The beverages category contributes 8-10 per cent of the total food & grocery (F&G) market in India. With the entry of major international beverage players over the past few decades, the market has evolved and has made way for many new products, which have found an instant connect with Indian consumers.
According to research conducted by IMAGES Group – the publisher of Progressive Grocer India – the overall market for beverages in India was close to Rs. 195,000 crore in 2016 and was growing at 20–23 per cent. Though confirmed market figures are not awaited, this growth rate was expected to take the beverage category to three-and-a-half times its size by 2020.
But even if that milestone were to be reached, India’s per capital consumption of non-alcoholic beverage drinks is just about 5 litre, which is very low in comparison to the global average of 85 litre. According to market intelligence and research firm Mintel, “for most packaged beverages in retail, India still remains a small market but one that is growing rapidly.”
Be that as it may, beverage products are gaining big traction among Indian consumers largely because of the convenience and hygiene offered by value-added non-alcoholic beverages. This is particularly true among those aged between 18 and 34 years as Indian consumers in this age group have either grown up consuming these products or have seen the market grow enough to be familiar with them.
For example, according to a study of 3,029 Indian adults by Mintel, over half the respondents said they had consumed juices and carbonated soft drinks (respectively) in the months of April, May and June, while 41% said they had consumed packaged ready-to-drink dairy drinks in the same time period. Consumption was higher among the younger adults and declined as the age increased.
Trade analysts observe that except for the past year or so, which should be taken as an aberration due to the Covid disruption, beverages as a category had been growing at a healthy clip of 20-25%, the highest among all food groups.
Even until the advent of the Covid outbreak in March last year, the category had continued to perform impressively. According to a GlobalData’s report, India Beverages Consumption Trends and Forecasts Tracker, Q4 2020 (Dairy and Soy Drinks, Alcoholic Drinks, Soft Drinks and Hot Drinks), dairy, soy drinks and milk alternatives’ sector was the only one to see its volumes rise in Q4 2020, led by strong growth in fermented milk, flavored milk and white milk categories.
However, the report says that soft drink volumes posted a sharp decline of 24.1% in Q4 2020 over the same quarter of the previous year with several categories registering double digit declines, even as enhanced water grew by 4.7%. Bulk/HOD water also fell by 32.5% in the same period.
But barring this brief blip in an otherwise exceptional growth run since 2015 onwards, the beverages industry is expected to see a strong revival from this year onward. With the Indian government’s vaccination campaign taking off, it is expected to boost the consumer confidence in bringing about a gradual return of normalcy, thus enabling people to socialize, travel and dine-out, spurring the sales of beverages.
As the market for beverages keeps getting more segmented and niche than ever before, the category is seeing the entry of many new players as well as the broadening of its consumer base. With India’s population skewed towards younger consumers, each beverage category has significant growth potential in the coming years. Busy, on-the-move lifestyles will also have a positive impact on these categories as consumers look for easy solutions to satisfy their thirst and hunger while they go about their day.
The emergence of various brands in all the segments has also given an unprecedented thrust to the category. Consumers can choose beverages of almost all flavours, colours, ingredients, health and nutritional values. The expanding products range is fuelled by the food processing sector and, with the growth, the category is bound to carry forward the acceleration.
Major beverage segments
The category can be divided into four broad segments – tea and coffee, occupying the largest market share; juices and flavored drinks; packaged drinking and flavoured water; and other non-alcoholic drinks, including soft drinks, mango drinks, lemon drinks, chocolate drinks, etc. The lion’s share of tea and coffee confirms that the category is still ruled by the traditional beverages.
Another traditional segment having a significant share is juices along with other canned and bottled beverage options. In spite of the large financial muscle powers and unparalleled distribution advantage, the global beverage giants are able to hold just a five per cent share in the category. About four cent per cent of the total beverages market is formed of the juices segment, which is growing at 20–25 per cent and is expected to grow almost four times bigger in the next five years. Today, Indians are spending at an average just Rs. 6 per month on juices, which is less than what they are spending on other beverages.
The juice segment has been somewhat impacted by the emergence of other flavoured drinks, which have become an easy alternative. Three-fourths of the juice market is urbanised. The high consumption of juices in these markets is the result of higher health awareness, availability of branded juices, urban lifestyle, boom in modern retail and mall culture, and influence of globalisation in the F&B space. People today realise the importance of healthy food and they are demanding packaged juices, which can easily be carried along while on the go.
The juice segment has two components – packaged juices and fresh juices. The packaged juices component has a higher growth rate since it is easily available all the time. However, not more than 15 per cent of the segment is dominated by packaged juices. The packaged juices can be further classified into fruit drinks, juices and nectar drinks, which are recent additions.
Fruit drinks have one-third fruit content in them and sell the most. Fruit juices, on the other hand, are 100 per cent composed of fruit content, and claim a 30 per cent market share at present. In contrast, nectar drinks have anywhere between 25 and 90 per cent fruit content, but account for only about 10 per cent of the market.
The rising number of health-conscious consumers is giving a boost to the fruit juices segment; it has been observed that consumers are shifting from fruit-based drinks to fruit juices as they consider the latter a healthier breakfast or snack option.
The juices and nectars market alone is estimated to be over Rs. 2500 crore in terms of consumer spend. The category is largely urban-centric with rural contribution less than 10 per cent of the overall juices industry. Given that the consumers are increasingly moving towards branded packaged juices format, we see a huge potential in the category in the years to come. The category has been growing at a healthy double-digit CAGR in the recent years.
Growth in nectars and juice drinks is estimated to be at a faster pace vis-à-vis 100% juice as higher prices and stressful lifestyles may restrict the demand for the latter. Owing to this, there could be a bigger demand for fruit-based aerated drinks/ beverages from the consumers. Lately, there has been the trend of a resurgence of traditional drinks. In the coming days, these factors will influence the beverage market in India.
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