HUL’s Pureit water biz to break even in a year
Jun 22 2011 , Mumbai
Unilever is now taking the Indian innovation to global markets
The business, started in 2004, is an Indian innovation, which its parent Unilever has now taken to other markets as well, like Indonesia and Mexico. Until HUL launched Pureit, Unilever was not in the water purification business. The Indian business, which has posted rising sales since the first year of operations, however, has lost money as it competes head on with market leader Eureka Forbes.
“We are on track with business plans for Pureit and will break even and record profits in a year’s time, and we fully expect this to become a large and substantial part of our overall business over time,” a top Hindustan Unilever official told Financial Chronicle.
In May, HUL said progress on the Pureit water business is in line with plans and a new integrated direct to home and retail distribution model has been rolled out. The company reports revenue from its water business under the omnibus heading ‘Others’, which amounted to Rs 438.03 crore on a standalone basis for fiscal year ended March 2011, up from Rs 346.72 crore in the previous year. The segment, which includes chemicals and water, recorded a higher operating loss of Rs 74.95 crore in fiscal 2010-11.
“The bottom of the pyramid market for water purification products has instead been made a bottomless market by some players. There has to be money in every proposition and we feel that there is no sense in buying market share or offering inferior products,” said Marzin R Shroff, CEO, direct sales, at Eureka Forbes.
HUL has been coming out with lower priced versions of its Pureit water purifier in response to competition from Tata Chemicals’ Swach. It’s running a promotion offering its Rs 1,200 Pureit compact water purifier at Rs 1,000. This is to take on Swach, which is priced at Rs 1,199, and Swach Smart priced at Rs 899. HUL is also running another promotional offer on Pureit from May 15, 2011 to September 30, 2011 where every promotional Pureit pack purchased will either get “Pureit free” or “Double warranty free”. The double warranty in this case would mean 12 months instead of the standard six months on the product.
“Other competitors have cut prices and used advertising and marketing to sell products. We would like to break even and make money as water is our only business. Our preference is to invest money in developing customised solutions based on the needs of the local market since water conditions differ across the country. To this end, we have set up 17 water laboratories across the country which allow us to deliver locally relevant solutions,” said Shroff.
HUL sees Pureit as an eco-friendly way of getting drinking water that is as safe as boiled water. According to the company, 80 per cent of diseases in developing countries result from unsafe drinking water. The firm estimates that 15 million Indians across three million households use Pureit. The purifier comes in multiple versions such as Classic with a 23-litre capacity priced at Rs 2,000 and Compact with a 14-litre capacity. Other versions are Autofill, which connects to a kitchen tap and shuts off when the purifier is full (price Rs 3,200) and the Marvella with a 4.5-litre capacity fully automatic purifier (price Rs 6,900).
The Tata Swach Smart, which has a 7.5-litre storage capacity, can purify 3,000 litres of water, while the Swach has a nine-litre filtered storage capacity. Tata Chemicals has so far sold four lakh units of Swach.
“Awareness generation of the need to purify drinking water before consumption is the biggest challenge in converting sales potential in this market. The market also needs more manufacturers coming out with a wider range of products at even lower price points to make them more affordable to the end consumer,” said Sabaleel Nandy, head, water purifier business, at Tata Chemicals.