managerial economics. A Demand and Supply of packaged drinkingwater

1. A Basic Analysis of Demand and Supply of
Packaged Drinking water

2.  Abstract
The study of the demand and supply for the packaged drinking water aims to provide
the review about the demand for packaged drinking water in India. This study
discusses these factors and explains the most hindering factors that affect the supply
of the packaged drinking water. To analyze the factors influencing purchase of
packaged drinking water.
To analyze the level of awareness and satisfaction of packaged drinking water among
the customers, on pre and post purchase.
 Introduction
Water is an essential for surviving of every human being and animal. Water is a
compound of hydrogen and oxygen is a precious natural gift. .Since it is a human
necessity it makes best sense to do business in. As a normal human being requires an
average of 2-3 litres of water every day and thus it is desirable and necessary to purify
the water and supply under hygienic conditions for human drinking purpose. World
population is more than one billion (growing at 2-3% annually) the business
opportunity is enormous and the potential is largely untapped. As the name implies,
the mineral water is the purified water fortified with requisite amounts of minerals
such as Barium, Iron, Manganese, etc which can be absorbed by human body. It is
either obtained from natural resources like spring and drilled wells or it is fortified
artificially by blending and treating with mineral salts.
The bottled water industry is estimated to be a whopping 1600 cr. business. It has
grown at a rate of 38-40% annually over the past four years. Initially bottled water
brands like the French manufactured Damoneand it was premium water and promoted
at clubs, fitness centre, cinemas, department stores, malls, ice-cream parlours, cafes
and retail sports outlets, besides restaurants, hotels and supermarkets with a price tag
of Rs. 70/- for 1 litre bottle. Other brands later began pitching for the larger middle
class and lower middle class markets. Indian local manufactured packaged drinking
water price is between Rs. 12 to 20 for 1 litre bottle.

3.  History
Bisleri was originally an Italian company created by Felice Bisleri, who first brought
the idea of selling bottled water in India. Bisleri then was introduced in Mumbai in
glass bottles in two varieties – bubbly & still in 1965. Parle bought over Bisleri (India)
Ltd. in 1969 and started bottling water in glass bottles under the brand name „Bisleri‟.
Later Parle switched over to PVC non-returnable bottles & finally advanced to PET
containers. In 1995 Ramesh J. Chauhan started expanding Bisleri operations. In 2003
Bisleri announced its venture to Europe. All shares are held by Mr Ramesh J Chauhan
and his family.
The brand name Bisleri is so popular in India that it is used as generic name for
bottled water.
Bottled water was made famous by one of the largest marketing campaigns in india
history undertaken by Bisleri. Eventually, other bottlers including dozens of local
ones, Coca Cola, Pepsi, Oxyrich, and other imported brands such as Evian began
marketing in the country.
 Demand
Earlier bottled drinking water was privileged to high class, foreign tourist and highly
health conscious people but the present decade has witnessed increasing popularity
among average consumers, increasing living standards, disposable income, education
and awareness among the consumers domestic and foreign tourist, sophisticated
business houses and offices has increased rapidly the sales of bottled water in recent
years.
The growing demand for bottled water speaks volumes of the scarcity of clean
drinking water and the quality of tap water. It has become an icon of healthy lifestyle
emerging in India. Selling – „safety‟ – i.e. pure and simple water has now become one
of the fastest growing industries in India despite the harsh truth it is build on the
foundation of bad governance, inequality and obvious exploitation. However, bottled
water provides the distance advantages of convenient packing, consistent quality and
is ubiquitous.

4. This particular industry in India has never looked back after the economic
liberalization process of 1991-92. In fact the fastest growth in the consumption of
bottled water in the world has been recorded in India according to a new study
conducted by the US based earth policy institute.
According to Bureau of Indian Standards (BIS), there are 1200 bottling plants (out of
which 600 are in the state of Tamilnadu and 200 brands of packed drinking water
across the country (nearly 80% of which are local) hitting over the markets which
thoroughly signifies the market is big, even by international standards.
These are boom time for the Indian bottled water industry – more so because the
economics are sound. India is the tenth largest bottled water consumer in the world.
The consumption of smaller units of 500 ml has increased by around 140%
perceptibly. Even school children are carrying the 500 ml packs in their school bags.
The 20 litre bulk water jars have found phenomenal acceptance in house hold and at
workplace. With the growing market size, one can imagine the employment
opportunity being created with the surge in bottled water industry.
The bottled water market is dominated by major player such as Coco-cola, Pepsico,
Parle, K.K. Beverages, Manikkchand, and Tata-Mount Everest. Although we have a
large number of players, Parle was the pioneer among the major player when it was
launched in India, 35 year s ago.
x axis –year ; y axis-millions of litres

