Competition in the Bottled Water Industry

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.