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BRITA WATER FILTERS HOME MADE BEVERAGE

BRITA CASE STUDY for Marketing Management (BMM699) The Winning Strategy

Presented by G-Force,

ABS MBA 2012 class

1. 2. 3. 4. 5.

Artit Chewachatchawal George Philip Cheruvelil Mohammed Omar Ratchanee Bhakdibanjiabongse Varun hedge

BRITA CASE STUDY

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TABLE OF CONTENTS

1. Executive Summary.......................................................................................................3

2. Marketing situation and challenges faced - Analysis ................................................4

3. Consumer review and segmentation study.................................................................6

4. Recommended Strategies to achieve double digit top line growth.....................10

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1.

EXECUTIVE SUMMARY

BRITA GmbH was German water Filter Company. The Clorox Company got the rights to market BRITA in 1988. The Company is a leading consumer products company with fiscal year 2005 revenues of 4.39 billion. With 7600 employees worldwide the company manufactures products in 25 countries and markets them in more than 100 countries. The Clorox Company was organized into SBUs and BRITA is one of the SBUs at Clorox. BRITA manufactures the PT (Pour-Through) water filter through which they achieved almost 200 million in revenues in the first 4 years. By 1999 BRITA was available nationally and the brand awareness stood at 70%. 18% of the 103 million US households were using BRITA. During the 1990s BRITA was faced with stiff competition from numerous companies making water filters. The competition also introduced innovative products ahead of BRITA. In 1998 PUR launched the FM (Faucet mounted) filter that screwed on to the tap. This was an alternative to the PT filter which at the time was the only product BRITA had. The fact that PUR filter removed certain illness causing drugs which was of concern and in line with their positioning to remove impurities helped them pay dividends as it was the only brand that seemed to gain on BRITA, the market leader with 65%-75% market share PUR was acquired by proctor and gamble. In the late 1990s the filtered water business changed with introduction of bottled water. This made up 8% of all the liquids that people paid to drink and was the industrys fastest-growing category.

BRITA sales declined and declined abruptly. While the filtration business was growing the core pitcher business remained stagnant. The BRITA team tried several strategies to boost sales but all the attempts failed.

BRITA needs a winning strategy to increase sales and bring the brand back to the top position. As part of the new plan BRITA will continue to be in the water filtration business, focussing on filtering water across all sources at home, school, office etc. thus providing clean and healthy water to everyone.

In this report we are presenting the current market situation, consumer trends and segments and which segments to target as part of the new strategy. Long term and short term strategies as well as how we intent to implement them in order to rejuvenate the BRITA brand in the minds of people, educate the importance of clean water for health and well being of people and thereby increase sales.

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2.

Marketing Analysis

situation

and

challenges

faced

-

2.1 SWOT ANALYSISBelow is the SWOT analysis of the BRITA case. Analysis of the company strengths, and weaknesses, as well as todays opportunities and threats will be given.

STRENGTHSThe original water filter company (The first in the industry) - Brita was the first company to introduce such a filtration system into the American homes. The fact that it was among the early players in this industry has added a sense of authenticity to its image and this will be positively reflected on the ongoing business processes. Strong brand - Ever since its launch in the market in the 1980s, the main concern was to create the necessary brand awareness in the minds of its customers. This was clearly presented by the efforts of the branding team who spent almost the first 4 years organizing marketing campaigns to educate consumers on how to use the pitchers as well as explain its importance to them. Large market share - Brita was made available all over the nation through mass channels. Places with high traffic like supermarkets, drug stores, hardware stores, and mega outlets as Wal-Mart, Costco and Target have made it quite easy for consumers to locate those filters. This was a smart step as almost 18% of the 103 million households representing this market were Britas pitchers users and held 71% of revenue share from the industry that is worth $350 million. Independent SBU & Support of Clorox - Being organized as a Small Business Unit is considered a strength point to Brita and its business operations. Instead of being lost in the hundreds of business activities of the mother company Clorox, this SBU system made a dedicated management team to look after its portfolio of products. Different areas in business like Marketing, R&D, Legal, or Sales will be taken care of by a group of people whom only mission is to accomplish what is right for the unit they are responsible of without being distracted by other brands of products.

WeaknessesLack of innovation - For almost 10 years, the pitcher that Brita was selling has never witnessed real improvements. Product-focused not customer-led - The approach followed by focusing only on the product it tries to sell had minimized the horizon for Brita. It was so attached to its pitcher to the point that it partially ignored those who actually consume it. In fact even when it tried to engage customers throughout the Memo technology application it failed. And this was greatly due to focusing on its product rather than understanding those who will actually consume it and their needs.

