4.Danone Final

7/28/2019 4.Danone Final

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Introduction

As a former windsurfing champion and current CEO of Frances Group Danone (Danone),

Franck Riboud has literally and figuratively ridden the waves to success.

Franck Riboud to lead as its CEO since 1996, is the number seven food and beverage

company in the world. With $14.5 billion in net sales and $1.5 billion in after-tax profits, the

company has experienced positive sales growth rates under his leadership.

Delivering 27% of the firms global sales, Danones water products, led by the well-known

glacier-source Evian brand, is number two worldwide in packaged water sales. Although

declining in recent years, sales growth from Danones Water Division in the last five years

has been positive. With all of Danones, Riboud was still faced with the challenge of a more

even geographic distribution of its customer base, particularly in the U.S. When it came to

water and the success of Danones water sales in the U.S., the compa ny was struggling.

Therefore, the acquisition is the option for Danone in the U.S. market. Kraft itself is a

company controlled marketing in the North America, which includes the U.S. in it. Kraft

marketing in the U.S. market has been very good and has a good brand positioning in the

eyes of American consumers.

Coca-Cola worked with Danone announced in 2002 that Coca Cola has taken over the

management of the brand Evian in North America.

The second main agreement Danone occurred in June 2002, when Danone and Coca-Cola

announced their Joint Venture Company for the production, marketing and distribution of

local and regional like Danone sales and bottle spring water sources in America.


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Executive Summary

As a driver as well as the founder of France Danone Group (Danone) is Franck Riboud has

the ability to succeed. Danone is the company where he was a leader and a director since

1996. By getting 27% of the global sales of existing, aquatic products named Danone led by

Evian brand is number two worldwide in bottled water sales.

Despite the success obtained by Danone and its focus on the sale of water in America,

Danone also has a lot of failures. In late 2001, Pepsi's Aquafina and Coke's Dasani water after

Danone in sales in the U.S. as the second-and third behind Nestle Perrier and Poland Spring

Water.


management of the brand Evian in North America. According to the analysis of JP Morgan,

Coca-Cola will get the master distribution rights to Evian and will handle all the promotion,

marketing to consumers, sales in stores, selling bottles. Danone will continue to handle

source control product distribution and product marketing strategies.



local and regional like Danone sales and bottle spring water sources in America. Complex

provisions of the agreement are as follows:

Danone contributed assets and retail bottled water business in the United States,

including five facilities to manufacture, license to use the brand Danone and spark

Letts and ownership of several value brands

Coca-Cola Danone pay cash of 128 million dollars, with a 51% ownership interest

and will provide channel marketing and brand management. The agreement contains

agreements benefit from Coca-Cola as ever-growing volume of sales in the market

that are used to maintain the stock market for profit.


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Danone's Bottled Water Business

In 2001, Danone Water Division to be the no. 1 in the world water market from sales volume

reached 12.5% in the international market. Of income derived approximately 27% of total

revenue 3.4 billion dollar in 2001. Danone leadership position that has been achieved so far

using the two-tier strategy: First Danone extends their brands to the international market

using the acquisition of top regional and local brands.

In France, growth European ever came of the offer size of container and eco-friendly

containers are easily collapsed to encourage popular recycling campaign.

Danone reports its company financials using the broad segment classifications of France,

Rest of Europe, and Rest of the World. A look at Danones water sales by region for 2001was: 64% Rest of the World, 19% Rest of Europe, and 17%

Local Ranking

France No. 2

Spain No. 1

Italy No. 3

U.S. No. 4

Canada No. 2

Mexico No. 1

Argentina No. 1

China No. 1

Indonesia No. 1

Water Position By Country

Exibit-1: water sales by region in 2001

While the data from the table shows how successful Danones water operations are globally,

the U.S. market clearly stands out as one of disappointing performance.

Evian: DANONEs Glacier Brand

Evian is a brand No. 2 in the world by sales volume more than 120 countries worldwide.

Evian distinguishes itself as pure water, natural spring water, bottled at the source and spring

in evian les bathing. Evian has a trademark that is untouched by man, perfect by nature.

Evian mineral water is very well known in France and in Europe. Manufacturers say that

France17%

Rest of Europe19%

Rest of World

64%

Water Sales By Region


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Evian water from the Alps, because of the purity and quality of the Evian water sell as good

product at a great price (premium price).

