Summary: Buoyed by the increased importance placed on water quality following outbreaks of waterborne diseases, the Indian bottled water market is in the midst of a critical transition. With an influx of outside companies attempting to capitalize on the market, regulations will become more imperative. The role of government may dictate who survives the impending battle.
The Indian consumer never had so much choice. In a country where 20 percent of the population has no access to safe drinking water, the bottled water industry is booming like never before. The contrast couldn’t be more ironic and everyone seems to want a part of the action.
In 1990, a person drinking bottled water in India was an oddity. Only foreign tourists and recuperating patients could be seen drinking from a bottle. The thought that people would pay money for drinking water was questioned. Yet things have undergone a significant change in 10 years and the bottled water industry has become one of the fastest growing segments, attracting a host of big multinational corporations.
Increased cases of cholera and other waterborne diseases caused urban India to become seriously aware of water quality issues. Urbanization left water quality and availability declining, heightening need for clean water. Also, in the early ’90s, economic liberalization in India prompted a wave of consumerism and more foreign brands. These two factors created the basis for astounding market growth, jumping at a rate of over 100 percent per year initially. Today, the bottled water market has grown to around US$250 million.
While reliable figures are difficult to come by, the branded bottled water market is believed to be about US$160 million. The rest is taken up by a number of unorganized players spread all over the country. Bisleri is the undisputed market leader with a market share of about 45 percent. It has won the bottled water battle on the strength of its distribution muscle, so much that the Bisleri name is almost synonymous with bottled water in India. Bailey is second with a market share of about 15 percent. There are over 200 other regional and local players crowding this market. Still growing at over 80 percent per year, it’s full of opportunities.
Bisleri is owned by the Parle Group, and has developed and enhanced the market by educating people about water quality. The company is headed by Ramesh Chauhan, the previous owner of leading soft drink brands Thums Up and Limca. When Coca-Cola was sent packing in 1977 by the Indian government, which had ordered it to dilute its stake in an Indian unit and turn over its secret formula, Chauhan consolidated his business and made it the undisputed leader in the soft drink market. When Coke came back to India in the early ’90s, Chauhan sold his brands to them at a very attractive rate. His focus has then gradually shifted to the bottled water market, which he wants to rule similarly.
The promise of a big market has attracted all major multinationals in the business. Three have jumped into the fray in the last four months. The first to challenge Bisleri’s leadership was Pepsi’s Aquafina. It adopted the advertising positioning of “Purest part of Body,” and directly targeted the youth and fitness-conscious consumer. Next came Coke with the launch of its Kinley brand. Promoting its endorsement by the Federation of Family Physicians Association of India (FFPAI), the launch raised a few eyebrows about the ethics and legalities of the move. But Coke stuck to its guns and continued with the same advertising.
The world’s No. 1 water bottler, Nestle also entered with a series of brands. After launching its premium Perrier earlier in the year, it has now introduced San Pellegrino, which is primarily targeted to the institutional market (see below for definition). Nestle also has plans to bring its Pure Life brand to India soon. Danone is also in the market with its Evian brand that goes to the premium segments of the market. The Nestle and Danone brands are currently being imported and have no manufacturing base in India.
Segments of water
The market is divided into the retail and institutional segments. While multinationals like Nestle are focusing on the institutional segment including hotels, restaurants, clubs and premium eateries, others like Pepsi want to ride on the distribution network of their soft drink business. They’re targeting the retail trade for pushing their products to tourists and roadside drinking.
Product packaging and sizing has also been played upon. Pepsi tried to build a premium positioning by coming out with a 750 milliliter (ml) bottle at the rate of 10 rupees (Rs.)—US$1 = Rs. 45—to compete against Bisleri’s one liter bottle at the same rate. Bisleri tried to counteract with a 1.2 liter bottle at Rs. 12 to target the regular mineral water consumer who’s accompanied by a friend. To create newer consumer segments, they’ve also scaled down sizes to come up with a 300 ml cup (roughly the size of a 12-ounce beer can). This is targeted for large public gatherings like seminars and marriages.
