SUMMARY
SUMMARY ■ Although the principles of selling abroad are the same as those in the home
country, the international businessperson must deal with a less familiar environment, which may be subject to rapid change.
■ Some methods for broadly assessing foreign demand for products are analysis of consumption patterns, estimates based on what has happened in otha countries, studies of historical trends, income elasticity, regression, and gap analysis. Some problems with these tools include taste and technology changes that render past observations and observations in other countries invalid for specific countries.
■ A standardized approach to marketing implies maximum uniformity in products and programs among the countries of operation. Although this will min-
Burton and Ed McMahon are now 'hooked' on Perrier" and Perrier "contains no sodium which causes heartburn."
These claims were abandoned in favor of messages emphasizing the water's qualities as a natural thirst-quencher with no calories and no additives. Initial promotion was regional, relying heavily on the print media. Groups of food and beverage writers were invited for dinners and exhibitions so that they would write about Perrier. The company sponsored marathons so that the product would be associated both with "healthiness" and "thirst-quenching." As distribution became national, Perrier switched to television spots on major networks. The advertising budget was set high. Perrier was able to maintain snob appeal by getting tidbits in gossip columns about celebrities being seen sipping Perrier in the "right places."
Sales increased rapidly to over 200 million bottles in 1980. The increase did not go unnoticed by either the media or competitors. By 1979 a bottling executive said, "Everyone with water seeping from a rock is buying glass, slapping a label on it, and marketing a new bottled water." Some of the old bottled spring water firms suddenly sought a larger share of the growing market. They promoted blind tasting comparisons to emphasize that U.S. water was just as tasty as the imports. Nestl^'s Deer Park brand made a challenge with a spring water priced 35 to 40 percent below Perrier. A Chicago firm, Hincley and Schmitt, introduced Premier in a bottle with a label that unashamedly copied Perrier. Its theme was, "Let your guests think it's imported." Norton Simon's Canada Dry began repositioning its club soda to be more competitive with Perrier. A market-research group, SAMI, reported 104 brands of bottled waters in its territory.
By 1980, Bruce Nevins believed that the "U.S. market for sparkling water is in the process of maturing." Perrier's sales peaked in 1980 and began falling, largely because of competition from domestic seltzer (carbonated tap water) and domestic club soda (carbonated tap water to
which mineral salts are usually added). Sales of imported water in the United States fell from 28.1 million gallons in 1979 to 12.1 million in 1982. To combat U.S. domestic competition, Perrier repurchased Poland Spring in 1980. After buying Poland Spring in 1976 for $1 million, Poland Spring's new owners had carbonated the still water, modernized the facilities, and captured 6 percent of the bottled-water market. The reported purchase price in 1980 was $10 million. But most of the growth in bottled waters was not for spring waters, which constituted only 11 percent of the bottled-water market by 1982. Another problem was that the name Perrier was becoming practically generic as customers increasingly asked for Perrier when they simply wanted some kind of sparkling water.
In 1982 Perrier devised a new U.S. strategy, the handling of specialized imports that could be sold to market segments similar to those to which Perrier seemed to appeal. This segment was described by different Perrier officials as "aspirant people who try to improve their quality of life," as "households with incomes of $30,000 or more," and as "the same people who tend to buy better fashions, better cars, and the like." Perrier took on Lindt chocolate from Switzerland in 1982 and Bonne Maman preserves from France in 1983. Both of these firms had been selling previously in the U.S. market with annual sales of $1 million and $1.5 million before the Perrier connection. By 1984 their sales were estimated to be $15 million and $5 million, respectively. In 1985 Perrier began marketing its mineral water with traces of lemon, lime, or orange flavoring to try to shore up its U.S. water sales.
But what had appeared to be a maturing of the U.S. bottled-water market turned out to be a mere blip. By the mid-1980s industry sales were growing at between 15 and 20 percent annually, the second-fastest beverage growth just behind wine coolers. The fastest segment of that growth was for imported mineral water. But the U.S. market has continued to be fragmented. One reason is that the cost and technology to enter
the market are low; thus 50 new companies started up in 1986 alone. A second reason is that transportation costs lead to regional distribution. By 1985 only Perrier was distributed nationally because it is actually cheaper to ship the water from France than to ship domestic waters across the United States by truck or rail. By 1988 several industry trends seemed apparent to Perrier's management:
1. Growth in all sectors of the bottled-water market would be robust over the next ten years, especially in geographic areas not yet accounting for a large share of the sales.
2. Big competitors increasingly would get involved. Coca-Cola, PepsiCo, Anheuser-Busch, and Japan's Suntory had all recently become involved in some aspect of the market through ownership, bottling, or distribution.
3. Because of the capital-intensive nature of distribution (e.g., cost of adding trucks), growth would be more apt to come from acquisitions by the bigger competitors than from the start-up of new firms.
