Bottled Water Marketing :

A Tale of Nepali Mineral Water Industry

-By Gautam Bania

The mineral water market is far more complex than is often recognized, though the product itself is simple. It is difficult to support an argument that there is a difference in quality and purpose between the most popular and other brands. Yet the market is divided into a number of segments.

Gautam Bania

There is always more than one way to visualize or describe a market and its component segments, but for purposes of this discussion we will refer bulk and the beverage water markets. The bulk water market includes the home and office delivery of water dispensed from coolers as well as the gallon or large size bottled water sold from retail stores. The beverages water market is the newest and fastest growing part of the bottled water market. It consists of the single serve. Personal beverage product ranges in sizes from 500 ml through 2 ltrs.

Historically, the bulk water business has been the core business of most existing big companies around the world. The home and office delivery of bulk water in 5 gallon ( 19 ltrs.) jar is a business identified with local or regional markets. It is marketing–drive business that responds well to sound databased marketing programs, direct sales and new customer promotions. Companies that have developed and refined advertising programs and marketing strategies measurable against results find the sales to be quite predictable from one year to the next. For many of these companies, it is possible to manage growth with relative precision by simply increasing or decreasing the level of promotion. In such cases, the budget for advertising and marketing is driven by clear sales objectives. While budget performance should in most cases be quite predictable, a number of uncontrollable factors can have a serious impact upon sales. These would include :

a. Dramatic changes in the level of competition

b. Major public relations issues affecting the company or the industry

c. Weather extremes, sufficient to substantially impact demand for water

d. Major changes in the perception of quality in the water source

Concerning the water source, most branded bottles of water in Nepal are full of nothing but harmful lies. Most of the so called mineral water bottles contain neither pure water nor mineral water, they are brought in a tanker from nearby polluted river and are chemically treated with hardly few filters. They are manually filled and contain harmful bacteria and foreign particle and highly injurious to human health.

The government must be aware of the water sources used by companies. Everyone knows the condition of our city rivers - they are full of drain water. Most of the mineral water companies are getting water from these polluted city rivers and treating this water chemically. It is 100 % injurious to human health.

To sell these water there is no need for strategic planning or advertisements. Brand awareness is very low in Nepal the total mineral water industry is in the hands of traders, and traders means profiteers and opportunists. Today in Nepal, mineral water units are all sick, due to price war. No company is benefiting from this except the traders. Small companies that lack a strong brand image are pushing their products through the whole-selers and retailers. As a result, the consumers are double cheated. When a consumer goes to a retailer and asks for a bottle of mineral water not naming the brand, the retailer pushes a product which gives maximum profit to the retailer. Four or five years back mineral water products were categorized as a curio product - meant for tourists, who used to be charged Rs. 20 to Rs. 25 for a bottle. Today with the entry of THIRST-PI brand, the consumer price is printed on labels and thus it is Rs. 15 a bottle. THIRST-PI has played a big role in bringing down the consumer price as well as in educating the Nepali mineral water consumers. If you really want to increase the industry volume, you have to educate your consumers also. Today the mineral water users constitute around. 5 % to 10 % of the population in Nepal. If you see countries of the Asia-Pacific, EEC and Americas, the local people constitute minimum of 70% to 80% of total mineral water consumers there. Even in India, around 30% of the total consumption is by local people.

Unless all the local mineral water processors are united, go for their own water source, upgrade their plants, and develop and educate the users, it will be difficult to expand the size of the industry.

Today this industry here has encountered only the beginning of the battle for quality water sources. Water rights and the prioritization of water use will be at the forefront of the issues concerning this industry over the next 50 years.

In the name of liberalization and privatization, authorities should not go haphazardly. They must see three basic things basically. i.e. chanees of monopoly being developed, undue advantages, and unhealthy competitions. If government does not take immediate steps in stopping the emerging undue advantages, and unhealthy competition, almost all of the companies will shut down - this is a forecast from my side.

Companies using polluted river water or using municipal water as a source for their bottled water should be required to improve their plant and machinery. Technological advancements in home boiling and filtering apparatus will bring pressure to bear on these companies as they attempt to differentiate their products from home boiled and filtered water. I think we will need to implement a major educational push so that the regulators understand our position. We have to have the ability to tap the resources necessary to meet the demands of our customers, and we need to be recognized as good stewards of this precious natural resource.

