Non-alcoholic beverages are broadly segmented into soft drinks and hot drinks. Soft drinks typically contain carbonated/non-carbonated water, sweeteners, and flavoring ingredients. Soft drinks market segment includes carbonates, juice, bottled water, ready-to-drink tea and coffee, and sports & energy drinks. On the other hand, hot drinks market segment comprises of coffee and tea.
In any beverage manufacturing company, syrup or concentrate producers and bottlers play a vital role as part of the value chain in the soft drinks market. The following figure demonstrates the value chain of the soft drink market:
The companies in the soft drink market employ multiple strategies to reach the end-user. One such method is through selling the beverage syrups and concentrates to authorized bottling partners. These authorized partners then formulate the final product by combining the concentrates with still or carbonated water, sweeteners, and other flavoring ingredients. Once the final products have been produced, then bottlers package the products in containers, and sell the same to distributors or sometimes directly to the retailers.
Another mode for companies to reach out to their end-user is through selling the finished products directly to distributors and retailers, which are produced at the company’s “in-house” bottling facilities. In addition, sometimes both the soft drink companies, and bottling partners engage in manufacturing of fountain syrups. This is then sold to fountain retailers, which includes restaurants and convenience stores. These retailers utilize such syrups to produce beverages for immediate consumption.
Non-alcoholic beverage market in India, evidently similar to the global scenario, is dominated by two giant players in the beverage industry: Coca-Cola Company and PepsiCo, Inc. These companies combined together account for around 60% of the carbonated-drinks market in India. In the meanwhile, fruit-based beverage market is dominated by players including Dabur, Parle Agro, and HUL.
As per market research, the non-alcoholic beverage industry in India stood at US$2.5 billion in 2015. The market is estimated to grow at a CAGR of over 17% in between the period from 2016 to 2020 to reach US$4.9 billion by 2020. The following figures depict the growth of non-alcoholic beverage industry in India from 2011 to 2015, and the estimated growth from 2016 to 2020.
In the recent past, global leaders – PepsiCo and Coca-Cola – both have announced their plans to invest heavily in India to exploit the growing demand and gain even stronger foothold in the emerging markets, as the sales in developed economies continues to slow down. In 2013, PepsiCo announced to invest US$5.5 billion in India by 2020 to expand its operation. In comparison, Coca-Cola also announced to invest US$5.0 in India by 2020 to capture the massive growth opportunities in the country.
However, market research estimates suggest that soft drinks market in India is highly underdeveloped, with limited products category, and poor penetration through modern retail. The number of regular consumers in India stood at just 250 million, out of an estimated population of over 1.2 billion in the country in 2014. In addition, per capita soft drink consumption in India is among the lowest in the world – around 5 liters per year, in comparison to around 100 liters in some of the developed economies.
Nevertheless, the market has witnessed rapid change due to increasing economic integration globally. In addition, positive economic indicators including rising purchasing power, rapid urbanization, and improving standard of living are expected to shape this market significantly in the near future.
