View stunning SlideShares in full-screen with the new iOS app!Introducing SlideShare for AndroidExplore all your favorite topics in the SlideShare appGet the SlideShare app to Save for Later — even offline
View stunning SlideShares in full-screen with the new Android app!View stunning SlideShares in full-screen with the new iOS app!
DANONE-AQUATHE SUCCESS OF THE TRUST IN INDONESIA Fanny Bonnet Mandy Breugne Rakesh Babu Raavi David Blum Maxime Louineau
Maxime Perron ContentI/ Context of the case GROUPE DANONE is a French food-products multinational corporation. It claimsworld leadership in fresh dairy products, marketed under the corporate name, and also inbottled water. In the bottled water marked DANONE has developed a very interestingpartnership with AQUA, to represent the brand in Indonesia.Many Western companies have failed to adapt to the complicated geography, customs andcostumes of this market. But this partnership with AQUA is a great achievement, which haswithstood many crises in the country (Asian financial crisis in 1997, Riots of Indonesia in1998, Military conflict with East Timor in 1999…).Thanks to the strategy developed by DANONE, now AQUA has 60% of the market share ofbottled water in Indonesia and sees its growth increase of 15% per year. This becomes a casestudy about how to approach an huge Asiatic market like Indonesia. So, let us analyze thesecrets of this success.(Sources : CIA The World Factbook https://www.cia.gov/library/publications/the-world-factbook/geos/tt.html, Official Web Gateway to the Government of Timor :http://www.gov.east-timor.org) Establishing the partnership with AQUA and understanding the Indonesian marketwas a challenge because of it’s population and geographic size, getting the market share wasnot the major problem because AQUA was a market leader in the mineral water market,DANONE also introduced its water brand EVIAN and positioning it to the upper class of themarket which is mostly sold at hotels, restaurants and night clubs, positioning of the two
products was clear DANONE AQUA to the masses and EVIAN to the upper class of themarket. Distribution of the product was a major issue since it has 20 depots and the producthas to be distributed effectively all over Indonesia, DANONE effectively distributes theproduct using three different ways i.e. direct routes, indirect routes and through exclusivedistributors. Taking the advantages of AQUA, DANONE is successful in becoming the marketleader in Indonesia.We can bring out three steps in the construction of the partnership between Danone andAqua. First of all, before the partnership, we’ve got two different companies with differentsituations. Then start the implementation of the partnership before we can analyze theprogress and the benefits of this partnership.Before the partnership, we’ve got on one hand Danone, the world n°2 firm on the market ofwater after Nestlé, therefore a strong experience in this industry, and with an image ofquality water, “health and pure”, thanks to its brand Evian, the most famous water brand ofthe world. On the other hand there’s an Indonesian “family” company, Aqua, with adominant position on the Indonesian market of water with 90% of brand recognition.The implementation of the strategic alliance started with Aqua, which was looking for apartner who could bring financial resources in the company to contribute to itsdevelopment. Aqua had only a few resources, and suffered of pressure from competitors, sothey needed a partner to respond to their ambitious objectives of growth.That’s why the Utomo family, and their charismatic leader M. Utomo decided to meet 3companies: Coca-Cola, Nestlé, and Danone. The first company, Coca-cola, didn’t haveenough experience in the industry of water, so the dilemma was between Nestlé andDanone. Nestlé was the favorite with its good experience and its good recognition on themarket of water, but thanks to their strong involvement in the project, Danone won. Indeed,when Nestlé only received the Aqua delegation with the executives from the Perrier-Vitteldivision of the company, the French CEO of Danone, Franck Riboud, received thempersonally. That was the first step from Danone to be trust by Aqua.Then, Danone knew being patient to slowly introduce itself in the company. Waiting was thebest thing to do, and the French company could finally take a place in the strategic decisionsof Aqua in 1998 when they took 40% of the capital of the company. 1998 was a period ofcrisis in Indonesia, so it was a high risk-taking for Danone, but they had to show theirsupport to Aqua to develop the partnership. After this date, Danone kept waiting, until 2001when they took 30% more of the capital of Aqua. With now 70% the cooperation is a hugesuccess.Danone successfully won the trust of Aqua’s managers, and succeed to implement theirindustrial experience adapted to the Indonesian context.This strategic alliance had a lot of benefits for Aqua; they could get rid of the pressure oftheir suppliers, they reinforced their reputation as producer of healthy and pure water, theyhad new equipments, and a better training to water careers for a lot of Indonesian.
