Module II Pre-Work Cases

Case Study - 3
Summer Time: Water
Please
Two parts hydrogen, one part oxygen may well be the newest get-rich quick recipe in
marketing circles. There is no questioning the existence of a market for water: the typical
human needs between 1 billion plus populace needs between 1 billion and billion liters a day!
e"en if the numbers crunching is restricted to the country#s 1$$ odd million consuming
classes, the result is a staggering 1$$ $$ million liters a day, or %&.' (% billion liters a
year. )n money terms, at *s. 1$ a liter, the potential market could be worth between *s.%&,'$$
and *s.(%,$$$ crore. + glass of water would be in order now.
The market is worth a measly-by-comparison *s.1$$$ crore now, but it is growing at the rate of
,$- a year . a claim not many markets can make/0. +nd in the last one year, the world#s
largest coloured water companies coca-cola and 1epsi2o ha"e made in roads into a market
pre"iously dominated by the 2hauhan brothers. 3umbers some times confound, but this time
they are as clear as, well, pure water. +ccording to market research firm 4*5-6+*5#s retail
audit in 6arch $$$, 1epsi#s +quafina had a negligible presence in the market, coke#s 7inley
was yet to be launched, and *amesh 2hauhan#s 8isleri and 1rakash 2hauhan#s 8ailley
accounted for three out of e"ery four bottles of water sold.
+ year later, in 6arch $$1, 7inley had a 1$ percent share of the market, +quafina, , percent,
and the share of 8isleri and 8ailley had come down to &9 per cent. 8y :une $$1, numbers
pro"ided by the companies indicate, it had come down to '( per cent and the cola ma;ors,
together, accounted for ;ust o"er a third of the market. 3umbers don#t get moir< dramatic than
that.
2oke and 1epsi aren#t the only transnationals to be drawn to this market. The world#s largest
water players =anone, and 3estle ha"e a presence in the )ndian market too. )t is the potential
of %&-(% billion liters that these% companies find attracti"e.
The si>e of the global water market is estimated at '' billion liters a year. The bulk of this is
packaged drinking water. ?ome analysts predict that coca-cola and 1epsico will offer a stiff
challenge to market leaders =anbone and 3estle. )ndia, with its huge potential . a word most
consumer marketers now use with caution0 could play a crucial role in that battle. @ Aorld
leaders =anone and 3estle can#t dent our sales in )ndia, because they ha"e a limited presence
in soft-drink outlets.B 8oasts 2oke#s 2C4 +lex Don 8ehr. @ 4ut here, we make the rules.B
The Transnational Edge
@ 2ompanies like 2oke and 1epsi buy sales rather than earn themB, gripes the '$ something
*amesh 2hauhan the chairman of 1arle 8isleri. The unfairness of it all is a little unclear as
2hauhan is referring to the huge in"estments both companies are making in bottling plants and
distribution. 8y end-$$, coke would ha"e doubled the number of water bottling plants to 1&,
and 1epsi would ha"e added se"en more to its existing base of fi"e plants. )n contrast, 8isleri,
a brand launched as far back as 1E&(, boasts a mere 1' bottling plants and three country-wide
franchisees. +lready 7inley reaches '$$,$$$ retail outlets, +quafina, between 1'$,$$$ and
'$,$$$.
)f the cola ma;ors ha"e an edge, it is because the key success factor in the water business is
the same as that in the cola one: getting the product within arms reach of need. 8ut with the
transnationals playing the "olumes-card and competing on price a 1-litre bottle of 7inley
costs *s.1$, +quafina, *s11 dealer-margins ha"e shrunk. @)n the last one year, margins ha"e
come down from *e1 a bottle to &' paise,B rues 1ramod +ggarwal, a =elhi based water
distributor.
Ahat#s helped companies like coke and 1epsi is a 6arch-$$$ 6inistry of Fealth notification
making it mandatory for all bottled drinking water brands to ha"e an )?) certification issued by
the 8ureau of )ndian ?tandards. Gnable to meet the bureau#s none too taxing standards,
se"eral brands "anished from the market! and finding the Hmarking fee# . the amount charged
by 8)?0 of paise for e"ery litre too high, a few other marginal players did. That made it easy
for 2oke and 1epsi to establish a presence in the market.
