Masters of Business Administration The American University in Cairo

Nestl Waters Egypt

Marketing Plan
Group Project

By:

Omar El-Attar Khaled Fouad Hady El-Gohary Ahmed Tarek Ayman Abourayyan

800-10-4018

Supervisor: Dr. Amr Kais Date: 22May, 2011

Table of Content
Executive Summary ................................................................................................................. 4 Chapter 1 : Internal Environment ....................................................................................... 5
1.1 1.2 Mission Statement ................................................................................................................... 5 Company and Brand Over View .......................................................................................... 5 Nestl ...................................................................................................................................................5 Nestl Waters ...................................................................................................................................7 Nestl Waters Egypt ......................................................................................................................7 Nestl Pure Life................................................................................................................................7 Nestl Pure Life Products: ...........................................................................................................7

1.2.1 1.2.2 1.2.3 1.3 1.3.1 1.3.2 1.4 1.5

Products ...................................................................................................................................... 7

Previous Results....................................................................................................................... 8 Channels ...................................................................................................................................... 9

Chapter 2 : External Environment ................................................................................... 10

2.1 2.2 2.3 Markets..................................................................................................................................... 10 Competitive Analysis ........................................................................................................... 11 Market Forces ........................................................................................................................ 13 Demographic Forces ................................................................................................................... 13 Economic Forces .......................................................................................................................... 14 Technological Forces .................................................................................................................. 16 Politicallegal Forces.................................................................................................................. 16 Socio-cultural Forces .................................................................................................................. 17 Natural Forces ............................................................................................................................... 18

2.3.1 2.3.2 2.3.3 2.3.4 2.3.5 2.3.6 2.4

SWOT Analysis ....................................................................................................................... 19

Chapter 3 : Marketing Plan ................................................................................................. 20

3.1 Marketing and Sales Objectives ....................................................................................... 20 Market Share.................................................................................................................................. 20 Numeric and weighted handling ........................................................................................... 21 Sales Volume .................................................................................................................................. 21 3.1.1 3.1.2 3.1.3

3.1.4 3.2 3.2.1 3.2.2 3.3 3.3.1 3.3.2 3.3.3 3.3.4 3.3.5 3.3.6 3.3.7 3.4 3.4.1 3.4.2 3.5 3.5.1 3.5.2 3.5.3 3.6 3.6.1 3.6.2 3.6.3 3.6.4 3.6.5

Regional Targets........................................................................................................................... 22 Market Segmentation ................................................................................................................. 23 Target Markets .............................................................................................................................. 25 Product ............................................................................................................................................. 26 Product Attributes ....................................................................................................................... 26 Brand Name& Positioning ........................................................................................................ 27 Packaging ........................................................................................................................................ 27 Label .................................................................................................................................................. 27 Quality .............................................................................................................................................. 27 Complimentary products .......................................................................................................... 28 Proposed Modification to the Coupon System ................................................................. 30 Annual subscription .................................................................................................................... 30 Current Distribution Channels ............................................................................................... 31 Proposed Distribution Strategy ............................................................................................. 32 Expansion of Water Hubs and Water Shops ..................................................................... 32 Advertising ..................................................................................................................................... 35 Direct Marketing .......................................................................................................................... 35 Public Relation .............................................................................................................................. 35 Sales Promotion I (Summer Package) ................................................................................. 36 Sales Promotion II (Water Catering Service) ................................................................... 37

Marketing Strategy............................................................................................................... 23

Product Strategy ................................................................................................................... 26

Price Strategy ......................................................................................................................... 30

Distribution strategy ........................................................................................................... 31

Marketing Communication Strategy .............................................................................. 35

Chapter 4 : Implementation &Control ............................................................................ 40

4.1 4.2 4.3 Action Plan for 2012 & 2013............................................................................................. 40 Budgeting................................................................................................................................. 41 Evaluation and Control ....................................................................................................... 44

References ................................................................................................................................ 45

Executive Summary
The main goal of this project is to create a marketing plan for Nestl Waters Egypt for the 5-gallon water bottles. The main focus will be on the business-to-consumer segment as it presents the bigger portion of Nestl Waters focus in Egypt. This project will study the various aspects of the current market in order to maximize sales by creating more brand loyalty and correspondingly creating a bigger customer lifetime equity. In addition, newer markets will be analyzed in order to maximize sales by penetrating newer market segments by offering a more diverse marketing mix.

The project is divided in to two major sections. The first section studies the business environment in general of all Nestl Waters in Egypt, covering the internal and external factors. This will be followed by a thorough SWOT analysis, which will be the foundation of the two-year market plan proposed. The second section will explain the marketing plan by analyzing each element of the marketing mix; the product, the price, the place, and the promotion.

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Chapter 1: Internal Environment

This chapter focuses on the internal environment of Nestl Waters Egypt. Therefore, in order to study the environment of Nestl Waters Egypt in specific, a brief over view for Nestl in general is given.

1.1 Mission Statement

Nestl Waters has the following mission statement:

As the leading healthy hydration company we passionately provide healthy solutions to enhance consumers' life

1.2 Company and Brand Overview

1.2.1 Nestl
Nestl is the worlds leading Nutrition, Health and Wellness Company. Wherever the Company is active, it has been focusing on the concept of shared value, an approach to business that says that if you want to have a long-term business success, you have to also create value for society. Nestl is currently the leading FMCG Company of Switzerland, and Henri Nestl established it. Nestl is serving a worldwide market, with more than 500 factories in 86 countries comprising almost all continents. This international and multicultural dynamic thriving is also one of Nestls strengths; its staff at its home base in Vevey represents a total of 85 different nationalities working in close collaboration. Nestls product portfolio has more than 6000 -5-

brands all over the world serving best to their customers. It offers a wide variety of products ranging from Chocolates, Baby food, Dairy products, Pet food, Beverages, Waters and more.

