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Cross Subsidy Model for Bottled Drinking Water #ResponsibleMarketing

Purified water (R.O./UV) provided for FREE in PET bottles(1l/2l)! With advertisements on the label as a way to generate revenue.

Photo of Venkata Subramanian R

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Introduction:
Access to clean drinking water is amongst top challenges that developing countries like India face. Water borne diseases such as diarrhea, cholera, typhoid etc factors for a majority of deaths of children and adults. The problem is more prevalent in urban areas where increasing population and industrialization has led to depletion of water bodies and ground water contamination. Major efforts to provide access to drinking water includes municipal tap water and water purification system installed at public places. Unfortunately all the measures have limited success that is plagued by unhygienic conditions and frequent breakdowns.
Also, the technology is still limited in case of purification on the move; therefore the only mature alternative is packaged drinking water. However, cost of packaged drinking water limits many from economically poor background to buy bottled water. 

Also many packaged drinking water companies like Coca-Cola, Pepsi  are criticized for polluting and depleting local water resources. It is nonsensical and unethical to drill a hole at a selected water rich place to  quench the thirst of entire country, eventually causing permanent damage to that ecology. The more logical one could be is to utilize water locally, purify and serve.

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Product description:


The product is purified drinking water served in PET bottles, provided from water vending kiosk located at public places. Water will be locally purified, bottled and given to the customers by a kiosk vendor.

The product will be given for free to the customers. Leading industry standard purification technology, reverse osmosis,ultra filtration and UV will be employed with continuous electronic monitoring of quality of water. An important embodiment of the idea is to use label space in the bottle for advertisements via coupons, thereby generating revenue. The idea is not only to provide cheap purified drinking water but also to enrich the value to customer by giving offer coupons.

In the following rough prototype, POSEIDON is the brand name, below which there are multiple advertisements. Advertisements will be dynamically priced, that subsidizes the cost of water with a certain profit margin. The target beneficiaries of this business model includes people across the spectrum from lower class, middle and upper middle class.

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Below is the image of label wrapped around a bottle.

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There will be ample transparent area in the bottle, thereby the customer gets the sense of purity.  

How would you describe the stage of development of your idea?

  • Conceptual Development

How big or scalable is the potential of your idea?

Customer segment for purified drinking water (B2C) is typically lower to upper middle class commuters, who will hesitate to pay higher priced packaged drinking water like kinley, bisleri.
The market size of packaged drinking water in India is over ~USD 1 billion, it is growing at 15%
since 3yrs.
Customer segment for advertisements (B2B) are various industries, technology companies etc.

Primary market research suggest that, in a busy railway station like Chennai Egmore or Chennai central, there is a demand of about 3500 units; 20 such places have been identified. Therefore about ~70,000 liter of drinking water is planned to be served daily in Chennai alone. Further expansion, would be at the rate of 4 new vending kiosk a month, reaching out to other cities such as Mumbai,Delhi, Jaipur, Kolkatta etc, making it potentially highly scalable business model.

Explain the sustainability aspect of your idea

The idea focuses largely on cross subsidy model, where cost of bottled water is compensated from the revenue earned through advertisements.

The cost to make a 1l purified water in bottle costs ~Rs6.60 (considering various factors including bottle cost, rent, utilities, salary etc).

Advertisements will be dynamically priced, with a minimum price of ~Rs1.50 per advertisements, with 6 advertisements earning a minimum of Rs9.
Earning a minimum margin of Rs3.40 per bottle.
 With about estimated 3500 bottles sold a day in a kiosk, at 20 different locations in a city. It a highly profitable & financially sustainable business model.

The chief sustainable competitive advantage is the long term contracts @public places awarded by the government (3yrs), during the period rapid expansion to various stations and bus stands. And also utmost efforts to build the brand with great customer experience and service that is recognized not essentially for its low cost product. Also periodic design and product innovation will be done to keep the product fresh.

What types of financing would be required for your idea to be successful?

The project to be on ground would require initial seed capital for rent license fee, purification equipments, employee salary etc, with at least 3 months operating revenue.

In-country experience

  • Yes, for two or more years

Is your organization currently legally registered in India?

  • No

What states or districts will you target/are you targeting within India?

1.Tamil Nadu, Chennai, Sub-Urban Railway Stations
2.Delhi,Delhi Metro
3.Mumbai, Sub-urban railway stations.

Tell us a bit about yourself.

I am pursuing my masters in nanotechnology, my thesis is in development of 'Development of low cost membrane for water purification'. I was first introduced to entrepreneurship at entrepreneurship cell in university. The room was bustling with ideas & brainstorming; ranging from computer apps, rural BPOs, intelligent energy management, waste management and numerous more with people from science, engineering, management collaborating on different college startups. I was on Jagriti yatra 2015, a train voyage with 450 young thinkers for 15 days with all from diverse cultural and professional background, the stress was on social entrepreneurship as a mean to bring change in society.

I will be very interested to work on vague ideas, innovative business models that challenges the existence of traditional business

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Photo of Nandan Jäs
Team

Hello venkat, That's a brilliant revenue modal idea! hope you will make it happen soon...
Also work on the recycling part to make it much more environmental as well commercial! 
Conrgatulations in advance. 

Photo of Venkata Subramanian R
Team

Hey Nandan,
Thank you, I hopefully find a solution on how to make it environmental friendly in  these brainstorming discussions. 

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