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FMCG majors eyeing mineral water - Views on News from Equitymaster
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  • Jun 16, 2000

    FMCG majors eyeing mineral water

    The mineral water market in India is burgeoning with the entry of MNC players. A number of global entrants are expected to shortly flood the branded water market. What is vital for success is a brand name and the ability to distribute it extensively and in a cost effective manner. The FMCG companies score well on these fronts.

    The size of the Indian mineral water market is estimated to be Rs 11 bn, of which branded water accounts for Rs 7 bn. The industry is growing at a phenomenal rate of 35-40% annually. This compares well with the near stagnant growth in other FMCG businesses such as detergents and soaps. As the awareness of people towards health and hygiene is increasing, people are willing to pay for drinking safe water. So there exists a huge untapped potential in the mineral water market. Parle’s ‘Bisleri’ is the leader in the market and the name is quite synonymous with the mineral water. The other leading players are Bailey, Yes and Hello.

    Looking at the growth potential of the industry, FMCG majors are planning a foray into the branded water market, which is a high margin business. Many MNC FMCG companies have the strong support of their parent in this segment.

    • Britannia Industries Ltd. (BIL), the biscuit major is mulling an entry into the bottled water market with the support of its parent Group Danone. According to market sources, BIL’s mineral water will most probably be sold under the brand 'Britannia Pure Health'. Group Danone is a global leader in this segment with its renowned brand Evian. The company will be able to access its parent technology in introducing the mineral water brand in India.
    • Nestle India, the food major, is planning to enter the market with its brand Pure Life by the end of the current year. The company has a strong backing from its international parent, which has brands such as ‘Perrier’ and ‘Vittel’.
    • After Britannia and Nestle, HLL also seems to be thirsty for mineral water. The fast growing mineral water market has been identified as one of the nine growth engines of HLL’s Project Millennium. HLL with its huge cash generating ability might acquire the leading brand from the market instead of setting up a new plant.
    • Pepsi is all set to expand its bottled water business with plans of setting up 3 new bottling plants for its ‘Aqua Fina’ bottled water brand. The company test-launched its brand last year in cities of Mumbai. It targets a market share to 25% by end of next year in areas where it is present.

    What favours growth in the branded-water segment is the country's changing demographics. The people are becoming health conscious and instead of having cola drinks they prefer branded water or fruit juices. The leader in the market would be the company, which has vast distribution and logistics network. The FMCG companies are best placed in this criterion and are expected to do well given their existing distribution network.



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