Klondinke Bottle Company (KBC) is a whole new concept of bottled water in Canadian market with new Plastic bottling technology (PET), rather than glass which add much costs to production. On the other hand, the geographical location of production and distribution facilities suggests excellent transportation rates where Test tube handling is also used which also helps to lower the overall transportation cost. It is also mentioned that there is negligible expenses for using water as a raw material, bacterial testing and ‘Priority water rights’ are there which also helps the company. As a matter of fact, excellent governmental and political support in Yukon for initial capital and advertising is offered to Klondinke bottles Company which definitely supports the initial growth of the business. We also see that there is proper infrastructure present and cost cutting procedures are utilized to its maximum. As a matter of fact, there is enough support of the people of the City of Dawson for the new venture like Klondinke Bottles which also serves as a vantage point for the company. The company has also injected innovation in bottled water with the introduction of Brich Sap which is medically beneficial and used as the key component in the new bottles. This will help in enhancing the sales pattern of the company.
On the other hand, we see that the company did not use attractive packaging for bottle which could have helped in good sales in the start of the business. Also there are no too many products in the product line to serve different segments in the market. This could have a negative impact on company’s image. Also, managerial problems are visible in the case. Budget constraint will not allow the launch of the products in the say it should have been; which restricts many advertising and promotional campaigns.
As far as the opportunities are concerned, the case suggests that there is a new trend which greatly suggests increasing demand for bottled mineral water by the people if compared to the municipal provided water. It also explains that pricing is not a problem as people purchase water even from French companies which are much costly. Also, industry size is swelling day by day; from of $44.7 million in 1988 to $337.3 million in 1997. This also calls for an opportunity for the company to expand by using maximum funds available to them. There is a huge potential present for the Canadian bottlers to export, which in last few years jumped to $206 million which accounted for 61% of their manufacturing volume. Also, there is an expectation of double digit growth in the next five years in the bottled water industry in Canada. As a matter of fact there is a presence of good international image for Canadian water, which also serves as an opportunity by KBC to avail.
As potential threats to the company, there are more than 100 water brands are present in the Canadian market. This shows that there is fierce competition amongst different bottled water brands in Canada. It is also known that PET bottles is not biodegradable and has a particular resentment by environment protectionists. The market also expectations of new entrants with innovation is another potential threat. There is also a threat as the presence of giants like Pepsi and Coca-Cola producing water brands of their own. The case also suggests that there is contaminated water as the most strong threat as water is the basic raw material which can put the entire existence of the company into jeopardy.
- New Plastic Bottling Technology (PET)
- Excellent transportation rates
- Test tube handling
- Negligible expenses for using water as a raw material, bacterial testing and ‘Priority water rights’
- Excellent governmental and political support in Yukon for initial capital and advertising
- Proper infrastructure and cost cutting
- Support of the people of the City of Dawson for the new venture
- Brich Sap is medically beneficial which is the key component in the new bottles
- Attractive packaging for bottle is not utilized
- Not too many products are there in the product line to serve different segments in the market
- Managerial problems are visible in the case
- Budget constraint will not allow the launch of the products in the say it should have been.
- Greatly increasing demand for bottled mineral water by the people than municipal provided water.
- Pricing is not a problem as people purchase water even from French companies much costly.
- Industry size is swelling day by day; from of $44.7 million in 1988 to $337.3 million in 1997.
- Canadian bottlers exported $206 million of bottled water, which accounted for 61% of their manufacturing volume.
- Expectation of double digit growth in the next five years in the bottled water industry in Canada.
- International good image for Canadian water
- Exchange rate of the Canadian dollar favors bottled water exports
- 'Oxygenated Water' is another key opportunity to attract health oriented water users
- Flavored mineral water with zero calories is another potential target product to jump in
- Attractive and facny bottle packaging can be used in future
- More than 100 water brands are present in the Canadian market.
- PET is not biodegradable and has a particular resentment by environment protectionists
- Fierce competition amongst different bottled water brands in Canada
- Expectations of new entrants with innovation is another potential threat
- Presence of giants like Pepsi and Coca-Cola producing water brands of their own
- Homogeneity in bottled water products does not permit effective branding
- Governmental and Ministry of health laws
- Rise in taxation and other overhead expenses due to recession
- Labor unions are another threat
- Contaminated water is another threat which can damage the whole water filtering process
The objective of this case is to analyze Klondinke Bottles on a strategic level. The company had a successful sister concern gold mine in Yukon Territory. The President of Oro Enterprises, Greg Hakonson considered the opportunity to avail a bottling plant for water. The concept was to develop Klondinke Bottles that would bottle President of Oro Enterprises; Greg Hakonson considered the opportunity to avail a bottling plant for water. The concept was to develop Klondinke Bottles that would bottle Yukon water in Canada. As a matter of fact, the bottled water industry in Canada is much homogenous with little brand recognition. Only some of the brands had brand loyalty and strong recognition shown by the consumers. The main objective of this study is to analyze the bottled water market in Canada in the presence of more than hundred water brands. Also, giving Klondinke Bottles one of a kind brand recognition to the right target market at right time. It also discusses availing different opportunities and injecting innovation in water bottling as many of the water companies have been doing for competitive edge. Unfortunately, Klondinke bottling Company (KBC) is far behind in innovation. Right now, its is to evaluate the acquisition of several small water players in Canada and also Brich Sap is medically which is to be used in bottled water as a key component; which is considered as medically beneficial. Competing in Canadian bottled water market is not an easy job where no as such target market demarcations are made in many cases. Therefore, this study aims to strategically fit Klondinke bottle in the Canadian bottled water market and introducing products based on different prices and Stock keeping units (SKUs) so it could serve different consumers with different needs.
