The Hindu Business Line : Slaking a city's thirst

A host of brands, local and multinational, cater to thirsty Chennai's need for clean drinking water. The city accounts for a quarter of the Rs 1,000-crore bottled water segment.

EVER since the bore well turned saline at her apartment building in South Chennai about two years ago, C. Renuka has been buying drinking water in cans from a private supplier, Varuna's Jal. This housewife shells out Rs 150 every month for these cans. Frequent purchase of not just drinking water, but also water for bathing and all other uses has seen her household expenses shoot up.

Renuka is not alone. Her neighbours and scores of city dwellers rely on packaged water suppliers for their daily needs. From black and yellow to brackish, the Indian consumer, especially in water-starved Chennai, has braved it all. But now she is willing to foot the extra bill for clean and potable water. And a host of water suppliers are making hay with a variety of bottled brands. Says Akshay Mahendran, Director (Operations) of water brand Cherio, "Today, the water scene, especially in Chennai, is very bad. Even to brush one's teeth, one has to use packaged water (in some parts of the city). Drinking mineral water used to be a fad, but now it is definitely a necessity. Even in juice shops, people ask if mineral water is being used."

Consumers know that it's better to be safe than sorry. According to industry estimates, the main consumers of packaged water are the SEC A, B & B+ income groups, reflecting changing lifestyles and consumption trends. Pepsi Food Ltd's Executive Director (Exports), Abhiram Seth, points out that it is "increasingly cool" to be seen with bottled water at home and outside. A spokesperson of Coca-Cola, which sells the Kinley brand of water, says, "Life in all the major cities, especially the metros, has become so fast-paced that people are looking at convenient, trustworthy and hygienic beverage solutions." As Pepsi's Seth puts it, "Increased health and wellness trends across the country are led by metros where it is necessary to drink packaged water. This also includes the need for pure drinking water at home and thus the home delivery of jars."

The statistics are staggering. The water market in the country, according to industry estimates, is worth over Rs 1,000 crore and water-starved Chennai alone accounts for a quarter of that pie! Seventy lakh litres of water are sold in the city everyday, out of which 3 lakh litres and 2 lakh litres are supplied by multinational water brands and Parle's Bisleri, respectively.

`Mineral' water first burst onto the scene with Bisleri. The brand became a household name, almost generic when one refers to mineral water. Today there is no monopoly, though, with several multinationals such as Coca-Cola, Kingfisher and Pepsi offering both bottled and bulk (can) water. At the national level, the market is dominated by Aquafina, Kinley and Bisleri. Pepsi's packaged water brand, Aquafina, among the largest-selling water brands in the US, has been growing at over 25 per cent in the country, claims the company. While the South, which is prone to water shortage, is one of its largest markets, the demand for packaged water is also growing northward towards Mumbai and Delhi.

Despite the presence of big players, the local players haven't done badly for themselves. "Water is a flowing product and there is always a constant demand for quality water. There is always room for local plants," says G. Vinayakamurthy of Chennai-based Diet Aqua. Bottled water is the company's main concern and accounts for 60 per cent of its sales.

It's the season of Southern comfort for water suppliers. According to the TN Packaged Drinking Water Manufacturers Association, 370 authorised water supply units have sprung up across Tamil Nadu. The drinking water industry in the State has seen higher growth in the last four years, with hundreds of small-scale suppliers foraying into the `thirst market.' Regional players operate plants replete with wells/bore wells, treatment units with modern reverse osmosis techniques and UV radiation units. Says A. Shakespeare, General Secretary, TN Packaged Drinking Water Manufacturers Association, "We inspect the microbiology labs at various units and also ensure that they measure up to BIS parameters."

