Bottled Water Business Plan
EXECUTIVE SUMMARY
Demand for bottled drinking water has been growing rapidly since the 2000s, increasing nearly
400% in the last decade according to the Council of Bottled Water Manufacturers, as a result of
declining consumer confidence in the safety and quality of municipal water supplies.
Bottled Drinking Water
To take advantage of this expanding market for drinking water, [your company] has been
established to provide home and office delivery of bottled water to the Cherry Hill area. After
months of extensive industry and market research, the company has developed a solid
business plan to enter the market for bottled water.
[your company] will generate revenue as a result of the rental and sale of water coolers, as well
as for the delivery of the three types of water: pure spring water, distilled drinking water, and
purified drinking water in 5-gallon bottles.
Management Team
[founder] is the owner and president of [your company], bringing years of experience in water
bottling and delivery to the company. His family has operated a thriving bottled water business in
Philadelphia for over 10 years, which he helped to run.
Two key managers have been retained to assist in the operation and expansion of the company:
[key manager 1] will serve as the company's Operations Manager, and [key manager 2] will be
the Route Driver, an extremely important position as the primary customer contact. In addition,
two commission sales associates will be hired to secure new customers.
Manufacturing
[your company] Bottled Water will be bottled by Sustainable Water Corporations in Pittsburgh
PA, who will fill the 5-gallon bottles and store them until they are needed by [your company], as
well as accepting empty bottles, cleaning them, and refilling them for reuse.
By using free trials to entice consumers to install their water coolers, [your company] will quickly
establish a customer base. The free trial offer will be advertised through a variety of media, and
will be promoted at trade shows and mall events.
The marketing budget of $25,000 will enable the company to quickly capture a large percent of
the potential market. All funding for marketing activities will be generated from the business as
earnings from operations, not from start-up capital, and is based on a standard 5% of first-year
sales.
INDUSTRY ANALYSIS
The market for bottled drinking water has been growing rapidly since the 200s, increasing nearly
400% in the last decade according to the Council of Bottled Water Manufacturers, as a result of
declining consumer confidence in the safety and quality of municipal water supplies. This
nationwide trend is also evident in the Cherry Hill area, where [your company] intends to
operate.
In response, individuals and businesses are purchasing bottled drinking water for use in their
homes and offices. Free of contaminants and government-monitored, bottled waters are derived
from protected springs or wells or are produced by purifying and processing water from public
water supplies. Consumer demand for bottled water is expected to continue to increase, as
water supplies worldwide are deemed undrinkable or unhealthy.
According to research, more than 60% of consumers questioned about their purchase of bottled
waters claimed "taste" was the primary reason for buying bottled water. Other reasons cited
were safety and concerns about "too many chemicals in tap water."
Growth Rate
The bottled water industry as a whole has been growing since the 2000s. Bottled water sales
increased 15% from February 2002 to February 2003, indicating a market rebound from the
single digit growth of the 2000s. Demand for home delivery of bottled water is expected to be
approximately 10%, with commercial distribution growing at a rate of 9% per year, according to
research.
Industry Size
By far, the most popular type of water is non-sparkling water; in 2001 sales of non-sparkling
water were $3,000,000,000, according to research. Total bottled water sales were
$4,000,000,000, including both domestic sparkling and imported drinking waters.
Total sales of bottled water increased by more than 15% from 2000 to 2005, and have doubled
in the last five years.
In terms of gallons sold, there were 2,500,000,000 gallons of non-sparkling water sold in the U.
S. alone during 2001, with that number increasing to approximately.
Consumption
Per capita consumption of bottled water in the U.S. is also increasing dramatically, rising from 6
gallons per person in 2000 to 9.0 gallons per person just five years later, in 2005.
Approximately 1 out of every 6 households currently consumes non-sparkling bottled water as a
source of drinking water. In addition, only 1% of the water being brought into a household is
used for drinking; the rest is used for washing, bathing, etc.
