Hindustan Lever Ltd.’s (HLL) much-talked-about foray into the water business is not about water per se. It is about a small device called Pureit, which can be attached to the kitchen tap to purify potable water at a minimum cost. If sources are to be believed, HLL’s main aim is to make the product extremely affordable so that it remains attractive to all income groups. Sources said if HLL manages to sell the idea to consumers who are conscious about both price and health, companies selling 20-litre water jars to the. residential segment may run into rough weather. Sources also pointed out that companies in the Rs. 9,000-15,000 price band (Aqua Guard and Pentair) will not be affected much as they operate in a different segment altogether. “HLL plans to take the small metros, towns and cities so that it does not remain an urban phenomenon,” sources said. When contacted, the HLL spokesperson said, “HLL is not going to enter water, the way other companies have entered. We have a very different framework. HLL’s venture involves new patented technology solution and creation of a new business model. We hesitate to say anything further on the venture because of competitive reasons. The company has a fixed target and is exactly on course with that target. HLL is very excited with the opportunity, because of its growth potential and huge benefit to the consumer.” Industry sources said HLL stayed away from foraying into bottle water as speculated because the market is crowded and Lever as a late entrant would not enjoy the early mover advantage. The segment operates on wafer-thin margins and requires a distribution network of a different kind. Very few players are making money and Nestle pulled out completely two years ago. On the other hand, water purifiers (residential segment) are growing at 22%-25% annually. It is a Rs. 550 crore industry with AquaGuard cornering more than 50% of the market. The rest is divided among Kent RO, Pentair, Ion Exchange and others. “We have experienced healthy growth rates. The industry as a whole is growing too. Our study showed that in Delhi alone, the demand for packaged water is 60,000 litres a remaining 30,000 litres is not guaranteed. There is lot of scope for the organised industry,” said Gautam Khanna, Managing Director, Pentair Water.
(a) What is the sole objective of Hindustan Lever Ltd. entering the water purifier business?
(b) In which segment does HLL’s competitors sell their product? Will Hindustan Lever Ltd., be able to affect the business of its rivals?
(c) How will Hindustan Lever Ltd., maintain its identity and why has Hindustan Lever Ltd. not entered into the bottled water segment?
