III INDUSTRY ANALYSIS
FUTURE OUTLOOK AND TRENDS
Bottled water is the fastest-growing beverage category in the world: it “has expanded from a tap water substitute into the beverage arena”. The bottled water industry is extremely prosperous, involving companies with different histories and approaches to water. Bottled water is a booming and very competitive market involving numerous companies. Although bottled water is a world market, with companies present world-wide, 75% of it is still controlled by local actors.
According to Senior and Dege (2005), the prospect for the future continues to be one of exciting and dynamic change on a global scale“. Although there are four big players on a global market (see Analysis of competitors), bottled water has always been a product for which a local producer can serve a local market, or where entrepreneurial spirits can carve a niche with a new idea. So diversity of companies and brands seems to be assured both on global and local level.
In regard with future outlook and trends in water bottling industry, bottled water is an extremely competitive market hence companies present on the bottled water market need to develop diverse marketing strategies and differentiate themselves amongst others. Trends in the water bottling industry will develop through two different channels:
Accessing new markets, by owning or developing partnership with regional companies, as a major marketing strategy. Consumers are traditionally keener on natural mineral water than on other types of bottled water and spring waters are very successful. They are considered as safe as natural mineral water while being much cheaper: water from different springs is sold under the same brand, reducing transportation costs. “Multi-spring water” is a new and and promising strategy, although this practice is long-established in North America. Nestlé launched its Aquarel spring water, and Danone counterattacked with Danone Water. Companies tend to invest abroad and create local bottling facilities so as to reduce transportation costs, rather than directly exporting the water. With so positive market trends, they can expect to recover their investment and generate profits in a rather short period.
Developing new packaging and products. The packaging is an important part of the bottled water marketing success. All types of bottles coexist and are regularly reshaped in order to better catch consumers’ attention. The most recent trends in the small bottles category goes for supposedly handier bottles, e.g. 0.5 liter bottles with a sport-type cap or 1 liter bottles for desk use. New products such as flavored water, waters enriched with vitamins and minerals and health-benefiting water tend to develop. Brands also diversify by creating numerous by-products, e.g. Evian’s atomizer for facial care and isothermal bag for the 1.5 liter bottle. The 0.33 liter Evian bottles can be adapted a teat, to turn into a babies’ bottle. Natural mineral water springs in Europe are often related to a spa offering water cures and beauty care products (e.g.: Vichy).
The combination of the two above mentioned strategies is definitely a course of operation of foreign investors that Fin Invest doo will try to utilize in order to raise the required funds. By providing the required funds to Fin Invest doo and entering into this joint venture deal, a foreign investor that is interested to be present in Montenegro and/or on Balkans, by doing this way will have a possibility to gain local presence and develop a new product for health-aware consumers – natural spring water from Ropušica springs in Montenegro – the Aqua Monta water.
ANALYSIS OF COMPETITORS
Bottled water is a particularly competitive market, hence companies need to develop diverse marketing strategies, such as accessing new markets by owning or developing partnership with regional brands, developing new products (e.g. flavored water) or by-products (e.g. cosmetics) and developing services (e.g. home and office delivery of carboy water). For a foreign investor, a partnership with Fin Invest doo will provide all of the advantages of developing partnership with a regional brands and a local company in a new market.
Three major types of bottled water companies that compete on the bottled water market that indicate the above mentioned future outlook and trends in the water bottling business are:
Companies that market one specific brand of bottled water, for instance Aquarel (Nestlé) or Evian spring water. Some of them are century-old and family-owned, but most of them have grouped or are now under control of major multinational food companies, in particular Nestlé and Danone in the mentioned example. Danone and Nestlé have a long tradition in selling natural mineral waters. Nestlé is number one on the world market of bottled water representing 15.3% of the world market share – and 67 bottling factories employing over 18,000 people in the world, owning well-known domestic brands in 17 countries. Danone, holding 9% of the world market share, challenges Nestlé with Its best-known brand Evian.
Sodas or soft drinks companies now turn to the very profitable bottled water market. Coca-Cola and PepsiCo, for example, are taking advantage of their large world-wide network of bottlers which provides them with immediate access to the domestic markets. The purified and aerated water used to make sodas is added a concentrated solution of minerals and sold as purified, enriched water, on the same principle as Coca-Cola and Pepsi. Like for colas, benefits for the company come from the sale of mineral concentrates to local bottlers. Coca-Cola markets BonAqua, and PepsiCo Aquafina. Although Aquafina labels “picture beautiful stylized mountains”, the water is actually derived from municipal tap water in conjunction with a concentrated solution of minerals.
