Soft Drinks Market in India
Executive Summary
Robust Growth Continues
The soft drinks
industry continued on its path to recovery from the low growth seen between
2005 and 2006, with higher volume growth in 2008 than that seen in 2007. The
mature sectors of bottled water, fruit/vegetable juice and carbonates saw a
dynamic year, with companies refreshing their products’ brand image and packaging
to attract new consumers. Emerging product categories, such as energy drinks
and reconstituted 100% juice, saw high double-digit growth rates, as companies
increased their products’ penetration in India. Off-trade volume growth was
slightly higher than on-trade volume growth, as convenient on-the-go packaging,
company sponsored chillers in kiranas and attractive supermarket displays
fuelled off-trade sales across the market.
Companies Reposition Their Brands and Update Product Portfolios
With the industry
back on the upward growth curve, companies refreshed their brands by
introducing new and more premium packaging designs, pack sizes and
communication campaigns. In 2008, bottled water was especially dynamic, with
all the major national brands following the cue of Bisleri’s rebranding in late
2007. Carbonates and juice drinks were also reinvigorated with new pack sizes
that targeted on-the-go consumption by young adults. With “naturally healthy”
becoming a key focus for consumers and manufacturers, fruit/vegetable drinks
companies focused their efforts on highlighting their products’ fresh fruit
content and health attributes. Companies put in motion plans to extend their
product portfolios to emerging categories such as 100% juice, energy drinks and
flavoured water.
Domestic Players Thrive
The
multinationals Coca-Cola India and PepsiCo India Holdings saw their off-trade
value shares of soft drinks in India decline over the review period, as other
national and regional players updated their brand portfolios and increased the
penetration of their brands in India. Bottled water players, such as Parle
Bisleri and Dhariwal Industries, were particularly successful in expanding
their consumer base through a concerted effort to increase their manufacturing
capacity and move to newer regions within India. Dabur India and Parle Agro
benefited from their first mover advantage in being present in high-growth
emerging product categories, such as 100% juice and other non-cola carbonates.
Modern Retailing Thrives Alongside Kiranas
With companies
increasing their spend on below-the-line marketing activities, the ubiquitous
kiranas were the beneficiaries of efforts such as branded glass door
refrigerators, regional language banners and displays, and the roll-out of
on-the-go packaging for carbonates and juice drinks. Supermarkets, which are
still something of a novelty in many small cities, continued to attract a
combination of regular grocery shoppers and young impulse buyers. Bundling and
discount promotions for fruit/vegetable juice and concentrates drove product
sampling in supermarkets. Emerging categories, such as energy drinks and RTD
tea, received a boost from impulse buyers in supermarkets, while attractive
displays and imported products in upmarket shopping centres introduced
consumers to new products, such as sports drinks and flavoured water.
Double-digit Growth Expected
With rising
consumer affluence and companies tailoring their product designs and marketing
specifically to target the young adult population group, the trend of robust
double-digit annual volume growth is expected to continue over the forecast
period. The foray of leading national players into emerging categories, such as
energy drinks and 100% juice, will help sustain high growth rates in the future.
Competition from the unorganised sector is expected to decline over the
forecast period, as the national players make a concerted effort to educate
consumers about the health benefits of packaged drinks, and move into markets
such as bulk bottled water, which are currently dominated by the unorganised
sector.
Key Trends and Developments
New Flavours Drive Product Innovation in Mature Categories
Mature product
categories, such as non-juice-based carbonates, juice drinks and concentrates
are dominated by well established brands, such as Mirinda, Fanta, Frooti and
Rasna. These brands have built sizeable brand equity over the years, and earned
consumers’ trust. The leading players have sought to bring back vibrancy to
these mature categories by extending their brands’ product portfolios with new
flavour variants. Also, in each of the categories, there is clear dominance by
the leading flavour: mango in juice drinks, orange in concentrates and lemon
and orange in non-juice-based carbonates. With a youthful consumer base that is
willing to experiment and is increasingly affluent, demand for soft drinks that
cater to a wide variety of taste preferences has increased. The increased
exposure of consumers to international products has also driven a growing thirst
to try new products. Flavour innovation offers both the familiarity of the
preferred brand and the novelty of a new drinking experience.
Current Impact
In 2007 and
2008, flavour innovation drove new product launches across mature categories
such as carbonates, juice drinks and concentrates. While in 2007, companies
experimented with local flavours, through test launches of products like
Mirinda Lemon Ginger, Masala Limca and Maaza Aam Panna, in 2008 more mainstream
flavours, such as apple and orange made inroads in product categories where
they were previously not present or were marginal. With the national roll-out
of Coca-Cola India’s Minute Maid Pulpy Orange and PepsiCo India Holding’s
Tropicana Twister Orange Thrill and Tropicana Twister Apple rush, the orange
flavour significantly increased its presence in the mango dominated juice
drinks (excluding Asian juice drinks) product category, while the mass media
blitz accompanying Tropicana Twister Apple Rush drew substantial consumer
attention to apple flavour. In late 2008, Fanta Apple by Coca-Cola India Pvt
Ltd was launched in non-juice-based carbonates, which are dominated by lemon
and orange flavours.
