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FMCG: Shaken & Stirred
Businessworld.in, 31 March, 2017


The new entrants and the existing players in the beverage industry are set to outdo each other in the business of quenching thirst

Temperature in western odisha’s Titlagarh town in Bolangir district hits nearly 50 degrees during peak summer. Enter any inter-city train in that geography, and you can see juice and cola sellers making maximum sales. Although the rest of India doesn’t sizzle as much as the tony Odisha town, the verdict is already out— there is no escaping summer. Call it climate change or even a low threshold to tolerate the heat, the situation is slated to work well for the $10-billion Indian beverage industry this summer. Innovative drinks and desi flavours (kokum, for one) in juices are finding place on the shelves despite aggressive marketing of existing brands. For instance, the quintessential Frooti will soon have a fizzy version. Parle Agro’s Frooti, launched 32 years ago, is launching Frooti Fizz, the first brand extension for the popular mango drink. Frooti still makes for more than 60 per cent of the company’s sales.

Sure, carbonated and aerated drinks market (Read: Coca-Cola and Pepsi) still dominate the beverages market. As per India Carbonated Drinks Market Overview, aerated drinks account for more than 40 per cent of the total non-alcoholic beverages market in India. However, these drinks are slowly being nudged off the prime time shelf space by indigenous companies such as Dabur India, DS Group, Hector Beverages and Hamdard India, who are out to capture the market with their juices and beverage drinks by gratifying the local palate and playing the ‘healthy and desi’ card. “This year, we are even more confident of making a stronger imprint in the market with newer products,” says Parvesh Debuka, Marketing Head, Hector Beverages which sells Paper Boat, a non-aerated, ready-to-drink juice. “We are aiming to make more strides in the general trade, which is an impulse market, and go full speed ahead with our sampling and promotional activities in modern trade where more stores are opening,” he says. Is Debuka being over ambitious? Not really. The enthusiasm seems contagious. While announcing the launch of Frooti Fizz, Nadia Chauhan, joint MD and CMO, Parle Agro, added that the company has set for itself the target of increasing annual revenue to Rs 5,000 crore by 2018, from Rs 2,800 crore now.

Currency Crisis

Last year, demonetisation hit the sales of the Rs 14,500-crore soft drinks market. A Coca-Cola India spokesperson says the company expects the short-term disruptions of demonetisation to tail off in 2017. Beyond this, the cola giant plans to leverage the full expanse of its portfolio this summer, which includes several new products including diets and light drinks — Coca-Cola Zero, Sprite Zero, Diet Coke, Aquarius, Fuze Tea and VIO.

Despite advertisements with social messages, several brands in the Indian market including Thums Up, Coca-Cola, and Mirinda have shown a slowdown in growth. Adverse effects of excessive sugar-based drinks is also working against these brands. “Social media campaigns crying hoarse that chemicals and preservatives in aerated drinks have proven harmful to people are responsible for the declining sales of the carbonated drinks in the Indian market,” says Abraham Koshy, a professor of Marketing at IIM Ahmedabad.

To counter these challenges, the makers of carbonated drinks are bringing new local flavours and low-sugar diet drinks into the market in the hope they will boost growth. However, these brands will have to go the extra mile to convince the consumers. “Local players such as Hamdard and DS Group have the flexibility to manoeuvre the taste as per local urge as they source production to a contract manufacturer whereas MNCs like PepsiCo and Coca-Cola and others are more constrained because they have to comply with internationally approved product and taste processes,” says Koshy.

You Are What You Drink

In the beverage industry parlance, drinks are typically packaged under three categories: juice, nectar and still drinks. All three differ only in their degrees or percentages of naturally extracted contents from fruit, vegetables or herbs. And it is not just about the taste buds that these beverage manufacturers have to think about. Lifestyle changes, growing awareness about food intake and active health check-ups are making the Indian consumers health conscious, thus driving a demand for healthy products such as packaged fruit juices with increased content of natural juices (Read: less sugar).

In a bid to woo this category of consumers, Coca-Cola launched Aquarius, a lemon flavoured non-carbonated drink in December 2016. The same year, the cola giant even added VIO to the portfolio, marking its entry into the dairy category. “This year, we are entering the “juice with fizz” category through the launch of Fanta Green Mango with a 10.4 per cent mango juice,” says the Coca-Cola spokesperson. In the same category, Dabur India too will launch its Real Volo range, a fizzy fruit drink that contains 20-25 per cent fruit juice content.

Beverage players are expanding their arsenal to capture a larger share of the market. Competition is also heating up in the Rs 6,000-crore fruit drinks market that consists of major players such as Frooti, Slice (PepsiCo) and Maaza (Coca-Cola). Dabur is all set to take on the might of Frooti, a market leader with a new low-priced mango fruit drink named Ju.C. Dabur’s Real recently pipped PepsiCo’s Tropicana market share by 5 per cent by gaining 2.5 per cent in the fruit juice category, Rs 1,000-crore in retail sales, according to Nielsen data. Real is the single largest brand for Dabur and is the market leader in the juices and nectars market with 57 per cent market share followed by Tropicana.

“We are spending Rs 1,100 crore in marketing, that is, 14-15 per cent of our turnover across all brands,” says Mayank Kumar, Head of Marketing, Foods, Dabur. Still, Dabur has a long way to catch up with Maaza, which is the largest fruit drink brand with 36.1 per cent share (retail volume), according to Euromonitor data.

New entrant in the ready-to-drink market such as Hamdard India, which test launched its ‘Fusion’ ready-to-drink beverage in Delhi and Uttar Pradesh, will launch in 18 states this year. Fusion is a mix of pure fruit juice with Rooh Afza concentrate. “We plan a volume sale of 8-10 lakh units this season,” says Mansoor Ali, Chief Sales and Marketing Officer, Hamdard.

Rooh Afza Fusion will compete with Maaza, Minute Maid (Coca-Cola) and Slice along with Frooti, which all fall in the juice drinks category and includes all still juice drinks made up of fresh juice or concentrate, not exceeding 24 per cent juice content.

In the same category, DS Group of the Pulse candy fame, launched its Pulse mango drink at a lower cost of Rs 15. “As the market size is getting bigger, the price point will lower,” says Shashank Surana, VP, new product development, DS Group.

Market and Competition

Euromonitor International says in its report that 96 per cent of India’s $4.9-billion soda market is dominated by Coca-Cola and Pepsi. The carbonated drinks sector is estimated to grow at an average rate of 3.7 per cent annually between 2017 and 2021. Additionally, the juices category is expected to clock a CAGR of 17.6 per cent between 2017 and 2021.

“India is one of the lowest per capita consumers of packaged beverages. There is huge room to grow not just for us, but all the other players,” says the Coca-Cola spokesperson.