Bottled water industry analysis India

Bottled Water

Category analysis:- Category definition (beverages)Definition and Market ShareOrigins of Bottled WaterFactors Driving the CategoryProduct lines and mixes SWOT analysis of the category Industry Trends

 Competitor Analysis:-Potters 5 forces analysisKey playersIndia As a marketKey players share

Market Analysis:-Market size and share Market segmentation Brand sharePricingDistribution analysisDrivers, Innovations and Challenges

A Srikrishna 01Dishant Bhatt 28Jayesh Gawde34Piyush Sinha 46Suraj Shivan 72

Category Definition (beverages)

Beverages category on the whole has been growing in India.

Non-alcoholic beverages includes soft drinks, energy drinks, juices & milk

Bottled water sector includes sparkling water, spring water and purified/table water.

Aggregation of Bottled water, carbonated bottled water, flavoured bottled water and functional bottled water.

Category Definition (beverages)

Beverages

Water Flavored

Nonalcoholic

Milk Juices

Alcoholic

Wine,Distilled

spirits,Beer etc

Definition and Market Share

Bottled Water India0

100020003000400050006000700080009000

Sum of 2008Sum of 2009Sum of 2010Sum of 2011Sum of 2012Sum of 2013

Research Sources:

Soft Drinks: Euromonitor from trade sources/national statistics

* In mn litre

Category Definitions Bottled Water This sector includes sparkling water, spring water and purified/table water. This is the aggregation of still bottled water, carbonated bottled water, flavoured bottled water and functional bottled water.

Origins of Bottled Water

Cost of a Manufacturinga One litre Bottle

General Scene and Market Overview

Bottled water off-trade value sales grow by 31% to touch Rs115.2 million

Average unit price grows by 6% in 2013 Bottled water off-trade value sales are predicted

to grow by a value CAGR of 18% in constant 2013 prices to touch Rs262 billion by 2018

Factors Driving the Category

Burgeoning population Rapid Urbanization Phenomenal increase in Tourism Inability of central local government to provide

clean drinking and safe draining water Strained  government resources

Factors Driving the Category

Rising health awareness among consumers in tier II and tier III cities.

Many consumers who do not have water purifiers at home bought bulk water bottles of 20 litres on a more frequent basis in 2013.

In addition, on-trade sales of bottled water also recorded an increase as consumers continued to ask for bottled water when dining out over the review period.

Spring Water is water derived from an underground formation from which water flows naturally to the surface of the earth. Spring water must be collected only at the spring or through a borehole tapping the underground formation feeding the spring

Mineral Water is natural water containing not less than 250 parts per million total dissolved solids.

Sparkling Bottled Water is water that, after treatment and possible replacement with carbon dioxide, contains the same amount of carbon dioxide that it had as it emerged from the source.

Fluoridated water contains fluoride added within the limitations established in the FDA Code of Federal Regulations. This category includes water classified as "For Infants" or "Nursery

Product Lines and Mixes

Still bottled water continues to be the only format in category

Other types of bottled water including carbonated bottled water, flavoured bottled water and functional bottled water remained in their nascent phase with merely one or two brands available.

These premium varieties continued to be picked up mainly by niche premium class consumers

Product Lines and Mixes

STRENGTH

1. Huge customer base2. Low cost of production3. Improper groundwater laws4. Convenient to get

OPPORTUNITY

1. Rising Middle Class2. Low per capita consumption3. Surging Tourism4. Surge in disposable incomes5. Rising Health awareness in Tier II and Tier III cities

THREATS

1. Environnemental Hazards2. Substitutes3. Compétition4. Water Purifier

WEAKNESS

1. Health Risks2. Low brand loyalty

SWOT Analysis

Bottled Water recorded further growth due to rising health awareness among the consumer base in Tier ii and Tier iii cities.

In addition on trade sales of bottled water also recorded an increase as the number of people buying bottled water bottles in the hotels increased.

2013’s total bottled water sales were recorded at 24%. The key drivers to growth of bottled water was rising consciousness and rising awareness about water-borne diseases.

Additionally youngsters did not carry bottles around and depended on RTD packaged water.

Trends

Still Bottled water continued to record the maximum Volume/Value growth due to being the only format available, with consumers starting to prefer bottled water to tap water due to safety issues.

