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Indian cold beverage (Porter Five Forces Analysis)
The Indian cold beverage market, valued at $2.15 billion in 2015, is projected to grow at a CAGR of 17% from 2016 to 2020. Major players include Coca-Cola and PepsiCo, with carbonated drinks dominating consumer choices. Competitive forces reveal high barriers to entry, moderate power dynamics among suppliers and buyers, and a rising threat from substitute products, particularly from emerging regional brands.
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Indian cold beverage (Porter Five Forces Analysis)
- 1. Indian Cold Beverage MarketAttractiveness PREPARED BY: SUMEET PAREEK SUBJECT: STRATEGIC MANAGEMENT
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- 3. Market Overview 0.88 1.1 1.38 1.72 2.15 0 0.5 1 1.5 2 2.5 2011 20122013 2014 2015 InUS$billion 1. The non-alcoholic beverage industry stood at US$ 2.15 billion in 2015 2. The market is estimated to grow at a CAGR of 17% between the period of 2016 and 2020 Source: https://www.dartconsulting.co.in/market-news/non-alcoholic-beverages-in-india-how-will-the-market-shape-for-non-alcoholic-beverage-segment-by-2020-in-india/
- 4. Market Overview (Cont’d) 2.54 2.99 3.52 4.14 4.88 0 1 2 3 4 5 6 20162017 2018 2019 2020 InUS$billion Source: https://www.dartconsulting.co.in/market-news/non-alcoholic-beverages-in-india-how-will-the-market-shape-for-non-alcoholic-beverage-segment-by-2020-in-india/
- 5. Market Overview (Cont’d) MajorPlayers Carbonated Drinks Fruit Based Drinks Coca Cola India Coca Cola, Diet Coke, Coke Zero, Thumbs up, Sprite, Kinley Soda, Fanta, Limca. Maaza, Minuite Maid, Nimbu Fresh PesiCo India Pepsi, 7 Up, Mountain Dew, Mirinda Slice, Nimbooz, Tropicana Parle Café Cuba, Frio, Dhishoom Frooti, Appy Fizz, Appy, Dabur India Volo (Launched in 2016) Real Fruit Juice (16 Variants)
- 6. Market Overview (Cont’d) 33% 22% 16% 1% 28% MarketShare (Soft Drinks) Coca-cola India PesiCo India Parle Agro Dabur India 25% 25% 14% 14% 22% Market Share (Retail Juice) Coca-cola India PesiCo India Parle Agro Dabur India Source: Economics Times
- 7. Beverages Consumer Choice CSD 71% MangoDrinks 7% Mixers 7% Dairy 15% Choice based Distribution Among all beverages, we see that carbonated soft drinks (CSD) are firmly in the lead, followed by non-carbonated mango- flavoured drinks. Source: Nielsen Survey
- 8. Porter’s 5 ForcesAnalysis Threat of New Entrants Capital Requirements Extensive Production & Distribution System to compete with the industry leaders i.e. High Capital Requirements Proprietary Product Differences Unique Packaging, image, secret formula is required i.e. High barriers to entry Learning Curve Industry technology is low and the manufacturing process is not difficult, therefore the learning curve is short i.e. low barrier to entry Access to Inputs Item such as cane, beet, corn syrup, honey, concentrated fruit juice, plastic, glass, and aluminum are easily available i.e. low barrier to entry Brand Identity Huge investment is needed to build a brand and foster customer loyalty i.e. high barrier to entry Access to Distribution Potential distribution network is blocked by major players i.e. High barrier to Entry
- 9. Bargaining Power ofSupplier Supplier Concentration No. of Supplier for major ingredients and other items are moderate i.e. Limited power over industry Input Differentiation Sugar and other chemicals are commodity items therefore supplier does not matter i.e. very little power over the industry Financial Sources Since industry is profitable, financial sources are available for expansion and upgrading and this is favorable to industry Backward/Forward Integration The suppliers do not have the capital required to forward integrate into the soft drink industry i.e. Attractive to investors Access to Labor Does not require highly skilled labor. Labor is easily available at lower cost. i.e. industry dominates over the labor market Porter’s 5 Forces Analysis (Cont’d)
- 10. Bargaining Power ofBuyer Buyer Information Flow of information from manufacturer to distributer and down to retailer that leads to the collaborative pricing Threat of backward Integration As distributors are specialized in the transportation and promotion of the product, it is moderately low Price to Total Purchase Manufacturer relies on the distributor to represent at the local level and maintain healthy relationship i.e. Buyer power is moderately high Porter’s 5 Forces Analysis (Cont’d)
- 11. Threat of SubstituteProduct Till 2016 Though Fruit juices, sports drink, energy drink might act as a substitute product, yet soft drinks were comparatively less expensive and threat of substitute product was moderately low As of 2017 Small beverages regional players such as Fresca Juices have really affected the revenues of leading brands such as Coca-cola and PepsiCo i.e. Presently threat of substitute product is very high Porter’s 5 Forces Analysis (Cont’d)
- 12. Rivalry among Competitors DiversityAmong Competitors Low level of product diversity makes the soft drink industry unattractive for investors Industry Growth Rate With high growth rate it can be said that this industry is moderately attractive for investors Porter’s 5 Forces Analysis (Cont’d)
- 13. Overall Market Attractiveness ForcesCurrent Attractiveness Future (10 years down the line) Attractiveness Threat of New Entrants Moderately Low: High Entry Barriers Moderately Attractive High Moderately Unattractive Bargaining of Supplier Limited power with supplier and labour Highly Attractive Power remains in the hand of manufacturer Highly Attractive Bargaining Power of Buyer Collaborative pricing: Channel promotions, maintaining healthy relationship Moderately Unattractive More information leads to more power in the hand of buyer Highly Unattractive Threat of Substitute Soft drinks are comparatively less expensive Attractive Regional players will eat the profits Moderately Unattractive Rivalry Among Competitors Competition is between 2 - 4 major players Moderately Attractive Regional Players will become major part of competition Highly Unattractive
- 14. Reasons for Threatof substitutes & Rivalry among Competitors 1. PepsiCo Indian lost ₹538 crore in FY 2016. Its profits dropped to ₹6,626 crore in FY16 from ₹7,682 in FY15 2. Fresca Juices has eat a portion of profit by bringing in juices as substitute product 3. Regional players such as Citi Cola and Jayanti Cola have made big players re-think about their marketing strategy 30% 15% 25% 0% 10% 20% 30% 40% Xalta City Cola Jayanti Cola Volume Growth (%) 2016 over 2015 Volume Growth (%) 2016 over 2015
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