The Hindu Business Line : Packaged water prices going up

IT'S a price war in reverse. At a time when prices of soft drinks have taken an unprecedented dip across all sizes, declining sharply by as much as 40 per cent in some cases, prices of packaged water — both in the bulk and retail segment — are witnessing just the reverse.

Coca-Cola recently made the first move within the fast-growing bulk water segment by hiking the prices of its 20-litre jars to Rs 55 from the earlier Rs 50. The move has surprised industry analysts, given that 20-litre jars do not involve recurring production costs since these are recyclable. However, Mr Sanjiv Gupta, President, Coca-Cola India, justified, "We are in a position to charge a premium over other packaged water brands, whether it is the bulk or the retail segment."

Mr Ramesh Chauhan's Parle Bisleri too has increased prices of Bisleri's 20-litre jars to Rs 45 from the earlier Rs 40.

And prices of Bisleri's 5-litre jars have been hiked from the earlier Rs 25 to Rs 30.

Mr Chauhan maintains that household bulk water segment will drive the packaged water business.

"Within five years, bulk water will account for 80 per cent of the branded water business — double of what it is today. Scarcity of water, inferior quality supply of tap water and reducing costs will lead to this," he had told Business Line.

According to industry estimates, the 20-litre segment now accounts for about 40 per cent of the Rs 1,000-1,100 crore packaged water market.

Within the retail segment too, it's Coca-Cola that has provided the trigger, by increasing prices of its Kinley one-litre bottles by 20 per cent — from Rs 10 to Rs 12.

In reaction, Bisleri too has taken an unprecedented hike in the price of its one-litre bottle — to Rs 12 from the erstwhile Rs 10. Interestingly, at the beginning of the season, only PepsiCo's Aquafina one-litre brand was selling at the Rs 12 price point. Company officials are of the opinion that maintaining the Rs 10-price point for one-litre bottles is unprofitable, given steep production costs.

Industry experts attribute the price stir in the packaged water industry to a demand-supply equation.

"Per capita consumption of soft drinks still remains very low in India, and soft drink companies have to generate volumes on the affordability plank. However, this is not true in case of packaged water," an industry source said. In the retail water segment, for example, all three brands now claim healthy sales growth figures, ranging from 30-50 per cent.

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