Overall strategy for positioning the product
As mentioned above, Canadian bottled water market is very homogenous. With the presence of over hundreds of water brands, even from France, it is much difficult to launch a new product and create brand recognition. Bottled water is a ‘low involvement’ purchase and does not carry any strategic buying analysis by the consumer. Therefore, it is implicitly purchased and in most case, consumed in the same manner. The main target of Klondinke bottling Company (KBC) is to establish the right product for the right target market and build brand loyalty in the market. Right target market always guaranteed extensive profits and brand loyalty in lesser time.
Doing so will not be an easy job. There are several aspects which are to be taken care of in order to successfully establish a water product. Firstly, there should be innovation injected in the product so that it automatically creates a new space in the market. There are many brands which have been showing positive cash flows due to having flavored and low calorie mineral water; for example Aloe Splash, Aqua Fruta, Aspen Flavored Water, Bearli, Geyser Beverages, Watermelon Illusion H2O Water, Le-Nature's Super Premium, Tropical Mist Mandarin, Meridian Clear, Kuhlar, Kwencher, Vari-Berry, Scott's Down Under Springs, and Very Fine Fruite 2O etc.
On the other hand, value function is also very important. What a consumer requires in the contemporary market is the ‘value’ in every product it consumer with respect to the cost he is going to pay. Highest value characteristics are always preferred at paying low cost. The same concept has to be applied by Klondinke bottling Company (KBC) in order to build a good customer base in the Canadian market.
For a better position in the market, it is suggested that ‘market penetration’ strategy is to be used. In this, low prices are to be set in order to enter the market and attain a good customer base. With the passage of time, prices could be increased accordingly. This very strategy is widely used in many parts of the world by companies like Klondinke bottling Company (KBC) for bottled water. As far as the new product mix is concerned, using Brich sap is a novel idea. The product mix involves Flat Spring Water, Enhanced Flat Spring Waters, Enhanced & Flavored Flat Waters ,Flat Spring Water/Birch Sap Lines ,Enhanced Flat Water/Birch Sap and Enhanced &Flavoured Flat Water/Birch Sap. The right strategy here to used by Greg is to take decision for prices of all the different products and offering different SKUs so that individual product positioning could be done easily and ‘homogeneioity’ could be eliminated.
Rich profile of your target market
Bottled Water market in Canada is much difficult to segment and target. Water is the necessity of every individual. It is well mentioned in the case that there are many problems with the water supplied by the municipal and people are more inclined towards bottled water due to safety and health issues. As a matter of fact, bottled water in Canadian market is showing a rapid growth with every moment passes. Therefore, there are two target market suggested for Klondinke bottling Company (KBC): Consumer market; household family users ideally living two children in Alberta and Consumer market, old people, mostly
Consumer Market: Household; Family with two children
Age: 30 – 50 years old
Income : $ 10,000 - $ 30,000
Personality: She is a wife, mother of two and works in an office. She loves to give time to his house and cares for the entire family. She also takes interest in home décor and always prefers to consume healthy edibles and drinkables for the entire family.
Benefits Sought: Image, status, taste
Usage Rate: Moderately to high mainly
Loyalty Status: Very little and much happy to try new products
Size of Segment: approximately 4,000,000 households
Growth: Stable growth approximately + 4 %
Consumer Market: Retirees, living with family
Age: 40-80 years old
Sex: Male, retired
Income : $ 10,000 - $ 15,000
Personality: He is a retired individual and spending his life with the family. Due to his age, he has Arthritis, and other problems for which he takes medicine two times a day.
Benefits Sought: health, comfort, taste
Usage Rate: Moderately to high mainly
Loyalty Status: Very high
Size of Segment: approximately 500,000 retired individuals in Alberta
Growth: Stable to small growth approximately + 3 %
Out of the two specified target market, according to rational thinking and huge costs involved, it is seen that Household target market is large in number where as the market for retirees is sort of a niche market. The total costs involved is $ 1300000 which is much in terms of serving a niche which is not guaranteed to give positive cash flows. As a matter of fact, Sap brich would allow the elderly people to maintain vitamin and other mineral levels on the higher end. But the prospect from the market looks extremely low. The first target market is showing a stable growth of around 4% where as the former is 3%. Therefore, Consumer market for household is the best target market to be catered by Klondinke bottling Company (KBC).
