DECLINING DEMAND OF CARBONATED DRINKS IN INDIA

“Colas aren’t fashionable anymore. They are considered harmful to health and the cola majors have to understand that,” says Ajimon Francis, Country Head of Brand Finance, a brand valuation company.

Gone are the days when pizza and fries were compulsorily accompanied by a fizzy drink. Today, almost everyone is health conscious and opting for the healthier route – whether it is hot tea or iced tea, or just a lemonade. No wonder then that forerunners of the industry – Coca-Cola, PepsiCo have been hit by the slow growth in the soft drinks arena, especially in India. The two soft-drink giants have been subject to a lukewarm demand and their growth has reportedly fallen to low single digits for seven quarters now.

While consumption has switched in favour of healthier beverages, the two industry giants have unfortunately not been able to tap into the new opportunities and have been losing market share. According to Euromonitor, between 2014 and 2016, Coca-Cola India’s market share has diminished from 35.5 to 33.5 percent while PepsiCo’s market share showed a similar decrease from 23.2 to 22.2 percent. Their combined market share is now down by 3 percentage points to 55.7% despite being in a healthy market that has grown from INR 44,624 crore to INR 60,336 crore.

Why did this situation arise and what has affected the demand for soft drinks?

The three main driving factors are:

  • Consumers preference for non-sugary, low-calorie healthier alternatives like fruit juice, green tea, iced tea, cold brew teas,
  • Growth of B-brands
  • A tax levy of 40% on aerated beverages under the single producer tax, i.e. GST has dented the profitability of both global companies.

Another partially responsible factor could be the fear of pesticide contamination in carbonated drinks, the report says.

Reduced demand and increased competition are not the only challenges that the cola giants are facing. They are unfortunately also having to deal with the repercussions of depleting water table across the country. Not long ago, two major trade bodies in Tamil Nadu – the Federation of Tamil Nadu Traders Associations (FTNTA) as well as the Tamil Nadu Traders Associations Forum (TNTAF) blamed the companies for hauling out too much water from rivers that has compounded problems for the already bereaved farmers. A ban was imposed on the sale of Coca-Cola and Pepsi beverages across the state.

Outside India too, the demand for carbonated drinks have been slipping across most countries. Reports suggest that over the last 15 years, Coca-Cola’s global revenue has dropped to 70% from 90%, and this is expected to fall further to 50% by the year 2025.

What does this mean for the beverage industry?

An Opportunity! Indian consumers are always looking for something palatable to drink and prefer variety and flavours with an Indian touch. They are all the more health conscious and desire drinks that have some health benefits or are at least not detrimental to the health. The declining demand for fizzy drinks has given still drinks like iced tea, green tea, cold brew teas, fruit drinks, etc. an opportunity to stand in the market. Other flavoursome health-based traditional drinks like lassi (buttermilk), aam panna (mango drink), lime juice, coconut water, sugarcane juice, packaged milkshakes and soya milk are also doing very well and have grabbed a huge share of the market.

Consumers see the massive health benefits in these drinks, especially in green teas and cold brew teas. Did you also know that sales of loose fresh lime juice, coconut water, sugarcane juice and other flavours amount to a staggering 2,000 million litres? Competitively priced, these still drinks are taking complete advantage of the situation and expanding their market reach.

Are you a soft drink addict still? Time to keep up and move on we would say. At least in the interest of your health and well-being. It wouldn’t be all that difficult considering the healthier alternatives are equally enticing and tasty. Take a sip of a perfectly refreshing cuppa cold brew from TeaPotions and you’ll know what we are talking about! Order your sample pack at just INR 139 today, and get the health going!

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