Water scarcity in Rajasthan threatens global beverage production and costs

Multinational beverage producers operating in Rajasthan are confronting a rising and tangible risk to production as local water supplies tighten, company disclosures and industry research show. The Thar Desert region has emerged as a focal point for intense groundwater extraction and limited piped supplies, forcing brewers and bottlers to weigh higher procurement costs, operational adjustments, and reputational risk.

Heineken’s senior director of global sustainability, Sonia Thimmiah, said, “(Water stress) is a growing issue in India.” She added that “a few years ago, water demand in some cities had come close to exceeding supply,” a warning that urban centers are reaching or have reached near capacity for municipal delivery. For companies that rely on steady, high quality water inputs, those constraints can translate quickly into production slowdowns or added expense.

Coca Cola’s 2023 water security plan states the company operates nine factories in India that are located in areas described as high or extremely high water stress. The plan also estimates that annual additional costs of procuring water could rise by between $180,000 and $2.7 million for the company, a concrete example of how scarcity translates to corporate expense lines and potential margin pressure.

These local impacts sit atop a stark national imbalance. India accounts for roughly 17 percent of the world’s population but has access to about 4 percent of global freshwater. That divergence helps explain why industrial demand is increasingly in tension with municipal and agricultural needs as the economy continues to expand.

The consequences already extend beyond beverages. Over the past decade India has lost several days of coal fired power supply because thermal plants were forced to suspend generation when water for cooling and operations ran short. That linkage highlights the systemic nature of water stress, with ripple effects for energy reliability, supply chains and manufacturing locations.

Industry level analysis points to an accelerated investment response. A Bluefield Research report titled Water for Food and Beverage Market Trends and Forecasts 2024 to 2030 projects that the food and beverage sector will invest more than $112 billion by 2030 in water infrastructure and wastewater treatment. Engineering firms summarizing that research identify India, China, Egypt and South Africa among countries already experiencing severe water stress, and they highlight production dense regions in South and Southeast Asia, Mexico and North Africa as particularly vulnerable.

Municipal priorities complicate matters for corporate users. Cities and towns generally prioritize domestic consumption, pushing industrial users toward alternative sources such as deeper groundwater and lower quality surface water. That pattern raises treatment costs, elevates operational risk and increases the potential for reputational damage when companies are perceived to compete with communities for scarce water.

For investors and corporate planners the implications are clear. Beverage companies face location specific operational risk and rising input costs that could prompt plant relocation, more capital expenditure on reuse and treatment projects, and closer engagement with municipal water planning. Policymakers confront a parallel challenge in balancing urban, agricultural and industrial needs while incentivizing private sector investment in resilient water infrastructure.

As water scarcity escalates in parts of India, the choices firms make now about sourcing, treatment and local partnerships will shape exposure to both immediate disruptions and longer term shifts in global production patterns.