The increased
emphasis on non-cola flavoured products in new product launches has been
welcomed by health conscious consumers, and has allowed soft drinks companies
to move away from their association with colas, which have an unhealthy and
artificial connotation in consumers’ minds. Over the review period,
concentrates lost consumers to ready-to-drink categories, such as
fruit/vegetable juice, as the latter provide convenience as well as access to a
variety of fresh fruit flavours. However, between 2007 and 2008, the
availability of a larger variety of flavours, including traditional flavours
such as jal jeera (cumin) and aam panna (green mango), and international
flavours, such as pina colada and iced coffee, kept concentrates relevant.
Outlook
Product line
extension through flavour innovation is expected to be a continuing trend
during the forecast period, as companies are able to leverage and refresh the
brand equity of their existing brands through such innovation. Moreover, as
categories such as bottled water and 100% juice, which were very dynamic
between 2007 and 2008, mature, product line extensions are expected to become
more common than new brand launches. The emergence of functional and fortified
drinks is also expected to create room for the introduction of new flavour
variants in the forecast period.
Future Impact
New flavour
variants are expected to drive new product development in non-cola carbonates,
fruit/vegetable juice and bottled water in the forecast period. These
categories are dominated by mature brands, such as Fanta, Mirinda, Sprite,
Frooti and Bisleri. During the forecast period, companies are expected to
refresh these categories with new flavour variants, in the form of product line
extensions, as well as limited edition launches which create a buzz in the
category. Several bottled water companies are expected to introduce flavoured
and fortified bottled water as high value extensions of existing brand
portfolio. DS Foods is expected to further expand the presence of its Catch
Flavoured water products outside its stronghold in north India, to capitalise
on the demand for premium and novel products in affluent urban areas.
With the entry
of a large number of regional players and imported brands in 100% juice,
PepsiCo India and Dabur India are expected to expand their coverage of niche
fruit/vegetable flavours to retain their consumer base. Niche flavours, such as
sea-buckthorn, spinach and pomegranate, which are related to superfoods, may be
lucrative additions to soft drinks portfolios, as they can help companies to
further leverage the growing health consciousness of consumers. The
incorporation of fruit pieces such as orange pulp or pear bits to 100% juices
is also a strategy that companies can use to differentiate the taste and
enhance the flavour of their products.
Demand for
convenience and a growing taste for international products, such as iced tea
and coffee, is expected to increase the consumer base for these powder
concentrates flavours in the latter part of the forecast period. However, as a
large number of fruit and traditional flavour variants are already available in
concentrates, the scope for the introduction of new flavours is limited.
Even in emerging
categories, such as energy drinks, companies can use flavoured variants to
differentiate their offerings from the entrenched market leader, Red Bull.
Amway’s XL energy drink, which was launched in 2008 in two different fruit
flavoured variants, is expected to be able to stand out from other energy
drinks in the market which are only available in a single flavour.
Packaging Innovation Expands Consumer Base
In addition to
differentiating brands, changes in packaging have helped to expand the existing
consumer base for brands. New packaging has enabled on-the-go consumption, with
smaller volume packs, while larger packs have encouraged purchasing for at home
consumption. Pack size innovation also allows for optimisation of the price
point, which is important in India, where there are vast differences in the
purchasing power of various consumer segments. Moderating pack sizes downwards
is a way of increasing consumption in volume terms, and helps to convey the
perception of lower prices to consumers.
Current Impact
Packaging
innovation has allowed soft drinks companies to make their products more
appealing and accessible to new groups of consumers, and to alter the
consumption patterns for their leading brands. PepsiCo India and
Coca-Cola India
launched new pack sizes for their existing carbonates and juice drinks products
in 2007 and 2008.
In 2008, PepsiCo
India extended its 250ml slim can “MyCan” packaging at the Rs15/can price point
across its carbonates portfolio. This packaging has made the canned product
affordable for students who enjoy the cool factor of “popping” open a can but
cannot afford the internationally standard 330ml can, which is priced at Rs25.
Coca-Cola India launched 350ml Xpress PET bottle packaging priced at Rs15 to
create a resealable on-the-go package for consumers who stop for a drink at a
small grocery stores. Coca-Cola also launched its 1.25-litre “Fridge Pack” at
Rs35 for carbonates, which offers a lower price point compared to the 1.5-litre
bottle for Rs45. The fridge pack is also well suited to small gatherings, and
fits well in small sized refrigerators. In late 2008 Coca-Cola also test
marketed “Pocket Maaza” in a 200ml liquid carton priced at Rs12, to compete
with Frooti, Tropicana and Real cartons of the same size.
Packaging
innovations, such as the tamper proof seals introduced by Parle Bisleri for its
bulk bottled water products and the new labels introduced by PepsiCo for Aquafina
to announce its plans to be a “positive water balance” company, have improved
consumers’ trust in the brands. The new seals have improved Bisleri’s brand
equity in bulk bottled water, as counterfeiting is rampant in this sector.