(Source : Institut de l’entreprise, 2003, http://www.institut-entreprise.fr/fileadmin/Docs_PDF/travaux_reflexions/Mondialisation/20_etudes_de_cas/DANONE.pdf)II/ Indonesia, a complex environment The Republic of Indonesia is situated in Southeast Asia. Indonesia is the largestarchipelago in the world of 2 028 000 square kilometer comprising 18 306 islands. Becauseof its location, Indonesia is one of the most diverse landscapes there are fertile fields, giantrainforests, savannah grasslands and snow-capped peaks. It’s also the world’s fourth mostpopulous country with 240 million inhabitants from more than 300 ethnic groups. TheIndonesian population is divides into 3 groups: the first one is the upper class whichrepresents 1, 3% of the population and earns between 10 to 20 $ a day, the second is themiddle class which represents 38, 5% of the population and earns between 2 to 10 $ a dayand the third one is the low class which represents 60, 2% of the total population and whosethe daily average salary is less than 2 $. In order to enter in Indonesia market Aqua has todeal with what some theorists call ‘the bottom of the pyramid’ namely takes into accountthe purchasing power of the low class population. This point is essential to enter theIndonesian market and develop Aqua products.All of this characteristics are important for Danone to have an over view and a knowledgeabout the market their want to enter in.Moreover, the poor quality of tape water reinforced the fact that mineral bottled waterrepresents a potential successful market. Then, the scarcity of water during the droughtseason emphasizes the need of bottled water. Furthermore, the high cost of fuel for lowincomes consumers can be considering as an opportunity for Aqua to increase its number ofpotential consumers. Indeed, more the price of the fuel is high more it’s expensive to boilwater before drinking it. Thanks to all these characteristics Indonesia represents certainly themost significant market of mineral water in the world.Finally, Indonesia represents a huge potential market of mineral bottled water and Aqua hasto take into account the diversity of the country and characteristics of the population. Then,a focus on the bottom of the pyramid is necessary for Aqua to success by creating a bottle ofmineral water affordable for low incomes salaries.(Source : www.aqua.com; http://www.euromonitor.com/bottled-water-in-indonesia/report;http://mineralwaters.org/index.php?func=country&parval=44)Competitors of Aqua The brand Aqua has a few direct and indirect competitors. Actually some brand asVIT, HEXAGONAL or FLOW represents a threats for Aqua. Despite the reliable image Aqua hassome serious competitors. Moreover some indirect beverages companies as Coca Cola, IceTea or Fruit juice compete with the market.
Key success factors Concerning the partnership between Danone and Aqua in Indonesia, the brand isnumber one in the market 44% off-trade volume share in 2010. To insure the production ofwater in the country, Aqua always must control the findings of new water resources.Furthermore, the brand is perceived by the population as trust brand and high qualitybottled water, which represent a huge strength for Aqua.(Source :http://www.euromonitor.com/bottled-water-in-indonesia/report)Key competencies In 2007, Aqua launched Lestari in Indonesia, an innovative development programaddressing both the social and environmental impacts of the problem, which mobilized thecompany and local communities in more than 20 projects involving 50 schools and over 300volunteers in eight locations. Through the program "Lestari" (which means "sustainable" inthe local language), the main challenge of Danone is to achieve the trust of localcommunities who are living in the territories where the resources are, and involve them notonly by improving the infrastructure of access to water, but also making them aware of theproper use of water and preservation of the resource over time.Moreover Aqua is reducing social gap thanks to its control of the distribution channel.Actually this action provides health, safe water and emphasis on quality of its products foreverybody. Water represents a primary need for people to survive in the world that’s whyAqua and Danone fight to reduce this social gap.III/ How Danone set its partnership with Aqua ? The advertising above is relevant of the segmentation used by DANONE and AQUA onthe Indonesian market; actually at the end of the video we can see the crowd, which isexactly what the 2 companies do regarding the segmentation. They focus the mass market, itmeans they are targeting everybody on the market.Positioning For the positioning both companies focus on “100% mountain spring water” insteadof only boiled and filtered water, each and every times they refer to healthy and safe water,“pure and sure”: the water which keeps all the natural benefits, “very clear and contains abalanced set of mineral composition”. In addition the DANONE AQUA logo on bottles is usedas a quality label.Communication
