H20

Packaged mineral water.

Introduction

H2O is an initiative to provide the customers with safe to drink and readily available
packaged mineral water. H2O is a mineral water company that will has its main
production plant at Chamoli, Uttaranchal. The water is drawn from the river Alkananda,
with the support from the Government, which is inviting companies to setup plants in
these backward areas and provide employment, etc. The government has come out with
very beneficial schemes in return for setting up the plants. The government has waived of
taxes for the first 2 years, and then later a tax payment of only 1% for the next three
years. This helps us maintain our competitive strength with the other brands for a pretty
long time. Besides these benefits the river water is very clean here and the atmosphere is
also pollution free, this helps keep some unnecessary contents away from the water.

Process:

H2O will be following a WHO recommended reverse osmosis process of water

filtration. This process uses a molecular approach to filtration; other particles like sand or
molecules bigger than that of water cannot pass through. Then we have the process for
removing the microbes. The process involves the use of Ozone; the process makes use of
triatomic Oxygen which is colorless, unstable & reactive gas with an acrid odour. It is
strongest available sanitizer and decomposes back to oxygen without leaving any tresses
and makes preferred choice for disinfection. Since it is a very reactive Disinfecting agent,
& 3000 times more effective than any other known disinfectants, it destroys any Bacteria,
Viruses, Cysts and Pathogens in a shortest possible time when it comes into contact with
water. This process uses no pesticides unlike that of other brands who use pesticides to
destroy the microbes we use Ozone. This helps in keeping the water, pesticide-free.

We have had talks with the railways to sell our water bottles in trains. We had applied
for a tender and they readily accepted the offer when we gave our water brand at a price
where they could get a profit of Rs. 3 per bottle and even the quality aspect was
considered and we could get the contract from the Northern railways and all trains that
operate from Uttaranchal will have H2O water sold in it. The other aspect to this
transaction is that the railways will help us transport our products from Uttaranchal to the
states of Rajasthan, U.P and Punjab. This is a mutually benefiting contract. The Indian
railway is looking for quality products on train and they don’t want anything that is of
low quality to be sold on the trains hence giving way to our bottles on the trains.
Product:

Our product will be available in four categories:

 Premium drinking water: this is the pure mineral water. This is the purest mineral
water brand in India and it is water at its best.
 Flavored drinking water: for the first time in India flavored drinking water will be
launched. This water will come in three flavors Lime, Jeera and Mint. The water will
have an essence, which will make it delightful experience. The three flavors wont
effect the quality of the product as after the filtration process is over a small amount
of flavor is added which will make drinking water a whole experience.

Price:

The Bottles have been priced at Rs.10 for the premium water category and Rs.12 for the
flavored water. The price is way lower than some of the market leaders who have priced
their products at Rs. 13 to 15. This price difference helps us maintain a competitive
advantage over the other brands.

Now that price has been covered the next most Important thing is the quality. In a recent
survey done on mineral water brands in India showed shocking results. No Indian brand
passed the quality check even the so called premium brands like Bisleri, Aquafina, etc. all
had pesticide levels nearly 25-80 times the prescribed limits. After what happened to
Coke and Pepsi for its pesticide contents, the same can be done in mineral water also. By
creating awareness of the level of purity in these products I can promote my brand which
has no pesticides in it.

Promotion:

The product will be extensively advertised through print media and outdoor
advertisements. We are looking to promote our product. The ad campaign will use
existing facts to bring awareness among the people and they will take more cautious steps
and buy our brand mineral water. The other way to promote our product would be tie-
ups. We will be looking at some tour agents like ITDC who conduct regular tours to
places; we will get into touch with them and offer them to serve our products.

