Mangalmay Journal of Management & Technology

Volume 6, Number 2, July - December, 2012

MANAGEMENT CASE :
CASE OF INDIAN BOTTLED WATER MARKET: ITS GENESIS,
GROWTH AND PROSPECTS
Sandeep Sharma
Professor
School of Management
MIMT, Greater Noida

Dr. J. N. Giri
Associate Professor
School of Management
MIMT, Greater Noida

Abstract:
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Indians currently spend about $330m a year on bottled water, analysts estimate. The packaged
water market constitutes 15 percent of the overall packaged beverage industry, which has annual
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sales of at least $2.6bn. The bottled water market in India, selling an estimated million bottles a
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day, makes the bottled water market a mere 6% of the total bottled drinks (non-hard/non
carbonated) market in India. The bottled water market is growing at a phenomenal 25-30% a
year. This case of Indian bottled water market embarks to bring forth the overall growth patterns
of industry in coming years, assessing in real terms the multiple player fragmented nature of
industry. The authors have given historical account of genesis of bottled water industry in India its
growth, profitability, entry of MNC's in Indian market and the competition from other alternatives
to getting pure water and the restriction of packages to already existing general purpose package;
also dealt with in the case are other issues directly affecting the expansion of the market in India,
and its future growth prospects. The case thus provides a panorama of core issues affecting the
evolving trajectory of Indian bottled water market, as may be seen from the stand point of its
projection in future.

Introduction:
Almost all the major international and national brands water bottles are available in Indian
market right from the railway stations, bus stations, grocery stores and even at panwala's shop.
Though imported brands like Avian, Perrier are exclusively available in star hotels. Few years
before, bottle water was considered as the rich people's choice, but now it is penetrated even in
rural areas. The current scenario is because of increased awareness about drinking pure water,
increased earning of retail consumers and the willingness of retail consumer to spend on water,
as something crucial to good health when compared to cost of drinking unsafe, contaminated
water. The inability of public utility services to provide safe drinking water to general
population and the cost of it to consumer has also facilitated the decision of consumer to make
the choice. The growth and status of Indian bottled industry in comparison with Western or
other Asian market, India is far behind in terms of quantum, infrastructure, professionalism and
standards implementation. Also as per UN study conducted in 122 countries, in connection with
water quality, India's number was dismal 120. In comparison to global standards India's

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Volume 6, Number 2, July - December, 2012

bottled water segment is largely unregulated. If oil is the focal point of world conflict now, it is
possible that water will be the next battle ground among monopoly capitalists and even among
nations. Prices of water and water services keep on increasing because most of our public water
utilities have already been privatized by the government. Private beverage and water
companies have been granted by the government with permits to practically control and
operate our natural springs and water sources in natural parks and protected areas for water
production and plants.

The bottled water category is growing at a rapid pace. The branded market is 40% of the
category and non- branded contributes to 60% of the market. The category is growing at a rate
of 30%. Bisleri is the market leader in mineral water in India with a 60% market share within
organized mineral water category. Three key players mainly dominate the Indian bottled water
market namely, Parle-Bisleri, Coca Cola India-Kinley, and Pepsico India-Aquafina. This market
is expected to grow at a 30% rate in the next 7 years. In 2011 the revenue generated by this
market was over $250 million.
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Bottled Water Industry in India

