THE CASE OF BOTTLED WATER

Chloe Magna Michael Mate Amit Khetan Siddharth Sahoo

11E5033 1111123 1111243 1111383

Case Background
Bottled Water Market Rs. 12 bn. market Growing at 25-30% 3 categories popular, premium and super premium Market leader Bisleri 40-45% market share Huge growth potential Aerated Drinks Market Rs. 45 bn. market Growing at 6% Coke + Pepsi market share of more than 95% High growth potential

Key Stakeholders Companies Profitability Reputation Consumers Health NGOs (CSE) Awareness Government Regulations

Bottled Water Sector

CSE

Ministry of Food & Consumer Affairs Responsible for formulation policies Established BIS in 1987 Identified 32 pesticides ; prescribed limits; 0.0001mg Argued Govt. not to adopt European standard Politically motivated

Dec 2002: Random test of bottled water using USEPA protocol Pesticides level in different brand : 7 79 times the prescribed level

Bottled Water Industry Conformed Indian standards for water Threatened legal action against CSE for the report

Water Purifiers Used it as an opportunity to promote their product Advertised impure water available in the bottle

Pesticides in Softdrinks
CSE Ministry of Food & Consumer Affairs

Aug 2003: Study on 12 soft drinks brand of Coke & Pepsi Pesticides in Excess of the European Standards Aug 2006 : Second report alleged Pepsi & Coke had 25-30 times level in 2003 Failure of Govt. to set necessary quality standards for soft drinks

Discussion on the report in JPC Investigation to suggest criteria for Safety Standards; A single regulatory authority for standards Max limit: 0.0001 mg/l; No objection certificate from Govt. under PFA Act

Consumers

Cola Companies

Public Awareness campaign Launched; partial bans on sale Seizure of Soft Drinks form bottlers Replacement of Coke & Pepsi with substitutes like juices

India : Important market for Coke & Pepsi Colas sale dipped by 10% Litigations related to sales of coke with high level of pesticide Brand image spoiled

Reaction of Cola Companies

CSE & NGOs
Contradicted validity of CSE reports & filed petition;demanded retesting CEO Coke: Alleged that COKE was used to get media attentions

Government Committed to follow the new standards No standards specified for soft drink industry; rules for water used but no specifications for final product

Cola Companies

Media Released ads & letters in media claiming the cola to be safe; assured consumers of high quality standard of the product Hired Amir Khan to reassure customers

Recommendations

Water Bottling Companies Pro-active approach : Adopt best practices and follow stricter European standards and testing methods Source of competitive advantage they would have gained market share when this issue eventually cropped up Collaboration: Worked with CSE and the government to come up with clear, quantifiable standards and measurement mechanisms Aerated drinks
Self-regulation: Coke and Pepsi had an early warning - they could have subsequently taken steps. Adopt Common Standards : Across countries instead of trying to benefit from regulatory arbitrage. The fact that they are large multinationals with a reputation to defend, they need to be extra-careful as they will always be targeted to highlight general issues which may otherwise not get coverage Damage control: longer it takes to resolve an issue, the greater the reputation damage