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Bottle water in Argentina


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  • 1.  Global Industry Analysis  Corporate Crisis  Crisis Management  Our Safety Net for the Future (Country Analysis) BOTTLED WATER INDUSTRY
  • 2. GLOBAL INDUSTRY ANALYSIS . Average growth rate per year: 12% . Main markets: Europe; US . Important growth market: Pacific . Growing and high consumption in South America Brazil (26 liters/person/year in 2004) Argentina (18 liters/person/year in 2004) . Production: 89 billion liters (2004), turnover: US$ 22 billion (2004) Annual growth in consumption (2000-2004), in % . Source: Dir. Nac. Alimentos – SAGPyA - sobre la base de .
  • 3. Negative publicity: « Greedy Western corporation that does not care about human rights and only wishes to make profit. » « Free access to safe water is basic human right » Ban-Ki Moon Criticism concerning the disrespect of environment followed by calls for boycotts by influential consumer groups Affect on sales (-30% within one month) and stock price (-10%) in the US and Western Europe (main markets) Corporate Crisis
  • 4. Crisis Management Communication : Ensure internal and external information flow Launch publicity / communication campaign Improve corporate communication Environment Use / introduce glass bottles Focus on recycling Create or support a foundation in Africa (« Water for the world ») Press : « Green Number » for questions related to environmental policy Develop a good relationship with the press Corporate / product : Change the name of the product before introducing to a new market Identification of responsabilities Crisis management department Use glass bottles
  • 5. Find a country…  With higher annual temperatures.  Where the tap water quality is not acceptable.  Where water is making up an important share in the beverage market.  Where health consciousness is growing. Our Safety Net for the Future
  • 6. ARGENTINA : EL PAYS AZUL A Country Analysis Franziska Bormann Hermann Cilliez Raphaël Henriquez Arnaud Jonquet Isabelle Thille
  • 7. ARGENTINA’S BACKGROUND  Spanish colonisation 16/18th century (independance 1816).  Turbulent history: From prosperous country to chaos in the 20th century  2001 : Argentine crisis  2003 / 2007 : Economic recovery (8,5% average annual GDP’s growth for 5 years)  Limited impact of global crisis Source : 2009 0.9% 2010 6.5% 2011 5% GDP Growth previsions
  • 8. POLITICS IN ARGENTINA • 2009: Cristina Kirchner crashed into a mid-term crisis that threatened her survival. • Today: Popularity increases (consequent economic recovery) one year before the presidential elections. 22 sept. 2010 CONS PROS - Bad relationship with the press. - Litigation with Great Britain on oil exploration around the Falklands. - 8% growth rate projected for 2010 - 40% of approval rates - Divided opposition
  • 9. Recent Political problems THE MEDIA: THE FALKLANDS:
  • 10. ARGENTINA’S ECONOMY September 2010 Argentina Outlook Update Exceptionally loose macroeconomic policies, a strong rebound in agricultural output […] are supporting overall economic activity. […] [T]he export-oriented industrial sector grew 9.2% YTD to July, mainly driven by strong growth in Brazil, which is Argentina’s largest trading partner and accounts for 34% of total exports. Meanwhile, strong fiscal spending (32% YTD to July), highly accommodating monetary policy (-15% real interest rates) and substantial wage increases (30% average) - together with some improvement in domestic confidence and limited capital flight - are pushing consumption and investment higher. […] [T]he construction and retail sectors, as well as public services and the automobile sector […] are showing positive dynamics into Q3 2010. Economic activity grew 9% y/y in H1 2010.
