Recommendations Shift the weight of marketing and advertising resources to the faucet-mounted filter systems to establish a new customer install base that will benefit the company in the long term by establishing future faucet filter sales revenue and allow you to direct competition with PUR in this growing market segment that charges a premium for systems and filters. Use the Brita Brand on the faucet-mounted filter to leverage the already established consumer perception for great tasting water. This will shift sales from pitcher systems to faucet systems but overall will increase profits.
Although Brita should introduce the faucet system, they should still focus efforts on the pitcher efforts as their remaining budget allows. Support The Brita strategy has been to put a system in the customer hands, even at a loss with the expectation that future revenue will be made with filter replacements on the system with over the lifetime use of the pitcher. The fact that PUR is currently losing money in the faucet mounting filter system is not a great indicator for future performance since it is highly likely that they will make profits of future filter sales in the upcoming years as was the case with Brita in the early 1990’s.
At 74% market share, PUR is the leader in the faucet mount market and with their direct campaign which explicitly calls out Brita and differentiates PUR as a superior product based on its faucet systems ability to filter against known bacteria’s which Brita pitcher system does not support. This 40 million dollar marketing campaign and the possible acquisition from Procter and Gamble make PUR a real threat. PUR is also bringing awareness for water filters to function and filter against bacterial containments. Currently, 67% of 18-24 year olds expressed concerns about health contaminants in household water.
If PUR wins over this customer segment, they will gain lifelong customers who will continue to buy the faucet filters because Brita does not provide a filter for bacteria’s. These young customers are the customers that Brita should be targeting and need a faucet filter to satisfy their needs Selling the filter systems will increase Brita’s profit even if it takes take away some of the Brita pitcher system sales. At $39. 99 and $34. 99, the perception of value for the faucet system is high. At the $39. 99 price point and with a $15 cost, the gross margin per unit for each faucet sold is $24. 99.
This is more than 3 times the gross margin per unit sold for the pitchers. With the forecast scenario #7, Brita will be able to sell 1,205,000 faucet systems at a total gross margin of $24,087,950. They are currently making a gross margin of $38,700,000 on the pitcher systems. Even if half of the pitcher sales are lost to the faucet systems, the overall profit on the systems will increase. For example, Brita will make ~$24 million of the faucet systems and ~ $19 million on the pitcher systems sales. This combines to ~$43 million, which is an increase from their current gross margin on systems.
Also, studies have shown that faucet filter owners will continue to use the pitcher in conjunction with their faucet product. This means more filter replacements which increase overall profits as well. From the market forecast scenario’s, option number 7 gives the highest net profit after advertising is included. Currently this scenario has ~$15 million for advertising. They are currently spending ~$30 million. The remaining money should continue to push the pitcher filter systems since these filters are a currently cash cow for the company and have been proven to be successful.