Tata-Pepsi JV to first focus on affordable packaged water

The proposed joint venture between Tata Global Beverages (TGB) and PepsiCo, announced this April to develop beverages in the health and wellness space, is likely to begin with developing affordable water.

Discussions are on, say sources, on the possibility of pricing a one-litre bottle of water below Rs 10, perhaps even around Rs 5. The joint venture may also offer fortified water and low-priced beverages in the earth and wellness space to attract health-conscious customers.

The current standard price at which most one-litre bottled water brands, including Coca-Cola’s Kinley, PepsiCo’s Aquafina and Parle’s Bisleri, are available is around Rs 15. Himalayan, a product from TGB, is available at over Rs 20, positioned on a premium platform as opposed to those popular brands.

The joint venture, say persons in the know, will not develop products related to tea, as PepsiCo already has a tie-up with Unilever on tea beverages across the globe. It is expected to cover areas other than India, too.

Executives in the Tata group say while TGB, formerly known as Tata Tea, focuses on products that are “value-accretive”, the joint venture will dwell on products for the masses. “This way, we avoid any conflict whatsoever,” said one.

L K Krishnakumar, group chief financial officer for TGB, declined to comment, saying the nature and scope of the proposed joint venture was yet to be finalised. “It will take a few months. I cannot comment on market speculation.”

A PepsiCo India spokesperson also said the company did not comment on market speculation.

The Indian packaged water market is already worth Rs 1,500 crore to Rs 2,000 crore and constitutes 15-20 per cent of the overall packaged beverage industry, which sees around Rs 12,000 crore of annual sales. The water market is growing at around 20 per cent yearly, but margins are very low, as many companies do heavy discounting in the retail market. The market is divided into two distinct segments, institutional and retail.

The Tatas have also looked at affordable delivery of water. Last year, the group launched ‘Swach’, a compact and affordable 19-litre water purifier. Tata Chemicals, which built the product, had announced it would sell a million such pieces across the country in a year. The aim is to provide drinking water at only Rs 30 per month for a family of five.

The two companies had, a few days earlier, announced the appointment of Punita Lal as chief executive officer of the joint venture. She was heading marketing for Pepsi’s high-profile beverage portfolio. She would be replaced by Deepika Warrier, who was director, marketing, at Frito-Lay India, the foods division of PepsiCo.