The bottling process is also unique as the bottles will be airtight and they are
biodegradable i.e. they can be decompose. The Uttaranchal government is very strict
about the environmental hazards and supports anti-plastic way of living but as mineral
water cannot be sold in any other means. Bio-degradable plastic will be used to store the
water.
Place:

The product will be placed only in the states of Rajasthan, Haryana, U.P., Punjab and
the territory of Delhi. These are the places where we will be selling our products for the
first 2 years. These areas are very humid and they have a heavy demand for packaged
water. The growing health awareness among the people has lead to the growth of the
mineral water market, which is growing at the rate 40% every year it is a tremendous
growth and there is tremendous competition also. Traveling also has increased among the
youth and hence providing a big opportunity to sell mineral water. Travelers consume the
most amount of mineral water in India, as they do not carry water from home.

This unique strategy and comparative advantages we will be able to pierce through the
market. Take the competition to a higher level and to top it all bring quality products to
every consumer.
Organization details

The main plant is situated in Chamoli, Uttaranchal and the main office is situated in
Gurgaon. Gurgaon has a huge IT crowd who don’t mind spending on mineral water. The
office is situated alongside the warehouse. The warehouse will be holding our buffer
stock; this is incase of emergencies such as production shut down, etc. The buffer will
also be used to control the varied supply of the product. There will two huge trucks which
will help us transport the goods from the production plant to the main ware house. The
other way of transporting i.e. the trains, will directly be sent to the concerned area and the
distributors in those areas will collect the consignment from the railway office. This is a
very efficient manner of transporting the goods.

Type of organization

We follow a formal style of working. It will be a line production layout, which is

departmentalized on the basis of functions. The formal type of functioning is adopted
because it will ensure all the work is done and every body knows their duty. Here the job
description and the line of authority are made clear this makes it easy to control and co-
operate the people in the organization.

Mission and Vision:

Our company looks at providing the best quality products at the lowest possible rates.
The company focuses on not only its survival but at providing quality products to the
customers and also opportunities to local people. The company provides proper amenities
to its employees and an opportunity to grow along with us. And we believe human capital
is the biggest asset in the company.

The mission statement of the company is

“To provide the best in breed products to customers, at optimum price level and
distribute the returns in the welfare of the interest of all stakeholders of the
company”

The vision of the company is:

“Quality in practice”

.
Business plan
H2O mineral water is India’s purest mineral water. The product is all set to make a
special position in the market by capturing a huge market share in its very first year due
to its high quality and low price it gives a win-win situation to the consumers. With the
new concept of flavored mineral water for the first time in India it will create new
markets for itself as they compete with mineral water brands as well as the soft drinks
and cold drinks. The concept is new and will become popular with the modern Indian
society and these products are also priced lower than the premium mineral water of other
brands. The flavored water will be available in three variants- Jeera, Mint, and Lemon.
There will be no change in quality of water. There will be a recognizable flavor in the
water this will make a whole new experience for Indians. These three variants along with
premium water make it a total tally of 4 products in the market.

Feasibility of the project.

Today India lacks a brand that gives pure drinking bottled water. The existing brands in
India all well surpass the minimum level of pesticide. They are more of chemical water.
The project is feasible cause it has an advantage above the other brands in terms of price
as well as quality. The project will be able ensure safety of funds of the investors as the
product is an FMCG which has a huge market government also is supporting the project
which gives us an upper edge.

SWOT Analysis.
Strengths:

1. Price is reasonable and competitive.

2. High quality when compared to any other brand in India.
3. Wide distribution network
4. Government support.
5. New innovated products.

Weaknesses:
1. No experience
2. Heavy investment
3. Heavy operating costs.
4. Low supply.
 Opportunities
1. Flexible market
2. Huge market.
3. Futuristic demand.
4. Growing health concerns
5. No existing flavored water market in India

Threats:

1. Market share of other brands.

2. Resistance to change.
3. Heavy marketing capital of other brands.
4. No solid back up for the early stages during emergencies.

