Packaged Water Industry in India : An Overview 30 th June, 2009 Pratik Pota Executive Director, South Pepsico India

The Packaged Water Industry includes Retail and Bulk Water and is 250MM c/s in Size Retail water : Packaged water <5Ltr 500ml 1ltr 2ltr Pouches Bulk water : Water packaged in >5Ltr 10ltr 20ltr 25ltr Nearly half the market is made of Pouches It is currently heavily South biased And largely Urban centric Source : Nielsen % Contr. Urban 80% Rural 20%

Retail water : Packaged water <5Ltr

500ml

1ltr

2ltr

Pouches

Bulk water : Water packaged in >5Ltr

10ltr

20ltr

25ltr

The Industry is highly fragmented and local % Contribution of the Top 5 Players ~35% Number of Players in the Category >1000 Source : Nielsen

The Retail Packaged Water Industry is growing at ~25% Source : Nielsen Growth driven by Rural and Small Towns All Regions seeing healthy growths Growth across all Packs Region % Growth North 25% East 31% West 20% South 26% India 24% Pouches 22% 500 ML 13% 1L-2L 28% Total 23% Metro ROU Rural % Growth 12% 28% 38%

What is fueling this Industry growth? Increased On-the-go behaviour Higher disposable income Importance of Hygiene Affordable Price Points Increased Availability 7 Lakh  9 Lakh outlets

The growth is expected to continue given the low Per Caps Per Capita Consumption (Litres) Global Average 25 USA 130 Mexico 269 Italy 245 Thailand 117 India 1.7

Globally, the Bottled Water segment has extended into Enhanced and Value Added Waters Vitamin/ Mineral fortified Added fibre/ performance enhancing ingredients Beauty ingredients Strengthen immune system/ treat specific diseases For diabetics Functional Waters Flavoured Water Fruit flavoured Natural Flavours Sugar Free Differentiated Packaging Premium Packaging Appearance changing More eco-friendly

Vitamin/ Mineral fortified

Added fibre/ performance enhancing ingredients

Beauty ingredients

Strengthen immune system/ treat specific diseases

For diabetics

Fruit flavoured

Natural Flavours

Sugar Free

Premium Packaging

Appearance changing

More eco-friendly

How will the Water Segment evolve in India? Some Crystal Ball Gazing! Category will continue to grow at >20% by Volume Increase in number of new pack offerings Straddle Magic Price Points Greater Differentiation Packaging Innovation Emergence of Value Added waters Flavoured Functional

Category will continue to grow at >20% by Volume

Increase in number of new pack offerings

Straddle Magic Price Points

Greater Differentiation

Packaging Innovation

Emergence of Value Added waters

Flavoured

Functional

Thank You

Case study In USA, Y Water released Brain Water under the Y Brain Water brand. Y Brain Water Brain Water is 100% natural, rich in nutrients, low in calories and free from artificial ingredients. According to the manufacturer, this water improves memory. The product has been USDA organic certified and is available in a 9-fl. oz. unique bottle. In Finland, Plup released Spring Water under the Plup brand. Plup has launched Lähdevesi (Spring Water) in a 0.4L bottle in a totally new drinking bottle design. The manufacturer encourages consumers not to return the bottle, but rather to re-fill and re-use it. The bottle is said to be highly durable and suitable for heavy use, such as hiking or boating. Other ready-to-drink-products will be sold in the bottle through grocery stores on a mass-market level as well as through other channels.The manufacturer is said to donate a vast amount of its profit for environmental issues such as cleaning up the Baltic Sea. Source : www.gnpd.com

In USA, Y Water released Brain Water under the Y Brain Water brand. Y Brain Water Brain Water is 100% natural, rich in nutrients, low in calories and free from artificial ingredients. According to the manufacturer, this water improves memory. The product has been USDA organic certified and is available in a 9-fl. oz. unique bottle.

In Finland, Plup released Spring Water under the Plup brand. Plup has launched Lähdevesi (Spring Water) in a 0.4L bottle in a totally new drinking bottle design. The manufacturer encourages consumers not to return the bottle, but rather to re-fill and re-use it. The bottle is said to be highly durable and suitable for heavy use, such as hiking or boating. Other ready-to-drink-products will be sold in the bottle through grocery stores on a mass-market level as well as through other channels.The manufacturer is said to donate a vast amount of its profit for environmental issues such as cleaning up the Baltic Sea.

Back-Ups

The profitability algorithm of Bottled Water presents a significant challenge MC Construct of 1L/ 500ml/ Pouch (get from IC/ Anshul)

MC Construct of 1L/ 500ml/ Pouch (get from IC/ Anshul)

The growth is expected to continue given the low Per Caps Global water consumption –estimated at 53bn gallons 2008 (242 bn ltrs) ( beverage marketing corporation) and growing World Per Capita Consumption averages 25ltrs( www.fnbnews.com India’s per caps - 5ltrs www.fnbnews.com ) Statistics on some countries- America US&Mexico – 29% of world market US Per caps 130ltrs, Mexico – 269 ltr Canada and US, bottled water is one of the fastest growing industries Europe France,Spain, Italy, Germany – 18% of world market 13 of the top 20 bottled water consumers are European countries Percaps in Italy highest at 245 ltrs ( beverage marketing corporation) Middle east and Asia UAE, with 182ltr percaps, 3 rd highest consumer in the world China has almost 10% in global volume with the highest growth rate CAGR (15.6%) over 03-08. However, per caps only 17.5ltr Thailand only Asian country in Top 20 consumption countries Nearly half the market is made of Pouches

Global water consumption –estimated at 53bn gallons 2008 (242 bn ltrs) ( beverage marketing corporation) and growing

World Per Capita Consumption averages 25ltrs( www.fnbnews.com

India’s per caps - 5ltrs www.fnbnews.com )

Statistics on some countries- America

US&Mexico – 29% of world market

US Per caps 130ltrs, Mexico – 269 ltr

Canada and US, bottled water is one of the fastest growing industries

Europe

France,Spain, Italy, Germany – 18% of world market

13 of the top 20 bottled water consumers are European countries

Percaps in Italy highest at 245 ltrs

Middle east and Asia

UAE, with 182ltr percaps, 3 rd highest consumer in the world

China has almost 10% in global volume with the highest growth rate CAGR (15.6%) over 03-08. However, per caps only 17.5ltr

Thailand only Asian country in Top 20 consumption countries

What would be the key triggers of growth? Barriers to Growth Availability /Scale Quality standards of unorganised players leading to loss of confidence in the industry Triggers Growth in affordable packs at Rs.5 and Rs.10 More variants in the top end (Mineral and fortified waters) More health/hygiene consciousness

Barriers to Growth

Availability /Scale

Quality standards of unorganised players leading to loss of confidence in the industry

Triggers

Growth in affordable packs at Rs.5 and Rs.10

More variants in the top end (Mineral and fortified waters)

More health/hygiene consciousness