The carbonated soft drink market in India is declining and beverage companies like Coca-Cola and Pepsi are losing market share. Both companies are focusing more on non-carbonated drinks like juices, bottled water, and sports drinks. They are innovating their packaging, sizes, flavors and brands in an attempt to attract consumers and stay relevant in the changing market. Healthier options like juices and bottled water are growing more popular as consumers seek alternatives to carbonated drinks. Coca-Cola and Pepsi face competition from local brands as well and are working to expand beyond their traditional carbonated drinks portfolios.

1. 28 • PROGRESSIVE GROCER • NOVEMBER 2008 AHEAD OF WHAT’S NEXT WWW.PROGRESSIVEGROCER.COM
Consumer Insight
By Bhavya Misra
E
ven as the cola majors reportedly post
reduced profits, the spirit of innovation
keeps them moving, and they keep com-
ing back with twists in the tale to corner
the consumers’ pockets.
Beverage Digest’s Special Issue:
Top 10 CSD Results for 2007, re-
leased in March 2008, stated an accel-
erating decline in the carbonated soft
drinks (CSD) category in the USA. It
reported a figure of -2.3 percent de-
cline in the CSD category. Topping
the list in terms of the least percent-
age volume change, however, were
the two major brands, Coca Cola and
PepsiCo. These two majors have been
quenching the Indian thirst too, but
not without a pinch of ‘salt’.
Coca Cola was India’s leading soft
drink until the then Government
forced its departure from the Indian
territory in the year 1977. The soft
drink giant again hit the Indian shore
in 1993, to commence a journey of no
return, rivalling its arch competitor,
PepsiCo, which had set foot in the
year 1989 itself. There was however,
a difference between the offerings of
the two cola giants. While the for-
mer dealt only in beverages, the latter
spread its pentacles to the snack foods
segment as well.
The initial years of both the cola
brands were marked by a foreign or
‘alien’ fear psychosis, thus putting them
through challenging tides of vicissitu-
dinous growth. And as the winds of
paranoia began settling down, the In-
dian consumer started maturing, thus
showing signs of saturation with the
usual soft drink flavours and packages.
Today PepsiCo and Coca Cola
are the ubiquitous CSD brands in
the Indian market. The difference
remains that the Indian CSD market
is also fast losing part of its share to
the Non-Carbonated Soft Drinks’
(NCSD) one. ‘The multiple bever-
age marketplace in India,’ a report by
the Beverage Marketing Corporation,
based in New York, corroborates the
statement.
While the report by the Bever-
ages Marketing Corporation reports
a share to the tune of 0.2 percent for
CSDs in the year 2002, which went
down to 0.1 percent in the year 2005
and regained its initial position of 0.2
percent across the span of year 2006
and 2007, the share of NCSDs re-
mained static at 0.0 percent. This
figure notwithstanding, the report
predicts looking forward an annual
growth rate of 25-30 percent for the
NCSDs, especially the fruit beverages
segment in India.
In fact, another report by Data-
monitor, the UK-based consumer re-
search company stated as well that the
carbonated soft drinks segment, which
accounts for the bulk of the revenue of
both companies (PepsiCo and Coca
Cola), grew at a compound annual
growth rate of only around 1 percent
between the year 1999 and 2006. The
agency’s analysis revealed that the soft
drinks industry in India, which in-
cludes carbonated soft drinks, juices,
water and other drinks, grew 6 percent
from $3.15 billion in 2004 to $3.34
billion in 2006. Of this, the carbonat-
ed segment grew from $1.31 billion to
$1.32 billion. Datamonitor, in another
report, further stated, “The energy
drinks market in India is estimated at
Rs 499.2 crore and is still at a nascent
stage when compared with carbonated
drinks, which is valued at Rs 6,027.9
crore. However, the energy drinks mar-
ket in India grew at 50 percent a year
between 2002 and 2007. In contrast,
growth of carbonated drinks in India
slowed to 0.5 percent during the same
period. On the back of an increasing
number of modern retail stores, the en-
ergy drinks market is expected to reach
Rs 1,100 crore by 2010.”
Even as both PepsiCo and Coca
Cola posted positive numbers in
their third quarter results, apprehen-
sions brewed, in the wake of PepsiCo
Inc announcing, in media reports, its
strategy to reinvest in soft drinks. In
October PepsiCo Inc was reported
to have announced that it would be
“making a major multi-year invest-
ment in its soft drink business to
Drink to
innovationPackaging, repackaging; branding, rebranding; launching,
relaunching, they’re doing it all.
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2. WWW.PROGRESSIVEGROCER.COM AHEAD OF WHAT’S NEXT NOVEMBER 2008 • PROGRESSIVE GROCER • 29
restore growth in a business that has
declined as US consumers seek drinks
they view as healthier.”
“The first step of the plan is to
change the graphics and logo on cans of
Pepsi, Mountain Dew and Sierra Mist
drinks,” the report quoted Pepsi spokes-
woman Nicole Bradley as saying.
This gains further momentum,
as the second quarter results of Coca
Cola saw a rise in its non-CSD port-
folio. The sports drink Powerade and
bottled water Dasani, which have not
yet entered India, together saw case
volumes leap by 12 percent in the sec-
ond quarter.