Outlook
Packaging is
expected to remain a key area of innovation over the forecast period, as rising
packaging costs and changing consumer profiles will necessitate the
reconfiguration of pack sizes over the forecast period. Although recyclable
glass bottled packaging is expected to continue having a significant presence
in carbonates and juice drinks, due to its cost efficiency, with rising
affluence among Indian consumers, companies are expected to gravitate towards
internationally standard sizes for PET bottles and cans in mature sectors like
carbonates, juice drinks and bottled water.
Future Impact
Companies are
expected to continue to use new packaging as a tool to attract new consumers
and to reposition their products for different usage occasions in the forecast
period. Tamper proof seals are expected to become standard for national and
regional players who wish to carve out a significant presence in the bulk water
market, which is home to many counterfeiters. 500ml PET bottles of water are
also expected to become a common standard for targeting on-the-go consumers.
Companies are expected to use small pack sizes, such as 200-300ml, to launch
products in nascent categories such as flavoured water and sports drinks, as
the high prices are expected to be deterrent for consumers who are as yet
unfamiliar with these products.
Rise of New Premium Product Segments
In soft drinks
in India there is generally very little differentiation in terms of economy,
standard and premium products within sectors. However, some product categories,
such as energy drinks in functional drinks, 100% juice in fruit/vegetable juice
and mineral water in bottled water, are considered as premium segments because
of their relatively high price points and affluent consumer base. With rising
consumer affluence and increased consumer willingness to pay more for health
and wellness products, the premium products segments in various sectors has
received a boost. With higher disposable incomes, young adults are also more
open to impulse purchases and experimentation. With greater demand for products
with a premium positioning in terms of quality, brand image and packaging,
companies are adding premium soft drinks to their portfolios.
Current Impact
Companies
expanded their presence in the premium product segments in 2008. An increased
focus on high price categories, such as energy drinks and 100% juice, was
evident in the entry of PepsiCo India into energy drinks, with SoBe Adrenaline
Rush, and Parle Agro in 100% juice, with Saint Juice. While 100% juice itself
is a premium category in fruit/vegetable juice, Saint Juice is priced higher
than the leading brands Real and Tropicana, in a bid to differentiate it as a
healthy product that is targeted as those who prize purity and natural
goodness.
New product launches
and product re-positionings in 2008 boosted the presence of premium products in
India. Parle Agro relaunched Appy Fizz with a new look and communication
campaign that highlights its premium image and positions it as a hip
alternative to alcoholic drinks at parties. Appy Fizz is the only notable
juice-based carbonate brand in India, and is priced about 35-50% higher than
non-juice-based carbonates. Qua mineral water, launched by The Narang group in
2008, has a more premium positioning than other national mineral water brands.
With its slightly higher price point, distinctive bottle shape and French
copywriting on the label, it aspires to be seen as a suitable substitute for
Evian. These premium products currently cater to an extremely niche audience, and
the masses still crave for greater affordability in standard products such as
carbonates and juice drinks. However, their high profile launches and their
visibility on the supermarket shelves are expected to elevate these premium
products to an aspirational status and give them a lucrative first mover
advantage. The entry of domestic players in premium categories, which were
previously dominated by imported foreign brands, also attests to the immense
potential of premium products in India.
Outlook
The expansion of
the premium products segments is expected to pick up pace over the forecast
period, as consumer spending power increases. With growing consumer familiarity
with international markets, the demand for premium products is expected to
increase and the consumer base for niche premium products is expected to grow.
The increasing concerns about health and wellness are also going to create
demand for premium products in the future.
Future Impact
As volume growth
slows in the forecast period, companies are expected to continue premiumising
their product portfolios to tap into the high value segments for additional
growth. Bottled water companies, including Parle Bisleri and Coca-Cola India,
are expected to move into flavoured water, while fruit/vegetable juice
companies are expected to experiment with products fortified with
anti-oxidants, vitamins and protein. More domestic and multinational companies
are expected to enter categories such as other non-cola carbonates, energy
drinks, RTD coffee and juice-based carbonates, which have premium price points
and currently a negligible or nascent market in India. Companies are also
expected to premiumise their existing brands with premium packaging and premium
brand extensions. Companies could also explore the route of foraying into soft
drinks retail to create a premium experience for consumers. This strategy has
been successfully implemented by alcoholic drinks and hot drinks players
including United Spirits Ltd and Tata Tea Ltd. Coca-Cola India has already started
experimenting with a retail lounge format for its “Red Zone” concept in 2007
and 2008.
The emergence of
upscale supermarkets, which increasingly stock imported premium brands, will
also fuel the growth of premium soft drinks segments. However, the emergence of
some premium categories which depend upon the development of large-scale cold
chain infrastructure, such as not-from-concentrate 100% juice and smoothies, is
expected to be slow or non-existent over the forecast period.
