Case Study: Bottled Water Industry

The category

• The bottled water market is estimated at around Rs. 1,250 crores

• The market is growing at around 25-30% a year and is expected to continue to its momentum in future as well

• The per capita consumption of packaged water in India is pitifully low at less than 5 litres a year compared to the global average consumption of 24 litres    

• The annual bottled water consumption in India had tripled to 5 billion liters in 2004 from 1.5 billion liters in 1999

• Global consumption of bottled water around 200 billion liters in ‘06

The category (contd.)

• Over 1,200 bottling plants across India– An estimated 600 in Tamil Nadu alone!

• There exists more than 150 brands of which nearly 90% are local – Making bottled water is a cottage industry in this country

• Bulk of the growth of the Indian market attributed to two reasons:

– Poor public water infrastructure – Increasing disposable income

• Per capita consumption in India is less than 5 litres/year

• The global average is around 24 litres

• Indians are ranked tenth in bottled water consumption

The competitors

• Despite the large number of small producers, this industry is dominated by big players– Parle– Coca-Cola– PepsiCo – Parle Agro– Mohan Meakins– SKN Breweries

• Parle, the first mover in the Indian market• When it introduced Bisleri in India 25 years ago

Price-based category segmentation

• Premium Natural Mineral Water – Evian, San Pellegrino and Perrier– Priced between Rs.80 and Rs.110 a litre

• Natural Mineral Water– Himalayan and Catch– Priced at Rs.20 a litre

• Packaged drinking water - Treated water– Bisleri, Kinley, Aqua fina etc.,– Priced around Rs. 12 a litre

Share of market

In the 20-litre bulk water segment - supply to offices and homes –Kinley & Bisleri are neck-to-neck (in the market not otherwise!)

• Plans to hike advertising and promotional spend by 46% in 2010 to meet rising competition

• Rs 35 crore on ad and promotion of the regular Bisleri in the current fiscal and Rs 12 crore on Himalayan

• Bisleri plans to put up 32 new plants over the next two years and plans to invest Rs 10 crore in each of them

• Grocers are among Aquafina’s key distribution points

• Company launched 2 litre & 500 ml packs to suit various consumer requirements

• Recently revamped the Aqua fina 500 ml carry pack and introduced a new enhanced translucent blue label giving the brand a new look

• It’s looking at building strong consumer engagement across geographies through campaigns and trade promos

• Kinley went for an all-new packaging recently

• Has plans to introduce its global brand ‘Bonaqua’ in India very soon

• It is within the realm of possibility that Coca-Cola’s next step will be to introduce flavoured water in India

Pack sizes

• Pouches, glasses and cups

• 200 ml (popular in flights)

• 330 ml bottles

• 500 ml bottles ml (a huge hit among the youth)

• 1 litre bottles (Hotels and travel sector)

• Large 2 litre bottles

• Bulk water - grew at a rate of 30 - 40% in 2002 alone– 25 litre HDPE can – 20 litre bubble top PET

Manufacturing

cost

Key industry trends

The consumer

• SEC A, B & B+ income groups reflecting changing lifestyles and consumption trends

• Increasingly cool to be seen with bottled water

• Fast-paced life is making them look for convenient, trustworthy and hygienic beverage solutions

• Increased health and wellness trends across the country, led by metros, is making it mandatory to drink packaged water

• Drinking mineral water used to be a fad but now a necessity

• Home delivery of jars highlights need for pure water at home too

• Consumers believe it is better to be safe than sorry!

Consumption pattern

• Consumption of bottled water in India is linked to the level of prosperity in the different regions– The western region accounts for 40% of the market– The eastern region accounts for just 10%– Bottling plants are concentrated in the southern region

Consumption pattern (contd.)