Visionary research will increase consumer confidence in bottled water. This will result into a greater product value and consumer support for higher prices. This will also increase volume by replacing tap water and by offering a better alternative to other beverages. It will also help improve margins per bottle.

The authorities have to study carefully about the project before granting the license to a new mineral water company. Final product should be approved for marketing only after the machinery proposed initially are actually installed, the trained manpower are arranged and the quality of the product at the trail production is actually as required.

There must be a government board to control minimum and maximum price. Today there are strong price wars in almost every product. Naturally it is good to have healthy competition, but it is war not competition that is going on. Three years back it used to cost Rs. 180.00 for 1 x 12 bottles of 1 liter mineral water. Today due to unhealthy competition most of the mineral water brands are selling at lower than Rs. 100.00 per 1 x 12 bottles case. This is a sign of unhealthy competition and price war. Within 3 years the cost in fuel, electricity, raw-materials, wages has gone up more than 100%. But the price of mineral water is coming down every day.

The above factors may impact favorably or unfavorably upon budget performance. In the home and office delivery business, an extra-ordinary, unforeseen inflow of new accounts can create serious problems for production. The appearance of these factors may require running changes in the execution of marketing plan.

The beverage part of the bottled water market is sometimes described as the single-serve market since even in large sizes, the product in this category is most often consumed by one person directly from the package in which it is sold. This product competes for market share with other similarly packaged beverages - colas and a wide variety of other flavored beverages. It is doubtful that increased consumption of the beverage category of mineral water will have any negative impact upon the consumption of bulk water. Increased exposure and consumption of bottled water in any form heightens consumer interest and awareness of the entire range of product categories.

Failure to recognize the distinction between these products, the ways in which they are used and the difference in consumer profiles can result in critical targeting errors and a greatly compromised efficiency in advertising exposures. Even worse it can lead some companies into believing that because of their prior success in a different market, they are well positioned to expand into the beverage market. Companies that have entered the beverage water market by extending their bulk water product lines without recognizing the impact such extensions would have upon their advertising budgets and strategies, are exposed to considerable risk.

When preparing an advertising and marketing budget for a home and office delivery service, it is important to be able to document the cost of acquiring new customers. This accounting needs to recognize not only direct media and creative costs, but all costs associated with the acquisition of a new customer. This includes discounts, incentives and initial set-up costs. Even the interest that would have been earned on rupees spent for customer acquisition should be calculated and treated as a part of total acquisition cost.

To the extent that there is confidence in the ability to make reliable projections, the construction of a marketing budget is based upon unit sales objectives most consistent with immediate and long-term growth plans, along with the cash resources needed to support the plan. These considerations, not estimates of a competition’s budget, are the driving force in the construction of a marketing budget. This is in contrast to the view expressed by some authors and agencies that one can gauge the adequacy of its advertising and marketing activities by referring to industry average. But what can one conclude from a percentage that relates to the activities of companies old and new, large of small – some of which are operating at 80 % of capacity, and others at 20 % ? Some companies need to plan an aggressive growth, while others set target sales at a level that would minimize the need for new capital assets.

In Nepal, smaller companies with superior marketing strategies can gain market share even in the presence of much larger competitors. The smaller company with aspirations of growing a beverage brand or profitable retail bulk water lines, faces a far more difficult challenge. The marketing considerations in these areas are far more complex and far less predictable. The number of companies competing in Nepal in the bottled water market continuous to increase. For companies are considering the expansion of their product lines into these areas, while some others have already done so. Therefore, a careful and realistic examination of the prospects for survival and profitability is needed.

In Nepal, the market will continue to see the introduction of new brands of water in beverage segment produced from low infrastructured In the long run however, this trend will slowdown. Ultimately, relatively fewer brands will dominate the market. In addition, the number of companies involved in the bottled water business will also decrease through attrition and consolidation, and the average size of these companies will increase. The smaller company with an appetite for this part of the market needs to recognize that it is entering a high-risk enterprise.

(Bania is the Managing Director of Raybot Springs Mineral Water (P) Ltd. that produces and markets Thirst-Pi brand of mineral water)