Bottled water’ s off trade value grew by 31% in 2013. Bottled water brands are available in almost all on-

trade channels from small kiosks to big restaurants. Most of the consumers prefer to have bottled water

instead of fresh water at restaurants because of growing concerns of safety and quality

On-Trade bottled water retail value sales grew by 34% in 2013.

Industry Trends

Porter’s Five Force Analysis

Competitive rivalry – very

high

Bargaining power of suppliers –

moderate to high

Bargaining power of buyers -

high

Threat of substitutes –

high

Threat of new entrants –

moderate to high

Bargaining Power of Suppliers – moderate to high

Limited number of bottle manufacturers, bottling plant equipment manufacturers; deionization, reverse osmosis and filtration equipment manufacturers

Workers/casual employees can also be considered suppliers, having a low bargaining power

High transport costs increases the overall cost Switching costs – High switching costs due to limited number of

bottle manufacturers and other machine suppliers Threats of forward integration – Limited threat

Bargaining Power of Buyers - high

Buyers (resellers and final consumers) have many suppliers to choose from.

Resellers - Significant portion of sales is through the main four supermarkets, while the remaining is through a large number of independent outlets. Several bottled water suppliers stated that resellers demand more of the overall profit margin (almost 50% of the profit margin)

Final consumers – Consumers prefer convenience (ease of accessibility), purity (fitness and health) and portability (ease to carry over glasses or cups of water). The large number of suppliers increases the bargaining power of buyers

Threat of backward integration – considered to be low

Switching costs – As the price of bottled water is cheap switching costs is considered to be low.

Competitive Rivalry – very high

Large number of manufacturers. Visiting any local supermarket one would find bottled water of many manufacturers being displayed.

The generic nature of the product and current low price levels lead to low switching costs

Market growth rate – High growth rate at least over the next three to four years.

Distribution costs – High transportation costs affects suppliers ability to have an island-wide presence. This would benefit the large established suppliers

Threat of Substitutes – high

There are substitutes in the form of pipe-borne water, carbonated drinks and fruit juices. Moreover tea, coffee, milk and alcohol are considered standard substitutes.

Innovative products such as flavoured water, non-calories water and vitamin added water (enhanced waters) could also be considered substitutes.

Switching costs – considered to be low as the price of bottled water is low

Threat of New Entrants– moderate to high

Capital costs – moderate investment costs High industry growth rates encouraging new entrants Economies of scale – The unit cost of production is low and continues to

decrease with use of the latest technology. Differentiation – Currently suppliers mainly produce a generic bottled

water product. Going forward new entrants may introduce ‘enhanced waters’.

Government regulations – Strict regulations introduced by the Ministry of Health and impending regulations is making operations difficult for existing and even more difficult new entrant

Distribution channels – As incumbents dominate the market, new entrants struggle to gain distribution channels/networks

Brand loyalty - As incumbents dominate the market new entrants struggle to develop brand loyalty for a generic product.

Key Players

India as a Market Rapid income growth, a young and growing population and a continued influx of investments underline the potentially fruitful opportunities on offer on the consumer side. India has a young and rapidly growing population of more than 1.2bnIndia's 2012 estimated per capita GDP of USD1,680 suggests that consumer spending is coming from an extremely low base, this translates into tremendous room for growthThe bottled or the packaged water category, which according to the Bureau of Indian Standards are more than 1,80 in number, has been witnessing an unprecedented amount of action.

India has an impressive rewards score of 59.0, rating it close to China and Indonesia on this metric. However, this potential remains difficult to exploit, particularly for foreign consumer goods investors, with market challenges such as poor infrastructure and restrictive regulations dampening India's overall investment attractiveness

India’s Risk/Reward Score

Bottled Water Market-Snapshot

Market Size(Volume)

Market forecast

Bottled water value sales growth in local currency terms for 2014 = +16.6%; CAGR 2013 to 2018= +15.4%

The Indian soft drinks market is well placed to offer the fastest absolute and relative growth across all global markets

Growth Forecast

Forecast Sales- Volume

million litres 2013 2014 2015 2016 2017 2018

Still Bottled Water  8,042.70 9,782.30 11,736.40 13,893.50 16,272.90 18,785.90

Forecast Sales- Value

Rs million 2013 2014 2015 2016 2017 2018

Bottled Water  1,15,215.00 1,38,494.20 1,64,765.10 1,94,601.80 2,27,203.10 2,61,637.60

Market Segmentation

Rural Vs UrbanUrban/Rural 2008 2009 2010 2011 2012 2013

Rural 13.5 15.0 15.0 16.0 18.0 19.0

Urban 86.5 85.0 85.0 84.0 82.0 81.0

The past 5 years have seen a slow but steady growth in the Rural Market as consumers become more aware of concepts of hygiene and safety.

