Brita Grp1

GROUP 1 :Abhishek Khanna Atiqul Haque Devika MathurDisha Bansal Rohan Tayal Sanchit Jain Vidhu Garg

PRESENTATION ON

The Clorox company• Major Manufacturer & marketer of water purifiers, laundry additives and cleaners•85% of Clorox brands first or second in their categories

•Tried to build dominant brands & pursued international expansion

The Brita company• Brita GmbH, headquartered in Germany, made water filtration products

• In September 1988, Clorox formed a subsidiary, Brita USA, the sole US distributor of Brita Products

Need for water purifiers• Growing concern in 1990s over the safety of tap water

• Polls found that 47% of the people didn’t want to drink water straight from the tap

• Sales of bottled water grew rapidly

The Product1.Two compartment pitcher 2.A replaceable filterBenefits• Filtered water tasted better

• Did not deposit scale when boiled

• Extracted harmful heavy metals

Filters required replacement every two months or after filtering 40 gallons of water and sold in packs of 1,3 or 5.

Product life cycle: Brita Pitcher

• As per the product life cycle theory, the Brita pitcher was in the Maturity stage.

• There was a slowdown in sales growth. 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

0

500000

1000000

1500000

2000000

2500000

3000000

Sales of Brita Pitcher systems and filtersSystems Filters

Unit Sales

Growth in Product Sales• INITIAL STAGE• Deficit spending strategy–Initial sunk cost > revenues from sales

GROWTH STAGE•Pitcher sales led to a flow of filter sales•Enjoyed customer loyalty + bought for gifting purposes•By 1999 – Brita held 70% of $350M retail water purification industry

Faucet mounted filter industry–PUR introduced Faucet

Mounted filters–Faucet-Filters in Growth Stage – growing demand

–With P&G taking over PUR, the company could pose a serious threat to Brita

–Brita in fear of losing market share owing to growing popularity of faucet-mounted filters

Pitchers v/s Faucet-filtersPITCHERS FAUCETS-FILTERS

Usually stored in refrigerators, so provided cold water

No cold water

In areas with hard water – only pitchers could remove hardness

Faucets filters could not remove hardness

Could not screen micro-organisms Finer filters that could screen micro-organisms

Water tasted crisper, with lower pH Water tasted less crisper

Costs 15-20 cents per gallon Costs half, as filter lasted longer

SWOT AnalysisSTRENGTH

–Established brand –Owns 70% of market share–Loyal customer base ; repeat customers with replacement filters

–Wide array of filtration products

–Only BRITA is perceived to improve the water’s taste

–Large retail distribution system; presence in multiple channels

–(“’Class to mass”)

WEAKNESS

• Possible cannibalization effect of faucet mount purifiers

• No first mover advantage to PUR with faucet mounts

• Requires sunk costs in promotion and innovation

• Slowing growth in product market

SWOT Analysis

OPPORTUNITY

• Younger generation (HEALTH CONSCIOUS) more likely to use pitchers and households likely to use faucet mounts

• Faucet mounts introduction increase the chances of buying a Brita line product

THREATS

• PUR about to merge with P & G, could become market leader in faucet purification

• Entrance of new competitors to the market; pitcher prices may drop

• PUR has 74% of total faucet mounts sales

Dilemma1) Focus on the pitcher/filter

market• Building the existing base of Pitchers

• Encourage installed base to buy more filters

2) Enter into the faucet market

• Only faucet-mounted

• Both pitcher and faucet markets

Option 1

Market Penetrati

on

Product Developme

nt

Market Developme

ntDiversification

Existing New

Existi

ngNe

w

PRODUCT

MARKET

1-a: Expansion by New Customers

PROS• Already Established and Successful Product in Market

• Scope of increasing customer base as only 1 out of 7 households use pitchers currently

CONS• Forfeit the opportunity to gain market share in Faucet Filter Market

• Inefficiency in germ removal being targeted by competitors

1-b: Expansion by Increased Usage

PROS• Scope of increasing filter as average usage is 2.5 filters per year only and it can be increased to 4-5 filters per year

CONS• Gain small profit from filter sale but lose out on profits from Faucet Filter sales

Option 2

Market Penetrati

on

Product Developme

nt

Market Developme

ntDiversification

Existing NewEx

isti

ngNew

PRODUCTMARKET

2-a: Faucet Only Option

PROS• Opportunity to tap into an emerging market

CONS• Significant up-front costs

• Battling strong competitor with a large grasp of the market

• Completely disregard the currently profitable product

2-b: Both Faucet & Pitcher

PROS

• Obtain a significance presence in both markets

• Increase overall revenue

CONS

• Potential product cannibalization

• Deficit Spending

Product Life Cycle ComparisonWith Faucet, Clorox can aim to capture market for taste as well as health

M 1 (Taste) M 2 (Health)

P1 (Pitcher)

P2 (Faucet)

P3 (Bottled water)

0100020003000400050006000700080009000

1992 1994 1996 1998 2000 2002 2004 2006

Total Annual Sale

s ('00

units)

Product Life Cycle

Total Pitchers Sales Total Faucet Sales

Scenario Analysis• Least loss is expected in scenario 7• Expect profits to come from sales of filters for

