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Indian Packaged Water Market - July'13


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Indian Packaged Water Market - July'13

  1. 1. INSIGHT & OUTLOOK Indian packaged water market Modern Food Processing | January 201356 Shushmul Maheshwari U ntil a few years ago, packaged water was primarily the choice of affluent class. However, with increasing penetration in remote and far-flung regions, affordable pricing, and aggressive marketing and distribution efforts by the packaging companies, the industry has grown at a surprising rate. The Indian packaged water market is currently estimated at around ` 83 billion and is expected to grow at a CAGR of around 21 per cent during the five-year forecast period (2012-13 to 2016-17). Indian packaged water market constitutes two per cent of global packaged water market, which is valued at around $ 90 billion (` 4,950 billion). The market is largely driven by small pouches and low volume bottles (200-500 ml), which are used by students, shoppers, tourists, etc. Apart from these, pack size of 1/2 litre, and bulk packages of 20/25/50 litre containers are also popular among organisations and households. The Indian packaged water industry has gained pace over the past few years unlike its Western counterparts,where the market is much more mature with high per capita consumption. The difference can be judged by the fact that while the global average of per capita consumption of packaged water is approximately 24 litre, Indian per capita consumption is much less at just 5 litre. The packaged water industry in India is heavily urban- centric. Nearly, 80 per cent market is derived from urban consumption. The demand is expected to shift towards tier II and III towns as further awareness and distribution speed up. Market dynamics The high growth trajectory of Indian packaged water market is eagerly tapped by large MNCs, national beverage manufacturers, and regional players. In terms of number of players in organised and unorganised market,organised players comprise 20 per cent and unorganised players (mostly small regional players) form the rest 80 per cent. The ratio just reverses in case of revenue earned. While organised players grab around 80 per cent of the packaged water market,the unorganised players bag just 20 per cent. The triumph of a handful of organised players is mainly due to economies-of- scale, better marketing and distribution channels, and of course, brand wagon. The various categories of packaged water have different price slots. Imported premium natural mineral water brands, such as Evian, San Pellegrino and Perrier are priced between ` 80 and ` 110 a ltr. Natural mineral water brands, such as Himalayan and Catch trade at around ` 20 a litre. The packaged water (treated water) brands, such as Bisleri, Kinley, Aquafina etc command prices in the range of ` 12-15 a litre. Regionally, the consumption of packaged water depends on the disposable income of people.South India is the biggest market for packaged water accounting for approximately 50 per cent marketshare, followed by West, North, and East with respective shares of 30 per cent, 15 per cent, and 5 per cent. In production terms, there are around 3,300 registered plants in the country, of which around 48 per cent are located in the South, and approximately 22 per cent in the West. As per a study, there is a huge number of unregistered plants too, spanning somewhere near 12,000. Fiercely competitive landscape The packaged water market in India is overcrowded with multinational and national players. Bisleri is a leading contender holding majority share in the organised Indian packaged water market with a marketshare of around 38 per cent. The popularity of the brand is so widespread that it has become the generic version of packaged water. While Coca Cola’s Kinley accounts for nearly 24 per cent share, Pepsi’s Aquafina holds 15 per cent of the overall market pie. Other brands including Bailley, Oxyrich, Kingfisher too have a significant presence in the packaged water market. In a bid to capture more of the marketshare and increased presence, major expansion plans are taken up by beverage makers. Coca Cola’s Indian bottling arm, Hindustan Coca-Cola Beverages, is all set to invest more than ` 2 billion for a huge production facility, which is expected to come up in Gujarat soon.The greenfield unit will be the Cola company’s biggest such production unit across India for the product category. The proposed plant will have a capacity to produce more than 700 bottles per minute. Interestingly, the production unit may also have production of flavoured and fortified waters. ON A CLEAN AND CLEAR ROUTE TO GROWTH The Indian packaged water market is taking giant leaps owing to its perceived safer and healthier attributes compared to tap water. With more awareness about the dreadful nature of water-borne diseases, more and more people are getting inclined towards packaged water. Netting in large base of consumers, the packaged water market is growing at a stupendous pace in the country.
