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In our second report on the Indian soft drinks industry, R.Badrinath examines the fragmented chaos of the fruit juice market, which is in marked contrast to the bottled water industry, where the multinationals have achieved genuine success in grabbing market share.

The Indian fruit juice market is one dominated by the independent fresh fruit juice retailers, who squeeze seasonal fruits on their stalls. Unfortunately there are no accurate estimates of the entire market, because this dominant segment is so fragmented and disorganised. However as the reach of the global soft drink giants continues to extend in India, so too does the branded segment of the juice market.

The growth of branded fruit juices is linked with the sale and distribution of the carbonated soft drinks market in India. And in the 'less than 20% fruit pulp content' sector Coke and Pepsi continue to dominate, along with a couple of local players, Parle and Dabur. Pepsi's brands include Slice and Dukes Mangola, Coca-Cola has Maaza, while Parle and Dabur have Frooti and Real respectively.

The branded juice market is currently worth about Rs600 Crores (US$120m) and almost 50% of the market is dominated by RGBs. However the growth of these products is still hindered by numerous quality and logistical problems. And the brands often have difficulty meeting consumer demand.


"all fruits suffer from a lack of fruit-growing acreage "
During 2002, Slice and Maaza introduced new juice variants in RGBs - Litchi, Pineapple, Orange, and Mixed Fruit. Almost all the flavours were well received in the market. But unfortunately, both Slice and Maaza could not meet consumer demand due to the limited supply period for cocktail pulps.

Except for mango, all fruits suffer from a lack of fruit-growing acreage and a limited harvesting period, usually less than six weeks. Mango cultivation has been increasing steadily due to consistent pricing and demand and this fruit dominates the segment with 80% of production, however other flavours have begun to threaten mango's position at the top.

Pepsi has recently launched a pilot project to increase fruit cultivation by training farmers in growing and harvesting techniques. Currently, most of the fruits grown are table fruits and not suitable for processing. This project is aimed at helping farmers to get an assured market for their fruit. Furthermore, the US-owned Liquibox Corp has set up an exclusive facility to cater to the bulk packaging of aseptic fruit pulps, a type of facility that is vital if the fruit juice supply chain is to be complete and in short supply in the country at present. These steps will help ensure consistent demand for fruit juices in the coming years.

Pepsi's Tropicana dominates the Rs100 Crore (US$20m) 100% fruit juice market (from concentrates). These juices are distributed in 1-litre tetra cartons. However, the carton-packaged sector suffers a significant cost disadvantage on its RGB rival due to the excessive cost of the packaging's raw materials. Carton costs are as high as 20% of the final product due to the duties imposed on them. This is compared to 10% or less for RGBs. Further growth in this category will depend on some liberalisation of the packaging taxes, increased fruit growing acreage, aseptic fruit processing facilities and cold storage.
 
Bottled Water

Like much of the rest of the soft drinks world, bottled water has been the high flyer in recent years and continues to register healthy higher 20s sales growth this year.

Currently, the bottled water market is valued at over Rs1,500 Crores (US$300m). During the year, Coca-Cola's Kinley brand emerged as the country's front-runner, gaining an edge over the local player Bisleri in terms of market share and value. Indeed Kinley has been the one of Coke's real success stories, and is seen as its star performer. What has evidently worked for Kinley is its consistent addition of franchisees and capacities at strategic locations throughout India, with an eye on improving the logistics of distribution. Such has been the brand's success that Coca-Cola was able to combat dwindling CSD consumption after the summer through its packaged water.

Expert Analysis

The Market for Soft Drinks in India
Analysing key sales, distribution, product and market share trendsm, the report investigates off-trade versus on-trade sales of soft drinks and value and volume growth in addition to supplying forecasts to 2006.  Products covered are carbonates, fruit / vegetable juice, bottled water, functional drinks, ready-to-drink (RTD) concentrates, ready-to-drink (RTD) tea and ready-to-drink (RTD) coffee.

 

For its part, Bisleri has fought back with something of a brand makeover, launching packaging variants in the form of 5-litre and 25-litre units, catering to the varied requirements in the market.

The enforcement of stringent ISI standards has caused the fade out of  small players in the water market who manufactured sub standard products. This has helped major players to consolidate their position. Coca-Cola and Pepsi, in particular, were able to surge ahead by complimenting bottled water with their robust CSD distribution network. And in the long term, the local player Bisleri has a significant disadvantage with its distribution focused on a one-product low margin portfolio.

The most important market in the country is the lucrative South India, which benefits from the relatively high purchasing power of its population and the extensive shortfall of municipal drinking water facilities in major cities such as Chennai and Bangalore. In this region, Pepsi's Aqua Fina is the laggard of the three major players with less than 15% market share.

Part of the problem for Aqua Fina is that it has failed to explore the bulk water market. However, Kinley has made forays into this area and introduced bulk packaging, but with limited success. The key to the success of bulk packaged mineral water lies in sound infrastructure and logistics that are closer to the market. Location will play a predominant role in determining the growth and distribution trends of bulk mineral water sales. Franchisees strategically placed at central locations could trigger significant growth opportunities for the players.

 


Companies: PepsiCo, Tropicana, Aqua

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