Case Study: The Brita Products Company

CASE SUMMARY

Situation Analysis:
In 1988 Charlie Couric, a marketing executive at Clorox, oversaw the acquisition by Clorox of the right to market Brita Water Purifier Pitchers in United States, and then became the President and General Manager of Brita USA. He proposed a risky deficit-spending strategy to gain market with the goal of getting a Brita water pitcher on every kitchen countertop in the United States. As a result Brita USA incurred heavy losses upfront as initial sunk costs dwarfed any revenue from sales, and the company saw no profits in its first 4 years. Couric however, believed that in the long run the strategy would pay off as once Brita had achieved enough market share the company would make back its losses through repeat sales for pitcher filters.

Time proved Charlie Couric right in that, for while the pitchers were developed at a high cost, the lower costing filters saved the consumer more money in the long run and became the main source of revenue for Brita. By 1999 Brita had sold 17 million pitchers and had close to 200 million in revenues per annum. Brita now enjoyed a 70 market share of home water purification industry.

Problem:
In 1999, Brita now faces a new competitor in the water purification industry, with a new product. PUR, the only competitor to Brita with double digit market share, announced that it would be spending $40 million in advertising and promotion to support the launch of a new line of faucet-mounted and pitcher filters, marketing its technologically-advanced filter system that removed more water contaminants than the Brita filters. As a result of this and Brita’s own plans to launch a faucet-mounted filter system, the company is faced a decision on how to react to this new competitive threat.

Strategic Alternatives: * Option 1: Take an aggressive