Tuesday, June 28, 2011

Private Label Bottled Water: A Profitable Niche in a Fast-Growing Industry Part 5

Evaluate intended market area

It’s critical before you set up shop to carefully analyze your market. Several key factors will impact decisions:

1. Measure your potential customer base-The ideal situation is to be located in an area with a population of at least 50,000. The types of organizations and events that lend themselves to using private label bottled water are typically found in larger communities. There have been private label bottlers, however, who’ve succeeded in smaller population areas where the right mix of other factors was present. You’ll need a consistent demand for bottled water and larger organizations can provide that need. A fairly large population base is necessary, because to break even you’ll need to sell about 12,000 bottles a month, assuming you’re selling only private label water. Most bottlers start showing a profit in as few as 12 to 18 months. In terms of profit margin, there’s no argument that this sector of the industry generates the highest margin of all marketable waters. Profit margins of at least 50 percent to as high as 200 percent are common.

2. Evaluate the competitive situation in your area-The larger the community, the more likely there are one or more bottled water companies serving the area. Are any of them already offering private labeling services? If so, to whom is the product being marketed? Is your competition doing a good job of servicing the area? Does your competition bottle locally or have its product shipped? If so, they may be at a distinct disadvantage because of shipping costs.

3. Highlight the big crowd pleasers-Are there any large events in your area that annually draw large crowds, such as state or county fairs, concerts and athletic events, etc.? (High schools and colleges are excellent potential clients.) These are important venues for you and potential customers.

4. Look for natural affinities-What’s the demand for bottled water in general in your community? Are you in a hot climate? Do home-delivered, five-gallon bottles of water thrive? This will give you an indication of the level of demand for bottled water in your city.

To be continued....