Financial Daily from THE HINDU group of publications
Wednesday, Aug 27, 2003
Corporate - Announcements
Distribution problems hit `Pure Life' Nestle India to exit water business
P.T. Jyothi Datta
New Delhi , Aug. 26
IT has always been choppy waters for Nestle India's bottled water businesses. First it's Perrier and San Pellegrino brands of carbonated water ran into rough weather.
And today, after more than two years of trying to get its act right with Pure Life, its mass bottled water product, Nestle India Ltd has announced that it "would be discontinuing the water business."
The company informed the BSE: "Pursuant to review of water business being conducted since last year, the company has assessed that the financial returns even in the longer term are unsatisfactory."
Tidings had been difficult for Nestle's Pure Life, with distribution problems limiting its presence in the market. And while the company officials were unavailable for comment, Nestle India's Chairman and Managing Director, Mr Carlo M. Donati, had told Business Line last year that Pure Life's problems were because the market was riddled with "discounts" and Pure Life did not have the distribution network of a Coke or Pepsi and the volumes of Mr Ramesh Chauhan's Bisleri.
With a strong presence in the global packaged water market, Nestle's tryst with water in India commenced in June 2000 when it launched its carbonated water brand Perrier or the `Champagne of waters'. In less than five months, the food corporate launched its San Pellegrino, another sparkling water brand touted to be `the most premium table water in the world'. Both products were premium, priced at about Rs 90 for 750 ml.
Meanwhile, the packaged drinking water category was bubbling with activity with the cola majors entering the estimated Rs 1,000-crore segment with their respective brands Aquafina from PepsiCo and Kinley from Coca-Cola India. This, even as the domestic generic brand, Bisleri, grew in strength.
Nestle's Pure Life made its entry in the country in February 2001. At that point, it was the only bottled water brand pegged at Rs 12 for one litre. It wore "purity" virtually on its sleeve in terms of sporting a tamper-proof hologram and production was to be undertaken at its Samalkha plant, Haryana.
At the launch, company officials had expressed optimism about the growth prospects for Pure Life, with ambitions to be No. 2 in the Indian market, in two years. Pure Life is also present in China, Brazil, Pakistan and Mexico. Nestle officials had then said that the water division of the Nestle group had developed and acquired several successful brands of mineral water and processed water and had 70 brands in 130 countries.
Trouble first started brewing for Nestle's Perrier and San Pellegrino in March 2001, following the Union Health Ministry's notification bringing water under the Prevention of Food Adulteration (PFA) Act, making it mandatory for bottled water to adhere to certain parameters and sport an ISI mark.
Since sparkling water did not meet the norms of still water, Nestle had to stop importing its carbonated water brands. Today's announcement on the BSE has poured water on the prospects of a revival for Nestle's struggling Pure Life. "And this could well be indicative that water will no longer be on the agenda for Nestle India. At least for the time being," point out analysts.
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