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Failure to identify target segments Brita failed to identify the target segments and focus its attention to meeting the requirement of the particular segment. Reactive to competition lack of innovation. Brita didnt realize the need to innovate and bring new products and were on a reactive mode to competition which is seen in the late entry of FM (Faucet mounted filters) after PUR released it. Small compared to P&G P & G is a giant in the consumer health care industry and BRITA doesnt have the bandwidth to compete against them.

OpportunityFiltered water users: A good percentage of the population still prefer filtered water over bottled water and tap water. Awareness of drinking water: People are becoming more aware of the importance of drinking water. People drink water because it is refreshing, cleansing and healthy. They appear to be happier, more confident and relaxed, and tend to plan more. Strong link between health and drinking water: Consumers believe that good tasting water is healthy. Consumers who drink lot of water remain healthy. Drinking water can reduce health issues like weight loss, kidney or bladder infection, obesity, heart conditions etc. Consumption of water outside of home is less across the entire population.

ThreatIncreased Competition - The first real competition began in 1998 upon the introduction of a new filter system by a company called PUR. The new FM system was the first serious threat to Britas product. This incremental product improvement has taken away some of the market share from Brita and it became even more difficult when PUR was acquired by the industry giant P&G. Competition also came in from the bottled water industry which was one of the fastest-growing business in the beverage industry. Commoditization of the Filtration Technology - Even when Brita started making the new FM system, it still had no luck in becoming the market leader as the case was with its PT filters a decade ago. Consumers favour products that show development and uniqueness in their attributes or functionality. Tap water is no different than filtered - The concept that tap water will provide the same water and that there is actually no difference between tap water and filtered water is a threat if people adopted this idea then it will affect Britas business as people will stop using their filtration systems.Internal Factors Strength Original water filter company Strong brand Large market share Independent SBU Support of Clorox Opportunity Filtered water users Awareness of drinking water Strong link between health and drinking water Consumption of water outside of home is less across the entire population Threat Increased Competition Strong and Innovative Competitors Commoditization of the Filtration Technology

External Factors

Weakness Lack of innovation Product-focused not customer-led Not targeted, Failure to identify growth areas

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Reaction to competitors Small compared to P&G

Tap water is no difference than filtered

3.2 SWOT Implications OpportunityHaving good filtered water filters allows BRITA to continue capturing more market segments as bulk of the population prefer filtered water which is considered pure and healthy. Lack of innovation giving BRITA the chance to innovate and improving its existing product, and introduce new product.

ThreatsBeing the best in the filtered water business there are still consumers of other filtered water sources and the Bottled water market.

Strength

Based on the above SWOT implications we find that BRITAs core strength which is having good filter systems allows BRITA to continue to capture more market segments but that fact that other forms of filtered water and the growth of the bottled water industry poses a threat to BRITA. Lack of innovation at BRITA gives them the opportunity now to develop and introduce new products targeting new segments which will require addition of resources to the R&D team.

3.

Consumer review and Market Segmentation

3.1 Consumer Review and Market Segmentation The Segmentation study has identified 6 segments as Tap traditionalist, Weary Tap Satisfied (WTS), Principled Filter Fans (PFF), Affluent Fridge Followers (AFF), Assertive Self Improvers (ASI), and Bottled Water Indulgers (BW). Majority of the group prefers tap contamination free water. PFF consumers believe that filtered water is healthier than tap water. AFF believe that filtered water helps to control weight and prefers it cold while the ASI consumers believe that they need to consume huge amount of water to keep them self healthy. Filters are used mostly in urban areas. Most of the consumers drink water as it is perceived to have many benefits to the body. The ASI is ranked 1st in water consumption per day with a score of 14.34. It has also observed that most of the consumers drink water when they are at home. The Weary tap satisfied users have the least water consumption per day with a score of 4.02. If we take the total of all the 6 segments then the scores come to be 7.77 with 2.74 of them having water away from home while 5.03 consume water at home. According to the source of water consumed, majority of the segment used tap water. The PFF ranked highest with 96.2 from the rest. The Bulk of bottled water was the least

Weakness

Develop the R&D team with more resources and not directly compete with P&G.

