In a bid to expand their market reach, several bottled water brands have raised sales commissions for distributors. As a result, the prices of bottled water have surged as companies aim to offset additional expenses.
In certain cases, the companies don't directly benefit from the additional profits, as these gains end up in the pockets of the distributors. Yet, they have chosen to persist with the strategy in the hope that distributors will prioritise their products over others to secure commissions.
Consequently, customers are finding themselves indirectly compelled to bear extra costs. Despite the exercise of indirect market control by the firms, neither the Directorate of National Consumer Rights Protection nor the Bangladesh Competition Commission has taken any measures.
One company has called it a 'marketing strategy' while several others declined to comment on the matter.
A professor of Dhaka University’s marketing department has referred to the tactic as 'malpractice', stating that it is undermining competition in the market. He called on the Competition Commission to investigate the matter.
Consumer rights protection agencies agreed, indicating that their ability to intervene is limited to cases where products are not sold in accordance with the maximum retail price indicated on the packaging.
The Competition Commission has not taken any action in this regard so far.
“The mysterious thing is that the shopkeepers are selectively stocking only the expensive brands. Now, you cannot find a 500ml water bottle costing Tk 15 anywhere. The price of 500ml bottles of Kinley, Mum and Aquafina has increased from Tk 15 to Tk 20,” Saifuddin, a government official, said.
Despite their higher price point compared to other brands, these three 'premium' brands are gaining increased visibility in local stores.
Retailers say that the companies are essentially transferring the additional profits to them. This has sparked greater enthusiasm among them to sell pricier water bottles to bag the extra earnings.
Shopkeepers can now purchase 500ml bottles of Kinley, Aquafina, and Mum for Tk 10 each. Subsequently, they sell each bottle for Tk 20, yielding a profit of Tk 10 per bottle.
Before June of last year, distributors bought water bottles at Tk 9.37 apiece and sold them at Tk 15. Earlier, the profit used to be a little over Tk 5 taka, but now it has shot up to Tk 10.
Some wholesalers said that companies offer water bottles through different promotions and packages. Packaged water bottles are sometimes available for less than Tk 10 each. Shopkeepers subsequently sell these water bottles for less than Tk 20 each to familiar customers. This, in turn, increases the customers' confidence in the shopkeeper.
Kazi Abdul Hannan, a spokesperson for the Consumers Association of Bangladesh, said, "On one hand, the companies will raise prices, and on the other, they will try to capture the market by increasing the profit margin of local shopkeepers. This is a monopolistic strategy."
"When familiarity is established in the market, they may reduce the profit margin of local retailers.”
The cost of 500 ml Aquafina bottles had been raised to Tk 20 in accordance with the company's pricing strategy. Prior to the adjustment, local retailers enjoyed a profit margin of Tk 6.3 per bottle, which has now increased.
Other brands, such as Pran, Daily, Spa, and Mukta, are also preparing to follow in the footsteps of Mum, Kinley, and Aquafina. However, these companies have confirmed that they are making good profits at the current pricing levels.
Kamruzzaman Kamal, marketing director of Pran-RFL Group, said, “The increase in the prices of electricity and fuel has put a strain on production and distribution costs. Pran is currently monitoring the market without raising prices."
'UNFAIR PRACTICES': CALLS FOR COMPETITION COMMISSION TO INTERVENE
Dhaka University's Prof Mizanur Rahman said when the price of a product from one company increases, it opens up an opportunity for other companies to introduce the same product at a lower cost in line with economic principles.
"Some brands increasing water prices in this manner may be seen as an opportunity for other companies to capture a share of the market. Those who have not increased prices can take advantage of this situation, thus increasing competition in the market."
The Competition Commission could potentially get involved and investigate whether any unethical practices are taking place in the market, according to him.
AHM Shafiquzzaman, the director general of the Directorate of National Consumer Rights Protection, said there is no scope for the agency to intervene in the pricing strategies employed by water companies.
"However, if anyone is found to be intentionally raising commission rates across different tiers with the motive of destabilising the market, then the agency can take action."
Md Wadud Hossain, a member of the Bangladesh Trade and Tariff Commission, holds a similar view.
Commerce Secretary Tapan Kanti Ghosh, said, "If companies increase the prices of products excessively, it will reduce the demand for those products among consumers. In such cases, it is advisable to increase the supply of products that are currently priced lower in the market. In this way, higher-priced products will be cornered."
A spokesperson from the Competition Commission said they conducted a market survey on bottled water at the end of the last fiscal year. The survey revealed various inconsistencies in the pricing of water among different companies.
"There are 232 companies with licences from the BSTI to market bottled water across the country. However, only 15-20 companies have a significant presence in the market," he said.
"Although each company has varying production costs, they all charge between Tk 15-20 for a 500 ml bottle of water. The commission is considering whether any action can be taken regarding this matter."
The commission can request remedies in such cases, according to the official.
[Writing in English by Md Taif Kamal]