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India Food and Drink Report Q4 2009
Business Monitor International, Sep 2009, Pages: 89
The India Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on India's food and drink industry.
Despite the slowing of the Indian economy and the impact this is having on consumer confidence, a number of drinks majors are continuing to invest in expansions, as discussed in the recently published India Food & Drink Report for Q409. The Indian drinks sector is very dynamic, having attracted considerable attention and investment from both international and local firms in recent years. The companies are all attracted to the vast size of the Indian population and currently low levels of market development, ensuring that market maturity is still a long way off.
Major multinationals Coca-Cola and PepsiCo dominate the country’s soft drinks sector, controlling 95% of the market between them. Both companies have been busy expanding beyond their traditional base and have entered the healthy and energy drink sectors within the country, as they have been doing on a global scale. In late May, continuing their ferocious market share battle, the US soft drinks giants were once again engaging in an Indian price war. Utilising reduced packaging costs, on the back of the unravelling of the global commodities complex and taking advantage of local rather than international raw material sourcing, Coca-Cola India and PepsiCo India will offer cola beverages for as little as INR20 (US$0.42) and INR15 (US$0.32) respectively. PepsiCo India also announced that it plans to invest more than INR10bn (US$220mn) in 2009, which it plans to use to increase the capacity of its beverages business in India.
These price cuts represent an attempt to reintroduce dynamism to a market suffering from falling consumer confidence. While the Indian economy has enjoyed explosive growth in recent years, the majority of the population still has low disposable incomes, which has forced the major food and beverage manufacturers to prioritise volume over value sales. As a period of economic weakness filters through to reduced consumer confidence, producers must do all they can to prevent their volume-focused strategy from unravelling and to stimulate industry dynamism. Soft drink sales in India are expected to increase by an impressive 38.6% over the 2008-2013 forecast period in value terms. However, this increase will still only result in industry value sales of US$2.67bn in 2013 – a modest total given the country’s vast population. Nevertheless, the incredible long-term growth opportunities will ensure that producers continue to push forward with investments.
In fact, in June, domestic operator Tata Tea revealed plans to reconcile its local, regional and global beverage brands under a single management entity, Tata Tea Group, in a bid to become a global beverage powerhouse. As a fully-integrated beverage company, Tata has said that it wants to take on the likes of PepsiCo and The Coca-Cola Company. Via this new global umbrella approach, Tata expects to benefit from a better sourcing and distribution network and most importantly better consumer brand recognition. While the company’s ability to achieve such ambitious goals is questionable, it is clear that it is looking to give its global rivals a run for their money.
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