Tata Consumer admits to a hunger for Bisleri, but will the brand be able to change the fortunes of the FMCG's water sales?

In India, the nearly Rs 50,000 crore packaged water market is largely unorganized, with a scattering of small players.

A mere fraction of the market is dominated by organised companies. Bisleri has always been one of them who stands out as a pillar. It is India's oldest, biggest, and most recognisable packaged water brand. So much so that for Indians, Bisleri is a synonym for bottled or packaged water. We frequently request Bisleri when we need a bottle of water!

This Bisleri might be sold soon. Ramesh Chauhan, the founder and chairman of Bisleri International, revealed on November 24 that he is in negotiations to sell this renowned brand to a number of parties, including Tata Consumer Products Ltd (TCPL).

TCPL also admitted that it was in communication with Chauhan, but neither side elaborated.

"We are now in conversations and cannot say further," a Bisleri representative stated.

The management of the company "remains in discussions with several parties, including Bisleri International Private Limited," according to TCPL's statement to the Bombay Stock Exchange (BSE) that it is exploring various strategic alternatives for corporate growth and expansion.

What is the value of the deal?

It is unclear if Chauhan would keep a minority investment in Bisleri or if the company is being sold completely. The deal's other specifics are similarly unknown, however reports have indicated that it may be valued roughly Rs 7,000 crore.

TCPL and Bisleri have reportedly been in negotiations for about nine months, and the former has been performing due diligence on Bisleri's activities for some weeks, according to a follower of the packaged water sector.

It was impossible to independently verify this. The same source also said Chauhan addressed a letter to his staff earlier on Thursday informing them of the potential takeover by TCPL and stating that such discussions are occasionally part of ordinary business developments.

A quick calculation reveals that Bisleri, with a market share in excess of 45 percent, is the undisputed market leader in the organised area. In other words, a Bisleri bottle of water is sold about every two branded bottles of water sold anywhere in India.

The other three companies in the organised sector are the brands Kinley from Coca-Cola, Aquafina from PepsiCo, and Clear from Ahmedabad-based Energy Beverages.

What motivated the action?

The main issue Chauhan faces seems to be a lack of succession planning. Any potential buyer's fortunes could be altered by a selloff.

The above-mentioned packaged water sector watcher predicted that it will speed the demise of the unorganised businesses and provide TCPL's water portfolio the much-needed boost.

How can TCPL benefit?

a significant boost to its goals of expanding its beverage line. According to TCPL's most recent annual report, the company sells four types of water products: packaged drinking water (Tata Copper Water), natural mineral water (Himalayan), fortified water or energy drinks, and fruit-based beverages (Tata Fruski). Himalayan is a high-end company.

Himalayan was the first item in the "naturally sourced mineral water" category, and the business asserts that this brand is currently the market leader. Sales increased by double in FY22, but from a modest basis, and they also turned a profit.

According to the industry observer previously cited, TCPL has had trouble competing with Tata Copper, a mass-market brand, "because it lacks experience in selling a product in the Rs 10–20 pricing segment." For any brand to flourish in the competitive bottled water industry, it takes more than simply money.

With the acquisition of Bisleri, TCPL will gain more than 10 lakh touch points, more than 5,000 distributors, and nearly 130 co-packers. It would have been nearly impossible for TCPL to develop this priceless network and distribution capabilities on its own.

issues facing the packaged water industry

Whatever the case, the packaged water industry in India faces a number of difficulties, including low brand awareness among customers and the need for numerous co-packers dispersed throughout the nation to control logistical costs.

Additionally, it makes it difficult to guarantee consistent quality across all of these bottling facilities. Therefore, any bottled water company must spend a lot of money creating and maintaining a vast distribution network.

The buyer of Bisleri will have to overcome all of these obstacles in addition to spending a lot of money on branding and expanding the brand's reach into the hinterland. The market for branded packaged water currently has a CAGR of almost 20%.

Other bottled water vendors did not respond to inquiries. However, Nayan Shah, the creator of Energy Beverages, which sells packaged water under the Clear name, claimed that, aside from Bisleri, Clear is the only pan-Indian brand that is well-known. It is expanding exponentially.

"Our aim for FY24 is Rs 500 crore, and we expect to end this fiscal year with a top line of Rs 225–250 crore. We are increasing at an 80 percent CAGR whereas the market is only growing at a 20 percent rate. We have made investments in personnel, distributors, hotels, and co-packers (40 vs. Bisleri's 130), and we anticipate rapid company growth over the next few years.

Will the acquirer, whether it is TCPL or another company, be able to repeat Chauhan's explosive success now that a sizable consumer base is readily available and that Bisleri may be able to provide marketing and distribution muscle? This is still up in the air.