5.  Factors affecting Demand
SHORTAGE AND LACK OF SAFE DRINKING WATER
Most places are in India in face water shortage and where available, it is mostly un fit
for consumption.
Failure of the government or public authorities to fitful this basic need is the single
most important factor driving the demand for bottled water.
Despite numerous plans provisions of safe drinking water by the government remains
a distant reality ensuring a long and prosperous future for bottled water industry.
RISING CONSUMER AWARENESS AND PURCHASING POWER
Consumer awareness of the hazards in consuming water tap water, especially outdoors
is in increasing.
In households, the use of bulk water pack is rapidly in increasing as an alternative to
water purifiers, which are rendered useless in water shortages.
Rising consumer‟s purchasing power especially of the middle class, and low prices is
transforming bottled water to a product for the masses.
Increasing penetration in rural areas, primarily among travellers, is also driving the
market.
 Climate change
Some companies are planning significant investment to deal with the expected impact
of climate change on water supply and demand. Climate change is an important issue,
and it is vital that companies plan carefully to mitigate and adapt to its impact.
However, we think it is equally important that companies provide robust evidence of
the need for expenditure before they commit to investment that will have a significant
impact on customers' bills. The paper explains what this will mean in terms of how we
will assess companies' business plans.

6. 1. DOMESTIC AND FOREIGN TOURIST.
2. BUSINESS OFFICE
 SUPPLY
ARCHAIC LAWS SUPPORTING GROUND WATER EXPLOITATION
Current laws permit land owners to freely draw ground water from surrounding areas
without limits there by supporting exploitation of public resources.
In 2006, the government formulated a draft policy to regulate commercial extraction
of ground water and to date it has not been put into practice.
EXTREMELY LOW COST FOR PRODUCING PACKAGED DRINKING WATER
Cost of water is virtually zero since archaic laws allow ground water exploitation and
changes.
Per Liter Estimate Lower Upper
Groundwater 0.02 0.03
Cap 0.25 0.25
Bottle 1.50 2.50
Treatment 0.10 0.25
Label 0.15 0.25
Carton 0.50 0.50
Transportation 0.10 0.25
Others (tape, case) 0.25 0.25
BIS Certification 0.02 0.20
(In Rupees) Lower Upper
Total Cost 2.87 4.27
Market Price 10.00 13.00

7.  SUPPLY FACTORS
Availability of Raw Materials
The main raw materials needed for the production of packaged drinking water is water
and minerals (micro, macro minerals). As for the correct scenario there is huge
scarcity of water which has to be met with. Therefore the manufacturers are taking
greed care the utilisation of water.
Nearness to market
Availability of power: Since availability of other resources such as coal, gas are
scarce, the availability of power is the predominant factor in the manufacturing
process. If production facility near by the market it can always have an eye on the
growing changes in the market.
Transport facility
This is one of the major factors affecting the supply since transportation cost changes
day to day basis. Fuel cost is souring and as a result the transportation of goods as
becomes expensive matter.
Availability of labour
People involved in daily labour activities are reducing most of them going out prefer
white collar jobs and as a result effecting the production.
CONCLUSION:
From the above review, it is concluded that “The demand and supply of
packaged drinking water” is growing higher comparing to the last 10 years. And it is
one of the rising industries; even it has several competitors around India. Many of the
new ventures like Tata, is also one of the recent competitor by introducing “Tata water
plus” gaining more support among the consumers. So it is clearly stated that the
demand for packaged drinking water is always high.

8. References:
1. An article about “Kinley” in Economic Times dated Nov.23, 2011
2. An article about “Bottled water industry” by Lance Klessing.
3. An article about “Water, water everywhere, but how many brands are
safe to drink? In THE HINDU dated Apr.23, 2012