The overall packaged bottled water in India is estimated to touch the Rs. 10,000 crore mark in
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the 2012-13 fiscal, growing at a compound annual growth rate (CAGR) of 19%. According to a
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research presently this market is estimated at Rs 8,000 crore, and could touch Rs. 15,000 crore
by 2015. While Bisleri continues as the top brand with a 36% share among national players,
Coca-Cola's Kinley follows with 25% share, followed by Aquafina at 15%. Other smaller brands
include Parle Agro's Bailley, Kingfisher and McDowells No.1. The global bottled water market,
which saw an increase of 40-45% over the past five years, is currently valued at close to US$ 85-
90 billion. The domestic market is split between three sets of players -- national brands with a
pan India presence worth around Rs 4,000 crore, local brands manufactured by registered
plants but restricted to regions estimated to have a combined turnover of Rs 2,400 crore and
unorganised local brands estimated at Rs 1,600 crore. There are over 2,500 brands in this
category, of which over three-fourths are local. The non-traditional category, or bulk packs,
(with over 5 litre capacity) is growing rapidly, and has a current share of over 40%. It is said,
"The rising trend of bulk water consumption in homes and institutional segments will pave the
way for bulk water packs to acquire half of the total bottled water market within next four-five
years". According to a national-level study, making of bottled water is today a cottage industry
in the country. Leave alone the metros, where a bottled-water manufacturer can be found even
in a one-room shop, in every medium and small city and even rural areas there are bottled water
manufacturers. The low entry level barriers in industry have helped in rapid expansion of the
market space. The high growth rate of the market, the distribution and production capacities of
big players are showing a huge gap thus facilitating the small players' entry into market with
reasonable profits to be made by making garnering the local unattended demand by big players.
The low exit costs also remove inhibitions among small operators to give wings to their
entrepreneurial yearnings. Thus, the market is getting fragmented by huge quotient in real
market share terms.

While India ranks among the top 10 largest bottled water consumers in the world, its per capita

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Volume 6, Number 2, July - December, 2012

per annum consumption of bottled water is estimated to be five litres which is comparatively
lower than the global average of 24 litres. Today it is one of India's fastest growing industrial
sectors. Between 1999 and 2004, the Indian bottled water market grew at a compound annual
growth rate (CAGR) of 25 per cent - the highest in the world. The total annual bottled water
consumption in India had tripled to 5 billion liters in 2004 from 1.5 billion liters in 1999.

Bottled Water Top Players in India

The market leader is Bisleri International, which boasts of a 40 percent share. It is followed by
Coca- Coca's Kinley (around 25 per cent) and PepsiCo's Aquafina (around 10 per cent). The top
players in bottled water industry in India are the major international giants like Coca cola,
Pepsi, Nestle and noticeable presence of national players like Mount Everest, Manik Chand,
Kingfisher, Mohan Meakins, SKN Breweries, Indian Railways so on. With increasing
competition, this sector will register a robust growth in 2012, predict industry analysts. To take
on rivals in this sector, PepsiCo India is drawing up a fresh game plan which includes
investment in capacity enhancement, packaging initiatives and below-the-line activities to
pump up volumes in the over-crowded category. Meanwhile, domestic major, Parle-Agro is
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extending the manufacturing facility for Bailley from 29 to 60 plants this year. While Bisleri
International is beefing up its distribution, manufacturing and marketing operations, Coca-Cola
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India is sharpening its focus on packaging initiatives of Kinley to woo new consumes. In essence,
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the packaged water industry in India will soon witness a major tussle between domestic and
international players to gain market and mind share. The western region accounts for 40 per
cent of the market and the eastern region just 10 percent. However, the bottling plants are
concentrated in the southern region. Of the approximately 1,200 bottling water plants in India,
600 are in Tamil Nadu. But a major problem is southern India, especially Tamil Nadu, is water
starved. Top multinational players such as Coca-Cola and PepsiCo have been trying for the past
decade to capture the Indian bottled water market. Today they have captured a significant
portion of it. However, Parle Bisleri continues to hold 40 per cent of the market share. Kinley
and Aquafina are fast catching up, with Kinley holding 20-25 per cent of the market and
Aquafina approximately 10 per cent. The rest, including the smaller players, have 20-25 % of
the market share. The international players though continue to put more marketing efforts on
their core power brands in soft drinks, the domestic major Bisleri is committed to marketing
the brand as its flagship product.

Bottled Water: How Safe?

