Case-Study: Pepsi versus water

Pepsi introduced its Aquafina (bottled water) in the US market some years ago and in year 1999 put almost $10m into its campaign. Relative maturity of the soft drinks industry is partially behind such moves. People are becoming more health conscious and rising standard of living in developing countries have given a boost to mineral water demand. In the US, where soft drinks sales rose by 0.5% in 1999, bottled water sales grew by 35%. Given that bottled water fits very well with Pepsi’s existing business, they want a share of this burgeoning market too.

Despite its impressive growth rates, however, the bottled water market will not be an easy market for the new entrants. The market is dominated by such global giants as Danone (owner of Evian) and Nestle (owner of Perrier and Poland Spring). Compared to Perrier’s $1.5b sales in the US, Pepsi’s Aquafina sales were only $285m. One major advantage of Pepsi is their distribution network. They have the ability to sell, and that is what really matters.

A) What are the two major reasons for Pepsi getting in the bottled water market?

B) Where would you put Pepsi’s Aquafina on the BCG matrix for bottled water?

C) What strategy Pepsi could adopt in order to improve its market share?

Give reasons for your answers.