Responses of bottled water companies in Kenya to the threat of substitute products:The case of bottled water companies in Nairobi

Abstract

The bottled water industry in Kenya is young with a large number of new market entrants. This industry is experiencing stiff competition especially from the beverages it had hoped to replace. Bottled water was introduced due to the need for safe drinking water when many consumers could not trust the purity of tap water. However now the government is making Water Sector reforms to ensure that tap water is safe for consumption. The study sought to identify the substitute products that the bottled water companies consider as a threat, challenges posed by this threat and how they have responded to counter the threat of substitute products. The population of study consisted of the 22 bottled water companies operating in Nairobi at the study. However, only twelve of them responded constituting a 55% response rate. Data was collected using a structured questionnaire (see Appendix 2). The data collected was analyzed using SPSS computer based statistical program to obtain the descriptive statistics. Data was presented in tables. The study revealed that the bottled water companies were concerned about carbonated soft drinks, juices and tap water as substitutes to bottled water. The companies acknowledged the fact that they experienced challenges but pricing seemed to be the key challenge. Faced with this threat of substitute products the companies have concentrated on their core product, which is bottled water. They have also differentiated their products from those of competitors, endeavored to create strong brand names and have made quality improvements in order to meet their main goal, which is customer satisfaction. Arising from the above findings, it was recommended that bottled water companies should consider introducing new beverages in the substitute industry. This implies viewing the substitutes as an opportunity. The companies also need to segment their markets and target those segments in which the substitution threat is least.