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Aava Natural Mineral Water A Case Solution
The case study is about a natural mineral water company operating in India, Aava. Aava is owned by Sheeple enterprises, and the case discusses the intense competition from other players in the market and has struggled to establish a strong brand image. Large institutions such as hotels, airlines and entertainment centers are Aava’s primary customer segment. In order to establish its position in the market, it is pertinent for Aava to focus on targeting large institutional clients in aviation and hospitality. Moreover, the case discusses the rise in the mineral water industry in India and how different players entered the market in 1990. The case even covers the number of competitors of Aava and the way they position themselves in the market. Aava faces trouble in entering the retail market, for which the company strives to expand its product portfolio. The management of Aava may consider launching an additional product category of flavoured water drinks or just remain in the water segment.
Following questions are answered in this case study solution:
Evaluate the performance of Aava Mineral water in the industry so far?
Considering the growing competition in the market, which customer segment(s) should Aava target primarily, and accordingly which product stock keeping units (SKUs) or package size should it focus on? Should it target the large institutional customers (SKU 200 ml bottles), retail and small institutional customers (SKU 1 liter bottles) or the bulk water customers (SKU 20 liter jars)? Taking the two cities of Ahmedabad and Mumbai as the base, which SKU is more profitable for the company? Conduct the profitability analysis of various SKUs considering different parameters?
Why does Aava feel the need to improve its positioning in the market? Considering how some of Aava’s closest competitors have positioned their brands, should Aava continue with its current positioning or should it modify it?
Considering how other natural mineral water manufacturing companies are expanding into other product categories, should Aava introduce new products to expand its consumer base or should it remain focused on its core product offering of natural mineral water?
Case Study Questions Answers
1. Evaluate the performance of Aava Mineral water in the industry so far?
Aava has been categorized in the natural mineral water category and was established in 2005; since then, it has grown to become one of the leading mineral water brands in India. The origin of Aava was from the Aravali mountain range, which was situated near Gujarat. The natural mineral water industry was rising at a pace, its production rose from 2 million cases in 1990-1991 to 44.50 cases in 2001- 2002 and speculating the increase in the number of entrants in the industry, it keeps on rising. The market of Aava was more than 50 percent which allowed the company to hold a volume leader in the natural mineral water market. Moreover, Aava also held the place of being the second largest player and volume leader in the Indian natural mineral water industry and has held awards such as the ‘best packaging innovation award.’ Aava was recognized as one of the packaged water companies that adhered to pharmaceutical standards by utilizing "clean room" technology to manufacture uncontaminated mineral water. During 2010-2011, the company had a daily production capacity of almost 30,000 litres of natural mineral water and generated approximately one million bottles every week.
Another advantage Aava had was the strategic geographical location which was based in western India, since it allowed it to easily serve the southern and Western markets. The company had the benefit of readily receiving low-cost sources of PET, which was the plastic raw material for packaging due to the PVC granule manufacturers which were present in Gujarat. Compared to the other brands, the expenditure of Aava was less as it spent INR 1.40 to transport 1 litre bottles to Mumbai while INR 5 per bottle was spent by other brands. The distribution cost of Aava in Ahmedabad, which is its local market was INR 0.20 and 0.50, which was very less, and the company's services spanned over 11 cities all over India which gave it a strong geographical advantage. Aava showed dominancy in the aviation sector by having a 60 percent market which majorly contributed to its sales. Furthermore, the price of a 1 litre bottle of Aava ranged from INR 20-30, which was comparatively less than its competitors and had successfully positioned itself as a premium water brand that emphasized its natural sourcing of water and high-quality standards. The company's annual sales and revenue have seen significant growth since 2006, which was INR 4,000,000 with an increase to INR 16,000,000 in 2007-2008, and it further rose to 80,000,000 INR in 2009-2010, which signifies a growth rate of 200-400 percent every year.
The expenses for promotions and advertisements account for 2 percent of the selling price for the bulk jars, which depicts that the company is not heavily investing in the marketing of the bulk water business. Aava is selling the bulk jar at a very competitive price of INR 60 for a 20 Litre jar; however, it provides smaller profit margins as compared to the other SKUs. The reason is the lack of geographic reach and the high expense incurred in its transportation beyond a certain area.
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