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Soft_Drinks_in_India_Analysis.pdf

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Soft_Drinks_in_India_Analysis.pdf

  1. 1. © Euromonitor Interna onal 2022 Page 1 of 5 EXECUTIVE SUMMARY Soft drinks in 2021: The big picture In 2021, India did not have a nationwide lockdown, unlike in 2020. Most of the state governments in the country implemented localised lockdowns to curb the spread of COVID-19during the second wave caused by the Delta variant. The restrictions enforced by the state governments were scattered and less severe than those seen in 2020. However, the lockdowns and resultant limitations on movement hampered the recovery of out of home consumption. The second wave started in mid-March and continued until May, just like in 2020. For the second consecutive time, the lockdown in the country coincided with the summer, which negatively affected on-trade sales of soft drinks in the country during this period. Therefore, although the on-trade returned to growth, the volume and value sales reached were nowhere near the pre-pandemic level. Meanwhile, off-trade sales also returned to growth 2021, offsetting much of the decline seen in 2020. Access to refrigeration appliances played a role in the growth of soft drinks in the off-trade in 2021. The average unit prices of fridge-freezers bought by consumers saw an increase of more than 10%, partly due to consumers buying bigger appliances, which was confirmed by the fact that the volume contribution of double door (top freezer) increased notably. The shift towards double door models resulted from the need for more space to store groceries, including soft drinks, particularly during the lockdowns. Bottled water remained by far the largest category within soft drinks in the off-trade in 2021, due to lack of access to clean drinking water for many, followed by carbonates and juice, with most other categories accounting for minimal shares of sales. Communication around functional references is of paramount importance The pandemic put the focus on health and the need to build immunity. Therefore, consumers have been re-evaluating their priorities and looking for products with functional benefits. To attract such consumers, companies have focused on communication highlighting the immune benefits of their products. Many companies offering juices have concentrated their entire communication around their functional benefits. In the second half of 2020, Coca-Cola India launched two juice products under its Minute Maid brand, fortified with vitamins and zinc. In 2021, Dabur India revamped its juices portfolio under the Real brand and developed a campaign to highlight the vitamin C content. The company launched new flavours under the Real brand, including aloe-kiwi and masala sugarcane juice. As part of this strategy, the packaging is dominated by pictures of fruits on the boxes. The packaging also contains messaging and claims around the benefits of these products. In general, companies give precedence to highlighting functionality and ingredients on their packaging to attract consumers. Even categories such as concentrates, which position themselves on value or accessibility, have started highlighting functional references to attract consumers. Competitive landscape Both the leading players in soft drinks, Coca-Cola India and PepsiCo India Holdings, have been focusing on reducing the sugar content in their products. The pandemic accelerated this process. Coca-Cola India is working on reducing the sugar content of 330ml carbonate cans to 6g from 35g. Similarly, in 2021PepsiCo India Holdings changed its formulation in India for the first time to reduce the sugar content. In conjunction with the growing trend of reducing sugar content across its portfolio, the company also wanted to reduce the gap with Thums Up by Coca-Cola, which has a lower sugar content. Over the last few years, the leading players have expanded their zero or low- calorie portfolios in India. Similarly, companies have been launching concentrates with fruit content. Considering COVID-19and increasing awareness of the importance of obesity in terms of the severity of symptoms, health awareness and weight loss have become increasingly important factors influencing consumers’ purchasing decisions. The pandemic highlighted the potential in rural areas. When demand declined, companies looked to rural India to drive sales. In 2020, to tap into rural demand and at- home consumption, which increased due to lockdown restrictions and increased working from home, PepsiCo India Holdings and Coca-Cola India partnered with Common Services Centres (CSC) to list their food products on the Grameen e-Store. Companies are addressing the need for last-mile delivery to these rural areas, as there has been increased demand due to multiple factors, including reverse migration. PepsiCo India started this as a pilot project for the state of Rajasthan. However, in 2021, owing to its success, it extended the partnership to three more states – Andhra SOFT DRINKS IN INDIA - ANALYSIS Country Report | Feb 2022 Market Sizes Sales of Soft Drinks Off-trade Volume - million litres - 2007-2026 15,809 2007 2021 2026 0 5,000 10,000 15,000 20,000 25,000 30,000 Forecast Sales Performance of Soft Drinks % Y-O-Y Off-trade Volume Growth 2007-2026 8.5% Forecast 2007 2021 2026 -10% -5% 0% 5% 10% 15% 20% 25%
