Competition in the Bottled Water Industry in 2006 - Essay Example

The bottled water industry has expansively grown over the years. In the US, people consume billions of bottles of water, each week. On the average, the American population use close to $16 billion dollars on bottled water. It is expected that by the year 2020, the industry will account for $148 billion, from the $70 billion in 2005. The growth rate of the bottled water industry is remains positive, because most companies are increasingly shifting from bulk productions to bottled water (McEachern 130).

Here, there are different competitors, who compete to be the best in the market. The key competitors, Nestle, Pepsi, Coca Cola, and Groupe Danone have developed effective strategies, which have made them to remain key players in the industry. Therefore, it is challenging for local sellers to compete with them. There are new entrants, and these introduce lower prices in order to compete favorably. A new trend in the bottled water industry is the production of the “enhanced waters.” This are highly priced, thus, more profits for producing companies.

The bottled water industry faced a high threat of substitute products. These mostly include the healthier products. Flavored water, vitamin added water, and non-calories water is the key substitute products of bottled water. . Furthermore, the bargaining power of suppliers is quite low. This is because of the large number of existing suppliers in the industry. Similarly, the bargaining power of customers is medium. Since water is a basic commodity, consumers will not cease buying it due to increased prices; however, they can choose different brands from the available producers.

Intense competition in the industry is a major competitive force in the industry. This is owing to the fact that the number of key global competitors in the industry is small. In addition, new entrants in the industry might base on the fierce competition to compete aggressively using product pricing. Furthermore, differentiation is an important factor in the bottled water industry. Therefore, developing the product is important in order to beat competition, as a new entrant. Nonetheless, basing on these factors, this industry is attractive for both the existing and new entrants, as long as they adopt effective strategies to counter competition.

The major competitors in the bottled industry use different strategies to remain relevant in the market. Nestle is the world’s leading seller of bottled water. In 2005, this company had a market share of 18.3%. By 2004, this had 77 brands in 130 countries. The major strategies for this company are its low product pricing, and entering into joint ventures. Additionally, the production of enhanced waters since 2006 has boosted its profits. On the other hand, Dasani, the brand of Coca Cola, has also enabled the company to make great profits.

In 2005, Coca Cola Company invested $20 million in the advertisement of Dasani, and distributed to all retail channels of Coca Cola Company. In 2006, Coca Cola diversified Dasani brand to include fruit-flavor.