C"en 2hauhan isn#t happy with this fee! 8isleri#s high "olumes meant he had to shell out
*s.($,$$,$$$ last year: @8)? is charging excessi"ely and there is no ;ustification for this. 1I+
and I14 . the other two regulators0 do not charge for membership. The )?) mark should be
made optionalB. Fowe"er, according to , *ohit Derma, the Cxecuti"e =irector of 1rime Aater,
some companies continue to "end their bottled water brands 1rimus, Fari 5anga, Curo and
*i"iera without an )?) mark. The incidence of such non-)?) brands is high in the southern and
eastern parts of the country. @ 4nly 1'-$ companies of the ,$$ or so who sell water in
2hennai and other parts of ?outh )ndia are recogni>ed by 8)?,B concedes *a"i ?hanker, the
managing director of +qua ?pring, and the "ice-president of the ?outh )ndia 1ackaged
=rinking Aater 6anufacturer#s +ssociation.
The Bulk-water Boom
Derma doesn#t lose much sleep o"er these brands. Fis company, 1rime Aater was one of the
first to reali>e the opportunity presented by the Hbulk-water# market. 8isleri, 7inley, 1rime and
Fello are the ma;or brands in the segment the water comes in ', 1$, $, or ' litre containers
which accounts for ' percent of the total market for water. )n some markets, though, this
proportion could be as high as '$ per cent. 2hennai and parts of Tamil 3adu are a case in
point. +lmost '$ percent of the water sold in these markets is in the form of 1 or $ litre
packs. @ 8ulk-packs make sense in 2hennai as there is a perennial water shortage here,B says
*a"ishankar.
8isleri is the dominant player in the segment, although it faces competition from local
companies +pollo in 2hennai and 1rime in =elhi in specific markets. Fowe"er, these
equations could change with 7inley#s recent entry into the market. @ 8ulk water sales is a great
opportunity and we use direct marketing to sell .bulk0 water to institutions and house holds,B
says 8ehr.
3ot e"eryone shares his enthusiasm. 1epsi2o#s Cxecuti"e =irector . 6arketing0, Dibha *ishi is
certain that her company will not extend the +quafina brand into the bulk water segment. @
3e"er mix the bulk and bottled stuffB, she warns. @The bulk segment is dependent on
franchising and that impacts qualityB.
That isn#t the only problem, adds 1rime#s "erma. @ + bulk container costs anywhere between
*s$$ and *s.%$$. These ha"e to be retrie"ed and sent back to the company or franchisee for
refilling. =istributors are loath to wait and fill the ;ar themsel"esB. ?till, with most urban areas
facing a shortage of drinking water ask people from 2hennai and 8angalore! they#ll tell you
stories the bulk segment looks set to boom. + 3ational ?ample ?ur"ey conducted by the
2entral ?tatistical 4rgani>ation in 1E99, showed that (.1 per cent of urban household had
access to piped water! by 1EE9, this proportion had reduced to ($.1 percent. +nd with most
urban @ 2onsuming 2lassB customers aware of the importance of pure drinking water, the
future looks promising for companies "ending the commodity.
Differentiating Drinking Water:
Traditionally, mineral water brands ha"e differentiated themsel"es on taste. 8ut there are only
three mineral water brands in )ndia Fimalayan, 2atch and Jifespring and the market is
dominated by packaged drinking water brands. Cxplains ?atish 2hander, +dditional =irector
5eneral, 8)?: @ The difference between the two is that mineral water isn#t to be processed,
while packaged drinking water needs top be processed and treatedB.
The Water Market : MN surge
om!an" Market Share #$%
Mar&h' ()))
Market Share #$%
Mar&h' ())*
Market Share #$%
+une' ())*
Bailey 23 17 10
Bisleri 53 51 47
Aquafina - 4 15
Kinley - 10 19
Yes 13 11 9
Others 11 7 -
)t won#t be easy for the brands to differentiate themsel"es. 2oke and 1epsi claim their water is
purer than pure, but building a brand around purity in a market where e"eryone else claims the
same product-feature is tough. The premium end of the market is the least crowded with ;ust
for brands: +anone#s C"ian and Ierrarelle and 3estle#s 1errier and ?an 1ellagrino. C"ian
retails at *s.9' a litre! 1errier . a sparkling water that means it is carbonated0, at *s. E$ for
('$ ml. 3ot many companies are keen to enter this segment, and =anone itself isn#t a"erse to
mo"ing a step below. =anone may go mass market with the 8ritannia brand of water. @ 8ut for
the moment, we are sticking to the concept of Hlifestyle# be"erages,B says su"een ?ahib
2ountry 6anager . )ndia and ?outh +sia0, =anone.
