Big players keen to get into bottled water

By Ramnath Subbu

MUMBAI, FEB. 17. The Rs. 500 crore bottled water market is witnessing hectic activity with many players entering the fray in the last one year and still more to come. Part of the fast moving consumer goods (FMCG) sector, bottled water is the only segment to have shown phenomenal growth of about 50 per cent in the last one year.

Hindustan Lever (HLL), the consumer goods giant, has initiated plans to enter this sector and the chairman, Mr. M. S. Banga, remarked at a recent press meeting, ``It seems like everyone now wants to get into water.'' The company is considering whether to set up its own facilities for bottled water or go in for an acquisition.

Nestle India is the latest to enter this market with the launch of its brand `Pure Life' in New Delhi last week. It plans to grab a 50 per cent market share in the next two years and emerge as a strong player. The company has not ruled out acquiring existing brands. The product will be available in other cities as well soon.

The water is bottled at Nestle's new plant at Samalkha in Haryana. Nestle has already launched two of its global premium mineral water brands `Perrier' and `San Pellegrino' which are targeted at niche markets.

The market is expected to continue to grow at a healthy clip. In fact, in the last two years, there has been a doubling of growth. Major players include Parle Bisleri, Parle Agro, Coca Cola, PepsiCo, and among domestic players UB and Britannia. According to Mr. Ramesh Chauhan, chairman, Parle Bisleri, ``The success of bottled water could be attributed to two factors. First, it has been an underdeveloped business for a while now and, second, soft drink manufacturers have priced themselves out by a long shot. The prices of soft drinks have, in fact, doubled in the last ten years and this has happened because the price of concentrates has shot up during this period.''

In fact, soft drink major Coke launched its Kinley brand of bottled water last year and Pepsi its global brand Aquafina. PepsiCo is reportedly contemplating two more pack sizes for its bottled water next month. Aquafina is the only brand which is not present in the one litre category as yet. It sells at Rs. 10 for a 750 ml bottle. Now with Kinley brand launched in 500 ml pack for Rs. 4 last month, Aquafina is the only brand with a single pack size. Kinley's new product follows the launch of `Chotu' Bailley, which is a 350 ml bottle introduced by Parle Agro at Rs. 3.50 a couple of months ago. Parle Bisleri's 500 ml product is priced at Rs. 5.

Kinley water was launched in August 2000 in one litre bottles for Rs. 10 but has not yet been rolled out nationally. The water is produced at Coca-Cola's three greenfield manufacturing plants at Bidadi near Bangalore, Dasna in Uttar Pradesh and Goa. The company plans to either add more water bottling operations or go for contract bottling as it goes national.

Regarding competition from newer players, Mr. Chauhan said he was not unduly worried because ``they have neither the brand equity nor the expertise in this business.'' Commenting on Nestle's entry through `Pure Life' and proposed entry into bottled water, he said, ``The result of this will be that a lot of smaller players will get marginalised. Bisleri has large pockets where we are not present and these would most likely be filled in by them. More importantly, these larger players will have to work out for themselves a low cost way of distribution and production. It must be realised that none of them has any expertise in water and in fact, Unilever is not into water anywhere else in the world.''

On the continued growth of the market, Mr. Chauhan said the rates should continue. ``At least at Bisleri, we have been growing at 160 per cent per annum in terms of litres and this should continue for at least the next five years provided we do not run into debottlenecking problems of production. We are already making pre-forms and caps on our own which should keep us going.''

According to a study done by Samsika Marketing Consultants, with a current market share of 48 per cent, Bisleri offers the maximum number of pack sizes. It is followed by Bailley with a 27 per cent share. The other brands including Kinley, Aquafina and Yes constitute the remaining 25 per cent market share in the bottled water market.

The Samsika survey further says that there are as many as 186 brands in the water market. Out of this, two are national brands, 17 regional and 167 local brands.

Apollinaris, a natural sparkling mineral water brand, has been introduced close on the heels of Nestle coming out with its sparkling water brands - Perrier and San Pellegrino. The product is being imported and distributed by the Mumbai based company, Veekay Food & Beverages. It is now available at restricted retail outlets in Mumbai and Delhi and a separate sub-brand is simultaneously being launched to take care of institutional sales.

It is also being launched under the sub-brand of Big Apple and Lemon. But the product is in a different price bracket altogether with the 750 ml Apollinaris Big Apple pegged at Rs. 99 and the one litre Apollinaris Classic sparkling water at Rs. 90.

Veekay has also signed an agreement with an Iceland based Thorspring Iceland for importing its still water brand, Iceland Spring. It is also considering an alliance with an Indian mineral water player to either get its distribution rights or pick up a stake in the company.

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