THE BRITA PRODUCTS COMPANY

The Brita Products Company

Introduction

Brief of the Case

Brita’s Success Story

Highlights

Brita Products Company

Industry: Water Filtration

• 2013: $ 362.64 mn• 2014: $ 394.42 mn

Founded: 1966, 49 years old

Headquarter: Taunusstein (near Wiesbaden), Germany

Corporate structure: Owner-managed family company Limited liability company (GmbH)

Number of employees worldwide: 1,430

Sales Turnover - Worldwide

BRITA Products: Filters for private households and commercial houses

Spread: Over 60 Countries

Clorox

Industry: Consumer Household Products, Healthcare and Food

Headquarters: Oakland California, US

Products: Cleaning, Food Storage, Food, Cat litter, Charcoal, Personal Care, Healthcare and Water filtration

Number of employees: 7,700

Revenue: $5.5 Billion

Operating Income: $ 977 Million

Brief of The Case

1987 – Charlie Couric, a Marketing Executive with Clorex Company proposed that Clorex acquires the right to market Brita in USA.

Charlie Couric looked at the repeat buying of filters (derived demand) as strategy and targeted to put a pitcher on every kitchen countertop, at a loss if necessary.

Clorex supported Couric’s deficit-spending proposal.

Sep 1988 – Clorex formed a subsidIary, Brita USA, to be the sole US distributor of Brita products.

Brita’s entry attracted large number of competitors.

1999 – Brita became Clorex’s one of the biggest brands; generating close to $200 mn revenue a year.

Late 1990s Changing external dynamics challenged and impeded Brita’s dream run demanding interventions

The Product

The Brita pour-through (PT) filtration system comprised a two-compartment pitcher and a replaceable filter

• Better Taste• No scale when boiled• Heavy metal free

Filter had two elements (activated carbon + ion exchange resin) that reduced chlorine, sediments, odour, heavy metals i.e. Lead, copper, mercury and cadmium as well as water hardness(magnesium and calcium)

Benefits:

The filter did not screen out microorganisms – two major sources of gastro-intestinal illness

Pitcher system was sold with a single filter in place. Filter required replacement every two months or after filtering 40 gallons of water

Brita supplied calendar stickers to help users track when a filter needed replacement. Filters sold in packs of 1/3/5

The Product

Selling a Need: Filtered Water

Determining a Price: Lower price may need to be charged in order to acquire market share

Product Quality: Brita water filters do not eliminate as many pollutants as its competitors

Product Taste: People are worried about taste as much as health

Aesthetics: Product appearance must be comparably nice to the competition

Defining A Market Focus

1988-93

• First in the market with value proposition of ‘Great Tasting Water’

• Educational ad campaigns on - ‘How to use Brita’ and ‘Tap water transformed’ sensitized markets

• Initial sluggish sales anticipated as per UK and Canada pattern

1994-98

• Derived demand matched anticipation• Customers word of mouth preference and

presentation of pitchers as gift helped sale and branding

• System and Filter revenues grew steadily in range of 65% - 75%

• ‘BOGO’ scheme doubled systems sales*

1999

• Brand awareness grew by 70%• Consumer choice limited to tap water or PT• 18% of 103mn households used Brita • 80% of customers still using it one year on• 70 competitors failed• Industry worth $350 mn (owned 70%)• National distribution (40,000 stores)

Brita’s Success – The “Blue-Water” Decade

Brita created the market for filtered water, aided by shifting consumer values towards safety, health, and great taste

• Brita USA emphasised on ‘Taste Benefit’• Taste and Health Benefits don’t go together• No other brand talked of health benefits• Desire to be at the top – any impurity removal claim could be

counter claimed • $100 mn cumulative advertising budget helped Brita find a

place in households• Brita owns ‘Waterfall Imagery’• Minimum Advertised Price policy – No retailer was

permitted to advertise a Brita line at below the set price; retailers incentivised for featuring products in their advertising display

POSITIONING AND ADVERTISING

• Brita USA exploited its existing breadth of distribution channel i.e health foods chain for introduction and establishment of variety of products

• ‘Class to Mass’ Strategy: • Up scaled pitcher ‘Ultra’ for department stores – 35%• Standard pitcher through Target, Walmart, Drug and

Grocery stores – 25% • Bonus pack system and a 5-pack filters for Club retailers

like Costco • Over 40,000 outlets in total

DISTRIBUTION

Growth Drivers

Outlets• Department Stores• Mass Merchandisers• Grocery Stores• Club Stores• Drug Stores

1992• 27%• 31%• 11%• 31%• ----

1998• 13%• 34%• 14%• 21%• 12%

Brita’s Distribution Channel

Brita’s main retail outlet had been health foods chain

Its competitors were in housewares stores e.g. Sear and Walmart

Brita continued with their traditional base, grocery and drug outlets with great success

Retail Market Shares: Systems

Type 1992 1993 1994 1995 1996 1997 1998

Pitcher(1000 of Units)

375 640 1,405 2,636 4,381 5,689 6,307

Brita 82% 82% 75% 77% 77% 80% 83%

PUR - - - - - 4% 8%

Rubbermaid - - - - - 7% 4%

All Others 18% 18% 25% 23% 23% 11% 5%

Faucet Mount(1000 of Units)

1,186 782 602 659 898 1,249 1,291

PUR - - - 9% 30% 67% 74%

Teledyne 23% 23% 30% 43% 43% 27% 23%

Retail Market Shares: Filters

Type 1992 1993 1994 1995 1996 1997 1998

Filter Sales($ Millions)

