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Drink tohealth
With carbonates fast losing their fizz to healthier alternatives, the Indian soft drinks market is certainly one space to look out for.

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ome March, and its a typical story across India welcome, the Great Indian Summer season. The mercury levels spiral upwards in most parts of the country, so does everyones thirst. What is slowly becoming non-typical, though, is how Indians choose to quench this thirst.
With the rising inclination among Indians to take health into their own hands, there is a parallel increase in the willingness to spend on packaged beverages, which have an assurance of quality and nutrition. Given these macro-behavioural changes, categories such as juices and bottled water are becoming significant contenders for a share of the Indian soft drinks market, which was worth `174.6 bn as of 2010. Even as recent as 2000, carbonates accounted for close to 75 percent of the total market share, but over the last decade, it has diminished to just a little over 50 percent. Companies such as Coca-Cola and Pepsi have continuously attempted to arrest this downslide by launching variants (in terms of flavours, SKU sizes and packaging formats) to increase/ change the consumption occasions favourably, but it has not been able to supersede the rising negative consumer perception regarding the health impacts of excessive consumption of carbonates. Losing Fizz? With the growth of modern trade outlets over the last few years, and the changing meal patterns of Indians, much has changed in the way consumers spend on their food and beverages. Given that lifestyle-related diseases are increasingly becoming commonplace, there is a tendency
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By Rahul ashok

among consumers to preempt and proactively enter into a disease-management mode when they choose their dietary intake. The fact that packaging literature and marketing communication is becoming more health-oriented is aiding this behaviour. and, unfortunately, carbonates as a category play solely on fun, pleasure and indulgence, rather than health. as a result, although the per capita spend of Indians on carbonates is the highest among all soft drinks, it is heading downhill, with the biggest gainer from this changing market landscape being bottled water. having said that, diet colas (which claim to be sugar-free and contain no calories) and mixers are the only two segments within the carbonates category which are expected to sustain the growth they have shown over the last five years. Water, Water Everywhere The growth of the packaged water market in India is a rather recent phenomenon, where people have begun to seek clean and safe drinking water, both inside and outside the home. Even for at-home consumption, apart from water purification systems, the market for bubble-top cans and the regular plastic water bottles has grown tremendously over the last five years. Outside the home, the affordability,

and, more recently, the accessibility of packaged drinking water has made it a direct competition to any other soft drink. Moreover, among all soft drinks, bottled water is the only category with SKU sizes ranging from 100-ml bottles to 20-litre cans, thus, making it easily adaptable to a wide range of consumption requirements and occasions. Given this scenario, it would not come as a surprise that bottled water, as of 2010, accounted for close to 50 percent of Indians per capita consumption of soft drinks. With improvements in supply chain and distribution, bottled water is certainly expected to further eat into the share of throat that carbonates currently command. although still unflavoured water is the largest segment in the bottled water category, others such as Sparkling and Flavoured water are also expected to bring a lot of opportunities over the next few years, owing to the fact that they can be positioned with certain health benefits, at a price point that is potentially competitive to where juices are currently placed. What would pose a challenge, though, are the taste and the willingness of consumers to perceive bottled water as sources of considerable nutrition. Brands such as Bisleri Vedica and himalayan are already positioning

their products on the platforms of enhancing immunity levels, instead of purity which, in reality, is a category pre-requisite. another noteworthy mention here is Qua, which is one of the first Indian brands to have launched a range of fortified water, Phat Burn, Ninja Kick, etc, which have ingredient modifications to provide health benefits on the platforms of energy, immunity and weight loss, among others. Going forward, such fortified and flavoured

Over the next five years, the contribution of bottled water as a share of throat, is poised to increase more sharply then even juices

2014

55%

34%

6% 5%

2010

48%

39%

6% 7%

2006

39%

46%

6% 9%

Bottled water

Carbonates

Juices

Others

Based on per capita consumption of soft drinks in india. others constitutes functional drinks, rtd tea and coffee,
concentrates and smoothies

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Over the next five years, the contribution of bottled water as a share of throat, is poised to increase more sharply then even juices

2014

43%

32%

14%

7% 3%

2010

50%

26%

14%

6% 4%

2006

60%

22%

12% 2 4% %

Carbonates

Bottled water

Juices

Functional drinks

Others

Based on per capita expenditure on soft drinks in india. others constitutes rtd tea and coffee, concentrates and
smoothies

water would certainly present a sizeable market potential, but the difficulty would lie in building consumers taste towards such products, as they would taste like highly diluted juice/carbonates. Apple, Blackberry and More The juices market in India, which was worth around `14 bn in 2006, grew to `24 bn by 2010 a 60 percent increase in just five years! Undoubtedly, this growth has been a key facet in defining the way the soft drinks market in India has transformed over the last few years. Until a few years ago, fruit juices broadly referred to fruit drinks

