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Case Study For Case 16 Danone: Marketing The Glacier In The United States

2064 words - 9 pages

Q1 Prepare a brief case overview. What are the main issues being discussed in the case?The French dairy giant Danone, whose water products contribute 27 percent of the firm's global sales, is suffering from an unhappy decline in recent years. Although Danone's water products, led by Evian, are stable favourite in homeland and rest of Europe, Evian's market share in the U.S. have shrunk from ranking one 7.2 percent to ranking four 3.6 percent between 1996 and 2001. In order to compete against Pepsi's Aquafina and Coca-Cola's Dasani which pulled ahead of Evian, a major strategic plan 'Diversification' (reduce Danone's dependence in Europe, enhance water operations in U.S.) had implemented by ...view middle of the document...

S. (including five production facilities, a license for the use of the Dannon and Sparkletts brands and ownership of several value brands), Coca-Cola pays Danone $128 million cash for 51 percent ownership interest and will provide marketing, distribution and brand management. The most essential is Coke's volume and profit guarantee which requires linear growth of sales volume (currently 20 percent annually). However, it is unclear what penalty Coke will face if it fails to secure proper growth level.The murky bottled water market in the U.S. which classification have little impact on consumption choices, leads to Evian's embarrassment in entering the cola-controlled distribution systems. In fact, the extreme price-sensitivity and less knowledgeable U.S. customers (compare with Europe customers) are simply fond of less expensive bottled water (Evian's average price per case is about 80 percent higher than that of Aquafina or Dasani).Given existing operations and strategies of Danone, there are some questions for Riboud to ponder. Are the joint ventures with Coca-Cola the bright decisions which assure success for Danone and Evian, especially under Coke's uncertain guarantee in Evian's gain for market share in the U.S.? Or the alliances with Coke fail, three alternative strategies (i.e. 'Go it alone', 'Get out of U.S. market', 'Merger') have to be weight pros and cons carefully. These questions will be mentioned below excepting 'Merger'.Q2 Why has Evian's U.S. market share continually decreased since the emergence of the cola giants' bottled water brands in the late 1990s?If not the U.S. market, then Evian has built a strong worldwide presence. Hence, this question aims at U.S. market rather than the rest. Evian's market share has continually decreased due to following factors.Consumption habitsHabits are conceptualised as inertia in consumer behavior and one form of context-cued responding that can perpetuate consumer choices (Ji and Wood, 1997). Unlike Europe, where consumers are knowledgeable and gladly pay a premium for the glacier-sourced Evian, U.S. customers take indifferent attitudes towards bottled water classification. Actually, they are extremely price-sensitive and tend to believe the cheaper the better. Under these consumption habits, the U.S. customers simply choose the less expensive bottled water (such as Aquafina and Dasani which are on average 45 percent cheaper than Evian).Distribution networkSuccess in the U.S. water market means access to a giant cola-run distribution network that includes access to rented store shelves. Although Evian is rarely a preeminent brand which survives in restricted points of sale (i.e. convenience-store, grocery store, street vendor), it is still unable to compete against a strong and established network in control of cola giant. This results in the fact that the U.S. customers could purchase Aquafina and Dasani anywhere within the U.S. which is Evian not capable of doing.PromotionConsumption habits...

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