Price war in branded bottled water
Published on: Mar 4, 2016
Transcripts - Price war in branded bottled water
Price war in branded bottled water,Vishal Megamart to sell 1 lit bottle at Rs.6 Ads by Google Reverse Osmosis Researchwww.WEFInternational.orgGet a free collection of articles from World Water and WEF today! Siemens answers:www.siemens.com/answersThe digital factory Wastewater recycling.After the successful completion of Vishal Retail’sIPO, with the issue being subscribed 82 times over,the company may stir the packaged mineral watermarket by launching a 1 litre bottle for as low asRs.6, to be sold initially at Vishal Megamart stores.The per capita bottled water consumption in India isless than 5 litres a year as compared to the globalaverage of 24 litres. However, the annual bottledwater consumption has risen rapidly in recent timesand is worth Rs. 800 crore today and growing at25% per annum, highest in the world.India has over thousand bottled water producers having more than 200 brands, of which80% are local producers. Despite this, the industry is dominated by big players like Parle(Bisleri), Coca-Cola (Kinley), PepsiCo (Aquafina) and Manikchand (Oxyrich).Vishal Retail may produce in-house or buy from outside manufacturer. If the pricingpoint becomes a market price base from the existing Rs.10 base, then key players may beforced to rethink their strategy and cut prices.Packaged water has 3 categories – premium natural mineral water, natural mineral waterand packaged drinking water. Vishal in keeping with strategy of growing its FMCGbasket, shall be catering to the last segment of packaged water.Now the question remains as how will the company be able to sell so low. The rawmaterial cost if just 0.02-0.03 paise and treatment and purification involves 25 paisa perlitre. The next cost is the cost of bottle, cap and carton which is Rs.2.50 at lower end. Butthe biggest cost is the transportation and marketing cost which forms a huge chunk of theprice, and this is where Vishal Megamart would score owing to its format of‘manufacturing-to-retailing’.
Vishal Retail though may be at a certain disadvantage as it is primarily located innorthern and central India while 40% of bottled water consumption is in western region,and bulk of the bottling plants are situated in Tamil Nadu.