- 1 Definition / Scope
- 2 Market Overview
- 3 Key Metrics
- 4 Market Risks
- 5 Top Market Opportunities
- 6 Market Drivers
- 7 Market Restraints
- 8 Industry Challenges
- 9 Technology Trends
- 10 Pricing Trends
- 11 Regulatory Trends
- 12 Other Key Market Trends
- 13 Market Size and Forecast
- 14 Market Outlook
- 15 Distribution Chain Analysis
- 16 Competitive Landscape
- 17 Competitive Factors
- 18 Key Market Players
- 19 Strategic Conclusion
- 20 Further Reading
Definition / Scope
Soft drinks in India fall under two categories. One is Carbonated Soft Drink (CSD) and another is Non-carbonated Energy Drink (NED). NED is further divided into energy drink and flavored juice.
This report excludes hot beverages and drinking bottled water through these two segments contribute larger share on the pie of soft drink because of the nature of their unorganized structure and difficult to accurately make the valuation.
The product-mix that forms the non- carbonated segments comprise of juices, bottled water, energy drinks, ready to drink tea and coffee, flavored milk, malted drinks and other drinks that are available.
The carbonated drinks are segmented into cola flavored drinks, lime- lemon flavored drinks, orange flavored drinks and others. The report mainly covers the detailed insights of the carbonated soft drinks market in India.
Carbonated drinks are those drinks that are fizzy because those are dissolved with carbon dioxide gas in it. Many people find the fizzy sensation to be pleasing and are fond of the slight different taste that carbon dioxide provides. The health concerns by the consumers in western market are leading the manufacturers to shape their corporate strategy, with diet and low-calorie varieties in the global market.
Unlike Global market, Indian carbonated drinks are less prone to concerns raised by Indian consumers over the taste that they prefer. Coca-Cola, for instance launched sugar-free coke in Indian market but within a few days it had to pull out the product as consumers didn’t prefer the taste. Therefore, it is a tough play for managers to decide on the strategy in Indian market. Nevertheless, the industry has moved far beyond simply offering low or reduced-sugar versions of their brands, reformulating their products to include natural rather than artificial additives so as to abide by food standards and regulations.
Over the past two years, the India soft drink industry has witnessed a value growth of 11% CAGR and a volume growth of 5% CAGR. In total, 5.9 billion liters of soft drinks are consumed in a year. The non-alcoholic beverage market was valued at USD 3,266 million in 2018 and is expected to grow at a CAGR of 17.6% till 2020.
Carbonated or fizzy drinks account for more than 40% of the total non-alcoholic beverages market in India. A carbonated drink which comes out very cheap is one of the products that go with every segment of people in India. Many brands that are selling in the Indian market are Thums Up, Coca-Cola, Pepsi, Sprite, Fanta, Limca, Mirinda, Mountain Dew, 7 Up etc. The major segment in the carbonated market is alsodone on the basis of flavors used i.e. Cola flavored drinks, lime - lemon flavored drinks, orange flavored drinks and other drinks.
Currently, the trend in terms of flavors is defined by lime - lemon flavored drinks in India. The urban segment dominates the Indian carbonated non- alcoholic market with a significant market share. But gradually, rural segment is expected to take back on the market. Geographically, majority of the consumers hail from the West of India followed by the South where people experience the exotic weather conditions.
Red Bull, Monster Beverages, Coca Cola India, PepsiCo, AMUL India, Goldwin Health Care Pvt. Ltd., Hector Beverages are some of the companies that dominate in the Indian Soft Drink market. Red Bull dominates the energy drink market while Gatorade captures sports drink market. Coca-cola and Pepsi are the major players in carbonated drink segment followed by Thumps Up, Sprite, and Limca.
- Multinationals such as Coca-Cola and PepsiCo dominate the segment with multiple offerings across different variants, such as cola, lime, and other fruit variants.
- As consumers increasingly realize the potential threats of sugary carbonated drinks, the growth of this category is expected to slow down. Meanwhile, consumers are expected to shift to healthier alternatives.
- Lemonade and lime-based carbonates are expected to experience the fastest growth due to their increasing popularity as mixers in alcoholic drinks.