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consumed. In the total consumption, the Tap water consumption was the highest with 67.7%, while the lowest was Bulk bottled water with only 24.4% consumption. In the primary source report, Filtered water has been ranked the highest in the PFF segment. In total, the Tap water is ranked highest with 35.4%, while the 2 nd is Filtered water with around 33.3% and the Bottled water stays last in the list with around 21.7%. In the type of filtered water consumed graph, the Refrigerator filter stands the highest with 13.6% consumption. The Pitcher stands 2nd in the list with 10.6%. In the segment penetration report, 78.9% of the consumers prefer FW from Refrigerator process which is the highest. The Brita owned PT model is the highest when compared to PUR. Majority of the consumers using filters while consuming water has the knowledge of impurities in water supply. Most of the consumers believe that using water filters improves the taste of the water and using fridge makes it more convenient to consume filtered water. All consumers agreed that they drank more water when it tasted good and less when it did not. 34.9% of PFF, 32% of AFF and 35.4% of ASI support to improve the taste of the water. Brita use is not correlated with perception of tap water. Britas users were drawn to the brand because it gave them clear and clean water. Brita use is not correlated with the desire for clean, clear, refreshing and good tasting water. As per Exhibit 4, The BW was given higher ratings than Pitcher water. 77% of the consumers believed that BW has a good flavour as compared to 32% of pitcher users. 63% of BW consumers believe that BW is pure as compared to 44% of pitcher users. People see water as healthy and something that they should consume. The AFF and ASI users along with PFF consumers believe that consuming water is good for health. About 73.8% are AFF users. The filter system needs to be easy to use to load and to know when to replace. Location of the indicator was not proper. It failed to show the relation between filter replacement and volume of water. As a result of the 46% of PT users who were likely to lapse within the 1st year of using the system, 71% decided not to use a water filtration system. 14% found it too expensive. WFS owners tend to be people who have a hands-on hobby. They Cook more and eat at home more and tend to plan more. They tend to do the right things like eat organic, be vegetarian, take vitamin supplements and eat nutrition bars, exercise/do yoga. 3.2 Recommended target segments Based on our study of the Clorox Company, strategic segmentation study by consumer centric solutions Exhibits 7 14, below are the details of the chosen target segments. The Brita brand is focusing on providing clean, clear and good tasting water to everyone. The strength is being the market leader in pitcher filter (as shown in Exhibit 12, 50.9 of the number of those who own pitcher filtering system use Brita) which led to strong brand awareness among customers in filtered water market. The three key factors that influence water filter system purchase are water quality, moving home and trying filtered water elsewhere (as shown in Exhibit 13). According to Exhibit 7, from six categories of consumers the target segment has been narrowed down to 3 categories of Water Filtration System (WFS) segments since competing in tap segments would need time and budget to develop and change consumers attitude towards tap water by advertising and investing in R&D and also market size of PFF at 17.4% has been ranked as the highest when compare to other categories (as shown in table 1). BW segment will not be considered as target market due to the market concentration and

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the strategy would be focus on core product strength which is filtered water market. Consequently, target segments are PFF, AFF and ASI which can be divided into two groups according to long-term and short-term strategies. For short term strategy to boost sales of BRITA we are targeting 2 segments which are PFF (Principled Filter Fans) and ASI (Assertive Self Improvers) due to the fact that PT is concerned to be core product used by PFF (Principled Filter Fans) and the ASI (Assertive Self Improvers) uses a mix pitcher and faucet mounted filter so there is a potential growth of filtered water market which is 49.1% (as shown in Exhibit 9). Moreover, according to Exhibit 8, people tend to consume more water at home than being away from home. Another indicator is primary source of water divided by each segment which explicitly show that large proportion of PFF, AFF and ASI consume filtered water as primary(figures are shown in table 1). This could be implied that water filtered equipment market will grow in the future. In a long run, we will target the AFF (Affluent Fridge Followers) segment which comprise of people in the thirties who are educated and busy and for whom drinking water is part of their lifestyle (Exhibit 7) require drinking water to be made more convenient. This segment being user of filtered water is a big potential to BRITA if this segment can shift to use BRITAs filters. Table 1 Indicators of target segmentation selection Weary Tap traditiona lists (TT) Tap Satisfie d (WTR) 17.2% 14.2% Principl ed Filtered Fans (PFF) 17.4% Affluent Fridge Followe rs (AFF) 14.2% Assertiv e Self Improve rs (ASI) 10.4% Bottled water Indulge rs (BW)

Size

11.7%

Primary Source Water consumption At home Water consumption Away from home Filtered water as

Tap

Tap

Filtered

Filtered

Split

Bottled

5.64

2.38

4.56

4.45 3

10.3

4.14

2.99

1.64

2.7

2.88

4.01

2.57

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Primary Source

4.3

12.1

90.6

75.7

32.3

0.4

4. Recommended Strategies to achieve double digit top line growthIn this section, the, recommendations of strategies for Brita to achieve double digit top line growth will be given. 4.1 Competitive positioning 4.1.1 Target Market

