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Saturday, December 20, 2014

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Voltic success story – decentralized bottling in Ghana

In the early 2000s, Voltic Ghana’s leading bottled water producer faced a common problem encountered by many beverage companies in emerging markets. How to sell water to the bottom of the pyramid (BoP) with hundreds of informal vendors already selling sachets at cut throat prices? The BoP water market held significant potential, but with low prices and little brand loyalty among consumers, it was viewed as a segment with high volume but with very low value. At the time, Voltic’s focus was concentrated on higher income Ghanaians servicing high-end outlets including hotels, bars and restaurants.

Rethink the business strategy

The company clearly had to rethink its business strategy in order to compete. Voltic realized that transporting water from centralized bottling facilities to the respective markets and high traffic areas was costly. Furthermore, with smaller package sizes the transportation cost per liter would increase, as sachets (or pouches) are not really known for stowability. Poor infrastructure and transport utilization in emerging markets likely compounded the problem. So, Voltic took a radical step to decentralize its bottling through more than a dozen franchisees and in the process, brought their water product closer to the market.

Selecting the right partners & sharing cost

Franchisees are local entrepreneurs with the ability to invest and grow the business. This includes bottling (including quality control) and distribution. In this partnership, Voltic pays for just over half the capital cost, with the rest of the costs covered by the entrepreneur. Voltic and the franchisees split the operating margin.

Branding & Pricing

Voltic introduced a new brand called Cool Pac and priced it at a slight premium above the numerous informal competitors. In the BoP segment where water functions more as a commodity, Voltic changed all of that with a strong emphasis on the brand and quality. Even though Voltic outsourced bottling and distribution, the company maintains close control over all brand building activities.

Route-to-Market

The sachets are distributed using a network of informal street hawkers. Sachets (500ml) are sold to consumers for $0.03 per sachet  on a cash and carry basis. Today more than 10,000 street hawkers sell nearly 480,000 Cool Pac sachets daily.  Following Voltic’s success, in 2009 Voltic was acquired by SABMiller.

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