In 2016, one saw the demand for aerated drinks fizzle as two large cola giants Pepsi and Coca-Cola saw a decline in numbers. PepsiCo India Holdings saw its revenue drop from R7,682 crore in FY15 to R6,626 crore in FY16, its lowest since March 2013. Even Hindustan Coca-Cola Beverages, which is the largest bottling partner of the Coca Cola Company in India, saw its profit fall from R214 crore in FY15 to R173 crore in FY16 (as per company financial data sourced from business research platform Tofler). Globally too, cola sales have been seeing a steep decline over the last few years.
With urbanisation and exposure to the West, Indian consumers today are increasingly becoming conscious of their lifestyle including food and beverage choices, in some cases prompting a shift from colas to healthier options such as juices, milk-based flavoured beverages, etc. Cold pressed juices too are slowly finding favour amongst consumers — while Keventers has expanded into Mumbai recently, Juice Up launched its first kiosk in Noida in 2016. Even the likes of McDonald’s are now offering customers the choice to opt for milk-based beverages (chocolate milk, smoothies or shakes) with their meals.
“Buying behaviour is changing. India is the diabetic capital of the world and there is much more awareness now leading to growth of fruit-based drinks in the last one year,” says Abneesh Roy, SVP institutional equities, Edelweiss Securities. “In the medium-to long-term, fruit-based and milk-based beverages will take away a lot of market share from colas with ready-to-drink beverages in the dairy segment also coming to the fore.”
The market share of fruit juices, nectars and juice drinks stands at around 25.1%, which is still less than that of carbonated drinks (approx 47.9%), as per KPMG. In such a scenario, how are packaged fruit juices and health drinks preparing to jostle for space on the consumer’s refrigerator shelf?
Increasing awareness on the health effects of carbonated drinks has certainly made some consumers rethink about the consumption of colas. While carbonates grew in India at 12.8% CAGR from 2010-15, the juice segment grew at 27.3% CAGR over the same period, KPMG states.
Deepika Warrier, VP — nutrition category, PepsiCo India states, “The juice category is witnessing high growth, which is characteristic of a higher per capita packaged beverage market as consumers start looking for a multitude of packaged beverage choices.” She adds that local innovations contributed nearly 70% to Tropicana’s growth last year.
Fruit juices are slowly becoming an indispensable part of breakfast, social gatherings, etc, encouraging companies to package them in convenient, easy to carry/easy consumption packs. Some have even launched variants catering to every consumer segment in the market.
Dabur India has different products positioned for different segments — Real Fruit Juice for mothers and children; Real Activ Juice for adults; for the 40+ age group it launched Amla and Jamun juice under its Real Wellnezz range; and for teens, who love the fun of fizz but are also conscious about their health, it launched Real Volo last year.
The reason for doing this, according to Mayank Kumar, marketing head — foods at Dabur India is that the all-India penetration of juices stands at around 3% which is very low, “so currently the strategy is to increase penetration and make products more relevant to the TG. We are doing this through new sub-brands and flavours.”
One can’t ignore that the major chunk of consumption still comes from the colas, but developments like the Tamil Nadu traders refusing to sell products by Pepsi and Coca-Cola don’t help the cause. As a result, we are seeing the proliferation of international and home-grown brands like Del Monte and Paper Boat.
The current scenario has led the juice category to grow at 15% y-o-y, highlights Yogesh Bellani, CEO, FieldFresh Foods. “This year we are looking forward to an overall growth of over 20% for fruit drinks over last year.”
“Youngsters are still consuming colas as a convenient drink and the fizz element continues to attract them,” says Harminder Sahni, founder and MD, Wazir Advisors. “Earlier, there was brand loyalty towards a drink. Now the youth love to try out new things.”
Going beyond the cola
India’s carbonated drinks industry, estimated at over R14,000 crore (media reports), is dominated by Coca-Cola and Pepsi. But these companies too are being forced to relook at their product mix. While Coca-Cola is exploring the launch of coconut water and flavoured milk, a case in point would be 7UP with 30% less sugar which was recently introduced in Gujarat. Another example is 7UP Nimbooz Masala Soda, a carbonated beverage with 5% lemon juice, introduced in 2013. Arvind Singhal, MD, Technopak agrees that there is pressure on the topline of cola companies, and the consumption of juices is significantly increasing when the consumer is on the go.
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PepsiCo recently launched a new sub-category Tropicana Essentials, of which the first variant is ‘Fruits & Veggies’ catering to the millennial. Tropicana aims to continue driving local sourcing with juices like Mosambi, Guava and Pomegranate with its Delights range. Sensing similar consumer trends, milk-based beverages are also coming to the fore with Amul actively pushing its Kool range, Danone Nutricia launching Protinex Grow for kids aged between 8-15, while Nestlé India has relaunched Milo as a ready-to-drink with less than 10 grams of added sugar per serve in a 180ml pack. Arvind Bhandari, GM — dairy, Nestlé India says, “The introduction is part of our vision to provide dairy-based beverage solutions rooted in nutrition, health and wellness.”
Yeh dil maange more?
While companies are doing their bit to grab market share away from colas, fizzy drinks still remain popular. Parle Agro too has launched a fizzy version of Frooti — the first brand extension for the mango drink in 32 years. One of the major reasons for this is that a majority of the juice market is urbanised. The culture of drinking juices and having energy drinks has limited penetration in rural areas.
Expansion in the category has to match with corresponding growth in support infrastructure, with refrigeration equipment that can operate without electricity, especially in rural areas. Key players have been regularly investing to bring in growth by increasing the number of stores stocking products.
Thus, the challenge currently for companies is to increase availability and affordability of packaged juices. Juice-based drinks are growing in small towns and rural markets as well but the breakfast table phenomenon poses another challenge. Unlike the West where juices form an important part of one’s breakfast, Indians are habituated to tea/coffee and milk. As a result, brands have to critically see how to position juices.
The beverages market is getting more segmented and niche than ever before with other canned and bottled beverage options quenching the thirst of many. Will Thanda matlab…? get a new meaning soon enough?