Henri Nestl used his surname, which means little nest, in both the company name and the logotype. The nest, which symbolizes security, family and nourishment, still plays a central role in Nestls profile. The first product made by Henri Nestl, a food for babies who were unable to breastfeed where his first success was a premature infant who could not tolerate his mother's milk or any of the usual substitutes. People quickly recognized the value of the new product, after Nestl's new formula saved the child's life, and soon, Farine Lacte Henri Nestl was being sold in much of Europe.

Nestl has always been known for its long-term commitment and strong connection to its economic and social environment. This was manifested primarily by its contribution to the development of milk-producing regions and the location of production facilities in rural areas. Subsequently, the Company quickly set to work developing more complex products to better meet changing consumer needs. Over time, the Nestl Group evolved in line with its market and moved progressively from basic foodstuffs to products with an emphasis on convenience and enjoyment. Nestl now focuses on nutrition, health and wellness products. Ever since its creation, Nestl has aimed at international markets. Its first product infant formula was on sale in sixteen countries worldwide only six years after its launch. The Group is now established all over the globe. This is an invaluable window of opportunity both for the town of Vevey, where the Group has been headquartered since 1867, and for Switzerland as a whole.

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1.2.2 Nestl Waters

Nestl Waters is a business-unit of Nestl that produces and/or distributes numerous brands of water across the world that are different in their brand names depending on the region.

1.2.3 Nestl Waters Egypt

Nestl Waters Egypt is one of Nestl Waters subsidiaries around the world; it is the premium between the bottled water companies in Egypt, offering two brands, which are Baraka and Nestl Pure Life.

1.3 Products
1.3.1 Nestl Pure Life
Nestl Pure Life is the number one bottled water all over the world, after that comes Danon Water then Aquafina and Dasani consequently. Nestl Pure Life started competing in the Egyptian market in 2002; its now offering several product sizes to serve the different needs of its consumers.

1.3.2 Nestl Pure Life Products

a) 0.60L Bottle b) 0.75L Bottle c) 1.5L Bottle d) 5-gallon Bottle

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1.4 Previous Results

This section reveals some previous results for the bottled water market in Egypt for the past 3 years. As shown in the below figure, there are at least eight market players in the bottled water industry. Furthermore, Nestl has been competing with Aquafina and Dasani for the past three years.

Market Share - Volume of Sales (litres)

30%

25%

20%

15%

10%

5%

0%

Nestle Aqua

Aquafina Hayat

Dasani Schweppes

Baraka Safi

Market Share (2008 to 2010)

The below figure reflects the sales concentration in 2010 for each company according to the geographical locations. Nestl, mainly targeted Cairo with 80% turnover, then came Alexandria with around 17% turnover. From the figure, it can be clearly observed that Nestl Waters Egypt does not target the major remaining areas of Egypt, such as: the Delta, Upper Egypt, or the Canal Zone.

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Bottled Water Category Turnover per Region (2010)

100% 90% 80% 70% % Turnover 60% 50% 40% 30% 20% 10% 0%

Cairo

Alexandria

Delta Egypt*

Upper Egypt*

Canal Zone

1.5 Channels
Nestl Waters Egypt has three main distribution channels: a) Traditional trade Mainly through kiosks, small and large groceries, and supermarkets. b) Modern trade Mainly through famous supermarkets and hypermarkets, such as: Metro, Hyper One, and Carrefour. c) Out of Home channel Mainly through hotels, cafes, restaurants, schools, hospitals, etc.

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Chapter 2: External Environment

This chapter covers the external environment that Nestl pure life faces in the bottled water market in Egypt.

2.1 Markets
The consumption of bottled water has been increasing consistently over the last decade, even in countries with excellent tap water quality. However in Egypt, due to the risk of contamination of tap water, the Egyptian market is shifting towards buying bottled water.

Nestls Pure Life 5-gallon bottled-water market consists of regular consumers and businesses. 5-gallon bottled-water has become a lifestyle for many families and business. For the business-to-consumer market, families, mainly with middle and high income, are the only segment present. On the other hand, for the business-tobusiness market, various business firms are present. Companies regardless of their sizes are increasingly looking for their employees health. 5-gallon-bottled water is becoming essential in almost every company nowadays.

Geographically speaking, the 5-gallon bottled water market is mainly concentrated in Cairo, Alexandria, Delta, Sinai, and Red Sea. However, Upper Egypt and the Canal area mainly rely on tap water.

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Nestl Pure Life is operating only in the Egyptian market. It heavily exists in Cairo with turnover of 80%, Alexandria 18%, and 2% in the Delta. The top market players in Egypt in bottled water are Aquafina, Dasani, and Nestl. Moreover, other competitors are also present, such as: Aqua, Hayat, Safi, and Schweppes.