All players also would like to get into the bulk market of 5- and 20-liter packs. Targeted at homes and offices, this is the fastest growing sub-segment. As consumers get more used to drinking bottled water on special occasions, they’re expected to increase their regular consumption. So the bulk packaging is expected to become 80 percent of the total market as compared to the current 20 percent.
A natural outcome of this boom was the entry of unscrupulous fly-by-night players in the market. A number of local players began selling plain tap water or filtered water as “mineral water.” With a number of consumers falling sick after drinking this “mineral water,” the credibility of the whole industry was at stake. In this backdrop, the Indian government stepped in to regulate the market.
The Health Ministry came out with new mineral water quality standards in line with international norms. Minimum standards for color, odor, taste, turbidity, total dissolved solids and microbial content have been established in line with international standards. All packaged water bottles need to carry an ISI certification from Bureau of Indian Standards (BIS), effective March 2001. The new notification also seeks to differentiate between “natural mineral water” and “packaged drinking water.”
The new standards ensure manufacturers that “natural mineral water” must maintain the purity of the source, surroundings of the plant and packaging material—to the highest standards of hygiene—so that the quality of the end product is assured. The standards are in alignment with the Codex standard on natural mineral water. However, certain additional parameters like magnesium, calcium, sodium, sulphide and some microbiological aspects are included, which are either not covered or only partially covered in the Codex standard.
The notification also regulates the labeling of these products and sets guidelines for health claims. This has created doubts on the viability of continuing Kinley’s current advertising and packaging. The government is clearly hoping the bottled water industry plays a more responsible role in ensuring the quality of its products. It wants to safeguard consumer interests and the industry. The move has been largely welcomed by all players in the industry, though they’re privately apprehensive of the repercussions.
This involvement of the government is the result of the failure of the industry to regulate itself and provide some kind of voluntary guidelines. This may be due to the unorganized nature of the industry, but the big players also need to take some responsibility for their lack of leadership. The question everyone’s asking is how will this impact this burgeoning market.
When the standards come into effect, there should be a shakeout in the industry. While the quality of implementation is clearly a question, it’s expected most small-time, unscrupulous players will be driven out of the market. There should be some consolidation and all the majors are hoping to take advantage of this.
Many smaller players are expected to sell off their operations and leave the market as things get hot. Markets were abuzz with rumors that Bisleri was holding talks with Nestle and Coke to sell its business. But nothing has come out of it so far. Also hoped is the new standards will make consumers more aware and conscious of what they’re drinking. But industry leaders might need to step in with more awareness campaigns.
The new standards should also lead to a lot of business for the water treatment systems industry. With bottled water companies getting more conscious of the quality of their product, a number of quality mineral water plants will be built and many existing plants will need servicing or updating. So it should be a boom time for a number of water treatment system manufacturers in India. Naturally, component suppliers aren’t complaining either. The reverse osmosis (RO) membrane and pump suppliers are particularly happy as most of the new bottled water plants are based on RO.
With all this interest in the bottled water industry and all the multinationals coming in, the water industry has suddenly become an attractive industry for new competition. Different companies are trying to occupy varied market positions from general retail, institutional and residential as they try to differentiate themselves and build brand loyalty.
Even as top marketing professionals rush in to understand and capture the bottled water industry, a new breed of chemists, engineers and systems designers is sure to be attracted to water purification technology. And that surely has to be good news for the industry.
This is one growing bubble that shows no sign of getting bottled!
About the author
H. Subramaniam is head of content at www.EverythingAboutWater.com, a leading comprehensive portal on water. It provides a wide range of information, products and services to both businesses and home users. He is also editor of a newly launched water magazine, EverythingAboutWater. Previously, he had marketing experience with a leading water treatment and pump company in India. He can be reached at +91 11 6800622, +91 11 6800923 (fax) or email: [email protected]