The popular segment brands priced at between *s.9 and *s.1 a litre is where the action
is. @This is a man eat dog kind of segment,B laughs an executi"e at a market research firm.
2oke and 1epsi ha"e positioned themsel"es snugly in this segment, and a mix of high-decibel
ad"ertising, smart merchandising and a focus on distribution ha"e seen them car"e out a third
of the market between them. The lower-end comprises water sold in polythene pouches, but
the market for these is almost non-existent in the northern and western parts of the country,
and it is dominated by small companies.
The real battle, then, is between 2oke and 1epsi. Aith the cola market remaining stagnant for
the past few years, the water one, with its ,$ per cent growth, should come across as an
attracti"e option for these companies. 2oca-cola expects to in"est *s.($-(' crore in its water
business o"er the next three years! for 1epsi2o, the corresponding amount is *s. 9$-1$$
crore. +lready, 7inley contributes ' per cent to 2oke#s re"enues in )ndia, and *ishi claims that
by the end of $$, +quafina will account for ( per cent of 1epsio2o#s )ndian re"enues.
The dark horse is *amesh 2hauhan! his brother 1rakash 2hauhan#s 8ailley brand has seen
its share dip to 1$ percent and is no longer a threat to +quafina and 7inley. Ior the moment,
*amesh 2hauhan has put on hold his plans to sell a ,E per cent stake in his company
. =anone and 3estle were reported to be interested0. The bu>> in the market is that 2hauhan
will wait until $$%, when his business will touch the *s.1,$$$ crore turno"er before bailing
out. 4nly, gi"en the rapidity with which 7inley and +quafina ha"e eroded 8isleri#s market share
that may be too late. *emember that the *ail 3eer is also about to flowKflood the market.
{Information can be used from theses web sites: www.mineralwaters.or.!"orld #hare$
www.bottledwater.or.!International %ottled "ater &ssociation$www.be'industr(.com
www.stanito.com !"orld leadin brands$)
Case adapted from %*+ #e,t. 1-+2001
,dditional -nformation *:
.rom the Ta! or Bottle:
Prote&ting the Sour&e
%( %i.sham /u00a+ 1ichard 2olland and 3atherine 4errier
#ummar(: as the bottled water industr( athers for the annual I%"& show in 4lorida this month+
there will undoubtedl( be some tal. on how ,eo,le from around the lobe 'iew the industr(. 5ne
such rou, with its distinct o,inions is the "orld "ildlife 4und. *he followin article is larel(
based on a stud( conducted b( ""4 earlier this (ear it in no wa( should be construed as
re,resentin the 'iews of "3678s ,ublisher.
9'er(one needs to drin. water e'er( da(. It8s an essential human necessit( and is bein
reconi:ed increasinl( as a fundamental riht as well. #till+ more than a billion ,eo,le mostl( in
de'elo,in countries either don8t ha'e access to safe water+ or suffer from un,redictable ,eriods
without su,,l(. ;es,ite technoloical ad'ances and mostl( risin income le'els+ a crisis of fresh
water is the dail( realit( in too man( cases. 9'en in industriali:ed countries+ ,ublic ,erce,tion of
ri'ers and la.es cho.ed with ,ollution means that confidence in drin.in from the ta, has been
seriousl( undermined.
9'er( cloud has a sil'er linin+ thouh+ at least in terms of new ,roducts and ,rofits. "ater sold
in bottles has become an iconic s(mbol of modern life. *en (ears ao+ the sale of bottled water
was minimal. *oda(+ 90 billion liters !23.< billion allons$ are bouht annuall( re,resentin =22
billion in sales.
Basi& Premise
>an( bottled water brands base their ,ublicit( on the su,,osed ,urit( of their ,roduct+ ?ualit( of
their source or additional ,ro,erties otherwise not a'ailable with ta, water. "ater+ whether
a'ailable in bottles or from the ta,+ alwa(s contains a certain amount of minerals and trace
elements+ collected throuhout its eoloical course. *he mineral com,osition of each water
de,ends on the eoloical la(ers crossed and time s,ent in the round. *hese inoranic elements
and their interaction are essential to the constitution of the human bod( and maintainin health.
#ome of these elements ha'e to be ,resent at certain concentrations fluoride hel,s to ,re'ent
tooth deca(@ the "orld 2ealth 5rani:ation !"25$ recommends addin fluoride to munici,al
water where concentrations are below 1,,m.A 4or eBam,le+ fluoride has to be ,resent at about 1
to 1.5 ,arts ,er million !,,m$ in drin.in water C less or more than that can lead to health
,roblems.
