Nestle India has decided to discontinue its packaged water brand, Pure Life.
In a notice to the Bombay Stock Exchange on Tuesday, the company said: "Pursuant to a review of the water business being conducted since last year, the company has assessed that the financial returns, even in the longer term, are unsatisfactory. Accordingly, Nestle India would be discontinuing the water business."
Nestle had launched its Pure Life brand in February 2001 to tap the over Rs 1,000 crore (Rs 10 billion) water market. The product was priced Rs 12 when all the other brands were priced Rs 10.
In its latest annual report, the company said Pure Life had performed below expectations and, consequently, a full review of the business category, including the business model, was being undertaken.
The main problems encountered by the brand included faulty distribution and pricing strategies. The brand did not pick up sales because of Nestle's emphasis on selling the product through the grocery channel.
Company executives also felt that the 20-litre home consumption jar was the growth engine of the business, and Nestle did not foray into that segment.
An industry expert says because of the pricing, the company could never acquire the critical mass, which became a major constraint in setting up additional manufacturing facilities in the country.
Since the company just had one manufacturing facility for Pure Life at Sambalkha in Haryana, distribution and logistics became a problem for the company.
The product was selling only in the north. The company also added that the bottled water market was extremely competitive and was witnessing depressed margins and prices. The category, therefore, requires sustained report, it added.
The brand received a further blow after the Centre for Science and Environment came out with a report earlier in the year saying that leading bottled water brands, including Pure Life, contained pesticides beyond permissible limits.
On their part, company officials added that since the water business was a very small component of the company's turnover, it will not make any dent in the business.