20.5 26.5 38.7 63.3 82.3 116.3 154.7

Brita 32% 43% 59% 65% 75% 75% 75%

Teledyne 25% 20% 15% 10% 9% 7% 4%

PUR 0% 0% 0% 1% 2% 8% 17%

Omni 12% 13% 8% 8% 5% 3% 2%

Sears 7% 6% 3% 2% 2% 1% 1%

Pollonex 7% 4% 2% 1% 1% 0% 1%

Brita Unit Sales

Type(in 1000)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Systems 171 194 202 302 546 1,056 2,030 3,363 4,565 5,266

Filters 402 581 876 1292 2,205 4,458 8,164 15,246 23,293 27,413

1989 1990 1991 1992 1993 1994 1995 1996 1997 19980

5000

10000

15000

20000

25000

30000

SystemsFilters

Sales of Brita Pitcher Systems and Filter

Brita’s success attracted competitors in droves

Prominent brand names were: Culligan, Electrolux, Sunbeam, Kenwood, Corning, Melitta, PUR, Rubbermaid, Teledyne, Omni and Mr Coffee

PUR with its launch of Faucet Mounted Filter in 1995 was the only competitor in double digit market share with its line of portable drinking water systems and desalinators

Rubbermaid had launched a product (pitcher) similar in technology and at a lesser cost, though sales were disappointing

1998 - International Housewares Show saw scores of competitors, who unveiled their products and intent indicating stiff competition ahead

Competition

Over the decade of 1990’s the safety of tap water became a topic of growing concern for US households

• 72% of all respondents and 89% of young adults, voiced some concern about quality of their household’s water supply• Majority of households used either bottled water or some purification system• Numbers taking no precautions declined from 47% in 1995 to 35%

By end decade survey’s found 47% of respondents preferred not to drink water straight from tap

Sales of bottled water from US super markets and home delivery services grew rapidly during the decade

By 1999:

Customer Attitude and Behaviour

1988 1989 1990 1991 1992 1993 1994 1995 19960

20

40

60

80

100

120

140

160

180

SpiritsWineCoffeeMilkTeaTotal MarketSoft DrinksBeerFruit JuiceBottled Water

Growth of Segments US Beverage Market

Percentage of HH Buying Price per 128 oz. Unit in $

Still Water Brands 44.77 1.03

Dannon 6.27 2.09

Arrowhead 4.57 0.95

Poland Spring 4.47 1.39

Sparkletts 4.05 0.86

Chrystal Geyser 3.85 2.13

Evian 2.61 5.49

Hinkley & Schmitt 2.38 1.36

Private Label 17.73 0.68

Carbonated Water Brands 26.83 3.70

Canada Dry 5.69 4.97

Schweppes 4.66 5.85

Vintage 2.65 2.44

Clearly Canadian 1.75 11.66

Perrier 1.31 9.47

Private Lable 12.52 2.78

Major Brands in Water Bottled Category (SM)

Expressed Concern About Household Water Quality

Expresse

d any C

oncern

Health Contam

inants

Aesthetics

Smell a

nd / or T

aste

Appearance

Hardness

Sedim

ents

Bacteria

0

10

20

30

40

50

60

70

80

199519971999

Expressed Concern: Household Water Quality By Age

Expressed any Concern Health Contaminants0

10

20

30

40

50

60

70

80

90

100

18-2425-3435-4445-5455-6565+

Use of Water Treatment Device

No Device Used

Bottled Water

System TT Pitcher

System on

Faucet

Whole House System

Softner0

5

10

15

20

25

30

35

40

45

50

199519971999

Use of Water Treatment Device By Region - 1999

Bottled Water

TT Pitcher System on Faucet

Whole House Syste

Softner0

5

10

15

20

25

30

35

40

45

50

North EastNorth CentralSouthWest

Brita Shipment Volume

Clorox was ready with a FMFby 1999 however did not launch it due to Strategic Dilemma: ‘FMF cannibalising Pitcher market’• Higher pressure and fine filters would screen microorganisms satisfying growing concerns• FMF water cost, per glass, significantly less due long filter life• Customers who had reverted back to tap water would graduate up to more convenient

and sophisticated faucet unit

For: • Pitcher water taste, the Brita USP, different than FM water taste• In certain parts due to hard water FMF may not be able to offer Brita taste • Need for separate set up involving capital• Addl royalty required to be paid to Brita GmbH as Clorex had no license for FMF

manufacture

Against:

Clorox organised Market Simulation Study by AC Nielsen Vantis a Division of AC Nielsen BASES group for inputs on adoption of FMF

Brita’s Dilemma: FMF Entry

The introduction of FMF will increase likelihood of buying a product from the Brita line

It however did not increase interest in the filtration category as a whole.

Combined Pitcher and FMF market not expected to increase

Though higher priced Brita FMF generated similar levels of purchase intention to the Brita Spacesaver Pitcher

About half the Brita pitcher owners who bought the FMF would continue to use the pitcher in conjunction with the faucet product

Both Brita and PUR FMF considered superior to Brita pitcher, however only Brita’s FMF was perceived to improve the water’s taste

Even after drop in sale price by PUR Brita’s sale was not likely to be significantly impacted

Revelations

Right or Wrong!!!!!

Marketing Mix

Customer Value Proposition

Segmentation – Target Group

Cannibalisation

Water Consumption by Segment(8oz. Glasses)

Strong Positioning without Segmentation

Icarus Paradox

Extended product line extension characterised by derived demand/ follow on revenue structure

Strong Channel Partners provided great shelf life to the product

Cooperative Advertising (at minimum advertised price)

Emerging environmental trends

Means-Ends Chains to identify ways to reduce Cannibalisation

Highlights

Thanks