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Water Ads and the Rising Tide in the Bottled Water Market
Subject Brand image
Topic Product Markets
Key Words Ads, market, products, brands, images, consumers
News Story

PepsiCo's ads to promote its Aquafina brand of water promise "nothing." Aquafina is purified water devoid of the minerals that other bottled waters and tap water contain. In the ads, simplicity is the watchword. Aquafina is featured on white space, with camera shots showing an open, cold, Aquafina bottle, rainbows of water pouring from it, and droplets of water. Lisa Kudrow, one of the actors on Friends, adds some of her trademark quirky remarks, such as, "So, with this and, you know, a little deodorant, I think we've got this whole summer thing beat." Last year's campaign emphasized the wellness benefits of bottled water; this year, the theme is that water is accessible to everyone, not fancy and spa-like.

Aquafina is increasingly important to PepsiCo. The bottled water market is growing fast, while the carbonated soft drink market is sluggish. Aquafina is the number one seller, but Coke's Dasani brand is number three and is catching up fast. Coke's campaign promotes Dasani, a mineral-enhanced purified water, as good for wellness and inner beauty. The two companies intend that their bottled water products become brands with powerful images that cause consumers to see a difference between the two. They expect that the market will shake out, and they each wish to dominate it.

(Updated September 1, 2001)

Questions
1. At first sight, bottled water is a homogeneous product.
a) What does this mean?
b) What kind of product market structure is characterized by a homogeneous product across different producers?
c) What is the long-run position of firms in this type of market structure?
2. The news story relates how PepsiCo and Coke are trying to establish distinct brand images for their water.
a) Why would firms seek to create brand images for bottled water?
b) What would happen to the market structure as a result?
c) What would be the long-run position of firms in this type of market structure?
3. The story states that the two firms aim to dominate the bottled water industry.
a) What market structure would emerge as a result?
b) Why would they seek to achieve this?
Source Betsy McKay, "PepsiCo Bases Water Ads on 'Nothing'," The Wall Street Journal, June 25, 2001.

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