2.2. Sales structure of the product
Regardless of geographical region mineral water can be purchased in the form of bottled liquid, in various quantities. There are some exceptions in the areas surrounding rich springs such as Bucovina, Borsec, Vatra Dornei etc…
All forms of retailing apply for the sale of this product, ranging from wholesale to boutiques. Standard sales dynamics apply, the higher the quantity sold the lower the price.
Mineral water can be found in carbonated and noncarbonated form.
Statistics show that consumption of carbonated bottled mineral water declined in favour of still mineral water. A Daedalus market research conducted during January-December 2009 on consumer awareness revealed that 46.4% of people living in urban areas consumed carbonated mineral water, while still water was consumed in proportion of 54.7% by Romanians in the same environment. A result of digestive problems that can be caused by ingesting carbonated water. We therefore come to the conclusion that Romanians exhibit a preference for still mineral water.
Stock increase, optimizing distribution and relationships with retailers are the main supplier tactics used to prevent a mineral water crisis. At the same time, producers continue to invest money in communication and their portfolio, since there will be strong competition between popular brands and private labels.
It is important to note that the importance of modern trade grows at the expense of traditional one. Among the formats that have become more important for the category of bottled water, we include hypermarkets, while the market share of boutiques has declined.
In terms of offer, the entire price range is covered, with premium products to economy and private label ones or imports, and producers continue to come up with new brands or variations of existing ones, or to consolidate the image of already existing brands. It is no longer a surprise that modern retail is gaining ground, both in terms of volume and in value.
Chapter 3.
Market structure
The sales structure is the sum total of all the guidelines, procedures, policies and tools your company uses to sell.
3. 1. Defining the market segment
Bottled mineral water addressed to a large market segment, consists of all individuals and is divided into several categories.
Depending on the socio-demographic criteria the targeted consumer is formed by people of all ages in urban and rural areas willing to meet the freshness of nature at each step, however as was stated beforehand consumption in rural areas is limited.
Depending on economic factors the product is mainly addressed to people from the urban environment that have a more stable and a luxurious life due to a greater availability to all the modern facilities(Internet, telephone, television and satellite communication facilities) along with the increasing number of educational facilities.
The product is also addressed to all three categories of costumers: natural persons, households and legal persons.
Studies indicate that as far as natural persons are concerned, women consume more water (28.2%) than men (15.4%)
Thus, natural persons and households become customers because of their day to day necessity of water in order to satisfy their basic human need for hydration.
Legal persons like retailers speculate this need and buy this consumable in order to sell it to the legal persons and households in order to make profit.
Chapter 4.
Market capacity
4. 1. Definition
Market capacity can be defined as the total demand that exists for a product or service within a particular market, or more simply how much of the product the market can absorb.
4. 2. The number of potential coustomers
We can assume that the potential market for mineral water, as a foodstuff is made from the whole Romanian population plus those who transit the country (foreign tourists)
about 23 million.
4. 3. The number of effective consumers and transaction volume.
The transaction volume of the product in the year 2009 was of about 1000 million litres and the consumption 46.5 litres/capita.
The effective market for mineral water is made of approximately 21 million people.
It is important to remember that anyone who finds himself in need of water will have to either find a tap or purchase a bottle of mineral water; we must also keep in mind that in Romania most bottled water originates from underground mineral springs.
Chapter 5.
Market dynamics
5.1 Average Variation in Sales
For the following calculations we considered:
- 300 million €;
- 360 million €;
n-3;
The sales volume has decreased with 8,71%
*all values are approximated
5.2. Discussing market trends
From the calculations completed above resulted a decrease in sales of 8.71%; a sharp downward incline which is consistent with the current economic climate since demand for water has shifted from mineral bottled to tap water.
Chapter 6.
Market evolution
The market for bottled mineral water is very sensitive to three factors external factors.
First of these factors is climate, sales of bottled water increase during the summer, due to increased need for liquids. How often do you find yourself in need of a drink while on the road?
Another key factor is the economic climate; Romania is a country that with a low average income, and thus consumers are less prone to invest in bottled water when they can satiate the same need with a product that is virtually free, tap water.
