Packaged Drinking Water

Prof. Ramanuj Majumdar IIM Calcutta Oct 26th 2006

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Introduction
Phenomenal increase in demand for bottled water from just 2.0 mn cases in 1990-91 to 76 mn cases in 2004-05
Market growth rate of more than 20% a year

Annual revenues of more than Rs 12 billion

More than 180 brands in the unorganized sector. Per capita consumption (per year) of bottled water
India - less than half a litre US - 45 litres France - 111 litres
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Demand Drivers
Tourism
Emergence of BPO and call centers

Growth in food industry

Aquifer depletion Water pollution Awareness and standard of living
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Segmentation
Customers
Individual buyer Bulk buyer

Channel
On-trade Off-trade

Trends

Manufacturing and packaging

New SKUs such as cups Jumbo home pack with spout

Core consumers Shift from 1 litre bottles to 20 litre pack Consolidation and expansion

Coca Colas purchase of Good Water

Parle investing Rs 2600 million in a new facility
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Trends
Market Segmentation Share (%) 80 70 60 50 40 30 20 10 0 Domestic Segment Institutional

Market Segmentation Share (%)

Cases (mn.)
300 250 200 150 100 50 0

Market Growth

Demand : Past & Future mn cases

Year Demand : Past & Future mn cases

90 19 91 92 19 9 3 94 19 9 5 96 19 9 7 98 20 9 9 00 20 0 1 02 20 0 3 04 20 0 5 06 20 0 7 08 20 0 9 14 -1 5

Competitive Scenario
Brand Kinley Bisleri Aquafina Bailley Private Label Company Coca-Cola India Pvt Ltd Parle Bisleri Ltd PepsiCo India Holdings Pvt Ltd Parle Agro Pvt Ltd 2001 30.5 39.0 13.5 6.0 1.0 2002 32.0 31.0 13.0 6.0 2.0 2003 37.5 31.0 15.5 7.0 2.0 2004 37.0 30.5 15.0 7.5 2.0

Others

10.0

16.0

7.0

8.0

Total

100.0

100.0

100.0

100.0
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Coca-Colas Kinley

Business Model
Contract packing deals struck throughout the country
Large number of takeovers in the large metros to increase capacity Coca-Cola has 27 plants of which 8 are 100% owned by CCI, 5 are with franchisees and 14 are of copackers Riding on the national Coca-Cola distribution network
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Competitive Positioning
Kinleys slogan, boond boond mein vishwas
Capitalized on the unreliability of ordinary piped drinking water Targeted towards families and homes

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Parles Bisleri

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Business Model
Parle Bisleri had 25 bottling units, a fleet of 2000 vehicles and 120,000 retail outlets spread across the country. Dual distribution strategy - penetrating smaller, interior markets in rural India, and pushing the brand in newer territories and roadside stalls in the metros. Within the institutional segment, hotels, railway stations and government offices are being tapped with increased aggression now.
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Competitive Positioning
Does not presently have the ability to compete against the multinationals on distribution or advertising. Instead developing the 20 litre bulk water business
Tender-driven supply deals, which guarantee a certain volume off-take but do not necessarily deliver much value.

Three strategies being followed:

Strength distribution in rural areas and explore new territories Competitive pricing Innovative packaging

Shifted from its initial Pure and Safe positioning to a new Play Safe positioning.
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PepsiCos Aquafina

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Business Model
Uses its distribution strength in carbonated brands to push its fruit juice brands as well as bottled water via the on-trade channel.
Exclusive contracts with many outlets and clubs throughout the country.

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Competitive Positioning

Pepsi is India's highest selling brand of carbonates, as well as the most popular soft drink overall. Strongly identified with energy and sports.

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Parle Agros Bailley

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Business Model
Bailleys price was higher than its competitors because it brings its products from outside the city, for which it has to pay an entry tax, the octroi. It has set up a PET plant in Silvassa, with an investment of Rs120 million.
A new 30 mm exclusive neck for the PET bottles, which cannot easily be duplicated, in an effort to fight the counterfeit trade.

It moved into bulk sales of 5 litres and 20 litres, with its biggest sales areas being water-starved cities such as Chennai in the South.
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Competitive Positioning
The company re-launched Bailley in smaller bottles and pouches.
Arrangements with Jet Airways to supply 200 ml bottles for the airline's in-flight customers.

A 330 ml bottle, priced at Rs 5, is targeted at schoolchildren.

A pouch of 200 ml priced at Re 1 is intended to introduce bottled water to the masses.

A new value-added mineral water brand called Bailley Plus is to be launched soon.
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New Entrants
Kingfisher from United Breweries Ltd.
McDowells No 1 mineral water from McDowell & Co Ltd. Indian Railway Catering and Tourism Corporation (IRCTC), a division of Indian railways, expanded the network of its own brand of bottled water, Rail Neer.
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A Case Study
Brands launched
Premium upmarket brands
- The internationally renowned Perrier - The sparkling mineral water brand, San Pellegrino

Pure Life, the mass market bottled water brand

- Initially positioned on the purity plank and targeted at family - Modified later and repositioned on the stay active and fitness platform - Priced at Rs 12 (higher than Kinley and Aquafina)

Portfolio taken off market in 2003 Why?

Inadequate distribution infrastructure Poor returns due to low margins
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Critical Success Factors

Sales and distribution
No. of channels Influence over channel members

Cost control
Value proposition Marketing budgets

Scale and size

Economies of scale Bargaining power

Innovative packaging Quality standards of product

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No, Break now!

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