Bottled water analysts also believed that many health-conscious consumers drank bottled water because it was a symbol to others that they were interested in their health. A certain amount of industry growth was attributable to increased concerns over the quality of tap water provided by municipal water sources. Exhibit 2 Per Capita Consumption of Bottled Water by Country Market, 1999, 2004 * CAGR = compound annual growth rate Source: Beverage Marketing Corporation as reported by the International Bottled Water Association, 2006. Exhibit 3 Global Bottled Water Market Wholesale Value and Volume, 2001-2005, Forecasts for 2006-2010 Exbibit 2 Per Capita Consumption of Bottled Water by Country Market, 1999,2004 Source: Beverage Marketing Corporation as reported by the International Bottied Water Association, 2006. East, and Mexico. Bottled water consumption in the United States also lagged per capita consumption of soft drinks by more than a 2:1 margin, but in 2003 bottled water surpassed coffey tea, milk, and beer to become the second largest beverage category in the United States. In 2005, more than 15.3 million gallons of carbonated soft drinks were consumed in the United States, but concerns about sugar consumption and other nutrition and fitness issues had encouraged many consumers to transition from soft drinks to bottled water. Whereas the bottled water market in the United States grew by 10.7 percent between 2004 and 2005 to reach 7.5 billion gallons, the U.S. carbonated soft drink market declined by 0.6 percent. Industry analysts expected the carbonated soft drink industry to decline by 1.5 percent annually for the foreseeable future as bottled water, energy drinks, and sports drinks gained a larger "share of the stomach." Exhibits 2, 3, and 4 illustrate the growing popularity of bottled water among U.S. consumers during the 1990s and through 2004. Almost one-half of bottled water consumed in the United States in 1990 was delivered to homes and offices in returnable five-gallon containers and dispensed through coolers. At that time, only 186 million gallons of water was sold in one-liter or smaller single-serving polyethylene terephthalate (PET) bottles. Beginning in the late 1990s, consumers began to appreciate the convenience and portability of water bottled in single-serving PET containers that could be purchased chilled from a convenience store and drunk immediately. By 2005, bottled water sold in two-liter or smaller PET containers accounted for 60.8 percent of industry volume. The unit sales of bottled water packaged in PET containers grew by 22.5 percent between 2004 and 2005. Water sold in five-gallon containers used in the home and office delivery (HOD) market accounted for only 17.8 percent of industry volume in 2005 and grew by only 0.2 percent between 2004 and 2005. Similarly, water sold in 1- or 2.5-gallon high-density polyethylene (HDPE) containers accounted for just 16.5 percent of industry volume in 2005 and grew by only 1.0 percent between 2004 and 2005. Convenience and portability were two of a variety of reasons U.S. consumers were increasingly attracted to bottled water. A heightened emphasis on healthy lifestyles and improved consumer awareness of the need for proper hydration led many consumers to shift traditional beverage preferences toward bottled water. Bottled water consumers frequently claimed that drinking more water improved the appearance of their skin and gave them more energy. Competition in the Bottled Water Industry in 2006 With global revenues exceeding $62 billion in 2005 , bottled water was among the world's most attractive beverage categories. Industry revenues were forecast to grow by an additional 30 percent between 2005 and 2010, to reach approximately $82 billion. Bottled water had long been a widely consumed product in Western Europe and Mexico, where annual per capita consumption approached or exceeded 40 gallons in 2005, but until the mid-1990s bottled water had been somewhat of a novelty or prestige product in the United States. In 1990, approximately 2.2 billion gallons of bottled water were consumed in the United States and per capita consumption approximated 9 gallons. U.S. per capita consumption had grown to more than 25 gallons by 2005 . The rising popularity of bottled water in the United States during the late 1990s and early 2000s had allowed the United States to become the world's largest market for bottled water, with annual volume sales of nearly 7.5 billion gallons in 2005 . In 2006 , emerging-country markets in Asia and South America seemed to be replicating the impressive growth of bottled water in the United States, with annual growth rates exceeding 20 percent. Exhibit 1 presents bottled water statistics for the 10 largest country markets for bottled water in 2004. The growing popularity of bottled water in the United States was attributable to concerns over the safety of municipal drinking water, an increased focus on fitness and health, and the hectic on-the-go lifestyles of American consumers. Bottled water's convenience, purity, and portability made it the natural solution to consumers' dissatisfaction with tap water and carbonated beverages. The U.S. bottled water market, like most markets outside the United States, was characterized by fierce competitive rivalry as the world's bottled water sellers jockeyed for market share and volume gains. Both the global and U.S. bottled water markets had become dominated by a few international food and beverage producers such as Coca-Cola, PepsiCo, and Nestl__but they also included many small rgional sellers who were required to either develop low-cost production and distribution capabilities or use differentiation strategies keyed to some unique product attributes. In 2006, competitive rivalry continued to ratchet upward as sellers launched innovative product variations, lowered prices in developed markets, used strategic agreements to strengthen positions in established markets, and acquired smaller sellers to gain footholds in rapidly growing emerging markets. Industry analysts and observers believed the recent moves undertaken by the world's largest sellers of bottled water would alter the competitive dynamics of the bottled water industry and would mandate that certain players modify their current strategic approaches to competition in the industry. INDUSTRY CONDITIONS IN 2006 Even though it was the world's largest market for bottled water, the United States remained among the faster-growing markets for bottled water since per capita consumption rates of bottled water fell substantially below those in Western Europe, the Middle 1. Major economic features of the industry, including, but not limited to market size, market growth rate, number of rivals, scope of rivalry, number of buyers etc. (Text Table 3.1). Describe only those features that are relevant to the case. 2. The industry's competitive (five) forces. You must discuss all five forces. Make sure to properly identify rivals, suppliers/suppliers, buyers, and substitutes. Don't forget to assess the strength of each force. Make sure you identify two or more factors that support your strength assessment (each with an example from the case) (Text Figures 3.3-3.8). a. Rivalry in the industry is. (strong, weak, or moderate) because b. Suppliers to the industry provide_(what?) They are (strong, weak, or moderate) , because. c. Buyers of the product are__(who?) They are (strong, weak, or moderate), because d. Substitutes are (what?) . They are (strong, weak, or moderate), because e. Threat of entry of new competitors is (strong, weak, or moderate), because The barriers to entry are _(what?) 3. Factors that are causing major long-term industry change (driving forces). Please identify the appropriate categories and provide an example from the case for each category (Text Table 3.2). This section should discuss at least 3 driving forces. 4. Key success factors. Please identify the relevant types of key success factors and provide an example from the case for each type (Text Table 3.3). This section should contain at least 3 , but no more than 6 key success factors