Nowadays whenever you go to a decent
restaurant, the first thing you notice on your table is a bottle of
Himalayan or Qua or some other premium bottle of natural mineral water!
If you pick up the bottle and see the price tag – it’s nearly double the
cost of a regular packaged drinking water bottle such as Bisleri and
Kinley. The questions that immediately come to your mind are – Why is
this water so costly? Why would anyone want to pay double the cost for
water? How is this water different from the other affordable water
bottles? Does anyone really buy this costly water?
Surprisingly, for a poor country like
India, premium natural mineral water currently accounts for nearly 15%
of the total packaged drinking water (in value) sold in the country. In
fact the natural mineral water market in India, which is currently
around INR 10bn, is expected to reach around INR 32bn by FY 2018
according to ValueNotes' recent report titled
Packaged bottled water market in India 2013 – 2018.
Current scenario for the premium natural mineral water segment in India
First let’s see the difference between
regular packaged drinking water and natural mineral water. Natural
mineral water is drawn from an underground spring, packaged close to its
source and meets the quality standards without processing. Packaged
drinking water on the other hand is sourced from any source that has
been treated and disinfected using a process that could involve
filtration, UV / ozone treatment or reverse osmosis before it is fit for
human consumption.
Currently nearly 90% of the sales for
natural mineral water come from institutions such as hotels,
restaurants, fitness clubs and air ports. The majority of the sales
happen either in metro cites or tourist destinations such as Jaipur and
Goa. Key consumers include mostly the tourists and high profile
customers who demand only premium products or Indians who have traveled
abroad and have tried natural mineral water.
Presently Bisleri’s Vedica brand and
Tata’s Himalyan brand are the biggest players with nearly 60% of the
market share, but many other local premium brands such as Aava and
Mulshi and various imported brands such as Perrier and Evian are making
their presence felt in the Indian market.
Most of the current players in this
segment are serving specific regions, with their focus still on urban
tier 1 cities. They are still not able to reach distant smaller cities
and town with large tourism potential. Only few large players such as
TATA and Bisleri are currently in a position to serve Pan India due to
their extensive distribution network and brand name.
What is really driving the market?
The biggest drivers for this industry are
the growth in foreign tourists and expatriate population, as well as
the Increasing consumer awareness and brand consciousness amongst
Indians.
The tourism industry in India is the
country’s third largest service sector, and has been showing tremendous
growth due to India’s vast collection of cultural heritage sites. Due to
campaigns like “Incredible India”, the number of foreign tourists in
India has increased by a CAGR of ~7.2% over the last 10 years to reach
7mn in 2013. But if you look at global numbers of foreign tourist
arrivals, India stands at a poor 39th rank, where in even
tiny countries such as Malaysia and Thailand have more than three times
the number of tourists than what India has. This shows that India has
tremendous potential when it comes to growth in the tourism sector.
The current BJP government is trying to
address this, by planning to improve the local infrastructure, including
better roads, improved airports, better hotels and better sanitation.
In fact the BJP, in its manifesto, has confirmed that tourism plays an
important role in socio-economic development through creation of jobs,
infrastructure growth and foreign exchange earnings. It is planning to
kick off a project to create 50 tourist circuits that are attractive yet
affordable. These circuits are expected to promote tourism in the
Himalayas, deserts, coastal regions, heritage and archaeological sites
of India. They have also announced tourist visa-on-arrival for all
except eight countries in the world, as well as the start of the
Electronic Travel Authorization (online visa). All these drivers are
expected to help the tourism industry in India to grow by more than at
least 10% YOY for the next 5 years.
Apart from tourism, India has witnessed
growth in its corporate sector leading to an ever increasing expatriate
population who are major consumers of packaged drinking water,
especially natural spring water. In fact according to a recent HSBC
survey, India has become home to the second largest proportion of
high-earning expatriates after China and ahead of countries such as
Switzerland, Russia and Hong Kong. According to The Economic Times, the
hiring of expat workers in India has amplified by about 20% since 2010
and estimates suggest that there are about 50,000 expatriates currently
working in India.
Most of the tourists and expats are
concerned about the quality of water in India and prefer to use premium
quality brands of mineral water during their stay.
I think the increase in the number of
tourists and expatriate in the years to come, will be the biggest driver
for natural mineral water sales in India for the next few years.
The road ahead
Considering that the market is quite
attractive and that the entry barriers are quite low, I think that the
competitive rivalry is going to be tough in the premium natural mineral
water segment, but the intensity won’t be as much as that of the
packaged drinking water segment. The key thing to remember is that this
segment needs a superior quality product with excellent distribution
network and brand image which makes it a little difficult for a new
player to enter and survive in this market. Only the players who are
able to work out an optimal distribution system along with an impactful
marketing strategy will be able to last in the long run.
Lastly, though tourism is set to fuel the
growth of this segment in the short run, I think industry players
cannot afford to ignore the larger segment of the market, which is the
ever increasing Indian middle class that is striving for a better and
healthier life style.