The U.S Bottled Water Market Analysis

In the United States market in the 1980s, mineral water from a selection of people for

medical reasons. In 1990 there was an increase purchase of mineral water by the gallon in the

U.S. The emergences of various issues that consume much healthier mineral water, and then

make the producers want to enter this world. Mineral water sold in the U.S. must be

compatible with the definition of the Food and Drug, so that the U.S. can trust the quality of

mineral water and are interested to buy it.

Products the Food and Drug Administration defines bottled water products are as follows:

height above the top of the aquifer is very good

solids may be labeled as mineral water

deionization, reverse osmosis

or other suitable processes.

dioxide itself value2 from a natural source be an

the surface of the earth.

The classifications of bottled water have had little impact on the U.S. consumer. In

fact, the result of these classifications has created a murky bottled water market in which little

distinction is made in the advantages of one type of bottle water over another.


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Competitors analysis

The American market is so exciting to be entered as seen from some factor that the American

public is increasingly concerned about the health, blindly joined Danone keen to try to enter

the U.S. market through the evian. Unfortunately, in America it has many more company that

also produces mineral water. The companies are fairly dominates local sales of mineral water

in America.

The main competitors of Evian in the American market, among others:

is one of the most famous brands in the U.S.

Aquafina (PepsiCo): Pepsi is one of the competitors of the Danone with the same product.

Aquafina water is known for its purity and taste.

-Cola): Dasani is a mineral water produced by Coca-Cola and Dasani use

local water sources as a base for mineral water.

The number of competitors who seemed to have been dominated by local players, making

Danone with Evian is difficult to get market share according to what they expect. Moreover,

Danone is one of the French companies that still hold the old-fashioned rules and strategies in

marketing their products. In fact, the market in Europe and America are very different and

Danone looks are not ready fully to enter the market. One example, the American public like

local products manufactured by local companies.

It is making sales of Evian in America is very small compared to only 11% of other countries.

In addition, only a brand Evian no.4 in America, while in the other a brand Evian no.1.

Although Danone has been trying to improve sales with a joint venture with Coca-Cola,

Evian sales and reputation is still very weak in the U.S. market. Things like this that make

Danone must make strategic and informed decisions in the face of the market. By the fact that

in the American market, Danone must as soon as possible to make the best decision for

Evian.


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MARKETING MIX

Evian is all natural and perfectly pure. Born in the heart of the Northern Alps over 15,000years ago, Evian Natural Spring Water is a geographical miracle. Deep inside the earth,

perfectly protected beneath dense layers of glacial sand, each droplet follows its own, natural

course, just as it has for centuries. Each drop of Evian starts as rain and melting snow on the

peaks of the Northern Alps. It filters through layers of glacial sand on a 15+ year old journey

deep in the heart of the mountains. Through this process, Evian is filtered naturally, without

chemicals, giving it the purity, mineral content and taste that nature intended.

Packaged in bottles of various sizes (4 sizes avail in US) that are environmentally friendly

(recyclable). Sizes ranging from 330ml sizes fit easily in your purse, pocket, and briefcase. At

work or at home, opt for the larger formats (1 liter or 1.5 liter bottles).

The labels emboss spring water 'with image Background Mountains.

Evian is a premium priced product. Example: 1.5L Evian price is 1.89 U.S. $

Our pricing object is Static pricing. Gaining certain market share with differentiating price.


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Distribution Evian performed in major cities in the U.S. such as New York, Los Angeles,

California, Washington Dc, Miami, etc. Distribution was performed in supermarkets, mini

markets, cafes, restaurants, cinemas, hotels.

Promoting through advertising on television by using the local background of the

Americas with the Alps.

Evian provides the latest information through the website.

Offering product bundling, for example by combining with other Danone products.

Brand premium shelf, put the rack position Evian near the entrance, cashier or point-

where looks that can cause impulse purchase.

Giving bonuses, like buy 4 get 5.

Posturing, billboards , goes to the mall, sell evian t-shirt

Evian has come up with a very catchy and strong advertisement. Because it really

builds a strong position in the mind very clear, very direct. Evian stands for origin,

health, and youth. Were clearly trying to own the word -youth the tag line is Live

Young.


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SWOT Matrix

Strength: Weakness:

1. Danone is a food and beverages

company no.7 in the world

2. Product Quality

3. Eco-friendly product with recycled

product packaging.

4. Evian water brand is no.2 in theworld..

1. High cost Premium price

2. Small market share.

3. Lack of Knowledge in US market

4. To follow the ancient tradition of the

company

Opportunities : Threats:

1. Health conscious people

1. Like to know more about springwater benefit on health issue

2. The population of America that much

3. Concerns over the environmental

issues

1. Strong competitors.

2. Place little value on Evian in terms ofprice.

3. prefer products manufactured by local

companies.

