Water Brands : Towards a Perimeter Expansion

With a very good dynamic in terms of volume, the water market is consolidating its image towards consumers. However, it does suffer from the hard competition over prices between the different brands.

« We are really satisfied with the growth of the mineral water market, especially compared to other drinks, such as colas and fruit flavored soft drinks ».

These were the exact words of Muriel Koch, Marketing Director of Nestlé Waters France-Belgium (Nestlé Pure Life, Contrex, Hépar and Vittel).

Indeed, while colas and soft drinks « decreased » respectively by 3.4% and 5% last year, plaque mineral waters increased its shares by 1.9%, according to IRI. Frédéric Guichard, marketing director of Danone Eaux France, has explained that « There is a good a dynamic in terms of volume, which was strengthened during the first quarter of the year, when the growth in CAM reached 3.5 % in volume and 1 % in value ». Between the first quarters of 2012 and 2013, the Group recorded a growth of 5.4% in volume and 8% in value on its two brands, Evian and Volvic.

To do so, three important strategies should be taken into account.

Promotion and Loyalty …

« In a complicated economic situation, promotions helped increase volumes but remain detrimental in value»

as expressed by Valérie Siegler, marketing director of Wattwiller, an Alsatian SME, a subsidiary of the Belgian Spadel group. IRI does effectively report a rate of sales below promotions by about 38% in 2012 (while the segment was historically used to rates of 20 to 25%), which penalizes small players.

Effectively, as explained by Christelle Lacaze, marketing and export manager of Mont Roucous (water from Haut-Languedoc very weakly mineralized), small companies refused to enter this race towards promotions and prefer to do trading operations on the regular stock as gifts to reward the loyalty of our consumers.

However, at Danone Eaux France, Frédéric Guichard insisted that this 38% rate should be put into perspective: « If we consider only the heavy promotions, those that have a real impact on sales excluding leaflets bottoms and price decreases over a short period, the real rate turns out to be around 15% ». On the other hand, he was concerned about the war between brands, categorizing for example mineral water as products with blocked prices. He said in this context that « This penalizes the margins even though they revived the market through the right levers».

Differentiation …

While promotions enabled the exhibition of water at the entrance of stores, manufacturers increased their investment in advertising (according to Kantar Media : an increase of 10 % in 2012, ie. 32.5 million euros in medias with 25.6 million on TV), they enhanced by 1% the penetration rate between 2011 and 2012 (89%), and increased consumption per household from 168 liters in 2010 to 175 liters in 2012.

Some categories of plaque water, such as the one for mothers and babies, are doing particularly well as sales reach out the 400 million euros and 4 million liters in 2012 (increase of 3% in volume). « France has a good birth rate and babies drink all the time» admitted Christelle Lacaze.

Regarding stakeholders, the dominants remain Nestlé Waters (18.7% of market shares in volume and 28.4% in value at the end of 2012) and Danone Eaux France (17% in volume and 26.6% in value), with private label companies ranked third (22.7% in volume and 17.7% in value). For small manufacturers (11.8% in volume and 10.2% in value), « the challenge, as highlighted by Valérie Siegler at Wattwiller, is about differentiation”. The Alsatian SME thus focuses on a premium positioning while Mont Roucous looks forward to become the champion of « well hydrated babies ».

In Arcachon (33), a company named Les Abatilles relies on its brand La Bordelaise. Hervé Maudet who recently acquired the brand with Jean Merlaut, a merchant-producer of Bordeaux wines explained that « With a bottle similar to a bottle of wine, it represents the great vintage of plaque water, and the purpose is to develop it in the Gironde while working on its export »

Brand animation …

The dominants, Nestlé Waters and Danone Eaux France, face problems related to brands animation or perimeter expansion. « We support promotion through marquees and water fairs Indeed, thanks to two major sport events, Roland Garros and Le Tour de France, we favor a qualitative brand animation » said Muriel Koch.

Evian for example experienced an incredible success with its Baby & me spot: more than 42 million views on the internet in 10 days. Volvic is still focusing on its relationship with nature, partly through its partnership with UNICEF. The aim of this project is to provide clean water to Sahel’s populations, without forgetting all the ecological aspects. The Eco Reserve 8 l, a fountain launched in early 2009 containing 40% recycled PET, has now reached out more than10% of its volumes. Through these innovative and clear positioning, brands can get the required attention and support of consumers.

Path towards expansion, Loss of identity

A perimeter expansion in indeed an important goal to achieve. Working the right way to evolve can will definitely enable brands to reach out more consumers and to increase their market shares. However, in this battle towards expansion, it is important to settle clear goals, set boundaries and follow a well designed strategic plan in order to avoid loosing the identity of the brand. Consumers become loyal to a brand for specific reasons; loosing this special thing can definitely drive them away.

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