Local players who have good distribution networks in a 100 km radius have affected the big brands by being able to cut costs on reaching the market quickly which has not allowed them to penetrate the rural markets effectively.

Nation Wide Segmentation

Market Segmentation (Packaging Size)

Brand Share

Brand Share

The Indian bottled water market is led by Parle Bisleri, which held a 33% retail volume sales. It maintained its leadership due to its high brand loyalty and strong distribution.

It was followed by PepsiCo (17%) with Aquafina. PepsiCo focused on promoting Aquafina by offering discounts and more margins to retailers. The company also expanded distribution to reach small shops and kiosks which cater to consumers on-the-go.

Coca-Cola was at 13% with Kinley The three major accounted for a 62% total volume

share.

Brand Share

From the brand share data set it is seen that Bisleri has been dropping market share from the years 2009-13 while the overall market size is growing.

Kinley seems to be the biggest gainer piggybacking on the Coca Cola distribution network.

International players including PepsiCo and Coca-Cola focused on enhancing their presence in bottled water through their strong distribution networks due to their established presence in carbonates.

This has led regional players, such as Parle Bisleri, United Breweries and Manikchand Group, to witness a decline in their presence.

1. BISLERI

• Parle’s Bisleri is the Market Leader in terms of Market share having 33% Market Share thanks to its high Brand Loyalty and robust Distribution• Sizes: It is available in 8 pack sizes: 250ml cups, 250ml bottles, 500ml, 1 litre, 1.5 litre, 2 litre, 5 litre, and 20 litre• Products:1. Bisleri: Normal Mountain Mineral Water2. Bisleri Vedica: Mountain Fresh Spring Water3. Bisleri Soda: Carbonated Bisleri Soda Water

Individual Products

2. AQUAFINA

•PepsiCo’s product Aquafina recorded the fastest increase in value share, gaining one percentage point to hold 17%

•PepsiCo focused on promoting Aquafina by offering discounts and more margins to the sellers

•Products:1.Aquafina: Normal Mineral Water2. Aquafina FlavorSplash: Flavored Mineral Water Variant with Peach, Orange, Berry, Strawberry and Kiwi flavors

3. B’lue

• In 2013, Danone Narang Beverages launched a flavored bottled water under the Brand Name B’lue, which is the first product in flavored water, which is a negligible market.

•Variants( Flavors) 1. Awesome Apple2. Lively Guava3. Peppy Peach4. Tasty Orange Lime

• This product was aimed at young consumers who are willing to experiment

• Available in standard PET Bottles

Pricing

Brands Company name Pack size Price (INR)Aava Sheelpe Enterprises 1 litres 18.0Aquafina PepsiCo India Holdings Pvt Ltd 1 litres 20.0Aquafina PepsiCo India Holdings Pvt Ltd 1 litres 15.0Aquafina PepsiCo India Holdings Pvt Ltd 1 litres 20.0Bailey Parle Agro Pvt Ltd 1 litres 18.0Bailley Parle Agro Pvt Ltd 1 litres 18.0Bailley Parle Agro Pvt Ltd 1 litres 15.0Bisleri Vedica Bisleri International Pvt Ltd 1 litres 40.0Bisleri Vedica Mountain Water Bisleri International Pvt Ltd 1 litres 18.0Bisleri Vedica Mountain Water Bisleri International Pvt Ltd 1 litres 18.0Bisleri Vedica Mountain Water Bisleri International Pvt Ltd 1 litres 18.0Evian Narang Danone Access Pvt Ltd 1 litres 175.0Himalayan Mount Everest Mineral Water Ltd 1 litres 40.0Himalayan Tata Global Beverages Ltd 1 litres 40.0Himalayan Natural Mineral Water Mount Everest Mineral Water Ltd 1 litres 40.0Kinley Coca-Cola India Pvt Ltd 1 litres 20.0Kinley Coca-Cola India Pvt Ltd 1 litres 18.0Kinley Coca-Cola India Pvt Ltd 1 litres 25.0Kinley Coca-Cola India Pvt Ltd 1 litres 18.0Qua Danone Narang Beverages Pvt Ltd 1 litres 45.0Qua Danone Narang Beverages Pvt Ltd 1 litres 45.0Tata Himalaya Tata Global Beverages Ltd 1 litres 40.0

Pricing

The prices of the three major brands are on similar ranges for the 250 ml, 500 ml and 1 litre.