Brita’s tap-mounted Faucets• Expected annual sales of Faucet filters = 3 X

(Annual sales of Faucet) Scenario

1Scenario

2Scenario

3Scenario

4Scenario

5Scenario

6Scenario

7Scenario

8Scenario

9Scenario

10                     

total households (million) 75.86 75.86 75.86 75.86 75.86 75.86 75.86 75.86 75.86 75.86Consumer Advert. Low Low Low High High High Very High Very High High Very High

Distribution (% of market reached) 72% 72% 72% 72% 72% 72% 72% 72% 72% 72%

List price (accounts for 30% of sales) in $/unit 39.99 39.99 34.99 39.99 34.99 34.99 39.99 39.99 34.99 34.99

MAP (accounts for 70% of sales) in $/unit 34.99 34.99 29.99 34.99 29.99 29.99 34.99 34.99 29.99 29.99

Consumer promo & trade spend Low Low Low High High High High Very High Very High Very HighFeature price

reductions/competitive pricing High Low High High High Low Low Low Low High

Total sales (units)

3,40,000

3,50,000

3,95,000

9,70,000

11,25,000

11,60,000

12,05,000

12,45,000

13,50,000

13,95,000 Revenues from sale of faucets ($

million) 12.4 12.8 12.4 35.4 35.4 36.5 44.0 45.4 42.5 43.9 Cost /unit ($/unit) 15 15 15 15 15 15 15 15 15 15

Cost of faucets ($ million) 5.10 5.25 5.93 14.55 16.88 17.40 18.08 18.68 20.25 20.93 Consumer promo & trade spend ($

million) 5.2 5.2 5.2 9.1 9.1 9.1 9.1 13 13 13Consumer Advert. Spend ($

million) 5.4 5.4 5.4 11.1 11.1 11.1 15 15 11.1 15Feature price reductions ($

million) 2.3 1.8 2.3 2.3 2.3 1.8 1.8 1.8 1.8 2.3Royalty to Brita GmbH (3% of

Revenues) 0.37 0.38 0.37 1.06 1.06 1.10 1.32 1.36 1.28 1.32 Operating Profit ($ million) -5.97 -5.26 -6.76 -2.72 -5.01 -3.97 -1.32 -4.41 -4.91 -8.61

Final choiceBoth Pitchers and Faucet Mounts,

because• Faucets increased likelihood of buying products from Brita

• Perceived superior to pitcher in removing contaminants

• High Convenience• Half the Brita Pitcher owners who purchase filters would continue to use pitchers in conjunction

• Similar level of purchase intention for pitcher and filter

Value Proposition - Brita Faucets • Compact

• Filter replacement indicator

• Increased purity level through finer filters

• Lesser cost per glass

Set of promises

• Good taste• Economical (Exhibit 3) – • Bottled water – 0.68 USD/ gallon (minimum)

• Faucet water – 0.07 USD/gallon (minimum)

Differentiating from

competition

• Research results• Self evidence

Compelling evidence

•Segmentation:a)Demographic - Based on age (Exhibit 4)The concern level on household water quality is reducing with increase in age

b) Based on end usage (Exhibit 4)The customers can be divided on the following segments

.

Segmentation, Targeting, and PositioningAge Percentag

e18-24 89 %25-34 79 %35-44 79 %45-54 70 %55-64 59 %65 and above

56 %

Customer segments PercentageNever used purifying device 35 %

Bottled water users 38 %Systems(Pitchers/faucets) 38 %

Targeting and PositioningTarget Segments:a) Non-users Positioning – Economical, healthy & good taste.As per the exhibit 4, the %age of non-users is decreasing due to increasing awareness. Since, it has considerably low recurring cost & has Brita’s brand name, new users are likely to opt for Brita Faucetsb) Bottled Water users:Positioning – Low recurring cost + low kitchen space + Better Taste

POINTS OF PARITYBOTTLED WATER USERS

• LEVEL OF PURITY

FAUCET USERS

• COMPACTNESS• ENHANCED

PURIFICATION

POINTS OF DIFFERENTIATIONBOTTLED WATER USERS• ECONOMY

• CONVENIENCE

FAUCET USERS• TASTE

• BRITA’s BRAND VALUE

PRODUCT

• Brita pitchers and faucets• Advantages of pitchers: portable, eliminates hardness from tap water, tastes crisper• Advantages of faucets: filter lasts longer, cost per gallon is nearly half of that for pitchers, can screen microorganisms

PRICE

• Pitcher - $15.16 (initial system cost)• Faucet - $34.99 (initial system cost)

PROMOTION

• Pitcher - Increase advertising budget to increase market penetration

• Faucet - In introductory phase; hence heavy expenditure on advertising required, increase product awareness. Promotions should focus on taste as a satisfier

PLACE

• Pitcher – Class to mass strategy. ‘Class’ market in department stores. ‘Mass’ market in grocery stores, drug stores, club stores

Overall Strategy For Brita Pitchers and Faucets

• Class Mass StrategyPresent in Class, First in massBrita Faucet Ultra – 34.99 USD (present in department stores etc.)Brita Faucet – 39.99 USD (in retail stores such as Walmart & drugstores)

Red Ocean v/s Blue Ocean thinking

Final Product and Placement

Thank You!