Soft Drink Industry

Topics: Soft drink, Coca-Cola, Carbon dioxide Pages: 43 (14476 words) Published: October 27, 2012
The 50-bn-rupee soft drink industry is growing now at 6 to 7% annually.  In India, Coke and Pepsi have a combined market share of around 95% directly or through franchisees. Campa Cola has a 1% share, and the rest is divided among local players. Industry watchers say, fake products also account for a good share of the balance. There are about 110 soft drink producing units (60% being owned by Indian bottlers) in the country, employing about 125,000 people.  There are two distinct segments of the market, cola and non-cola drinks. The cola segment claims a share of 62%, while the non-cola segment includes soda, clear lime, cloudy lime and drinks with orange and mango flavours. The per capita consumption of soft drinks in India is around 5 to 6 bottles (same as Nepal's) compared to Pakistan's 17 bottles, Sri Lanka's 21, Thailand's 73, the Philippines 173 and Mexico 605. The industry contributes over Rs 12 bn to the exchequer and exports goods worth Rs 2 bn. It also supports growth of industries like glass, refrigeration, transportation, paper and sugar. The Department of Food Processing Industries had stipulated that 'contains-no-fruit-juice' labels be pasted on returnable glass bottles. About 85% of the soft drinks are currently sold in returnable bottles. There was a floating stock of about 1000 mn bottles valued at Rs 6 bn. If the industry were to abide by the new guidelines, it would have to invest in new bottles, resulting in a cost outgo of Rs 5 bn. Neither Coke nor Pepsi is in a position to invest such a large amount. Around 400,000 tonnes of raw material would be required to replace the existing stock of bottles.  Instead, the soft drink industry suggested that a seven-year moratorium be extended to the industry so that it can incorporate the change in a phased manner.  There is no such mandatory requirement anywhere in the world to specifically label the glass surface of returnable bottles. The government has decided to extend the date for replacing the bottles to end-march 2006. In the meantime, the producers have shifted substantially to the use of PET bottles. Soft and aerated drinks were considered products for the middle class and the affluent. That segregation is no more valid. Soft and aerated drinks are consumed by all except those who cannot afford to buy any drink. An NCAER study says that 91% soft drink sales are made to the lower, middle and upper middle classes.   The soft drink industry has been urging the government to categorise aerated waters (soft drinks) equitably with other consumer products of mass consumption and remove special excise duty.The industry estimates that the beverage market should grow at twice the rate of GDP growth. The Indian market should have, therefore, grown by atleast 12%. However, it has been growing at a rate of about 6%. In contrast, the Chinese market grew by 16% a year, while the Russian market expanded at almost four times the rate of growth of the Indian market. It may be recalled that Coca-Cola, the world's number one player, was present in India for a long time in collaboration with an Indian producer but was thrown out in the late 1970s. It reappeared in India following the economic liberalization era - but after its rival, world's number two, had already entered in a big way following a long and tough fight against the opposition from the domestic producers. When Coca-Cola re-entered, it installed a new milestone. It acquired the well flourishing India's top player, Parle. Since then it is basically a fight between the two American giants.  Others are playing a peripheral role, as adjuncts to the two MNCs.  World's third biggest player, Cadbury Schweppes, had also made an entry but was gobbled up by Coca-Cola. When Coca-Cola acquired Parle brands, it was, in fact, buying the bottling facilities, the marketing network, and the established consumer preference during the market build-up. The brands...
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