There is a global opportunity for companies producing vitamin enhanced water, but do the marketing executives see it? China is the second largest market for energy drinks in the world. According to research by Zenith International (2009), the United States and Canada combined to consume 37% of the overall volume of energy drinks in 2008 (Just-Drinks.com). The Asia Pacific region boasts 30% of the global volume.

With a strong distribution channel, competitive pricing, smart positioning, and aggressive advertising Glaceau VITAMINWATER^® enhanced water can become the number one energy drink in China.

Overall sales of energy drinks worldwide have doubled in the last five years (Roethenbaugh, 2009). Clever marketing and product positioning has blurred the line between energy drinks and the six categories of water that struggles to compete in the same market. Flavored waters muddy the market with nothing more that bottled water with a twist. Clustered water, the latest version of ultra purified H2O, has yet to take hold. Fitness and oxygenated waters appeal to athletes and casual gym patrons. Premium waters are typically enjoyed at fine restaurants as an alternative to tap water. Vitamin enhanced waters are targeted to health conscious individuals.

The market leader in energy drinks manufactures and distributes a product containing high levels of caffeine. The public perception is that caffeine is the most effective stimulant for energizing your mind and body. However, other energy drink companies have made attempts to make a splash in the market by using energy boosting ingredients such as green tea and ginkgo biloba (AllBusiness.com, 2005). These particular products find themselves competing with soft drinks, smoothies, and iced teas for market share—and as a result, barely providing competition for the caffeine based products.

The most compelling statistic that would encourage Glaceau to re-position their VITAMINWATER^® enhanced water in the energy drink market is the 12% annual growth prediction taking sales to over $9 billion dollars in the U.S. (ReportBuyer.com, 2007). Based on this prediction, and the knowledge that the Asia Pacific market enjoys similar sales forecasts, the timing is perfect for Glaceau VITAMINWATER^® enhanced water to enter this new market. The industry for bottle waters, fitness drinks, and enriched waters is flourishing. PepsiCo cites the declining popularity on carbonated soft drinks is partly responsible for the increase in sales of their sports drink, Gatorade (Farrell & Rappeport, 2010).

The largest segment for the VITAMINWATER^® enhanced water product in the Asia Pacific market is in China. The most recent census data shows the average total consumption expenditure for a Chinese family is 7142 Yuan, or approximately $1,053 U.S. dollars (Coutsoukis, 2004). Nearly 38% of the total expenditure is on food. Based on this information alone, Glaceau should be skeptical when deciding whether or not the market can sustain the energy drink business. One existing company has a proven track record in the Asia Pacific market.

Red Bull, the world’s leading manufacturer of energy drinks, has enjoyed several years of success in China. However, their flagship product is targeted specifically to males between the ages of 18 and 24 (Yates, 2008). Glaceau VITAMINWATER^® enhanced water, with a slight product repositioning, can cast a wider net and attract a strong target audience comprised of males and females between the ages of 18 and 49. China has approximately 700 million people that fall within this demographic model. Many, of course, do not have the income to justify purchases outside of the bare essentials. However, companies currently with market saturation have isolated the target audience.

Constant adjustments to the U.S. – China trade agreements need to be considered when planning a manufacturing and distribution strategy. There have been several talks within the last few months regarding trade barriers (Lawder, 2010). Depending on the outcome of the trade agreements between the United States and China, Glaceau may need to establish production and distribution within China as opposed to exporting the VITAMINWATER^® enhanced water product from the United States.

A few trade sectors in China are suffering from overcapacity (Gunn, 2010). The overcapacity is mostly within the industrial and commercial sectors. Environmental issues and increasing social tension are a few current weaknesses that should be monitored, but not distract from the plan to introduce VITAMINWATER^® enhanced water to the Asia Pacific market. China’s overall economic position is strong—boasting a $53 billion dollar surplus in the first quarter of 2010.

The China Food & Drink Report (2010) exposes one of China’s weaknesses as their under-developed agriculture and distribution system (Business Monitor International). Moreover, the health scares with products produced in their own country has opened a door for imports. The timing could not be better for Glaceau VITAMINWATER^® enhanced water to spring into the spotlight, and begin an aggressive campaign to dominate the energy drink market.

The Chinese government is overwhelmed with issues regarding the environment. While the 8% average growth has enhanced the standard of living for the population, it has also contributed to their environmental challenges. Any company, regardless of origin, with the intent to develop a manufacturing facility in China will find most of the opposition coming from special interest groups. Glaceau must continue to monitor and assess political risks. Coca-Cola Company has been conducting business in the Asia Pacific market for many years. Their experience in this area will help foster the necessary relations with key government officials and organization for success.

Glaceau is a privately owned subsidiary of Coca-Cola Company. The company began manufacturing enhanced waters in 1998. The Smartwater product, an electrolyte enhanced water, is the foundation for the VITAMINWATER^® enhanced water product. Glaceau VITAMINWATER^® enhanced water is produced in eleven flavors and enriched with energy enhancing natural ingredients and vitamins. VITAMINWATER^® enhanced water is positioned to compete with traditional bottled water, sports drinks, and flavored waters. The brand is recognized world wide as simply another variation of enhanced bottled water.

Glaceau has positioned its VITAMINWATER^® enhanced water product as a healthy alternative to soda. However, the Asia Pacific market currently perceives VITAMINWATER^® enhanced water as a product for the affluent. VITAMINWATER^® enhanced water in the Asia Pacific market is available in upscale restaurants and high-end retail outlets. This is in complete contrast to the public perception of the same product in North America. The company acknowledges the need to tap into a market with the potential to dwarf sales in other global markets.