Focus on Young Adults Sharpens
With a growing
economy and the boom in the IT and BPO sectors, the youth category aged 18-28
years has seen a rise in disposable incomes and increased exposure to
international trends. This population segment is increasingly flexing its
muscles in the Indian soft drinks market and driving the growth in emerging
categories, such as RTD tea and energy drinks. The leading soft drinks players
are shifting their focus from market penetration to market segmentation, and
are implementing product, packaging and communication strategies specifically
to target this group.
Current Impact
New product
launches, brand repositioning and new communication campaigns have all seen an
increased emphasis on specifically targeting the upwardly mobile young adult
population in urban and semi-urban areas. Growing demand from this consumer
group is driving the high double-digit growth rates in energy drinks and RTD
tea. Energy drinks sales are primarily through impulse buys at supermarkets and
experimentation with cocktails at pubs and clubs. Recognising the importance of
this group, companies have positioned their new launches in other products to
target this group. In 2008, Balan Natural Foods Pvt Ltd launched its orange
juice drink brand Jossh with the tagline “Jossh at 20” (“enthusiasm at 20”),
and is specifically promoting its products on college and IT campuses. Several
bottled water brands, including Kinley and Bailley, underwent rebranding to
introduce new curvy bottle shapes and new communication campaigns in 2008. The
hip, seductive, unabashed and tongue-in-cheek image of this age group was also
mirrored in the ongoing Pepsi MyCan campaign, and in the new communication
material for juice drink Slice, which had the tagline “Aamsutra”
(“mango-sutra”), and Appy Fizz, which had the tagline “A cool drink to hang out
with”.
Outlook
Urbanisation,
the increasing flow of rural and small town young people to IT and BPO
campuses, and the growing reach of cable TV and the Internet in semi-urban
areas is expected to make the young adult group more homogeneous and cohesive
in the forecast period. As the median age of the Indian population is expected
to be just under 25 years over the forecast period, companies’ focus on the
young adult age group is expected to intensify. This group’s increasing
exposure to international products is also going to make it a testing ground
for new launches.
Future Impact
With carbonates,
juice drinks and bottled water reaching maturity, segmentation of the consumer
base is going to be a key focus for driving growth among soft drinks players.
Young adults are expected to drive trials in nascent product categories, such
as sports drinks, RTD coffee and flavoured water over the forecast period.
Social marketing campaigns specifically tailored to this group, similar to the
voter registration initiative undertaken by hot drinks company Tata Tea Ltd,
will also provide companies with an opportunity to create a positive image
among this large population segment at an early age.
Companies are
also expected to introduce foreign brands from their international portfolios
in India, as this consumer group is expected to become more aware of the
products available in international markets. The focus on this group is
expected to contribute significantly to premiumisation in the soft drinks
industry, due to their ability and willingness to spend on products like energy
drinks and flavoured/fortified water that exude an upmarket image. However,
products with a mass appeal, such as carbonates and juice drinks, will continue
to face the challenge of hitting a price point which strikes a compromise
between the premium image of the product, because of its
packaging/communication, and the affordability of the product to youngsters
under 25 years of age who are not yet earning.
Regional Players Start To Emerge in A Market Dominated by National Players
While domestic
and multinational players dominate soft drinks in India, regional players have
several advantages over national players in their local markets. They have first-hand
knowledge of local consumer preferences, they often enjoy greater fiscal
benefits and they incur lower costs on overheads, such as transportation and
warehousing. Regional players are increasingly leveraging these advantages to
foray into product categories which have been strongholds for the leading
national players, such as carbonates and fruit/vegetable juice, and emerging
product categories, such as energy drinks.
Current Impact
While regional
players’ brands have long had a strong presence in bottled water, because of
their lower price points, their presence has increased in other product
categories, including carbonates, fruit/vegetable juice and energy drinks. Such
players generally have a very small presence in India, which is often restricted
to a couple of states or even a few cities within a state. Their cheaper
packaging and lower price points give these brands the image of economy brands.
Often, a large proportion of such companies’ sales is attributable to
institutional sales to other manufacturers, the hospitality sector, or to
exports of soft drinks raw materials, such as fruit pulp and syrups. Golden Dew
Inc, which is a syrups and flavourings player, markets Pop Digestive Jeera
Drink (which is based on a traditional digestive drink made with cumin) in
other non-cola carbonates, and Mekkeh Cola in cola carbonates in the Delhi NCR
region.
Regional
companies, such as North-based Hello Mineral Water Pvt Ltd – a bulk bottled
water player, and South-based Balan Natural Foods Pvt Ltd – a 100% juice
player, made their presence felt in juice drinks with their Hello and Jossh
brands, respectively. In 2008, regional players continued expanding the
presence of their existing brands in bottled water and 100% juice to other
regions. North-based DS Foods expanded the presence of Catch flavoured water in
the major cities. The off-trade value share of West-based regional player
Dhariwal Industries Ltd grew by 26%, as it continued to expand its distribution
in South India. Balan Natural Foods Pvt Ltd also continued to expand its
presence in neighbouring regions, to include Orissa and Goa. Energy Beverages
Pvt Ltd, a regional player based in the West, also expanded the presence of its
brand Current in the North and South.
