It is this price differential that is preventing the market for fruit based drinks from expanding. Of the R300 billion soft drinks market, carbonated drinks dominate at 95% market share, leaving only a miniscule share of 5% for packaged fruit juices. As P Rashmi Upadhya, associate director, advisory, PricewaterhouseCoopers India (PwC), an audit and consulting firm, puts it, consumers have started thinking seriously on healthy living. However, pricing will inhibit wider adoption.
Deepika Warrier, vice president, marketing, PepsiCo India, which makes Pepsi, Mirinda, 7Up, Mountain Dew, Nimbooz, Slice besides Tropicana, seconds that. While consumers are more than willing to purchase the 200ml pack of Tropicana for about R20, affordability is a big factor when it comes to the large pack, she says, adding that there is a long way to go before packed juices become part of the drinking culture.
Till then it is the sparkling beverage category including cola, lemon and orange based drinks that continue to witness a healthy growth. For instance, Coca-Cola in July this year reported that its second-quarter second-quarter earnings dipped, as it notched strong volume growth in Asia but flat volumes in North America, Europe and Latin America. Net earnings at the US beverage giant came in at $2.6 billion, down 3% from the year-ago period. Worldwide volumes grew 3%, with an 8% jump in Asia Pacific thanks to strong results in China, India and other Asian markets. Coca-Colas sparkling beverage portfolio in India includes flagship brand Coca-Cola, besides Fanta, Thums Up, Limca, Sprite along with mango-based drink Maaza.
Acknowledging this reality, the two beverage giantsPepsiCo India and Coca-Cola Indiahave been focussing on their core products this year to further expand the market. In the R285 billion carbonated drinks market in India, cola drinks Coca-Cola, Pepsi and Thums Up together take 40% share. Non-cola drinks form 60% of the segment. Colas, as expected, remain their top priority and much of the action is taking place here.
Whether it is Pepsi going for a brand revamp along with the launch of a new bottle or Coca-Cola reducing the price of brand Coke to penetrate rural India better, both the companies appear to be on a mission to make cola the most preferred drink of India.
Debabrata Mukherjee, vice president, marketing and commercial, Coca-Cola India, agrees. He says that the company has been focussing on brand Coke for the last two-three years. We believe that Coke's time in India has come and it is the ideal time to make it a household name. In the last two years brand Coke has recorded double-digit growth in India, he added.
Analysts say it is the weather which is the ultimate reason for beverage makers to report good growth in Asian countries. The sparkling coloured flavoured sugared drinks category in India is stuck in the paradigm of heat. The hotter it gets, the more it sells. The category has not been able to break its way into being an all-season drink, as it is in the developed markets, said Harish Bijoor, brand expert and CEO, Harish Bijoor Consults Inc.
For instance, if it is too hot, with temperatures hovering around 50-degree, then people prefer to stay indoors. Similarly, if the weather is pleasant you do not need a cold drink to cool you down, says Warrier. Mindshare, PepsiCo Indias media planning agency, has designed what it calls the loop room - software that allows the beverage company to monitor weather conditions. According to Warrier, the 40-45 degree Celsius temperature range is ideal and with the help of the new tool, Pepsi is able to prepare almost a week in advance to meet the demand for its products.
Packing it right
In a world full of choices, beverage companies from time to time rely on packaging and pack sizes to catch the attention of consumers. So if last year Coca-Cola introduced a 400-ml bottle for its brand Coke, this year PepsiCo has revamped the bottle for brand Pepsi. This year we have introduced a new bottle called AXL. Consumers, who found the old packaging for brand Pepsi boring, call the new packaging bold and youthful. We believe the way to drive a brand is in the hands of consumers, said Warrier.
Bijoor says packaging is a key differentiator. If you see the trend in glass bottles, more squat bottles have given way to more sleek. The idea is to subliminally look trim and thin. The way your packaging looks will dictate subliminal messaging of fat and fit. According to him, glass will remain in markets which demand visual cues that are more solid, and PET will dominate functional markets. The markets will therefore be divided into the cosmetic and the functional. In between these two, will emerge packaging that is funky and functional, a la PaperBoat, he added.
As mentioned earlier, price is a game-changer. It was Coca-Colas decision to bring down the price for a 200 ml of Coke to R8, and other sparkling drinks such as Thums Up, Limca and Fanta to R10, that triggered a price war as PepsiCo followed suit. According to Coca-Colas Mukherjee, the company uses various price points to drive trial of its products. R5, R10, R18 and R20 are magical price-points that help in selling our products. As for brand Coke, in order to drive traction we are looking at a recruitment price strategy and therefore the price for 200-ml glass bottle was dropped to R8, he said.
Meanwhile, Warrier says that the price war has been a blessing in disguise as it has led to the return of glass bottles this year. Till last year, sales of 2-litre bottles were growing very fast. But this year, we saw the return of the returnable glass bottle mainly because the price was slashed, she added.
PwCs Upadhya says both players are relying on multiple price points to push volumes. Some entry-level price points are not that profitable, but they make up for the slower movement of bigger packs, she added.