  2. 2. 57January 2013 | Modern Food Processing Indian packaged water market Giving an entirely new direction to the industry, Bisleri is working on creating an exclusive retail presence to push its products. The company is delving into the possibility of establishing its own exclusive retail outlets called ‘Bisleri Shopees’, which would bring the company’s products more closer to the customers. The concept is yet unexplored in India. To entrap huge opportunity, new players have also propped in. Having earned name in water purification arena, the well-known Eureka Forbes has forayed into bottled water market. The company’s packaged water brand, Aquasure, has rocked the store shelves in size of 500 ml. The company has taken the franchisee route to tap the market. State-run Indian Railways Catering and Tourism Corporation (IRCTC) has decided to revamp the production of its packaged water brand Railneer to cater to the growing demand for clean drinking water in trains. It plans to set up four more manufacturing plants across Mumbai, Delhi, Hyderabad, and Nagpur in addition to the existing three Railneer plants. Besides, industrialists are on their heels to further bring down the production costs and increase affordability. Industry challenges Regardless of so many positives, the industry faces certain hurdles that need to be addressed for smooth market growth. Differentiation from competitors is a big issue faced by market players. With numerable products at almost same price points, it becomes difficult for a manufacturer to develop a distinct product image in the minds of consumers. Barring a few key players, the products are almost indistinct and hence do not command brand loyalty. Another challenge is the transportation cost incurred specifically in case of natural mineral water due to procurement from a single source. Considering the low cost of packaged water manufacturing and lack of regulations, the entry barriers for this industry are extremely low. In southern states, for instance, various illegal manufacturers make money during the summer season in areas of water scarcity. The adverse impact of these challenges can be countered with wise strategies of genuine industry players and of course, the regulatory authorities. Some of the suggestive measures include: o Awareness programmes to increase consumer consciousness about quality compliance of the product o Effective regional marketing by local players to grab the consumer mind space o Strategies to bring down cost through effective production; minimum wastage is an area of consideration for big players o Devising an optimal distribution channel can itself cut competition to a large extent o Innovative efforts as taken up by Bisleri (opening exclusive Bisleri Shopees) can give a competitive edge to the early mover o Strict vigilance and prompt action on unlicensed manufacturers o Heavy penalties imposed on products that do not comply with regulatory norms Future prospects The packaged water market is majorly driven by small pouches on one hand and bulk packages on the other. The industry is growing by leaps and bounds and is expected to show double-digit growth in the years to come. The key to growth for the existing players is to tap the market nerves and create distinct brand entity in the minds of consumers as this product category is much crowded with thousands of indistinguishable brands. As the market further develops, the industry is expected to take more organised structure, with higher penetration and quality compliance. The growing awareness in Indian masses shall sweep off unscrupulous products and help sustain a healthy water business. More channelled approach in distribution will help improve the bottom lines of companies. Shushmul Maheshwari is the Chief Executive of RNCOS E-Services Pvt Ltd, a market research & information analysis company with global presence. He has spent more than 15 years working in the senior management teams of both, Indian and multinational companies. He has gained expertise in research & analysis field and actively participated in various national and international conferences & discussions organised by business & trade-related associations. Email: INADEQUATE GOVERNANCE TAKES TOLL Packaged water falls in the domain of Food Safety and Standards Act 2006, and BIS certification is mandatory for packaged water. Indian packaged water industry is governed under two categories. The Packaged Natural Mineral Water (PNMW) is governed by IS:13428 and is drawn from a natural source. It should meet the composition standard defined under IS:13428 and must be bottled without altering the natural composition of water. The Packaged Drinking Water (PDW) is regulated under IS:14543 and is ordinary water treated to meet the regulatory standards. In this case, any of the processes of filtration/disinfection listed under the IS:14543 can be used for changing the composition of water before bottling. Apart from emphasis on packaging, hygienic conditions, labelling restrictions, etc, exhaustive critical parameters have been established for quality and composition of water under both categories. Despite laid out rules and regulations, numerous illegal packaging plants are in operation. The unchecked growth of unlicensed packaged water producers clearly reflects the irregularities on the part of regulatory bodies in India. Despite the fact that the Bureau of Indian Standards (BIS) has made ISI certification obligatory for water packaging units and outlined detailed testing norms, except a few big players, scores of small manufacturers have been breaching the norms. A yet another major issue facing the government is the lack of proper infrastructure and expert panel to test water samples.