Interestingly, Pepsi has so far categorically ruled out entering the bulk water segment in India. The company has maintained that it will focus only on the retail segment with its bottled water brand Aquafina and was slowly and consistently building its brand.
However, industry sources said a strategic decision to explore the growing bulk water segment has been taken recently by Pepsi and is currently believed to be working on the business model for this business.
PepsiCo India spokesperson, when contacted, said the bulk water question was premature at the moment. However, she added that the company was looking at various options. Bottled water has a growing market, and we are looking at various options and exploring possibilities. However, we have not finalised any plans as yet, she said.
Pepsis interest in the category is understood, given the action happening in the segment. The 20-litre bulk water packstargeted at the institutional and the home segmentis understood to be recording the highest growth, cornering about 40 per cent of the Rs 800-crore market.
Further, growth in the category has mainly been spurred by the entry of global soft drink major and Pepsis arch rival Coca-Cola India (CCI). CCI, to garner market share in this segment, went all out to either buy-out or tie-up with strategic partners in almost every metro and mini-metro, last year. The gameplan was to gulp down a mouthful of the 20-litre water jar segment, till recently dominated by regional players like Hello, Yes, Thermax and others.
Now what route will Pepsi take to facilitate future expansion of its brand in India remains to be seen. However, according to industry sources, the soft drinks major may also go with the contract manufacturing model, like what CCI has done.
The company is currently believed to be scouting for alliances though no final deals have been signed yet. A leading regional bulk water manufacturer based in Delhi, requesting anonymity, confirmed that talks had been initiated between the two but did not result in any fruitful decision. Delhi, incidentally, is the biggest market for bulk water.
Interestingly, PepsiCo worldwide is present in the bulk water segment in only two countriesthe US and Mexicothrough its bottled water brand Aquafina.
According to an industry analyst, the packaged water market currently estimated at Rs 800 crore is expected to grow to Rs 1,200 crore in the next two to three years. However, being a low-margin, high-volume category, it will take time before water starts making a substantial impact on the companys total turnover in India.