An extended heatwave in most parts of India generated a soaring demand for carbonated drinks and, in the process, hurt the sales of juices and nectars in the April-June period.
With more and more people thirsting for fizzy drinks, companies such Dabur and ITC that focus on juices and non-fizzy drinks saw their sales slump, their Q1 results showed. And, bottled soft drinks emerged the biggest gainers during the summer months, breaching the annual penetration of 50%, research agency Kantar said about the shift in consumption.
“In temperatures of 40-50°C outside, consumers want more hydration rather than nourishment. Fizz is more thirst quenching as compared to a juice or a nectar,” Dabur’s CEO Mohit Malhotra said on Thursday, pointing to how fizzy drinks appear exciting to consumers despite being unhealthy.
Kolkata-based ITC, which has the B Natural brand of fruit juices, also admitted that discretionary and out-of-home consumption categories (such as beverages) were hurt by the intense heatwave in Q1. “Extreme heatwave conditions adversely impacted segments of the portfolio that have high out-of-home salience,” the company said.
Kantar says that consumption of bottled soft drinks has grown in the last two years on the back of growing distribution and affordable packs pushed by new and existing players. The average household consumption of carbonated drinks, for instance, has expanded by 250 ml over the last two years, with the trend expected to grow, Kantar says, as fizzy drink makers keep prices in check to drive consumption aggressively.
For instance, a 200-ml pack of Campa Cola from Reliance Consumer Products is available for Rs 10, a 50% reduction in price to Pepsi and Coca-Cola packs of the same size, forcing the latter two players to respond to the pricing action, experts said. Reliance Consumer Products also aggressively pushed ethnic fizzy drinks such as Lahori Zeera during the summer months for Rs 20 for a 200-ml pack to drive consumption in the marketplace.
Juices and nectars bore the brunt of all this action in Q1, sector experts said.
Dabur’s beverage portfolio, led by its Real brand of fruit juices, grew 2.8% only in the June quarter, impacted by hot summers, Malhotra said. While ITC did not provide details of its beverage category growth in Q1, analysts estimate the fruit juices business to have grown around 2-3% during the April-June period.
In contrast, soft drink bottling companies such as Varun Beverages, which is PepsiCo’s bottler outside of the US, said that it remained bullish about growth prospects in India. In the June quarter, the firm’s India business volumes grew nearly 23%, contributing to a 28% growth in topline seen during the period.
Ravi Jaipuria, chairman, Varun Beverages, said that the company was on track to deliver healthy double-digit growth in the 2024 calendar year on the back of a strong performance in the June quarter.
“India remains a high-demand market with massive growth potential, driven by a growing consuming class and a young population,” he said.
