Indian Beverage Industry – Market Strategy & Detailed Analysis for Paperboat with Top brands

Overview of the Industry

Industry Highlights:

• Global Soft Drink Industry – $310Billion(2015 Expected)
• Indian Beverage Industry – $230 Million of the $65Billion Food Industry
• Increase in aerated drinks: 3 to 14 servings/person
• Current Growth Rate: 15% & Expected Rate: 16-17%
• Coke & Pepsico covers 90% of the market.
• Juices will surpass carbonate market by 2016

Globally

The global soft drink industry is estimated to reach $310 billion in 2015. The soft drink industry spans sparkling drinks, bottled water, smoothies, ready-to-drink tea, concentrates, juices and coffee and functional drinks.

In a recent survey conducted by Associated Chambers of Commerce and Industry, consumers are seeking healthier beverages even if they are more costly, due to their positioning. The rising awareness levels with regard to obesity and related health issues, especially amongst teenagers and young adults, have helped push sales of non-carbonates. The report revealed that there has been a strong recent shift in consumer beverage demand towards non-carbonated alternatives creating opportunities for drink manufacturers in the country.

The report also pointed out that juice segment is the fastest growing segment with the growth of 30-35% annually while the fruit drink industry has been witnessing growth of 10-15%.

Source: www.statista.com

Fig: Leading 15 most valuable soft drink brands worldwide in 2014

In India

Beverages account for $230 million in the $65 billion food processing industry in India. In terms of volume, total soft drink (carbonated beverages and juices) market is estimated at 284 million crates a year ($1billion).

The market is predominantly urban (75%) and 25% contribution comes from rural areas.

In the year 1990 people got more inclined towards living a healthy lifestyle. Beverages which fit into this category were water, natural beverages (such as tea and sodas) and juice based sparkling waters and drinks. Juice based drinks were the ones which saw sudden growth.

In the latter part of the year 2000, due to the economic slowdown, there had been a negative impact on the food and beverage industry. The beverage sector witnessed a decline of 73.2% in terms of transaction value and 37% decline in the number of transactions.

The consumption of aerated beverages in India has increased from a meagre three servings per person, per annum in 1993 to 14 servings in 2013. Given the sheer weight of Indian population this is huge to reckon with for the world’s leading food and beverage corporations, even though the global average is 94 servings. The non-alcoholic beverage segment can broadly be classified under three categories: carbonated drinks, fruit drinks and functional drinks.

Table: Category Wise Distribution of Drinks

Some of the highlights of Indian soft drinks market are as below:

• Soft drinks market of India is expected to be the fastest among all global markets. The companies, both local and global giants are looking to adopt aggressive strategies to expand their business. Coca-Cola and PepsiCo are leaders in this segment.
• Consumers have started thinking seriously on healthy living. So, product like fruit juice expected to have good growth in future. Soft drinks manufacturers are also customizing their product to address this change E.g.: Cadbury India, launched juice drink Tang Mango focusing more on the nutritional aspects of the drink.
• Consumers ware likely to switch to those drinks which are perceived to be healthier in comparison to the traditional carbonated drinks.
• Coca-Cola planning to invest US$5bn into its regional operations before 2020. And PepsiCo is also considering investing US$5.5Billion in its India operations by the end of 2020.

The Finance Minister has proposed to levy an additional duty of excise at five per cent on aerated waters containing added sugar seen as a negative decision for the industry.

Source: Intecos – CIER

Fig: Market Segmentation

Paperboat Drinks

Hector’s Paper Boat come in 7 variants such as Aamras (45% mango pulp), Kokum (20% kokum), Jaljeera (8% lime), Jamun (10% Jamun), Aampanna, Imli and Golgappe. Major competitor for this can be Coca Cola’s Minute Maid having 6 variants such as Pulpy orange (11.8% Orange), Nimbu fresh (5.7% of lime), Guava (15.5% guava), Apple(17% apple), Mango(11% mango) and Mixed fruit {Mango Pulp (10.7%), Guava Pulp (2.9%), Banana Puree (2.9%), Papaya Puree (0.3%)}.

Hector’s Paper Boat has comparative advantage over other brands as Hector has given drinks traditional names which are catchy and attracting the consumer and also fruit content of Paper Boat drinks are higher than its competitor brands.

Variant Based Analysis

Price based Analysis of Paperboat

Source: Euromonitor International

Fig: Prices of major beverage brands (200 – 300 ml) from 2012 to 2013

It clearly indicates that Paper Boat is amongst the highest priced beverage as compared to its close competitors in the 200 – 300 ml range and the second highest after Minute Maid in terms of the price per ml.