- Widespread availability of such products in all retail channels across India will lead to an increase in sales.
- Multinationals like Coca-Cola (Minute Maid and Maaza) and PepsiCo (Slice, Tropicana) continue to be the frontrunners in the market, followed by Indian companies such as Dabur (Réal) and Parle (Frooti). Together, these brands hold a combined market share of 72%.
- Juices have become a supplement to the morning breakfast in many households and, thus, their popularity continues to rise.
Moreover, people have become more conscious of their health habits and are switching from carbonated drinks to juice drinks. Unpackaged juices, however, continue to be popular as they are viewed as fresh and free of preservatives.
According to data compiled by market research agency Euromonitor International, Coca-Cola’s shares in the juice segment rose to 31.1% (retail volume) in 2017 from 28.5% in 2012, while it lost share in its core carbonated beverages from 60.8% in 2012 to 56.3% in 2017. In the water business, its share dropped to 9.7% in 2017 from 12.6% in 2012.
Coca-Cola has been losing market share in the core carbonated beverages segment to regional brands such as Bovonto in Tamil Nadu, and Jayanti Cola and Xalta in northern India which are playing low-cost differentiation strategy. But for Coca Cola, its juice portfolio that comprises Maaza and Minute Maid has been growing.
These products are competing against PepsiCo’s Slice, Parle Agro’s Frooti and Manpasand Beverages’ MangoSip. In addition, PepsiCo’s Tropicana, home-grown Dabur India Ltd’s Real and Kolkata-based ITC Ltd’s
BNatural are competing with Minute Maid. Besides, start-ups like Hector Beverages Pvt. Ltd’s Paper Boat traditional drinks and lately yoga-guru-turned businessman Baba Ramdev’s Patanjali Ayurved have also entered the segment with positive customer responses.
|Base Year||2017||Researched through internet|
Large competitors possess resources advantage and could scale up rapidly in response to competitive pressures and changes in consumer preferences by introducing new products, reducing prices or increasing promotional activities. This is a threat for small players.
In contrast, there can also be reverse competition that means small players with great product and innovative technology have potential to grab the market share of big players. When expanding market internationally companies also face risk of international operations from distribution to legal requirements.
Another factor is the perishable nature of beverages. It can’t be put in shelves for a very long time since they have less than 6 months of best use cycle. Therefore, shortening the time taken for distribution is a major challenge that could save huge costs. Say for example, a soft drink usually having 6 months expiry takes 1 month to reach last mile consumer its sales volume lags by 1 month cycle which is a complete waste of both time and money.
Lastly, as raw materials come from different parts of the country especially in case of juice drinks changes in climate and environmental issues affect the working cycle of the manufacturer.
Top Market Opportunities
Focus On Non-Carbonated Beverages: Apparently, the carbonated drink manufacturers are looking to focus on innovation to introduce new/modified beverages to attract consumers to cope up with healthy drinking habits. As consumers continue to shun heavily processed and sweetened beverages in favor of offerings that they perceive to be ‘natural’, plant-based ingredients such as botanicals, herbs, and nut milk have been gaining traction in the soft drinks market.
The changing food habits coupled with increasing population of young people in developing countries drive the market demand for carbonated drinks. The consumption of carbonated beverages is also accelerated with the growing demand for processed food products.
A rise in disposable incomes, increasing health awareness, and the adoption of western culture are some factors driving the growth in this market.
Demand factors: Large share of young population: Demographically, India is one of the youngest markets with more than 45% of population below 25 years age bracket having liberal mind set when it comes to purchase decision making.
- Increasing level of disposable income: India’s personal disposable income is currently at INR86.5 trillion and is expected to grow at CAGR of 10.35% to reach USD 2 trillion by 2020.
- Changing consumer lifestyle: Increasing preference for ready to drink beverages, busier lifestyle, and stressful work are some factors that are changing the way people live their lifestyle.
- Increasing urban working population.