2.2 Competitive Analysis

Nestl Pure Life had the third biggest share of the Egyptian bottled water market in 2010 with market share of 20%. Aquafina, owned by Pepsi, was the market leader with a market share of 25%and Dasani, owned by Coca Cola, was second with 23% market share. Dasani has not yet entered the 5-gallon bottles market in Egypt, which leaves the competition to Aquafina, Aqua delta, Hayat, and Nestl pure life. Aquafina bottles are disposable (one time use) same as Hayat. However, Nestl pure life & Aqua delta bottles are using bottles refill technique. Disposable bottles claim that it provide better sterilization, but Nestl pure life quality control tends to be the highest among its competitors (as described later in the product strategy). However, a recent study conducted by Egypt Consumer Protection Agency on bottled water in Egypt confirmed that there are only 7 brands of 1.5-litre bottles fit for consumption, and those brands are Aqua, Nestl, Aquasiwa, Mineral, Dasani, Siwa, Aquafina, and the 19-litre bottles of Nestl. The study also found seven other brands were fraudulently labeled, meaning the ingredients on labels did not match what was in the water, but said they were still fit for consumption. Those include the 1.5-litre bottles of Baraka, El-Manar, Delta, Hayat, Aquamena, Nahl, and the 19-litre bottles of Siwa. Below table provide in-depth competitive analysis between the top bottled water competitors in Egypt

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Brand

Market Share

Large sizes features

Value added services Alliance with producers of water dispensers Using disposable bottles for better sterilization

Size: 12 liter & 19 liter Aquafina 25% Prices 13EGP & 18.5EGP No delivery services Dasani 23% Not Producing Size: 19 liter Nestl 20% Price: 20EGP Delivery service: Available Size: 19 liter Aqua delta 8% Price: 18EGP Delivery service: Available Size: 19 liters, 12 liters, and 6 liters Hayat 4% Price: 20EGP, 12EGP, 5EGP Delivery service: Available

Alliance with producers of water dispensers Coupon subscription with 19EGP/bottle Alliance with producers of water dispensers Coupon subscription with 16EGP/bottle Using disposable bottles for better sterilization

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2.3 Market Forces

2.3.1 Demographic Forces
a) Population and age structure Egypts population was 80,471,000 in July 2010. The age structure shows that about 33% of the population is between 0-14 years, 62.7% between 15-64 years and only 4.3% are above 65 years. The population has a median age of 24 years old. About 50% of the population are below 20 and 39% are below 15 years old. The above distribution shows that the Egyptian society is a young society, which could represent a clear opportunity for bottled water industry since the new generation could be easily attracted to the bottled water culture than the older generations. b) Geographical distribution of population Egypt is a dry country with most of the population accumulated around the Nile and the Delta regions. About 45% of the population lives in urban cities and only small percentage of population are living in desert areas. This could represent a threat to the bottled water industry, since a very high percentage of population is concentrated in areas where a cheap source of water, which is tap water, is available from the Nile and its branches. c) Educational trends Rates for primary and secondary education have strengthened in Egypt in recent years. The vast majority of children are in primary schools; however there is a high rate for dropping out. There are approximately 200,000 primary and secondary schools with some 10 million students, 13 major universities with more than 500,000 students, and 67 teacher colleges. Efforts are done to force education to the remaining 7-9% of students who drop out illegally. The higher the educational level is, the higher the opportunity for the penetration of bottled water industry.

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2.3.2 Economic Forces

a) Natural resources Egypt has groundwater resources that could easily serve the country for the next century, as stated by Dr. Farouk El-Baz, Egyptian scientist and director of Boston Universitys Center for Space Physics. The big reserve of groundwater in Egypt represents a great opportunity for bottled water industries to provide a sustainable supply of healthy and economic hydration.

Distribution of Egypt Water By Source for 2006/2007

b) Income per capita and unemployment The below table shows the main economic indicators in Egypt for 2010. The low GDP per capita, high inflation rate and high percentage of population below poverty line represent big challenges for the bottled water industry in Egypt. Large segments of the market will not be willing to direct a percentage of their limited income towards products, which they consider non-essential especially in the light of availability of free substitution from tap water. In the tight economic conditions, the intangible health considerations may not be the dominating factor.

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GDP
GDP growth GDP per capita Inflation (CPI) Population below poverty line

$500.9 billion (2010 est.) 5.3% (2010 est.) $6,200 (PPP) (2010 est.) 12.8% (2010 est.) 20% (2005 est.) 26.1 million (2010 est.) 9.7% (2010 est.)
Egypt's Economy

Labor force Unemployment

c) Professional business environment The increasing trend of foreign and local investments in Egypt in the last two decades has massively increased the number of companies, banks and institutions that have professional business offices. In such offices, bottled water is the main source of hydration and hence the demand on bottled water increased d) Tourism The Egyptian tourism industry is one of the most important sectors in the economy, in terms of high employment and incoming foreign currency. Egypt is one of the best-known touristic countries in the world. It has many constituents of tourism, mainly historical attractions especially in Cairo, Luxor and Aswan, but it also offers beaches and other sea activities. About 12 million tourists visit Egypt each year. This has a considerable effect on the demand on bottled water, since it is the main source of hydration in touristic places such as hotels, airports and entertainment areas. The high potential in this sector could be considered as an opportunity for bottled water industry but its instability due to political and safety considerations could also be a threat.

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e) Competition The Egyptian market of bottled water industry is characterized by being a free highly competitive market. There are more than six players in the market with the maximum market share less than 25%. The fierce competition increases the price elasticity of demand dramatically and opens the door for a price war.

2.3.3 Technological Forces

The phenomenal change in technology has its effect on all business and on bottled water industry as well. The effect of technology is clear on the new technologies associated with product lines for various products such as flavored water, packaging and bottling techniques and new tap-water filters. The effect of technology has exceeded the effect on the product-related to another effect on the distribution and promotion. The tools of the new digital world, such as the Internet and mobile communications, are now widely used to reach new segments of customers and create new marketing channels with them

2.3.4 Politicallegal Forces

a) Local specifications of bottled water in Egypt The Egyptian ministry of Health has determined in the specification number 9551 the local specification of bottled water. All market players should comply with these specifications or else they will face legal implications, which could affect their image or get them out of the market completely. In 2007, the ministry of health conducted an audit, which clarified that some products were not compliant with the specifications. The concerned companies were highly affected by the results of the study and some of them got out of the market.