>inerals are com,osed to electrol(tes: anions !chloride+ bicarbonate+ ,hos,horous+ sul,hur+
oranic acids+ ,roteins$ and cations !sodium+ ,otassium+ calcium+ manesium$. 4or inestion@
calcium is essential to strenthenin teeth and bones and ,hos,horous is necessar( to the
assimilation of calcium and contributes to brain acti'it( and teeth ,rotection. *race elements of
metals and metalloids in 'er( small amounts in the human bod( ,artici,ate in most of its
biochemical reactions. Iron+ fluorine+ selenium+ silicon and 'anadium are the main trace elements
found in waters+ but some waters can also contain iodine+ :inc+ co,,er or sil'er.
*o ,ut fiures in ,ers,ecti'e+ the total 'olume of water consumed in the world !90 billion liters$
is about the 'olume of water the Indian ca,ital of ;elhi !,o,ulation 12 million$ consumes in two
months. *he amount of mone( s,ent on bottled water ,er (ear !=22 billion$ would enable enouh
water to be su,,lied throuh munici,al s(stems to 2+000 cities each with a ,o,ulation of 4
million. *oda(+ the total in'estment in ta, water su,,l( and sewae treatment worldwide is onl(
a few times reater than the annual lobal fiure for bottled water sales.
Su/stantial 0rowth
*he ,henomenal rowth of bottled water sales is b( no means limited to the industriali:ed world.
*he Indian bottled water industr( is estimated to be rowin at 30-50 ,ercent a (ear. In 3hina+
one brand sells about <3- million liters !221 million allons$ and has a turno'er of =375 million.
*he industr( is rowin 15 ,ercent annuall( in &sia and 10 ,ercent in Dorth &merica !see 4iure
1+ #ource: %elot 2000$.
In man( cases+ ,ublic confidence in ta, water has eroded due to imaes of ,olluted ri'ers+ la.es
and underround water sources. Eac. of en'ironmental ,rotection and wea. enforcement of
reulations are ,artl( to blame. *here are+ of course+ issues of health and taste that are also
im,ortant+ es,eciall( in industriali:ed countries !see 4iure 2+ #ource: 5lson 1999 and I49D
2000$. &lthouh these factors ma( encourae ,eo,le to see. other sources of water+ about half of
all bottled water is little more than ta, water C albeit re-filtered-deli'ered in bottles instead of
,i,es.
3an bottled water be a lon-term solution for water su,,l(F *he answer is sim,l( no. 9'en in
de'elo,ed countries+ not e'er(one can afford to drin. it on a dail( basis. *here8s onl( one lon-
term solution to im,ro'e water ?ualit( at the ta, and restorin ,ublic confidence. *reatin the
wastewater dischared into ri'ers+ la.es and wetlands is that solution. 9'en bottled water ?ualit(
'er( much de,ends on this+ since nature is its source.
To ser1e and !rote&t
*he increasin ,o,ularit( of bottled water ma( seem to su,,ort the arument that ta, water is
often undrin.able. *his sends the wron messae+ howe'er+ concernin the ,riorit( we should
i'e to ,rotectin and im,ro'in our ri'ers+ la.es and underround sources- the natural
ecos(stems-that are the source for all waterG whether it comes to us in a bottle or throuh a
,i,e. If wealthier ,eo,le are able to o,t out of usin ta, water b( bu(in bottled water+ then this
means C successi'el( fewer ,eo,le use ta, water for drin.in C that ,ressure on towns+ cities and
countries to in'est in en'ironmental ,rotection and ,ublic water s(stems will be lower. &nd
ultimatel( all water sources will become deraded.
%ottled water also suffers from ,roblems+ 0ust li.e ta, water. In de'elo,in countries+ for
eBam,le+ the same wea.nesses concernin ,oor enforcement of en'ironmental and h(iene
standards a,,l( e?uall( to ta, water and bottled water. In other countries+ labelin standards ma(
allow misinformation bein ,assed to consumers.