Outlook
With national
players aggressively expanding their distribution networks and marketing
coverage, the presence of regional players is expected to remain limited over
the forecast period. National players also have a significant first-mover
advantage, with several well entrenched brands in soft drinks.
Future Impact
While the
presence of multinationals, with behemoth brands like Pepsi, Thums Up and
Limca, and extremely deep pockets, is expected to hamper the expansion of
regional players in cola, orange and lime/lemon carbonates, there is scope for
regional players to introduce traditional and local flavours, such as jal
jeera, kala khatta and kokum in other non-cola carbonates.
The number of
regional players is also expected to rise in sectors such as bottled water and
fruit/vegetable juice, where the barriers to entry are lower. The presence of a
large unorganised sector dealing in agricultural products, such as fruit pulp,
will drive an increase in the number of fruit/vegetable drinks players in the
forecast period. The ability of regional players in fruit/vegetable juice to be
able to offer lower priced products and discounts to retailers, resulting in
higher trade margins, will also help them to increase the penetration of their
products in their own regions. Regional hot drinks players, such as Wagh Bakri,
are expected to foray into RTD tea and coffee over the forecast period.
Regional players are expected to continue to dominate bulk bottled water,
because of their ability to offer low prices and free home delivery.
Territory Key Trends and Developments
East and Northeast India
Trends
·
Off-trade sales of soft drinks
in East and Northeast India grew by almost 11% in current value terms in 2008,
to reach Rs10,634 million. The region accounted for 11% of national off-trade
value sales of soft drinks in 2008. Being smaller and less affluent, this
region has a smaller consumer base for soft drinks than other regions. Low
temperatures in the mountainous areas and poor infrastructure for transport in
the northeast region are also significant challenges for the future development
of the soft drinks industry.
·
However, urban areas saw a rise
in disposable incomes over the review period, and the lack of dependable
infrastructure has created demand for bottled water, especially bulk bottled
water.
·
Functional drinks showed the
highest off-trade value growth in 2008, of 56%, as they are growing from a very
small base. Energy drinks emerged as popular among students in the urban areas
of Kolkata and Patna.
·
Concentrates and cola carbonates
saw the lowest growth rates, as these are mature product categories, and growth
has slowed with the slowdown in the addition of new consumers. After the
pesticides controversy of 2006, the Kolkata Municipal Corporation is setting up
its own infrastructure to test for presence of contaminants in soft drinks and
public water supplies.
Competitive landscape
·
East and Northeast India is not
as attractive a region for soft drink manufacturers as the rest of the country.
The comparatively low purchasing power of the people in the region, coupled
with the political problems in the Northeast, mean that soft drinks
manufacturers are not focused on East and Northeast India. Distribution costs
in the region are high, which leads many players to shy away from building up
any presence for their brands in the region. With many of the Northeastern
states remote and inaccessible, unbranded and unpackaged soft drinks abound in
the region.
·
Mother Dairy Calcutta Ltd is
one of the leading companies from this region, with its bottled water
commanding significant sales in Kolkata. Regional players, such as Tashi Group,
with its Druk range of concentrates and juices, command good brand recall and
sales in the region. The fast-growing fruit/vegetable juice sector has seen the
entrance of local players, such as Priya Laboratories Pvt Ltd, with its brand
Priya Yours.
·
Another regional player,
Ralli’s has its own retail stores in Kolkata, where consumers enjoy the RTD
format of its concentrates, along with other savouries. The Ralli’s brand is
available in both its own retail outlets as well as other stores, such as
independent food stores and supermarkets.
·
While major national players,
such as Coca-Cola India, have several manufacturing locations in this region,
their marketing activities are rarely focused entirely on this region.
Prospects
·
East and Northeast India is
expected to post strong off-trade constant value growth over the forecast
period; however, this will lag behind other regions, as the income levels
amongst the majority of consumers will remain far behind those of their
counterparts in other regions. The unorganised channel will also pose
competition to organised sales of soft drinks, with fruit/vegetable juice
particularly affected, due to the numerous street vendors selling unbranded
fresh juice at much lower prices than packaged and branded juice.
·
Fruit/vegetable juice and
bottled water is likely to continue to outperform carbonates, as health
awareness grows and regional players expand their footprint. Fruit/vegetable juice
sales will grow mostly at the expense of carbonated soft drinks. Bottled water
growth is likely to be mostly in urban areas, due to the shortage of safe
sources of drinking water.
North India
Trends
·
Off-trade sales of soft drinks
in North India grew by almost 15% in current value terms in 2008, to reach
Rs32,647 million. The region accounted for 35% of national off-trade value
sales of soft drinks in 2008. With a severe summer season in most of this
region, soft drinks sales have a strong seasonality. As the region includes
many well developed cities, such as Jaipur, Delhi and Chandigarh, the consumer
base is relatively prosperous and widely exposed to premium and international
products.