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b) Political status The unclear political future in Egypt before the revolution and the instability after the revolution have a direct effect on the professional business environment, tourism and foreign investments; these factors have clear effect on the sales of bottled water as shown in the economic forces

2.3.5 Socio-cultural Forces

a) Hydration Culture Unfortunately, most people in Egypt are not much aware of the importance of hydration to preserve good health. People do not care much to keep their bodies hydrated especially in hot weather, which Egypt has most of the year. Moreover, people have high tendency to acquire their hydration from juices and fizzy products rather than from bottled water. It is a big challenge for the market players in this industry to work on changing this culture. However, the new increasing segment of educated Egyptians represents an opportunity for this industry b) Life Style Some segments of the Egyptian market are customers with a lifestyle that is potentially going to fit with heavy consumptions of bottled water. These segments include athletic people who have higher hydration needs. They also include weight watchers who have tendency to satisfy their hydration needs without gaining extra calories. Finally, these segments also include outgoing people who spend long hours outside their homes without an available source of hydration but bottled water. c) Social Networks The exponential increase in number of Egyptians joining social networks, such as Facebook and Twitter, represents a situation that could be effectively utilized. These social networks could provide a major platform to reach out to customers in order to communicate ideas, and in order to spread certain cultures to the market. - 17 -

d) Social Class The higher the social class of the customers the higher is their demand on bottled water products. Social class is a very important factor for segmentation, since it could play a major role when it comes to the mentality of the customers.

2.3.6 Natural Forces

a) High Kidney Failure rate Egypt has the highest kidney failure rate in the world, mainly because of the lack of a reliable source of clean drinkable water. Despite that most Egyptians believe tap water is contaminated and very unhealthy. However, in many cases they are forced to use it due to economic implications. b) Availability of tap-water In many desert areas and cities away from the Nile, tap water is either not available or has a bad taste. These areas represent an opportunity due to the increased demand on bottled water. A good example of this is the high demand on bottled water in the summer in major attractions in the north coast areas, such as Marina. c) Seasonal Effects Some seasons have obvious effect on the demand on bottled water. For example, the demand increases in summer due to the higher needs for hydration. On the other hand, this demand may decrease in Ramadan due to decrease of demand in professional working environments, such as companies and banks.

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2.4 SWOT Analysis

Strength
Strong brand name and brand

Weaknesses
Availability outside Cairo. Availability in Kiosks, gyms, restaurants, and clubs. Credit policy (traditional trade)

Internal

positioning. Vertical Integration (From raw material to finished product) Product range capability (incl. Nestl Food). Financial strength Product/Production experience.

Opportunities
Geographical location Government subsidy (elec., gas, etc.) Labor cost (exports) Potential market growth outside Cairo. New residential areas in Cairo and Alex. Perception of tap water. Sparkling and flavored water. Ramadan in summer. Increased consumption per household

Threats
Unexpected regulations and expectations by consumer protection agencies and ministry of health. Global and local deals of exclusivity for hotels & restaurants Storage conditions at traditional trade. Advertisement costs. Filters industry. Competition. Egyptian mentality: common citizens not encouraged to pay for water.

External

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Chapter 3: Marketing Plan

3.1 Marketing and Sales Objectives
3.1.1 Market Share
The graph below shows the market share of Nestl Waters in Egyptian market since 2008 throughout 2010. The market share of Nestl has increase by about 5% in the last two years, from an average of 15% to an average of 20%. The target of this plan is to increase market share by 3% annually in the next two years.

Market Share for Bottled Water

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3.1.2 Numeric and weighted handling

Numeric handling is the number of outlets Nestl is available while weighted handling is the efficiency of this availability (selling water in the right place). It is clear from the above graph that Nestl has succeeded to increase its numeric handling from 4 to 5% in 2010. However, this has affected its weighted handling, which has decreased from 50 to 45% as shown in the below graph.

Weighted handling of Nestl waters

In this plan, we plan to achieve a tough target of increasing the numeric handling to 7.5% while keeping the weighted handling above 50% within the next two years. This means that Nestl needs to adopt a smart distribution strategy to increase its existence in the efficient places.

3.1.3 Sales Volume

The current annual sales growth rate of Nestl Waters is 10% and the target of this plan is to reach an annual growth rate of 15%. It is planned to reach an annual growth rate of 12% in the first year and 15% annual growth rate in the second year.

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3.1.4 Regional Targets

The above target is for the overall growth rate. However, we believe that Nestl should have targets concentrated on certain geographical areas to seize the potential growth opportunities in Delta and Upper regions. Only 2% of Nestl sales are in delta while Nestl is not almost in the picture in Upper Egypt and Canal cities. Below are the geographical targets of this marketing plan:

Delta: Increase annual sales volume by 30%; numeric handling from 1% to 3% Upper Egypt and Canal: Increase annual Sales Volume by 50%; Numeric handling to 1%

Two-Year Marketing Plan Objectives Summary

Increase Market share to 23% in first year and 26% in second year Increase Numeric handling to 7.5% in two years while keeping weighted handling above 50%

Reach 15% annual Sales growth rate; 12% in first year

Delta: 30% sales growth rate, 3% numeric handling Upper and Canal: 50% Sales growth rate, numeric handling 1%

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3.2 Marketing Strategy

The following section will discuss the marketing strategies that will help in the performance of the sales and customer loyalty of the 5-gallon water bottles.

