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Drink worth taken!
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Monday, 05 April, 2010, 08 : 00 AM [IST]
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IRUM KHAN
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 "Why does man kill? He kills for food. And not only food: frequently there must be a beverage," said Amreican actor Woody Allen. Beverage has now become more than a need for existence. The thirst quencher is no more simply a glass of water. It is mineral water for some, soft drinks for others and flavoured water for a few.
India accounts for approximately 10% of the total beverage consumption. It is the third largest country in the world after the US and China. The Indian non-alcoholic beverage market which comprises hot drinks, carbonates, non-carbonates and health, is estimated to be around Rs 23,000 crore growing at a CAGR of 7% y-o-y.
In terms of volume, the market share of hot drinks comprising tea and coffee is 29.1% growing at the rate of 7.55%. The market share of carbonates is 34.3% growing at the CAGR of 1.14%. Non-carbonates which are growing at the CAGR of 16.35% have a market share of 27.9%. While health drinks hold 8.7% share of the market growing at the rate of 7.23 %. Carbonates, concentrated drinks,are expected to reach around 3.15 billion litres by 2012.
In hot drinks tea represents 69% of total value followed by other hot drinks with 22% share and coffee 9%. The Government of India has almost doubled the money allocation to the coffee market segment (Rs 750 crore under the 11th Plan) which is a real boost for coffee growers.
The total non-carbonated beverage market was estimated to be around Rs 6,400 crore in 2008. Bottled water shared 50.02% and was growing at the rate of 12.91 %. The share of juices was 29.6% growing at the rate of 18.98%. Functional drinks had a remarkable growth rate of 59.95% and its total market share was 10.4%. Other non-carbonated beverages including ready-to-drink tea and coffee, concentrates and smoothies shared 9.8% of the non-carbonated beverage market and were growing at the rate of 7.45%.
However, India's per capita consumption of non-alcoholic beverage drinks is just 4.8 litres which is very low in comparison of global average of around 85 litres.
Globally, India is one of the fastest growing non-alcoholic beverages markets. In fact, both leading companies, Pepsi & Coca-Cola had witnessed high growth of about 20-30% in Indian non-alcoholic beverage market in 2009 despite the recession where consumer globally typically traded down.
The key driving factor for India is the low per capita consumption of non-alcoholic beverages (about 5 litres as compared to the regional average of 27 litres and global average of 84 litres). India primarily being a hot climate country there always exists a demand for beverages. The key change that has started happening is that the Indian consumers are slowly shifting from traditional home-made beverage/cooler options to packaged drinks due to the convenience factor and increasing disposable income. Additionally, some of the product categories such as juices and functional drinks are finding favour amongst the health conscious consumers.
However, the growth of the packaged fruit juices cannot be exactly termed as encouraging. Barring Real, Frooti, Slice, Maaza, Tropicana, fruit juices like Godrej's Xs and Parle Agro's Saint juice have not shown any remarkable performance. The total value of the juice market stands at Rs 2,000 crore. The reason for the slow growth is that 1/3rd of the market is still highly fragmented. However, given the low per capita consumption of packaged juices in India as compared to the regional average, there is scope for more fruit drink/juice players to enter the market. Furthermore, due to the high growth potential of the juices category in India driven by increasing health consciousness amongst Indian consumers along with the convenience factor associated with packaged juices, this market can surely accommodate more players as it grows.
Having said the above, the key to success of these products in the Indian market definitely lie in the right pricing for the consumer mindset and widespread retail distribution set-up.
In case of Parle Saint, high pricing along with a selective distribution approach is possibly limiting the expansion of the product. While for Xs, the Godrej-Hershey's JV's distribution network is more focused on confectionery and not aiding the juices sales as desired, resulting in stagnant growth of the brand over the past couple of years.
Nimbu paani and milk beverages by giant soft drink companies have also not given the anticipated results. The competition of soft drinks companies is not between each other but is largely from the unorganised players like the local juice vendors who serves fresh lemonade juice, lemonade made in homes.
The organised players entered the market with an aim to convert the consumers of unorganised players into theirs. On the contrary consumers gave a thumbs down to the experiments conducted by them in the beverage segment and showed a preference to fresh lemonade (Nimbu Pani) as compared to bottled beverages. For the same reason coconut water failed in packed version as consumers preferred to drink fresh coconut water which is easily available these days all over India.
Energy drink is fast becoming popular among the youth of the country. In spite of the negative media reports companies are coming out with energy drinks targeting young population and this segment has a large market potential to grow. The Food Safety and Standards Authority of India (FSSAI) is contemplating on laying down the standards for these drinks, thus limiting the excess of use of caffeine by the manufacturers.
The ready-to-drink tea segment had been dominated by Unilever for all these years and the new entrant which is going to challenge the market giant is Tata Tea. It is evaluating the brand To Life in the market currently in India and overseas as well. With Unilever eyeing to increase its consumer base in RTD tea by tying up with Pepsi to increase the market presence with iced tea Lipton. RTD (iced) tea has a market share of 10% in total market value of carbonated drinks. The functional water is growing at a steady pace and is expected to rise four times by 2012. Flavoured water is the new category that is waiting to explode in the Indian beverage & water industry.
There is a boom in consumption of beverages with rise in consumer awareness related to availability, spending power and life style. With rising consumer affluence and companies targeting youth population the market trend shows double-size market growth in packaged beverages which will be a boost for the packaging industry. Foraying of major players in energy drinks and juices targeting the youth population is showing a viable sign of extreme growth in beverage packaging segment.
The industry overall in the growing mode still has a number of challenges to face and issues to look at. The main challenge realised over the recent months was shortage of sugar. The country faced acute sugar problem and soft drink manufacturers were asked to limit their sugar stocks. In such scenarios there are options available with the farmers, with some Indian breed plant which acts as sweeteners. If the companies can look for this alternative with farming of this sweet crop, the shortage for beverage industry can largely be solved and agricultural output will also get a boost. Another major challenge is the country's agricultural industry. Despite India being known as an agricultural hub for all these years with huge potential, lack of investment and climatic turnaround is not allowing this segment to
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