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Indian beverage consumption expected to grow by 16.5-19% in next 3 yrs
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Monday, 10 March, 2014, 08 : 00 AM [IST]
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Abhitash Singh, Mumbai
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fiogf49gjkf0d Reports by the Indian Council for Research on International Economic Relations (ICRIER) and the Indian Beverage Association (IBA) concurred that the consumption of non-alcoholic beverages in India could grow between 16.5 and 19 per cent over the next three years, as more people are now shifting towards packaged drinks.
In the non-alcoholic beverage market, the fastest-growing category is fruit-based beverages. At present, the Indian packaged juice market is valued at Rs 1,100 crore ($177.78 million), and it is further projected to grow at a compound annual growth rate (CAGR) of 15 per cent over the next three years.
Byas Anand, head, corporate communications, Dabur India Ltd, said, “In the Indian juice market (estimated to be worth Rs 1,000 crore), Dabur (whose fruit juice brand is Real) is the leader. Its market share is about 54%. PepsiCo India (whose brand is Tropicana) has the second-largest share (25-30%). There are also a number of unorganised players, who contribute around 5-10%.”
Arvind Varma, secretary general, IBA, said, “A majority of India’s beverage market is unorganised, but this segment caters to about 75% of the consumers’ demand. However, in the last three years, global giants Coca-Cola and PepsiCo Inc have tried to meet the rising demand for packaged beverages by investing in building capacity and developing bottling infrastructure in the country.”
He added, “According to the ICRIER and IBA reports, it is not only the disposable incomes of Indians that have risen, but the non-alcoholic beverage segment in the country has also evolved, both in terms of the number of product variants available in the market and the number of companies in the market.”
“Due to the abundant supply of raw material, and the ready availability and affordability of skilled labour, the Indian non-alcoholic beverage sector has a number of advantages. Moreover, it caters to a sizable consumer base. The sector is presently contributing one per cent to India's gross domestic product (GDP),” Varma stated.
“It has seen double-digit growth after the liberalisation of the economy in 1991. The announcement of big investments in the Indian non-alcoholic beverage sectors by companies like Coca-Cola and PepsiCo Inc clearly indicates that the sector has the potential to grow in the coming years,” he added.
Milk and tea could also witness rapid growth, because foreign firms have started looking at India as a huge dairy market. It has been projected that India’s packaged milk segment would grow from $7.76 billion to $32.9 billion and register an annual growth of eight per cent by 2030. The top ten companies in India account for 65% of the hot beverage market.
IBA’s report - titled 'Unleashing the potential of the non-alcoholic beverage sector' - stated that non-alcoholic beverages by corporate manufacturers were expected to grow at 16.5% per annum and those by non-corporate makers at 19% per annum. The estimates were based on an assumed gross domestic product growth of 7%, which is higher than the 5% growth forecast by several economists.
According to a report by market research firm Business Monitor International, “The non-alcoholic beverage market in India - comprising carbonated drinks, juices, packaged drinking water, milk, ready-to-drink tea, tea, coffee and sports drinks - is expected to touch the $5.8-billion mark by 2015.”
Majors keen to invest
Several large companies plan to invest in India's beverage sector. ITC Ltd is keen to acquire B Natural, the Bangalore-based Balan Natural Food Pvt Ltd's brand, and would roll out packaged fruit juices under its foods category.
Unique Organics plans to set up an integrated herbal tea processing facility in West Bengal. The total outlay for the project is estimated at Rs 500 core ($80.81 million).
PepsiCo India plans to set up a plant at Sri City Industrial Park in Andhra Pradesh, which would be the company's largest in India. The plant will be producing the full range of beverages ranging from carbonated drinks, fruit-based drinks and sports drinks.
Hardcastle Restaurants, the master franchisee for McDonalds’ West and South India operations, is keen to bring its coffee retail format, McCafe, to India. Over the next five years, they would be setting up 150-plus McCafes.
Problems faced by investors
Varma said problems like land aquisition and the cumbersome procedure it entails make investments unviable.
“There are other issues such as inadequate and poor quality of surface water, poor road conditions, delays on inter-state borders, capacity constraints of Indian Railways and inadequate cold storage and warehousing facilities, which result in significant wastage in the supply chain. These are crucial to the growth of the non-alcoholic beverage sector,” he added.
“The non-alcoholic beverage sector is further impacted by the inconsistent supply and poor quality of agricultural raw material, rising raw material prices due to inflation and restrictions on imports. There are a number of complex regulations in India, and these have affected the entire supply chain and not allowed the sector to reach its full potential,” said Varma.
Global best practices
Speaking to FnB News on the condition of anonymity, an ITC official said, “While most of the countries follow some common global standards such as Codex standards, they customise these to suit their own requirements.”
“In developed countries, regulations related to safety of food and environment protection are more stringent, but they are also more transparent and better implemented, and this has enabled the non-alcoholic beverage industry to grow and reach its potential,” he added.
“In developing countries, regulations are evolving, and their implementation is an issue. Since India is in the process of implementing the Food Safety and Standards Act (FSSA), 2006, and other regulations that are likely to impact the non-alcoholic beverage sector, we should learn from the global best practices in order to compete with them,” the official stated.
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