SWOT Analysis Of Paperboat

Porter’s 5 Force Analysis

• Bargaining power of buyers: The product is placed at departmental stores where consumers can access it. As these outlets buy in bulk hence they have Medium Bargaining Power. Also, Tuck shops inside corporate do buy in large quantities. Thus, as a mix of all the consumers, bargaining power of buyers is Medium.
• Bargaining power of suppliers: The basic pre-mix of the drink is supplied by just one company and thus supplier of this material has High Bargaining Power.
• Competitive Rivalry: There are a number of existing rivals in the industry like Minute maid, Slice, Maaza and Nimbooz. However, price differential reduces the power of the rivals. Still, on the whole competitive rivalry for Paper Boat is Medium.
• Availability of Substitute: The availability of substitutes for the juice drinks is high and hence threat is High.
• Threat of new Entrants: India is considered to be an unexploited market for juice drinks with high growth potential for competitors to enter the market and thus, threat of new entrant is High.

• Marketing Strategies Adopted

  Pricing Strategies

  S. Kannan Sitaram, the operating partner at the Indian Equity Partners that invests in consumer companies said that Paper Boat has been very innovative in their approach towards creating products that Indians love. According to him, the products taste great and also have a great packaging. He also said that Paper Boat is competing with non-branded products, some of which are still prepared in many households in India, especially in smaller cities. Therefore, Paper Boat has to price its products very carefully to be able to justify as to why will consumers pay a premium price for their products which they can prepare by themselves.
  Mr. Sandeep Barasia of the Bain and company said in a statement recently that, “Companies need to operate at the right price point, have differentiated packaging, flavours and yet not lose focus on gross margins.”
  The company’s products currently come in 250ml pack size and cost Rs.30 per pack. The company recently introduced a 1 litre pack, priced at Rs.120. Its close competitor Dabur also sells a 1 litre pack of Aam Panna at about Rs.80 and has not yet commented about competition from Hector’s Paper Boat brand (HT Media Ltd., 2014).

  Promotion Strategies:Paperboat

  Paper Boat’s promotional efforts have been relatively very subdued until now because of the unexpected sales that the brand has had since its inception. Its founders, the former Hindustan Coca-Cola Beverages Pvt. Ltd employees Neeraj Kakkar, and Neeraj Biyani were taken aback by the demand of Paper boat. Six months ago Hector Beverages was selling about million packs a month and now it’s selling close to two million in a month. Paper Boat Aamras, Aam Panna and Jaljeera drinks have been selling like hot cakes in local airlines such as Indigo and Jet Airways (India) Ltd, (HT Media Ltd., 2014)
  The company’s current marketing efforts are focused largely on advertising in newspapers, digital marketing through their website, social media and most importantly by positive word of mouth communication. One example of marketing of the product that is happening through word of mouth communication is a blog written by Ms Chitra Reghuraj. She writes that she finds their website to be very attractive and so is their facebook page. The company differentiates its product offerings by linking it with nostalgia and childhood memories and hence the tagline drinks and memories. Every person in their 20s or 30s can associate themselves with this tagline because drinks like Aamras, Aam Panna and Jaljeera, which are of Indian origin and were consumed by children in every household across India almost every day in the summers. Its promotional efforts, which include posting images about childhood memories on their facebook page and website, are in sync with the tagline of the product. The images overwhelm the customers with their own childhood memories, fostering a thought process to establish a connect with the brand and eventually yearning to buy more of it.

Promotion Strategies:Competitors

Although, Paper Boat has quickly achieved immense success and recognition in the metro cities in India, the brand is yet to make a strong place in the overall Indian market. This can only be achieved by the company with the use of mass media marketing i.e. following the footsteps of its competitors like Coca Cola, Pepsico, Parle and Dabur to name a few. The big players in the market extensively use mass media advertising on television and now are also concentrating on social media marketing. Most of them use famous bollywood actors, cricket stars to endorse their product on television, which has a major impact on the brand awareness of the organization’s products. Some recent examples of endorsements by major brands are:

1. Deepika Padukone endorsing Coca-Cola
2. Ranbir Kapoor endorsing Pepsi
3. Sharukh Khan endorsing Parle’s famous brand Mango Frooti.
4. Bipasha Basu endorsing Real Activ juice from Dabur

Research by: Mr. Brajdeep Singh

In a research done by Mr Brajdeep Singh, advertisements have a significant impact on the choice of a brand and celebrities have a positive effect on the perception that people have of brands. 83% of the respondents agreed that they were able to recall the advertisements of their brands. This helps in the decision making process while purchasing the product. It was also found that people recall different aspects of an advertisement, the first being the tag line followed by the celebrity. The study found that companies selling aerated drinks spend nearly 35% of their cost on advertising.

The findings of the study also revealed that the most liked medium, by customers, for viewing advertisements of products was television followed by internet and outdoor media. On the other hand newspapers and radio had a very low rating as compared to other mediums (Singh, 2012). Paper Boat must consider this factor while designing its advertising campaign since Paper Boat has been using newspapers for advertising its products.

