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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!