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1. Bottled Water ‐
Bottled Water India
December 2008

2. Executive Summary
 Rapidly growing market
 Estimated worth USD 400 mn in 2007 & USD 885 mn in 2012
Market  Packaged Drinking Water: 90% of total market
 Natural Mineral Water: 10% of total market
Natural Mineral Water: 10% of total market
 Drivers: Sound economics, government failure to provide safe drinking water, and archaic laws
Drivers & encouraging groundwater exploitation
Challenges  Challenges: Inefficient transportation infrastructure difficulties in brand differentiation and
Challenges: Inefficient transportation infrastructure, difficulties in brand differentiation, and
possible threat from public campaigns/litigation
 Recent Brand Building activity
 Continued focus on institutional sales
Continued focus on institutional sales
Trends  Flavoured water expected to be launched soon
 New entrants from other industries, especially retail and hospitality
 Possible export of Himalayan natural mineral water
 Packaged Drinking Water segment
– Fiercely competitive and includes a sizeable unorganized sector
Competition – Bisleri, Coca Cola, PepsiCo and Manikchand are market leaders
 Natural Mineral Water Segment
Natural Mineral Water Segment
– Little competition and dominated by Tata’s Himalayan brand
BOTTLED WATER – INDIA.PPT 2

3. •Market Overview
•Drivers & Challenges
Drivers & Challenges
•Trends
•Competition
•Key Developments
BOTTLED WATER – INDIA.PPT 3

4. The Indian bottled water industry is growing dynamically and is
forecast to accelerate until 2012
Overview Size and Segments
•One of the fastest growing, competitive Market Size and Growth
USD m
industries in India
1,000
1 000 885
•Industry estimated to be worth USD 395 mn in +18%
800
2007, growing at 12% p.a. since 2003 600 +12%
395
•Growth is forecast to accelerate to 18% p.a. 400
220
from 2007 to reach USD 885 mn by 2012
from 2007 to reach USD 885 mn by 2012 200
0
•Market comprises of two segments:
2002 2007 2012
 Packaged drinking water: Water from any source,
which is treated for consumption Major Segments
 Natural Mineral water: Drawn from a natural
Natural Mineral water: Drawn from a natural
underground source Mineral Water
10%
•Consumption varies across regions and is
primarily linked to the level of prosperity
W t
Western region is the largest market with 40%
i i th l t k t ith 40%
 However, southern city of Chennai is estimated to 90%
account for 25% of the market alone Packaged Water
•Production is concentrated in South India
where ~50% of all bottling plants are located
h 50% f ll b li l l d
BOTTLED WATER – INDIA.PPT 4

5. Packaged drinking water segment dominates the market
compared to the natural mineral water segment
Parameter Packaged Drinking Water Natural Mineral Water
• Water from any source is treated and purified • Drawn and packaged at natural sources
Description for human consumption without any treatment
• Groundwater is the primary source
Groundwater is the primary source • Himalayan aquifer is the main source
Himalayan aquifer is the main source
Segment Size 90% 10% (including premium sub‐segment)
• Pouches Bottle: 500 ml, 1 ltr
• Glasses
Packaging
• Bottle 330 ml 500 ml 1 ltr 2 ltr 5 ltr
Bottle: 330 ml, 500 ml, 1 ltr, 2 ltr, 5 ltr
• Bulk packs: 20 and 50 ltr
INR 10‐15 • Regular: INR 20 and above
Pricing
• Premium: INR 80 to INR 125
• Very high: >800 brands mostly local • Low: 11 licensees
Competition • Few national players and a large number of • Includes premium imported brands
small, regional producers
• Differentiation from competitors • Transportation cost due to single source
Challenges
Ch ll •LLow consumer awareness of difference
f diff
between packaged and natural mineral water
Key proposition Safe potable water at affordable prices Health and wellness
Hundreds of participants exist in the large packaged drinking water segment
Hundreds of participants exist in the large packaged drinking water segment
BOTTLED WATER – INDIA.PPT 5