  2. 2. © Euromonitor Interna onal 2022 Page 2 of 5 Pradesh, Madhya Pradesh and Jharkhand. More prominent players also collaborated with hyperlocal players such as Swiggy, BigBasket and Dunzo to ensure the availability of products, particularly during the lockdowns. Retailing developments Most companies allocated more resources to the e-commerce channel during the pandemic. In 2020and 2021, the lockdowns overlapped with the summer season, thereby limiting the growth of soft drinks. Companies therefore partnered with online delivery platforms to drive sales and get their products to consumers. In some cases, cost took a back seat, as the main aim was to ensure that consumers did not shift to other brands due to lack of availability. Although e-commerce is here to stay, and products will continue to be sold online on marketplaces such as Amazon and Flipkart, companies believe that partnerships with hyperlocal delivery players such as Swiggy and Dunzo are not sustainable in the long run. The commission charged by hyperlocal players is high, and the margins on some of these products do not warrant partnership. Although fmcg giants can go down the direct to consumer route, mid-sized and smaller companies cannot do this, due to the high logistics costs and fuel prices. Many companies offering bottled water have also warmed up to e-commerce. Parle Bisleri, the bottled water company, launched its web shop.bisleri.com, through which consumers can order bottled water. However, the direct to consumer model is challenging to sustain, especially for still bottled water, as the margins in this category are narrow. However, the channel gave a new lease of life to companies that target the hospitality and aviation industries by selling premium products. Many companies engaged in institutional sales were forced to review their business models and modify them to offer their products through retail channels, as the COVID-19pandemic and the resultant lockdown restricted out of home sales. On-trade establishments continued to be impacted by consecutive waves of COVID-19, not allowing these players to have any respite. For instance, before the pandemic, companies selling premium bottled water brands such as Aava Alkaline, Blue Pine, GC Natural Spring Water and Perrier, had a limited retail presence, and they were available only in selected modern retail outlets. However, to ensure cash flow, companies were forced to offer their products primarily through e-commerce, as well as selected modern grocery retail chains. Companies tied up with online marketplaces and grocery delivery platforms such as Amazon and BigBasket and modern retailers such as Food Hall to connect with their target customers. Similarly, some companies offering 100% juice and kombucha also took the direct to consumer route. These are premium products with higher margins that are made available only in metropolitan areas and tier 1cities, ensuring the direct to consumer path is cost-effective. Foodservice vs retail split In 2020, the pandemic set back the on-trade channel by a few years. According to the National Restaurant Association of India (NRAI), the foodservice industry declined by more than 50% in FY2021. One of the reasons was that many on-trade establishments had to shut permanently, as they could not adapt to an online-only or online-heavy model. Also, when consumers order at home, soft drinks do not heavily feature amongst the items available. The subsequent waves of COVID-19continued to batter on-trade establishments, hindering on-trade recovery in 2021. At the end of 2021, the country was hit by the Omicron wave. Due to the high transmission rate of the virus, the state governments had to reimpose restrictions, although restrictions have progressively become less severe. However, when a wave reaches its peak, most state governments suspend restaurant dining at night and at weekends by implementing night and weekend curfews. These times contribute significantly to the sales of on- trade