Delivery of Water
The Council of Bottled Water Manufacturers divides the distribution channels for bottled water
into: retail grocery, commercial delivery, home delivery, restaurant purchase, and vending.
While retail purchase accounts for the largest percentage of bottled water purchases (41.5%),
21.3% of sales are made through commercial delivery of water and 21.4% are through home
delivery sales. The percentage of the industry that relies on water deliveries for its water is
42.7%, the largest percentage of all.
Cost
In the U.S., the average price for a 5-gallon delivered bottle of water is $9. An informal poll of
local Cherry Hill distributors showed that the average price in the area was also approximately
$9.00 per bottle, which is what [your company] intends to charge.
After water and delivery costs of $2.00, each bottle generates $7 in profit per unit for the
company.
[your company] will purchase coolers at a cost of $200.00 and rent them to customers for a fee
of $13.00 per month. In just 21 months, each rented cooler will be paid for and generating profit
long-term for the company.
Suppliers
The Council of Bottled Water Manufacturers reports that there are approximately 430 bottling
facilities in the U.S., producing more than 700 different brand labels.
MARKET OVERVIEW
Water supplies in the Cherry Hill are rising due to consumers looking for drinking alternatives.
Potential Customers
Because delivered bottled water is relatively inexpensive, virtually any household can afford to
have a water cooler in their home.
The cost to rent a cooler is $13 per month, and an average household drinks 20 gallons per
month (4-5 bottles).
Size of the Market
The size of the non-sparkling bottled water market for the Cherry Hill area is approximately
16,871,019 gallons per year, assuming a population size of 2,444,099 in the New Jersey area.
The value of the local water market is approximately $17,177,220, as of 2004.
Competition
There are currently 13 bottled water distributors listed in the Cherry Hill Yellow Pages, however
only 7 companies are actively engaged in home and office delivery of drinking water. The other
6 companies are equipment sales representatives.
The 3 largest competitors are:
Crystal Water
Rain Man Water
Hello! Water
However, these firms, in total, control just 5% of the potential market for bottled water, according
to the local Small Business Administration office. In fact, all have stated by phone that they
constantly have more orders for coolers and water delivery than they can handle, indicating
strong demand for bottled water that has overrun the capacity of companies already in the
market.
BUSINESS DESCRIPTION
[your company] Bottled Water is a regional distributor of bottled waters for use in conjunction
with rented company water coolers.
Corporate Structure
[your company] Bottled Water was established in 2010 as a PA corporation. [founder] owns
100% of the stock of the company.
Name
The trade name [your company] is registered, and the product logo has been finalized for
imprinting on the bottles.
Operations
Spring, distilled, and purified drinking waters will be bottled by a Sustainable Water Corporation
who will fill the 5-gallon bottles labeled with the [your company] logo. The refillable bottles will be
collected from customers when empty and returned to the bottler bi-weekly for cleaning and
refilling.
Personal Investment
[founder] has already invested over $20,000 of his personal funds during the last year in order
to thoroughly research the U.S. bottled water industry and verify demand within the local Cherry
Hill market through attendance at industry conventions and trade shows (which included
attendance and travel expenses). Funds have also been invested in association memberships,
logo and label creation, and professional consulting fees in order to incorporate, register the
trademark, and finalize the company business plan.
PRODUCT DESCRIPTION
[your company] offers home and office delivery of drinking waters, as well as water cooler
rentals, under the [your company] label.
Drinking Water
The company offers three types of water in 5 gallon refillable bottles:
Pure spring water
Pure spring water is collected from protected springs and wells and contains no contaminants or
additives. Consequently, it is considered to have the best taste of all drinking waters.
Distilled Water
Distilled water is produced by vaporizing water and then allowing it to condense, thereby leaving
behind any dissolved minerals present in the original water.
Purified Drinking Water
Water is purified by a process of reverse osmosis, where the water is forced under pressure
through membranes which remove 90% of the dissolved minerals.
Water is delivered in 5-gallon bottles made of plastic. [your company]is the only water company
in the Cherry Hill area to offer a special new handle that makes lifting and refilling bottles much
easier. Eventually, the company intends to offer smaller 2- and 3-gallon bottles of water.