4. New importers would attack Perrier through targeting specific U.S. market niches. For example, Rambosa (Sweden) targeted snooty consumers, Eau Canada Sparcal (Canada) played up its high calcium content to appeal to women fearful of developing weak bones, and Heart of Tuscany (Italy) promoted its low mineral content for therapeutic value.
As a result of these trends, Perrier reempha-sized the bottled-water market in the United States as opposed to the handling of related products. This was done largely through acquisitions: Perrier acquired Calistoga in California, Oasis Water in Texas, and Zephyr Hill in Florida. It outbid major competitors to acquire Arrowhead, the market-share leader in bottled water, for an estimated $500 million. Perrier has made no attempt to connect these brands to the Perrier name.
In 1990 Perrier was hit by two unforeseen events that had a negative impact on its U.S. sales. First, due to a bottling worker's error in France, some bottles reaching the U.S. were contaminated with benzene, forcing a worldwide recall. Second, the Federal Food and Drug Administration (FDA) required two changes in Perrier's labels: The terms "naturally sparkling water" and "calorie free" had to be dropped because of carbonation added and because "calorie-free" seemed to imply that other water contains calories. Prior to the recall the Perrier brand held 5.7 percent of the U.S. bottled-water market and 44.8 percent of the imported market, but these sales fell 42 percent in 1990. Its major French competitor, BSN's non-bubbly Ev-ian, became the number-one U.S. water import. Yet Perrier-owned brands in the United States, which held 18.2 percent of the bottled-water market, increased their sales so that overall sales went up by 3 percent in the U.S. market.
Many U.S. analysts openly questioned whether Perrier would ever regain the market share that had made it the best-selling bottled water in the United States. U.S. supermarket sales rebounded to their earlier level in the first year after the benzene-scare recall; however, sales in restaurants and bars, which had accounted for 35 percent of the Perrier brand sales in the United States, have not recovered completely. In contrast, Perrier regained its French market share (the number 2 position after BSN's Badoit for bubbly water) almost immediately after relaunching the water in 1990.
In 1991 Perrier's new chairman, Jacques Vincent, announced a long-term strategic change for Perrier. The company plans to position Perrier as a more exclusive product to be sold mainly in restaurants. Supermarket sales will focus on locally produced, less expensive brands that are not readily associated with the Perrier name. To this end, Perrier acquired Volvic and Contrex, two popular brands in Europe outside of France. Through brand diversification, Perrier expects to be able to minimize problems with any single brand.
country, the international businessperson must deal with a less familiar environment, which may be subject to rapid change.
■ Some methods for broadly assessing foreign demand for products are analysis of consumption patterns, estimates based on what has happened in otha countries, studies of historical trends, income elasticity, regression, and gap analysis. Some problems with these tools include taste and technology changes that render past observations and observations in other countries invalid for specific countries.
■ A standardized approach to marketing implies maximum uniformity in products and programs among the countries of operation. Although this will min-
Burton and Ed McMahon are now 'hooked' on Perrier" and Perrier "contains no sodium which causes heartburn."
These claims were abandoned in favor of messages emphasizing the water's qualities as a natural thirst-quencher with no calories and no additives. Initial promotion was regional, relying heavily on the print media. Groups of food and beverage writers were invited for dinners and exhibitions so that they would write about Perrier. The company sponsored marathons so that the product would be associated both with "healthiness" and "thirst-quenching." As distribution became national, Perrier switched to television spots on major networks. The advertising budget was set high. Perrier was able to maintain snob appeal by getting tidbits in gossip columns about celebrities being seen sipping Perrier in the "right places."
Sales increased rapidly to over 200 million bottles in 1980. The increase did not go unnoticed by either the media or competitors. By 1979 a bottling executive said, "Everyone with water seeping from a rock is buying glass, slapping a label on it, and marketing a new bottled water." Some of the old bottled spring water firms suddenly sought a larger share of the growing market. They promoted blind tasting comparisons to emphasize that U.S. water was just as tasty as the imports. Nestl^'s Deer Park brand made a challenge with a spring water priced 35 to 40 percent below Perrier. A Chicago firm, Hincley and Schmitt, introduced Premier in a bottle with a label that unashamedly copied Perrier. Its theme was, "Let your guests think it's imported." Norton Simon's Canada Dry began repositioning its club soda to be more competitive with Perrier. A market-research group, SAMI, reported 104 brands of bottled waters in its territory.
