US-Iran war makes bottled water costlier in India
What's the story
The ongoing conflict in Iran has led to an 11% increase in the price of bottled water in India. The rise comes as the cost of plastic bottles and caps has skyrocketed, negating the benefits of a recent GST cut on water announced by Prime Minister Narendra Modi. The Indian bottled water market, worth $5 billion, is competed for by Bisleri, Coca-Cola, Pepsi, Reliance and Tata.
Market pressure
Bisleri hikes prices by 11%
The bottled water industry is feeling the heat as rising oil prices push up the cost of polymer, a key ingredient for plastic bottles. Bisleri, India's largest player in this sector with a market share of one-third, has hiked its prices by 11%. A pack of 12 one-liter bottles now costs ₹240, up from ₹216 earlier.
Cost increase
Packaging costs surge
Angelo George, CEO of Bisleri, said the price of packaged drinking water has gone up to ₹20 per liter due to a massive spike in packaging material costs. These costs have shot up by over 70% in just two weeks. The cost of plastic bottle manufacturing material has increased by 50% to ₹170 per kilogram due to rising oil prices linked to the US-Iran conflict.
Comprehensive increase
Price of caps more than doubles
The cost of caps has more than doubled to ₹0.45 each, while even corrugated boxes, labels, and adhesive tape have become more expensive. This price surge comes after Modi's September tax reforms slashed taxes on bottled water from 18% to 5%, prompting several companies to reduce their prices. However, the recent market changes have reversed these gains for many players in the industry.
Industry response
Other companies follow suit
Other companies in the sector have also responded to these market changes by increasing their bottled water prices. Parle Agro has hiked the price of its Bailley brand by around 11%. Nayan Shah, CEO of Clear Premium Water, said he had raised retail prices by 8% to 11% due to geopolitical developments.