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Sunday, July 27, 2003

MARKETING LIQUID ASSETS

Brands vie for your thirst


Staff writer

"Advertising," as it's often defined, "is the creation of wants."

News photo
Are you alive? That's what this advert asks; with the answer being this brand. (Photo courtesy of Nestle Japan Group)

In summer in Japan, though, there's little need to create a demand for cool drinks. But if you're a supplier, there's every incentive to create a demand for your particular product. And when products are basically very similar, like brands of bottled water, advertising agencies make hay (especially while the sun shines) trying to distinguish their client's version from the others.

In doing this, their job is made a little easier because this highly competitive, 116 billion yen-a-year market has two basic divisions: one between big bottles for family use, which account for 80 percent of sales, and small ones for personal use, which soak up the rest; the other between imported and domestic water, with imports now running at around 20 percent.

Nowadays, the main suppliers appear to be adopting divergent strategies, with some teaming up with foreign partners to bring in upscale imports, and others introducing new products or expanding their distribution channels.

Imported mineral water apparently benefits from the handy size it comes in. Unlike most domestic brands, which are frequently sold in 1- or 2-liter bottles, imported water usually sells in the 500 ml bottles that are popular with convenience stores and station kiosks.

While the price of imported mineral water seems to be stable, at around 130 yen per 500 ml bottle, price competition is intense between domestic brands. Linked to massive promotion campaigns, market leaders such as the Coca-Cola group and Suntory are in a head-to-head sales battle that has seen their 2-liter bottles plummet to well below the regular price of over 200 yen.

A two-pronged approach

However, others take a different approach. "In order to boost our market share, it is vital to have a competitive and fancy foreign brand name," said Munechika Yokomizo, president of Kirin MC Danone Waters Co. The joint venture was established last November between the nation's third-largest beverage company, Kirin Beverage Corp. and Groupe Danone of France to market Volvic, Japan's top-selling brand of imported mineral water.

Introduced here 11 years ago, Volvic was an instant hit. "The special feature of the product is its level of hardness," explained Yokomizo.

Here, Yokomizo was referring to a classification of water depending on how much calcium and magnesium it contains, with high levels constituting "hard" water, and lower levels "soft." Most bottled water produced in Japan is soft, with a hardness level of less than 100, while imported water is usually harder, as it is richer in minerals. Hence the French brands Evian and Vittel have hardness levels of 291 and 307 respectively -- in contrast to Volvic's 60.8, which Yokomizo said is why it has been easily accepted by Japanese people, accustomed to soft water as they are.

But in its bid to expand its share of the market, Kirin is taking a two-pronged approach. Along with Volvic, it is selling its own-brand Alkali Ion-no-Mizu as well. While reportedly beneficial to sufferers from diarrhea, indigestion and gastric hyperacidity, the company is also promoting it as being ideal for cooking, saying it enhances the flavor and goodness of rice, vegetable stews, soup stock and such.

News photo
Sippin'sporty (Photo courtesy of Calpis Itochu Mineral Water Co.)

"Although the brand cannot be classified as natural mineral water due to its chemical treatment, we hope housewives will use it for cooking in place of tap water," Yokomizo said. To aid this sales pitch, in cooperation with a famous cooking teacher, Sachiko Murakami, Kirin is distributing a booklet of recipes using Alkali-Ion-no-Mizu with each bottle.

Through such strategies, Kirin MC Danone is aiming for a 20 to 30 percent increase in the combined sales of its own product and Danone's in 2003.

Three-way strategy

Suntory Ltd., Japan's leading bottled-water producer, seems to be taking a similar approach to maintaining its dominant position. The Osaka-based company and Mitsui & Co. have tied up to market Vittel, which is bottled by the Swiss-based Nestle SA.

Whereas Nestle had previously sold Vittel in partnership with Sapporo Breweries Ltd., since January it has tied up with Suntory, the second-largest player in the soft-drinks market, to distribute it through that company's channels, including its 400,000 vending machines and convenience stores.

Meanwhile, Suntory also owns Minami-Alps-no-Tennensui, the top-selling brand of domestic mineral water, whose name it changed in February to Tennensui -- Minami Alps, at the same time as it expanded its Tennensui range to include Tennensui -- Minami Aso, whose source is Mount Aso in Kumamoto Prefecture, Kyushu.

"The new product was developed especially for the Kansai region, where the name of Mount Aso is more familiar than Minami Alps," said Gen Saito, the water-sales manager in Suntory's Food and Beverage Division. "We expect the new product will strengthen our sales in western Japan."

Since Suntory's water is sold mainly in 2-liter bottles, the company hopes to expand its customer base through the Nestle link, as Vittel comes mainly in 330 ml and 500 ml containers.

However, Suntory's assault on the booming water market also saw it launch a third, distinctive product line in February. Called 100% Shinsousui, this uses mineral-rich deep-ocean water from at least 200 meters down off the Miura Peninsula in Kanagawa Prefecture. Once desalinated, this is said to be free of chemical pollutants and bacteria, and to contain more inorganic nutritional salts, including nitrogen and phosphorus, than water from land sources. As a result, even though in Japan it is prohibited to make health claims in advertisements, 100% Shinsousui is being touted for health-conscious people to use as a dietary supplement.

Despite its higher suggested retail price of 450 yen for a 1.5-liter bottle, the brand is growing in popularity, Saito said, adding that, "the therapeutic quality of the water seems to spread by word of mouth." He said that by adding this third brand to its product lineup, Suntory -- which currently holds about 20 percent of domestic mineral water market, is hoping for a 30 percent sales increase this year.

Stepping up the pressure

Not to be left behind, Calpis Co. is stepping up its marketing of Evian, the major import brand from Danone. Although Evian, named after the eastern French village where it was discovered, is the world's best-selling mineral water, being sold in 120 countries, in the Japanese market it lags behind Volvic.

To expand its sales reach, Calpis recently clinched an agreement to sell Evian nationwide through vending machines belonging to rivals Asahi Soft Drinks Co., Ito En Ltd. and Sapporo Beer's Beverage Co.

Currently, vending machines account for almost half of Japan's total soft-drinks sales; Evian's vending machine sales are less than 20 percent of its total. "Since our main lines are the 350 ml and 500 ml bottles, we need to increase the vending-machine sales to reach younger consumers," said Takashi Hirahara, managing director of Calpis Itochu Mineral Water Co. "With Evian's stylish, urbane image, we are targeting sales at those in their 20s and 30s with a penchant for fancy brands."

Perhaps they're onto something, because last year's sales of Evian were 36 percent up on 2001, and Hirahara expects a further 20 percent increase this year.

With such business activity, and massive promotions and advertising budgets to match, it's hardly surprising that Japan's mineral-water market has boomed in the last decade. However, competition looks set to get more intense, with Nestle alone now having introduced six of its 72 international brands to Japan. These include the medium-hard Valvert from Belgium; naturally carbonated Perrier, in its fashionable green bottle; and the extraordinarily hard Contrex, which is regarded as being a useful mineral supplement.

"With so many different types of bottled water now available to them," said Sahoko Takeuchi, water-business marketing manager at Nestle Japan Group, "it is necessary for consumers to understand the difference between the products and choose the one appropriate to their usage or situation. Then, too, products that do not meet customers' demand will automatically run out of steam."

But this didn't seem to be troubling Takeuchi unduly, as -- with a twinkle in her eye -- she added that "the number of loyal customers who cannot go back to tap water is rising steadily, so the prospects for the business in Japan look good."

It's all going swimmingly, she might have said.



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