His new battleground will be flavoured water, a segment that cola majors have avoided so far. Will he be able to repeat his earlier successes?
Chauhan, who is already the largest player in the Rs 4,000 crore branded packaged water market, is now planning to enter a space which has so far been avoided by the cola giants. Though Delhi-based D S Foods launched flavoured water a few years ago, it remains a bit player and is making no effort to either push the product or increase its availability.
That’s just what the doctor ordered as far as Chauhan is concerned. He expects at least 5 to 10 per cent of urban soft drink consumers to shift to flavoured water in the next two to three years. His optimism is based on the increasing health consciousness among consumers who want to shift to new beverages but are confused in the absence of an alternative, though a part of that vacuum has been met by juices.
“Consumers are increasingly getting health conscious and are ready to pay a premium for a healthy alternative. Plain water is boring for most of them, so flavoured water is the way to go. We want to have the first-mover advantage” says the Bisleri Chairman. His plan is to begin with Mumbai next year and then move to metros such as Bangalore, Hyderabad, Ahmedabad, to name a few.
The going may not be that easy, as Chauhan will have to contend with his old adversaries in the business -- PepsiCo and Coke – which have invested millions of dollars in building their distribution system and are growing in double-digits in their beverage business. “We can launch flavoured water, but it is an insignificant market in India. If required, we can launch it any time” says a senior executive of one of the beverage multinationals.
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Industry experts say that both the players have been planning to enter this market but have not taken the plunge as they feel the effort may not be worth it. After all, their experience with water has been mixed so far: it may sell in huge volumes, but the high retail margins and heavy discounting have led to not-so-encouraging profits (less than Re 1 a bottle). Flavoured water of course could give better margins, but getting volumes would be difficult in an extremely price-conscious market.
But MNCs have a whole range of products to choose from -- PepsiCo has Aquafina Flavour Splash which it sells globally as well as SoBe Life Water. And Coke has Dasani Flavoured Water as well as a range from US-based Glaceau which it acquired some years ago.
This does not worry Chauhan who is a veteran of many battles with MNCs. “They are still concentrating on soft drinks in India” he says, dismissively. But like in Thums Up, the successful cola brand which he built with a distinctive strong taste and fizz (it’s still the largest soft drinks brand in India), Chauhan is aware that he has to have the right formulation for flavoured water. And that is why he is experimenting with various combinations to come up with the right choice for Indian consumers. The first issue Chauhan and his team are grappling with is whether the water should be fortified with isotonic salts and vitamins. The team has still not come up with an answer.
The second issue is whether the flavour should be strong or whether there should be only a hint of the flavour. Should it be sweet; should it also have an alternative for the diet conscious. What should be the right calories?
“It’s like launching a perfume: should it be a light cologne or should it be a deodorant with a strong perfume. The key thing is that the product should have a distinctive taste to make it different from soft drinks,” says Chauhan.
The formulation is just one part of the challenge that he faces. Chauhan says since he is positioning the product against soft drinks, its pricing has to be set against soft drinks and not packaged water. He is veering round to the view that his flavoured water will be 20-30 per cent costlier than soft drinks, but can’t be more than that.
Chauhan is also clear that he does not want to play with too many bottle sizes. He points out that even the smallest pet bottle for a cola is at 500 ml, which is too big for one serving. Similarly the one litre bottles are primarily meant for use in parties. So he would sell the flavoured water only in 250 ml packs – meant primarily for one serving. He of course believes that the product can be given a premium image by bottling it in glass, but that could increase the cost of the product substantially.
Chauhan is clear that he will not sell flavoured water under the Bisleri brand. The name of the product must convey what it is all about and Bisleri does not fit in here.
But perhaps a bigger challenge will be distribution. Currently the company sells its packaged water even in small kirana stores who are unlikely to be enthusiastic towards flavoured water given its premium image. Modern trade is the most obvious option, but Chauhan isn’t quite sure whether this will work. If such products have to succeed, kiranas have to store them, he adds, and is trying to figure out how best to equip them, or whether he would have to create a new distribution channel.
Chauhan plans a modest start (one plant will be devoted to making flavoured water) perhaps because he is still trying to find an answer to the many questions about his new venture. He has done it earlier with Bisleri. Will the magic work again?