Regarding to the communication, they use the traditional medias, even if we’ve seenbefore they especially make TV advertising.Portfolio of products and packaging Both companies provide a multiple products and packaging adapted to different usesand targets. The portfolio of DANONE and AQUA is divided into: ▫ Glass packaging (cup of 240 ml) as a single use. ▫ Plastic bottle packaging (330 ml, 600ml, 1.5L) which used recycled PET in order to reduce carbon and provide “Green image” to their products. ▫ Glass bottle (380 ml) which are more and more replaced by plastic bottles, still to protect the environment. ▫ Gallon packaging (19L) which targeted group consumption as office or big family.In addition all those products are sealed with safety hologram which is a specific innovationdone by the companies, in order to reinforce the image of safe and sure water.Incomes in Indonesia DANONE and AQUA set a cheap price regarding the high quality of water they’reproviding, but to better understood how they fixed it we have to study first the Indonesianincomes: ▫ On the one hand the minimum salary is 600 000 IDR/month or 60 USD/month, so the purchasing power per day is approximately 2 USD. ▫ On the other hand the average one is 1 200 000 IDR/month or 120 USD/month, so the purchasing power is approximately 4 USD.Consequently DANONE had to reduce its margin in order to provide affordable price.Furthermore the companies need big volume to make benefits, that’s why they target eachand every people: DANONE and AQUA focus the global purchasing power instead of theindividual one.Few words about Evian
Now we’re going to speak few words about EVIAN which is the DANONE brand andalso the premium brand of spring water.For this brand the segmentation followed is different, according to Julia ARTHA who is Evianbusiness development manager “the health-conscious fashion set is Evian target market”, soEVIAN focus essentially the upper class or the well-off people.Then for the positioning as we said before EVIAN is the premium brand of spring water: “thesource of life, the source of youth and the source of health”.In Indonesia DANONE provide EVIAN limited edition made by the famous designer: PaulSMITH, but the company also sell other products through different kind of plastic bottle(330ml, 500ml, 1L, 1.5L, 2L).All those products are distributed into the premium supermarket, hotel, restaurant, bar andnight club, still targeting the upper class consumption.(Sources: The Jakarta Globe, 2010, http://www.thejakartaglobe.com/fashion/evian-gets-a-designer-makeover/360847 ; Air Minum untuk Kesehatan Keluarga - Danone Aqua,http://www.aqua.com/faq/General?ref=search#why-is-aquas-price-is-more-expensive-than-other-bottled-water-products )How to make the product to reach masses? It’s the most important and the most difficult aspect for DANONE Aqua because of thegeographical constraints. Indonesia is the 15 th largest country in the world, having a stretchof 5200 km from Merauke to Banda aceh, and totally consisting of 18306 islands in whicharound 6000 are inhabited. Population wise Indonesia is the fourth largest in the world,having a population of 240 million people and almost half of the population 120 million isconcentrated in the main island i.e. java island. So DANONE Aqua uses three differentstrategies for distribution that is the direct routes, the indirect routes and exclusivedistributors. 1: The direct routes- Direct route sales constitute 20% of the total sales for DANONE Aqua,here the company directly sells and distributes the product to the consumer, they deliver theproduct directly to homes and offices. 2: Indirect routes- Indirect route sales constitute 34% of the total sales for Aqua, here thecompany sells the product to small wholesalers and large retailers which in turn sell toconsumer. 3: Exclusive distributors- DANONE Aqua appointed exclusive distributors and contractorsin parts to deliver the product to the final consumer, wholesalers and retailers whichconstitute to the 46% of the total sales.Business strategy implementation from late 1999 has been:"The capillary (growth of digitaldistribution) by multiplying by two point delivery. Direct and indirect routes increased in 2years from 60 to 300. In addition to the 41 exclusive distributors were encouraged to greatlyincrease the number of delivery points in the areas they cover. "The route optimization(mapping) to improve the productivity of roads and concentration of 400 routes "direct"
Aqua on the best areas (areas of concentration offices and homes to higher standards ofliving).DANONE Aqua has 11 natural spring water resources around the country and 14 factories forpurifying and bottling which are mainly situated in the mail island (java island). DANONEAqua has 11000 employees to work in factories and for distribution in direct routes and has20 depots around the country for efficient distribution. The different packaging sizes helpsAqua reach different target consumers effectively, Aqua sells 750,000 of 5G jugs every dayand 2.7 billion of 240ml units every year, which makes DANONE Aqua the largest sellingwater brand in the world.IV/ Perspectives and conclusion So concretely, this is a very good example of international expansion strategy whichhas been characterized by a cautious approach, and by providing a good image of theirproduct as Coca-Cola did, comparable to a 3 “A” Strategy: • Affordability: they developed a price affordable for everybody by an offer from the Cup to the gallon. • Availability: they control the distribution channel which allows them to provide water to any village, any company, any Indonesian home. • Acceptability: They won the trust of Indonesian people by managing sustainable actions for people (as Lestari program) but above all by bringing a water security to their product. Now a similar adaptation can be done somewhere else. There is still a huge watermarket to conquer in south-east Asia, especially in Malaysia and Thailand. DANONE cansucceed on those markets too, if they respect the same method. Which is : Be careful tounderstand well the specificities of the markets and local customer expectations, Develop anefficient distribution channel adapted to the country, and Keep doing partnership to reducethe risk of failure.