- 100% FDI on trade of food, produced in India
- 100% FDI on Single Brand Retail Trading and B2B Trading
- Growth of hyper local market for ordering
The rising concerns about the health effects of artificially sweetened beverages are gradually restraining the overall growth of the non-alcoholic beverages market to a certain extent. Government scrutiny could stand as obstacle for companies as activists raise health concerns of drinking such beverages.
Over years, the soft drinks market has hit by issues related to health concerns and pressure from government policies. Moreover, as consumers are switching towards fresh juice drinking habit market has seen a decrease in sales of carbonated drinks in the cities like Bangalore and New Delhi.
Thus, the challenge for this industry remains at restoring its pace of volume growth by increasing the per capita consumption of soft drinks in India and perform at par with other FMCG categories in India, like salty snacks, chocolates, and biscuits. Moreover, consuming soft drink hasn’t been adopted as a regular habit as in western countries and people drink it mainly during summer season. The demand for the soft drink in India is driven mostly by weather condition, therefore, managing the level of distribution pressurized by seasonal market demand and withdrawing expired and unsold inventory from the market is another big challenge both in terms of time and cost.
While the market for energy drinks is expanding and is expected to grow further, the drink manufacturers have a challenge of supplying drinks that consumers feel are safe to consume as there has been a lot of talk ill effects on health of such drinks and health risks associated with them.
Packaging: Pepsi Proprietary glass bottle is designed that is suitable for high-end use in restaurants and pubs. Its structure provides an ideal grip that perfectly fits the hand. And interestingly it doesn’t need to be returned at the point of sale upon use. So far, Pepsi Black was available in cans and polyethylene terephthalate (PET) bottles. It saved a lot of cost on logistics for bringing it to the plant for reuse.
New Product: Gluco +, a beverage with electrolytes and glucose; and Lehar Iron Chusti, a fortified iron snack is the two test-prototypes innovated by Pepsico both aimed at consumers at the bottom of the pyramid in rural as well as urban areas to fulfil health benefit as well as to capture billion dollar untapped market in rural India’s school going segment.
Coca-Cola on the other hand is innovating towards environmental sustainability. One innovation has been on how the products are made, they have reduced water consumption in their plants and now consume 40 percent less water than they did five years ago. They have been innovating on the equipment we place in the market. Solar-powers have been put in rural shops to chill the coke.
Beverage brands have been using the following pricing strategies over the years.
- Psychological Pricing
- Promotional Pricing
- Segmented Pricing
- Discriminatory Pricing
- International Pricing
As seen in the figure, prices are market driven. Every product is priced just above or below the competitor’s price while offering unique taste.
Under ‘Make In India’ campaign, Indian prime minister urged all the soft drink brands to include 2% fruit drinks in the aerated drinks might bring a lot of new products in the market sooner or later.
The FSS (Packaging & Labelling) Regulations, 2011 already have the clause under “Special Labelling Requirements for Other Products”, where it has been specified that the declaration of “Added Sugar”, No-Added Sugar”, “Use of Artificial Sweetener” etc. must be mentioned on the label of the food product. But as per proposed amendments of 6th July,2017 ,which will be called the Food Safety and Standards (Food Products Standards and Food Additives) Amendment Regulation 2017 has made leniency on the matter and proposed omission of labelling requirements for Beverages (Non-Alcoholic Carbonated).
Companies selling beverages that have caffeine will have to abide by norms defined by the food regulator, the Food Safety and Standards Authority of India (FSSAI).
Non-alcoholic beverages with more than 145mg of caffeine per litre will be labelled as „caffeinated beverage‟ and caffeine content in these beverages should not cross 300mg per litre irrespective of the source of the caffeine
Other Key Market Trends
Hyper Localisation: Company like Coca-Cola and PepsiCo are focusing on developing products in India for the local market that are more suited to palates of a particular region, or income class, or even parts of an Indian state, especially in terms of flavours to compete with local players like Parle Agro and Dabur. Even the Indian consumers are looking for variety and flavours with an Indian touch, which preferably should have some health benefits or at least free from chemicals that cause ill-health.
Market Size and Forecast
The non-alcoholic beverage market was valued at USD 3,266 Million in 2018 and is expected to grow at a CAGR of 17.6% to reach USD 16.63 billion by 2020.
