Drinking water manufacturers mull sales outlets

The Andhra Pradesh Packaged Drinking Water Manufacturers Association is planning to open its own outlets in the state capital for the sale of packaged drinking water of various brands under one roof.

According to association general secretary, P Srinivas Rao, due to cut-throat competition in the industry the existing retail margins of packaged drinking water are as high as 50 per cent.

This is making packaged drinking water costlier and unaffordable to large sections of the people.

At present, he said, the maximum retail price of a litre of packaged drinking water was Rs 12. Of this, the retailer's margin accounted for as much as Rs 6, while the producer's margin stood at 25 paise to 30 paise.

Hence, if the manufacturers themselves opened their sales outlets, they would be able to not only improve their margins but also sell the water at a much less price of about Rs 8 per litre.

However, Rao said that the major problem in opening a common sales outlet was ensuring promotion of various brands without any bias. This issue is currently being debated among the members of the association.

Rao is the producer of Bibo brand of packaged drinking water, which has 40 per cent share in the 20-litre bulk water market of Hyderabad. The total market for packaged drinking water in Hyderabad is estimated to be Rs 100 crore per annum.

He told Business Standard that there were 220 ISI-certified packaged drinking water manufacturers in Hyderabad, of which 150 were members of the association. The remaining 70 manufacturers were also being invited to become the association members so that they would be able to chalk out a common strategy with regard to retail sales.

Besides the ISI-certified units, there were as many as 700 packaged water producing units in the unorganised sector in the state.

Most of these units continue to remain under the unorganised sector as the government was 'taxing the industry heavily', Rao said adding that a 12.5 per cent value added tax and 16 per cent excise duty were being imposed on packaged drinking water.

With regard to Bibo water, he said the company was planning to introduce 1 litre bottles in the retail market shortly. At present, the company was selling 1 litre bottles only to the South Central Railways.

The company was also planning to make Bibo a national brand by setting up manufacturing units in 10 major cities by 2010. It had earmarked an amount of Rs 20 crore for this purpose.