The bottled water industry has spent billions over the past decade to sell you on the idea that
bottled water is better than tap water. Well the short answer is they are both unhealthy. One of
the most ironic parts of the bottled water tragedy is that the water bottling industry gets the
water nearly free, filters it, bottles it and sells it back to us at 900% profit. The ironic part is that
tap water is legislated to be 7.0pH neutral. They first dump a TON of chlorine in the water to kill
off all the bad bacteria, this makes it highly acidic. In India around 100 companies sell an
estimated 424 million litres of bottled water valued at around Rs 200 crore in the country
annually. Most bottlers claim that their water is 100 per cent bacteria-free, safe, tastier and
healthier. But is the water in these bottles really safe to drink? Do they conform to international
or national standards? To find out, the Ahmedabad-based Consumer Education and Research

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Volume 6, Number 2, July - December, 2012

Society (CERS), an independent non-profit institution with a sophisticated product-testing

laboratory, recently carried out a detailed study on 13 major brands of bottled water available
in the country. The national brands -- Bisleri (separate samples were taken from their units in
Bangalore, Ghaziabad, Calcutta and Baroda) and Bailley (Mumbai and Surat) -- were selected on
the basis of their dominant position in the overall market. Bisil (Mehsana), Golden Eagle
(Chennai), Aquaspa (Mumbai),Saiganga (Ahmednagar), Nirantar (Thane), Trupthi (Chennai)
and Yes (Nadiad) were included because of their regional popularity. To conform to
international standards for such testing, 21 bottles of each brand were tested in the CERS
laboratory against "analytical" and "sensory" parameters as well as for "microbiological"
contamination. To ensure fairness, the results were sent to the individual companies for their
comments. So how safe is bottled water? Not that safe, says the CERS survey. As many as 10 out
of the 13 brands had foreign floating objects in clear violation of norms. Again during a surprise
inspection by the health committee chairman Manjunatha Reddy and team at two mineral
water units in the Bangalore on January 11, 2011, it was found that mineral water production
unit owners were bottling bore-well water. The units were also illegally using several branded
labels on the bottles to market the water. The standing committee visited a mineral water
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production unit called AM Enterprises and found the owner selling water without an ISI mark
from the Bureau of India Standards. He was found mixing mineral water with bore-well water
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and selling it in cans to the public.

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Bottled Water: High Profit Proposition A Disconcerting Fact

What is amazing is that, people are prepared to pay Rs. 12 for a liter of water-in India especially
when the cost of material input (0.25 paisa per liter excluding labors cost) pales into
insignificance before the price of the product. Up to 40% of bottled water comes from the same
source as tap water, but is sold back to consumers at hundreds of times the cost. Not only Coca-
Cola but thousands of brands are there in India's $445 million packaged water industry (i.e.
mineral and bottled water both included). Not just bottlers are involved. In south India,
thousands of fuel trucks converted to be water carriers sell ground water to households and
establishments at about $10 for 5,000 liters. More than 3500 tankers carry water drawn from
farmland surrounding the national capital, according a social activist R. Srinivasan. He
estimates a $148 million tanker industry is cashing in on Delhi's acute water scarcity. The story
is replicated across India.

Bottled Water law in India

The term, "mineral water" is misleading because our laws do not stipulate the minimum
mineral content level required for water to be labelled as such. Ahmedabad-based Consumer
Education and Research Society (CERS), an independent non-profit institution with a
sophisticated product-testing laboratory, recently carried out a detailed study on 13 major
brands of bottled water available in the country. As many as 10 of the 13 brands had foreign
floating objects in clear violation of norms found in the survey. The CERS study indicates that
there is an urgent need to revise standards for bottled water.

Competition to Bottled Water and Trends Across Market

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Volume 6, Number 2, July - December, 2012

Competition to Bottled Water is coming from water purifiers being used by households to
purify Tap water. This is decreasing the market for bigger sized packages being used by
industry, as the office and institution segment is fast acknowledging the efficacy of 25-50m
liters inbuilt storage purifiers for limited purposes of office use. The housing Societies are also
installing mini water treatment plants thus providing safe water option to households thus
increasing TAP water consciousness, this trend is catching on rapidly.

The general purpose 1 liter bottle remains the most popular package; the other packages with
sole exception of 20 liter have not caught on with public. The 2 liter economy package launched
with fanfare as economy pack has proved to be too bulky for comfort of tourist population,
which by definition is on move and does not likes to carry extra burden in terms of comfort level
desired in carriage of items.

