The Structure, Economics and

Concernsof the

Indian Bottled Water

Industry

The Bottled Water Industry is one of India's fastest growing industrial sectors. Between 1999 and 2004, the Indian bottled water market grew at a compound annual growth rate (CAGR) of 25 per cent - the highest in the world. The total annual bottled water consumption in India had tripled to 5 billion litres in 2004 from 1.5 billion litres in 1999.

•Water that can be considered fit for human consumption is called potable water.

THE

DEMAND

•Every person needs good quality potable water.

•Water is an important necessity for life.

THE SUPPLY(in INDIA)

•Millions of people, both in rural and urban India, suffer from inadequate or no tap water supply.

•Even some parts of Mumbai, the country's financial capital, get a mere two hours of daily water supply. •The city's Virar suburb gets ONLY 45 minutes supply.

THE SUPPLY (in INDIA) cont…

•Still, the water supplied in our homes is NOT FIT for direct consumption and most homes use water purification systems due to this reason.

•However, even the option of such personal water purification system is not always available, for example, at public places- bus stands, railway stations, metro stations etc.

THE SUPPLY (in INDIA) cont…

Thus, the failure of the government to provide basic water services has opened the door to private companies and vendors filling a critical need at a very high cost to consumers through BOTTLED WATER.

BOTTLED WATER TO THE RESCUEThe situation is so amazing that people are prepared to pay Rs. 15-20 for a litre of water-in India especially when the cost of material input (0.25 paisa per litre excluding labors cost) is insignificance before the price of the product.

Up to 40% of bottled water comes from the same source as tap water, but is sold back to consumers at hundreds of times the cost

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 20050

10

20

30

40

50

60

70

80

90

GROWTH OF BOTTLED WATER DEMAND IN INDIA

MILLION CASES

THE RESULT

Variety of packages

Bottled water is sold in a variety of packages: • pouches and glasses, • 330 ml bottles, • 500 ml bottles, • one- litre bottles and• 20- to 50-litre bulk water packs.

ABOUT BOTTLED WATER

The formal bottled water business in India can be divided broadly into three segments in terms of cost and type:

1. Premium natural mineral water includes brands such as Evian, San Pelligrino and Perrier, which are imported and priced between Rs.80 and Rs.110 a litre.

2. Natural mineral water, also known as mountain water, with brands such as Himalayan and Catch, is priced around Rs.20 a litre.

3.Packaged drinking water, which is nothing but treated water, is the biggest segment and includes brands such as Parle, Bisleri, Coca-Cola's Kinley and PepsiCo's Aquafina. They are priced in the range of Rs.10-15 a litre.

The FDA also classifies some bottled water according to its origin.

Tap Water Some bottled water also comes from municipal sources--in other words--the tap. Municipal water is usually treated before it is bottled.

Well water. Water from a hole bored or drilled into the ground, which taps into an aquifer.

Spring water Derived from an underground formation from which water flows naturally to the earth's surface. Spring water must be collected only at the spring or through a borehole tapping the underground formation feeding the spring.

Mineral water. Water from an underground source that contains at least 250 parts per million total dissolved solids. Minerals and trace elements must come from the source of the underground water. They cannot be added later.

Artesian well water Water from a well that taps an aquifer--layers of porous rock, sand and earth that contain water--which is under pressure from surrounding upper layers of rock or clay.

Bottled water has been treated by distillation, reverse osmosis, or other suitable process and that meets the definition of "purified water". The bottled water treatments include:

* Distillation. In this process, water is turned into a vapor. Since minerals are too heavy to vaporize, they are left behind, and the vapors are condensed into water again.

* Reverse osmosis. Water is forced through membranes to remove minerals in the water.

* Absolute 1 micron filtration. Water flows through filters that remove particles larger than one micron in size, such as "Cryptosporidium", a parasitic protozoan.

* Ozonation. Bottlers of all types of waters typically use ozone gas, an antimicrobial agent, to disinfect the water instead of chlorine, since chlorine can leave residual taste and odor to the water.

Cap cost

Bottle cost

Treatment cost

Label cost

Carton cost

Transportation cost

Other costs (eg. Tape & case)

Total cost excluding labour

Total cost to manufacturer

Selling cost

Rs. 0.25

Rs. 1.5-2.5

Rs. 0.10-0.25

Rs.0.15-0.25

Rs.0.50

Rs.0.10-0.25

Rs. 0.25

Rs.3.5 (approx)

Rs.4.75 (approx)

Rs.10-15

COSTING

WHY IS THERE A GROWING NEED FOR BOTTLED WATER?

•Lack of role of government in providing good quality drinking water.

•Scarcity of pure and safe water

•Urbanization

•Increasing water pollution

•Growing number of cases of water borne diseases

•Scarcity of potable and wholesome water at railway stations, tourists spots, etc.

THE STATS

Indians are currently spending about $330m a year on bottled water, analysts estimate.

The packaged water market constitutes 15 per cent of the overall packaged beverage industry

15%15%

12%

12%

15%

11%

20%

CARBONATED SOFT DRINKS

COFFEE

MILK

TEA

BOTTLED WATER

FRUIT BEVERAGES

OTHERS

SOURCE: beverage marketing corporation

INDIA??