6. •Market Overview
•Drivers & Challenges
Drivers & Challenges
•Trends
•Competition
•Key Developments
BOTTLED WATER – INDIA.PPT 6

7. Drivers & Challenges
Challenges
Ch ll
Inefficient transport infrastructure
Low‐entry barriers and threat from
y
Drivers low‐quality products
Water shortage or lack of safe drinking
Brand and category differentiation
water in most places
Increasing consumer awareness on
Increasing consumer awareness on Possible threat from public campaigns
Possible threat from public campaigns
health issues and litigation
Archaic government laws supporting
groundwater exploitation
Sound economics and high
S d i d hi h
profitability
BOTTLED WATER – INDIA.PPT 7

8. Lack of safe drinking water, archaic laws supporting groundwater
exploitation and rising health concerns are driving the industry
Water shortage and lack of safe drinking water Impact
• Most places in India face water shortage and where available, it is mostly unfit for consumption
• Failure of the government or public authorities to fulfil this basic need is the single most
important factor driving the demand for bottled water
• Despite numerous plans, provision of safe drinking water by the government remains a distant
reality ensuring a long and prosperous future for the bottled water industry
Rising consumer awareness and purchasing power
Rising consumer awareness and purchasing power
• Consumer awareness of the hazards in consuming tap water, especially outdoors, is increasing
 In households, the use of bulk water packs is rapidly increasing as an alternative to water purifiers, which are
rendered useless in water shortages
• Rising consumer purchasing power especially of the middle class and low prices is transforming
Rising consumer purchasing power, especially of the middle class, and low prices is transforming
bottled water to a product for the masses
• Increasing penetration in rural areas, primarily among travellers, is also driving the market
Archaic laws supporting groundwater exploitation
• Current laws permit landowners to freely draw groundwater from surrounding areas without
limits thereby supporting exploitation of public resources
• In 2006, the government formulated a draft policy to regulate commercial extraction of ground
water and to date it has not been put into practice
BOTTLED WATER – INDIA.PPT 8

9. Cost of producing packaged drinking water is extremely low with
transportation costs being the most important component
Extremely low cost for producing packaged drinking water Impact
• Cost of water is virtually zero since archaic laws allow groundwater exploitation and charges are
not in line with the end‐market
• Transportation is the key cost factor and is dependent on strength of the distribution network
 Leading brands reduce transportation costs on the strength of existing distribution network while regional
brands concentrate on higher penetration in a limited geographical base
 Transport costs for mineral water are much higher since it is typically sourced from one location
Per Litre estimates Lower Upper Lower Upper
Groundwater1 0.02 0.03
Cost Total2 2.87 4.27
Cap 0.25 0.25
Bottle 1.50 2.50
Treatment 0.10 0.25
Label 0.15 0.25
Market Price 10.00 13.00
Carton 0.50 0.50
Transportation 0.10 0.25
Others (tape, case) 0.25 0.25 HIGH
BIS Certification 0.02 0.02 PROFITABILITY
Sound economics and resultant high profitability is the strongest driver.
Sound economics and resultant high profitability is the strongest driver.
1 Cost of water per litre is calculated assuming that 2‐3 litres of groundwater is required to generate 1 litre of bottled water.
2 Excluding labour, marketing and tax
BOTTLED WATER – INDIA.PPT 9

