June Management Briefing - The BRICM Markets – Part IV: India

India’s Fruit Drinks Show Strong Potential

India’s drinks industry was not harmed badly by the recession, with domestic sales of soft drinks and juice production all growing steadily throughout 2009, according to a recent Euromonitor report. In the soft drinks sector, Coca-Cola was the clear leader with Pepsi close behind, but several Indian companies such as Parle Agro, Parle Bisleri Ltd and Dabur India Ltd proffered some healthy competition. According to Euromonitor, domestic companies get their edge from relying on juice and water for the bulk of their domestic sales – two sectors that have been growing faster than carbonated soft drinks (CSDs). 

The fact that India is a leading and cheap producer of tropical fruits helps: these include mango - the country accounts for 65% of world production - banana, guava, pomegranate and papaya. According to Sunil Deshpande, senior vice president (foods division) of Jain Irrigation Systems, a Mumbai-based agriculture company, India’s exports of drinks and fruit concentrates is growing, while the domestic market is booming with an average annual growth rate for Indian sales of these products of around 25%.

“When we say fruit juice in India, it is more nectar and fruit drink i.e. fruit-based beverages rather than 100% juices,” says Deshpande. The major producers in this segment are Pepsi, Coca-Cola, Dabur, Godrej, Hindustan Unilever and Parle Agro. The pure juices market, he said, was growing annually only “at a single-digit rate”.

According to a Federation of Indian Chambers of Commerce and Industry (FICCI) report, entitled 'Flavours of Incredible India – Opportunities in the Food Industry', there is significant potential to boost exports. Many small-scale processors in India, however, lack the necessary monitoring mechanisms to maintain export-level quality. Deshpande highlights India’s Jain Irrigation as one exporting success story, exporting more than 50% of its fruit pulp and concentrates to Coca-Cola, Unilever and other companies in Europe, the US, Japan, Canada, Australia, New Zealand and the Middle East

Looking at alcohol, here too the recession has not done much harm to the Indian drinks sector. According to RNCOS’s new report, 'Indian Food and Drinks Market: Emerging Opportunities', alcohol’s growing popularity in India has the multinationals interested. “High growth in the alcoholic segment has attracted more players to venture into this lucrative segment, which will make competition tougher for the existing players,” the report says.

It projects that India’s food and drink industry’s annual turnover will grow to US$330bn by 2013, representing a growth of 7.5% from 2009.

In terms of alcoholic exports, a new and growing industry in India is wine – and exports from Indian vineyards have been increasing exponentially. According to online business forum the Indian Agricultural Industry Portal: “Both the Indian wine market and the indigenous wine industry are in their nascent stages, but growing by leaps and bounds.” It has a lot of ground to make up – Indian per capita annual consumption is only 9 millilitres. According to the Ministry of Food Processing Industries, out of the total grapes production of 1.6m tonnes in 2009, only 1.2% was processed into wine. However, United Spirits, which handles wine for Indian drinks giant The UB Group, has said it hopes to produce 5m cases of wine a year within five years.

As for beer, according to the All India Brewer’s Association, 80% of the Indian beer industry’s 15 hectolitres annual production is controlled by UB and SABMiller, while Anheuser-Busch Inbev, Carlsberg and Asia Pacific Breweries are the other key producers. 

The Indian drinks market by sector, 2009 (m litres, tonnes and %)

The Indian drinks market, broken down into alcoholic, hot and soft drinks sectors, shows the 2009 market size of each sector in millions of litres, as well as the percent change between 2008 and 2009.

Source: Euromonitor International

Exported processed fruits and juices from India, 2008-2009 (US$ m)

The amount of exports of processed fruits and juices from India is expressed in millions of US dollars, including a comparison of exports between 2009 and 2008.

Source: Directorate General of Commercial Intelligence and Statistics

Exported spirits and beverages from India, 2008-2009 (US$ m)

The amount of exported sprits and beverages from India is expressed in millions of US dollars, including a comparison of exports between 2009 and 2008.

Source: Directorate General of Commercial Intelligence and Statistic

This is part four of just-drinks' management briefing for June. For part three, click here. Part five can be found here.