The beverage majors are on a new high in India and setting a scorching pace of growth. Both Coke and Pepsi grew their sales by over 30 per cent. They are optimistic to repeat the same and therefore are offering some more varieties to consumers.
Wider choice of products, pack sizes and better chilling infrastructure are fuelling the sales growth of Coke and Pepsi.
The growth last year was a meager 10 per cent. So what’s driving the business? There is a lot of potential in the Indian beverage market which is driving the business. And as an industry, they have just about started to unlock the potential. The key to growth in this industry is to be able to provide consumers with the product of their choice at the right place at the right time and at the right price.
That is the key difference from earlier years. ‘The consumer today has lot more choice from juices to colas to Nimbooz to Gatorade and in different pack sizes from affordable glass bottles to PET bottles if you are ‘on the go’, to slim cans. The industry is doing a better job in meeting the consumer’s varied needs.
The weather gods have also been kind to them. The summer this year was strong and long, especially in North India, after winter finished abruptly in early February. The weather has been great for the soft drinks industry.
The beverage majors have also been able to hold their price line even as commodity prices spiked. This made the colas more affordable and encouraged relative consumption of the consumer.
The market is catching up to its potential. The industry has been growing at a nominal rate of 15 per cent, which declined during the pesticide controversy. ‘Growth is coming back to normal. There was latent demand, which was egged on by the summer and pricing.
The beverage majors have also stepped up investments in India in the last couple of years, which had slowed down when the companies were in trouble. Two years ago, Coke announced an investment of a few million dollars to be spent over three years to streamline bottling operations, enhancing infrastructure such as coolers and bottling lines and investing in sales, equipment, trucks and distribution.
PepsiCo is investing about Rs 1,000 crore its highest amount in India in the last 20 years, thanks to good growth and significant momentum. The company decided to invest an additional few million dollars taking its total investment to $330 million. The proposed investment is part of the $500-million investment plan announced by PepsiCo.
Growth is helping justify investments. Coke achieved a volume growth of around 30 per cent after boosting growth from 25 per cent. Coke’s business has been growing for the last 11 quarters in terms of volume. Pepsi has followed a similar trajectory. The growth in 2008 was double that of 2007 and 2010 has been higher still.
This growth has been led by continued focus on the route-to-market strategy and ongoing investments in technology, infrastructure and consumer marketing. Coke India has been working with its bottlers to ensure availability of chilled products, build capacity to service anticipated demand and offer innovative packages at affordable price.
What’s helping them is market expansion through the launch of new products. Take PepsiCo’s Nimbooz, sour lime water sweetened, which has clicked with the Indian palate. The response was so good that Pepsi was struggling to supply to the marketers and had to curtail the launch to a certain set of cities. It is asli nimbu (Real sour lime) resonated well with the customer. There’s no fizz; it appeals to the palate and culture. It is real, genuine and natural, which has appealed to a wider number of people.
There have been innovations on new products (Nimbooz) and packages (Pepsi’s slim cans, which have been a hit with the youth) and more chilling equipment. All this is showing results today. It is expected that volume growth in the quarter ending June will exceed that in the quarter ending March. Coke and Pepsi also say consumers today are more receptive to packaged beverages and are buying them more often than earlier. The cola majors would hope the good times last longer.