Archive for the ‘Brand’ category

Distribution Is More Important than Advertising

25 June 2010

First, a disclaimer: I do not drink bottled water. I use filtered water using the same process most of the major brands use: reverse-osmosis. Almost all bottled water is either filtered tap water or water from springs that are usually less healthy than New York tap water. In fact, some bottled water is merely unfiltered tap water.

You may be interested to learn that US consumers spend more on bottled water than on iPods or movie tickets, although sales have fallen in the past few years due to environmental concerns and the bad economy. New York, Illinois and Virginia state governments have banned bottled water at public events and in state offices. Some eco-conscious companies like Cisco and Google have removed it from their corporate campuses as well.

I will not discuss why consumers would pay up to 10,000 times more for bottled water than what they can get in their own homes; I want to discuss who gets the major share of the 50 billion bottle per year sales in the US and why.

The top two sellers in the US, Aquafina from PepsiCo (launched in 1994) and Dasani from the Coca-Cola Company (launched in 1993), both originate from municipal water systems. But they did not start the bottled water business. There were hundreds of smaller, family-owned companies that were operating for more than a century. For example, Mountain Valley Water (launched in 1871) became the first bottled water to be available coast to coast in 1928.

But despite hundreds of companies, bottled water was barely a business in 1976 when the makers of a small green bottle opened an office in New York. By 1988 Perrier had 80% of the imported bottled water market by convincing restaurant owners that they could make more money touting bottled rather than tap water to their patrons.

So the two big Cola bottlers were decades late to the party. In addition, most of the century old bottlers were selling water from natural springs, while Coke and Pepsi were merely selling filtered tap water. But being first or having a superior product is not what drives a market.

As much as advertising and packaging are important to sales, nothing pushes consumer purchases as shelf-space. Advertise all you want, make it look pretty, but if your product is not in every supermarket, on the right shelves, you are not going to turn over product.

If there is one thing that Coke and Pepsi have, it is distribution. By tapping into their large network of bottlers, they have immediate access to the same shelf space at every supermarket in the country. If a new type of drink comes along, say goat-juice, as disgusting as it may sound, if Pepsi and Coke put it on their shelves then you can take it to the bank that those particular brands of goat-juice would outsell anyone else.

And with a little bit of advertising and the right packaging, it could be a national drink in short order.

By the way, NestlĂ© is the world’s largest water bottler by virtue of having many more brands, such as Poland Spring (3rd in sales), Deer Park, S. Pellegrino and Perrier. NestlĂ© as well has great distribution powers.

Toyota Brand Still Strong

20 April 2010

toyota recallA few months ago we read headlines that Toyota Customer Loyalty Takes a Hit After Massive Recall.

Yet according to the Consumer Reports 2010 Car Brand Survey, 60 percent of current Toyota drivers said they would most likely purchase another Toyota (that’s only a drop in 10 percentage points from a December 2009 survey) and Toyota’s Overall brand perception is still the highest.

But you couldn’t tell Toyota was having any problems at a packed local New Jersey auto lot. My wife and I went looking for an 8 passenger SUV the other day and we thought since Toyota was having safety issues that this would be a good time to buy a Toyota. Apparently so did many other car shoppers.

We asked if there were any discounts – nope. We asked if there was any reduced finance charges – nope. We asked if there were any deals – nope. The reason? Toyota Brand loyalty. People were still willing to buy Toyotas despite its current problems.

What does this say about building brand strength? Even bad news, if your brand is strong enough, cannot hurt you.