28 29 nov 08
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The carbonated soft drink market in India is declining and beverage companies like Coca-Cola and Pepsi are losing market share. Both companies are focusing more on non-carbonated drinks like juices, bottled water, and sports drinks. They are innovating their packaging, sizes, flavors and brands in an attempt to attract consumers and stay relevant in the changing market. Healthier options like juices and bottled water are growing more popular as consumers seek alternatives to carbonated drinks. Coca-Cola and Pepsi face competition from local brands as well and are working to expand beyond their traditional carbonated drinks portfolios.
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28 29 nov 08
- 1. 28 PROGRESSIVE GROCER NOVEMBER 2008 AHEAD OF WHATS NEXT WWW.PROGRESSIVEGROCER.COM Consumer Insight By Bhavya Misra E ven as the cola majors reportedly post reduced profits, the spirit of innovation keeps them moving, and they keep com- ing back with twists in the tale to corner the consumers pockets. Beverage Digests Special Issue: Top 10 CSD Results for 2007, re- leased in March 2008, stated an accel- erating decline in the carbonated soft drinks (CSD) category in the USA. It reported a figure of -2.3 percent de- cline in the CSD category. Topping the list in terms of the least percent- age volume change, however, were the two major brands, Coca Cola and PepsiCo. These two majors have been quenching the Indian thirst too, but not without a pinch of salt. Coca Cola was Indias leading soft drink until the then Government forced its departure from the Indian territory in the year 1977. The soft drink giant again hit the Indian shore in 1993, to commence a journey of no return, rivalling its arch competitor, PepsiCo, which had set foot in the year 1989 itself. There was however, a difference between the offerings of the two cola giants. While the for- mer dealt only in beverages, the latter spread its pentacles to the snack foods segment as well. The initial years of both the cola brands were marked by a foreign or alien fear psychosis, thus putting them through challenging tides of vicissitu- dinous growth. And as the winds of paranoia began settling down, the In- dian consumer started maturing, thus showing signs of saturation with the usual soft drink flavours and packages. Today PepsiCo and Coca Cola are the ubiquitous CSD brands in the Indian market. The difference remains that the Indian CSD market is also fast losing part of its share to the Non-Carbonated Soft Drinks (NCSD) one. The multiple bever- age marketplace in India, a report by the Beverage Marketing Corporation, based in New York, corroborates the statement. While the report by the Bever- ages Marketing Corporation reports a share to the tune of 0.2 percent for CSDs in the year 2002, which went down to 0.1 percent in the year 2005 and regained its initial position of 0.2 percent across the span of year 2006 and 2007, the share of NCSDs re- mained static at 0.0 percent. This figure notwithstanding, the report predicts looking forward an annual growth rate of 25-30 percent for the NCSDs, especially the fruit beverages segment in India. In fact, another report by Data- monitor, the UK-based consumer re- search company stated as well that the carbonated soft drinks segment, which accounts for the bulk of the revenue of both companies (PepsiCo and Coca Cola), grew at a compound annual growth rate of only around 1 percent between the year 1999 and 2006. The agencys analysis revealed that the soft drinks industry in India, which in- cludes carbonated soft drinks, juices, water and other drinks, grew 6 percent from $3.15 billion in 2004 to $3.34 billion in 2006. Of this, the carbonat- ed segment grew from $1.31 billion to $1.32 billion. Datamonitor, in another report, further stated, The energy drinks market in India is estimated at Rs 499.2 crore and is still at a nascent stage when compared with carbonated drinks, which is valued at Rs 6,027.9 crore. However, the energy drinks mar- ket in India grew at 50 percent a year between 2002 and 2007. In contrast, growth of carbonated drinks in India slowed to 0.5 percent during the same period. On the back of an increasing number of modern retail stores, the en- ergy drinks market is expected to reach Rs 1,100 crore by 2010. Even as both PepsiCo and Coca Cola posted positive numbers in their third quarter results, apprehen- sions brewed, in the wake of PepsiCo Inc announcing, in media reports, its strategy to reinvest in soft drinks. In October PepsiCo Inc was reported to have announced that it would be making a major multi-year invest- ment in its soft drink business to Drink to innovationPackaging, repackaging; branding, rebranding; launching, relaunching, theyre doing it all. Consumer insight_November_08.indd 28Consumer insight_November_08.indd 28 11/11/2008 7:14:05 PM11/11/2008 7:14:05 PM
