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Packaged water


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managerial economics.

A Demand and Supply of packaged drinkingwater

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Packaged water

  1. 1. A Basic Analysis of Demand and Supply of Packaged Drinking water
  2. 2.  AbstractThe study of the demand and supply for the packaged drinking water aims to providethe review about the demand for packaged drinking water in India. This studydiscusses these factors and explains the most hindering factors that affect the supplyof the packaged drinking water. To analyze the factors influencing purchase ofpackaged drinking water.To analyze the level of awareness and satisfaction of packaged drinking water amongthe customers, on pre and post purchase. IntroductionWater is an essential for surviving of every human being and animal. Water is acompound of hydrogen and oxygen is a precious natural gift. .Since it is a humannecessity it makes best sense to do business in. As a normal human being requires anaverage of 2-3 litres of water every day and thus it is desirable and necessary to purifythe water and supply under hygienic conditions for human drinking purpose. Worldpopulation is more than one billion (growing at 2-3% annually) the businessopportunity is enormous and the potential is largely untapped. As the name implies,the mineral water is the purified water fortified with requisite amounts of mineralssuch as Barium, Iron, Manganese, etc which can be absorbed by human body. It iseither obtained from natural resources like spring and drilled wells or it is fortifiedartificially by blending and treating with mineral salts.The bottled water industry is estimated to be a whopping 1600 cr. business. It hasgrown at a rate of 38-40% annually over the past four years. Initially bottled waterbrands like the French manufactured Damoneand it was premium water and promotedat clubs, fitness centre, cinemas, department stores, malls, ice-cream parlours, cafesand retail sports outlets, besides restaurants, hotels and supermarkets with a price tagof Rs. 70/- for 1 litre bottle. Other brands later began pitching for the larger middleclass and lower middle class markets. Indian local manufactured packaged drinkingwater price is between Rs. 12 to 20 for 1 litre bottle.
  3. 3.  HistoryBisleri was originally an Italian company created by Felice Bisleri, who first broughtthe idea of selling bottled water in India. Bisleri then was introduced in Mumbai inglass bottles in two varieties – bubbly & still in 1965. Parle bought over Bisleri (India)Ltd. in 1969 and started bottling water in glass bottles under the brand name „Bisleri‟.Later Parle switched over to PVC non-returnable bottles & finally advanced to PETcontainers. In 1995 Ramesh J. Chauhan started expanding Bisleri operations. In 2003Bisleri announced its venture to Europe. All shares are held by Mr Ramesh J Chauhanand his family.The brand name Bisleri is so popular in India that it is used as generic name forbottled water.Bottled water was made famous by one of the largest marketing campaigns in indiahistory undertaken by Bisleri. Eventually, other bottlers including dozens of localones, Coca Cola, Pepsi, Oxyrich, and other imported brands such as Evian beganmarketing in the country. DemandEarlier bottled drinking water was privileged to high class, foreign tourist and highlyhealth conscious people but the present decade has witnessed increasing popularityamong average consumers, increasing living standards, disposable income, educationand awareness among the consumers domestic and foreign tourist, sophisticatedbusiness houses and offices has increased rapidly the sales of bottled water in recentyears.The growing demand for bottled water speaks volumes of the scarcity of cleandrinking water and the quality of tap water. It has become an icon of healthy lifestyleemerging in India. Selling – „safety‟ – i.e. pure and simple water has now become oneof the fastest growing industries in India despite the harsh truth it is build on thefoundation of bad governance, inequality and obvious exploitation. However, bottledwater provides the distance advantages of convenient packing, consistent quality andis ubiquitous.
