Tales of eau
Swallow hard before investing in Vietnam's
bottled-water market. While business is growing
rapidly, it's highly vulnerable to fluid consumer loyalties.
The latest casualty is the Laska brand, produced by a
British Virgin Islands firm, Tropical Wave. General
Director Philippe Perruchot is struggling to win back
customers after the company's licensed natural spring
suddenly dried up and a spurt of bad press suggested
that Laska was plain river water--a charge he denies.
"We have to work twice as hard as before," says
Perruchot.
But the tears shed over Laska's troubles would fill less
than a thimble in this highly competitive business, which
counts at least six major firms and more than a dozen
smaller provincial bottlers. "Some of our old customers,
who switched to Laska, are coming back to us," gloats
a sales manager for Vietnamese brand Waterman.
Six years ago, hardly anyone was drinking bottled
water in Vietnam. Now it's a mainstream beverage in
urban areas, with 93% of Hanoi residents and 79% of
Ho Chi Minh City residents guzzling large amounts of
the stuff--nearly a third of them reaching for a bottle on
a daily basis, according to a recent survey by market
research firm Taylor Nelson Sofres Vietnam. In many
offices and homes nowadays, bottled water is offered
as a courtesy to guests more readily than the traditional
green tea.
In rural areas, however, it remains a luxury at 4,500
dong (29 U.S. cents) for a half-litre bottle. The average
Vietnamese farmer would still rather haul water from his
backyard and boil it over an open fire. Further market
expansion will depend largely on growth of prosperity.
Vietnam's consumption remains paltry by international
standards, reaching an estimated 70 million litres last
year, less than one litre per person. Compare that to
three litres per person in China, 47 litres per person in
Thailand, or 150 litres per person in France. "You can
safely say that Vietnam's consumption will never go
down. It can only go up," says Robert Combee, general
manager of La Vie, a joint venture between Long An
province and France's Perrier Vittel, within the Nestle
group.
Hope springs eternal
La Vie--which has a $14 million investment in southern
Vietnam--has long been the dominant brand in the
country. Now it plans to open a new plant near Hanoi
by mid-2002. A Taiwan brand, A&B, also hopes to
migrate north after much success with a $20 million
investment in the south. Meanwhile, a popular
Vietnamese brand, Vital, will soon be available in
19-litre containers designed for water coolers--a niche
in which Laska once boasted a 40% market share,
aided by vigorous marketing through brochures and TV
spots. Most firms have concentrated on half-litre and
1.5 litre bottles, which are easy to transport and
recycle.
Tropical Wave poured $4 million into its purification
plant in northern Hai Duong province. In late 2000 the
company won a licence to tap a local natural spring that
had been flowing ceaselessly since 1967. It came as a
shock when the spring suddenly dried up in February
2001. Two months later, a suprise government
inspection produced allegations that Laska was
mislabelled as "natural spring water," instead of "purified
water" originating from the Thai Binh river.
Consumers reacted immediately to local press reports.
"There could be anything in that river," fretted one
Hanoi insurance executive, who cancelled his Laska
account at home and at work. The queasiness spread
rapidly by e-mail and word-of-mouth, though some
foreign clients remained loyal.
No one has solved the mystery of why the spring
suddenly dried up. But Perruchot insists that his bottles
were correctly labelled "natural spring water," since
they were filled with reserve stocks of water. In future,
Tropical Wave will rely on a spring in southern
Vietnam.
Luckily for Laska, the government appears to be
backpedalling a bit. Mindful that Tropical Wave is one
of just 30 sought-after foreign investors in the province,
the Hai Duong authorities recently instructed local
reporters to run positive stories about the brand.
The episode has left Perruchot weary, but not humbled.
"With all the equipment that we have, we can take any
kind of water--even toilet water--and purify it for
drinking," he says. Such statements probably won't
inspire his customers to come running back for more.
By Margot Cohen - The Far Eastern Economic Review - September 20, 2001.
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