10. Transportation is likely to remain the biggest challenge apart
from brand differentiation and the low entry barriers
Inefficient transport infrastructure Impact
• Transportation, which is the key cost factor, is a challenge due to the vast size of India as well as
the inefficient and insufficient infrastructure
• However, leaders are emerging with innovative distribution methods:
 Distributed plants: Bisleri is setting up plants in new cities to lower transport costs
 Natural Mineral Water: Plans to use railways to transport Himalayan water across long distances (Tata
Himalayan). Sourcing and bottling water from mountains other than the Himalayas. (Bisleri)
Low entry barriers and threat from low‐quality products
Low entry barriers and threat from low quality products
• Considering the extremely low cost of manufacturing bottled water and lax regulations, the
entry barriers for the packaged drinking water business are extremely low
• There are instances of small players using trademarks of established players
• Unsafe water from small regional and unorganized players can negatively impact the image of
the entire industry
Brand and category differentiation
• In the crowded packaged drinking water segment, it is difficult for companies to differentiate
their product since most marketing campaigns focus on purity
 Major companies like Coca Cola and PepsiCo have used smart merchandising and extensive advertising to
capture market share
• For natural mineral water brands the challenge is that most consumers are unaware of the
For natural mineral water brands, the challenge is that most consumers are unaware of the
difference between packaged drinking water and natural mineral water
BOTTLED WATER – INDIA.PPT 10

11. The threat of public campaigns against groundwater continues and
legal action against packaged water brands cannot be ruled out
Possible threat from litigation and public campaigns Impact
• In recent years, bottlers have faced public campaigns and litigation against groundwater
exploitation by local communities living near their plants
• Similarly, there was public outcry over pesticides found in carbonated beverages, which
impacted bottled water as well since both are made from the same contaminated groundwater
• Similar action cannot be ruled out in the future and large brands are likely to suffer the most
BOTTLED WATER – INDIA.PPT 11

12. •Market Overview
•Drivers & Challenges
Drivers & Challenges
•Trends
•Competition
•Key Developments
BOTTLED WATER – INDIA.PPT 12

13. Key Trends
Brand building begins
only recently
Institutions continue
Natural mineral
Natural mineral
to be an important
water going abroad
channel
Trends
Expected launch of Wide packaging
flavoured water formats
New entrants from
other sectors
BOTTLED WATER – INDIA.PPT 13

14. Focus on brand building for differentiation and institutional sales, and
innovation in packaging are a few trends in the industry
Brand building begins only recently
• Major players began serious efforts at brand building only since 2000 and it is extremely tough
in the crowded packaged drinking water segment Consumers do
not differentiate
not differentiate
• Increased marketing spend by market leaders is being generated by squeezing distributor and
between brands
retailer margins, which were traditionally much higher than carbonated beverages
or segments
• At a broader level, natural mineral water brands’ marketing is focused on educating the
consumer the difference between their product and packaged drinking water
Institutions continue to be an important channel
Institutions continue to be an important channel
• Institutional sales have proved to be an important channel, especially since it targets the core
consumer directly
Cost effective
• Most water brands continue to nurture this nascent distribution channel through exclusive or way to reach
co‐branding partnerships
b di t hi core consumer
• Partnerships typically exist with airlines, hotels and cinema halls although institutions such as
hospitals and railways are also gaining importance
Wide packaging formats
• Numerous packaging formats are required to target the various consumer segments
 Bottles are the most predominant format although bulk water packs are equally important for the home and Necessary to
office segments target diverse
 National brands concentrate mostly on bottles of different sizes and bulk water packs consumer
 S ll
Smaller players use popular formats like glasses/pouches as well as large bulk water packs
l l f t lik l / h ll l b lk t k groups
• Natural water is sold only in bottles, mostly one litre bottles, due to low volumes
BOTTLED WATER – INDIA.PPT 14

