water purifier report
DESCRIPTION
reportTRANSCRIPT
Business plan for
Whirlpool’s
innovative water
purifier product
2012
Leveraging iPerformance
WHIRLPOOL OF
INDIA LTD
A case s tudy on Commercia l water puri f ier in India
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Whirlpool, a 100 year old global leader in home appliances has also been a leader in this industry
(Rs. 30000 Cr market for white goods) in India since many years.
It is a leading player in India in Refrigerators and Washing Machines – which are also the top 2
categories in the home appliances industry.
It entered the fast growing but intensely competitive water purifier segment in 2008 with a view
to leveraging some of its key assets – a well-known brand, a wide service network of more than
700 service centres, a strong product organization that can design, source/engineer, test and
manufacture electrical appliances within a 1-2 year time span and a strong distribution network
that enabled Whirlpool products to reach more than 30000 home appliance sellers across India.
What made water purifiers lucrative was that they ensured a significant trail of revenues through
filter replacement required for each product – as high as 20-30% of initial value of the product
could be gained every year from each installation.
This strategy banked on introducing a line of RO purifiers, with low technology differentiation
but targeted at the higher end of the market and high on aesthetics, usage and convenience
features that leveraged its brand, distribution and service network. It hoped to gain advantage as
the transactions shift to buying from retail as a natural move from the more expensive and
tedious door to door selling.
After 4 years of using this strategy, Whirlpool has a market share of 3% in household purifiers
by value - far below its initial estimation. Continued prevalence of the door to door and direct to
home models of selling; intensifying competition and low differentiation in its products were
some of the key drivers.
As the Category Manager heard the MDs address to the executives urging them to focus on core
performance in each of its appliances (this was called iperformance in Whirlpoolspeak) - he
started thinking about how this would be relevant to his category. The product that gave the best
performance vis-a-vis competition was the Platinum RO purifier – a product that the company
had struggled with because of low sales – but this was a product that was most suited for
commercial applications, he wondered what go-to-market would be needed to market this
product to Commercial establishments – as the sales system in Whirlpool was used to selling to
Retail outlets that were visited by individual consumers. He also wondered if adding another
product, the UTS RO purifier would strengthen this line-up and give a low cost option to the
sales force. Another issue worth considering was whether leasing this product to restaurants for
an initial installation cost and charging them a usage fee per month, a model that was successful
in Whirlpool-Brazil, would be a right approach to use in India.
A case s tudy on Commercia l water puri f ier in India
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Background – Water Business in India
The domestic water purification appliances business in India started with the introduction of
electrical UV purifiers by Eureka Forbes in 90s, who sold it through a door to door sales
network.
Between 2000-2005 other players like Kent, Zero B, HUL launched household purifiers with
different technologies and price points and around 2008 when Whirlpool entered it had
become a 1500 Cr. Market growing at 20-25% p.a. (Refer Exhibit 1)
All major players were banking on selling a proprietary technology and so had to still use
direct to home approach to seed their technologies.
Whirlpool entered the household purifiers market with a line of purifiers based on RO
technology and chose to take the retail route for distribution. (Refer Exhibit 6)
Features of Whirlpool Platinum RO and Whirlpool UTS RO
Features Whirlpool Platinum RO Whirlpool UTS RO
Filtration Capacity 72litres/hr 14litres/hr
Certification WQA gold seal Best in class
Mounting Counter top and Wall mount Under the sink
Purification Removal up to 2500 TDS Removal up to 2500 TDS
Advantages of Whirlpool Platinum RO and Whirlpool UTS RO
Whirlpool, the global leader in Home Appliances markets the most innovative water purifier in
India- the Platinum RO Water Purifier. It is the only online RO Water Purifier in India, with an
electronic system that automatically cleans the filters and also informs the consumer when to
change the filter. With an unprecedented recovery rate of 40% and a purification rate of 72 litres
per hour, it is the most powerful and environment friendly RO Water Purifier in India. Through
its 1000 installations in high volume applications, it drives saving of 1 million litres of fresh
water every day. The Platinum RO purifier can work directly with coolers and with water
dispensing refrigerators.
Whirlpool UTS RO has best in class certifications and high aesthetic appeal with its
chrome and gold styled faucet and is ideal for pairing with modern kitchens and works as a
direct attachment with coolers and water dispensing refrigerators.