The majority of the leading still bottled water brands continued to be positioned in the standard segment in 2013. On the other hand, premium brands such as Evian and Perrier cater to higher-income consumers and tend to perform well in the on-trade channel.

Mid-priced brands such as Himalayan cater to urban consumers who prefer to pick still natural bottled water.

Pure Life a product by Nestle is positioned in the low-end segment.

Distribution Analysis

Bottled water see’s a majority of their sales through store based retailing outlets especially Kirana stores/ Grocery retailers.

Parle Agro, Coco Cola and Pepsi have been able to leverage their wide distribution network and long standing presence in the Indian market and consumers minds.

1. ON-TRADE CHANNELS

•On trade channels refer to sale of licensed good like water where the water is to be consumed on the premises

•On Trade channels include restaurants, hotels, kiosks

2. OFF-TRADE CHANNELS

•Off trade channels refer to sale of licensed good like water where the water is to be consumed off or away the premises

•Off Trade channels include retail outlets, supermarkets, hypermarkets etc

Distribution ChannelsCategories 2008 2009 2010 2011 2012 2013

Bottled Water - Off-trade Volume 2,734.3 3,290.6 3,966.8 5,126.5 6,537.1 8,042.7

Bottled Water - On-trade Volume 1,143.7 1,365.4 1,652.6 2,158.8 2,777.2 3,518.3

Driver - Hygiene Conscience and Awareness

Hygiene conscience has been increasing among Indians with the increase in literacy.

India’s adult literacy rate is 74.04 % (2011) and youth literacy rate is 81.1 % (2006)

Driver - Increase in disposable income

Annual disposable income has increased to 1,647,822.2 million USD in 2014 from 1,587,620.9 million USD in 2013

Drivers - Others

Portability – Portability is one of the major factor that has influenced the use of Bottled Water. People do not like to carry lots of water with them and thus prefer bottled water while on journey or a long outdoor activity.

Security – Bottled water has easily captured the imagination of consumer in the form of sense of security.

Increase in distribution channels – A huge network of dealers are spread throughout the country. For example, unlike its competitors who concentrate only in urban areas, Bisleri is found everywhere. It has a countrywide distribution.

Challenges

People have apprehensions about value for money. Water is a basic commodity that is easily available. Traditional water purifying methods and an increase in the use

of water purifiers, which need a one time investment, are a big threat to the growth of the bottled water market in India

Duplicate and filled water in un-destructed used water bottles. Other beverages and soft-drinks in the market. Polyethylene terephthalate (PET), the petroleum-based resin

used for drink bottles, is not a traded commodity. Beverage manufacturers cannot enter into fixed price contracts for PET

The bottled spring water industry, which pipes its water straight from natural springs or municipal water sources, is increasingly being attacked by government, utilities, and environmentalists.

Challenges

MYTH ONE – BOTTLEDWATER UNITS ARE MINTING MONEYWhile going through various articles and news items in print / electronic media, a general impression has been created that bottling units are minting money as they do not pay for raw material [ bore well water ] and sell one litre water for Rs 15.

The fact is that bottled water market is completely retailer dominated commodity and having a lions’ share. Taking out a good margin for distributor too , manufacturer is left with a wafer thin margin for himself. The “FREE” water gathers considerable packaging cost till it reaches the dispatch stage.

Moreover, indirect cost includes steep marking fee charged by Bureau of Indian Standards [ BIS ], Salaries of trained Chemist / micro biologist and  maintaining a full fledged laboratory adds huge cost  to regular processing unit expenses.

As bottled water is a very difficult commodity to transport, its delivery charges are steep and eats up the margins.   Credit sales, late realization, competition  hence makes it a  difficult product to produce , distribute and market unless scientific study is not conducted beforehand.

Innovations

Research and development in addition of better minerals and vitamins.

Flavored bottled water bottles. More user friendly and innovative packaging. Premium bottled water.

Thank YOU ......... Grab a bottle of water now