Though traditionally India has been a very cost sensitive country, the premium natural mineral water industry has been growing at a pretty brisk pace. This article tries to understand the reasons and drivers behind this.

1. Why premium mineral bottled water is an attractive opportunity in a price sensitive
market like India!
Nowadays whenever you go to a decent restaurant, the first thing you see on your table is a bottle of
Himalayan or Qua or some other premium natural mineral water bottle! If you pick up the bottle and see
the price tag – it’s nearly double the cost of your regular packaged drinking water bottles 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 ValueNote’s recent report on 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 water which 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. Most sales happen either in metro cites or tourist destinations
such as Jaipur and Goa. Also currently key consumers include mostly the tourists and high profile
customers who demand only premium products or Indians who have traveled abroad and tasted natural
mineral water.

2. 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 as well as 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

3. 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. The government has
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 this 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 bit tough 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 endure 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.
Author:
Aniket Pargaonkar | Project Manager
Aniket has more than 10 years of industry experience in the Middle East, APAC and India. As a project
manager at ValueNotes, he has managed a variety of research assignments, including market sizing,
industry & sector studies, opportunity assessment studies, competitive intelligence, due diligence and India
entry studies. He has handled both Indian and international clients from across industries such as
engineering products, lighting and lighting equipment, outsourcing and consumer electronics.
Prior to ValueNotes, Aniket led the Research and Transaction support team at Gulfstone Capital and
worked on research, due diligence, business plans, financial modeling and various deal collaterals. Some of
the key projects he worked on included a private placement of USD 30m for an Indian agricultural seed
company, a private placement of USD 200m for a Saudi-based distribution company, and a strategic restructuring of a Qatar-based
cosmetics company. He also worked in WNS Global Services as a team leader where he managed a team of 20 analysts
who researched global M&A activity including public offers, spin-offs and joint ventures with a special focus on leveraged buy-outs.

4. Aniket has an MBA in finance from the ICFAI Business School, a Postgraduate degree in Commerce, and a degree in Law from
the Mumbai University. He is also a certified PMP from the Project Management Institute.
You can reach him at aniket@valuenotes.co.in