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EXECUTIVE SUMMARY
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The aim of the dissertation is to demonstrate and explain why the bottled water
industry is a misinterpreted market. Primary and secondary researches have been
conducted in order to develop a situational analysis.
All the books, website and articles that has been used to support this paper are
describe and analyzed in the literature review. Also the methodology illustrates the
research process and critically evaluates the validity of the primary and secondary
data gathered throughout the research.
Three interviews were conducted in order to collect the information needed for the
market evaluation. The interviewees are all high skilled managers that operate in the
bottled water industry. The secondary researches are the result of the collection of
information from a large number of sources.
During the research process several key-factors of the industry have been defined
and analyzed. Sustainability, Carbon Footprint and Water Footprint are the most
important topics that have been discussed, in order to be able to evaluate this
industry. These three key-factors are deeply described and analyzed in the
dissertation. The information background delivers to the reader the minimum
knowledge required to being able to correctly evaluate the bottled market industry.
The research highlights that the misinterpretation of the industry is given by a wrong
approach to the topic. The information gathered in the paper show that there are two
main approaches to the topic: sustainability and ethics.
It has been concluded that neither of both approaches is incorrect, but it is wrong to
consider the two approaches in the same time.
It has also been recommended to use the information and data present in this
dissertation to be able to autonomously analyze the situation, without external
influences. In fact, the purpose of this paper is not to suggest to the reader a specific
approach to the topic, but only to impartially outline the situation, supporting all the
thesis discussed with reliable data and referenced sources.
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1. INTRODUCTION
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The aim o f t h i s d i s s e r t a t i o n i s t o e s t a b l i s h a r e l a t i o n s h i p b e t w e e n e x i s t i n g
environmental, economical and market trends with the ethical behaviour and
Corporate Social Responsibility (CSR) activity of the international companies in the
bottled water industry.
Considering that water is probably the most valuable resource on the planet, it is
really important, as individual, to be able to evaluate if we are using it in a proper and
sustainable way.
The reason why is imperative to explain the mechanisms within the market is the
general misinterpretation of the people towards the bottled water industry.
Prof. Igor A. Shiklomanov is a leading expert in the global freshwater resources and
its use in the World. He estimated that about 4.250 km3 of fresh water is used every
year for covering the global human needs. It spreads as follows:
- 70% for agriculture
- 20% for industry
- 10% for domestic needs (households)
With around 36 billion liters to meet its operational needs, Nestlé Waters represents
only 0.0009% of the total freshwate r used in the World. The total bottled water
industry is estimated to represent 0.007% of the global water use.
Zenith International recognised since the 1990s as Europe’s leading food and drinks
consultancy has over 1,000 clients across more than 50 countries. In 2008, Zenith
International expects bottled water sales to have declined by 4% due to poor summer
weather, a drop in consumer spending as a result of the global economic crisis, and
the media backlash against bottled water. Meanwhile, preliminary analysis suggests
that sales of carbonated soft drinks have increased by a similar level. Although a
direct link is not proven, these figures suggest that as some consumers turn away
from bottled water, they are turning to sweetened and artificial alternatives.
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The bottled water business is facing a difficult moment, mainly because of two
factors:
• Economic downturn
• Increasing belief that it is not a sustainable business
Water is a basic product, but also an essential product for any human being. The
bottled water industry represented an enormous worldwide business. There are
many expects of this business that are not entirely clear and define.
The final objective of the dissertation is to provide the reader with the data and the
knowledge necessary to be able to understand and evaluate the current market
situation and to better comprehend the meaning of ‘sustainability’ in the bottled water
context.
In 1987, the World Commission on Environment and Development created a
definition of sustainability, which has known as the Brundtland Report and it affirmed
that: ‘sustainable development meets the needs of the present without compromising
the ability of future generations to meet their own needs’.
Gradually since 1987, in all the multinational companies, the corporate social
responsibility department became day by day a more fundamental part of the
business structure. Today any company, even of medium size, has a CSR
responsible that is in charge of meeting the corporate strategy with the company’s
sustainable objectives.
The sustainable process cannot be analyzed without considering the market
situation, for this reason the setting for the research is the economical crisis, which
pools all the organizations.