About 220 water units are operating near Chennai. On a daily basis, the companies rake in revenues of Rs 80 lakh to Rs 1 crore in the city, according to industry estimates. Interestingly, the ratio of each player's market share to the entire packaged water market is the same in both lean and peak seasons. Shakespeare says that mostly the higher income group as well as corporates go in for multinational brands like Kinley, while the middle-income households prefer local suppliers. Currently, Bisleri, Apollo and Team are among the leading brands in the city. Water supplier Sabols' market share has gone up to 40 per cent in one of Chennai's upmarket areas, Nungambakkam, claims Ram Venkatesh Arogya, its distributor. Households, software companies and banks are among its clients. "About 80 cans are delivered door-to-door each day in the area," says the distributor.

But all is not peachy for other small-scale units as packaged water prices have dropped due to stiff competition. The average price of a 25-litre can of water has fallen to Rs 25 from Rs 35 last year. Brita, a maker of cans, which supplies 25 litre bubble tops in Chennai, has slashed prices by Rs 5 this year. Citing a 3 per cent market share, the unit's proprietor, Mohan Raj, admits that rivals have eaten into revenues. MNCs, on the other hand, have bucked the price-cutting trend. A leading multinational brand has, in fact, almost doubled the price of its 20-litre can from Rs 25 to Rs 40. Chennai-based Cherio claims a 25 per cent share in the regional market and says it is one of the top five players in Tamil Nadu. Bulk water forms 25 per cent of Cherio's sales, while bottled water accounts for the remaining majority. "Chennai is our biggest market, and we plan to expand to Maharashtra, Kerala and Karnataka in three to four months," says Cherio's Mahendran.

Understanding the local market and its psyche is key to better distribution and sales. So much so that Kinley, with a 25 per cent market share in the national market, recently appointed a local company as a franchise bottler for the brand at Coimbatore.

Bottled water comes in various sizes from 200 ml (popular in flights) to 500 ml (a huge hit among the youth) to 1 litre and the large 2-litre bottles. Bulk water usually comes in two sizes — the 25-litre HDPE can and the 20-litre bubble top PET can. Pepsi, for its part, has priced the one-litre Aquafina pack at Rs 12 to cater to the mass segment. While its retail strategy is centred on the 1-litre pack, the company has also launched 2-litre and 500 ml packs. "It is important to be available in all sizes to suit various consumer needs," adds Seth. But does the sales size matter? "Pack sizes do have an impact on sales simply because of the profile of consumers drinking packaged water. The target consumer for packaged water is somebody who has an `on the go lifestyle,' one who is looking for hygienic and trustworthy drinking water on the move. It is because of this reason that the 1-litre bottle of Kinley is clearly the largest selling pack size," says the Coca-Cola spokesperson.

Apart from domestic and commercial use of packaged water, the Indian Railways is also a market with huge potential. Water bottles, especially the 2-litre variety, are fast movers among the travelling population. "The good thing is that no single player can monopolise this market. The Railways orders 10,000 cases (of 12 bottles each) a day," says Cherio's Mahendran. The Railways account for 5 per cent of Cherio's water sales. Groceries are among Aquafina's key distribution points, while top-end bottled water is selling fast across fine-dining restaurants. "Our water brand rides on our existing carbonated soft drink distribution structure," points out Pepsi's Seth. "Pricing is competitive and at par with the other organised sector players."

The Aqua Division of the Chennai-based Shyam Group of Hotels — which sells the water brands Amravathi and Savera all over Chennai — has fixed an MRP of Rs 30 per can. After factoring in distribution and pilferage costs, the company says it makes a profit of Rs 2 per unit. Despite the soaring mercury, it has been a summer of content for the Shyam group, which is selling 2,500 cans a day. Prasad Reddy, Factory-in-Charge of Shyam Hotels Group, says that demand has been on an upswing over the last two years. According to K. Paari, manager, Aqua Division, the company bottles about 25,000 litres of water in Chennai a day. During the summer months (April to July), this rises to about 40,000 litres a day! And as it rains profits for the water entrepreneurs, the market looks like a big bubble that promises to only get bigger.

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