According to industry estimates, India has about 8.5 million fast moving consumer goods outlets. While Coca-Cola India claims to be present in about 2 million outlets, PepsiCo India too enjoys a robust presence across the country. Urban areas including metros and mini-metros continue to be the main markets, with rural India currently accounting for around one-fourth of sales. It is easier to expand in the urban market as it is a more structured geographical terrain. Rural, on the other hand, is not organised. So the idea is to expand reach with the help of our partners including bottlers besides launching various solutions which would help us break into rural markets, Mukherjee says. For instance, for its consumers in rural markets, Coca-Cola is experimenting with two new models. Pioneered by Hindustan Coca-Cola, the largest bottling partner of Coca-Cola India, one of the models called a Splash Bar comprises a dispenser, on which a 2-litre bottle can be placed, allowing one to serve 100-150 ml cups of cold drink. Happiness-on-the-go is another initiative started by Coca-Cola in Gujarat and Karnataka. Here, the company sells beverages in 100-150 ml cups at R5 and 200-300 ml cups at R8-10 through a portable fountain machine installed on a small van. The sampling units are great examples to drive trials at R5, especially in interiors where due to unavailability of chilling equipment, selling cold drinks can become a daunting task. Also with this, a customer gets to drink a cup of chilled beverage without worrying about spending too much, he added. Coca-Cola plans to introduce more Happiness-on-the-go machines in rural, semi-urban and key urban pockets with high footfall. It also runs a programme called, Own your asset through which it helps retailers buy chilling equipment at a reduced price from select companies.
Hot on the heels is PepsiCo with its unique solutions for consumers in rural India. The company distributes ice-chesta small box full of ice where cold drinks can be storedand insulated vest a jacket which allows one to keep a 1- or 2- litre bottle cool to shops located in the hinterland. About 27% of liquid refreshment beverage (LRB) comes from the rural market; so there is huge opportunity for growth and the first port of call is to drive availability of chilling equipment, said Warrier. This year we identified key rural markets such as Uttar Pradesh, Rajasthan and Haryana where in addition to installing traditional chilling equipment such as refrigerators in large and medium size shops, we provided shop keepers in rural areas with ice chest and insulated vests. PepsiCo claims that in rural markets this year it seeded double the number of glass bottles for Pepsi compared to last year.
What's more, like many brands PepsiCo India too utilised the 2014 general election to connect with its consumers. The company claims to have targeted around 80 election rallies reaching out to nearly 5 million people. Brands such as Pepsi, Mountain Dew and Kurkure were available in small serve packs of R5 distributed through on-foot servers as well as stalls at entry points. We also set up in-premise stalls at close to 50 polling booths in Lucknow where we provided t-shirts and posters encouraging youth to vote, explained Warrier.
On the campaign trail
Nonetheless, expanding reach is not simply enough. Creating noise through various marketing initiatives helps in staying ahead of the competition as it increases brand recall. Agnello Dias, co-founder and chief creative officer of Taproot India, which created Pepsis campaigns this year, says two kinds of stories are usually told in case of beverages. In case of beverages which have a distinctive taste such as Slice and Maaza, product proposition will be the focal point in story-telling and various emotions will be used to highlight this. But in case of colas where look is not a distinguishing factor, the brand proposition is used to tell a compelling story, he said.
Prasoon Joshi, chairman and chief creative officer, McCann Worldgroup India and president, South Asia says storytelling has become more complicated with time. Advertising is no longer about one thematic campaign. Rather, parallel stories are told with each one catering to a different set of consumers. For example, while Coca-Colas commercial featuring actors Deepika Padukone and Farhan Akhtar talks to rural consumers, the brands digital campaign woos consumers in urban cities, he said.
In addition to colas, mango based drink Slice was also in the news this year for its campaign themed SwayAAMvar featuring brand ambassador actor Katrina Kaif. Slice is a brand which spends less on advertising and marketing as compared to competitors but because the ideas are always very innovating and engaging, it has been able to create its own place in the hearts of consumers. Every campaign of Slice is about really owning the brand, added Warrier.
In the meantime, Coca-Cola India along with its creative agency Ogilvy & Mather quietly gave its orange based sparkling drink Fanta a complete overhaul. The objective is to promote in-home consumption of Fanta. Our studies have shown that orange as a flavour has traction into homes via children; therefore we are now positioning Fanta as a beverage which could be consumed during snacking time, said Mukherjee. This year, the global campaign of Fanta adapted for India includes a special cartoon character an Indian mother in a sariin its effort to increase proximity between the brand and consumers.
All along, the two multinational giants are not oblivious to the threat posed by regional players such as Parle Agro with its new carbonated coffee drink Caf Cuba besides new entrant Hector Beverages through its ethnic beverage brand PaperBoat. Coca-Cola India plans to launch Maaza Milky Delite across the country after piloting it in three districts of Uttar Pradesh. We are not in the business of selling white milk but we are in the business of value-addition, so we will continue to launch such products that will help in adding value, says Mukherjee.
It plans to launch Coke Zero towards the end of the third quarter this year. We follow the red-silver-black strategy, for brand Coke. While Diet Coke is a style icon, Coke Zero is nothing but a variant of Coke. Basically, Coke and Coke Zero (It is a Variant)are two sides of the same coin. The idea is to ensure all the colours of Coke is present in the market, explained Mukherjee.
Meanwhile, PepsiCo launched 7UP Nimbooz Masala Soda across northern India this year apart from introducing Tropicana Coconut Blends. India is a very big market and there is a huge scope for growth. The entry of regional players such as Parle Agro and Hector Beverages is not only helping the category grow, it is also forcing us to do more than before. So if earlier the category witnessed brand led innovation, one can expect more consumer centric innovations in the near future, said Warrier of PepsiCo.