A case s tudy on Commercia l water puri f ier in India
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Business Case
Based on the facts attached in the case study suggest:
1) Three year business plan for Whirlpool commercial purifier category highlighting:
Market size estimation
Proforma P&L
2) Marketing plan for Platinum & UTS RO purifiers targeting out of home consumption
addressing
Segmentation/Targeting/Positioning
Pricing (Outright sale/Leasing/Hire purchase)
Distribution channels (Own/Franchisee/Third Party)
3) Innovative Ideas to increase adoption
Please state clearly the assumptions considered while responding to above questions.
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Exhibit 1: Water purifier technologies
Type Price range Description
Residential
Gravity fill Rs. 499-3500
Basic type of water purifier which is Non-
Electric water purifier (Non EWP). They
rely on chemicals (chlorine) and activated
carbon to kill germs.
UV Rs. 4000-8000
Electric water purifiers are perceived to be
more effective than gravity fill drip
methods. They rely on UV radiation to kill
bacteria/microbes.
RO Rs. 9000-20000
Reverse osmosis (RO) based water purifiers
is the largest segment and used in areas with
higher water salinity – it is perceived as the
best water purification technology due to its
performance – it can remove
germs/pesticides and salts.
Commercial RO/UV Rs. 22000+
For commercial usage, usually higher
capacity RO and UV plants are used; the
choice depends on salinity in water. In
areas like Delhi NCR, TN, Gujarat, Punjab
RO filtration is preferred while Mumbai
Region, Kerala where water salinity is low
UV plants are preferred.
Exhibit 2: Whirlpool Sales and service organogram
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Exhibit 3: Steps in decision making process in large organizations (staff strength > 300)
1) Felt need – During new office construction/renovation/expansion/increase in facilities
provided. Key decision makers and influencers likely to be Top Management and
Administration unit head.
2) Defining performance and cost – Executed by Administration executives with decision from
Administration Head and Top Management.
3) Sending out RFQ (Request for Proposals) in a formal organization or direct contact with
vendors in an informal organization – Short listing of candidate products/offerings by
Administration executive.
4) Finalization of product by Administration executive
5) Installation by Vendor/Service Provider
6) Post installation feedback from staff gets channelled through to Administration executives
7) Servicing by Vendor/ Service Provider
8) Decision for replacement during renovation/expansion/increase in facilities
Exhibit 4: Commercial segments
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Division by outlet Division by type Division by method of installation
Commercial outlets
Commercial (15%)
Food chain , Gyms , Restaurants,
Hospitals (70%)
Airports , Railways , Malls ,
educational inst (30%)
Commercial Type(84%)
Residential type (16%)
Counter Top/Wall Mount (98%)
Under the Sink (2%)
Residential(85%)
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Exhibit 5: Whirlpool RO vs. Competitor RO and Bottled water
Specifications
Whirlpool
PURAFRESH
PLATINUM
RO
Whirlpool
PURAFRESH
UTS RO
KENT ELITE
II ZERO B INTELLO
Image
Purification
Capacity 72 litres/ hour 14 litres/ hour 50 litres/ hour 25 litres/ hour
Dimensions
(WDH)
240*410*420
(mm)
400*200*260
(mm)
260*450*870
(mm)
445*275*410
(mm)
Purification
Capacity 5 stage 4 stage 4 stage 5 stage
TDS removal Upto 2500 Upto 2500 Upto 750 Upto 750
Certifications WQA Gold
seal NSF, USA - -
Mounting
Counter
top/Wall
mounted
Versatile Wall mount Counter Top
Warranty 1 year 1 year 1 year 1 year
In-House
Manpower
Consumption
Litre/day
No. of 20 L
jars annual#
No. of jars
5 years
Premium jar cost 5
years @ Rs. 70/20L jar
25 32 480 2400 168000
50 64 960 4800 336000
100 130 1950 9750 682500
300 400 6000 30000 2100000
Water consumption per Person per day in controlled environment of 20 -24 deg C –is 1250 ml in
8 hours.
#assuming 300 working days in a year. Jars are 20 litre packs of water sold in plastic containers.