Present and future scenario:

The mineral water market is worth Rs. 4500 crores (all kinds of packaged water).The
mineral water market is growing at an average rate of 40% every year, this growth
will sustain as there are growing health concerns among people and water is the
universal carrier of many diseases people are more careful with the water they drink
when they are outside home. The growing IT crowd who are much in favor of
hygienic living support the growth of this segment of the market. Till date no Indian
brand has been exporting Mineral water due to its low quality and standards. But
whereas H2O is concerned it adheres to international norms therefore making it
eligible or export. But the exporting of H2O will not be taken up until the 5th year.
Competitors:
Our chief competitors would be Bisleri, Aquafina, Kinley, Bailey, etc. But these
companies don’t work under the standards set by the BIS (Bureau of Indian Standards)
leave alone international standards. As far as quality is concerned only the European
brand Evian will be our competitor as it adheres to international standards, but when the
prices compared Evian costs 85 Rs, and H2O only 10 Rs. Where as quality of other
brands are concerned they all cross the existing BIS standards. They contain more
pesticides than permissible limits. Bisleri contains 79 times more pesticide contents than
that allowed by the BIS. Kinley contains 14.6 times the permissible limit.
Flavored water does not have any competitors in the Indian market it will create a whole
new market for itself we can take the first move advantage and with its low pricing
strategy it sure to be a success. The growing need of something new in every sector has
been seen in the Indian markets) H2O is our offering of something new in the packaged
drinking water segment.

Challenges:
The challenges faced by the company would be to take on the already established brands
like Bisleri, etc. which have a huge market share and can spend lots on marketing of their
products these brands can launch a series of ads in response to our advertising campaign.
This can affect our sales. But the major offering from our side would be that we would be
able to compete with them on both aspects price and quality. The other challenge would
be to meet our demand. The supply of our products could be hit if there is a huge demand
this would mean that we could lose some of customers, if the product is not available to
them they might opt for other brands. The supply is limited with 2 machines that filter
and bottle water; the supply will be around 80000 bottles a day. But we can actually
increase the production capacity of our plant and compensate for the shortage. There
would be expansion into the south also according to the standing plan it would take place
in the 4th year. Our challenges could also be to bring a number of customers to the
flavored water also.

Worst case scenario and contingencies.

Physiographically Chamoli, which lies in a region of tectonic or folded and over thrust
mountain chains, has strata are structurally marked by complex folds, reverse faults, over
thrusts and napes of great dimensions, all these as well as frequent earthquake of varying
intensity give region to believe that the region is still unstable. Although any movement
or tremor of the earths crust in the district is not produced by volcanic activity, the
Chaukhamba peak a pair to be the crater of an extinct volcano. The plant has been made
earthquake proof but if in any case anything happens we have insurance for the plant. But
if the plant breaks down it will take a minimum of 1 month to start production again. This
gap in supply could be met by the buffer system, which we use. We will be able to store
some stock during the month when the demand is less and release it while the demand is
high or during emergencies. This buffer will be able to last at least 2 weeks. For the
remaining 2 weeks we can actually use the south plant to compensate for the loss in
production time. But until the south plant is not constructed there is no backup.
 Human Resource Plan:

Organization structure:

Sankeet
MD

V.P V.P V.P

Marketing Finance Production

Sales
Legal Audit Workers
Workers.

Number of partners:
The whole business will be carried on, on the basis of a Pvt, ltd company. And there
are no partners as such I will be holding 45% shares. In the company there will be a
ESOPs provision where 5% of the company stocks will be distributed.
Number of employees in each department:
The whole organization is divided into three departments: -
1. Marketing: this department will be managing the sales of the organization. There
will be 10 workers under this department this department will make sure that the
products are delivered to the distributor on time and it will also take bulk orders
from customers.
2. Finance: this department is further divided into two parts- legal and audit, which
will have 2 and 4 staff respectively. This department will take into consideration
all legal issues and accounting issues. The V.P will be guiding the company on its
expansion and investment plans.
3. Production: this department is situated at the plant in Chamoli. The total number
of workers under this department would be 45; this includes the machine
operators, repairmen, cleaning staff, etc.