- 2. WWW.PROGRESSIVEGROCER.COM AHEAD OF WHATS NEXT NOVEMBER 2008 PROGRESSIVE GROCER 29 restore growth in a business that has declined as US consumers seek drinks they view as healthier. The first step of the plan is to change the graphics and logo on cans of Pepsi, Mountain Dew and Sierra Mist drinks, the report quoted Pepsi spokes- woman Nicole Bradley as saying. This gains further momentum, as the second quarter results of Coca Cola saw a rise in its non-CSD port- folio. The sports drink Powerade and bottled water Dasani, which have not yet entered India, together saw case volumes leap by 12 percent in the sec- ond quarter. Pack of lives In India too, Coca Cola has been replicating its American NCSD model even as it continues to constantly inno- vate upon its pack size for products in the CSD segment in India, thus mak- ing best efforts to keep its CSD share intact. Just a month ago, Coca Cola launched a first of its kind on-the-go package of 350 ml size for its popular brand Sprite, under the name, Sprite Xpress. The package, reportedly, is es- pecially designed to offer convenience and to adapt to the on-the-go lifestyle of the Indian consumers. Another mo- tivation behind the easy pack of Sprite Xpress was to strengthen Coca Colas connect to the younger population, which constitutes a substantial portion of its target segment. The launch of Sprite Xpress has soon been followed by the entering of the Coca Cola Xpress pack of 350 ml in the market, which is backed by an advertising campaign containing an offbeat visual appeal and jingle that undoubtedly promises to get en- grained in the consumers mind. Not losing out on the NCSD category, Coca Cola also introduced the Xpress pack for its fruit beverage, Maaza un- der the brand name, Pocket Maaza. The Xpress packs are expected to be offloaded in the market for the Diet Coke, Thums Up and Kinley club Soda brands of Coca Cola, in the near future too. Besides these, Coca Cola has also launched, in a phased manner, Fanta Apple, the refreshing fruit flavoured sparkling drink, which according to Coca Cola, is a product innovation and formulation developed specially to suit Indian taste and preferences. Fanta Apple will be initially made available to consumers in Andhra Pradesh and Tamil Nadu, followed by a national roll out by the end of this calendar year. Fanta Apple, as per Coca Cola, is targeted at todays youth who are bold and expressive, desire inno- vative experiences, and are constantly on the lookout for creatively shield- ing themselves from convention. The company attempts to communicate its consumer proposition with the tag line, Go bite, for Fanta Apple. Amidst all the product line exten- sion and innovation undertaken by the Coca Cola Company, the subtle aim of beating the competition with the rival PepsiCo, is clearly under- stated. The latter, has as well been at par, making a considerable product line extension and innovation. Last year PepsiCo launched its fruit drink, Tropicana Twister, in two standard packs of 350 ml and 1.2 ml. Its sports drink, Gatorade, though having made inroads in India in the year 2004, started gaining visibility only through extensive brand promotion exercises, such as participation in tournaments like those of Davis Cup, PGA (Pro- fessional Golfers Association) and the likes. While the NCSD category of PepsiCo is dominated by Tropicana, TropicanaTwister, Gatorade and Slice, the CSD category is represented by a range of brands like Diet Coke, Mir- inda, 7up and Mountain Dew. Tropicana 100 percent Fresh was recently brought out as the relaunch version of Tropicana Gold. This was in keeping with the aim to double PepsiCos share in the estimated Rs 1,500 crore Indian branded fruit juice market. The new Tropicana, ac- cording to sources, were made avail- able in apple, orange and grape va- rieties in two standard packs of 200 ml and 1 litre. Besides, PepsiCo has also been harbouring plans to launch Indianised drinks to expand its pres- ence in the NCDs space. There have been reports of PepsiCo undertaking the R&D exercise to finally roll out its long awaited Nimbu-Paani, which would compete directly with Coca Colas Aam-Panna. That being said, the international cola majors are not alone in battle for the NCSD market share in India. Dabur and Parle Agro are the other most potent contenders in the fruit juice segment, who have been cherish- ing consumers trust, most important of all. Euromonitor Internationals lat- est report titled Carbonates in In- dia, informs that soft drinks sales in 2007 were propelled by bottled water and fruit/vegetable juice with their healthier positioning helping to drive sales of soft drinks. While carbonates posted single-digit growth in 2007, rebounding from the pesticides con- troversy of 2006, it was bottled water and fruit/vegetable juice that stormed ahead with high double-digit growth rates. Fruit/vegetable juice is growing as a result of increased consumer ex- penditure on naturally healthy (NH) beverages, the report says. The report further stated a slipping ofCocaColaIndiaandPepsiCosshare, pointing out, With consumers show- ing a growing preference for healthier soft drinks such as bottled water and fruit/vegetable juice rather than car- bonates in 2007, the two carbonates giants suffered a marginal decline in share. Although both players em- barked on a change in strategy to focus more on non-carbonated soft drinks in their portfolios, they were unable to maintain share and lost out slightly to home-grown players Parle Bisleri and Dabur India. Coca-Cola India launched Minute Maid and pushed the sales of its juices while PepsiCo India heavily promoted Tropicana, Aquafina and Gatorade during 2007. In addition, Coca-Cola India and Pep- siCo India embarked on re-branding themselves as total beverage players and not just carbonates brands. The journey of colas that began in the 90s seems to have taken a turn to- wards non-colas, having met up with the crossroads of the evolving Indian consumer. With all credit goes to the players experimenting with every pos- sible innovation to keep their coffers brimming, what the next step in in- novation could be is anybodys guess. What is certain is that it is the con- sumers who will romp home with the victory of having innovated upon their choices. Consumer insight_November_08.indd 29Consumer insight_November_08.indd 29 11/11/2008 7:14:07 PM11/11/2008 7:14:07 PM