Tropicana has dropped a 5% share both by value and volume between April 2016 and January 2017 compared with the corresponding period a year-ago. By contrast, Real has gained about 2.5% each on both parameters, according to the data.
New entrant ITC’s B Natural and ethnic drinks maker Paper Boat both marginal players have gained slightly in 2017. In contrast, Coca-Cola and Pepsi have been losing market share.
According to a report, the beverage category contributes 8-9% of the Indian FMCG market. The market is growing at 20-23% and is expected to become three times the current size by 2020. The recent liquor ban could turn the game in the favor of non-alcohol beverages and can fuel further growth than the estimated projection.
Juice market segments, which are flourishing extremely well in India is valued at USD 200 million and is projected to grow at a CAGR of 15 per cent over the next three years. The key drivers of growth of juice market are rise in the disposable income, people adopting Western culture, health awareness and import of fruits to India.
Distribution Chain Analysis
Efficient distribution is the biggest challenge both in backward distribution and downward distribution. Another challenge remains at packaging the drink so that it remains as fresh and unsoiled until it reaches the last mile consumer.
Retailers: There are estimated 9 million retail outlets in the country. Coca-Cola products are sold at only 2.6 million stores.
Carbonated or fizzy drinks account for more than 40% of the total soft beverages market in India.
On the packaged juice segment, Dabur is the major market player. It is expected to grow by 20-25 per cent annually. Super Fruits is premium and healthier juice sub brand launched recently.
The company has 55 per cent market share in the packaged juice segment, has also start selling drinking yogurt. At present, Dabur has three sub brands in the juice segment — Real, Activ and Burrst.
Similarly, in this segment ITC Ltd captures 18-20% of India’s juice market through its brand B Natural by focusing on regional flavours and offering premium versions of juices available in the market.
The company, which acquired B Natural in 2014 from South Indian firm Balan Natural Food, is has to launched two variants including Bel (Wood Apple) and Falsa (Grewia asiatica berry).
PepsiCo’s Tropicana has 28% market share, according to data from AC Nielsen from January 2017. The non-carbonated markets are growing at a double-digit growth rate while the Indian carbonated drinks market has declined by 15-20 per cent in the last three years. There has been a strong shift in the consumer beverage demand towards non-carbonated alternatives, creating new opportunities for drinks manufacturers in the country.
Paper Boat is a recent launch positioned as a traditional drink in juice drink market. It was launched in the north, a market which soon saw it booming with its clever marketing positing touching childhood.
According to filings with the Registrar of Companies, for fiscal year 2014 Hector Beverages earned revenue of USD 2.2 million. For FY15, it was closer to USD 3.4 million (Rs25 crore) (estimated post-adjustments). The company had expected to grow to USD 13 million (Rs100 crore) in 2017 though figures haven’t been published yet.
Paper Boat uses Doypacks to package ethnic Indian drinks in a convenient, contemporary and youthful fashion.
Tropicana, which was launched in India in 2004 as 100% juice and then extended to other juice-based drinks, generated business of “more than USD 141 Mmillion” in 2017. PepsiCo has entered into an agreement with its bottling partner Varun beverages Ltd for distribution of Tropicana juice in North and East India and aiming to make Tropicana available across 250,000 retail outlets, 2.5 times of 100,000 now.
According to Euromonitor, Slice, which is considered a regular juice drink, lost market share from 19.4% in 2015 to 18.1% in 2016, while Coca-Cola’s mango drink Maaza gained from 28.8% in 2015 to 29.7% in 2016.
Firstly, uniqueness in terms of taste is the main factor that differentiates one product from another. Carried out with distinctive marketing strategies along with the product superiority, even the smaller players are competing with big ones. From the successful launch of Paper Boat that adopted the same strategy it is obvious that if one can create the brand of any local product it turns out to be a market hit.
Secondly, price is another factor on which beverage brands compete on. They set price similar to that of their competitive product price. Establishing strong distribution channel is core to success. For a brand that is new in market and have a few product varieties would be difficult to habe strong bargaining power in supply chain. That’s one of the reasons why Paper Boat has launched a host of fruit-based beverages recently.
