Bisleri getting sold to Tatas
There is a lot of news in the financial sector about the biggest brand in Packaged Drinking Water : Bisleri is selling it's business to Tata Consumer Products. The takeover is yet to happen or might have happened as well, till reader is reading this post. Some points of note for learning from this whole incident :-
Why is TATA buying this ?
Portfolio Enhancement and Distribution-ready Network
Tata is already into the beverage segment & has been observed to introduce one brand after the other. It already has Himalayan Water as natural mineral water. In addition it has Tata Copper (Earlier, there was Tata Water Plus) in the low value segment. It is not packaged drinking water, but a product sold at same price to target the same market. In addition it has Tata Gluco Plus & Frusti (These are pitched as Energy Drinks and targeted similarly for relevant audiences).
By buying out Bisleri, they are also into this thirst-quenching water business, which attacks the basic need of a human being, drinking water, moreover : Pure & Safe Bottled drinking water, which the BIS has categorized as Packaged Drinking Water. Kindly note that even the Tata Copper Plus is NOT packaged drinking water, though the packaging looks similar.
It would be interesting to know as to Why Tatas never opted to enter as a Standalone brand in Packaged Drinking Water.
Is it because the segment is too crowded, dominantly inorganized and not much profit-centric ? God knows. However, Tatas have never observed to be competing aggressively with packaged drinking brands like Bisleri/Kinley/Aquafina/Clear/Oxyrich.
It's equally interesting to know what has made them buying Bisleri now.
The packaged drinking water proposition wouldn't have been attractive then, however, with Ramesh Chouhan ( Bisleri owner ) coming forward with sale offer, Tatas would have thought this as a convenient deal to try their hands-on.
Let's examine the gain-points for Tatas through this deal :-
- Mfg-Distribution facility Getting a ready-made business with established factories, contract packers ( 130+ ) & distribution ( 4500+ ) network & Own Delivery Vehicles ( 6000 + ) . They have to just put-in money.While continuing Bisleri as their Bread (not butter) giving product; the ready-made distribution will be available to Tatas to push their butter giving products gradually. The Customer Touch Points for Bisleri is also a "Gain" factor for Tatas, and for the sellers, Tata is also a great brand.
- Opportunity to cater to an enhanced market. After Covid-19, the demand for PURE drinking water has increased drastically, packaged drinking water is on the rise. This is a 10-15% growth rate segment.
- Opportunity to use Bisleri's brand value for existing profit making products. For the water business owners, money lies in the Value Added Water Based Drinks, though not BIS approved. These drinks are the Tonic Water, Lemon Water and similar varieties. Tatas can push these drinks gradually under great brand like Bisleri.
Challenges Which they might incur :-
- Rs. 7000 CR is a huge debt even for giants like Tatas. Interest Burden is heavy. The story is different from Jaguar, because comparatively, Bisleri Business is a low-profit business. Just 7% margin. (FY 2021 Bisleri Ended with NP of 100 CR from Sales of 1472 CR). Somewhere I did see a mention of making 220 CR from 2,500 CR in 2022. However, while examining results, we should check the Operational Profits, not from other sources.
- Overall, Packaged Drinking Water is not an attractive Business for Corporates. The majority (65%) market is ruled by inorganized sector. For Mr Ramesh Chaouhan, it might be another great deal ( He has done with other popular brands of his own like Thumps Up, Limca etc...), but interestingly, the most obvious buyers like Pepsi ( Aquafina Owners ) Or Coca-Cola ( Already owning Chauhan's old Thumps brand & owning Kinley ) have not been seen to be on stage. Instead it's heard that Reliance Retail ( Ambani Group ) and Danone ( Evian Water Owners ) have made offers.
- Duplication. Great Brand can be winner or killer at times. With so much inorganized sector domination; Duplicators are many; and there can be a tremendous Legal Cost to monitor this. See how Pepsi has to fight for its Mountain-Dew brand. Mountain Dew is comparatively very small & its duplicators also. But for huge penetrator in India Market like Bisleri, the legal operations cost can be huge. May not be that justifiable with the cost involved.
- Typical "Distributor" type approach. While looking at the market segment where Bisleri has anchored themselves in, Price-Hike seems very difficult. Going for an MRP of Rs.25 from Rs. 20 looks difficult now. Out of Rs. 20, Bisleri has to offer Rs. 10 to distributor, leaving them with just 7-8 % NP.
Learnings for a Bottled Water Business Owner :-
It's all in the Brand
I don't just mean Brand Name. Because Bisleri doesn't carry any meaning, it's no way a familiar name to us-Indians. It's the way the business built around it. Mr Ramesh Chouhan bought this business from an Italian in late 60's. Till '93 he didn't have major plans, but later he has made this not just another brand, but a category by itself. We call .... "Bhai ek Bisleri de do" and then he brings packaged drinking water. This is "Brand".
The sooner we learn this, the better we benefit. It's never late, we can start from today !
It's also the great Distribution Network
Bisleri at present has 4500 distributors, 6000 vehicles & over 10 Lakh customer touch points ( The points of sale ). Bisleri also has a great training module. They have an excellent audience knowledge for their industry.
Network of Contract-Packers
Source of Water for a Packaged Drinking Water Plant is usually the Borewell. And water from the source plant cant be transported to distances. Hence Bisleri identified this limitation very quickly while building a network of Contract Packers ( 135 as of now ) across the country. Advantage : Bisleri will be available at the same rate at Kanpur as well as Madurai.
Acknowledging the Forthcoming Challenges
Bisleri acknowledged the SUP ( Single Use Plastic ) challenge well in advance & started a drive called Bottles for Change way back since 2016. How does this matter ? : In this drive, Bisleri collects back used bottles and sends them for recycling.
Exit, if you can't hold it
It's said that Mr Chouhan, nowadays does not keep physically well ( He's already 82 ). At the same time doesn't have a successor to run this show ( his daughter has shown no-interest ). What can be the most ideal time tan this to get out of this with a huge cash ! Certainly a great timing again.
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