3.2.1 Market Segmentation

In this part, we are concerned with segmentation of the bottled water market to help Nestl waters to have a more focused approach to its different customer segmentations. a) Geographical segmentation This is the traditional segmentation of the market based on the geographical distribution. The figure below shows the distribution of Nestl sales among the different geographical regions in Egypt. It is clear that the sales are mainly concentrated in Cairo and Alexandria. This coincides with Nestl positioning strategy, which stresses on quality and targets premium customers, which are normally concentrated in Cairo and Alexandria.

% Sales of Bottled Water per area

6% 12% Cairo Alexandria 22% Delta 60% Upper and Canal

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However, we see that there is a high potential in other geographical regions such as Delta and Canal where Nestl can concentrate its effort and address segments of customers who seek high quality hydration in absence of trusted source of tap water.

b) Indoor versus outdoor users The customers of bottled water could be differentiated into segments with respect to their indoor/outdoor consumption pattern: Outdoor users: These are the customers who tend to use bottled water while they are outdoors where they do not have access to source of trusted tap water. However, these users tend to use tap water while they are indoors. This segment of customers is a good target for the small packages like the 0.6L and 1.5L bottles. Even if these customers occasionally use bottled water at their homes, they will not use the 5-gallon package. Hence, we believe that this segment is not a good target for the 5-gallon business-to-consumer marketing plan. Indoor users: These are the users who tend to use bottled water in their homes. These users usually do not trust tap water and only adopt bottled water as the trusted healthy source of hydration. This segment of users is characterized by having higher money income, education and loyalty to a specific brand. This segment of customers will be focused at the most in the suggested marketing strategies.

c) Volume Consumption The customers could be segmented according to their annual volume consumption of bottled water into three segments Heavy users: These are the customers whose annual consumption exceeds 500 liters. (Equivalent to 25 5-gallon packages)

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Moderate users: These are the customers whose annual consumptions range from 200 to 500 liters. (From 10 to 26 5-gallon packages)

Light users: Annual consumption is from 100 to 200 liters (5-10 5-gallon packages)

d) Quality-seeking versus price-seeking segmentation The customers can be divided into two segments regarding their tendency to seek quality of hydration. The first segment is the quality-seeking segmentation. This segment concentrates on the quality of the bottled water and on the health concerns. The second segment usually tends to use bottled water due to unavailability of tap water. For this segment, price will be the dominant attractive factor. The customers in this segmentation do not see major differences between the different brands and they will not be very loyal to any company. They can shift easily from one brand to another if they get better offer. We see that Nestl should definitely targets the two segments in different ways. For the first segment, Nestl should promote its positioning as the brand with premium quality and distinctive health specifications while with the second segment, Nestl should promote itself as a company which delivers the best quality for money through attractive offers.

3.2.2 Target Markets

Considering the above segmentation, Nestl Business-to-consumer 5-gallon marketing plan should target the following segments 1) All geographical regions. Maintain and develop existence in Cairo and Alex and establish existence in other regions 2) Indoor users 3) Subscribers with heavy and medium consumption 4) Quality seekers segment will be the main target. However, Nestl could also target the price seekers by special promotions by adopting the Best price for quality strategy that matches with the positioning of Nestl in the market. - 25 -

3.3 Product Strategy

3.3.1 Product
Nestl Pure Life is drinking water that has been treated and rematerialized using a standardized industrial process to ensure purity and quality. Pure and Safe Nestl Pure Life refills your body with water to maintain a good level of hydration. It provides a balanced mineral formula (on average 150 170 mg per liter), contributing to daily mineral requirements.

3.3.2 Product Attributes

Nestl Pure Life is a pure, safe and healthy, colorless and odorless drinking water with a pleasant taste. The source of the water is a deep well in Kafr Al Arbein in Banha, Qualubiya. a) Water Contents Mineral Calcium Magnesium Sodium Potassium Bicarbonate Sulfate Chloride Silicate T.D.S Concentration (mg/liter) 16.3 6.28 16.00 1.40 87.84 17.00 8.80 9.0 132 - 26 -

3.3.3 Brand Name& Positioning

Nestl branding strategy is using the company name combined with a product name: Nestl Pure Life. A Nestl brand name on a product is a promise to the customer that it is safe to consume, that it complies with all regulations and that it meets high standards of quality.

3.3.4 Packaging
Nestl Pure Life 5-gallon is available in one package; a 18.9-liter bottle that has a protective cover so that the consumer can immediately define that the product was delivered from the factory. Its proprietary design equally protects the brand from counterfeiting. Bottles are now manufactured in Egypt, combining the benefit of a local production and the strength of a worldwide brand. The are no suggestion on any modification to the product itself, as it would require a huge effort to change the current design of the product, and thus it will be more efficient to keep it as it is.

3.3.5 Label
The labels on Nestls bottled water brands are often designed to convey the image that the water itself comes from pure and pristine sources. The label provides information like quantity, mineral contents, logo, and manufacturing date. Consumer service number is mentioned as well.

3.3.6 Quality
Every day, millions of people all over the world show their confidence on Nestl by choosing Nestl Pure Life. This confidence is based on quality image of Nestl and a reputation for high standards that has been built up over many years. - 27 -

Nestl commitment to product quality remains the corner stone of its business philosophy. Every product on the shelf, every service and every customer contact helps to shape this image. A Nestl brand name on a product is a promise to the customer that it is safe to consume, that it complies with all regulations and that it meets high standards of quality. Under no circumstances will Nestl compromise on the safety of a product and every effort must be made to avoid hazards to health. Likewise, compliance with all relevant laws and regulations is a must and is not negotiable. People, equipment and instruments are made available to ensure safety and conformity of Nestl NPL at all times. Nestl executives say:

Quality is our most successful product. It is the key to our success, today and tomorrow.