Key Market Players
- Coca Cola Its name originates from its two major ingredients Kola Nuts and Coca Leaves but yet the formula remains a company secret. According to Interbrand study in 2015, Coca-Cola was the world’s third most valuable brand. Their Diet Coke and Coca-Cola Zero are currently launched in the market. Not only carbonated drinks but the company also has likes of mineral waters like Kinley. With the drink enjoyed across 200 countries, the brand is looking forward to lessening the sugar content in the drinks.
- Pepsi Pepsi is reported to have a market share of 30.8% where Cola reaches to almost 40%. From Brad’s Drink to Pepsi Cola to finally Pepsi, the brand name might have changed but the taste remains almost same. Launched in the Indian market in 1990, Pepsi is enjoyed by millions nationwide.
- Sprite It was founded in 1999 in India and is another product of the Coca Cola Company. Sprite overtook Pepsi in 2009 as the second most popular drink in terms of consumption. It became the top brand in 2013 when it surpassed Thums Up with 15.6 percent of the soft drink market share.
- Thums Up First launched in 1971, now owned by Cola-Cola Company was on limelight in 1996 when Thumps Up was killed from market under company’s own marketing plan which later appeared to be a worst decision as it cannibalized coke’s own market share that led Thumps Up customers switch for Pepsi. Therefore, later on to fight against their rivals Pepsi, it was revamped and launched again in the market. Its fizzy and intense carbonated flavor is its striking feature. Thums Up always dominated the Indian market until 2013 when Sprite took over this giant. But still, it is considered as one of the most prominent brands among the younger generation of India.
- Limca Limca is popular because of its Lime and Lemon flavor that Indian people prefer it after having food. It was launched by Parle Agro in 1971 and was bought by Coca-Cola in 1993.
- Fanta This orange colored soft drink is a huge hit in the market. It has more than 100 flavors existing worldwide. It was launched during World War II in Germany. Due to trade problems the ingredients available in Germany at the time couldn’t reach rest of the world. It entered the Indian market in 1993.
- Maaza It is the largest selling ‘bottled mango’ drink in India. This brand has its roots in India and is now traded in the Middle East, Europe and other parts of Asia too. Long back in 1993, it was acquired by Coca Cola. Mango drinks currently account for 90% of the fruit juice market in India. Unlike its other counterparts like Slice and Frooti, they contain Alphonso variety of mangoes in their drink.
- 7 Up Similar to Limca with lime and lemon flavored drink, it is licensed by Dr. Pepper Snapple Group in the United States, and PepsiCo in the rest of the world. Keeping in mind the Indian market, they have come up with flavors like Nimbooz.
- Mirinda Just to give a competition to Coca Cola’s Fanta, Pepsi Co’s Mirinda exists in the market but surely lags behind a bit in its popularity. It was originally created in Spain. With new flavors like Mirinda Orange Mango and Orange Masala, they look forward to uplift their market share in near future.
- Mountain Dew The original formula was invented in 1940 by Tennessee beverage bottlers Barney and Ally Hartman. Later it was acquired by Pepsi Co for further distributions. Though many flavors do exist its citrus lemony flavor is most popular. Caffeine-free mountain dew, mountain dew red, cherry mountain dew were recently introduced in the Indian market.
Indian soft drinks segment represents an important market for various players to build a strong beverage brand. The Indian non-alcoholic beverage market is among the fastest growing markets globally as various macro factors support strong growth. The reasons for growing traction of juice market in are rise in the disposable income, people adopting Western culture, health awareness and import of fruits to India.
In a market dominated by big multinationals like Coca-Cola and PepsiCo, local players like paper Boat and Raw Pressery are luring customers by playing to Indians' soft spot for local products and flavors.
The regulatory body has set ceiling for the amount of caffeine content in energy drinks to protect consumers’ health but still the energy drink manufacturers will have to evolve a strategy to overcome this challenge of gaining the consumers’ confidence that what they are consuming is safe. Thus, the energy drink makers need invest on innovative products which are harmless to the consumers.
- Retail and Consumer Quarterly Newsletter Q1 FY 2018, pWc