Big fizz gets the miss as cola warriors slug it out with fruits

As more people shun colas, competition hots up in the non-carbonated drinks segment

MUMBAI: Swelling wallets and changing lifestyles are altering the story of the Rs 7,000 crore Indian soft drinks industry, with a little bit of help from some "pesticides". 

It's also the story of a generation brought up on three Cs - cricket, computers and cola - slowly dropping the last one.

Whether it's your neighbourhood grocery store or the big malls, the shelves storing non-carbonated drinks are only getting bigger.

Sample this.

Recently, Amul launched chocolate milk under the brand name Amul Kool Koko. Dabur Foods brought out a fruit drink, Twist, in March and Parle Agro is busy promoting Appy Fizz.

Agrees Unmesh Sharma of Macquarie: "This segment (non-carbonated) is looking really good. The availability of packaged fruit juice has become as widespread as carbonated drinks now. Apart from the big players, a lot of local and regional players are also entering this business since it is easier for them to manage products with lower shelf life."

As the fruit drink market grows at 50% and milk-based beverages segment is doubling every year, the biggies have started taking note.

"We see ourselves as the king of the juice segment. In the next five years, non-carbonated drinks business will become larger than our carbonated business," Sanjeev Chadha, chief executive officer, PepsiCo India, told DNA Money.

The other cola major, Coke, is also testing waters with Minute Maid. PepsiCo, which plans to double its business in three years says that this growth will accrue from non-carbonated drinks.

According to Sanjay Sharma, business head, foods division, Dabur India, "For the first quarter of financial year 2007-08, Real saw a 40% growth, and going forward, we see a CAGR of over 25%. We will be looking at more launches and increasing the production of fruit drink Twist as per demand."

Nadia Chauhan Kurup, director, Parle Agro Pvt Ltd, declined to give any numbers regarding Frooti or Appy or Appy Fizz.

Parle Agro is focusing on the hospitality segment and various entertainment channels to promote Appy Fizz.

The company is training bartenders to make cocktails and mocktails using Appy Fizz, so as to increase the visibility of the product in restaurants, bars and lounges. This product is doing well because it is cool to have natural drinks than artificial ones.

According to an analyst report from Canadean, a beverage industry research group, still drinks, nectars, bottled and flavoured water have benefited greatly as consumption of carbonates has declined for the second year running in 2006.

The carbonated segment still accounts for 85% of the soft drink market, but it's clearly on the wane.

"The milk drinks market is growing at 100% every year and we intend to grow at the same pace. A probiotic Lassi which has been tested in Ahmedabad will soon be launched nationally" said S Sodhi, chief general manager, Amul.

Gujarat Co-operative Milk Marketing Federation has introduced a slew of milk-based drinks over the past few months.

Flavoured milk Amul Kool, Masti Butter Milk, ready-to-drink coffee - Kool Café and sports drink Stamina are already in the market.

The margins in this segment are thin at about 5-6% and input cost pressures do lead to higher prices, but the consumer is not complaining, he says. The fruit drinks and juices segment is worth Rs 1,100 crore.

Led by Dabur, which has a 51% market share in the segment, fruit drinks are seeing a 40-45% growth rate. Coke, which is present in the Rs 500 crore fruit drinks segment through Maaza, has been preparing to launch its fruit juice brand, Minute Maid for over a year now.

The company has launched Minute Maid Pulpy Orange in Andhra Pradesh, Tamil Nadu and Karnataka.

Not many new players are entering the market despite the huge potential. Abhijeet Kundu, senior research analyst, Prabhudas Lilladher Pvt Ltd, has the answer.  "To come out with a new brand and establish it would be difficult. Yet, giants like Dabur and Coke can go for smaller regional brands and expand their portfolio" he said.

Although margins in the fruit juices segment are quite low at 8-10%, the revenue growth is phenomenal and so this sector is doing very well, added Kundu.