As mentioned in previous section, we have a short term and a long term strategy to help BRITA grow and sustain the business. For the short term target strategy we are targeting the PFF (Principled Filter Fans) and ASI (Assertive Self Improvers) segments based on the information that both segments drink filtered water with the existing technology of Brita; pitcher or faucet mount. Both segments can cover 27.8% of total market size. Moreover, in order to sustain the companys future growth, theres an opportunity for Brita to enter into the AFF (Affluent Fridge Followers) segment in the future. The main reason is that this segment also drinks filtered water with another behaviour and technology; which is refrigerated filter water, and has low tap satisfaction index at 81%. Also, comprise a market size at 14.2%. Brita needs to improve & introduce a new product to serve this segment in the future. 4.1.2 Competitors Base on the segmentation study and consumer review, we can divide the competitors into two categories by the technologies which are a) Direct competitors: Other pitcher brands. b) Indirect competitors: Other filtered systems, Tap water, bottled water. 4.1.3 Competitive advantage Short term strategy - Differentiate by new product and integration of branding Base on the analysis mentioned regarding consumer review indicate that all consumers want good tasting water. Furthermore, considering the information of key benefits driving purchase (exhibit 14) show that contamination removal and improved taste are major points compared with the existing situation of Britas product quality. Therere two alternatives to improve this issue. The first one is to improve the impurity removal which is currently behind the performance of the competitor; PUR. The second one is to improve the taste of water by focusing on removing taste violators. By considering the previous analysis, One of Britas weakness which it should avoid is the competition with PUR which is now owned by P&G, a giant in the health care FMCG (fast moving consumer goods) industry. We recommend focusing on the latter alternative to avoid the direct competition with P&G and become leader by providing better tasting water.

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However, only the new product alone couldnt lead Brita to achieve the double digit growth target. In the next section, we will provide the recommendation on marketing activities to achieve the goal by applying the 4Ps of the marketing mix analysis.

Long term strategy Offer Breakthrough product (portable filter) Since the inception of the first filter, Brita has had the same filter with minimal changes and then later joined behind PUR with the FM (faucet mounted) filter. This resulted in a drop in sales since 1999 and the sales have been stagnant ever since. The long term strategy is to introduce a new filter in the market aimed at the AFF (Affluent fridge followers) users. This will help penetrate a new segment, shifting these people to use the new BRITA filter and the innovation also helps existing users to remain motivated and interested in what BRITA has on offer apart from the usual filters. The AFF segment comprise of people in their thirties, well educated and employed. A detailed analysis of the particular segment is given below. Key characteristics of the AFF demographic group identified from Segmentation Study - Source: The Clorox company, strategic segmentation study by consumer centric solutions 1. Busy people, always on the move and drinking more water is part of their lifestyle (Exhibit 7) 2. The percentage of tap water consumed is high indicating that since this segment constantly travels they are unable to get fridge filtered water wherever they go and they by the consumption of water when theu are out of home is less. (Exhibit 8 & 9) 3. Fridge filtered water being the primary source of water and the group being users of filtered water makes them a potential for shift to new water sources. 4. Making drinking water more convenient is of high importance to the group (Exhibit 14) 4.2 Marketing Mix In the following section, 4P marketing analysis will be described. 4.2.1 Product As mentioned in the competitive advantage that we should improve our products to deliver the best water taste. However, we recommend not to totally neglect removal of imputrities as this is still a key driver affecting consumer decision. Put a slight effort to keep the improvement. Moreover, idea to improve the taste of water should be the development of new filters with the value-added features e.g. the mineral filter, longer period filter, and fruitflavour filter. Also, there are some critics from the customers who question about the reliability of Memo; usage indicator. We recommend improving the usability property by the visual display at the filter e.g. colour will change from white to red. With the value-added, Brita can increase the price of new filters. The company will receive more revenue in long run. As of the key triggers of the purchase process for water filter system is the consistence of water supplied quality, we recommend to corporate with the tap water supplier; which is the original source of water, to provide the good quality of water which will support Britas

