Volvic 1 for10
Dr Pegram Harrison DipSI 19
-
7/27/2019 4. Bottled Water
20/25
Dr Pegram Harrison DipSI 20
-
7/27/2019 4. Bottled Water
21/25
Strategic System
Youre not really buying water; youre buying oil!poly(ethylene terephthalate) PET
In 1980s, PET bottled water jumped from 7th place inbeverage industry to 2nd (after carbonated soft drinks).
Growth of $2-3 billion annually.
This innovation came from bottled water industry.Now its everywhere.
PET platform: without it, bottled water would be lesswidespread.
Dr Pegram Harrison DipSI 21
-
7/27/2019 4. Bottled Water
22/25
Water and Oil do mix
Bottled Water = Water + Oil
In 1980s, a revolution. The worlds two most preciouscommodities in one neat package. But
In 1990s, a backlashwith the green movement. The oil equates to 20% volume of water. It takes 3 litres of water to make 1 litre of bottled water.
In response: Reducing weight of bottles Make over 40% of bottles with recycled PET Millions mangroves planted for CO2 credit
Dr Pegram Harrison DipSI 22
-
7/27/2019 4. Bottled Water
23/25
Future Strategic Landscape of Bottled Water
Who is best positioned?
Who has best resources?
Who can access optimal value?
Who controls the system best?
Why?
Dr Pegram Harrison DipSI 23
-
7/27/2019 4. Bottled Water
24/25
Whats next?
Sales dropping in WestBut news of its demise is prematurely exaggeratedCompetition moving East and South
Pure Life well adapted to any territoryMore people, less clean water, bigger markets
Danone has created new brandsAqua in Far East, BonaFont in Latin America60% of volume in high growth countries>50% of margin in developing world
Dr Pegram Harrison DipSI 24
-
7/27/2019 4. Bottled Water
25/25
Whats the lesson?
The positional & resource-based views of strategydont fully describe whats going on in bottled
water industry.
There is a whole system of value being added andallocated.
How does this work?How can you control your part in it?
Dr Pegram Harrison DipSI 25