Pack of lives
In India too, Coca Cola has been
replicating its American NCSD model
even as it continues to constantly inno-
vate upon its pack size for products in
the CSD segment in India, thus mak-
ing best efforts to keep its CSD share
intact. Just a month ago, Coca Cola
launched a first of its kind on-the-go
package of 350 ml size for its popular
brand Sprite, under the name, ‘Sprite
Xpress.’ The package, reportedly, is es-
pecially designed to offer convenience
and to adapt to the ‘on-the-go’ lifestyle
of the Indian consumers. Another mo-
tivation behind the easy pack of Sprite
Xpress was to strengthen Coca Cola’s
connect to the younger population,
which constitutes a substantial portion
of its target segment.
The launch of Sprite Xpress has
soon been followed by the entering
of the Coca Cola Xpress pack of 350
ml in the market, which is backed by
an advertising campaign containing
an offbeat visual appeal and jingle
that undoubtedly promises to get en-
grained in the consumers’ mind. Not
losing out on the NCSD category,
Coca Cola also introduced the Xpress
pack for its fruit beverage, Maaza un-
der the brand name, Pocket Maaza.
The Xpress packs are expected to be
offloaded in the market for the Diet
Coke, Thums Up and Kinley club
Soda brands of Coca Cola, in the near
future too.
Besides these, Coca Cola has also
launched, in a phased manner, Fanta
Apple, the refreshing fruit flavoured
sparkling drink, which according to
Coca Cola, is a product innovation
and formulation developed specially
to suit Indian taste and preferences.
Fanta Apple will be initially made
available to consumers in Andhra
Pradesh and Tamil Nadu, followed by
a national roll out by the end of this
calendar year. Fanta Apple, as per Coca
Cola, is targeted at today’s youth who
are bold and expressive, desire inno-
vative experiences, and are constantly
on the lookout for creatively shield-
ing themselves from convention. The
company attempts to communicate
its consumer proposition with the tag
line, “Go bite,” for Fanta Apple.
Amidst all the product line exten-
sion and innovation undertaken by
the Coca Cola Company, the subtle
aim of beating the competition with
the rival PepsiCo, is clearly under-
stated. The latter, has as well been at
par, making a considerable product
line extension and innovation. Last
year PepsiCo launched its fruit drink,
‘Tropicana Twister,’ in two standard
packs of 350 ml and 1.2 ml. Its sports
drink, Gatorade, though having made
inroads in India in the year 2004,
started gaining visibility only through
extensive brand promotion exercises,
such as participation in tournaments
like those of Davis Cup, PGA (Pro-
fessional Golfer’s Association) and the
likes. While the NCSD category of
PepsiCo is dominated by Tropicana,
TropicanaTwister, Gatorade and Slice,
the CSD category is represented by a
range of brands like Diet Coke, Mir-
inda, 7up and Mountain Dew.
‘Tropicana 100 percent Fresh’ was
recently brought out as the relaunch
version of Tropicana Gold. This was
in keeping with the aim to double
PepsiCo’s share in the estimated
Rs 1,500 crore Indian branded fruit
juice market. The new Tropicana, ac-
cording to sources, were made avail-
able in apple, orange and grape va-
rieties in two standard packs of 200
ml and 1 litre. Besides, PepsiCo has
also been harbouring plans to launch
Indianised drinks to expand its pres-
ence in the NCD’s space. There have
been reports of PepsiCo undertaking
the R&D exercise to finally roll out its
long awaited ‘Nimbu-Paani’, which
would compete directly with Coca
Cola’s ‘Aam-Panna.’
That being said, the international
cola majors are not alone in battle
for the NCSD market share in India.
Dabur and Parle Agro are the other
most potent contenders in the fruit
juice segment, who have been cherish-
ing consumers’ trust, most important
of all.
Euromonitor International’s lat-
est report titled ‘Carbonates in In-
dia,’ informs that soft drinks sales in
2007 were propelled by bottled water
and fruit/vegetable juice with their
healthier positioning helping to drive
sales of soft drinks. “While carbonates
posted single-digit growth in 2007,
rebounding from the pesticides con-
troversy of 2006, it was bottled water
and fruit/vegetable juice that stormed
ahead with high double-digit growth
rates. Fruit/vegetable juice is growing
as a result of increased consumer ex-
penditure on naturally healthy (NH)
beverages,” the report says.
The report further stated a slipping
ofCocaColaIndiaandPepsiCo’sshare,
pointing out, “With consumers show-
ing a growing preference for healthier
soft drinks such as bottled water and
fruit/vegetable juice rather than car-
bonates in 2007, the two carbonates
giants suffered a marginal decline
in share. Although both players em-
barked on a change in strategy to focus
more on non-carbonated soft drinks
in their portfolios, they were unable
to maintain share and lost out slightly
to home-grown players Parle Bisleri
and Dabur India. Coca-Cola India
launched Minute Maid and pushed
the sales of its juices while PepsiCo
India heavily promoted Tropicana,
Aquafina and Gatorade during 2007.
In addition, Coca-Cola India and Pep-
siCo India embarked on re-branding
themselves as total beverage players
and not just carbonates brands.”
The journey of colas that began in
the 90s seems to have taken a turn to-
wards non-colas, having met up with
the crossroads of the evolving Indian
consumer. With all credit goes to the
players experimenting with every pos-
sible innovation to keep their coffers
brimming, what the next step in in-
novation could be is anybody’s guess.
What is certain is that it is the con-
sumers who will romp home with
the victory of having innovated upon
their choices. ■
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