As per this study by Brajdeep Singh which involved 150 respondents, most of which were in the 18 – 25 age gap, it was found that 43 respondents strongly agreed that advertisements have a very strong effect on the brand that a consumer prefers.

We also analysed that 52% of the respondents(150 Respondents) surveyed agree that celebrity endorsements influence their buying behaviour. This can also be used to draw our second conclusion that Paper Boat can look at endorsing a celebrity to promote their brand which will have an immediate impact on the preference of its customers and will enable an easy brand recall in the consumer’s mind.

Competitor Analysis

Market Capture

Considering entire beverage market including juices and water, Coke leads the market with close to 56% market share, followed by Pepsi with approx 34% market share. Rest 10% includes Parle Agro, Dabur etc.

When only carbonated soft drinks are considered, Coke again leads with 55% share and Pepsi 45%.

Compared with the 35% share of colas in the Rs 14,000-crore aerated drinks category, the lime-lemon segment now leads the race with a 36% share. However, the updated share shows slight variation in the figures with Sprite having a share of 15.6% in comparison to 15.3% of ThumsUp.

Sprite replaced Pepsi as the #2 brand 4 years ago.

Mountain Dew is the country’s fastest growing aerated drink but declined to divulge market share.

Coca-Cola emerges as overall market leader without considering the bottled water sale. It is then followed by PepsiCo.

Dabur Real is the market leader in juice segment which is followed by Tropicana from PepsiCo.

Past Sales: Off Trade & On Trade

Off trade channel typically refers to the usual stores and markets which do not require any special licence for sale of beverages. These can be supermarkets and retail stores etc. On trade refers to the channels which require licence to operate. These comprise of hotels, bars and restaurants. Since Paper boat has more focus on regular retail channels so focus will be more on Off Trade sales and growth. Total sales in beverage industry will be combination of Off Trade and On Trade channels.

Source: Euromonitor International

Table 1: Off-trade Vs.On-trade Sales of Soft Drinks(ass old) by Category:Volume 2013 and Value

Source: Euromonitor International

Fig: Off-trade Vs.On-trade Sales of Soft Drinks(as sold) by Category:%Volume-2013

We can clearly see from the above figure that carbonates and juice are in close range in Off Trade market but in On Trade carbonates take a clear lead because of commercial collaborations. An example can be Pepsi with Pizza Hut. Juice sales are not very high in this market.

Industry Forecasts

The future looks good for the industry.

Source: Euromonitor International

Table 2: Forecast Off-trade Sales of Soft Drinks by Category: Value 2013-2018

Juice industry is expected to grow by CAGR of 18% from 2016-18 (Refer the figure below) and as per the estimations the sale of Juice may surpass the Carbonate drinks sales by 2016.

Source: Euromonitor International

Fig: Forecast for Sales of Juice and Carbonated drinks by Value 2013-2018 (INR Million)

Source: Table 2

Figure: Shows future prediction of market capture

Recommendation: Paperboat

• Penetration of Paperboat is very limited. With limited visibility, it has a direct impact on the sales of the Paperboat. It must make sure that it is present in all retail outlets where maximum footfall happens. Generally there are long queues at the billing counter in big retail outlets e.g. Big Bazaar. Therefore keeping Paperboat at such areas would make people buy it to get rid of their weariness because of shopping. It would also be wise to run discounts and offers for the first few weeks of existence, in order to draw in more potential customers.
• In bars and pubs, 30-40% people don’t take hard drinks. Instead look for drinks which add to their taste. This is one of the area which is untapped by many beverage players and there is a huge demand in these channels.
• Owing to the price of the drink and affordability as compared to other drinks in the same category, Paperboat need to tie up with schools where majority of the drinkers are children. They are going to be the potential buyers and thus it is important to encash this opportunity at its early stage.
• In order to increase the visibility of Paperboat, company should give incentives to shop owners to keep the stock and keep it at a position where display of the product is proper. Retail Schemes like certain number of bottles free per case, display schemes, target schemes, installation of refrigeration facilities.
• One of the problems is that most of the consumption of the drink happens during summers.All the variants i.e. Aamras, Aam panna, Jamun kala khatta, Kokum, Golgappe ka paani and Imli are all summer coolers. Paperboat should try to introduce some winter drinks also. This would not only keep up the sales during winters but also keep the brand visible and connected throughout the year.
• The promotion strategy could consist of advertisements which relate Paperboat with taste and healthy drink. An emphasis on the healthier aspects over things like coffee must be stressed in an early advertisement campaign. Associating Paperboat with a tagline will help in the increasing the percentage of recall for the brand.
• In order to maintain exclusivity, Paperboat should also come in gift packs where all the variants are packed together. Most of the people nowadays prefer giving some gifts whenever they visit friends. This will help in circulating all the flavours and urge the people to try out all the flavours.

By : Tarun Gupta