Training procedure and implementation:

The jobs in H2O are of various categories most of the jobs are non technical-
driving, loading cleaning, etc. The other jobs like maintenance of machines the staff will
be trained by the manufacturers of the machines. One maintenance staff member will be
given an instruction session in brief about the working of the machine. This staff member
will be giving a small amount of briefing to the operators. And for the other jobs such as
marketing heads, etc they will be hired on basis of their experience by our HR agency,
which will train them on the necessary skills required. We have specialized HR agencies,
which will not only hire but also train. H2O will not be taking in new employees every
now and then. It has a small staff, which has a 1-year temporary contract after which they
will be given a permanent contract on the basis of their performance.
 Marketing plan:

Target market:
Mineral water is not a product for any age group it is or everyone above the age of 3
months. Our target market is huge so we need to keep it in mind and then go for our
advertisement campaign. The market is a huge one and the main aim in the first year
would be to capture at least 15% of the market share in the areas where we place our
products. In the first year we would be looking at a regional approach and extensive
advertisements in local newspaper and billboards.

Advertising:
We in the 1st year won’t go for any television or radio advertisement we will be using
billboards and newspapers to spread the news. We use these mediums for the fact that
they can be retained and can be re-read. The message in the ads will be about the facts of
mineral water brands in India and a strong message stating why H2O should be preferred.
In the 2nd year we will use all sorts of magazines and newspapers for advertisement and
this will be only for increasing the popularity. The message would be sent in the first year
only. The 2nd year will be only for brand popularity 3rd year the ad campaign will slow
down in the north and the same strategy of north will be used when the south division is
opened.
Sales tactics:
The product will use only advertisements to promote itself and there will be not be any
sorts of offers that will accompany the product. The flavored water may be distributed in
sample packs, that also is just a back up plan i.e. if the popularity of the flavored water is
not high then this will be used. In the first month we would start accumulating our stock
so as to meet our buffer limit and once this is done we will start sending our products to
the distributors and launch the advertising campaign in a week’s time. This is for the
reason that the customers who have seen the ads are not disappointed on the non
availability of products, which commonly happens with many newly launched products.
As the company will kick off in January,

Trade shows:
Trade shows will be used to promote our products among various corporations. Many
IT and other field companies will be participating in trade shows. We can use trade shows
to popularize our brand among these people as they will do the same in their company
which be our unpaid for publicity. Trade shows will also be able to give us a feedback on
our products.

Price:
The premium mineral water will be priced at Rs.10, and Rs.18 for two litres. The
flavored water will be priced at Rs.12 for 1 litre. There will be no 2-litre bottle for the
flavored variant

RS.10

Rs.3 app. cost

of production.

Rs.1 app.
distribution.

Rs.3 retailer’s
profit.

Rs.3 app. our

profit.

Distribution-Re.1: the distribution cost is fixed at 1 rupee because we pay our distributor
50 Ps. Per bottle the distributor he will make sure our product reaches all the required
areas where we have planned to sell our products. And the other 50 Ps. Is our advertising
cost and our transportation cost from our factory to the main office in Gurgaon.

Cost of production: the cost of production is Rs.4, which includes our bottling expense
of Rs.1, and the rest is for electricity, etc.

Our Profit: The above is the price split up of our product (premium water). The price is
fixed after calculating our profit tin such way so as to break even quickly. Our profit
margin will be of Rs.3 this is high because we have to cover up the investment and then
we even have expansion plans, therefore the profits will help our business grow, and
grow substantially.

Retailer’s profit: the retailer’s profit is fixed at Rs.3 per bottle, this is attractive and this
will make sure the retailers position our bottles in their shops. We don’t have any
wholesaler and the distributor will be selling the products directly to the retailers. So we
have cut down expenses in our distribution channel, we follow the pattern of ‘fewer the
middlemen lower the costs, and higher the profits’.

5 force analysis.