establishments, and their inability to function during these times impacts their recovery. Moreover, the first and second waves in 2020and 2021coincided with summer, the peak season for soft drinks consumption, which complicated matters even further. What next for soft drinks? By the end of 2021, approaching half of the Indian population was fully vaccinated, which bodes well for both on-trade and off-trade recovery. However, the pandemic has brought with it much uncertainty, and new variants of the virus are hampering the return to growth. India has been reeling under the effects of the Omicron wave at the start of 2022. Naturally, state governments enforced localised lockdowns. The on-trade channel always bears the brunt of lockdowns, ensuring slow recovery for the channel. Although this variant is not as devastating as its predecessor Delta, its high transmission rate is dangerous. Another issue is that even less harmful variants which have a significant impact on only a small percentage of the population still burden the health infrastructure due to the large population. On-trade recovery will continue to be dependent on subsequent waves of the virus and resultant lockdowns in the future, with a return to the pre-pandemic level of on-trade volume sales not expected to be reached until 2025. However, the off-trade is already getting back to normal much more quickly, and the 2019level of sales is set to be achieved as early as 2022. Boosted by COVID-19, the health trend will remain evident in India, as indicated by the expectation that bottled water will see the highest growth both on-trade and off-trade in volume terms over the forecast period as consumers turn to less sugary soft drinks. Meanwhile, the larger players in the market will seek to continue to reduce the sugar content in their products, in an effort to address consumers’ growing health concerns. Companies are also either reformulating their products or conveying the benefits of Off-trade Volume - million litres - 2021 Growth Performance Sales of Soft Drinks by Category Bottled Water 9,690.3 Carbonates 3,532.3 Concentrates 48.7 Juice 2,464.2 RTD Coffee - RTD Tea 22.4 Energy Drinks 15.4 Sports Drinks 35.2 Asian Speciality Drinks - SOFT DRINKS SOFT DRINKS 15,808.5 0% 15% 25% CURRENT YEAR % GROWTH % CAGR 2016-2021 % CAGR 2021-2026 Competitive Landscape Company Shares of Soft Drinks % Share (NBO) - Off-trade Volume - 2021 Others Tunip Agro Pvt Ltd Rakyan Beverages Pvt Ltd Hamdard Wakf Laboratorie... Pioma Industries Ltd Red Bull GmbH ITC Foods Ltd Hindustan Unilever Ltd UB Group Dabur India Ltd Dhariwal Industries Ltd Parle Agro Pvt Ltd Parle Bisleri Ltd PepsiCo India Holdings P... Coca-Cola India Pvt Ltd 42.3% 0.0% 0.0% 0.1% 0.1% 0.1% 0.1% 0.2% 1.2% 1.3% 2.4% 3.1% 8.0% 17.2% 23.8%
  3. 3. © Euromonitor Interna onal 2022 Page 3 of 5 existing ingredients at a time when there is rising demand for immunity-boosting products. In addition, younger consumers will drive demand in categories such as 100% juice, functional bottled water and kombucha, which benefit from healthier attributes compared with alternative soft drinks. Chart 1 Soft Drinks Off-Trade Volume Sales Growth Scenarios: 2019-2026 Source: Euromonitor International Industry Forecast ModelNote: C19Pessimistic 1 represents a modelled scenario with an estimated probability of 25-35% over a 1-year horizon, factoring in macro drivers including GDP, stock prices, business and consumer confidence rates alongside infection rates, supply chain and labour supply disruption rates Chart 2 Soft Drinks On-Trade Volume Sales Growth Scenarios: 2019-2026 Source: Euromonitor International Industry Forecast ModelNote: C19Pessimistic 1 represents a modelled scenario with an estimated probability of 25-35% over a 1-year horizon, factoring in macro drivers including GDP, stock prices, business and consumer confidence rates alongside infection rates, supply chain and labour supply disruption rates Chart 3 Soft Drinks Impact of Drivers on Off-Trade Volume Sales: 2019-2026 Source: Euromonitor International Industry Forecast ModelNote: The above chart shows the growth decomposition split by macro drivers such as GDP per capita and population alongside soft drivers listed as having a positive (+) or negative (-) impact on the total growth rate Chart 4 Soft Drinks Impact of Drivers on On-Trade Volume Sales: 2019-2026 Source: Euromonitor International Industry Forecast ModelNote: The above chart shows the growth decomposition split by macro drivers such as GDP per capita and population alongside soft drivers listed as having a positive (+) or negative (-) impact on the total growth rate APPENDIX Fountain sales in India Trends The presence of fountain