Consumers Take To Fizzy Drinks As Consumption Slowdown Hits Juices

This turns on its head the problem that has long affected fizzy drink makers—a shift in consumer preferences towards healthier beverages.

But as consumption slows across the Indian economy, price is back to being the king. And cola companies are winning that game. A litre of juice costs Rs 100 on average. In that same amount you can get 2 litres of cola or any carbonated drink. By the way, milk-based beverages are priced even lower—at Rs 35-40 per litre.

The market size of carbonated drinks in India stood at Rs 18,200 crore as of 2018 and for juices it was at Rs 16,602 crore, according to Euromonitor International.

In an investor call after the July-September quarter, Coca-Cola Co.’s Chairman and Chief Executive Officer James Quincey said sales in India were growing in double digits. “In India, for example, immediate consumption transactions have grown double digits year-to-date.”

While Coca-Cola India and PepsiCo India did not respond to BloombergQuint’s queries seeking more information, data from Euromonitor International show an uptick in consumption in the carbonated drinks category in the last two years—from 5.4 percent in the 2016 to 10 percent in 2018.

The juices category’s growth rate, though on a low base, has declined in 2018 to 16.5 percent from 17.8 percent in 2017, the research agency’s data showed.

According to Kantar Worldpanel, which also tracks household consumption data of various consumer goods categories, the carbonated drinks category grew at 7 percent as of September 2019 compared to 4 percent during the same period in the preceding two years.

Fruit juice makers have acknowledged the shift, with some even suggesting a sales contraction in the past few months.

Dabur India Ltd., the market leader in the category with 60.5 percent market share, cited Nielsen India’s data in its investor presentation after the second quarter to indicate that the juices and nectar market declined by 7.2 percent in the July-September 2019 period.

One the other hand, carbonated beverages as a market segment of Rs 24,000 crore is now growing in high single digits, Mohit Malhotra, chief executive officer of Dabur India, told investors after the company’s second-quarter earnings.

The reason for the slowdown, according to the company, is because consumers are downtrading—looking for cheaper alternatives.

To lure customers who prefer lower price points, Dabur has launched a Rs 10 pack of its juice brand Real—called Real Koolerz. Malhotra told investors that the new offering has witnessed strong traction in urban India.

However, Parle Agro Pvt. Ltd., which dominates the lower price end of the juice market with brand Frooti, said it hasn’t seen much impact from the ongoing consumption slowdown. “The current economic slowdown has not affected our business and we are not seeing much impact on the drinks category. We today have a healthy mix of lower price point units and larger packs, with both pack formats growing at a healthy double digit pace,” Nadia Chauhan, joint managing director and chief marketing officer at Parle Agro, told BloombergQuint in an emailed statement. A 1.2 litre pack of the mango drink retails at Rs 64.

The company is gaining market share with all its brands, backed by a strong belief that consumers want fruit-based beverages, she said.

A Delhi-based retailer said most of his customers continue to prefer carbonated drinks over fruit juices. Three out of five Mumbai-based retailers that BloombergQuint spoke to said that consumers preferred carbonated drinks over juices with Thums-Up being the top seller, while two retailers said the demand was more or less the same.