  4. 4. This particular industry in India has never looked back after the economicliberalization process of 1991-92. In fact the fastest growth in the consumption ofbottled water in the world has been recorded in India according to a new studyconducted by the US based earth policy institute.According to Bureau of Indian Standards (BIS), there are 1200 bottling plants (out ofwhich 600 are in the state of Tamilnadu and 200 brands of packed drinking wateracross the country (nearly 80% of which are local) hitting over the markets whichthoroughly signifies the market is big, even by international standards.These are boom time for the Indian bottled water industry – more so because theeconomics are sound. India is the tenth largest bottled water consumer in the world.The consumption of smaller units of 500 ml has increased by around 140%perceptibly. Even school children are carrying the 500 ml packs in their school bags.The 20 litre bulk water jars have found phenomenal acceptance in house hold and atworkplace. With the growing market size, one can imagine the employmentopportunity being created with the surge in bottled water industry.The bottled water market is dominated by major player such as Coco-cola, Pepsico,Parle, K.K. Beverages, Manikkchand, and Tata-Mount Everest. Although we have alarge number of players, Parle was the pioneer among the major player when it waslaunched in India, 35 year s ago. x axis –year ; y axis-millions of litres
  5. 5.  Factors affecting DemandSHORTAGE AND LACK OF SAFE DRINKING WATERMost places are in India in face water shortage and where available, it is mostly un fitfor consumption.Failure of the government or public authorities to fitful this basic need is the singlemost important factor driving the demand for bottled water.Despite numerous plans provisions of safe drinking water by the government remainsa distant reality ensuring a long and prosperous future for bottled water industry.RISING CONSUMER AWARENESS AND PURCHASING POWERConsumer awareness of the hazards in consuming water tap water, especially outdoorsis in increasing.In households, the use of bulk water pack is rapidly in increasing as an alternative towater purifiers, which are rendered useless in water shortages.Rising consumer‟s purchasing power especially of the middle class, and low prices istransforming bottled water to a product for the masses.Increasing penetration in rural areas, primarily among travellers, is also driving themarket. Climate changeSome companies are planning significant investment to deal with the expected impactof climate change on water supply and demand. Climate change is an important issue,and it is vital that companies plan carefully to mitigate and adapt to its impact.However, we think it is equally important that companies provide robust evidence ofthe need for expenditure before they commit to investment that will have a significantimpact on customers bills. The paper explains what this will mean in terms of how wewill assess companies business plans.
  6. 6. 1. DOMESTIC AND FOREIGN TOURIST. 2. BUSINESS OFFICE SUPPLYARCHAIC LAWS SUPPORTING GROUND WATER EXPLOITATIONCurrent laws permit land owners to freely draw ground water from surrounding areaswithout limits there by supporting exploitation of public resources.In 2006, the government formulated a draft policy to regulate commercial extractionof ground water and to date it has not been put into practice.EXTREMELY LOW COST FOR PRODUCING PACKAGED DRINKING WATERCost of water is virtually zero since archaic laws allow ground water exploitation andchanges. Per Liter Estimate Lower Upper Groundwater 0.02 0.03 Cap 0.25 0.25 Bottle 1.50 2.50 Treatment 0.10 0.25 Label 0.15 0.25 Carton 0.50 0.50 Transportation 0.10 0.25 Others (tape, case) 0.25 0.25 BIS Certification 0.02 0.20(In Rupees) Lower UpperTotal Cost 2.87 4.27Market Price 10.00 13.00
  7. 7.  SUPPLY FACTORSAvailability of Raw MaterialsThe main raw materials needed for the production of packaged drinking water is waterand minerals (micro, macro minerals). As for the correct scenario there is hugescarcity of water which has to be met with. Therefore the manufacturers are takinggreed care the utilisation of water.Nearness to marketAvailability of power: Since availability of other resources such as coal, gas arescarce, the availability of power is the predominant factor in the manufacturingprocess. If production facility near by the market it can always have an eye on thegrowing changes in the market.Transport facilityThis is one of the major factors affecting the supply since transportation cost changesday to day basis. Fuel cost is souring and as a result the transportation of goods asbecomes expensive matter.Availability of labourPeople involved in daily labour activities are reducing most of them going out preferwhite collar jobs and as a result effecting the production.CONCLUSION: From the above review, it is concluded that “The demand and supply ofpackaged drinking water” is growing higher comparing to the last 10 years. And it isone of the rising industries; even it has several competitors around India. Many of thenew ventures like Tata, is also one of the recent competitor by introducing “Tata waterplus” gaining more support among the consumers. So it is clearly stated that thedemand for packaged drinking water is always high.
  8. 8. References: 1. An article about “Kinley” in Economic Times dated Nov.23, 2011 2. An article about “Bottled water industry” by Lance Klessing. 3. An article about “Water, water everywhere, but how many brands are safe to drink? In THE HINDU dated Apr.23, 2012