Indian Softdrink Industry Analysis

Topics: Soft drink, Coca-Cola, Carbonated water Pages: 11 (3811 words) Published: October 5, 2008
For a number of years the main competition in the non - alcoholic sector was the battle between Coke and Pepsi for the cola market. But as the customer preferences and concerns started to change, the industry's giants have begun relying on new product flavours and looking to noncarbonated beverages for growth. Globally, the market size of this industry has been changing. Soft drink consumption has a market share of 46.8% within the non-alcoholic drink industry. Datamonitor (2005) also found that the total market value of soft drinks reached $307.2 billion in 2004 with a market value forecast of $367.1 billion in 2009.

The modern soft drink industry started in 1886, when Dr. John S. Pemberton invented "Coca Cola" in Atlanta, Georgia. This was followed by the invention of "Pepsi cola" in 1898 by Caleb Bradham. In India the two major player Coca cola and Pepsi made their entries in 1977 but then the market was not that much friendly to the foreign companies. More over the political situation was also not conducive for the foreign companies. But later on the situation post reforms began to look up for these two giants. In 1990 Pepsi-Cola went on sale in India for the first time in 28 years after a six-year battle to sell the US soft drink in India. In 1997, to ensure fast re-entry, Coca Cola paid $40 million to buy the biggest Indian soft-drink brands, including ThumsUp, from a family-owned business. In recent years the soft drink industry in India has been hit by the concerns over health and environmental aspects.

2.1Political Factors
The entry of the global soft drink giants in India was possible following the liberalization policies initiated by the government in the 1990s. This was ironical in the case of Coca – Cola Company considering that it was government policy that had been responsible for its exit from the Indian market earlier. For any industry the government regulatory policies, or their absence, form an important variable in the political environment which shapes strategy. For a number of years in India there was an absence of notified standards which made regulation of the soft drink industry difficult. Soft drink manufacturing was exempted from industrial license under the Industries Act of 1951 and only a one-time operating license under the Food Products Order (FPO) 1955 was required. All that the industry was required was a no objection certificate from state governments and the State Pollution Control Boards for its operations. The presence of pesticides and insecticides in food is regulated under the Prevention of Food Adulteration Act, 1954, but bottled water or beverages were not within the scope of the Act. There was also no mandatory requirement for Environmental Impact and more importantly, the use of water by soft drink manufacturers and bottling plants which is largely non - priced ground water was not regulated. Regulations for the bottled water industry were notified in 2004 after a 2003 report by the Centre for Science Environment (CSE) that found pesticides in bottled water. This prompted the government of India to adopt E.U. standards for bottled water at 0.1 ppb (parts per billion) for single residues and 0.5 ppb for multiple residues. New regulations for carbonated soft drinks issued by the Health Ministry in the same year mandated that water used by soft drink companies as an input for their products must meet bottling water standards. However, the Ministry did not notify standards for the final products. In future more stringent regulatory policy and stricter controls on environmental aspects could be a major factor affecting the soft drink industry – especially when it comes to setting up and location of bottling plants. 2.2Macro – economic factors

The Indian soft drinks market generated total revenues of $3.8 billion in 2006, with a compound annual growth rate (CAGR) of 7.5% for the five-year period...

References: 1. Datamonitor. (2005, May). Global Soft Drinks: Industry Profile, New York. Reference Code: 0199-0802.
2. Datamonitor (2007, September). Soft Drinks in India: Industry Profile, New York, Reference Code: 0102-0802
3. McKinsey Global Institute (2007, May). The ‘Bird of Gold’: The Rise of India’s Consumer Market
4. The Marketing Whitebook (2007 -2008), Businessworld, New Delhi
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