The Hindu Business Line : Water biz on a boil

AMONG beverages, the year clearly belonged to packaged water. The Rs 1,000-crore packaged water segment outperformed beverage categories such as carbonated soft drinks, tea and coffee, and powder drinks. The year witnessed large-scale consolidation, with smaller players gradually being edged out by the big contenders.

The battle of the year was contested fiercely between two key players - Mr Ramesh Chauhan's Parle Bisleri, and Coca-Cola India's (CCI) Kinley.

In September, CCI made an announcement that literally grabbed the headlines. The soft drinks major announced that within two years, Kinley had ended Bisleri's 20-year-long run as the country's leading water brand. CCI announced that Kinley had overtaken the near-generic Bisleri brand in terms of market share. Quoting ORG-MARG/ AC Nielsen data, CCI claimed that for the period ended July 31, 2002, Kinley's market share had been recorded at 35.1 per cent, against that of Bisleri's 34.4 per cent. CCI added that Bisleri had lost 0.7 per cent share of the retail market in July.

Parle Bisleri, of course, did not buy that claim, and Mr Chauhan went on record that his Bisleri brand continued its leadership status in the market.

CCI, meanwhile, maintained that packaged water was among the four big ideas it had identified to carry forward its `beverage revolution'. CCI's three other big ideas for the year were pushing 200 ml and PET bottles in carbonated soft drinks, powders, and tea and coffee.

PepsiCo India's Aquafina, meanwhile, remained a low-key player, with its market share hovering around 11-12 per cent through the year.

Nestle India - a marginal player in this category - said it would relaunch its Pure Life retail water brand.

French food major Group Danone also talked of changing strategy and shedding its low-key strategy for its bottled water - Evian. In addition to driving distribution at clubs, fitness centres, cinemas, department stores, malls, ice-cream parlours, cafes and retail sports outlets besides restaurants, hotels and supermarkets, Danone rationalised prices too. From a price tag of Rs 83 for a 1-litre bottle, it cut the price to Rs 70, while the price of 500 ml bottles was slashed from Rs 55 to Rs 43. The company attributed the price rationalisation to a five per cent reduction in duty on imported products.

Packaging

Perhaps the most significant development of the year in the branded water segment unfolded on the packaging front.

The peak summer months saw CCI rolling out Kinley in 200 ml cups. The cups, priced at Rs 3 each, were first rolled out in pockets of Gujarat. The nationwide roll-out of these, however, is yet to happen. With this initiative in place, the company is hoping to generate market share from the institutional segment such as restaurants and hotels, caterers, and transport channels such as buses and trains.

The soft drink major foresees Kinley cups as occupying the top end of the pouches water market. In addition to Bisleri, only few other brands retail packaged water in cups of 250 ml and 200 ml sizes. The presence of most brands in this pack size has been limited, owing predominantly to quality control issues. Mumbai, meanwhile, has emerged as a key market for 250 ml cups and 330 ml bottles, priced at Rs 3 and Rs 5, respectively.

Bulk water

The big action in packaged water, however, was in the bulk water segment. According to estimates, bulk water packs of 20 litres, targeted at the institutional and home segment, grew at a blistering pace of 30-40 per cent.

Bisleri `reinvented' its 20-litre jumbo home pack to acquire a more `consumer-friendly' format. The new pack was relaunched with thread fitting and valve cap, against competing brands, which come equipped with snap-on fittings. The packaging `innovation' according to Mr Chauhan, was to facilitate easier draining of water from the jar. Existing 20-litre Bisleri packs were pulled out and the roll-out of the new jars, priced between Rs 40 and Rs 60, began. Parle Bisleri also announced that its 5-litre jars would come fitted with spouts, henceforth, to make these more consumer-friendly.

CCI continued to spearhead its 20-litre bulk business by tying up with/acquiring strategic partners, and opting for contract manufacturing.

And, after all these years, PepsiCo India began putting in place plans to foray into this segment with its Aquafina brand. While industry analysts maintain that Pepsi's rather delayed entry in the bulk water segment will probably have the company on the backfoot with stiff competition from Bisleri and Kinley, PepsiCo remains bullish about its bulk water plans, which are likely to take off early next year. The company is now investing in additional capacity at its plants in Bangalore and Chennai for this venture, given that it is the South that is the biggest market for bulk water.

Distribution

Investments in additional capacity at existing plants were steady.

CCI said it was doubling the bottling capacity for Kinley through a combination of company-owned plants, franchisee operations and contract packers. Two of CCI's key bottling partners, namely the Gandharis and Goenkas, invested Rs 10 crore for a new bottling water plant in Punjab for Kinley. Interestingly, Punjab has not been a strong market for Kinley. The development marks CCI's first bottling water plant in this market. CCI has been feeding Kinley to the Punjab market from neighbouring States previously. CCI also separated the distribution channels for Kinley and its carbonated beverages.

PepsiCo infused capacity expansion at its seven plants for Aquafina, while Parle Bisleri undertook a consolidation exercise, under which some group companies were merged and others were closed down. An estimated Rs 100 crore was allocated for increasing manufacturing capacities across some of the company's 22 bottling operations and broadbasing logistics further.

The company also embarked on an environment-friendly project, involving sub-contracting local manufacturers to create PET bottle crushing gadgets. About 20,000 such machines across institutions and public places such as cineplexes, family entertainment and amusement centres, large office complexes, were targeted.

Meanwhile, the development that could have turned the industry on its head, did not happen. Talks between Parle Bisleri and Nestle India; and Parle Bisleri and the French Group Danone; which had been on for the past couple of years, came to a standstill. While Mr Chauhan maintained that he was open to the idea of a strategic alliance, negotiations were stuck at pricing. The previous year too, talks between Mr Chauhan and Nestle India and Group Danone for selling Bisleri for a rumoured Rs 500 crore with a 49 per cent stake did not lead to anything concrete.

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