Bottled water industry analysis India

the assignment has analysis of package water in India and the category analysis

1. Bottled Water

2. Category analysis:- Category definition (beverages ) Definition and Market Share Origins of Bottled Water Factors Driving the Category Product lines and mixes SWOT analysis of the category Industry Trends   Competitor Analysis:- Potters 5 forces analysis Key players India As a market Key players share Market Analysis:- Market size and share Market segmentation Brand share Pricing Distribution analysis Drivers, Innovations and Challenges A Srikrishna 01 Dishant Bhatt 28 Jayesh Gawde34 Piyush Sinha 46 Suraj Shivan 72

3. 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.

4. Category Definition (beverages)

5. Definition and M arket Share 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.

6. Origins of Bottled Water

7. Cost of a Manufacturing a One litre B ottle

8. 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

9. 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

10. 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.

11. 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

12. 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

13. STRENGTH 1. Huge customer base 2. Low cost of production 3. Improper groundwater laws 4. Convenient to get OPPORTUNITY 1. Rising Middle Class 2. Low per capita consumption 3. Surging Tourism 4. Surge in disposable incomes 5. Rising Health awareness in Tier II and Tier III cities THREATS 1. Environnemental Hazards 2. Substitutes 3. Compétition 4. Water Purifier WEAKNESS 1. Health Risks 2. Low brand loyalty SWOT Analysis

14. 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

15. 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

16. Porter’s Five Force Analysis

17. 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

18. 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.

19. 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

20. 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

21. 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 D istribution 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.

22. Key Players

23. 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 1.2bn India'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 growth The 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.

24. 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

25. Bottled Water Market-Snapshot

26. Market Size(Volume)

27. 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

28. 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

29. Market Segmentation Rural Vs Urban Urban/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.

30. Nation Wide Segmentation

31. Market Segmentation (Packaging Size)

32. Brand Share

33. 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.

34. 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.

35. 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: Bisleri : Normal Mountain Mineral Water Bisleri Vedica : Mountain Fresh Spring Water Bisleri Soda: Carbonated Bisleri Soda Water Individual Products

36. 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 Water 2. Aquafina FlavorSplash : Flavored Mineral Water Variant with Peach, Orange, Berry, Strawberry and Kiwi flavors

37. 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) Awesome Apple Lively Guava Peppy Peach Tasty Orange Lime This product was aimed at young consumers who are willing to experiment Available in standard PET Bottles

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

39. 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.

40. 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.

41. 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 Channels Categories 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

42. 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)

43. 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

44. 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 .

45. 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.

46. Challenges MYTH ONE – BOTTLEDWATER UNITS ARE MINTING MONEY While 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.

47. Innovations Research and development in addition of better minerals and vitamins. Flavored bottled water bottles. More user friendly and innovative packaging. Premium bottled water.

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