By 1980, Bruce Nevins believed that the "U.S. market for sparkling water is in the process of maturing." Perrier's sales peaked in 1980 and began falling, largely because of competition from domestic seltzer (carbonated tap water) and domestic club soda (carbonated tap water to
which mineral salts are usually added). Sales of imported water in the United States fell from 28.1 million gallons in 1979 to 12.1 million in 1982. To combat U.S. domestic competition, Perrier repurchased Poland Spring in 1980. After buying Poland Spring in 1976 for $1 million, Poland Spring's new owners had carbonated the still water, modernized the facilities, and captured 6 percent of the bottled-water market. The reported purchase price in 1980 was $10 million. But most of the growth in bottled waters was not for spring waters, which constituted only 11 percent of the bottled-water market by 1982. Another problem was that the name Perrier was becoming practically generic as customers increasingly asked for Perrier when they simply wanted some kind of sparkling water.
In 1982 Perrier devised a new U.S. strategy, the handling of specialized imports that could be sold to market segments similar to those to which Perrier seemed to appeal. This segment was described by different Perrier officials as "aspirant people who try to improve their quality of life," as "households with incomes of $30,000 or more," and as "the same people who tend to buy better fashions, better cars, and the like." Perrier took on Lindt chocolate from Switzerland in 1982 and Bonne Maman preserves from France in 1983. Both of these firms had been selling previously in the U.S. market with annual sales of $1 million and $1.5 million before the Perrier connection. By 1984 their sales were estimated to be $15 million and $5 million, respectively. In 1985 Perrier began marketing its mineral water with traces of lemon, lime, or orange flavoring to try to shore up its U.S. water sales.
But what had appeared to be a maturing of the U.S. bottled-water market turned out to be a mere blip. By the mid-1980s industry sales were growing at between 15 and 20 percent annually, the second-fastest beverage growth just behind wine coolers. The fastest segment of that growth was for imported mineral water. But the U.S. market has continued to be fragmented. One reason is that the cost and technology to enter
the market are low; thus 50 new companies started up in 1986 alone. A second reason is that transportation costs lead to regional distribution. By 1985 only Perrier was distributed nationally because it is actually cheaper to ship the water from France than to ship domestic waters across the United States by truck or rail. By 1988 several industry trends seemed apparent to Perrier's management:
1. Growth in all sectors of the bottled-water market would be robust over the next ten years, especially in geographic areas not yet accounting for a large share of the sales.
2. Big competitors increasingly would get involved. Coca-Cola, PepsiCo, Anheuser-Busch, and Japan's Suntory had all recently become involved in some aspect of the market through ownership, bottling, or distribution.
3. Because of the capital-intensive nature of distribution (e.g., cost of adding trucks), growth would be more apt to come from acquisitions by the bigger competitors than from the start-up of new firms.
4. New importers would attack Perrier through targeting specific U.S. market niches. For example, Rambosa (Sweden) targeted snooty consumers, Eau Canada Sparcal (Canada) played up its high calcium content to appeal to women fearful of developing weak bones, and Heart of Tuscany (Italy) promoted its low mineral content for therapeutic value.
As a result of these trends, Perrier reempha-sized the bottled-water market in the United States as opposed to the handling of related products. This was done largely through acquisitions: Perrier acquired Calistoga in California, Oasis Water in Texas, and Zephyr Hill in Florida. It outbid major competitors to acquire Arrowhead, the market-share leader in bottled water, for an estimated $500 million. Perrier has made no attempt to connect these brands to the Perrier name.
In 1990 Perrier was hit by two unforeseen events that had a negative impact on its U.S. sales. First, due to a bottling worker's error in France, some bottles reaching the U.S. were contaminated with benzene, forcing a worldwide recall. Second, the Federal Food and Drug Administration (FDA) required two changes in Perrier's labels: The terms "naturally sparkling water" and "calorie free" had to be dropped because of carbonation added and because "calorie-free" seemed to imply that other water contains calories. Prior to the recall the Perrier brand held 5.7 percent of the U.S. bottled-water market and 44.8 percent of the imported market, but these sales fell 42 percent in 1990. Its major French competitor, BSN's non-bubbly Ev-ian, became the number-one U.S. water import. Yet Perrier-owned brands in the United States, which held 18.2 percent of the bottled-water market, increased their sales so that overall sales went up by 3 percent in the U.S. market.
Many U.S. analysts openly questioned whether Perrier would ever regain the market share that had made it the best-selling bottled water in the United States. U.S. supermarket sales rebounded to their earlier level in the first year after the benzene-scare recall; however, sales in restaurants and bars, which had accounted for 35 percent of the Perrier brand sales in the United States, have not recovered completely. In contrast, Perrier regained its French market share (the number 2 position after BSN's Badoit for bubbly water) almost immediately after relaunching the water in 1990.
In 1991 Perrier's new chairman, Jacques Vincent, announced a long-term strategic change for Perrier. The company plans to position Perrier as a more exclusive product to be sold mainly in restaurants. Supermarket sales will focus on locally produced, less expensive brands that are not readily associated with the Perrier name. To this end, Perrier acquired Volvic and Contrex, two popular brands in Europe outside of France. Through brand diversification, Perrier expects to be able to minimize problems with any single brand.
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