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retail market, which made up the bulk of the total volume sold in the United States, was by
contrast, characterised by steep price and distribution elasticities. Consumers bought
mainly on price and availability. They tended not to be willing to pay premium prices for
products and would purchase those products that were available, rather than buy specific
brands. As might be expected in this price sensitive retail market, a substantial proportion
of total sales occurred during special offer periods. Purity of supply remained an important
promotional element, with the authorities providing certification of water content, which
was vital to achieve a reasonable level of sale. Large pack sizes were commonplace, with
gallon - 3.6 litre - plastic containers the favourite size.
The competition
The retail market was dominated by three brands, each with over 15 per cent of the
market: Deer Park, Appalachian Spring, and Mountain Dew. All three had a target $0.99
retail for a gallon, but each discounted heavily during sales promotions. The average
discount offer was for $0.10, or 5 gallons for the price of 4. Branchwater with its 5 per cent
market share in the areas where it was sold, aimed for a target price of $1.10 based
around a superior product benefit. It was believed that the price elasticity in the market
was high, around 7 to 10 which meant that pricing and cost control was vital to a
successful product.
Product benefit
Branchwater had detailed market research for its sales areas. This had shown that in
addition to price and availability there were two other important influences on purchasing.
The first was purity. The typical bottled water customer was interested in the source of the
water and the certification. The detail on the packaging was also perceived as another part
of the product benefit, confirming the quality of the water and its purity. The management
of Branchwater had taken this concept further and had introduced a clear plastic bottle -
the competition, in contrast, continued to bottle product in mottled or blue containers. The
choice of clear plastic had a minor, but unimportant effect on shelf life. Bottled water
generally had a long shelf life, in excess of 8 months, but clear plastic meant that the taste
of product might alter if exposed to strong sunlight over a long period of time. This change
reduced the shelf life by approximately 5 weeks, but had little real effect on the product
because of the normal speed of sale. The second important element of the product benefit
was attitudinal. In the restaurant/cafe sector the attitudinal component emphasised
sophistication, while in the retail sector traditional values were more important. The name
Branchwater was largely a result of this research. Branchwater was associated with pure
spring water, only available high up in the hills before it joined another stream (above the
branch, or branchwater).
Distribution channels
Supermarkets accounted for 95 per cent of all bottled water sold in the United States.
Volumes were highest in suburban locations, which served the main bottled water
segment, the ABC1 households, particularly those with younger children. Supermarkets
required frequent deliveries into their central depots. Though there were considerable
variations, the majority of outlets could hold 2-3 days' stock but not more. Most outlets also
demanded suppliers support their products with an annual listing fee. For each of the 30
depots that Branchwater supplied this averaged $10,000 per depot per year. A small, but
growing percentage of the market was supplied by home delivery to households with in-
home water coolers. Market surveys suggested that this part of the market was likely to
grow rapidly in the main urban centres. Retail margins were typically around 15 per cent
of the retail price.
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