Natural or treated, all of Nestl Waters bottled waters undergo the same strict quality controls and adhere to different local and international regulations linked to their specificities. Based at the Product Technology Centre (PTC) in Vittel in France, the Central Laboratory carries out over 200,000 chemical and microbiological analyses every year. Linking two regional laboratories, the Central Laboratory is not only a quality guarantee of the resource and the final product, but also a center of expertise for the hundred Nestl Waters production sites.

3.3.7 Complimentary products

The two main complementary products are the electronic water dispenser and the manual water pump:

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a) Water Dispensers The water dispensers are machines where the 5-gallon bottle is fitted on top of it. The water dispenser offers the customers cold water, hot water, and roomtemperature water. Nestl already offers these water dispensers to the market in partnership with different suppliers of these dispensers. The water dispensers are a vital complimentary product, which will be a major element of the different proposed marketing strategies.

One major suggested modification is to offer dispensers without the option of heating the water. By doing so, the cost of the dispenser will decrease, which will allow more customers to be willing to buy the dispensers, and consequently increasing the sales of the 5-gallon bottles. The main reason for such modification is that the culture of the Egyptian market is that Egypt is more of a tea-drinking culture, where people require boiling water to make tea. And since, these dispensers are not able to produce water at boiling temperatures, therefore the option of hot water is irrelevant.

b) Manual Water Pumps This product is another potentially vital product. It is simply a manual pump that is mounted on top of the 5-gallon bottle, and it allows customers to manually pump water from the bottle. The main advantage of this product is that it will target the segments of the market that are not willing to pay money for the more expensive water dispenser. Moreover, almost all of the targeted customers have refrigerators at home, and taking into account that some of the customers no longer rely on tap water for cooking, therefore it will be important to have the option of having a large water source at home with a practical appliance to get this water.

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3.4 Price Strategy

For a lot of consumers, value and price are highly related: the higher the price, the higher the value. Consequently, Nestls intention to position Nestl Pure Life as a unique, high quality product gives it a certain control over Pure Life price. Nestl Pure Life is following brand pricing through which it provides functional and psychological value to its target customer. The pricing strategy of Nestl Pure Life is market skimming. Prices of Nestl Pure Life are relatively higher than their competitors. The typical consumer price for the 5-gallon bottle is 20L.E. noting that 80% of the price goes for logistics and 20% for the actual product value. Nestl provides coupons for home consumers. A 10 coupon book costs 190L.E. resulting in unit price 19L.E. per bottle. Special rates can be agreed on with Business-toBusiness customers.

3.4.1 Proposed Modification to the Coupon System

We suggest a modified option that targets the market segment that will not be willing to pay the whole price for the coupons at once. The main idea is to allow these customers to pay only half the price in advance, and the rest of the price will be paid as an extra charge with each coupon exchange.

3.4.2 Annual subscription

a) Idea We propose the introduction of an annual subscription program. The main idea of the annual subscription is to target the heavy users with a loyalty program that ensures the continuity of the service with premium prices. Also, such program will allow Nestl to have a bigger chance of retaining the customers, as it will create brand loyalty, and also will increase the customers lifetime equity. b) Details The subscription will be as follows: - 30 -

1- Paying the entire price of the package once per year. 2- Special rate of LE 17 per bottle. 3- Package will be for 96 Bottles per year with average of 8 bottles per month. 4- Refund policy for 5 Bottles at end of year.

3.5 Distribution strategy

Nestl Water todays challenge is in the logistic cost of its 5-gallon bottle; the product cost represents 20% of the total cost, while the remaining 80% represents the distribution cost.

3.5.1 Current Distribution Channels

1. Nestl water hub (warehouse): there are total of 4 hubs from where water products are distributed to retailers, supermarkets, and customers (on specific days of the week). These hubs are located in: a. Aburawash b. El Salam c. Hurghada d. Alexandria 2. Only one water shop exists in Rehab city. 3. Factory to retailers.

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Nestle Factory

Hubs

Retailers

Water Shops

Retailers

Nestl Water Multichannel Distribution System

3.5.2 Proposed Distribution Strategy

Our strategy will aim at increasing 5-gallon coverage through using Multichannel Distribution Systems. We shall expand the hubs and water shops in different strategic locations in order to achieve an intensive distribution strategy that is able to reach out to the biggest number of customers possible.

3.5.3 Expansion of Water Hubs and Water Shops

Nestl-Waters hubs and water shops are its main source of water delivery to its consumers. Having known that 5-gallon bottles product pricing is actually divided between the product (the water and the package itself) and the delivery fees, it could be fruitful to increase Nestl-Waters hubs and water shops to best reach the consumers and decrease the distribution cost leading to higher profit margins. - 32 -

The Water Hubs - Water Shops idea is basically aiming to increase the geographical footprint of Nestl-Waters around Egypt. Besides, the Water Shops could be another alternative for Nestl-Waters consumers to go and buy the packages themselves if for any reason they missed the normal distribution round or they need extra bottles. Having previously discussed that Nestl currently has 4 hubs and a water shop, this acted as guidance for where new locations should be reached according to the expected market potentials. The target is to reach more consumers in Cairo, Alex, Delta, and Upper Egypt.

a) Water-Hubs Two Water-Hubs can be added to the existing network to increase Nestl-Waters coverage. It has been found that Mansoura & El-Minya are optimum spots to start with in Delta and Upper Egypt. Delta & Upper Egypt were specifically chosen as new Water-Hubs location at this phase because a potential has been noticed there based on the competitors sales percentages per region while Nestl nearly doesnt exist in those regions.

