The Indian Railway Catering and Tourism Corporation (IRCTC), which was riding a crest after its listing last year, may find itself boxed into a corner due to the disruptions caused by the coronavirus pandemic. Although its Q4FY20 earnings bucked the trend as it reported a 79.3 percent rise in net profit at Rs 150.6 crore, the uncertainty surrounding normal resumption of passenger trains is bound to affect its topline.
The company, which provides catering services, e-ticketing services and packaged drinking water at railway stations and trains, is expected to face the heat of the coronavirus pandemic from Q1FY21 and may have to look at improvising its traditional revenue generating streams.
Its bottled water brand Rail Neer may show the way. Revenue from its sales stood at Rs 51 crore as against Rs 58.6 crore a quarter ago.
From its conference call to announce earnings results, it has emerged that IRCTC was exploring options to sell Rail Neer outside railway stations.
So, does it stand a chance of competing against the likes of Bisleri and Kinley?
"If Rail Neer can beef up its distribution plan and put some good money into brand building efforts, it can be done," Harish Bijoor, Brand Guru and founder, Harish Bijoor Consults Inc, told Moneycontrol.
Bijoor said Rail Neer has always held the potential to be a non-captive brand on trains alone.
"The brand has a daily-exposure potential of 23 million plus in normal times of train travel. Few brands can boast of this kind of exposure ability. Rail Neer, therefore, has the vestiges of brand memory in every rail traveller. Its price is yet another attraction at the lower end of bottled water consumption. The brand, if unleashed in regular markets is bound to find traction. The key issue is however one of attaining the kind of width of distribution reach this kind of a brand of bottled water really requires," he said.
Moneycontrol tried reaching out to IRCTC on its plans for the bottled water segment but there was no response.
Jinesh Joshi, analyst at Prabhudas Lilladher, however, is not too enthused by the prospect of Rail Neer taking on established brands.
"Rail Neer's presence is limited. They plan to increase the number of bottling plants from 10 to 20 as they are looking to increase their volume of market share from 45 percent to 80 percent but that will happen over a period of time. Rail Neer's contribution to its revenue is hardly 10-11 percent," he told Moneycontrol.
Joshi said IRCTC’s plan to take the product outside the railway premises hinges on its capacity to come up with a robust distribution structure and ability to compete with established brands for the long haul.
"Right now, Rail Neer enjoys a monopoly. But that won't be the case when it hits the general market. The cost of production of some of the unorganised players is very low compared to Rail Neer. So, they will be hard-pressed to compete on the pricing front. So gaining market share for them is difficult and anyways, this is not the focus area for them at this point of time," Joshi said.
Bijoor also agreed with the view that distribution will be a key factor in Rail Neer's growth prospects.
"Rail Neer needs to establish brand credibility to cater to general audiences who are exposed to the best of brand messaging from bigger brands such as Bisleri, Kinley and more. Rail Neer needs to morph from being the convenient water at arm's-length reach on a train to be the water of choice by a discerning general audience that is not on a train," he added.
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