Tipperary Mineral Water Company (TMWC) was founded in 1986 in Tipperary, Ireland. Currently, the company is part of the Gleeson group and its headquarters is in Dublin. Gleeson Group also manufactures other products such as wine and cider. In addition, it boasts of being among the 200 best companies in Ireland. TMWC specializes in the production of still and sparkling mineral water (Gleeson Group). These two brands are recognized as being the first Irish mineral water that actually met the requirements set by the European Union in regards to such products.
In addition, the company also expanded its products portfolio by introducing flavored mineral water, mineral water for children, energy drink mineral water and glassed mineral water. These products have made the company a force to reckon with in Ireland by guaranteeing a 15% market share in Ireland. This success is attributed to the fact that these new products have won the British Bottlers Institute gold award severally. Despite these notions, consumption of mineral water in Europe is becoming a common place and many companies (existing and new) are investing heavily in this product so as to capture a piece of the seemingly lucrative venture. In fact, statistics indicate that the consumption of mineral water in the European market has increased significantly due to consumer preference.
In addition, documented evidence indicates that most people prefer mineral water than alcohol in social events. These factors indicate that there is high competition between associate companies for the natural resource as well as for the consumers within the European market. It is for these reasons that TMWC has decided to expand its operations to other markets.
Before doing this, it is always important to segment the potential markets so as to have a selection process that is efficient and successful. In this paper, we are going to analyze the potential markets that TMWC should consider within and outside Europe. The entry strategy that is most suitable for each market shall be evaluated using the International Market Selection (IMS) model developed by Hollensen (Keegan and Schlegelmilch 27).
As mentioned earlier, mineral water is easily becoming a preferred substitute for alcoholic beverages in the European market. In addition, more people in Europe prefer taking bottled water as compared to tapped water (Bernan 12). This is attributed to health and environmental hazards that are associated to the latter. As such, Europe would be a great investment opportunity for the TMWC considering that the company has an array of differentiated products to offer the European consumers. Still mineral water seems to dominate the market and it is followed by Sparkling mineral water, which is used occasionally by consumers.
However, the flavored mineral water would not do so well in this market since consumers do not like it as yet. Some of the factors that are going to be considered while selecting the suitable market include but are not limited to competitors, demography, barriers to entry or exit, political and social stability, economic development of the markets, brand importance and distribution channels.
Germany, France, Italy and the U.K are the best markets to invest in in Europe. Germany should be the first choice since it offers the largest market for mineral water.
Germany has over 490 competitors for this product. Majority of the brands in this market are local and there are a few private labels which constitute an average of 3% of the market share. The main competitor in this market is Gerolsteiner Brunnen GmbH & Co. this company has an 11% market share. In regards to distribution, most of the sales (71%) of all brands are made by supermarkets and specialist bulk stores (Mineralwaters.
org). Germany is the best option since the German consumers tend to buy more carbonated water as compared to other European countries. In addition, the consumers prefer sparkling water more that they do still water. The flavored brands do not do well in this market. In addition, consumers’ desire to lead a healthy lifestyle has greatly increased the market growth and demand for mineral water by a rate of 8.
2% in regard to sales recorded between 2006-2007 financial years (Mineralwaters.org). Unlike in other European countries, consumers in Germany tend to buy a huge amount of carbonated water.
The sale of sparkling water is higher than still water. Flavored water is unimportant and has a very small market share. The trend towards a healthy lifestyle is also contributing to the market growth rate of 8.2% in term of sales from 2006-2007.
Considering that the products of TMWC emanate from a natural source, it would be impossible and expensive to produce the water in other markets (since the company cannot move the water source). As such, the best entry strategy would be to apply a direct export strategy (using agents or intermediaries) to distribute the products (Keegan and Schlegelmilch 34). To attract a viable consumer base, the company should create brand awareness by using the main distribution channels, which in Germany are supermarkets and bulk stores. In addition, it should focus its efforts in exporting the still and sparkling water as well as its plastic bottled products.
The flavored and kids mineral water brands should be ignored since they may lead to losses.
Most developing and developed countries outside Europe do not use mineral water sine it is more of a luxury than a need. As such, countries that use this product have a high purchasing power or the prices are affordable to the consumers. As such, the best market to invest in would be the U.S. market. The off-trade sales revenue for mineral water in this market grew by 13.
37% in 2006-2007. In addition, this market consumes a huge amount of still water as compared to sparkling and flavored mineral water (Bernan 12). In regard to competition, Nestle SA is the leading competitor with a 19% market share. It is followed by Groupe Danone SA, which has a 10% market share. The main consumers of mineral water in this market are aged between 35 and 44 years. In regard to distribution, 64% of all sales are made through supermarkets and food outlets while 15% of the remainder is accomplished through vending machines (mineralwaters.
org). Similarly, the best way of entering this market is by direct exportation. The main advantage of using intermediaries and agents is that they help a new company cope with the challenges associated with marketing in new international markets.
By using this strategy, TMWC will be able to market its product and advertise itself in a highly competitive market. TMWC should only export the still water products to the U.S. market.
The other brands cannot compete with the well established sports and energy drinks that dominate this market.
From this report, it is evident that TMWC has the potential to become an international brand. However, it should tread carefully before venturing into new markets. To this end, recommendations on the best markets for entry within and outside Europe have been offered and strategies to ensure that the products sold are profitable given.
The entry strategy recommended herein will ensure that TMWC creates awareness of its product thereby placing it in a good position to compete for a larger market share in the future.
Bernan, Michael. Minerals Yearbook: Area Reports: International 2005, Europe and Central Eurasia.
USA: Government Printing Office, 2008. Print. Gleeson Group. Tipperary Waters: Brands. Jan. 2011. Web. 06 September, 2011.
http://www.gleesongroup.ie/brands/water/keegan, Warren and Bodo, Schlegelmilch. Global marketing management: a European perspective. New York: Financial Times Prentice Hall, 2001. Print. Mineralwaters.
org. Mineral Waters of the World: Market Statistics for Bottled Water. Web. 06 Sept, 2011.