Brita Company

Executive Summary

In 1987, Charlie Couric, marketing executive of The Clorox Company, convinced Clorox to launch a deficit spending campaign to acquire the marketing rights for the Brita pitcher-and-filter water purification system in the United States. Clorox concurred since it saw the revenues from the repeat sales as the major attraction and a profitable venture.

A decade later, Brita had grown to become one of Clorox's biggest brands. Brita had created a home water purification industry worth $350 million and it accounted for over a 70% share of the revenues.

However, in 1999, with the launch of a new product by a small competitor, PUR, Brita had to make decisions for the future. Technological innovations and improvements by competition started to make the market move towards faucet-mounted filters in comparison to pitchers. At this point, Brita had three choices. They could continue to emphasize their water pitchers. They could begin to endorse a faucet-mounted system. Or they could shift their emphasis to increase filter sales versus pitchers.

All along, Brita's advertising in the U.S. had emphasized a taste benefit, which was now being challenged. PUR, their primary competitor, was focusing on the greater technological abilities in its filtration process. Hence, Brita was faced with the serious threat of losing market share to PUR.

It is recommended that Brita begins endorsing the faucet-mounted water purification system in conjunction with the pitchers, as well as pushing filter sales. The studies show that the introduction of a faucet filter increased the likelihood of consumers buying a product from the Brita line. Keeping in view the importance to match competition on certain PoD's, it is important that Brita should incorporate this product into its product line. By pushing the two water filtration systems and replacement filters, Brita should be able to maintain its market leadership position.

Situation Analysis:

In 1987, Charlie Couric, a marketing executive with the Clorox Company, discovered Brita's home water pitcher and filter system which led Clorox to collaborate with Brita GmbH for selling the products in the US market. The company was convinced that there were long term gains in the industry and resorted to deficit spend in the initial years of operations. By 1999, Clorox had succeeded in creating a $350 million home water purification industry and held a 70% revenue share as it had built well on the first mover advantage.

The home water purification industry basically served the customer's need of healthy and safe drinking water availability at home. The industry was fast growing as percentage of people not using any device at their homes had decreased from 47% in 1995 to 35% in 1999. Further, customers were increasingly concerned about the supply of tap water at their homes as indicated by a survey in which 47% of respondents preferred not to drink water straight from the tap. The need for pure water was corroborated by the demand for bottled water, a segment in beverage market which had grown by over 60% since 1988 (cumulative). The market was segmented on following bases:

1) Preference - Taste, Pureness

Within the industry, the customers were usually influenced by the taste of the water and considered it representative of pureness of water.

2) Age groups - customers in age group 18 -44 years showed greater concern about drinking water quality whereas older customers seemed to be less concerned about the same.

3) Geography - customers in south and west parts seemed to prefer bottled water whereas customers in North East and North Central part opted for some method of purification.

4) Form of product - pitcher, faucet mounted

Market leader Brita had a wide product line which it marketed through its diverse distribution channel. It had different offerings for different distribution modes such as

- Ultra upscale pitchers for Department stores

- Standard pitchers for mass merchants like Target and Walmart stores including drug and grocery stores

- Bonus-pack system and a 5-pack of filters for club retailers.

Based on a well-executed research, Brita's branding was majorly emphasized on taste benefit. The study conducted by the company said that when taste is focused, they get the advantage of addressing health benefits of consumer. Brita aimed top position in the market by avoiding any future threat from competition. It did not focus on lead removal in order to avoid itself getting involved in the claims war. Hence it concentrated on driving home the advantage of taste in the market. The company has given equal importance in its advertising to make people well aware regarding how the product works and how water tastes.

Further, Brita had developed a sound business model relying on repeat sales of filters and customer retention. The entire profitability of the company was based on customer life-time value and on expanding its base of customers for subsequent sales of filters.

Brita's major competitor was PUR which was a small, loss-making firm. However, it had technological edge over Brita since its products were superior. It had 74% market share in the faucet mounted segment.

The market positioning of the top 2 competitors in the industry on basis of taste and purification was as shown below. Brita was already differentiated in the market and perceived to provide good taste. However, in was lacking in the point of parity on purification standards set by PUR.

The preference of the customers had started evolving as they started paying more attention to health benefit in terms of purification quality of the product - an area in which PUR had a distinct advantage over Brita's existing line. PUR was also aggressively beginning to highlight its superiority in purification, which if successful, could threaten Brita's market share. Further, possible acquisition of PUR by P&G could mean infusion of fresh resources into the company which would make matters more difficult and tougher for Brita to defend its market leadership position.

Problem definition:

The task before Brita is to fend off the threat posed by competition on its market share and safeguard the same.

Generation of options:

Brita had three feasible alternatives:

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