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Tata Consumer tries to poke a drinking straw into Bisleri as the FMCG seeks to slake India's thirst

It is not clear whether Bisleri Chairman Ramesh Chauhan will retain some stake. Reports say deal could be worth about Rs 7,000 crore. Succession planning seems to be the reason for Bisleri. TCPL stands to gain nearly 130 co-packers, and over 5,000 distributors.

November 25, 2022 / 11:24 AM IST

The nearly Rs 50,000-crore packaged water market in India is overwhelmingly unorganised, with small players dotting the landscape.

Only about a tenth of the market is with organised players. Among them, Bisleri has always stood out as a stalwart. It is the oldest, the largest and the most well-known packaged water brand in India. So much so that Bisleri is synonymous with bottled/packaged water for Indians. When we want a bottle of water, we tend to ask for Bisleri!

This Bisleri may soon change hands. Bisleri International Founder and Chairman Ramesh Chauhan confirmed on November 24 that he is in talks with several suitors, including Tata Consumer Products Ltd (TCPL), for selling this iconic brand.

TCPL also acknowledged it was in talks with Chauhan, but neither party talked more about the matter.

A Bisleri spokesperson said: “We are currently in discussions and cannot disclose further.”

TCPL told the Bombay Stock Exchange (BSE) it is evaluating various strategic opportunities for growth and expansion of business and “the management of the company remains in discussions with various parties, including Bisleri International Private Limited”.

How much is the deal worth?

It is not clear whether Bisleri is being sold fully or whether Chauhan will retain some stake. The other contours of the deal also remain under wraps, though reports have suggested it could be worth about Rs 7,000 crore.

A packaged water industry watcher said that TCPL and Bisleri have been negotiating a deal for nearly nine months and that the former has been conducting due diligence of Bisleri’s operations for many weeks.

This could not be independently confirmed. The same person also said that Chauhan wrote to his employees earlier on Thursday after news of a possible acquisition by TCPL was out, saying that such discussions are part of regular business developments and happen from time to time.

A back-of-the-envelope calculation shows that Bisleri is the clear leader in the organised segment, with a market share upwards of 45 percent. In other words, nearly every second branded bottle of water sold anywhere in India is a Bisleri.

Coca-Cola’s Kinley, PepsiCo’s Aquafina and Ahmedabad-based Energy Beverages’ brand Clear, in that order, are the other three organised sector players.

What is behind the move?

Lack of succession planning appears to be the nub of the problem Chauhan is faced with. A selloff could also change the fortunes of the buyer, whoever it may be.

The packaged water industry watcher quoted above said it would likely hasten the collapse of the unorganised players and provide a much-needed impetus to the water portfolio of TCPL.

How will TCPL gain?

A huge leg-up in its ambitions to grow its beverages portfolio. As per TCPL’s latest annual report, the company sells four categories of water products: fortified water or energy drink (Tata Gluco Plus), Natural Mineral Water (Himalayan), Packaged Drinking water (Tata Copper Water) and fruit-based drinks (Tata Fruski). Himalayan is a premium brand.

Himalayan was the first product in the category called ‘naturally sourced mineral water’ and the company claims this brand is already a market leader. Sales doubled in FY22, albeit on a small base, and also broke even in FY22.

The industry watcher quoted earlier said that TCPL has struggled with the mass brand Tata Copper “because it has little expertise in selling a product in the Rs 10-20 price point. It needs more than just money for any brand to succeed in the challenging packaged water business.

With the acquisition of Bisleri, TCPL will get nearly 130 co-packers, over 5,000 distributors and more than 10 lakh touch points. This invaluable network and distribution prowess would have been next to impossible for TCPL to create on its own.”

Challenges before the packaged water business

In any case, the packaged water business in India has several challenges: low brand consciousness among consumers and the necessity of multiple co-packers spread across the country to manage logistics costs.

This also means that ensuring consistent quality from all such bottling plants becomes a big headache. Hence, any bottled water brand must invest large sums in developing and sustaining an extensive distribution network.

All these challenges will have to be navigated by the acquirer of Bisleri, in addition to making significant investments in the branding and in strengthening the brand’s reach into the hinterland. The branded packaged water industry has a CAGR of nearly 20 percent now.

Queries to other packaged water sellers remained unanswered. But Nayan Shah, founder of Energy Beverages, which sells the Clear brand of packaged water, said that, apart from Bisleri, Clear is the only pan-India brand which is widely available. It is growing at an exponential rate.

“We will close this fiscal with a top line of Rs 225-250 crore and our target for FY24 is Rs 500 crore. The market is growing at a 20 percent CAGR but we are growing at 80 percent. We have invested in manpower, distributors, hotels and co-packers (40 co-packers versus 130 of Bisleri) and we see exponential growth in business in the coming years”.

So, with a large consumer base readily available and now perhaps the marketing and distribution muscle of Bisleri, will the acquirer - whether TCPL or any other - be able to replicate Chauhan’s roaring success? This remains to be seen.
Sindhu Bhattacharya is a journalist based in Delhi who writes on a range of topics in business and economy.
first published: Nov 25, 2022 10:24 am