Water Cooler Rentals
[your company] will offer a variety of water coolers for rent to its customer base, including
standard floor models or counter top models offering choices of cold water only, hot and cold, or
room temperature and cold water dispensing.
Advantages of Water Delivery
While many consumers choose to purchase bottled water at the grocery store in small 1- or 2-
gallon bottles, home and office delivery of water is increasing in popularity for several reasons:
Convenience —instead of having to lug heavy, bulky bottles all the way from the grocery store
home, delivery personnel bring longer-lasting, 5-gallon bottles right inside homes and offices.
Customer service —if there is ever a problem with the water cooler, [your company] arrives
quickly to replace it, taking the faulty cooler back to the warehouse for repairs.
Monthly billing —instead of weekly trips to the grocery store, customers receive a single monthly
bill based on the quantity of bottles consumed.
Home vs. Office Delivery
[your company] anticipates that approximately 50% of its deliveries will be to homes and 50% to
offices.
MARKETING STRATEGY
In order to effectively and quickly build its customer base, [your company] intends to
aggressively promote its free trial program, offering new customers the use of a company cooler
for a period of 30 days free of charge and includes two free bottles of water.
In addition, the company will implement a variety of other marketing methods to complement
and build on the free trial offer. Since the competition has failed to utilize other marketing
methods beyond the free trials, [your company] will quickly achieve a competitive advantage.
Marketing Methods
Free Trials
Through research done by the company, this marketing approach has been found to be
extremely effective in enticing consumers to try bottled water and to become used to having a
cooler nearby. Once the cooler is in place, the majority of customers find it most convenient to
leave it there and order additional bottles of water from the company that provided the cooler.
[your company] will contact free trial customers two weeks after the cooler has been placed in
their home or office, when the two free bottles of water have most likely been emptied, and offer
them an incentive to commit to a cooler rental agreement before the 30-day free trial is actually
over. The incentive may involve free bottles of water or a reduced fee for water.
The cost to deliver and place the cooler is minimal, by comparison to the advantage of having a
customer essentially locked in to having water delivered by the same company that is renting
the cooler to them.
Advertising
[your company] intends to advertise its free trial offers by way of radio ads (secured through
cross-promotion deals or barter arrangements), door hangers, and ads in coupon packages.
Existing competitors do not currently invest in advertising, leaving the market wide open to [your
company].
Direct Mail
Post cards offering a 30-day free trial will also be mailed to homes and businesses in selected
zip codes within Cherry Hill.
Trade and Consumer Shows
Attendance and exhibits at local home and mall shows is also planned, to keep the [your
company] Bottled Water name constantly in front of consumers.
Placements
The company will also place coolers in public places frequented by health conscious
consumers, such as pharmacies and hospitals.
Budget
An annual marketing budget of $25,000 has been established for the first year of operation,
based on a calculation of 10% of first year sales of $247,928. This funding will be generated
from profitable operation of the business and not from the start-up capital.
Competitive Advantage
[your company] will quickly establish itself in the Cherry Hill market as a top quality provider of
bottled water. The company will do this by emphasizing superior customer service in all aspects
of the company operations.
One major component of ensuring that customers are delighted with [your company]'s products
and service, is the appointment of a talented and outgoing route delivery person who is
responsible for monitoring customer satisfaction and for pursuing new business. Part sales
person and part delivery person, [key manager 1] has been hired for this important role at [your
company].
OPERATING PLAN
Spring, distilled, and purified drinking waters are bottled by Sustainable Water Corporation who
will fill the 5-gallon bottles labeled with the [your company] logo. The plastic, refillable bottles will
be collected from customers when empty and returned to the bottler bi-weekly for cleaning and
refilling.
Plastic is preferred as the bottle packaging because it is lightweight, unbreakable, and
inexpensive to produce and ship.
