Case Nestlé Waters: enter the Indian bottled water market

Résumé du document

Faced with a saturated market, companies have to internationalize themselves in order to extend their markets. Internationalization occurs when a firm expands its R&D, production, sales and other business activities in the international market. It is a very expensive process which needs to consider many factors to build a strong strategy. Several strategies exist for internationalization. Companies have to consider many internal and external factors to enter a market, adapt their product to the country targeted and avoid many entry barriers.

Nestle seems to be an ideal firm for internationalization, because it is a multinational enterprise, which is of the critical size to internationalize, a lot of available resources, international experience and a wide product range. We chose Nestle Waters because the bottled water industry is a rapidly growing market based on the ‘healthy living' trend. The Swiss company is not yet present in the Indian bottled water segment which is why we decided to target the Indian market.

First, we will present Nestle Waters by an internal scanning of the firm. In part two, we will analyze the environment in India in order to define opportunities and threats of this emerging market. And in the last part, we will consider and evaluate three market entry options, to define the strategy to follow.

"Nestle Waters", a Nestle subsidiary, is nowadays the largest bottled water company in value (Danone SA is the largest in quantity). The brand is present over all the continents. The company has 19% of market share and in 2006 achieved €6.1 billion in sales. It currently employs 32000 persons and produces its products via 105 manufacturers over 37 countries. This global location allows the company to control all the markets where it sells its products. A factor of the company's success can be shown by its wide portfolio, which represent 72 brands of bottled water, with some famous around the world, like Perrier, Vittel, Contrex, Aquarel or Pure Life distributed in 21 countries, which is the 2nd most sold water in the world.

"Nestle Waters" is led by the same values and mission as its parent group Nestle SA. Nestle has built its business on its social responsibility. The company promotes a really strong model, designed by the "creation of share value". These values determine all its actions, like its products, the subsidiaries strategy, the human resources policy, as well as its positioning. The Nestle Waters' idea about its missions is symbolized by three words: "Health, Wellness and Pleasure". These values are put in action in all countries.

Nestle Waters' strategy is based on some main purposes. Firstly, as we said before, the wide portfolio of brands allows strong complementarities and offers a good solution to the consumer's needs. In fact, among its 72 brands, 75% of the sales are achieved by local brands. That shows that the company market entry strategies differ according to the country. Sometimes the company launches a global brand, for example "Pure Life" in 1998 in Pakistan, or use joint-venture or merger strategy, like in 2006, when Nestle Waters acquired 60% of the company ERIKLI, to enter the Turkish market.

Extraits

[...] - Himalayan: is the first choice local spring water for the upper classes Substitutes: Tap water is the most important substitute of the bottled water industry. Tap water is cheaper than mineral water, and very easier to access. It is very difficult to bypass this subtitutes because a lot of people are equipped with taps. But in india, water is very polluted, so if the taste of tap water is bad, people will purchase mineral. Filter pitcher or faucet filter which removes trace chemicals and bacterias. [...]

[...] A scope company like Nestlé, which is positioned as an international leader, has to be more implicated in a huge and complicated market as India is. As well, companies interested in a long term profit have to be more involved when they enter a market. Then, to use the export method involve to launch again the world wide Nestlé Waters's brand "Pure Life". But the previous experience of the brand in India can involve a negative association in the customers mind. [...]

[...] The first is to invest in a long term view and above all a deep cooperation between occidental and Indian staff. The author also adds that of the biggest mistakes is treating the country as the “flavor of the month”. To avoid it a great acknowledgment of the staff is required (cf PEST appendix social, working rules). The second is the capacity to the marketing teams to “adapt their businesses to local conditions rather than forcing foreign model”, that mostly means adapted distribution (local retailers) and (low) price policy. [...]

[...] Socio-cultural: High attachment to Indian local brands The Indian consumer is really sensitive to local brands that can be for example one of the reasons why Himalaya is leading the bottle water market. Technologic: Using technology is reserved to the elite This is important by the fact that consumers may not have easy access to information and will not be efficiently exposed to marketing communication campaigns. Effectively only 16 person for 1000 have access to a computer. (source Coface 2007) Environmental: Aging infrastructures In order to transport and distribute products, especially in the bottled water industry (cf PEST appendix infrastructure of the host country is a key point for the decision to move in a market or not above all because of the costs that will engage. [...]

[...] Business authors even say that “India has a rich cultural heritage. It is important to well understand traditions and ways of communicate with others. These two variables are the basis of India's society.” (Jodie R. Gorrill, 2007). The land is comporting no less than six official languages: Hindi, Urdu, Tamil, Bengali, Kashmiri, and English. That is complicating the verbal and non- verbal communication. These issues are also increased by the fact that it is difficult to find accurate data about consumption. [...]