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Platinum filter cost
Filter Cost(Rs.) Usable
upto(litres)
Flow amount
in litres/day
Neo sense 1200 7200 30
Membrane 8000 8100 15
Post carbon 1200 8100 15
Recovery rate: 50%
UTS filter cost
Filter Cost(Rs.) Usable upto(litres)
(average value)
Flow amount
in litres/day
PRE-FILTER 410 14400 60
PLUS SEDIMENT 400 10800 60
PRE-CARBON 400 14400 60
MEMBRANE 2100 5400 15
POST-CARBON 750 5400 15
Recovery rate: 25%
*Recovery rate is a measure of purified water a RO water purifier provide
Exhibit 6: Initial line of products and proportion of unit sales from 2008-2010
Whirlpool Purafresh Deluxe RO 80%
Whirlpool Purafresh Elite RO 19%
Whirlpool Purafresh Platinum RO 1%
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Exhibit 7: Report on Water purifier market in India by Adi media-Veopar journal
The water purification business in India is undergoing major changes, not just in terms of
technology, but also in terms of pricing and competition. Innovation and product differentiation
seem to be the key mantras in the business. The drivers include scarcity of clean drinking water,
low penetration of water purifiers, increasing urbanization, and waterborne diseases, while
challenges faced are the lack of standards and low awareness levels. There would be tie-ups for
enhancing distribution, increasing product portfolio, and rural expansion. Competitive landscape
identifies major players in the market. The market has also started evolving in the offline
category for consumers who do not have access to running water and electricity and at a lower
price point. With the market opening up, it is only helping a larger base of India get water
purifiers.
As per World Bank, 80% of communicable diseases in India are water related. With the
population size of 1.17 billion, only less than 15% people have access to safe drinking water. It is
estimated that about 10 million illnesses and 700,000 deaths in India could be attributed to
diarrhoea of which 400,000 are children under the age of five. Moreover, due to over
exploitation of ground water, the levels of mineral contaminants such as arsenic and fluoride in
water drawn from wells have increased dramatically.
About 50 million people in West Bengal are presently affected by arsenic poisoning while an
additional 70 million people are affected in neighbouring Bangladesh, which according to the
A case s tudy on Commercia l water puri f ier in India
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World Health Organization (WHO) is the largest mass poisoning in human history. In addition,
about 60 million people across India, mainly in Rajasthan, Gujarat, and Andhra Pradesh,
consume water with high fluoride content. Given the gravity of the situation, there is an urgent
need for deploying technologies for removing microbiological, arsenic, and fluoride
contamination from drinking water before it is consumed.
Nearly 30% of rural India has no access to safe drinking water. Awareness of health risks linked
to unsafe water is still low among the rural population. But the rising prosperity in rural India
means people may be willing to pay more for safe water. One clear indicator is the thrust that
conventional packaged water companies such as Parle, Bisleri and Coca-Cola are giving to rural
distribution.
Governments too are now willing to work with private parties. For instance, California-based
Water Health International is in the process of setting up 225 water treatment plants for
panchayat blocks in Andhra Pradesh on a build-own-operate-transfer (BOOT) basis. Water
Health will make its money from user fees.
There certainly exists an opportunity. But it is a long haul. A number of things from the business
model to community acceptance of safe water for a price have to fall into place for these
ventures to turn into stable, sustainable operations. The period and amount of returns are
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uncertain and most companies are still nascent.
As more households switch to water purifiers, there is an urgent need for stringent standards for
the equipment. In India, unlike producers of natural mineral water and packaged drinking water,
who are required to meet Bureau of Indian Standards (BIS) norms, there is no such mechanism
for ensuring safety of potable water purification devices.
Some leading consumer organizations in India observed the World Water Day in Delhi to attract
the attention of the government, policy makers, and media to ensure access to safe potable
drinking water to the citizens and take immediate steps to bring reforms in its distribution in an
equitable manner.
They believe the domestic water purifier market is aggressively marketing the chemical-based
technology to purify water, which is a serious public health issue. There is also a huge
unorganized market in India, which is misleading the consumers. There are no regulatory
mechanisms mandated to check the standard of water consumed by the ignorant and helpless
consumers.
The use of chemicals including chlorine in these purifiers should be carefully governed and
regularly monitored to ensure that the dosage is administered under safe level. Also some other
chemicals used in the cleaning process by these purifiers decompose themselves during filtration
and treatment of water and produce products which when combined with other routinely used
material can be harmful to health.
There is also a growing fear that water will be cornered by the highest bidder to be sold to those
who can afford to pay, leaving large parts of India outside the net. Does this mean that people
who cannot afford are destined not to get safe water?
