Global Industry Analysis

Corporate Crisis

Crisis Management

Our Safety Net for the Future (Country Analysis)

BOTTLED WATER INDUSTRY

GLOBAL INDUSTRY ANALYSIS

. Average growth rate per year: 12%

. Main markets: Europe; US

. Important growth market: Pacific

. Growing and high consumption in South America Brazil (26 liters/person/year in 2004)Argentina (18 liters/person/year in 2004)

. Production: 89 billion liters (2004), turnover: US$ 22 billion (2004)

Annual growth in consumption (2000-2004), in %

.Source: Dir. Nac. Alimentos – SAGPyA - sobre la base de

.http://www.wateryear2004.org.  

Negative publicity: « Greedy Western corporation that does not care about human rights and only wishes to make profit. »

« Free access to safe water is basic human right » Ban-Ki Moon

Criticism concerning the disrespect of environment followed by calls for boycotts by influential consumer groups

Affect on sales (-30% within one month) and stock price (-10%) in the US and Western Europe (main markets)

Corporate Crisis

Crisis Management

Communication :Ensure internal and external

information flowLaunch publicity / communication

campaignImprove corporate communication

EnvironmentUse / introduce glass bottles

Focus on recyclingCreate or support a foundation in Africa (« Water for the world »)

Press :« Green Number » for questions related

to environmental policyDevelop a good relationship with the

press

Corporate / product :Change the name of the

product before introducing to a new market

Identification of responsabilitiesCrisis management department

Use glass bottles

Find a country… With higher annual temperatures. Where the tap water quality is not acceptable. Where water is making up an important share

in the beverage market. Where health consciousness is growing.

Our Safety Net for the Future

ARGENTINA : EL PAYS AZUL

A Country Analysis

Franziska BormannHermann Cilliez

Raphaël HenriquezArnaud JonquetIsabelle Thille

ARGENTINA’S BACKGROUND

Spanish colonisation 16/18th century (independance 1816). Turbulent history: From prosperous country to chaos in the 20th

century 2001 : Argentine crisis 2003 / 2007 : Economic recovery (8,5% average annual GDP’s

growth for 5 years) Limited impact of global crisis

Source : http://www.edc.ca/english/docs/gargentina_e.pdf

20090.9%

20106.5%

20115%

GDP Growth previsions

POLITICS IN ARGENTINA

• 2009: Cristina Kirchner crashed into a mid-term crisis that threatened her survival.• Today: Popularity increases (consequent economic recovery) one year before the presidential elections.

http://www.affaires-strategiques.info/spip.php?article3933 22 sept. 2010

CONS PROS

- Bad relationship with the press.

- Litigation with Great Britain on oil exploration around the Falklands.

- 8% growth rate projected for 2010

- 40% of approval rates

- Divided opposition

Recent Political problems

THE MEDIA: THE FALKLANDS:

ARGENTINA’S ECONOMY

September 2010 Argentina Outlook Update

Exceptionally loose macroeconomic policies, a strong rebound in agricultural output […] are supporting overall economic activity. […] [T]he export-oriented industrial sector grew 9.2% YTD to July, mainly driven by strong growth in Brazil, which is Argentina’s largest trading partner and accounts for 34% of total exports. Meanwhile, strong fiscal spending (32% YTD to July), highly accommodating monetary policy (-15% real interest rates) and substantial wage increases (30% average) - together with some improvement in domestic confidence and limited capital flight - are pushing consumption and investment higher. […] [T]he construction and retail sectors, as well as public services and the automobile sector […] are showing positive dynamics into Q3 2010. Economic activity grew 9% y/y in H1 2010.

http://www.reuters.com/article/idUSN1321562620100913

ARGENTINA’S ECONOMY

+ + + + - - - -Abundant natural resources

Export-oriented and globally competitive agricultural sector

Rich industrial base

GDP growing strongly (between 6.5 and 8-10%)

Infrastructure well-developed for Latin American countries

Foreign trade growing

Well-educated, young and connected population

Service economy

Highly indebted but risk of default low

High inflation (178/222) (estimation partly up to 20%)

Unemployment high 8.7% but decreasing

13.9% of population under poverty line

Unequal society (38/134)

Slow down of economic development for 2011

EASE OF DOING BUSINESS IN ARGENTINA

04080

120160

ArgentinaFrance

Source: The World Bank Group 2010

One of the most favorable climate for FDI in South America.

