BOTTLED WATER ASSIGNMENT

Bento, Alexandra
Martinez, Rafael

Aqua Panna is an Italian bottled water company that nowadays is sold in Europe and North America, and it is sold through Nestlé’s distribution chain. It is well known in most of European countries, for that reason we believe that this brand would be easily identified by Latin American customers. We decided to undertake an external analysis in order to identify the barriers that this company would face entering into the Venezuelan bottled water market.
The local market is vastly dominated by 6 principal brands: Minalba, Nevada, Los Alpes, Zenda, Aqua Matter and Canaima. The most share of the market is hold by Minalba and Nevada which are brands of Pepsi and Coca Cola respectively. Nevertheless, due to political pressure, Pepsi Co. and Coca Cola are losing market share as the government is setting economical regulations to this companies to control the business.
As the Venezuelan wealth is not well distributed, there is a massive part of the population which does not have enough money for spending in not essential products, for that reason luxury brands of water are not popular among the society members.

The local market of bottled water is as shown below: Brands | 2008 | 2010 | Difference | Minalba | 31% | 28% | -3% | Nevada | 29% | 25% | -4% | Los Alpes | 14% | 15% | +1% | Zenda | 9% | 7% | -2% | Aqua Matter | 5% | 6% | +1% | Canaima | 3% | 7% | +3% | Others | 9% | 13% | +4% |

Venezuela is one of the biggest bottled water consumers in Latin America, and it is an increasing market as the population needs this water for their daily basis consumption. In the last 3 years the consumption rose from 438 to 547,50 liters per capita per year, it is an increment of roughly 25% in this period. This increment was motivated by three fundamental reasons: 1. The population in this country is growing up fast. The last Census in Venezuela showed that the population in 2.001 was 23,2 million people, and last census in 2011 reveals that the population is about 26 million people (unofficial number). It means that the rate of increasing is 0.3% per year. 2. Changes in climate condition around the world had impacted negatively in the weather in this country. Nowadays, it is in average 2 Celsius degrees warmer than 10 years ago. For that reason the water consumption has increased. 3. New technologies in bottling and distribution contribute to a decrease in prices. Making this product more accessible to a larger part of the population.

Evaluating Venezuelan market through Pestel model, we found out that this country is a high regulated market. In Venezuela there is an insecurity legal framework, as the current government is applying pressure to the private sector. In addition, Venezuela has an economical control, in which companies have no access to foreign currency in a free market. Thus it could be expensive to invest in new technologies for setting a new business. Moreover, in Venezuela there is a high level of poverty and the quality of the municipal water is very low. For that reason, people are push to buying bottled water for the regular consume.
As the government tends to regulate almost every aspect of the economy, there is a huge legal framework that the company will face for entering in the market and also there are several regulations in terms of the environmental protection.
In our opinion there is a good business opportunity investing in this country. As a consequence of the regulations applied by the government to the two main competitors, the market is becoming wider. A prove of it is that in 2010 the other brands’ market share increased from 9% to 13%. It means that the leading companies are not filling some gaps, and Aqua Panna can take advantage of this situation. In addition in this country there are a large amount of international trades with other countries in Latin America, so that, if Aqua Panna achieve a well position into this market it would be easy to develop their business in other Latin America’s countries and this will make higher turnovers.
Ones we know barriers and market needs, we suggest that the better way to penetrates this segment and have an strong position is by making advertising campaigns through organizing marathons and human races (in recent years it is becoming more and more popular among the members of the society) and also it is a positive idea if this campaigns include help to nonprofit organizations, because it is well perceived by the government and citizens.
As the Venezuelan government is trying to take over the control of the beverage business, it is a positive idea to make an alliance with the public administration, in which we will get the sanitary permission for extracting water from a local source and a public loan to develop the company in this country. At the same time we will provide the knowledge in this business. For Aqua Panna would be positive because it brings an increment in our profit, and for the public sector will be beneficial because they would have an official brand to compete against the private sector.