·
In North India, soft drinks
continued to experience a gradual shift from carbonates to products such as
fruit/vegetable juices in 2008, as a large number of consumers are looking for
healthy options. In modern retail outlets, fruit/vegetable juice occupy more
shelf space than any other product category, giving consumers a wide assortment
to choose from. The gap between supply and demand for tap water has further
boosted the demand for bottled water. Urban areas, where the influence of
Western culture, tourists and health consciousness are more prevalent among
consumers, are driving demand for bottled water.
·
The development of modern
retail distribution channels, in the form of supermarkets and hypermarkets, in
Delhi, NCR (National Capital Region) and in the big cities of North India, such
as Chandigarh, Lucknow and Kanpur, means they have become important sales
outlets for soft drinks. These cities are also important markets due to
urbanisation and infrastructure development, with consumers more likely to
experiment with and adapt to new tastes and flavours. Impulse purchases of
energy drinks, sports drinks and premium mineral water are high.
Competitive landscape
·
Soft drinks companies have
added new variants to their existing brands, offering new flavours, and
attractive and low-priced packaging. Being a key region for national players,
most new product launches see intense marketing efforts being focused here.
National player Dabur India derives a large proportion of its sales from North
India
·
In order to stay on top of the
competition, players are introducing new types of packaging to refresh their
brands’ look in the market. PET bottles, cans and tetra packs are the favoured
packaging types in the region, while glass bottles continue to cater to the
price conscious. PepsiCo India Holdings introduced Tropicana Twister in
returnable glass bottles to target busy young consumers, while Coca-Cola India
launched Pocket Maaza to lure on-the-go consumers.
·
Coca-Cola India has continued
to be the market leader in soft drinks in North India, and by setting up a new
manufacturing plant for Maaza and Minute Maid in Punjab it has increased its
penetration of the fruit/vegetable juice sector, which is dominated by Dabur
India.
·
Regional players, such as
premium bottled water player DS Foods and fruit/vegetable juice player Surya
Foods, expanded their presence outside of North India in 2008.
Prospects
·
The off-trade soft drinks
market in North India is projected to grow at a CAGR of 12% in constant value
terms over the forecast period, with fruit/vegetable juice and bottled water
the major growth drivers. The emerging subsector of energy drinks is expected
to ride a wave of new product launches and product sampling. The use of energy
drinks as mixers in on-trade outlets is expected to drive on-trade functional
drinks volume sales over the forecast period.
·
Changing lifestyles, increasing
disposable incomes and the nuclear family trend in Delhi, NCR, Lucknow, Kanpur,
Ludhiana, Dehradun and other big cities are among the key socioeconomic factors
drivers of future growth. The convenience of packaged fruit/vegetable juice
over freshly squeezed juice will help drive growth in the sector, as packaged
fruit/vegetable juice consumption is well suited to busy lifestyles. RTD tea is
also expected to increase its share, as it offers a different taste and flavour
to consumers who are looking for alternatives to carbonates.
·
The reliance on packaged water
will increase both at home and on-the-go, as consumers remain concerned about
drinking tap water, which is considered to be polluted in cities, as well as in
smaller towns. This region is expected to be a testing ground for the launch of
flavoured bottled water products by companies, as consumers here are familiar
with the product category.
South India
Trends
·
Off-trade sales of soft drinks
in South India grew by 14% in current value terms in 2008, to reach Rs21,046
million. The region accounted for 23% of national off-trade value sales of soft
drinks in 2008. With a hot and humid climate almost all year long, this region
is a crucial market for soft drinks.
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Consumers in South India are
particularly partial to natural and fruity flavours, such as orange. While
lemon is a popular flavour in North India and West India, orange is a prominent
flavour in South India. Regional player Balan Natural Foods launched Jossh – an
orange juice drink – in Bangalore in 2008. With its IT-driven towns teeming
with young people from all over India, the region is also a preferred launch
pad for many new product launches and test marketing exercises. Newly launched
product Fanta Apple was retailed across 35,000 outlets in Andhra Pradesh and
Tamil Nadu before the national roll-out.
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The shortage of water is
acutely felt in South India, due to the hot climate, and the poor state of
municipal infrastructure in cities such as Chennai further compounds the
situation. Institutional sales of bottled water are very high in the region,
due to the number of IT and BPO offices, especially in the cities of Bangalore,
Hyderabad and Chennai. The massive demand for home/office delivery of bottled water
makes the bottled water industry very competitive in the region. With consumers
viewing bottled water as a commodity, they are price-conscious and switch
brands in order to get a bargain.
Competitive landscape
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Regional brands are prominent
in bottled water in South India. Kingfisher and McDowell are leading bottled
water brands in Karnataka. Several regional companies, such as Crystal Aqua Inc
and Kalathur Foods & Beverages Pvt Ltd, control the bulk bottled water
market in South India, and the unorganised sector also has a substantial
presence.