Bargaining power of the customers:

 We don’t directly cater to the customer we have a distributor who will make the
product available at all retail centers. We only adhere to bulk orders (minimum of 240
bottles) here we will be giving them a discount of Rs.150 that is a discount of Rs.1.50 per
bottle.

Bargaining power of the suppliers:

We don’t have any suppliers as such other than our bottle manufacturer. We don’t have
any suppliers, as we are an extractive industry. The suppliers for bottles have a contract
with us.

The threat of new entrants:

New entrants will have an effect on our sales only if they match our price and
quality. If the price is matched then it will affect our sales with the middle-income group,
who are more concerned about the price and if the quality is matched then the upper class
sales will be affected, by the time any new player enters the market, the brand awareness
for our product would have spread considerably.

Threat of substitute products:

There wouldn’t be much threat to our products from substitute products, this is
because we are trying to gain market share, and we don’t have anything to lose. With the
price and quality of our products there is no match and therefore not much of a threat. But
for the flavored water there will be close competition from other juice brands like tender
coconut which our completely natural and there will still be a conception in the minds of
the people that the mineral water is flavored by artificial flavors and this can effect our
sales.

Intensity of competitive rivalry

 There are about more than 30 brands in the market. These brands are very low in
quality. There is report by the Bureau of Indian Standards (BIS), which says that there is
only one brand in India, which adheres to the prescribed pesticide levels and that is Evian
the French brand, but it is priced at Rs.85 per litre. There is no competition between
Rs.10 and Rs.85, with the same quality our brand wins hands down. This is the reason for
no mineral water brand in India to have any standardization certificate. Even the market
leader Bisleri was stripped of the ISI certificate because of unforgivable pesticide levels.

The industry today is growing at the rate of 40% every year and the market is growing
at a phenomenal rate this gives lots of opportunity to grow. Though the other brands have
been building their brand name they have been cheating the consumers as far as quality is
concerned. This is one problem towards which, people have not given much importance.
H2O will help in raising awareness among the people. We can take the recent pesticide
hue and cry to our advantage.

Financial plan:

Balance sheet:
(Rs. In lacs)
Particulars Amount Amount Amount
(1st year) (2 year) (1st year)
nd
I. Sources of funds

1.Shares

a. Capital 1092 1920 3400

b. Reserves and surplus. 463 580 100

2.Loan funds
a. Secured loans 1000 500 700
b. Unsecured loans. -nil- -nil- -nil-

Total 2555 3000 4200

II. Application of funds

1) Fixed assets
a) Gross block 940 1400 3412
b) Less depreciation 48 112 273
c) Net block 892 1288 3139

2) Investment 500 950 150

3) Current assets:
a) inventory 158 120 300
b) cash in hand and bank 900 574 500
less: liabilities
a) provisions 48 68 111

4) Miscellaneous expenditure 57

Total 2555 3000. 4200.

Rs in lacs.

Start up cost:

Land and building: 30000000

Motor vehicles: 6000000
Machines: 20000000
Furniture and fittings: 1000000
Legal expenses: 10,00,000
Commission: 0,00,000
Labour:5,00,000
Miscellaneous:2,00,000.

Total: 15,37,00,000

Operating capital:

Wages: 38,00,000
Salaries: 91,00,000
Power & fuel: 19,00,000
Transportation: 3,00,000
Commission: 15,00,000
Materials: 1,46,00,000
Maintenance: 15,00,000
Depreciation: 48,00,000
Legal: 20,00,000.
Advertising: 20,00,000
Interest: 80,00,000.

Projected return on investment:

Shareholders:
The share holders will be paid a return of 8% in the first year on their
investment. This is the projected return for the first year.

Debentures:
The debentures will be paid 10% per year and they have term of 5 years after
which they will be paid back to the owners.

Loan:
The loan is a scheme where the company is liable to pay 6% interest on the
principle amount and then after 3 years it has to be paid in lump sum.

