Soft drinks continue to dominate the ‘cold’ war

Soft drinks continue to dominate the ‘cold’ war: 

Even though traditional and home-made drinks continue to remain popular, packaged beverages appear to be gaining traction with Indian consumers who are frequently reaching out for more soft drinks.

Aggressive and continuous focus on innovation has ensured carbonated drinks account for more than half of the soft drink market, according to a report.

The country’s soft drink category is dominated by carbonated soft drinks including Coca Cola, Sprite and Pepsi, which make up more than 70 per cent of the total beverages market. A report by market research firm Nielsen has noted that over the past two years, the soft drink industry has seen a value growth of 11 per cent compound annual growth rate (CAGR) and a volume growth of 5 per cent.

Indians tend to drink 5.9 billion litres of soft drinks in a year, which does make India’s per capita soft drinks consumption large, but at 1/20th of that of the US, 1/10th of Kuwait, 1/8th of Thailand and Philippines, and one-third that of Malaysia’s.

Innovation, new consumption occasions, and focus on execution are set to be the biggest growth drivers of the soft drink segment, the report has pointed out.

Genuine innovations, as distinguished from “me-too’’ drinks, also appear to have paid off for the soft drink industry. Another growth driver highlighted was the entry of new regional players in the soft drinks category, “who are likely to bring both investment as well as variety.”

Though the category is dominated by two national players, regional players are steadily gaining ground in pockets. Large markets like Tamil Nadu, Uttar Pradesh, Delhi and Madhya Pradesh, have seen the emergence of regional brands that have grown the pie as far as both consumption as well as retail presence are concerned, the report notes.

Innovation in flavour has also worked wonders. With more Indians open to the idea of trying out newer and different flavours, it has turned out to be a good time for beverage companies to launch new variants. Currently, apple, orange and mixed fruit flavours account for 55 per cent of the non-carbonated market, with brands like Tropicana (PepsiCo) and Real (Dabur) dominating the segment.

Not high on water

But the other half of non-carbonated soft drinks, comprising flavours like guava, pomegranate and litchi, has contributed 38 per cent incremental volume over the last three years, thereby driving sustainable growth for the category, the report added.

However, when it comes to quenching thirst, consumers tend to typically choose between soft drinks and packaged drinking water. The report noticed that there were two times more players in the packaged drinking water category than in soft drinks.

Stating the retail water segment is far more fragmented, as the top two players contribute only 35 per cent of the volume, the report said.

Comparatively, the top two soft drink players contribute 80 per cent of the volume in their category. The report alluded to another trend working in favour of soft drinks — the relatively lacklustre appetite for packaged drinking water, with consumers choosing soft drinks over branded packaged drinking water.