Companies providing tap water, with extensive know-how in water purification and pipe distribution now turn to a more lucrative way of distributing water. They now develop water services, such as home and office deliveries of water carboys in large packages of 5, 10, 15 liter PET cans.
In the era of globalization and intensive market competition both domestically and abroad, marketing and advertising campaigns are essential to differentiate the product and attract consumers. Brands tend to associate with specific activities: sport, fitness, slimming, fashion, etc. For example, in the last 50 years, Evian has been the water of babies, emphasizing that its low mineral concentration is suitable for them. The brand’s marketing strategy capitalizes on infants, from the pink color of its labels to advertising campaigns. Evian also sponsors pediatric research.
 Lenzer, R.: “A monster beverage event”, in Forbes Magazine, 20 October 1997.
 Ferrier C.: Bottled Water: Understanding a social phenomenon, WWF Discussion paper, 2001.
Although all of the above brands proclaim that the water originates from pure mountain springs of Serbia, Croatia, Slovenia… there are doubts about the veracity of these statements. Instead, the producers might sell purified tap water.
All in all, the competition of Aqua Monta includes not only other bottled spring water products but also carbonated and soft-carbonated bottled water as well as carbonated and non-carbonated soft drinks. Therefore, in order to maximize its reach, Aqua Monta will differentiate itself amongst others by focusing on a local reach, proclaiming tradition and heritage, as well as with its price which is significantly under the price of competitors. Additionally, Aqua Monta will offer an additional distinctive service to its customers, and that is the service of private customized labeling whereas companies and customers will be able to order larger amounts of bottles with their private label which will depict alternatively the logo of a company, event, occasion, etc.
Drinking bottled water has become a trivial habit in many people’s everyday lives. Bad tap water taste or quality, fitness objectives or safety purposes, numerous reasons lead consumers to buy bottled water. Bottled water may even be necessary, for instance in case of temporary tap water contamination. The trend toward consuming more and more bottled water will keep increasing in the coming years. This flourishing market is profitable for a high number of companies, and employs thousands of people world-wide.
An analysis of trends in the bottled water market requires market segmentation. In addition, bottled water is itself a segment of the overall soft drinks market. And consequently also the natural spring bottled water. Segmentation is needed because different product/market combinations react in different ways in different countries.
When categorized and segmented, it can be said that Aqua Monta is a:
- Non-returnable PET/glass packaged, still, mineralized, mainstream, natural spring water with an own label (brand).
Consumers that choose to drink only bottled water are mostly women and elderly people. Other consumers are travelers, athletes, schoolchildren, and others. There are several reasons for drinking bottled water:
- Consumers care for their health and safety,
- Wealth and changes in ways of life,
- Habit, comfort, and ease,
- Effective marketing and availability,
- Taste and quality,
- Need in specific situations and occasions, etc.
Considering the segments categorized by the type and characteristics of the water, bottled water can be segmented as bottled spring water, carbonated and soft-carbonated water. Additionally, the water can be flavored (raspberry, apple, lemon, peach, herbals, etc.), packaged in different packages and volumes, or positioned towards specific categories of users: people who want to loose weight, athletes, pregnant women, elderly, children, etc.
The market that will be under a reach of Aqua Monte is a niche market and is intended to be focused on users of all generations that strive to consume healthy, pure, natural spring water of neutral taste, that value the tradition and heritage of Montenegro nature, and are familiar with the excellent characteristics of Montenegro spring water (see chapter IV Description of ventures, Product).
Though many municipalities, particularly in the developed world, provide high-quality, highly regulated, potable water, occasional problems with contamination from commercial fertilizers or other contaminants are often widely publicized. Violations of tap water standards are also openly reported. While most cities have what is considered safe tap water, contaminants ranging from bacteria to heavy metals were present in some tap water. This is particularly the case in Montenegro where the tap water supply by municipalities is rather poor, especially on and near the seaside. Delays and shortages of water supply are very oft. The actual or perceived threats like these drive up bottled water sales annually. In case of Serbia and Montenegro, target markets of Aqua Monta, the sales figures by towns and regions are given in the table below.