15. In the future, expect more new entrants from other sectors, launch of
flavoured water and the export of Himalayan mineral water
New entrants from other sectors
• New entrants include retail, hospitality, as well as state‐owned companies driven by:
 Retailers: Lucrative market, lower cost due to established distribution network, brand building
More national
More national
 Hotels: Image and brand building through exclusive sales in their properties
level brands
 State‐owned entities: Vast existing client‐base and distribution network
• Retailers likely to sell packaged drinking water while hotels will sell natural mineral water
• Sub‐contracting (private label) is the more likely route rather than setting up own units
Expected launch of flavoured water
Expected launch of flavoured water
• Industry experts rate flavoured water as the next prospective area for investment from large
bottled water brands
• Companies like Bisleri and PepsiCo are said to be considering the launch of flavoured water as a Next major
healthy alternative to carbonated drinks
h lth lt ti t b t dd i k product launch
product launch
• Until 2008, however, no flavoured water product has been launched in the market
Export of Himalayan water
• Tata Himalayan and Bisleri, market leaders in natural mineral water, are considering export of
their respective brands to foreign markets Huge potential
for natural
• Both are relying on the exotic appeal and purity of the Himalayan water source
mineral water
• Exports are expected to accelerate growth of the natural mineral water segment
Exports are expected to accelerate growth of the natural mineral water segment brands
BOTTLED WATER – INDIA.PPT 15

16. •Market Overview
•Drivers & Challenges
Drivers & Challenges
•Trends
•Competition
•Key Developments
BOTTLED WATER – INDIA.PPT 16

17. Bisleri, Coca Cola, PepsiCo and Manikchand lead in packaged drinking
water while Himalayan dominates the natural mineral water segment
Packaged Drinking Water Market share – organized sector
•Fiercely competitive due to attractive Others
economics and huge size 21%
•Organized sector comprises Bisleri, Coca Cola’s Coca Cola 19% 40% Parle Bisleri
Kinley, PepsiCo’s Aquafina, Manikchand’s Kinley
Oxyrich and numerous regional brands 10%
10%
•Includes a large number of regional or
•Includes a large number of regional or Pepsi
P i
localized brands as well Aquafina Manikchand
Oxyrich
Natural Mineral Water Market share
Others
•Few participants ‐ only 11 licensees
15%
•Dominated by Tata Himalayan
•Other domestic brands include Bisleri, Catch,
and Aava
dA
•The niche premium import segment includes 85%
Evian, San Pallegrino, and Perrier Himalayan
A large unorganized sector also exists providing fierce competition to larger players
BOTTLED WATER – INDIA.PPT 17

18. •Market Overview
•Drivers & Challenges
Drivers & Challenges
•Trends
•Competition
•Key Developments
BOTTLED WATER – INDIA.PPT 18

19. Key Developments
Date Development
29‐Oct‐08 BPCL, a state‐owned refiner, plans to sell bottled water generated from the power plants it will setup over the next three to
five years. The plants will use hydrogen fuel cell technology to generate power, which will generate huge amounts of pure,
potable water. BPCL is considering the sale of this water through its national retail network.
13‐Oct‐08 Leading pharmacy and retail chains like Aditya Birla Retail, Apollo Pharmacy and Guardian Lifecare are considering launching
their own brand of packaged drinking water. Other recent entrants include Vishal Retail as well as IRCTC, an Indian Railways
concern. Similarly, the Oberoi Group‐promoted East India Hotels is also planning to launch its own brand of mineral water
for sale in its hotel properties.
7‐Oct‐08 Bisleri is planning to invest USD 75 mn towards doubling their market presence through expansions in the tune of one
p g g p g p
factory per month for the next two years.
15‐Sept‐08 Tata is planning to set up co branding initiatives for their “Himalayan” brand. They are in the process of tying up with leading
airlines and are also looking at partnerships with hotel chains, hospital chains, cinema chains and schools. Mulshi Springs is
also looking at deals with UB group in the aviation industry, ITC and Oberoi group in the hotel industry and FMCG major
Hindustan Unilever Ltd.
26‐April‐08 Tatas acquisition of brands such as Tetley of the UK in 2000 and the US based Eight O' Clock Coffee in June 2006 has allowed
them to have a global presence in the beverage industry. They are now planning on using this platform to launch their
bottled water product, Himalayan in the US and UK markets through their association with the US based water company
Glaceau. Manikchand is also looking at exporting their product, under the brand name “Oxyrich” to South Africa as well as
the US and the Chinese market
BOTTLED WATER – INDIA.PPT 19

20. Thank you for your time
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