PER CAPITACONSUMPTION

What is per capita consumption?

•In India, the per capita bottled water consumption is still quite low - less than five litres a year as compared to the global average of 24 litres.

However, this does not reflect the huge market for bottled water in India, this number is low because of the large population of our country.

PER CAPITACONSUMPTION

Cont…

The total annual bottled water consumption has risen rapidly in recent times - it has tripled between 1999 and 2004 - from about 1.5 billion litres to five billion litres

TOTAL GROSS CONSUMPTION•India ranks in the top 10 largest bottled water consumers in the world.

ASIA

EUROPE

NORTH AMERICA

OTHERS

SOURCE: Beverage Marketing Corpora-tion

Global Bottled Water Sales 2011

Currently, the natural bottled water market is growing at a phenomenal 40-50% a year in Asia and particularly in India.

Estimated growth by 2020

However, the bottling plants are concentrated in the southern region - of the approximately 1,200 bottling water plants in India, 600 are in Tamil Nadu

The western region accounts for 40 per cent of the market and the eastern region just 10.

GEOGRAPHICALDISTRIBUTION

In south India, thousands of fuel trucks converted to be water carriers sell ground water to households and establishments at about Rs.500 for 5,000 litres. More than 13,000 tankers carry water drawn from farmland surrounding Chennai, according a social activist R Srinivasan. He estimates a $148 million tanker industry is cashing in on Chennai's acute water scarcity. The story is replicated across India, including in New Delhi.

But a major problem is southern India, especially Tamil Nadu, is water starved.

The Current market trends in INDIA

The branded bottled water category is 40 % of the market and non- branded contributes to 60% of the market.

40%

60%

BRANDED

NON BRANDED

MARKETSHARE

Presently, this market is estimated at Rs 8,000 crore

The overall packaged bottled water industry in India is estimated to touch the Rs 10,000 crore mark in the 2012-13 fiscalThis could touch Rs15,000 crore by 2015

The current domestic market is split between three sets of players –

1. national brands with a pan India presence worth around Rs 4,000 crore,

2. local brands manufactured by registered plants but restricted to regions estimated to have a combined turnover of Rs 2,400 crore and

3. unorganized local brands estimated at Rs 1,600 crore.

13 2

The market leader is Bisleri International, which boasts a 60% share. It is followed by Coca- Coca’s Kinley (around 25%) and PepsiCo’s Aquafina (around 10%).

MARKET LEADERS

The non-traditional category, or bulk packs, (with over 5 litre capacity) is growing rapidly, and has a current share of over 40% share.

The rising trend of bulk water consumption in homes and institutional segments is estimated to pave the way for bulk water packs to acquire half of the total bottled water market within next four-five years

Mineral bottled water in India under the name 'Bisleri' was first introduced in Mumbai by Bisleri Ltd., a company of Italian origin in 1965. Mineral bottled water were in glass bottles in two varieties - bubbly and still in 1965 This company was started by Signor Felice Bisleri who first brought the idea of selling bottled water in India.

About the leader- BISLERI

S. F. Bisleri

Parle bought over Bisleri (India) Ltd. In 1969 and started bottling Mineral water in glass bottles under the brand name 'Bisleri'. Later Parle switched over to PVC non- returnable bottles and finally advanced to PET containers.

Since 1995 Mr. Ramesh J. Chauhan started expanding Bisleri operations substantially and the turn over has multiplied more than 20 times over a period of 10 years and the average growth rate has been around 40% over this period.

Presently it have 8 plants and 11 franchisees all over India. Bisleri command a 60% market share of the organized market.

Bottled Water: How Safe is it?

In India around 100 companies sell an estimated 424 million litres of bottled water valued at around Rs 200 crore in the country annually.

Most bottlers claim that their water is 100 per cent bacteria-free, safe, tastier and healthier.

But is the water in these bottles really safe to drink? Do they conform to international or national standards?

This question is not easy to answer as the definition of ‘SAFE’ in terms of Indian law is ambiguous.

Indian norms regarding packaged water are not quantified.

Drinking water norms of BIS say “pesticides should be absent’Packaged water norms say “ below detectable limits”

So, Ahmedabad-based Consumer Education and Research Society (CERS), an independent non-profit institution with a sophisticated product-testing laboratory, recently carried out a detailed study on major brands of bottled water available in the country keeping european standards in mind.

The results were frightening…

EVIAN

HIMALA

YAN

CATCH

AQUAFINA

MINSCOT

PRIME

PURE LITE

KINLEY

PARAS

BAILEY

HELLO

KWEN

CHER

KINGFISHER

VOLGA

BISLER

I

NO.1 MC DOW

ELLS

AQUAPLUS

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

PESTICIDE RESIDUES (mg/L)european limit (0.0005mg/ml)

FUTURE FORECAST

Prices of water and water services will keep on increasing because most of our public water utilities will soon be privatized by the government.

It is possible that water will be the next battleground among monopoly capitalists and even among nations, like it is with oil today.

Water!!!

BUT STILL…

ITS ALL A GREAT BUSINESS

fin.

Akash Deep ChoudharyAbout.me/akashdeepchoudhary