The fragmented market has brought in the effect of unorganized sector moving to occupy the
vacant market space. The presence of small players in market of product which has huge
implication on customers health, raises concerns about the ability of the small players to
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provide high quality bottled water as sought by discerning customers .As the learning curve of
consumers take a definitive up ward swing following the experiences that they have with both
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branded and unbranded mineral water, the concerns regarding hygienic water are increasing .
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Secondly the tests done by publicly spirited organizations like CERI do not reflect positively on
adherence to professed standards by big players in rush to capture the expanding markets. The
international players still view the bottled water brands as supplemental to their core business
brands and are not doing enough for building better production processes, but are playing on
the distribution prowess of the power brands existing in their stable. All these may hamper the
growth of bottled water markets rate of growth, especially with availability of mini packs of
fruit juices and flavoured non carbonated drinks in same price range.

Conclusion:

Drinking bottled water has become a trivial habit in many people's everyday lives. Bad tap
water taste or quality, fitness objectives or safety purposes, numerous reasons lead consumers
to buy bottled water. Bottled water may even be necessary, for instance in case of temporary tap
water contamination. The trend toward consuming more and more bottled water will keep
increasing in the coming years. This flourishing market is profitable for a high number of
companies, and employs thousands of people world-wide. Bottled water quality is generally
good, although it can suffer from the same contamination hazards as tap water. In Europe,
natural mineral waters quality is frequently tested, both by independent labs and by
companies' internal services. These latter controls may not be fully reliable. Yet, it is not in the
interest of the companies, who base their marketing strategies on the purity of their products,
to hide away occasional and traceable contamination. To make sure bottled water quality is as
good as it is claimed to be, companies should release their quality tests on a day-to-day basis and
make them available to a wide number of people, for instance through the internet. It is
essential that consumers have access to major information, directly on the bottles' labels, i.e.,
the “type” of water (natural mineral water, purified water, etc.), its mineral composition, and

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Volume 6, Number 2, July - December, 2012

the location of the spring or the treatments this water may have undergone. International
companies locally investing in bottled water businesses should make sure that the products are
of good quality and packed is hygienic conditions, particularly in emerging and developing
countries. They should also be careful to the additional pressure they put on local water
resources. International standards could facilitate the access to bottled water products, for
instance simplifying bottled water designations. Negative environmental impacts of bottled
water could be reduced implementing simple solutions, e.g. re-using bottles of water in
adequate sanitary conditions on a local basis, rather than just recycle or re-manufacture them
into new products. Certification of local supplies under international brand names could reduce
environmental impacts due to world-wide transportation of some bottled water brands. Could
the current increase in bottled water consumption threaten local water resources, in particular
in countries already facing alarming water problems (i.e. in Asia and the Pacific, where the
major increase in bottled water consumption is taking place)? Either bottled water put an
additional pressure on local water resources already under stress, or imported bottled water
slightly reduces water stress. Is bottled water a threat to tap water? Some proposals suggested
that, considering that using tap water for drinking or cooking represents only a minor part of
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households' tap water consumption, it would not be necessary anymore to provide them with
fully drinking quality tap water. Tap water could be of lower quality, and replaced, for drinking
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purposes, by carboy-delivered purified water. Nevertheless, bottled water should not be

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considered a sustainable alternative to tap water, as it is not exempt from periodical

contamination. In addition, tap water is more energy-efficient as it is provided through
underground pipes, compared to fuel and energy needed for filling bottles and transporting
them around the world. Tap water is and should remain a public service meant to deliver good
quality drinking water. Indian market is expecting big gains in coming years but the gains may
be confined to few general packages and to travelling population wchich remains the primary
consumers of it new segments are not to be seen on the horizon sooner unless water quality
deteriorates further exceptionally fast across the cities and towns forcing people to live on
bigger sized packages across the country's burgeoning urban landscape.

References:

1. Danone (2010): “Annual report 1999”, Groupe Danone

2. Cristian Joaquim (2007): “Bottled water in India” Journal of APAC Markets .
3. Latham, M. (1997): “Human nutrition in the developing world”, in Food and Nutrition
Series, Food and Agriculture Organisation of the United Nations (FAO).
4. Olson, E. (1999): “Bottled water: pure drink or pure hype?”, Natural Resource Defense
5. Council (NRDC).

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