  • 11. ARGENTINA’S ECONOMY + + + + - - - - Abundant natural resources Export-oriented and globally competitive agricultural sector Rich industrial base GDP growing strongly (between 6.5 and 8- 10%) Infrastructure well-developed for Latin American countries Foreign trade growing Well-educated, young and connected population Service economy Highly indebted but risk of default low High inflation (178/222) (estimation partly up to 20%) Unemployment high 8.7% but decreasing 13.9% of population under poverty line Unequal society (38/134) Slow down of economic development for 2011
  • 12. EASE OF DOING BUSINESS IN ARGENTINA 0 20 40 60 80 100 120 140 160 180 Argentina France Source: The World Bank Group 2010
  • 13.  One of the most favorable climate for FDI in South America.  Same rights and obligations for foreigners as for Argentine companies.  Opportunities for investors to participate actively in the country’s privatisation process in particular in the water industry. FOREIGN INVESTMENT POLICIES Pro’s Con’s Potential index 60 (2008) According to the CNUCED, rank on 141 countries Source :
  • 14.  Water = vital for life and good for health  Production 2004: 5 million hectoliters (43% rise compared to 2002)  Turnover 2004 (in ARS$): 500 million for mineral water, 230 million flavoured water Argentine Water Market Sales of bottled water on the domestic market, 2004 (hectoliters) .Source: Dir. Nac. Alimentos – SAGPyA - sobre la base de Fortuna. Estimation of sales of bottled water in pesos, 2004 Source: Dir. Nac. Alimentos – SAGPyA - sobre la base de Fortuna.
  • 15. Source: Dir.. Alimentos – SAGPyA - sobre la base de Fortuna. Division of the Market according to Water Types Flavoured water is growing the fastest in the market (60% lemon) • Attraction of investors and consumers (few calories)
  • 16.  The market is dominated by two European companies with several brands: Aguas Danone de Argentina SA (around 50%) and Nestlé Water (around30%)  Others companies: Coca-Cola, Garbin y Pritty  A lot of local and regional companies Market Domantion by Foreign Companies COMPANY Aguas Danone de Argentina S.A. Nestlé Waters Coca-Cola Garbín Pritty Country FRANCE FRANCE USA ARGENTINA ARGENTINA BRAND Villavicencio Eco de los Andes Kim Sierra de los Padres Magna Villa del Sur Nestlé Pureza Vital Ser Glaciar Villa de los Arroyos Perrier San Pellegrino
  • 17. Source: Dir. Nac. Alimentos – SAGPyA - sobre la base de Fortuna. Market Share 2004
  • 18.  1995-2004: Export of only 16 million liters (3% of the production in 2004 and US$ 3.5 million)  1995-2004: 8.5 million liters imported (US$ 3.5 million)  1995-2004: Greatest part of production exported to Chile (33%) and Uruguay (39%). 2 reasons: (1) Mercosur, (2) Shipping difficulties  80% of the water is imported from France (High production, popular brands) IMPORT/EXPORT of bottled water (1995-2004)
  • 19. Import/export of water Destination of exported water 2004 (value) .Source: Dir. Nac. Alimentos - SAGPyA - a partir de INDEC. Origin of imports of mineral water 1995-2004 .Source: Dir. Nac. Alimentos - SAGPyA - a partir de INDEC.
  • 20. Porter’s 5 Forces Analysis Substitutes  Hot drinks like teas and coffee  Dairy drinks  Juice  Soft, sport and power drinks  Light alcoholic drinks like beer and wine New Entrants  Innovation is limited  Strong competition of established brands  Great number of new entrants every year Power of Buyers  Bargaining power high for mass merchandising and fountain supermarkets  No bargaining power of buyer for vending Entry Barriers  Strong competition by established brands  Limited access to water supplies Bargaining Power of Supplier  Plastic bottle suppliers has great power  Dependency on government that is supplying water  Possibly privatisation of water works might increase prices
  • 21. Conclusion Even if there is a high inflation and a rising debt, Argentina’s economy has shown its improvements and its competitive performances. Foreign trade is growing and the opportunities to exchange abroad have evolved in the last few years. Water industry has a competitive advantage for Argentina to be a real brand on the global market. Argentinian’s consumption’s habits have revealed that Argentina is nowadays more than a potential market.