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Suntory Water Group

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To: Nobutada Saji, President

From: Daniel Landis, Consultant

Re: Bottled Water Industry Analysis

Suntory Water Group

Memo

To: Nobutada Saji, President

From: Daniel Landis, Consultant

CC:

Date: April 27, 2006

Re: Bottled Water Industry Assignment

In an effort to end recent slides in sales volume and market share, I have created a report detailing the bottled water business. This memo will describe the major business and economic characteristics of this highly competitive industry as well as evaluate the key forces that shape the industry. In addition, I have enclosed a basic strategic action plan that breaks down the key factors of success in the industry, and how Suntory Group can integrate these critical components into their operations. Suntory Groups strong financial position generates a number of opportunities for growth and income. A few of these options include product diversification, differentiation, global expansion, and increased vertical integration. Given the nature of this Japanese company, I believe it is obvious the key to increased market shares and volume in the United States is an emphasis on global expansion.

Business/Economic Characteristics Of The Industry

In order to better understand Suntory Group's position, we must first analyze and determine the principal business and economic characteristics of the trade. The US bottled water industry is a fiercely competitive, growing industry. It is lead by a small number of international food and beverage companies. Although the US is the largest market for bottled water, it is still a growing at a tremendous pace. US bottled water consumption increased almost two billion gallons from 1996-2001 as health-conscious Americans continue to make the switch from soft drinks to bottled water. Analysts believe the reason many of these health-conscious consumers drink bottled water because it tells others they care about their physical wellbeing.

Recent Trends

In 2002, the introduction of enhanced water promised added health benefits from water mixed with vitamins and other supplements. This important product innovation quickly became a market trend with many industry leaders releasing their own versions of enhanced water. The concept was appealing to consumers and offered higher margins than regular water. In order to prepare for industry maturity, rivals are entering new distribution channels, developing innovative product variations, entering into strategic agreements to penetrate new international markets, and acquiring smaller sellers that might hold strong positions in certain US regional markets or emerging markets.

Forces Shaping The Industry

After looking at the five forces that affect every industry, I think there are two main forces that shape the leading bottled water producers such as Suntory Group. These two forces are the power of the buyer and competitive intensity.

The power of the buyer is a force we at Suntory Group can use to our benefit. Being

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