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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

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Trends

Manufacturing and packaging

• New SKU’s such as cups

• Jumbo home pack with spout

Core consumers

• Shift from 1 litre bottles to 20 litre pack

Consolidation and expansion

• Coca Cola’s purchase of Good Water

• Parle investing Rs 2600 million in a new facility

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Trends

Market Segmentation Share (%)

01020304050607080

Domestic Institutional

Segment

%

Market SegmentationShare (%)

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Market Growth

Demand : Past & Future mn cases

0

50100

150

200250

300

Year

Cases (

mn

.)

Demand : Past& Future mncases

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Competitive Scenario

Brand Company 2001 2002 2003 2004

Kinley Coca-Cola India Pvt Ltd 30.5 32.0 37.5 37.0

Bisleri Parle Bisleri Ltd 39.0 31.0 31.0 30.5

AquafinaPepsiCo India Holdings

Pvt Ltd13.5 13.0 15.5 15.0

Bailley Parle Agro Pvt Ltd 6.0 6.0 7.0 7.5

Private Label 1.0 2.0 2.0 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-Cola’s Kinley

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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 co-packers

Riding on the national Coca-Cola distribution network

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Competitive Positioning

Kinley’s slogan, ‘boond boond mein vishwas’

Capitalized on the unreliability of ordinary piped drinking water

Targeted towards families and homes

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Parle’s 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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PepsiCo’s 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 Agro’s Bailley

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Business Model

Bailley’s 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.

McDowell’s 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!