Growth through internationalisation

If domestic markets are mature, brands should look for better markets. This is why all brands look eastward, towards the Eastern European countries and Russia, and towards India and China. The two-digit growth markets of tomorrow are there. Brazil and Argentina should also qualify as growth markets once the Argentinian financial crisis is over. Finally, brands meeting sophisticated needs can find in North America the wanted source of growth.

For instance, Evian water has since 1991 faced an unprecedented challenge in its home country: the emergence of low-cost bottled water, sold at a third of Evian’s price. These waters are not ‘mineral water’, with a guaranteed proportion of mineral ingredients in them, but ‘spring water’.

(Another category is ‘purified water’, such as Coke’s now famous Dasani, Dannon water and Nestle Aquarel. These brands are mostly sold in North America and in emerging countries, and hardly at all in Europe.) While Evian is still the leader in value share, the volume-share leader is a low-cost brand, Cristaline.

It is easy to see how difficult it is to have to suddenly justify a major price gap. In 1972, four brands represented 80 per cent of the 2 billion litre bottled water market, and Evian was the leader with 653 million litres. Since then 17 major competitors have entered the market, and in 2003 the four main brands represented only 40 per cent of what had grown to be a 7 billion litre market.

Evian’s annual sales volume is now 793 million litres. The brand succeeded in growing its sales in value through three strategic actions:

  • Permanent innovations in the format, packaging and handling of the packs. All these apparently tiny improvements gain significance when one has to shop for water.
  • Systematic repositionings of the brand, from generic health and nature to equilibrium and now to the concept of eternal youth, while remaining within the brand’s identity.
  • Extending the brand. As early as 1962, Evian was a pioneer in brand extension. In response to hospital requests it introduced a spray to vaporize water on the faces of patients and babies.

In 2001 Evian Affinity, another brand of facial spray, was launched in alliance with Johnson and Johnson. Two years after its launch it had become the number five brand by sales in the sector of mass market facial cosmetics. It now plans to launch in other countries such as Japan and Korea. This extension is consistent with the repositioning of Evian less as a water than as a source of health and beauty.

To make the business of Evian far more profitable, a simple calculus shows that a litre of water can be sold at a double price in developed countries such as the UK, Germany, the United States, Canada and Japan: there is a growing demand for healthy bottled drinks that is in reaction to the overconsumption of soft drinks, and the obesity syndrome attached to it.

The real un-cola is not Sprite or Seven Up: it is Evian. Despite transportation costs, selling Evian in the United States delivers a high margin. The main problem is to access consumers and to justify the price premium in a market where Nestlé and Coca- Cola Corporation have established cheaper brands of purified water. This is why an alliance was needed with Coca-Cola to distribute Evian in North America in every outlet and vending machine.

Today, export represents 50 per cent of Evian sales. In each country the brand’s role is to create the market for mineral water (not simply purified water), in order to build the business and become its referent, the brand with a fashionable, premium positioning.

Strategic Brand Management Related Practice Tests

Strategic Management Practice Tests
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