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Alissa Indra
Trevor Setvin
Competition in the Bottled Water Industry
The primary challenge of the bottled water business is competition. In order to
effectively compete in the business the bottled water companies have to distinguish
themselves from other competitors.
Barriers to market entry make it near impossible for a smaller company to enter
the market because of the fierce competition. Bottled water companies are forced to
compete with other products that promote the same advantages (i.e. hydration) that there
bottled water does.
This concept directly relates to the idea of substitute products: tea, juices, sports
drinks, energy drinks, and many others that share a similar consumer base. Substitution
in the business is easy because of the broad array of choices among bottled water brands.
Because these brands are so well established the brands have dominated the
market. Companies listed such as: Coca-Cola, Pepsi, Nestle, Crystal Geyser, and Danone
are large bottled water suppliers. These suppliers are able to keep prices at market
equilibrium and have the ability to sell at a price that consumers are willing to pay while
still maintaining a relatively high profit margin.
These companies, to compete, must distinguish their product from other similar
products in the industry. This article addresses the strategies that Nestle, Coca-Cola, and
Pepsi have implemented to compete in the market. Each one offers something different
and has a competitive edge in the market because they have large consumer bases in the
beverage market. Brand names have allowed for large corporations to monopolize the
beverage industry as a whole. Submarkets have begun to take shares of the market by
diversifying their products. For instance, Vitamin Water has begun to take market shares
because of the unique benefits it provides to its consumers. Enhanced water has been
deemed the “most important product innovation since bottled water gained widespread
acceptance” (Pg. 23).
Customer bargaining powers have an influential affect on these companies. For
instance, Western Oregon University only sells Coca-Cola products. Companies such as
Coca-Cola have taken control of market shares by making agreements with various
establishments via incentive programs allowing for these establishments to only sell one
brand. Consumers want that convenience and may settle for a product that they may not
otherwise purchase. In the widespread market consumers have such a broad selection of
substitutes that companies must compete for their market shares.