Bottled Water Category Turnover per Region (2010)

100% % Turnover 80% 60% 40% 20% 0%

Cairo

Alexandria

Delta Egypt*

Upper Egypt*

Canal Zone

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Mansoura was chosen due to the following reasons: 1. Intermediate locations with respect to other Delta cities. 2. Close to Cairo. 3. High living standards and educational levels.

El-Minya was also chosen to similar reasons: 1. Intermediate locations with respect to other Upper Egypt cities. (Especially the ones between El-Minya& Cairo) 2. Upper Egypt distribution can also depend on the Hub already existing in Hurghada using Safaga-Quena Road to reach cities as Quena, Edfu, Luxor and Aswan if needed.

b) Water-Shops Nestl-Waters currently has one Water-Shop in Rehab mainly serving the residents there. The idea seems a promising one and thus it has been thought of launching new ones. Six Water-Shops could be added in Cairo, Alex and a seasonal one in the North Coast. Cairo Water-Shops: 1. Mohandseen. (Serving Mohandseen, Zamalek, Agouza & Dokki areas). 2. Heliopolis. (Serving Heliopolis and Nasr City areas). 3. Carrefour-Maadi. (Serving Maadi, Helwan and New Cairo areas). 4. 6th of October. Alex & North Coast Water-Shops: 1. Somouha. 2. Zahran Supermarket in the North Coast (Seasonal). - 34 -

3.6 Marketing Communication Strategy

We will use a mix of tools in our promotion strategy not only to increase our coverage in the 5-gallon but also to introduce new services such as machine renting, water catering services and water coupons.

3.6.1 Advertising
1- Flyers in hypermarkets and super markets, such as Spinneys and Carrefour. 2- Flyers attached with local newspapers on Fridays. 3- Handing out flyers at toll stations (Cairo-Alex, Cairo-Alamein, Cairo-Sokhna) 4- Nestl delivery workers will distribute brochures on current customers and new customers as well. This will be done as they are performing the regular delivery of the 5-gallon bottles to homes. 5- Sales Representatives at hypermarkets. 6- Flyers attached to current Nestl goods.

3.6.2 Direct Marketing

24/7 Nestl hotline will be available for customer questions and feedback.

3.6.3 Public Relation

In all our promotion tools a link of website will be communicated to consumers where they can visit and check all our new services and promotions for the whole year.

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3.6.4 Sales Promotion I (Summer Package)

a) Promotion Idea The seasonal package is a temporary offer that is offered to customers who travel for holidays to destinations such as the North Coast or the Red Sea. The main idea of the seasonal package is to target the customers who travel to certain locations in the country in specific times of the year and who have the demand of a clean source of drinking water. The main targets will be the north coast travelers in the summer, and the red sea travelers in spring and summer. The main potential here is that these customers travel for holidays and they need a clean source of water. However, they might not be willing to permanently purchase the water dispenser since they will not need it except for a short period of time.

b) Promotion Details The promotion will generally be as follows: 1- The customer contacts Nestl to request the package. 2- The customer will be asked to decide desired package according to the duration and the number of the 5-gallon bottles required. 3- Nestl shall deliver the water dispenser and the water bottles on the weekend at a time that is both agreed on by the customers and Nestl. 4- Nestl shall pick up the rented water dispensers at the date the package expires. 5- The customer can also contact Nestl to request the water dispenser to be picked up at a date earlier than the designated expiration date, or if s/he may wish to request extra bottles. 6- In such case, an extra delivery fee shall be incurred. 7- The customer could also return the water dispensers in case s/he is not available on the date the package expires. - 36 -

8- The customer is entitled to a refund on a certain number of water of bottles only according to the package itself

c) Promotion Packages Package 1 Duration # of Bottles Price/Bottle Machine Rent Charge Max # of Returned Bottles Deposit Delivery Charge Additional Delivery Charge Weekly TBD (min 4) LE 20 LE 70 2 LE 150 LE 15 LE 20 Package 2 Monthly TBD (min 8) LE 19 LE 180 4 LE 150 LE 15 LE 20

3.6.5 Sales Promotion II (Water Catering Service)

a) Promotion Idea The water catering service is offering customers a supply of drinking water in case of events. It is quite similar to normal catering services, where Nestl will provide the customer with the water dispensers and a number of water bottles for a day or a small period of time depending on the event. The main market segment that is targeted by this initiative is the higher end of the Egyptian population, which are mainly the upper-middle class and the upper class. The main idea is to target the potential customers who frequently organize events, such as gathering or meetings. And usually these people are required to offer their guests with a supply of drinking water. Therefore, the main initial markets will be in Cairo and Alexandria. - 37 -

b) Promotion Details The promotion will generally be as follows: 1- The customer contacts Nestl to request the water catering service. 2- The customer will be asked for required numbers of bottles, water dispensers and the duration of the offer. 3- Nestl shall deliver the water dispensers and the water bottles at a time that is both agreed on by the customers and Nestl. 4- Nestl shall pick up the rented water dispensers at the end of the service. 5- The customer is entitled to a refund on a certain number of water of bottles.

c) Promotion Packages Package Duration # of Bottles Price/Bottle # of Water Dispensers Rent Charge / Water Dispenser Max # of Returned Bottles Deposit Delivery Charge TBD (min 1 day) TBD (min 6 bottles) LE 19 3 LE 20 2 LE 150 LE 25

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d) Additional Promotional Strategy Having some sort of alliance with current food catering businesses, in order for the products to compliment each other. By doing so, Nestl has the opportunity to accelerate the demand on the water catering service. Offering Nestl foods products with the water catering service, in order to encourage the customer to request the service. For example, a customer who has a breakfast event could ask for Nescafe and other Nestl foods product along with the water catering service.