The research methods used are semi-structured interviews and observations. The
use of different methods guarantee the validity of the data and decrease the
possibility of a misinterpretation of the results obtained. A list of the primary research
collected is available in Ch.3 – Research Methodology
Also a various collection of theories and previous analysis, elaborated by specialist in
different sectors, support the research. In the Ch.2 – Literature Review the main
theories and past analysis are better explained.
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The conclusion of the dissertation does not intend to give a specific point of view to
the reader about the situation of the bottled water industry. The aim of the paper is to
clearly show the condition of the business from an objective point of view, leaving to
the reader the choice of the final conclusion.
It is shown in the following dissertation that many issues regarding the bottled water
market are misjudged, mainly because of a generalized lack of knowledge. The
paper wants to be a tool that gives the possibility to the reader to elaborate his own
idea about the real market situation, without been influenced by the generic and
imprecise perception of the people.
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2. LITERATURE REVIEW
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‘Throughout history and across the world, water rights have been shaped both by the
limits of ecosystems and by the needs of people. People have a right to life and the
resources that sustain it, such as water. The necessity of water to life is why, under
customary laws, the right to water has been accepted as a natural, social fact.’
(Vandana Shiva – 2002:19)
The above statement highlights the importance of water as a fundamental resource.
The bottled water market is a global business. Given the size of the industry and the
importance of the source used, it is imperative to maintain the business sustainable
and ecological friendly. All over the planet the different companies that manufacture
bottled water have to confront with different scenarios and issues, but recently two
problems are common to all the players of this market: the worldwide economic crisis
and the sustainability. The level of sustainability of a company is strongly related to
the CSR strategy.
2.1 Changes in Business Ethics
Nowadays, social responsibility has become a threat to companies. Consumers and
clients are becoming more and more conscious of the environmental impact that
businesses have on the earth’s ecosystems; thus the risk of loosing clients who
prefer investing on companies that promote and publish their effort in reducing
environmental damages, is significantly increasing. Each company usually takes a
position regarding the level of social responsibility of their productive system; this is
stated on the “code of conduct”, which is published on the company’s literature and it
is communicated to t h e e m p l o y e e s o n a r e g u l a r b a s i s . F u r t h e r m o r e , o t h e r
businesses even construct their levels of input and output in such a way that they
can meet the ethical standards required, for instance the English corporation Marks
& Spencer has defined an arrangement, denominated Plan A, which promotes a
strategy in the UK market that allows its company to be 100% sustainable till the year
2012.
Today the majority of modern corporations establish, either publicly or privately, a
firm set of principles, values and guidelines by which they carry out their operations.
However it is well know that most of these actions are taken in the interest of
enlightening their self-interest. Nevertheless, it is important to take into consideration
the nature of each company in order to distinguish their possibility in reducing their
impact on the environment. Therefore it is not possible to define global targets on the
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levels of social responsibility that each business should comply; instead targets
should be imposed for companies producing similar products.
2.2 Economic Crisis
Alan Beattie, economic advisor and journalist of the Financial Times, stated: ‘Global
trade in goods has continued to bounce back rapidly from its huge fall a year ago,
with an authoritative index recording the fastest monthly increase in December in its
19-year history.’ (FT – 1
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March 2010)
The economic crisis has to be considered in relationship to the bottle water industry
because it strongly influences the market. The needs of the consumers changed
because of the economic downturn. For these reason the companies have to set up
new strategies in order to continue to satisfy their clients. Many changes have to be
done in the marketing strategy, because the marketing mix is strongly affected by the
shift of customers’ needs (McCarthy 1981). The marketing mix describes the
marketing elements that could affect the way a product performed in the marketplace
(Borden 1964). A c o mp a n y mu s t mo v e f r o m u s i n g i n s i d e -out thinking, to using
outside-in thinking (Duncan 2002). This can happen if the company if focus uniquely
on the customers’ needs and wants.
The process of create, implement and monitor the marketing strategy, before the
crisis, required the use of an important part of the annual budget. Now a days the
budget are strongly reduced, because of the need of cut costs, so the managers
have to find new and more cost-effectives way to reach and satisfy the consumers.
2.3 Implication on Marketing Strategy
‘Marketing is considered a social and managerial process; by which individuals and
groups obtain what they need and want through creating and exchanging products
and values with others. It is an integrated process through which companies create
value for customers and build strong customer relationships in order to capture value
from customers in return’ (Kotler P. et al – 2008).
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