‘Proper laws needed for bottled water industry’
By Suresh Perera
The market has reached virtual bursting point with an avalanche of players squeezing margins amidst the looming threat to companies in the arena, who had made a substantial investment to bottle water on par with international standards, being edged out due to cut-throat competition, they warned.
"We are talking of a kind of ugly competition where some market players use street urchins to collect discarded empty plastic bottles from the Galle Face Green and other public places for re-filling to cut down on production costs", the Managing Director of a leading company in the trade said.
Buying back a used 1.5 litre bottle for one rupee from street collectors is shocking because of the health risk it poses to the unsuspecting customer, but then it’s only the tip of the iceberg of an industry in a largely sink or swim scenario, he asserted.
For each used bottle bought back, the producers save Rs. 13 which is the production cost. With a rupee paid to the collector, they save a full Rs. 12 which bolster their profits, he explained.
Of around 168 known players in the bottled drinking water market, only about 15 have received SLS certification, which offers an assurance of quality to a growing customer base left to grapple in a state of confusion with a crop of products at diverse prices.
The retail sellers of bottled drinking water are having a field day, thanks to the absence of proper regulation and supervision in the trade, and profits for them are as substantial as Rs. 20 or more per 1.5 litre bottle, depending on the brand. The retail price per bottle range from about Rs. 28 to Rs. 40.
A well-known bottled drinking water producer said the bulk price of a 1.5 litre bottle is Rs. 15/90. After production costs and overheads are taken into account, the profit per bottle is two rupees. Moreover, as discounts are also offered on commercial orders, the margins remain thin.
"Those who use a small filling plant without any safety standards and buy back empties to save on production costs certainly offer a better price and a bigger margin to traders", he said.
Unlike some years back when only foreigners and affluent Sri Lankans used bottled drinking water, the market has undergone a rapid transformation with health-conscious people from all walks of life contributing in a big measure towards its expansion, he explained.
Today anybody without any knowledge or the basic infrastructure can float a small company and start filling so-called ‘bottled drinking water’ which people take as safe and hygienic on its face value.
It could be far from that as it is an open secret in the industry that at most of these filling plants the threat of bacteria is alive as bottles are kept open for some time before sealing, the workers don’t wear gloves or uniforms and hand washing is not done, he claimed.
"What is worse is that there are no inspections at all by those in authority unless it’s a SLS-certified company which ensures rigid safety standards", he said.
Perturbed over the disturbing developments which reflect on the whole industry, some concerned producers have pressed for compulsory SLS certification to market bottled drinking water, but as a result of lobbying by those thriving in a lucrative trade by dishing out substandard products, the required regulations are still not in place, trade sources said.
"Those who fear laws to regulate the industry argue that the preparation of bread should be legally supervised to ensure hygienic standards before they turn to bottled water", they said.
Emphasising on the importance of purchasing only SLS-certified bottled drinking water, Nishantha Delgoda, Managing Director, Speed Water Systems (Pvt) Ltd., said the authorities must intervene to regulate this vital industry as it is an aspect which deals with the health of the nation.
The company which markets ‘SPEED’ bottled drinking water has made significant headway in a relatively short span and, notwithstanding the thin margins, dispensers are given free of charge more as a service to encourage people to drink safe water, he said.
He said SPEED is on line for SLS certification shortly with two inspections already completed.
Most of the trade names being used have not received official approval and certain producers resort to common names s1uch as those of countries to market their products. Unlike other products, bottled drinking water is not price marked. Hence, the arbitrary prices demanded by traders, the sources added.
"Ignoring the official refusal to register their trade names, the producers continue to remain in business as nobody in authority is interested in waking up to reality", they said.
The usage of the term ‘Mineral Water’ by some producers is misleading as no SLS certification has been given so far for this category as a certain criteria has to be fulfilled.
Delgoda said his company has applied for SLS certification in this regard as well and mineral water can be also produced for the export market if the green light is received.
Though some bottles describe the contents as "Mineral Water" and gives the components of chemicals used, it is not mineral water bottled on par with accepted specifications, he said.
There are companies which have committed a considerable investment to offer safe drinking water to the people. This mission should not be allowed to be hijacked by those who want to make a fast buck at the expense of the health of the nation, Delgoda stressed.
American Premium, Water Mart and Frosty, which launched their products in 1996, are the market leaders as the pioneers in the bottled drinking water sphere in Sri Lanka, industry officials said.
With ISO-9002 certification, Water Mart (Pvt) Ltd., also exports its products. "In local sales, the manufacturer who has a slim margin has also to bear the cost of replacing damaged 19-litre glass bottles (which averages around 200 per month) at a cost of Rs. 750 each", a senior company official said.
Declining to divulge the bulk sale price, he said supermarkets sell a 1.5 litre Water Mart bottle at Rs. 32/- but traders who are not in favour of the products being price marked keep a broad margin.
A market survey was conducted by a top multi-national beverage company in Sri Lanka to launch bottled drinking water, but the idea was shelved after it was found that the existing 100% trade margin was a disincentive for large business establishments with heavy overheads to venture into the competitive field.
"We can offer a three-rupee profit per bottle, as in the case of beverages, to the trader but certainly not the kind of shocking margins that dominate the market", a company spokesman said.
Some of the companies are supplying drinking water in glass bottles exclusively to top hotels and resorts. Some companies which have diversified into the hospitality industry have their own filling plants to meet their own requirements, industry sources said.
A spokesperson for Ole Marketing, which bottles Pepsi said there are no plans to venture into the bottled water market.
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