4. Consumer indifference


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SWOT Analysis

Danone is a food and beverages company no.7 in the world and Evian water brand is no.2 in

the world making a name Danone is already very well-known and obtains brand

positioning in the eyes of the market. Produce eco-friendly product with almost 100%

recycled packaging. By Utilize awareness of product quality, the company can develop

strategy according to US market and captured the good market share.

Danone assumes that the market of America is equal to the European market that is why their

strategy was not good when entering the U.S. market. They do not develop properly in

marketing the products Evian for following the ancient tradition of the company.

Evians average cost per case is about 80% higher than that of Aquafina or Dasani. In the

U.S., customers place little value on this premium and simply choose the less expensive

bottled water.

The population of America that much and this society likes a healthy mineral water because

they are very much health conscious and also the emergence of the global warming issue is

making people like something environmentally friendly. But they are not aware like Europe,

consumers who are more knowledgeable of the types of bottled water and accept the

premium on the Evian brand. But in US market little distinction is made in the advantages of

one type of bottle water over another. If we educate them more, then significant market has

been captured like UK.


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Danone is French company and also products come from French. The main competitors are a

local company and American people like to buy their own product. And also customer

indifference has been a substantial disadvantage in gaining market share in the U.S. If Evian

can take position by adopting locally and create great value on Evian in terms of price by

create more awareness about healthy issue that is supported by natural pure water (spring

water Evian). The market scenario will be change.

Segmentation Market

In segmentation the market we use demographic&psychographic segmentation (gender, age,

income, occupation, education, and similar attitudes, values, and lifestyles)

Target market

Everybody who desires to take care of their body is invited to consume. Our target consumer

is all ages people. But especially we focused the people of age from 20 to 40. And during

many years, women have been the main target of the healthy and diet products. Nowadays,

men are also a sector to focus in. target group are-

Health conscious and accept higher price for healthy product like UK.

Concerns over the environmental issues

Moderate & high income consumer, as evian is luxury water brand.

Healthy and authentic lifestyle

Well-Informed (normally know about the product that they are buying)

Positioning Strategy

Evian is global brand but we follow LCCP Strategy for positioning as the US is developed

country and they have strong nationalism. And also they are very much conscious about


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health. According to our strategy choice is build the full brand ladder yet focus advertising

on emotional benefit live young.

Our objective is to position the product for all the features it really has: freshness, high

quality, good taste, and purity.

People want to have information about any product, which means, a good and large

information policy is good for sales. So we educate to people on the healthy benefits of Evian

water.


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Questions Analysis

Why has Evians market share continually decreased since the emergence of the cola

giants bottled water brands in the late 1990s?

Evians market share has continually decreased due to:

Lack of understanding US market Evians U.S. market share has continually

decreased since the emergence of the cola giants bottled water brands because Evian

failed to foresee competition from the likes of Coca-Cola in the bottled industry.

Evian also failed to realize that selling bottled water in the U.S. is completely

different from selling bottled water in Europe. In Europe, consumers are more

knowledgeable of the differences between purified and glacial spring water, prefer the

glacial spring water and are willing to pay more for glacial spring water brands like

Evian. In the U.S. consumers are indifferent to the types of bottled water and make

purchase decisions based solely on price. Evian s average cost per case is about 80%

higher than that of Aquafina and Dasani because of the additional handling and

transportation costs of bottling water from Evians French/Swiss Alps glacier source.

Because purified water is cheaper than imported glacial spring water, consumers in

the U.S. prefer purified water brands like Aquafina and Dasani.

Distribution deficiencies When compared to the distribution capabilities of Coke,

Pepsi, and Nestls water brands, Danone is inferior. Considering the points of sale

for bottled water (grocery stores, convenience outlets, street vendors, and vending

machines), and Evian is rarely the prominent brand.

Lack of advertising Danone has never attempted to away the U.S. market to

embrace the glacier premium with a comprehensive advertising campaign.

Presentthe positives and negatives for remaining a single enterprise entity and going it

alone.

Positives for remaining a single enterprise entity:

If Danone continues to operate the Evian brand as a single enterprise entity, Danone will

have to accept Evian water as a niche product rather than a leading product. However, if

Danone pushes Evians pristine qualities and positions the brand and as a high -end premium


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beverage with a healthy edge via marketing and advertising, Evian may be able to provide

Danone a higher profit even with smaller volume sales.

