With challenges facing the CSD category at every turn, Euromonitor has spotted a surprise opportunity for producers, in some of the emerging markets of the World.

While there is high potential for the volume growth of carbonates in emerging countries, economic inequalities have made it difficult for higher-priced beverages to reach all consumers. This is especially true in the developing countries of India, Indonesia, Malaysia and the Philippines, where over 40% of consumers earn less than 50% of the average gross income of citizens aged 15 or older. In these markets, carbonates are sought after, but remain a luxury that many cannot afford.

To that end, companies like Coca Cola Co and PepsiCo have found success in offering smaller cans and bottles at very low prices. These single serve units are often higher priced in terms of price-per-litre when compared to multi-serve products, but can be offered to low-income consumers at a much smaller unit price – thereby increasing market penetration and broadening the reach of their beverages. As the economies of these countries grow, however, products like Coke’s Mismo PET bottle in the Philippines blueprint a path for increased value, while still maintaining relatively low price points.

Small packaging sizes dominate consumption

India, Indonesia, Malaysia and the Philippines accounted for 28% of Asia Pacific’s 5.1bn litre off-trade carbonate volume growth from 2007-12 and are expected to contribute 55% of the region’s expected 3.5bn litre carbonate growth from 2012-17. A key to the historic performance of carbonates in these countries has been the proliferation of smaller, cheaper pack sizes. 

As demonstrated by the chart above, beverage packaging under 50cl dominates sales in these countries. Compare this to Mexico, where sales of 50.1-100cl containers outnumber sales of both 10.1-30cl and 30.1-50cl containers, and the US where 10.1-30cl containers account for less than 3% of carbonate packaging. 

The key to the success of these products in emerging Asian countries is unit price. A 30cl can of Coke in India retails for INR12 rupees (US$0.19). In Indonesia, a 33cl can of Pepsi Twist is US$0.46, while a 32.5cl can of My Cola is US$0.34 in Malaysia. Perhaps most indicative of this trend of offering small serving sizes to appeal to lower income consumers are 20cl returnable glass bottles. 

Coca-Cola engineered an entire branding campaign behind this package size in the Philippines. Priced at a mere PHP5 (US$0.12), Coca-Cola called the drink 'Sakto', the Filipino word for “exactly”. It was marketed directly to consumers who had very little pocket change and wanted “the exact amount of Coke at the exact price”. This particular packaging has performed well for all carbonate manufacturers, with almost 2.5bn glass bottles sold in India, Indonesia and the Philippines in 2012.

PET bottles can increase value

While sales of 30cl cans and 20cl glass bottles have helped increase market penetration, there is room for premiumisation amongst growing economic classes in these countries. Sakto may have been “exactly” what some consumers wanted to drink, but it was often ridiculed by some Filipino consumers as “exactly” what poor people could afford. Students, one of Coca-Cola’s primary targets for Sakto, viewed the product as a statement of poverty and would be wary of purchasing it amongst friends. In essence, there existed a demand for a premium economy product.

When Coca-Cola FEMSA purchased Coca-Cola’s interest in the Philippines in late-2012, many assumed that the Latin American bottling giant would address some of the inefficiencies of Coca-Cola’s bottling operations in the country. Sakto was thought to be one of those issues, due to its low price tag and returnable glass bottle model. To that end, Coca-Cola launched 'Mismo' this Summer. 

Similar to Sakto, Mismo means “specifically” and features a small serving size. However, unlike Sakto’s, Mismo contains 30cl of Coca-Cola, comes in a re-sealable PET bottle, and costs double what vendors charged for Sakto (PHP10 or US$0.23). To promote the new product and highlight the target audience, Coca-Cola held an event across three Manila malls called “Ito Na” (meaning “this”) and invited members of the US television show Glee (popular amongst Filipino young adults) to join Coca-Cola ambassadors on stage to unveil the new product. The event drew over 30,000 people to the three area malls and the video of the event was uploaded to YouTube where millions of Filipinos watch videos daily.

Through this promotion, Coca-Cola was not only able to double the unit price of Sakto while including only 50% more product, but the company created a premium product that is both affordable and popular amongst teens.

Thus far, consumer reaction has been positive. Many high school and college-aged consumers proudly switched from Sakto to Mismo in the months following the launch, and retailers were happy to carry the product, which was not burdened by the returnable glass bottle model. The price tag, despite being double that of Sakto, has thus far not been an issue, especially in the bustling urban areas like Manila. 

The launch of Mismo could serve as a strong example for the evolution of carbonate packaging in markets like India, Indonesia and Malaysia. Keeping unit prices low remains important to secure deeper consumer penetration as well as in attracting consumers from poorer rural areas to the product.

However, even amongst lower income consumers, there exists a desire to purchase a product that is fun and hip, even if it costs a few cents more. By merely tweaking the packaging size and type, while still keeping prices low, carbonate manufacturers could increase value without pricing out their consumers.