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Brita Case Study

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BRITA WATER FILTERS – “HOME MADE BEVERAGE”

BRITA CASE STUDY for Marketing Management (BMM699)

– The Winning Strategy

Presented by

G-Force,

[pic]

ABS MBA 2012 class

1. Artit Chewachatchawal 2. George Philip Cheruvelil 3. Mohammed Omar 4. Ratchanee Bhakdibanjiabongse 5. Varun hedge

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

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 SBU’s and BRITA is one of the SBU’s 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 1990’s 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 1990’s 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 industry’s 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.

2. Marketing situation and challenges faced - Analysis

1. SWOT ANALYSIS

Below is the SWOT analysis of the BRITA case. Analysis of the company strengths, and weaknesses, as well as today’s opportunities and threats will be given.

STRENGTHS

The 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 Brita’s 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.

Weaknesses

Lack 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.
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 didn’t 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 doesn’t have the bandwidth to compete against them.

Opportunity

Filtered 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.

Threat

Increased 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 Brita’s 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 Brita’s business as people will stop using their filtration systems.
|Intern|Strength |Opportunity |Externa|
|al | | |l |
|Factor| | |Factors|
|s | | | |
| |Original water filter company |Filtered water users | |
| |Strong brand |Awareness of drinking water | |
| |Large market share |Strong link between health and drinking water | |
| |Independent SBU |Consumption of water outside of home is less across the | |
| |Support of Clorox |entire population | |
| |Weakness |Threat | |
| |Lack of innovation |Increased Competition | |
| |Product-focused not customer-led |Strong and Innovative Competitors | |
| |Not targeted, Failure to identify growth areas |Commoditization of the Filtration Technology | |
| |Reaction to competitors |Tap water is no difference than filtered | |
| |Small compared to P&G | | |

3.2 SWOT Implications

| |Opportunity |Threats |
| |Having good filtered water filters allows BRITA to |Being the best in the filtered water business there are still |
|Strength |continue capturing more market segments as bulk of the |consumers of other filtered water sources and the Bottled |
| |population prefer filtered water which is considered pure|water market. |
| |and healthy. | |
| | | |
|Weakness |Lack of innovation giving BRITA the chance to innovate |Develop the R&D team with more resources and not directly |
| |and improving its existing product, and introduce new |compete with P&G. |
| |product. | |

Based on the above SWOT implications we find that BRITA’s 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 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 2nd 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. Brita’s 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.

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 consumer’s 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 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 BRITA’s filters.

Table 1 Indicators of target segmentation selection

| |Tap traditionalists |
| |(TT) |
|Short Term |Short Term |
|Provide new innovative products which can reduce contamination |Maintain pitcher price, and keep looking at price gap with the main |
|focusing on taste e.g. mineral filter, longer life period of |competitors. |
|filter. |Provide wide range of filters with value-added benefits at higher |
|Visual contamination removal display. |price. |
|Long term |Long term |
|Portable water filter that can fit to any standard size water |When new products are launched, a premium can be charged and at the |
|bottle available in the market. |same time organization can consider reducing the legacy filter |
| |systems price. |
|Place |Promotion |
|Short term |Short term & Long term |
|Provide availability to all the place related to customer |Create advertisement with a theme “Homemade beverage” to healthy |
|lifestyle |concern people through |
|Drug Store |TV commercial e.g. cooking programme |
|Healthy or organic food shop |Magazine e.g. home decoration, Food and cuisine |
|Fitness centre |Brita’s website |
|Convenience store |- Advertising campaigns targeting the busy and travelling consumer|
|Online store |stressing the need for clean and healthy water (for AFF Segment) |
|Furniture or warehouse store |Provide on-site demonstration as customer experience approach |
|Long term |At convenience store |
|Hotels |At fitness centre |
|Tourist Spots |Create website to provide product information, demo Videos and |
|Schools |campaigns. |
|Vending machines |Setup call centre to provide product information and answer |
| |inquiries. |

2. 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. Cross-functional 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 pour-through group, a faucet mount group, and a new product group. Branding and advertisement 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.

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