Location
The company will operate from approximately 2,500 sq. ft. of warehouse space in Cherry Hill
county, with a portion of that space being set aside for office space. [your company] is currently
working with county officials to identify and negotiate the lease on an appropriate site.
Deliveries
It is expected that the route delivery person will make approximately 40 deliveries per day, or
400 per month. One delivery person will be needed at the start and an additional delivery
person will be added when the number of monthly deliveries exceeds 1,600, which is
anticipated at the end of the fourth month of business.
Insurance
Through [your company]'s agreement with Sustainable Water Corporation, Sustainable Water
Corporation's product liability insurance will cover any such claims against [your company].
[your company] will also carry its own insurance, including a $ 1 million umbrella liability policy.
Future Plans For Bottling
Once [your company] achieves a customer base of 3,000 or deliveries of 12,000 bottles per
month, the company will begin to investigate investing in equipment to bottle water in-house. An
investment of approximately $250,000 would be needed in order to purchase the bottling
equipment.
MANAGEMENT AND STAFFING
[founder] has been involved in the water industry virtually all his life. From an early age, he sold
and delivered ice and water to local residents for his family's water business in Philadelphia.
This experience familiarized him with all aspects of production, delivery, marketing, accounting,
and collections.
Since moving to Cherry Hill, [founder] has carefully researched the opportunity to start a similar
bottled water business in the area.
[founder]
In addition to developing a strategy for entering the market by purchasing needed equipment
and supplies, [founder] has already identified a bottler who will bottle and store water for [your
company] and has invested personal funds to trademark the name and logo associated with
"[your company] Bottled Water."
[founder] will continue to manage all strategic planning, marketing planning, staffing, and
accounting activities for [your company], building on his experience in the bottled water industry.
His involvement in the Council of Bottled Water Manufacturers will keep him well-informed of
market changes and opportunities.
Management Team
[founder] has secured commitments from two experienced and talented individuals who will be
responsible for daily operations and for delivery of the water.
[key manager 1] will assume responsibility for training sales representatives and route delivery
personnel, implementing the company's marketing plan, and delivering coolers as needed to
new customers. [key manager 2] will become the company's primary route delivery person,
serving as the key link between [your company] and its customers.
[key manager 1]
[key manager 1] has counseled small businesses for several years as an independent
consultant, on issues related to operations, marketing, and training. [key manager 1] intends to
apply the experience she has gained in her work with clients to [your company]. This knowledge
of training, marketing, and operations is directly applicable to [founder] business.
[key manager 2]
[key manager 2] has worked for several companies during his career, using his knowledge of
employee management, operations, and machine repair to succeed in each position. Because
of his outgoing personality, talented management style, and interest in working hands-on within
a smaller company, [key manager 2] has been invited to join the [your company] management
team. His initial responsibilities will consist of cooler delivery and customer interaction in order to
build the company's customer base quickly.
Sales Staff
[your company] will hire two commissioned sales people who will focus on placing new water
coolers in offices and homes. In return for each new placement, the sales person will receive an
amount equal to the first and last month's rent on the cooler in payment, after the customer has
completed the free trial period and has committed to cooler rental. It is expected that
salespeople should be able to make at least $80 to $140 per day, based on placing just 4
coolers.
FUNDS NEEDED AND THEIR USES
In order to start and establish [your company] as a leading supplier of quality bottled drinking
waters, funding is required in the amount of $95,000 and will be utilized as follows:
Capitalization plan:
Equipment Cost:
Delivery truck down payment $6,000.
Purchase of 1,000 bottles $5,800.
Purchase of 100 coolers $20,200.
Computer/Office equipment $3,000.
Telephone system $1,000.
Office and warehouse supplies $1,500.
Deposits (securities, utilities, licenses, telephone) $14,000.
Start-up promotional costs $4,000.
Professional fees $2,500.
Opening inventory $5,000.
Total Start-up Costs $64,000.
Working capital $31,000.
Total Funding Needed $95,000.
Sources of capital:
[founder] personal investment $20,000.
SBA loan $65,000.
Total Funding $95,000.