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Chapter 4: Implementation &Control

4.1 Action Plan for 2012 & 2013
A 2-Years action plan (2012 & 2013) has been prepared to fulfill the optimistic marketing objectives we have and implement the suggested initiatives.

Mansoura

Jan

Water-Hub opening

Jan

Launch of Water Catering campaign

Feb

Preparing & Promoting Carrefourfor

Feb

2012 Action Plan

2013 Action Plan

Mar

Maadi Water-Shop CarrefourPreparing & Promoting for Zahran Super Market Water-Shop Opening

Mar

Preparing & Promoting for Heliopolis Water Shop

Preparing & Promoting for the Seasonal Packages campaign

Apr

Maadi Water-Shop opening

Apr

Water-

May
Zahran

May

Heliopolis

Shop opening

Jun

Supermarket Water-Shop opening

Launch of the Seasonal Packages campaign

Jun

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Jul

Preparing & Promoting for Mohandseen Water-Shop Opening

Jul

El-Minya Water-Hub opening

Aug

Aug

Preparing & Promoting for 6th of October Water-Shop Preparing &

Sep

Sep

Mohandseen

Oct

Water-Shop opening

Oct

6th of October WaterShop opening

Promoting for Somouha Water-Shop

Nov

Preparing & Promoting for the Water Catering Campaign

Nov

Dec

Dec

Somouha Water-Shop opening

4.2 Budgeting
A suitable budget should be dedicated to efficiently cover the suggested initiatives needed to achieve the defined marketing objectives. The budget should be covering activities as advertising, Water-Shops & Water-Hubs renting and launching.

Activity Location Rent Mansoura Water-Hub Water-Hub Preparations Delivery Trucks Location Rent CarrefourMaadi Water-Shop Water-Shop Preparations Flyers Distribution with news papers

Frequency 1/year 1/month 2/year

Count 1 7 1 200,000

Price/Unit 1,000,000 200,000 100,000 15,000 100,000 70,000

Budget 1,000,000 200,000 700,000 180,000 100,000 140,000

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Street Banners Small Vans Location Rent Water-Shop Preparations Zahran Supermarket Water-Shop Flyers Distribution with news papers Street Banners Small Vans Flyers Distribution at Toll Stations Seasonal Package Campaign Brochures handed out at home Radio Ads Location Rent Water-Shop Preparations Mohandseen Water-Shop Flyers Distribution with news papers Street Banners Small Vans Location Rent Water-Shop Preparations Somouha Water-Shop Flyers Distribution with news papers Street Banners Small Vans

1/month 1/month 1/year 1/month 4/month (3 months) 1/month (3months) 3/Day (3 months) 1/month 2/year 1/month 1/month 2/year 1/month -

1 2 1 200,000 1 2 25,000

50,000 75,000 15,000 100,000 70,000 50,000 75,000 5,000

60,000 150,000 180,000 100,000 70,000 600,000 150,000 60,000

50,000

10,000

30,000

1 200,000 1 2 1 200,000 1 2

2,000 15,000 100,000 70,000 50,000 75,000 15,000 100,000 70,000 50,000 75,000

540,000 180,000 100,000 140,000 600,000 150,000 180,000 100,000 140,000 600,000 150,000

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Location Rent Water-Shop Preparations Heliopolis Water-Shop Flyers Distribution with news papers Street Banners Small Vans Location Rent El-Minya Water-Hub Water-Hub Preparations Vehicles Location Rent Water-Shop Preparations 6th of October Water-Shop Flyers Distribution with news papers Street Banners Small Vans Flyers Distribution at Water Catering Campaign Hypermarkets & Supermarkets Brochures handed out at home General Ads Total Budget Ramadan TV Ads

1/month 2/year 1/month 1/year 1/month 2/year 1/month -

1 200,000 1 2 1 5 1 200,000 1 2

15,000 100,000 70,000 50,000 75,000 1,000,000 200,000 100,000 15,000 100,000 70,000 50,000 75,000

180,000 100,000 140,000 600,000 150,000 1,000,000 200,000 500,000 180,000 100,000 140,000 600,000 150,000

2/year

200,000

40,000

80,000

4/year 8/Day (1 month)

200,000

40,000

80,000

15,000

3,600,000 14,400,000

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4.3 Evaluation and Control

Regular systematic evaluation and control systems are mandatory to monitor the performance and the degree to which the target objectives and goals are met.

Evaluation and Control process could be implemented in regular forms:

1. Monitoring the Sales objectives on quarterly basis. 2. Evaluating the degree to which marketing objectives are achieved quarterly. 3. Checking the progress done in preparing the new Water-Hubs and WaterShops on monthly basis to meet the opening scheduled dates. 4. Seeking regular feedback from call center representatives that could help to enhance the provided service to ensure a 2-way communication process. 5. Arranging regular monthly meeting with the operations, sales and supplychain teams to ensure all teams are on the same track towards the overall objectives.

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References
The Nestl Waters Management Report by Nestl The employee policies and procedures handbook by Nestl Waters Egypt http://en.wikipedia.org/wiki/Economy_of_Egypt http://www.Nestl-purelife.com/wide_range.aspx http://www.Nestl.com/Pages/Nestl.aspx Meeting with Basma.

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