Marketing mix program
Marketing mix involves:
- Place (Distribution)
- Product :
In order to capture a good share in Canadian bottle water market, a strong product mix has to be formulated. For that conventional plain water will not serve the purpose. The company has chosen Birch Sap as a sweetener from Birch trees. Also there are many medically proven benefits of Sap birch including vitamin C, potassium, manganese, thiamine, and calcium. In sap, the main sugar is fructose, an easily digested simple sugar. As far as the new product mix is concerned, using Brich sap is a novel idea. The product mix involves Flat Spring Water, Enhanced Flat Spring Waters, Enhanced & Flavored Flat Waters,Flat Spring Water/Birch Sap Lines ,Enhanced Flat Water/Birch Sap and Enhanced &Flavoured Flat Water/Birch Sap.
This shows that it is a novel idea to use a combination of both plain water and flavoured water to be introduced in the market. Also, for the first time, the introduction of a medically proven ingredient will definitely serve to strengthen the product mix.
- Price :
Prices are to be done on a very competitive level. Initially the company should go for ‘market penetration’ price in which it should be charging less than $1 for 5 litres water bottle. It would give the company a stance to better approach the target market with high value and quality with low prices. With the passage of time, these prices could be increased when there is an adequate customer base is formed and brand loyalty is there. Different SKUs are to be produced of all of the above mentioned products and therefore different prices are to be set in order to make sure that each product serves a different class of needs shown by the water consumers in Canada.
- Place :
The place selected for the initial launch is Alberta, Canada. Also, there is a growing potential in other states and cities of Canada. Therefore, within two years, the company will start getting positive cash flows and therefore would be able to expand its operations. There is also a growing potential in exporting the bottled water. As the company is bringing a innovation in water by introducing Sap Birch, it will flourish the sales in many marts of the world.
- Promotions :
As mentioned, the bottled water market in Canada is much homogenous. Hence, promotion is the most important tool that is to be used in bringing brand loyalty and sales. For the reason, both Above the hand
(ATH) and Below the hand
(BTH) techniques are to be used. In Above the hand, there should be brand campaigns in airports, colleges, universities, tradeshows, etc and free samples of water should be provided in order to familiarize the target markets with the brand. Also pamphlets, Television Commercials (TVCs), magazines and internet are to be used. In internet Social Media Marketing (SMM) is the most and contemporary advertising tool to be used. Discount coupons, extra liters in low prices, free 18 liters bottle for first one thousand registrations, etc are also effective advertising tools which would draw water consumer’s attention.
In Below the hand, there should be enough profit margins that should be provided to the retailers, distributors and giant stores in Canada, which should be more than the competitors. Most of the competitors are offering up to 30 % profit margin, where as Klondinke Bottles Co. (KBC) should give around 35 % profitability margin to the retailers.
As it is mentioned, the first year, the company is expected to have strong losses and the situation would get better in the next tow to three years. As a matter of fact, in the prelaunch and post launch stages, most of the advertising and promotional activities are required in order to secure future positive cash flows. Therefore, with the anticipation of losses in the first year, it makes it very difficult for the company to make strong decisions for promotional activities. Also, 35 percent profitability share for the retailers and middlemen is much difficult to absorb where the company is facing losses. Therefore, there are some tradeoffs which are to be made in order to have successful launch of Klondinke bottles. Promotional and advertising schemes are way too important to be organized in a very healthy and vigilant manner. The best target market decided is the consumer household market. Therefore it is to be target through Television commercials, magazines and free bottle distributions in retail stores in order to develop a strong base with the housewives and those women who does grocery for the entire household.
Klondinke Bottling Co. (KBC) is taking a start from $1,300,000 in total involving bank loan, owner’s equity and a share of ORO enterprises. The first year is showing heavy losses but the situation gets positive in the second and third year. As mentioned, promotional activities would prove as the key success element in the launch of water brands of the company. But we see that for Advertising & Promotion, the budget is confined to a total sum of $ 30,000. In this situation it is much difficult to launch the product mix on the level which it should be in order to have successful brand recognition and brand loyalty. Also, salaries amount to a total of $ 150,000 which is another negative point in financial matters. As a matter of fact, the entire launching operations could get into jeopardy as working capital is also confined to $ 100,000. Therefore there are serious financial problems which are present in the launching process. There should be efforts made in order to secure more leverage from bank or increased owner’s equity which could back up the entire process and enable the company to have advertising and promotions on the level which ensures profit and success.