Remaining a single enterprise entity will preserve the national, historical and family pride of

the company.

Negative for remaining a single enterprise entity:

As a single enterprise entity Danone will have to continue fully covering marketing,

distribution and brand management costs for Evian that Coca-Cola has offered to provide in

exchange for a 51% stake in the company.

As a niche product, Danone would focus its sales efforts on the exclusive group of U.S.

consumers willing to pay more for glacial spring water.

In order to avoid operating Evian as a niche product, Danone could chose to find a local

spring water source in the U.S. in order to cut costs and compete with Aquafina and Dasani.

However, the Danone line of production and distribution would have to be built out with

acquisitions. This strategy would require high investment without a quick return on

investment.

Given Evians lack of success in the U.S. market, what would be the consequence of

Danones exiting the U.S. bottled water market altogether?

Another option presented to Franck Riboud is to leave the U.S. altogether, keeping the

Evian brand in the U.S. only as a niche competitor. Perhaps management needs to realize

that the water drinkers in the U.S., with their lack of differentiation between bottled water

varieties, are not within the scope of Danones global marketing strategies. Because the

marketing successes that Evian has experienced in other countries cannot translate to the U.S.

market, a no-entry strategy would eliminate costly entry expenditures and allow Danone to

shift focus to gaining share in countries where the glacier premium is recognized. This

option could be referred to as the LU Biscuit strategy while Danones biscuit brand is

number two in the world, it is non-existent in the U.S.


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Are the joint ventures the Coca-Cola the right decision? Why or why not?

Considering the costs of distribution, marketing and advertising the premium attributes of the

Evian brand, we consider the Coke/Danone joint ventures to be the most ideal business set-up

for building a competitive premium brand in the U.S. After reviewing the case, in my

opinion it is the right decision for Danone to enter into a joint venture with Coca-Cola. Since

Evians primary profits dont come from the U.S. market and since Danone itself is not doing

anything to improve profits in the U.S. It would not in any way be detrimental to Danone to

sell 51% of the Evian brand to Coca-Cola. Danone would immediately make $128 million

from Coca-Cola and would still stand to make a profit as a partial owner of Evian since Coca-

Cola has drafted documentation in which it promises to grow Evians sales volumes. Also as

a partial owner, Danone could ride the marketing coattails of Coca-Colas success since

Coca-Cola has promised to provide for all marketing and brand management of the Evian

brand. Danone would be able to focus more on advertising Evian in the already profitable

European market and in other parts of the world in order to grow brand recognition and make

an even larger profit outside the U.S. Coca-Cola has even promised to handle distribution

within the U.S. Since Coca-Cola already has an established distribution line within the U.S.

unlike Danone, finding a local spring water source is a more viable option. And if Coca-Cola

chooses to continue to ship the water from the French/Swiss Alps, then Danone would save

money on having to do this itself.


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Conclusion

Group Danone today has very little in common with its original operations, except that the

Riboud family has been in charge for over four decades. Danone has accomplished its

leadership position by using a two-tier strategy, first by extending Evian as a global brandand by using acquisitions to acquire top regional and local brands. Danone reports its

company financials using the broad segment classifications of France, Rest of Europe, and

Rest of the World. A look at Danones water sales by region for 2001 was: 64% Rest of the

World, 19% Rest of Europe, and 17%. When it came to water and the success of Danones

water sales in the U.S., the company was struggling.


management of the brand Evian in North America.



local and regional like Danone sales and bottle spring water sources in America.


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Reference

http://www.just-drinks.com/news/danone-and-coca-cola-linked-with-joint-water-

venture_id72651.aspx

http://www.just-drinks.com/news/coca-cola-takes-over-evian-in-us-and-canada_id78974.aspx

http://www.foodnavigator.com/Financial-Industry/Danone-declines-to-comment-on-Evian-

in-US

http://designtaxi.com/news/27835/Evian-Natural-Spring-Water-Urges-U-S-Consumers-To-

Live-Young

http://online.wsj.com/article/SB1017872878174568680.html

http://www.beveragedaily.com/Regulation-Safety/Danone-mineral-water-brand-Evian-fails-

Chinese-entry-inspection

http://www.emeraldinsight.com/journals.htm/journals.htm?articleid=870541&show=html&

WT.mc_id=alsoread

http://ideas.repec.org/p/ags/uconnr/25187.html
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4.Danone Final

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