Sustained economic growth and a growing middle class have helped drive demand for perceived healthier and higher value soft drinks, such as bottled water, in emerging markets throughout Asia. In those markets in which affluent consumers are further encouraged to drink bottled water, due to perceived unsafe domestic water supplies, multinational soft drink producers are encountering an immense opportunity. In India - one of the largest and most high profile of these markets - bottled water sales are growing by around 15% annually and yet producers are increasingly being forced to acknowledge that harnessing this opportunity will not be plain sailing.

India's bottled water industry was traditionally dominated by local producer Parle Bisleri. The leading multinational soft drink producers in the country - Coca-Cola India and PepsiCo - focused instead on their flagship carbonates, confident that emerging consumerism would fuel demand for Western brands and products. However, India - which typically boasts fairly healthy lifestyles - has been very quick to adopt the global movement towards health consciousness. Consumers benefiting from GDP growth that has averaged 7.6% annually since 2002 have been able to pursue this movement within the confines of the newly accessible packaged food and beverage market, and products like bottled water have been the main beneficiaries.

If this trend saw Coca-Cola and PepsiCo's market share decline initially, they have taken significant strides towards righting these wrongs in the past two to three years. Parle Bisleri has seen its lead slashed by the successful marketing of Coca-Cola's Kinley and PepsiCo's Aqua-Fina, while both have been joined on the market by fellow multinationals Nestlé and SABMiller and domestic major UB Group via its Kingfisher and McDowell No. 1 brands.

In Full Flow

India Bottled Water Sales - Historical Data & Forecasts

e/f = BMI estimate/forecast. Source: Trade press, Company information, Central Statistics Organsation, BMI

Increased competition and investment has further stimulated growth, and to 2012 BMI expects sales of bottled water in India to increase by an enormous 123% to $893USmn. Of course, such growth means higher exposure and increased liability to severe global criticism. Observers have been damning about the ubiquity of bottled water, many claiming it to be no healthier than local water - an argument backed by repeated plant closures due to unsafe pesticide levels - and others claiming it to be unjust that poorer consumers are left to risk their health while the middle classes can simply convert to a safe alternative.

Of course such criticism is nothing new for these industry giants; they have faced similar censure in other emerging markets, while globally they are currently dealing with an intense backlash against the environmental impact of bottled water growth. Price wars, which would improve the affordability of bottled water, only serve to exacerbate environmental criticisms, while the opposite would be true of price increases with more consumers now left exposed to supposedly unsafe local water supplies.

For multinationals and local bottled water producers alike, the best prospect of success in this emotive industry is a heavily backed corporate social responsibility programme and a guarantee that products are suitably differentiated from the widely available domestic alternative that often comes at one-hundredth of the price.