The bottled water brand leader is opening 35 new plants in smaller towns and entering the high-margin segments
Bottled water brand leader, Bisleri’s new plants at Pune and Nagpur are ready to meet the summer demand. And over the next six months, the company will start operating more plants at Thane, Ratnagiri, Nasik, North Bengal and Bhubaneswar.
This is part of the company’s plans to open as many as 35 new plants across the country to tap the fast-growing market for packaged water (at Rs 2,400 crore now) in India’s hinterlands. Each of these plants is expected to service a radius of 100-150 kms. The growth will come, Parle Bisleri says, as there is an increasing consciousness even in villages to the fact that over 1,600 Indians are dying every day because of waterborne diseases and almost four million people in India are affected by water-borne diseases every year.
So how does the company select a location? “We know there’s a need for drinking water everywhere, and we just want to make sure we are there to meet those needs,” says Bisleri International Director (business development) Anjana Ghosh.
Rohit Chadha, Associate Director, Consumer Products of consulting firm Technopak, says it’s a significant move from Bisleri. “Branded bottled water has been limited to urban areas so far. But the extension of modern trade to lower-tier towns as well as the increased awareness and aspiration amongst the youth in Tier II and III cities mean you have to be closer to your consumers,” Chadha says. Branded players now account for just 30 per cent of the bottled water market.
There’s another reason for Bisleri’s ambitious plans. It will help the company shave costs. Typically, in this business, transporting water to a distance of 200 km costs the company Rs 30 per case freight. But with distances cut, the company will now spend only Rs 4-5 per case freight. But Bisleri invariably starts selling the product in a given location before the plant comes up.
Ghosh’s rationale for deploying her sales force and spending that extra buck on distribution is simple, “We are ready to do the initial struggle because the long-term benefits are far more. In any case, it’s a win-win strategy for us. While new bottling units means assured supply to consumers at any given point of time, they also help control cost in the long-term,” she says.
The move is similar to what Coca Cola and Pepsi did earlier with Kinley and Aquafina in 2001. At the time, both companies spent massive amounts on bottling plants and distribution and within a year, Coca Cola sought to double its plants to 16 while Pepsi had 12. But market leader Bisleri had only 15 bottling plants. The results began to show:
While Aquafina and Kinley garnered a third of the market, Bisleri’s market share dropped from over 60 per cent to just 47 per cent.
No doubt, that was tough to take for Bisleri. The first thing it did was to change the look and feel of its brand. From the earlier conical shaped bottle, Bisleri took on a streamlined, round shape, replacing the erstwhile blue logo with an aqua green one.
The move paid off. According to Technopak, Bisleri leads the pack with a market share of 60 per cent, followed by Aquafina at 15 per cent and Tata’s Himalaya brand at 8 per cent. As for bottling units, Bisleri has 52 while Aquafina has about 41. For its part, the Pepsi brand is not perturbed. “We are the top two brands nationally in terms of both size and distribution, and are clear leaders in several markets in South and West,” says the company’s Executive Vice President Homi Battliwala.
Bisleri’s other problem was thin margins even though the market has been growing at as much as 40 per cent. To find out what’s going wrong, Bisleri has undertaken a mammoth research exercise across 60 districts in the country, speaking to as many as 30000 people. As part of this exercise, Bisleri is trying to understand why consumers are compromising on their health, what are they consuming, and if they are brand conscious. While the verdict is yet to be out, some initial results have begun to trickle in. Early results suggest that many consumers are known to pick up duplicate brands while spending about the same on it. “Any brand that has passed the test with the Bureau of Indian Standards is allowed to sell their products. So far there are 2000 such brands against just five branded bottled players,” says Ghosh.
To tackle that problem, Bisleri is in the process of rolling out a communication to raise brand awareness. “Our task is to increase consumer awareness as it is a low involvement category and is an impulse buy. Our two biggest problems are that people don’t realise that they are paying the same price for a Bisleri and buying an unbranded bottled water.” Ghosh adds.
Bisleri is doing several other things as well to open up the higher margin market. For one, it is in talks with beverage makers and bottlers in countries such as Sri Lanka, Bangladesh, Oman and the United Arab Emirates to franchise its brand name. Exports to Singapore have already started.
It also launched Vedica, its first mineral water, in January and is test marketing flavoured water in Mumbai. The company is also setting up a new manufacturing facility in Delhi for its enhanced water brands, which will be fortified with vitamins and minerals. These are brands that will tap the top end of this market, which now account for just 10 per cent of the packaged water market, and bring in substantial profits. Vedica will take on Himalayan and foreign brands like Evian and Perrier in a category that is willing to shell out that extra buck.