A factor that has less influence is public awareness concerning the risks of drinking tap water, and the benefits of bottled water.
As far as these three factors are concerned economic standing seems to be most important, most of the decrease in sales can be attributed to the economic crisis that started in 2008 and which had dire consequences on the Romanian economy and more importantly on consumer income.
Internally the market will most probably face a few changes due to pressure from foreign distributors bringing in cheap bottled water which seems to appeal to the impoverished Romanian consumer.
In terms of development of the market about 90 companies are licensed by ANRM for bottling. Most major players in the mineral water market are Romaqua Group – Borsec, Bibco - Biborteni ,European Drinks – Izvorul minunilor, Coca-Cola HBC - Dorna, Perla Harghita, Carpatina, Zizin, Herculane, Bucovina, Tusnad who have invested in this field over 500 million dollars.
Chapter 7.
Market conjuncture
7.1. GDP dynamics
Estimated GDP for 2009 was 491.273 billion over current prices, declining in real terms by 7.1 percent compared to 2008
Romania's GDP estimated for 2008 was 503.958 billion lei in current prices, up by 7.1% in real terms compared to 2007.
Therefore we can extrapolate a rate of decline of 3%.
7.2. Wholesale dynamics
In 2009, the volume of turnover for wholesale trade fell by 10.3% compared to 2008.
7.3. Inflation rate dynamics
Inflation has dropped to 4.74% in 2009 (from 6.3% in 2008).
7.4. Unemployment rate dynamics
Unemployment rate in Romania at the end of 2009 was 7.8% increased by almost 50% from 2008
7.5. Exchange rate dynamics
The average exchange rate for 2009 is 4.2373 lei / euro, 15% above average reference rates from 2008 of 3.6827 lei per euro.
The average grade for market conjuncture is -1, thus we can assume that the situation in 2009 was not a favourable one for bottled water producers.
Chapter 7.
Demand and offer
7.1 Demand
Demand for mineral water has, until 2009, experienced an upward trend, with more and more consumers orienting themselves away from tap water, in light of growing awareness as to the risks of consuming unfiltered tap water, and also as a result of growing incomes.
2009 marked a turning in the evolution of consumption of mineral water, as consumption dropped from 48.5 to 46.5 l/capita.
To be noted that the in 2009 the average price for a litre of mineral water was around 1.68 RON. A substantial amount considering an average human being consumes around 2 litres of water a day which would bring costs of an average household of three, to some 180 RON per month, taking into account that half the households in Romania have an average income of less than 1000 RON, we can easily see how some Romanians will turn away from buying bottled water.
7.2 Offer
According to SNAM production volume in 2009 amounted to 1000 million litres a slight drop from the 1048 produced in 2008, a result of the crisis impacting producers, which in the face of dwindling demand have cut production and investments in an attempt to deal with raising costs.
In 2009 the market experienced an 8.71% overall drop in value.
7.3. Main producers
About 90 companies are licensed by ANRM for bottling. Most major players in the mineral water market are Romaqua Group – Borsec, Bibco - Biborteni ,European Drinks – Izvorul minunilor, Coca-Cola HBC - Dorna, Perla Harghita, Carpatina, Zizin, Herculane, Bucovina, Tusnad who have invested in this field over 500 million dollars.
Out of these the main producers of mineral water are Romaqua, Coca-Cola HBC, European Drinks, Apemin Tuşnad şi Bucovina amounting 81,6% of the internal market.
Romaqua – 22% 66 million
Coca Cola HBC – 14% 42 million
European Drinks – 18% 54 million
Apemin Tusnad – 11.5% 34.5 million
Bucovina – 9 % 27 million
The National Company of Mineral Water stated that that in period 1998-2008, bottled water market has experienced steady growth, with average annual growth of around 20%.
Chapter 8
Prices and tariffs
As was established earlier the average price for mineral water in 2009 was aprox. 1.68 RON/litre.
For 2009 the lowest price was recorded during the winter and was aprox 1 RON/litre and the highest was 2.5 RON/litre.
The price of mineral water has increased from 1.5 RON/litre in 2007 to 1.68 RON /litre in 2009, amounting to an increase of 5.83%, which is moderate considering market conditions.