🤔 Tata Going the RIL Way in FMCG?
Tata is reportedly planning on buying a stake in Bisleri. Though the deal hasn’t been confirmed yet here are the possible reasons Tata may be interested in the company.
Reliance has turned on the heat in the FMCG space.
After news came out that the company is buying Campa Cola, other FMCGs are also looking at acquisitions now.
And Tata is trying to acquire something that Reliance failed to, something that has become a staple part of our lives anytime we travel.
Reports suggest that Tata wants to buy Bisleri,the brand that is synonymous with mineral water in India, for Rs. 7,000 crores!
💧The Story of Bisleri
Tata Consumer Product’s motive behind acquiring a stake in Bisleri and no other mineral water brand is clear: Bisleri is the most wanted mineral water in India (at least in the non-premium segment) enjoying a 32% market share.
That number may sound small but around 60% of the bottled water market is ruled by unorganised brands, that is tiny brands whose individual share doesn’t amount to much.
So, how did Bisleri manage to capture this huge market share?
Bisleri was originally an Italian brand started by Felice Bisleri. After his death it passed onto Dr. Rossi, who saw the massive potential for clean drinking water in India. He set up a plant in India in 1965.
But the problem was that Indians were not ready to pay for something that they got for free.
Bisleri realised it would be difficult to sell to the normal Indian public.
But what about the rich? And what about the tourists?
They had money and would pay for clean water.
So, it started selling in five-star hotels and restaurants to cater to this crowd.
Despite seeing some success, Dr. Rossi decided to sell the brand to Parle’s soft drink division.
Fun Fact: The Parle Group split into Parle Products and Parle soft drinks division in 1961. In the 1970s, the soft drinks division further split into Parle Bisleri and Parle Agro. Parle Bisleri owns the Bisleri brand and is now called Bisleri International.
Parle faced trouble trying to scale the brand even with its unique advertising campaigns. One reason for this could be that Bisleri sold its water in glass bottles, which were difficult to handle.
But then in the 1990s, when our economy opened up, a lot of Indians suddenly started going abroad. There they were exposed to the concept of clean bottled water. And they began buying bottled water once they returned to India.
To capitalise on this growing market, Bisleri reduced the price of its bottled water and shifted to plastic bottles that were convenient but bad for the environment.
It also began sending free samples of its water bottles to weddings.
This gave the company a massive monopoly on the packaged water market.
However, local brands and international companies like Coca-Cola (Kinley) and Pepsico (Aquafina) also soon entered this space.
In fact, Parle Agro also launched Bailley, its very own water brand.
So many water brands have diluted Bisleri’s market share but it is still the number one water brand in India.
And it isn’t just a water brand. It also sells soda, and carbonated beverages like Spyci and Limonata. It has also recently entered the hand sanitiser space.
But why is Tata interested in the packaged water space at all?
🔍 Tata’s Interest in Water
Tata’s interest in water is not new.
The company has several water brands: Tata Water Plus, Mount Everest water, Himalayan water.
But none of these companies have been able to capture a significant market share.
With travel now increasing again, it seems like the perfect time to enter the Rs, 20,000 crore water business.
And like we said, with Bisleri it isn’t just the water business, it is also a soft-drink business.
This will also help Tata Consumer Products grow and compete with upcoming brands like Reliance Retail. Acquisitions are the quickest way to do so since that is the exact way in which Reliance is scaling up.
Plus, this will give Tata an entry into chemists shops, retailers, milk shops, hotels and several such new arenas.
But what would Bisleri get?
Bisleri has been working very hard to increase revenues. So, it has partnered with Swiggy, Zomato, Dunzo and other such apps to make its water available directly to consumers.
And Tata could help Bisleri grow its reach by giving it a place in its Starbucks and Qmin stores.
Stake sale could be a part of Bisleri’s succession plan as well. Currently the company is owned by Ramesh Chauhan who is grooming his daughter Jayanti to take over.
And though Jayanti has claimed that the brand would not be up for sale till she was alive, she had given up on the business back in 2010.
However, for now the stake sale is just a proposal. We will have to wait and watch if it materialises.
⚡In a line: Tata is showing interest in India’s top packaged brand as a way to scale up its FMCG business fast.
💡Quick question: The super large packaged water market made us question whether water should be continued to sold in bottles or should we work towards making clean water available everywhere?
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