Same rights and obligations for foreigners as for Argentine companies.

Opportunities for investors to participate actively in the country’s privatisation process in particular in the water industry.

FOREIGN INVESTMENT POLICIES

Pro’s Con’s

GDP Growth

HDI >South America

Level of Education

Raw materials

High inflation rate

Low investments

in energy

Weak bank sector

Potential index 60 (2008)

According to the CNUCED, rank on 141 countries Source : www.interex.fr

Water = vital for life and good for health Production 2004: 5 million hectoliters (43% rise compared to 2002) Turnover 2004 (in ARS$): 500 million for mineral water, 230 million

flavoured water

Argentine Water Market

Sales of bottled water on the domestic market, 2004 (hectoliters)

.Source: Dir. Nac. Alimentos – SAGPyA - sobre la base de Fortuna.

Estimation of sales of bottled water in pesos, 2004

Source: Dir. Nac. Alimentos – SAGPyA - sobre la base de Fortuna.

Source: Dir.. Alimentos – SAGPyA - sobre la base de Fortuna.

Division of the Market according to Water Types

Flavoured water is growing the fastest in the market (60% lemon)• Attraction of investors and consumers (few calories)

The market is dominated by two European companies with several brands:

Aguas Danone de Argentina SA (around 50%) and Nestlé Water (around30%)

Others companies: Coca-Cola, Garbin y Pritty

A lot of local and regional companies

Market Domantion by Foreign Companies

COMPANY Aguas Danone de Argentina

S.A.

Nestlé Waters

Coca-Cola Garbín Pritty

Country FRANCE FRANCE USA ARGENTINA ARGENTINABRAND Villavicenci

oEco de los

AndesKim Sierra de

los PadresMagna

Villa del Sur Nestlé Pureza Vital

Ser GlaciarVilla de los

ArroyosPerrier

San Pellegrino

Source: Dir. Nac. Alimentos – SAGPyA - sobre la base de Fortuna.

Market Share 2004

1995-2004: Export of only 16 million liters (3% of the production in 2004 and US$ 3.5 million)

1995-2004: 8.5 million liters imported (US$ 3.5 million)

1995-2004: Greatest part of production exported to Chile (33%) and Uruguay (39%). 2 reasons: (1) Mercosur, (2) Shipping difficulties

80% of the water is imported from France (High production, popular brands)

IMPORT/EXPORT of bottled water (1995-2004)

Import/export of water

Destination of exported water 2004 (value)

.Source: Dir. Nac. Alimentos - SAGPyA - a partir de INDEC.

Origin of imports of mineral water 1995-2004

.Source: Dir. Nac. Alimentos - SAGPyA - a partir de INDEC.

Porter’s 5 Forces Analysis

Substitutes Hot drinks like teas and coffee Dairy drinks Juice Soft, sport and power drinks Light alcoholic drinks like beer and wine

New Entrants Innovation is limited Strong competition of established brands Great number of new entrants every year

Power of Buyers Bargaining power high for mass merchandising and fountain supermarkets No bargaining power of buyer for vendingEntry Barriers Strong competition by established brands Limited access to water suppliesBargaining Power of Supplier Plastic bottle suppliers has great power Dependency on government that is supplying water Possibly privatisation of water works might increase prices

Conclusion

Even if there is a high inflation and a rising debt, Argentina’s economy has shown its improvements and its competitive performances.

Foreign trade is growing and the opportunities to exchange abroad have evolved in the last few years.

Water industry has a competitive advantage for Argentina to be a real brand on the global market.

Argentinian’s consumption’s habits have revealed that Argentina is nowadays more than a potential market.