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Market Dynamics
The Indian water purifier market is on a high growth trajectory. It is estimated at Rs.2000 crore
with total sales of about 5 million units. TV Veopar for the sake of total accuracy has considered
top 5 brands, which together constitute 3,627,759 numbers, estimated at Rs. 1142.44 crore. The
five brands are Aquaguard, Hindustan Unilever Limited, Kent, Zero B, and Whirlpool.
Eureka Forbes has the highest turnover in the segment, estimated at over Rs. 510 crore. It is
present in all the three categories – RO based, inline/UV based, and offline purifiers – through its
brand AquaSure.
Hindustan Unilever Limited dominates the offline water purifiers market and has some presence
in the inline category with Marvella OGT and Auto fill purifiers. Its turnover from water
purifiers division is estimated at Rs. 300 crore.
Kent with its focus primarily on the premium RO-based purifiers had a sales turnover of Rs. 240
crore in 2010-11. Kent moves ahead with its vision toward making the world a healthy and
happy family.
Ion Exchange had sales of Rs. 54.57 crore in 2010-11 from its direct sales and retail counters for
Zero B water purifiers for domestic use. The company is present in all the categories, with inline
being solar-based purifiers. Ion Exchange is a specialist and offers total water solutions for
industry, homes, and communities. Integrating process technology, design engineering, and
project management capability, Ion Exchange takes end-to-end responsibility – planning,
integrating and managing water supply, quantity, quality, discharge, and environmental fronts.
The company has provided installations for diverse industries in India and abroad, from nuclear
and thermal power plants, fertilizer, refinery, automobile, electronics, and textile industries.
Whirlpool, Tata Chemicals, Usha Brita, Bajaj, and Philips are the other aggressive brands. Many
other brands are making a foray into this segment. Some regional ones have a stronghold in their
respective areas. These include LG, IFB, Godrej, and Kelvin catering to the Delhi market; and
Gilma, Moniba, Morf, and Nasaka from the Okaya Power group, and many more in the southern
parts of India.
The Indian market has tremendous potential, which is evident from the fact that global majors in
the water purifiers segment have stepped in and are looking to increase their share of the market.
The principal players today are Hindustan Unilever, Kent RO, Eureka Forbes, Ion Exchange
(Zero B), Whirlpool, Philips, Tata Chemicals, and Usha Brita. Many regional brands are
successful in their respective geographical areas. In the years to come, many others may enter the
fray.
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The low-cost offering of high-end durables targeted at households in small towns and rural India
are the water purifiers from the house of Eureka Forbes and Hindustan Unilever. Both are
becoming increasingly popular because they are effective and affordable. Also, they do not run
on electricity or require continuous water supply and, therefore, are ideal for locations where
water and power supply is unpredictable. Other aggressive brands available in the offline
category are Kent, Zero B, Bajaj, and Tata.
The Global Scenario
The market for water purification was USD 85 billion in 2010 (only equipment and products)
and is growing on an average over 6–10 percent per year depending on the country. The highest
growth is to be expected in China with an annual growth rate of over 15 percent followed by
Brazil, South-East Asian countries, and the Middle East. The European market is generally on a
high level and is dominated by membrane technologies, accounting for approximately 50 percent
of the total market in Europe.
Breakthrough in Technology
Researchers at the North Carolina State University have developed a new material that can
remove radioactive contaminants from drinking water, a discovery that could help Japan deal
with its unfolding water crisis. The new material is made of forest by-products and crustacean
shells. The material works like foam. It absorbs water and can soak up contaminants in water and
salt from seawater. In future, the new material could be packaged in a small bag or it can be used
as a filter to clean up large areas.
As we are currently seeing in Japan, one of the major health risks posed by nuclear accidents is
radioactive iodide that dissolves in drinking water. Because it is chemically identical to non-
radioactive iodide, the human body cannot distinguish it – which is what allows it to accumulate
in thyroid and eventually lead to cancer. The newly developed material binds iodide in water and
traps it, which can then be properly disposed of without risk to humans or the environment.
Not only can the new material remove radioactive iodine, but can also strip heavy metals like
arsenic from drinking water. If the material is eventually used in disaster situations, it could help
clean water when there is no electricity source to tap. The current situation in Japan is a good
example of how this material might help clean up the water supply.
Water availability is a major issue in many parts of the world; not only drinking water demands
are increasing but also water is invaluable for the industry and community uses. Currently in
India, every company is striving to make its products available at different price brackets, thus
making it possible to provide safe drinking water to every Indian.
Based on Research conducted by TVJ in July 2011.