Evian bottled water brand in the US market

1. Case overview:

Although it has achieved great success in other part of the world, the Danone and its Evian bottled water brand are facing significant pressure while handling the U.S. market. After the cola giants Coke and Pepsi set up their own bottled water brands, Dasani and Aquafina, Danone is the number four in the U.S. market with only a 3.5% market share in 2001.

Danone is facing two main problems when dealing with the U.S. market. Firstly, the U.S. customers do not accept the premium on the Evian brand, they care less about the type of the bottled water and prefer cheaper water like Aquafina or Dasani. Then, the distribute system in U.S. market is quite different from that in Europe.

To carry out a strategy for its further business in the U.S., Danone made the first agreements in April 2002 with one of its most powerful opponents Coca-Cola to let Coke take charge of the Evian brand in North America. Coca-Cola will help Danone within the distribution and market performance, and will get incentives in return of the annual sales growth of Evian bottled water. The second agreement carried in June 2002 is mainly about the two companies announced a joint venture. Danone will contributes license for use several value brands and production facilities, while Coca-Cola pays cash for ownership interest and provide management. Coca-Cola needs to help achieve a guaranteed profit level; however, the penalty is not clear.

The alliance of the two companies provokes debates about whether it is a way to improve sales condition or it is a sign of Danones’ unofficial quit from the U.S. bottled water market. What is the right decision for Danone remains to be proved.

2. Why Evian’s market share in the U.S. kept falling after the cola giants start their bottled water brands in the late 1980s?

The Japanese strategist Kenichi Ohmae developed the 3C’s Model indicated three main players that are necessary for successful business strategy: the corporation, the customer, and the competitors. (Kenichi Ohmae, 1982)

When mention the competitors, Coke and Pepsi who sell purified water that avoid extra handling and transport costs, enjoy much lower cost than Evian does. Meanwhile, their distribution systems are well developed thanks to their successful operating on other beverage such as cola. The result is that they can have their cheaper products on more shelves quickly. What is more, as Coca-Cola, Pepsi and Nestl