5ne bottled water website states: H1emember 2ow fresh the air smells after a stormF %asicall(+
we run our water throuh a lihtnin storm for (ou to ,ro'ide a fresh+ clean taste. In addition to
this+ the a'erae *;# !total dissol'ed solids$ is 300 ,arts ,er million !,,m$+ but our water has
onl( 15 ,,m+ and is siB times ,urer than the ,urest water in the world.I *his brand in the Jnited
#tates costs =1.50 ,er liter C three times as eB,ensi'e as asoline C but its consumers aren8t told
that such low le'els of *;# in drin.in water would actuall( be harmful.A
!1997$
!2000$
Effe&ts on en1ironment
Dot onl( do such bottled water ,roducts drain (our ,oc.et of mone(+ the industr( contributes to
deradation of the en'ironment b( consumin ,lastic. 3urrentl(+ 1.5 million tons of ,lastic are
used annuall( for these bottles. *his will increase further. *otal ,lastic consum,tion increased
loball( from 1.- million tons in 1950 to 135 million tons in 2000. *here are some efforts to
rec(cle bottles end u, on the beach+ or consum,tion has doubled in the last three (ears to 4
.ilorams !<.<2 ,ounds$ ,er ca,ita then ine'itabl( contributes to the increase in ,lastic C as well
as lass and aluminium C used and resultin waste enerated !see 4iure 3+ #ource: JD9#9>
2000$
"ater in the bottle is onl( worth a few cents+ if that. "hat consumers are reall( ,a(in for are
,lastic bottles+ trans,ortation+ ,ac.ain and mar.etin+ which accounts for about 90 ,ercent of
the ,rice. #ome brands trans,ort bottled water lon distances to other countries. &round 25
,ercent of all bottled water crosses an international border before it8s consumed. *rans,ortation
of bottled water lon distance in'ol'es consum,tion of fossil fuels+ which adds to consum,tion
of fossil fuels+ contributes to reenhouse as emissions and+ ultimatel(+ affects climate chane.
The u!side
*he bottled water industr( has ta.en ,ositi'e ste,s to reduce its ecoloical foot,rint. 1ec(clin
and reusin bottles is increasin+ larer containers+ home deli'er( and local water sources could
all reduce ,ac.ain waste and trans,ort costs. 7ersuadin all the com,anies in the sector to
match the best ,ractices of the leaders is a challene ahead for the industr(.
%ut is this the best wa( of meetin drin.in water needs for e'er(oneF 5b'iousl( not. It8s both
chea,er and more sustainable to .ee, ri'ers+ la.es and underround water sources clean and to
use these for ,ublic ta, water su,,lies. Dew Kor. 3it(+ for eBam,le+ has started a ma0or ,roram
to secure ,rotection of its water sources far u,stream of where it8s consumed b( cit( dwellers.
%ut with more ,eo,le turnin to bottled water+ such watershed manaement ,ro0ects ma( loo.
unnecessar( and eB,ensi'e to decision-ma.ers tr(in to .ee, costs down !for ,eo,le who aren8t
actuall( usin the water for drin.in$. *here8s no ,oint in ta.in such measures to ,rotect water
in nature if ,eo,le are drin.in bottled waterL &s an industr( re,resentati'e !I%"&8s #te,hen
Ma(+ *he Dando *imes+ >a( 3+ 2001$ obser'ed+ H%ottled water is not the ,roblem+A the industr(
is onl( res,ondin to it.I %ut this is a tem,orar( and eB,ensi'e fiB and it ma( dela( the touh
decisions re?uired to reach a ,ermanent solution.
on&lusion
3onsumers+ o'ernments and the ,ri'ate sector need to wor. toether to ensure that ta, water is
a'ailable+ safe to drin. and tastes better. *hat re?uires a commitment to the en'ironment and
in'estment in infrastructure e?ual to the ,ublic8s desire for clean and health( water. %ottled
brands ma( be desiner ,roducts+ but the water inside the bottle still comes from nature.
7rotectin and restorin freshwater ecos(stems is the onl( solution that8s sustainable in the lon
term. &nd it should be chea,er for e'er(one+ too.
A It8s the ,osition of "367 that drin.in water shouldn8t be relied u,on as the source of
essential 'itamins and minerals that the bod( needs. &s mentioned in earlier related articles+ the
bod( ets these larel( from the foods we ear. If a ,erson8s diet is low in certain of these+
su,,lements are recommended. *o rel( on water for the federal 1ecommended ;ail( &llowance
!1;&$+ howe'er+ would mean drin.in thousands of eiht-ounce lasses of water a da(.
&lthouh ,ro,er h(dration is essential to ood health+ this is im,ractical and unnecessar( C *he
9ditors.
#ource: *he stud( and related ,ress release can be found at: www.,anda.orNli'inwaters. *he
authors can be reached b( email: bu00aOwwfint.or
Discussion Questions:
1. What environmental factors apply in the Water War?
. What is the value chain of !isleri and ho" do you propose to recompose it?
3. What should #e the future directions for $anone and %estle?