containing less than 30 percent of juice content. These drinks were primarily positioned for kids, and usually had a significant amount of added sugar content. With the rising health and wellness-seeking behaviour among Indians, the amount of juice content in fruit juices also increased, and there evolved three clear sub-segments within fruit juices fruit drinks, nectars and 100 percent juice, each with varying degrees of health benefits and claims. With this evolution, the packaged juices category has gained a lot of acceptance among Indians, owing to the combination of convenience, taste and benefits it offers. The positive health perception is amply evident in the fact that 100 percent fruit juice (from concentrates) is the fastest growing segment in juices, and has grown at a CaGR of 19 percent during the 2006-10 period. With Indians more willing, than ever before, to experiment with tastes and flavours, companies have gone beyond the mainstay flavours orange, lemon and mango to introduce products with cranberry,

pineapple, and even vegetable-blended flavours. This has helped shape the market dynamics in two different ways. Firstly, at a time when the category itself is becoming more relevant as a source of nutrition, the flavour innovation is fueling a barrage of ingredientlinked health claims as well. Daburs range of Real fruit juices is one of the brands to leverage this opportunity very well. Each of their 12 fruit juice variants has a specific combination of vitamins, minerals and nutrients, targeted at providing specific health benefits. also, it has helped the category stretch its relevance beyond kids, and is being positioned for adults who lead an active lifestyle, as being a perfect way to supplement the existing dietary intake, and also compensate for the increasing tendency among Indians to skip their meals or have a light breakfast. Examples include Real activ and Tropicana. Real activ took the concept of fruitnutrition a step further, when they pitted their juices against what Indians traditionally consumed as snacks, with their tagline Snack healthy. Tropicana, with its recent commercial, is positioning its product as helping to make breakfast 100 percent. Despite this optimistic market scenario, most companies have realised that it is a major challenge to ensure sustainable sourcing of many raw materials and future strategies would largely rely on building the assurance of a robust supply chain system. For instance, even now most major manufacturers import the fruit pulp for various flavours, and do not see a situation where these could be sourced locally and at more lucrative price points. So, what this means is that while 100 percent fruit juices as a category shows promising growth, there is a high barrier for new

brands to enter the fray. Concentrated Market, for Sure as Indian consumers begin to look out for more health benefits and convenience from their soft drinks, the equation between the form-factor in which the product is available and the perceived value is bound to change significantly. a classic example where this was apparent was the case of Gatorade in India. The product was perceived as being too expensive to become a part of ones regular exercise regimen, in contrast to other beverage options. The company, therefore, launched a sachet with Gatorade in powder form, which was available at `15 per SKU (which could make 500-ml of Gatorade), in contrast to the bottle which was priced at `35. With this change in product format, Gatorade was seemingly brought within direct competition of other powdered concentrates, such as Tang

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The concentrates market in India has been dominated by Rasna for the last two decades.

and Rasna, as far as the perceived value-volume equation is concerned. If one were to think about the rationale behind Gatorades different product format, the strength of concentrates as a category would become evident. They have the advantage of being easy to stock (both in-store and at home), do not require any refrigeration, have a longer shelflife and are quick to prepare. This has ensured that concentrates have maintained a CaGR of seven percent over the last five years much lower than bottled water or juices, but higher compared to carbonates. While it is a growing market, it is important for prospective players to note that the concentrates market in India has been dominated by Rasna for the last two

decades. The companys powdered and liquid concentrates account for a whopping 83 percent of the total market value, as of 2010. The reason behind the hegemony of the brand (apart from the category benefits described in the previous paragraph) is the strong value for money it offers, which has been even bettered in the recent past, with the introduction of variants with vitamin and mineral fortification. Therefore, any brand looking to enter this space has to offer a strong, clear and sustainable difference, if they are looking at getting even a small share of the pie. The David among the Goliaths This is a question that has been raised again and again, over the last decade is there really a potential for functional drinks in India as yet? What has lately increased the optimism in answering this in the affirmative is the meteoric rise of energy drinks, although sports and neutraceuticals still remain in their infancy. Quite clearly, the major deterrent to the uptake was the fact that consumers did not quite perceive the need for, or realise the value of, these products. as of 2010, the energy drinks market in India was worth `11.2 bn and has grown at a CaGR of 46 percent over the last five years. Even keeping in mind that the market grew from a very small base, this tremendous growth can be attributed to the brand Red Bull, for having slowly, but carefully, building the energy drinks market.

at this juncture, it is rather interesting to note that the growth of the category was rather indirect. In India, Red Bull was more commonly used as a mixer, than as a standalone drink. But, over the last three years, price reductions, active on-ground activities and creative marketing efforts have helped in growing the brand through association with various high-energy activities such as sports, rock concerts and Formula 1. although this has helped build the category, an average Indian still does not fully understand the difference between an energy drink and

a sports drink. For that, it is going to become more imperative to have frequent and targeted marketing efforts such as those by Gatorade, which communicated the fact that the product contained electrolytes and replenished other vital nutrients that are lost during physical exercise. Going forward, any new entrant into this space, albeit having to spend on creating awareness and such category credence, would greatly benefit from the fact that they would be one of the first in the market. n Rahul Ashok is a consultant, Consumer Markets, at Datamonitor.

The juices market in India is still highly fragmented, with two major mango juice brands Frooti and Maaza accounting for a third of the total market
1% 6% 1% 1%

10% 11%

38% 15% 16%

Other Activ

Frooti Minute Maid

Maaza

Real Real Twist

Slice

Tropicana

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