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The use of regional celebrities
in advertising and promoting soft drinks is on the rise. Regional celebrities
are increasingly being employed by multinational companies and domestic players
in order to connect to the consumers in the region. Godrej Hershey Foods
deployed below-the-line marketing material for its XS nectars brand, such as
posters in kiranas in various regional languages, including Telugu, Tamil and
Kannada.
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Regional companies, such as
Balan Natural Food, which introduced Jossh in Bangalore, and Vega Agritech
& Impex Private Ltd, which imports Middle Eastern juice drinks brand Rani
Float, have a strong presence alongside national brands in fruit/vegetable
juice. Within fruit/vegetable juices, Tropicana is more popular in South India
than Dabur, which is the leading national player.
Prospects
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Over the forecast period,
off-trade value sales of soft drinks in South India are expected to grow at a
CAGR of 11%, behind the growth rates in North and West India. With young people
from all over India migrating to the cities of South India, attracted by the IT
boom, the preference for packaged soft drinks over unpackaged soft drinks is
expected to become more prevalent. The rising incomes, urbanisation and growing
penetration of modern trade in the smaller towns is also expected to contribute
to the double-digit annual growth rates in the forecast period.
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Growth in on-trade and
supermarket sales of soft drinks is expected to develop significantly in South
India over the forecast period. Since any growth is from a relatively small
base, the rate of growth in the on-trade channel and supermarkets is expected
to be fairly high. On-trade sales of soft drinks will benefit from consumers
eating out more often, as their busy lifestyles leave them with less time to
prepare food and drink at home. At the same time, supermarket retailing will
allow manufacturers and retailers to stock premium soft drinks for home
consumption.
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The youth-centric population,
which is experimental and casual in its attitude towards spending, and the
regions’ popularity with companies as a testing ground for new product is
expected to drive the growth of emerging product categories. With the region’s
preference for coffee over tea, RTD tea is expected to emerge faster in this
region than in others as these younger consumers will accept iced tea as they
are not as strongly tied to the notion of hot tea.
West India
Trends
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Off-trade sales of soft drinks
in West India grew by 15% in current value terms in 2008, to reach Rs28,435
million. The region accounted for 31% of national off-trade value sales of soft
drinks in 2008 and was the second largest region for soft drinks consumption,
behind North India. This region is affluent and highly urbanised, and has a
more developed market than other regions for mature as well as emerging product
categories.
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Consumers in West India,
especially in the major cities, such as Mumbai, have to travel long distances
on the local trains. With the hot climate of the region, consumers on-the-move
look for beverages for refreshment. While sales of unpackaged lemonade and
water were quite prevalent over the review period, packaged juice drinks and
bottled water are becoming increasingly popular, as these are priced comparatively
cheaply and carry the assurance of food safety.
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The presence of premium
supermarkets/hypermarkets in this region has exposed consumers to many imported
soft drinks brands. For example, HyperCity in Mumbai imports Tango from the UK.
Consumers’ awareness of their own high-stress lifestyles and a growing emphasis
on health and wellness has also seen a growing preference for natural
alternatives to carbonates, and this has benefited 100% juices and bottled
water.
Competitive landscape
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Coca-Cola India Pvt Ltd and
PepsiCo India Holdings Pvt Ltd are the leading players in soft drinks in West
India. Due to their leadership in carbonates and strong positions in
fruit/vegetable juice and bottled water, these two players maintained their
leadership in the market. Parle Bisleri Ltd and Dabur India Ltd follow, with
their smaller product portfolios.
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Regional players have a small
presence, as the region is a major focus for national players. Some regional
players occupy flavour niches, such as Rogers Ltd, which offers a raspberry
flavoured carbonate. This is usually associated with the niche eateries serving
the cuisine of the Parsi community. There are also regional players in bottled
water, and there are many importers which serve the region, such as V Pearl Health
Foods Pvt Ltd, which imports the Middle Eastern juice and nectars brand Safa.
Gujarat-based bottled water player Dhariwal Industries is slowly expanding its
penetration within West India, as well as the neighbouring states. GCMMF, the
regional dairy cooperative, is currently marketing its whey-based sports drink
brand, Stamina, in this region.
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Within concentrates, there are
a number of regional players present. Of these, Mapro Foods Pvt Ltd, Manama,
Mala’s and Guruji’s are strong in the region. The product portfolios of these
players are focused primarily on the consumer preferences of people in the
region, with flavours such as khus khus (poppy seeds), alphonso mango, thandai
(almond, spices, milk and sugar) and aam panna (green mango) appealing to consumers
in the region. Pioma Industries Ltd, with its origins in Gujarat, has gone on
to become the leading player in concentrates nationally.
Prospects
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Off-trade value sales of soft
drinks in West India are expected to grow at a CAGR of 12% over the forecast
period, spurred by growing demand for packaged and branded soft drinks. With
the widespread presence of shopping centres and an educated consumer base in
cities such as Mumbai, Pune and Ahmedabad, companies are expected to expand
their presence in new distribution channels, such as vending machines.
