Number of Words : 1295
This paper analysis the following case study -
Nestlé has flown into another storm concerning its approach to marketing in the Third World.
Bottled water has been one of the success stories of the past 20 years. Always popular in some European countries such as France and Italy, fears about contamination of water supplies coupled with rising affluence has resulted in exponential growth in the market in countries where previously people were perfectly happy to drink tap water. The growth in the world population, and consequently increasing pressure on freshwater supplies, means that tap water in many countries is either contaminated or (at best) tastes unpleasant owing to residues from the purification system.
The problem for many of the firms in the industry has been the cost of purifying and bottling the water; traditional sources of mineral water, such as the Perrier springs, are inadequate to cope with the potential world supply. Nestlé’s answer to the problem is to source the water in China, where bottling costs are low, and rather than use expensive spring water, to purify ordinary tap water. This renders the water safe to drink, but at a fraction of the overall cost of using spring or mineral water.
Nestlé initially entered the Asian market by buying out local brands. The company now owns over 50 local brands in Asia, and is lobbying governments in Pakistan, Ghana and the Philippines to allow foreign ownership of local companies. In some Asian countries, notably Thailand, the market has developed to the point where only the very poorest people would drink tap water; Nestlé hopes to achieve a similar success in countries such as Pakistan, where the company’s Pure Life brand was launched in 1999.
Two months into the launch of the product, Nestle had won 60% of the Pakistani market for bottled water. Although the current projections for the market are low (Nestlé estimates that Pakistanis will drink an average 0.2 liters per annum of bottled water, compared with Italy’s average 154 liters per person), the potential for growth is correspondingly huge. In particular, Nestlé has not been slow to notice that the market growth in next-door India was 400% between 1993 and 1997.
The company’s publicity campaign emphasizes the purity and safety aspects of the water. Store banners reading ‘Pure Safety. Pure Trust. The ideal water, from Nestlé with love’ are seen throughout the country, and billboards urge people to ‘Drink only Nestlé Pure Life’.
Nestlé expects that most customers will come from the affluent, urban classes, and this poses a problem from the viewpoint of Third World pressure groups such as Oxfam. Oxfam points out that much of the tap water in Pakistan is of ‘debatable’ quality; about 80% of diseases in the Third World and one-third of the deaths are caused by contaminated water, and some commentators believe that Nestlé’s action in bottling water will actually worsen the situation, because it might reduce the political will to act in bringing all drinking water up to safe standards.
Nestlé has also been criticized for some of the PR exercises undertaken on their behalf by their advertising agents; seminars were run explaining the health risks attached to drinking tap water, and ‘health education’ campaigns run in the Pakistani press also heightened fears about drinking any other water but Pure Life. Some of these activities were undertaken without Nestlé’s knowledge or approval, but they have resurrected memories of the baby-milk scandal of the 1970s and 1980s. The managing director of the Lahore Water Supply Company is reported as saying ‘These foreign companies are misleading people to make money.’
Despite these problems, Nestlé is planning to spend up to $250m on bottling and marketing the water in Asia between 2000 and 2004. This includes spending $150m on a new bottling plant in China. In the longer term, if the Asian market reaches the same levels of consumption as most Western European markets, Nestlé stands to be in the forefront of the world bottled water market.
This paper answers the following questions on the case study – <br />1. What trends in the global market are Nestlé addressing?<br />2. How might the company overcome the negative publicity surrounding its campaign in Pakistan?<br />3. How does Nestlé’s success in the market relate to globalization drivers?<br />4. What future trends would help Nestlé?<br />5. Bottled water is usually promoted in terms of its purity; why should this be a problem in Pakistan?<br />
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