What if, and at the same time, VITAMINWATER^® enhanced water is re-positioned as an energy drink?

The competition for energy drinks in China is far less crowded than with specialty waters. This is unexpected considering that caffeine-based energy drinks originated in Japan and Thailand (AllBusiness.com). The Austrian-distributed drink, Red Bull, has dominated this category for several years. Glaceau can make a strong impact and at the same time broaden the definition of energy drink to include healthy alternatives. Health conscious consumers, regardless of location, would cross over to create a new market.

All mind and body stimulating energy drinks that would compete with VITAMINWATER^® enhanced water in the Asia Pacific market contain caffeine. Glaceau boasts no artificial flavors, colors, are any chemical stimulants as contained in the products of the competitors. Glaceau can leverage their all-natural approach as the differentiator that will eliminate the caffeine-based products from the competition. The current VITAMINWATER^® enhanced water product line will not be adjusted or altered for the Asia Pacific market, but rather re-positioned as a healthy alternative energy drink.

There are over 500 energy drink products worldwide. Five producers dominate the market share.  Red Bull is the leader with 42.7% overall sales. Hanson Natural, the manufacturer of Monster brands has 16% of the market. PepsiCo has pushed their SoBe and Amp products to an impressive 13.2%. Rockstar International enjoys 12% and Full Throttle by Coca-Cola has 10% of the market (Simon & Mosher, 2007).

Each of these producers of energy drinks leverage caffeine as their main ingredient. Glaceau VITAMINWATER^® enhanced water, repositioned to compete in the energy drink market, would enjoy immediate success by attracting health conscious energy drink consumers. The assumption is that many consumers remain leery of the chemical-based energy drink, and because there are no alternatives choose to consume the caffeine riddled energy drinks. There is little competition in the energy drink market for products that bring a healthy natural alternative to the mix.

Glaceau VITAMINWATER^® enhanced water has a strong global presence, with the exception of the Asia Pacific market. This is due mostly to the fact that the product was perceived by the Asian population as an upscale water only available to the affluent. In all fairness to the consumers, without a marketing plan to properly position the product—there would be no reason to think otherwise. The strategy is to create a drink category that attracts consumers from both the energy drink category and the fitness water category.

Better positioned as an energy drink, Glaceau VITAMINWATER^® enhanced water can make an immediate impact to the Asia Pacific market by advertising the differentiator. VITAMINWATER^® enhanced water is an all-natural alternative to the chemical laden products in a can. Unlike other energy drinks, VITAMINWATER^® enhanced water is safer for a broader age group. Energy should be replaced naturally. With Glaceau VITAMINWATER^® enhanced water, you can reenergize and “harness your energy—naturally.”

References

AllBusiness.com (2005). In the energy drinks market by 2009 the United States is expected to have the largest market. Business Wire. [Electronic version] Retrieved July 21, 2010, from http://www.allbusiness.com/consumer-products/food-beverage-products-nonalcoholics/5178192-1.html

China Food & Drink Report – Q3 2010. (2010). Business Monitor International. [Electronic version]  Retrieved July 26, 2010, from ProQuest: http://proquest.umi.com/pqdweb?index=7&did=2062171471&SrchMode=1&sid=4&Fmt=2&VInst=PROD&Type=PQD&RQT=309&VName=PQD&TS=1280177041&clientId=74379.

Cateora, P. & Graham, J. (2007). International marketing. New York: McGraw-Hill Irwin.

Coutsoukis, P. (2004). Per capita annual living expenditure of urban households (2004) – China statistics census. Retrieved July 24, 2010, from http://www.allcountries.org/china_statistics/10_7_per_capita_annual_living_expenditure.html

Farrell, G. & Rappeport, A. (2010). PepsiCo net income falls 3%. Financial Times. [Electronic version]  Retrieved July 26, 2010, from ProQuest: http://proquest.umi.com/pqdweb?did=2087426421&sid=1&Fmt=3&clientId=74379&RQT=309&VName=PQD

Gunn, N. (2010). Coface’s China country rating and business climate rating. Retrieved July 21, 2010, from http://import-export.suite101.com/article.cfm/cofaces-china-country-rating-and-business-climate-rating

Just-Drinks.com (2009). Energy drink sales hindered by Thai decline – research. Retrieved July 20, 2010, from http://www.justdrinks.com/analysis/energy-drink-sales-  hindered-by-thai-decline-research_id98736.aspx

Lawder, D. (2010). US-China talks to focus on trade barriers—Geithner. Retrieved July 26, 2010, from http://www.reuters.com/article/idUSNLLIGE64020100518

ReportBuyer.com (2007). New report predicts energy drink sales in the U.S. to exceed $9 billion by 2011. Retrieved July 20, 2010, from             http://www.reportbuyer.com/press/new-report-predicts-energy-drink-sales-in-the-us-to-exceed-9-billion-by-2011/

Roethenbaugh, G. (2009). Global energy drinks market 2003-2008. Retrieved July 25, 2010, from http://www.researchandmarkets.com/reports/c29596

Simon, M. & Mosher, J. (2007). Alcohol, energy drinks, and youth: A dangerous mix. Retrieved July 20, 2010, from http://www.marininstitute.org/alcopops/energy_drink_report.htm

Yates, D. (2008). Is coffee an old man’s beverage? Retrieved July 21, 2010, from http://www.energydrinkreviewer.com/