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With cosmopolitan areas like
Mumbai, Pune and Goa having high exposure to international pop culture,
international trends, brands and product categories are expected to catch on
sooner in this region than in others. The trendy young people here are expected
to drive the growth of nascent sectors, such as sports drinks and RTD tea and
coffee. The growing number of gym chains in this region is expected to provide
a lucrative channel for the marketing of sports drinks.
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Soft drinks growth is expected
to be driven by health-oriented products, such as 100% fruit/vegetable juices,
over the forecast period. The growing health trend, as well as the unhealthy
image of carbonates is expected to drive growth in bottled water, RTD tea and
fruit/vegetable juice.
Rural Vs Urban Key Trends and Developments
Trends
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Rural sales accounted for 17%
of off-trade volume sales of soft drinks in India in 2008. The reach of soft
drinks in rural India is limited by poverty and a lack of infrastructure for
the establishment of a distribution network. With rural India being mainly
agricultural, there is an abundance of fresh fruit, and drinks are prepared
from freshly squeezed fruit or with traditional recipes from preserved
ingredients. such as green mangoes and kokum. However, with the expanding reach
of television and growing affluence, awareness of packaged soft drinks has
grown, and the aspirational quality of products associated with film and
cricket celebrities has driven growth in rural India.
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Carbonates have the highest
penetration in rural India, as they have low price points. Carbonates are
followed by concentrates in terms of penetration, as concentrates provide a
cheap means of providing refreshment at gatherings and weddings. Juice drinks,
such as Frooti and Maaza, which are also low-priced, are popular because of
their mango flavour, which is a favourite in both rural and urban areas. Demand
for 100% juices is mainly urban, as these products are priced out of the reach
of rural consumers. While urban Indians have been quick to adopt packaged
juices because of health concerns and busy lifestyles, the product’s attribute
of convenience has less relevance for rural consumers, where almost all food
and drink products are freshly home-made or bought from unorganised players.
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Functional drinks and RTD tea
are completely urban in terms of demand and availability. These are niche
sectors with very specific demand in small pockets of urban areas. Even within
urban areas, these products cater to upmarket, high-income consumers. As such,
these products are not available across the grocery distribution network in the
way that carbonates are, but are mostly sold in health food stores,
supermarkets and convenience stores, which are typically frequented by the
target consumer group.
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Among the ready-to-drink
beverages, bottled water has the highest rural off-trade volume sales. Due to a
lack of reliable water supplies, bulk bottled water delivery, which is
available cheaply from regional and unorganised players, is often purchased for
weddings and celebrations, thus a peak in demand for bottled water in the rural
areas coincides with the wedding season.
Competitive landscape
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While leading soft drinks
players Coca-Cola India and PepsiCo India Holdings focus their marketing
efforts on the urban areas, their low-priced carbonates in glass bottles have a
good reach in the rural areas as well. Their recent packaging innovations, such
as PepsiCo India’s “MyCan” and Coca-Cola India’s “Xpress” bottle and “Fridge
pack”, have been targeted at urban young people. Both companies are engaged in
corporate social responsibility (CSR) activities in rural areas, where they
promote sustainable agriculture and water conservation.
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Companies in emerging
categories, such as 100% juice and energy drinks, also focus their efforts on
urban areas, as demand for these premium products is most pronounced in these
areas.
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Pioma Industries Ltd has
introduced a number of smaller single-serve packs of concentrates in rural
areas, such as Rasna Ek Ka Do. One of the primary reasons why Pioma Industries
is looking to increase rural penetration is its decreasing sales in urban
areas, as it faces stiff competition from other soft drinks which are available
in RTD format. Moreover, single-serve concentrates priced at Rs2 and Rs3 are
much more affordable than other soft drinks, where a single-serve 200ml RTD
offering is typically priced at Rs10.
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In rural areas, there is
significant competition from the unorganised sector, such as unpackaged drinks
vendors, due to the high prices and low distribution penetration of packaged
soft drinks.
Prospects
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Rising disposable incomes,
growing awareness of the health risks of contaminated food and water products,
and exposure to urban lifestyles through travel is creating favourable
conditions for increasing the presence of soft drinks in rural India during the
forecast period. However, urban areas will continue to be the drivers of
growth. With distribution costs in rural areas remaining high and significant
competition from the unorganised sector, it will be tough for manufacturers to
penetrate rural areas.
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Carbonates will continue to
have the highest penetration in rural areas, due to their mass appeal and low
price points. As incomes rise in rural areas, bulk bottled water is also
expected to benefit, as drinking water supplies are a fundamental human need
and infrastructure development in India continues to lag behind as rural
Indians lift themselves out of poverty.
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With new product launches
becoming increasingly tailored to target urban young people, companies will
have to develop different strategies to drive rural growth. Regional language
marketing, easy to read labelling and rugged, transport-friendly packaging will
be key to expanding companies’ footprints in rural India.
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Nascent product categories,
such as energy drinks and RTD tea, and sales of premium products will continue
to be driven by urban areas in the forecast period.