Break-even analysis:
The company will break-even in the 3rd year’s first quarter. The company
will break-even at the 4.5th crore unit and this according to our sales
projection will be in the 1st quarter of the 3rd financial year.
 Initial Capital Investment:

Borrowed capital:
The borrowed capital of the firm will be Rs.10, 00,00,000 and this will be through
two means:
• Debentures.
• Loan.

The 10 crore rupees will be split between the two means in 1:1 ratio. The loan will be
worth Rs.5 crores and 6% interest will be payable on it. This loan will be taken from the
IDB (Industrial Development Board) of Uttaranchal. The Uttaranchal government is
taking strong moves to develop the area and under this initiative the government is ready
to give funds at a low rate of interest. The government will also support some of our
initiatives to improve the surrounding area.
The other 5 crores will be raised through debentures. And these debentures are
secured; this will ensure that we get the required funds. A debenture is easy sell if it is
secured. These debentures will be of Rs.100 each and 10% interest will be payable on it.

Owners fund:
Rs.10 crores will be given to share holders. Of which I will be investing Rs.5crores
and I will hold a 50% stake in the company. The shares will be issued at a nominal value
of Rs.100 each and there will be 10,00,000 shares.

Execution Plan

Management team:
The top-level management will consist of the CEO, and three V.P.’s. The V.P.’s are
very qualified persons in their respective fields and with the expertise of these people I
will be able to guide the company to achieve its goals. There are direct workers below
these persons and they will be doing the work.
Implementation strategy:
The implementation will be done through our marketing agency who will go ahead
with the ad campaign after consulting our V.P. marketing and the legal advisor. The
brand will reach our target market through our distribution agency. The distribution
agency is located at Gurgaon and the marketing agency is situated in Delhi.

Operational strategy:
Daily our trucks will be transporting finished goods and raw materials from Gurgaon
To Chamoli, and back. There will be two machines that will working for around 8 hours a
day. Giving an output of 40000 bottles a day.

Risk analysis:

Inflationary risk:
We don’t buy many raw materials. This is because we are a kind of extractive industry
and the only purchase we makw is the bottles and electricity. The government at a cheap
rate provides electricity, as the plant is quite close to the dam and the cost of transmission
decreases. The bottles are made available to us at a fixed cost and there is an

Business risk:
We face a huge risk from the competitors because they have a he budget to tackle the
moves I make, i.e. the ad campaign I launch they can suppress it by launching a bigger
campaign.

Financial risk:
We have a huge amount of fund collected as loans we need to pay them of before we
can borrow more funds. If any undesired situation arises then we won’t be able to gather
more funds as we already have a huge amount of loan to be paid back.

Marketing strategy:

Locational analysis:
The product will be placed only in the states of Rajasthan, Haryana, U.P., Punjab and
the territory of Delhi. We have expansion plans for the 3rd year. In the 3rd year we will be
looking to place a products in the central areas such as Madhya Pradesh, Mahrashtra and
the western state of Gujrat.
The states of Rajasthan, Haryana, U.P., Punjab and the territory of Delhi have a
market for mineral water worth Rs. 900 crores and the brands-Bailey and Bisleri mainly
capture this. These areas are very humid and hence the consumption of mineral water in
these areas is high. We are launching our product in January and then we will launch a ad
campaign which will extend till late May, the summer here starts from March and by the
2nd week of April the tourists start flowing in by that time we would have already made a
lot of brand awareness and the product would be available at every retail shop and we can
rake in a lot of sales.

Facilities equipments, and service delivery needs:

Our office is located in Gurgaon where we have ease contract with the owner where the
lease amount is Rs.30 lacs. My production machinery costs Rs.5 crores in total. The
machinery is imported from Spain and someone from their company will train some of
our employees to operate and repair the machine in case of any breakdowns.

Suppliers and transportation factors:

We have our manufacturing plant in Chamoli, and our main office and the place of
dispatch is Gurgaon. And the distance between them is 400 kilometers, and we have 2
trucks, which will be transporting the raw materials from Gurgaon to Chamoli and the
finished goods from Chamoli to Gurgaon.