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business to improve the appropriate product based on the information of water supplier throughout the country. For the long term strategy, we will develop a portable filter that can be fitted to a standard size water bottle currently available in the market and allowing consumers the ability to carry filtered water with them whenever they travel. It also allows customers to use tap water from any place as this will get filtered when poured into the bottle. 4.2.2 Price From the information regarding segment penetration (Exhibit 12), Brita processes 50.9% volume share in PFF segment at the moment. For ASI segment, the customers have high revenue at $50,000 (Exhibit 6). Therefore, we recommend maintaining the price at this stage. In the meantime, the company should also pay attention to the price gap with the main competitor to make sure that the price wont be too high for the competition. However, the opportunity to increase the price comes from the improvement of filters. We can increase the performance of filter in terms of taste removal as well as several value-added benefits mentioned in product activities. 4.2.3 Place For Short term Strategy There are several places which we can offer product to the customers based on their profile, lifestyle, and purchasing criteria. By consider the information of water filtration system owner (WFS), the customers tend to have health-related activities. By consider their lifestyle, both target segments prefer cooking, reading, and love to learn. Furthermore, PFF segment is still young at the age of 20s, and doing exercise. Moreover, the target segments would like to buy water filtering system when they move to a new house. From all information, we suggest to provide the availability of the products at the place which related to health concern activities which are drug store, organic and healthy food shop, and also fitness centre. Moreover, another place should be convenience store where the people can buy the food. To serve the people at young age and love to learn by themselves, online shop in Brita webpage is the strong recommendation to serve this group of people. Finally, to cope with the customers who consider buying filtering system when moving to a new house, warehouse and furniture shops should be another point of purchase of the products. For long term strategy The product will be made available at all of BRITAs current distribution channels along with hotels, schools, community halls, tourist spots and the same can also be made available in vending machines which will be installed in all place frequented by people. This will help people who are paranoid about drinking filtered water and the sources of water to simply carry a filter or purchase it conveniently to drink filtered water. 4.2.4 Promotion Promotion for target segments should be selected to comply with their preferences. All segments would like to drink safe water. For filtered water consumers; which are our target segments, they all tend to have the healthy concern in mind. They usually receive the media by TV, magazine, and internet. We recommend Brita to create promotional campaigns to enhance the health of people. We have come up with the theme named Homemade beverage. Then, promote this theme through several media such as TV commercial focusing add intervals during cooking shows,

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Advertising campaigns targeting the busy and travelling consumer stressing the need for clean and healthy water, magazine focusing on home decoration and food & cuisine categories and Britas website. We also recommend providing on-site demonstration at the place where our target customers visit frequently e.g. fitness centre and convenience store. This approach will allow the prospect customers; which comprise of the ASI segment who has an indulgent shopping style, to have a chance to experience our product before they decide to buy. Ultimately, website and call centre are recommended as a channel to communicate product information, and receive customer feedback for either pre-sales and after-sales stage. Product PriceShort Term - Provide new innovative products which can reduce contamination focusing on taste e.g. mineral filter, longer life period of filter. - Visual contamination removal display. Long term - Portable water filter that can fit to any standard size water bottle available in the market. Short Term - Maintain pitcher price, and keep looking at price gap with the main competitors. - Provide wide range of filters with value-added benefits at higher price. Long term - When new products are launched, a premium can be charged and at the same time organization can consider reducing the legacy filter systems price.

PlaceShort term - Provide availability to all the place related to customer lifestyle o Drug Store o Healthy or organic food shop o Fitness centre o Convenience store o Online store o Furniture or warehouse store Long term o Hotels o Tourist Spots o Schools o Vending machines

PromotionShort term & Long term - Create advertisement with a theme Homemade beverage to healthy concern people through oTV commercial e.g. cooking programme o Magazine e.g. home decoration, Food and cuisine o Britas website - Advertising campaigns targeting the busy and travelling consumer stressing the need for clean and healthy water (for AFF Segment) - Provide on-site demonstration as customer experience approach oAt convenience store oAt fitness centre - Create website to provide product information, demo Videos and campaigns. - Setup call centre to provide product information and answer inquiries.

4.3 Organisation In this section, we shall provide the recommendation for Brita to align the organisation to support the achievement of recommended strategies. Information referring from Director of R&D shows that Brita should improve collaboration and communication among departments in new product development process to make sure that all related departments; especially R&D, understand customer requirements clearly. Crossfunctional committee should be organized for new product development process. This approach will enhance the effectiveness as well as efficiency of the development process in terms of transformation of customer requirements into value added products. Regarding Brand or product portfolio management, Brita should review the direction to branding multiple products within SBU which have different functions which are a pourthrough group, a faucet mount group, and a new product group. Branding and advertisement

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campaigns should aim at promoting all brands of BRITA without undermining any one product of BRITA. In order to realize long term strategy; to enter the AFF segment with the new product, the organisation should provide resources for R&D department to enhance competency and accelerate in new product development.

BRITA CASE STUDY