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Drinkhealthto

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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and, more recently, the accessi-bility of packaged drinking water has made it a direct competition to any other soft drink. Moreo-ver, among all soft drinks, bottled water is the only cat-egory with SKU sizes rang-ing from 100-ml bottles to 20-litre cans, thus, making it easily adaptable to a wide range of consumption require-ments 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 improve-ments in supply chain and distribution, bottled water is certainly expected to fur-ther eat into the ‘share of throat’ that carbonates cur-rently command.

although ‘still unfla-voured water’ is the larg-est 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 con-sumers to perceive bottled water as sources of considerable nutrition.

Brands such as Bisleri Vedica and himalayan are already positioning

Come March, and it’s a typical story across India – welcome, the Great Indian Summer season. The mer-cury levels spiral upwards in most parts of the country, so does every-

one’s thirst. What is slowly becoming non-typical, though, is how Indians choose to quench this thirst.

By Rahul ashok

among consumers to preempt and proactively enter into a disease-man-agement mode when they choose their dietary intake. The fact that packaging literature and marketing communication is becoming more health-oriented is aiding this behav-iour. and, unfortunately, carbon-ates as a category play solely on fun, pleasure and indulgence, rather than health.

as a result, although the per cap-ita spend of Indians on carbonates is the highest among all soft drinks, it is heading downhill, with the big-gest gainer from this changing mar-ket landscape being bottled water. having said that, diet colas (which

claim to be sugar-free and con-tain 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 mar-ket in India is a rather recent phenomenon, where people have be-gun to seek clean and safe drinking water, both inside and out-side the home. Even for at-home consump-tion, apart from water purification systems, the market for bub-ble-top cans and the regular plastic water bottles has grown tre-mendously over the last five years. Outside the home, the affordability,

their products on the platforms of enhancing immunity levels, instead of purity – which, in reality, is a cat-egory pre-requisite. another note-worthy 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

Bottled water JuicesCarbonates Others

2006

2010

2014 55%

48%

39%

34%

39%

46%

6%

6%

6%

5%

7%

9%

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

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 nutri-tion. Given these macro-behavioural changes, categories such as juices and bottled water are becoming sig-nificant contenders for a share of the Indian soft drinks market, which was worth `174.6 bn as of 2010.

Even as recent as 2000, carbon-ates 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. Com-panies such as Coca-Cola and Pepsi have continuously attempted to arrest this downslide by launching variants (in terms of flavours, SKU sizes and pack-aging 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 common-place, there is a tendency

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water would certainly present a size-able market potential, but the diffi-culty would lie in building consum-ers’ 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 trans-formed 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 behav-iour among Indians, the amount of juice content in fruit juices also in-creased, 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 pack-aged 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 per-cent 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 veg-etable-blended fla-vours. This has helped shape the market dy-namics in two differ-ent ways.

Firstly, at a time when the category it-self is becoming more relevant as a source of nutrition, the flavour innovation is fueling a barrage of ingredient-linked health claims as well. Dabur’s range of ‘Real’ fruit juices is one of the brands to leverage this oppor-tunity very well. Each of their 12 fruit juice variants has a specific combination of vita-mins, minerals and nu-trients, 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 ex-isting dietary intake, and also com-pensate 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 fruit-nutrition a step further, when they pitted their juices against what In-dians traditionally consumed as snacks, with their tagline ‘Snack healthy’. Tropicana, with its recent commercial, is positioning its prod-uct as helping to ‘make breakfast 100 percent’.

Despite this optimistic market scenario, most companies have re-alised 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 im-port the fruit pulp for various flavours, and do not see a situ-ation 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 consum-ers 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 sig-nificantly. a classic ex-ample where this was apparent was the case of Gatorade in India. The product was perceived as being too expensive to become a part of one’s regular exercise

regimen, in contrast to other bever-age 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

Over the next five years, the contribution of bottled water as a ‘share of throat’, is poised to increase

more sharply then even juices

Carbonates JuicesBottled water Functional drinks Others

2006

2010

2014

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

32%43% 14% 7% 3%

50%

60% 22% 12% 2%

4%

26% 14% 6% 4%

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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, Consum-er Markets, at Datamonitor.

and Rasna, as far as the perceived value-volume equation is concerned.

If one were to think about the rationale behind Gatorade’s differ-ent product format, the strength of concentrates as a category would become evident. They have the ad-vantage of being easy to stock (both in-store and at home), do not require any refrigeration, have a longer shelf-life and are quick to prepare. This has ensured that concentrates have maintained a CaGR of seven per-cent 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 play-ers to note that

the concentrates market in In-dia has been d o m i n a t e d by Rasna for the last two

decades. The company’s 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 de-scribed 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 of-fer a strong, clear and sustainable dif-ference, 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 up-take 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 slow-ly, but carefully, building the en-ergy drinks market.

at this juncture, it is rather in-teresting to note that the growth of the category was rather indirect. In India, Red Bull was more com-monly 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 asso-ciation with various high-energy ac-tivities such as sports, rock concerts and Formula 1.

although this has helped build the category, an average Indian still does not fully understand the differ-ence between an energy drink and

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

Other Frooti Maaza Real Slice Tropicana

Activ Minute Maid Real Twist

38%

16%

15%

11%

10%6%

1% 1%1%

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