on-trade sales of soft drinks is negligible in India. The availability of fountain soft drinks in the on-trade channel is restricted to tier 1cities such as Delhi, Mumbai, Bengaluru and Chennai, and nearly always to captive environments such as multiplex cinemas, railway stations and airports. Carbonates is the major soft drinks category sold through fountains in India, followed by RTD tea. Pepsi, Coca-Cola, Sprite, Fanta, Mirinda, Mountain Dew and Thums Up remain the most common brands sold through fountains. In addition, Hindustan Unilever’s Lipton Ice Tea, Nestlé India’s Nestea Ice Tea, and Georgia Gold’s RTD Ice Tea are also sold through fountains. Fountain sales of soft drinks through convenience stores remained negligible at the end of the review period, and consumer foodservice channels remained the major contributors to fountain sales in 2020. Over the forecast period, fountain sales of soft drinks are expected to grow in direct correlation with the increases expected in the number of consumer foodservice outlets, shopping centre food courts and office complexes, amongst other possible locations for sales of fountain soft drinks. It is expected that carbonates and RTD tea will remain the most popular categories for fountain sales of soft drinks in the future, as other types of soft drinks have yet to be introduced. DISCLAIMER Forecast closing date: 15November 2021 Report closing date: 7February 2022 Analysis and data in this report give full consideration to consumer behaviour and market performance in 2021and beyond as of the dates above. For the very latest insight on this industry and consumer behaviour, at both global and national level, readers can access strategic analysis and updates on www.euromonitor.com and via the Passport system, where new content is being added on a systematic basis. SOURCES Sources used during the research included the following: Summary 1 Research Sources Official Sources Agricultural & Processed Food Products Export Development Authority (APEDA) Agriculture & Agri-Food Canada Federation of Indian Chambers of Commerce & Industry Brand Shares of Soft Drinks % Share (LBN) - Off-trade Volume - 2021 Others Tropicana Kingfisher Réal Fanta Mirinda Pepsi Coca-Cola Limca 7-Up Slice Oxyrich Mountain Dew Frooti Thums Up Maaza Sprite Aquafina Kinley Bisleri 44.2% 0.8% 1.2% 1.3% 1.4% 1.4% 1.6% 1.7% 1.7% 1.8% 2.0% 2.4% 2.6% 3.1% 3.4% 4.2% 4.3% 6.1% 6.8% 8.0% 5-Year Trend Increasing share Decreasing share No change
  4. 4. © Euromonitor Interna onal 2022 Page 4 of 5 Ministry of Food Processing Industries United States Department of Agriculture (USDA) Foreign Agricultural Service (FAS) Trade Associations Asian Bottled Water Association (ABWA) Assam Trade & Agency Associated Chambers Of Commerce & Industry Of India, The Association of Bottled Water Calcutta Tea Traders Association Coffee Board of India Confederation of Indian Food Trade & Industry (CII) Federation of Biscuit Manufacturers Association of India Federation of Indian Chambers & Commerce of Industry India Coffee Depot India Tea Promoters Bureau Indian Soft Drinks Manufacturers Association Indian Tea Association International Bottled Water Association International Copetence Centre for Organic Agriculture International Council of Bottled Water Associations (ICBWA) International Federation of Fruit Juice Producers Kho-Cha Darjeeling Tea Bureau MOFPI PHD Chamber of Commerce & Industry Tea Board of India Trade Association UNESDA & CISDA Trade Press 2point6billion.com Beverage Digest Beverage Net Beverage World BeverAsia Business India Business Line Business Standard Business Today Business World Capital Market Catalyst Commodity India Domain-b Economic Times Economics time Equity Master Express Hotelier & Caterer Financial Express Food & Beverage News Food Industry India Foodandbeverages.in FoodAsia Foodbev.com Free Press Journal Hindustan Times I Love India India Brand Equity Foundation India Buzz info India Earnings India Infoline India Retailing India Times India Today Indian Express Indian Industry Tracker IndianTelevision.com Live Mint Official Sources Agricultural & Processed Food Products Export Development Authority (APEDA)
  5. 5. © Euromonitor Interna onal 2022 Page 5 of 5 MAG India Money Control NDTV Outlook Money Retail Asia Reuters Soft Drinks International Tea & Coffee Asia The Economic Times The Financial Express The Hindu The Hindu Business Line The Indian Express The Week This Week Bangalore Times Food Processing Journal Times of India Trak Tribune YourStory Official Sources Agricultural & Processed Food Products Export Development Authority (APEDA) Source: Euromonitor International

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