• PET is growing in South• Accounts for 48 per cent of the total market

• South India is the largest consumer of PET material for packaging mineral water

• South India commands a market share of 48%

• West India accounts for 28%

• North and East India, combined contributes to 24%

The new consumer

• The main consumers no longer restricted to the upper class but include:– Middle class – And lower-middle class families as well

• Driven to the category by lack of clean, hygienic water

• The rural market – Dominated by tourists and travelers– Packaged water now an essential appendage to any form

of travel

TN Focus

• 370 authorized supply units have sprung up across TN

• The regional players: – Operate plants replete with wells, bore wells – With modern reverse osmosis techniques, UV radiation units

• About 220 water units operate near Chennai alone

• Companies rake in Rs 80 lakh to Re. 1 crore daily!

• Ratio of each player's market share to the entire packaged water market is the same in both lean and peak seasons

Chennai: In focus

• The water market is worth over Rs 1,250 crore• Water-starved Chennai alone accounts for a quarter of

that pie!

• 70 lakh litres of water are sold in the city everyday

• 3 lakh litres by multinational water brands

• 2 lakh litres are supplied by Parle‘s Bisleri

• High-income group & corporates tend to choose Kinley

• Middle-income households prefer local suppliers– Bisleri, Apollo and Team are among the chosen ones

Chennai: In focus

• 5 million quarter-liter packets @ Re. 1 each

• 75,000 1-liter bottles @ Rs. 10 to Rs.12 each

• 100,000 12-liter cans @ Rs. 18 to Rs. 30 each

• 25,000 20-25 litre bubble-top containers from Rs. 38

• 10,000 water tankers carrying 12,000 litres each @ Rs. 700 to Rs. 900 / tanker

The Chennai consumer

• Majority of city households depend on packaged water for cooking and drinking purposes

• The bubble top has become the mainstay in most homes despite round-the-clock supply by Metro water• Daily sale of 20-litre bubble tops exceeds 75,000 units a day• MRP Rs. 15 - Rs. 35 per can

• The residents are collectively spending more than Rs. 15 lakh every day on potable water

• Residents got used to packaged drinking water during the successive drought years (a few years back) and there has been no going back!

Railways - A great opportunity

• Railways is a huge potential market

• Water bottles, especially the 2 litre variety, are fast movers among the train-travelling crowd

• According to officials at Cherio, the railways order 10,000 cases (of 12 bottles each) a day

• It accounts for 5% of Cherio’s water sales

The Marketing Challenge!

Summary of category learnings

• Competitors compete globally, internationally, nationally, regionally, and locally

• All brands are pretty much identical– Though there are sub-segments in the bottled water

industry viz., purified, mineral, sparkling, or enhanced waters

• Large number of players and increasing competition have been pushing the prices and margins down

Summary of consumer learnings

• Though most consumers are health-conscious and all that, bottled water is a low-involvement category for them

• They might ask for a ‘Bisleri’ or ‘Water bottle’ to the retailer and take whatever is handed to them– As long as it looks and feels like a mineral water bottle!– Incidentally, to the consumer ‘Bisleri’ means ‘Mineral

Water’!

• Brand loyalty is almost non-existent!– (Or is it?)

Summary of the advertising scenario

• Though there has been sporadic advertising, most brands seem to be disinterested to advertise– Given the low consumer involvement in the category

• Very few consumers can even recall advertising of the brands that have done so– Again, due to low category involvement

• Some brands do resort to ground-level initiatives and activities like sponsorships– Aqua fina and Kinley are cases in point

Now, here’s what you are supposed to do…

• Help launch a bottled water brand for a small company– Small compared to the likes of PepsiCo, Coco-Cola, Parle etc.,

• A company that can spend some money on promotion but can’t match the budgets of the biggies in the category

• The bottled water you are planning to launch would be no different from the other brands in the market– As my good-looking science teacher in school used to say

‘water is a colourless, tasteless and odourless liquid!’

Remember…

• The facts given in the case are just indicative…

• You are expected to do some level of research on your own…

• Talk to consumers…

• Talk to yourself……

• Do some desk research….

• Review competitive advertising…

And…

• …help launch a brand in this category

• …suggest a persuasive and pocket-friendly promotion strategy

• …keeping mind the constraints– Of the category that is low-involvement– A client who doesn’t have huge budgets– And a consumer with fickle loyalty levels!

Un-bottle your strategic and creative acumen. Good luck!