Professional Documents
Culture Documents
FMCG - Beverages
Group No. 5
Mohammad Saif
Sabitra Subhadarsan Panda
Abhishek Sinha
Rahil Badashah M Maniyar
Kumar Amit
Arun Kumar Pasi
Rajeshkumar V
Table of Contents
Table of Contents....................................................................................................... 2
Executive Summary....................................................................................................3
Market Overview.........................................................................................................3
Hot Drinks................................................................................................................3
Alcoholic Drinks.......................................................................................................4
Soft Drinks...............................................................................................................4
Major Players.............................................................................................................. 4
PepsiCo India........................................................................................................... 4
Coca-Cola India........................................................................................................5
United Breweries.....................................................................................................5
SABMiller India.........................................................................................................5
Impact of Government policy on Giant Players in the beverage market....................6
Coke in India ...........................................................................................................6
Pepsi in India........................................................................................................... 6
Indian Regulatory Environment..................................................................................7
Centre for Science and Environment.......................................................................7
Impact of Economic reform on Beverage Industry......................................................8
Impact of Union budget on FMCG Sector....................................................................8
Measures.................................................................................................................8
Impact.....................................................................................................................8
Implication of International treaties such as WTO/ Free trade agreements for the
sector.........................................................................................................................9
Innovative products entering the market:................................................................10
Key drivers of cost /profitability/growth....................................................................10
Key events in the recent past...................................................................................11
The key Management Personnel...............................................................................12
United Breweries -India.........................................................................................12
SABMiller India.......................................................................................................12
Promoters.............................................................................................................. 13
Listed or Not Listed................................................................................................13
Market Capitalisation.............................................................................................13
References and Data Sources...................................................................................13
Financial Overview of Pepsi Foods and Coca-cola.................................................13
Sales overview of soft drinks.................................................................................15
Sales overview of carbonates................................................................................17
Executive Summary
India’s economy is set to continue its growth, with GDP growth expected to keep increasing in
the coming fiscal year. This means that more people will obtain higher buying power which can
drive the beverages sales in the country. As a result a number of beverage manufacturers seek to
take advantage of the opportunities presented by India's sustained economic growth.
BMI recently published India Food and Drink Report for Q310. As per that report,
approximately 120 billion liters of beverages are consumed by Indians every year, but only 5%
represent store-bought packaged beverages. The majority of Indian consumers (75%) still
consume non-alcoholic store-bought beverages ‘less than once a day’, highlighting a large
untapped market opportunity, particularly in the carbonated drinks and juice or juice-based
categories (estimated to be worth $1.5 Billion and $.25 billion respectively). In order to increase
consumption and penetration of such beverages, manufacturers will have to address the two
primary reasons why some Indians abstain entirely, that is, health concerns and undesirable taste.
Market Overview
Hot Drinks
India’s hot drinks sector is fairly mature. The country’s tea industry has a growth forecast of only
9.7% to INR 53.14bn in 2014. Faced with a saturated domestic market, India’s leading tea
manufactures, such as Tata Tea and Apeejay are looking outside India for better opportunities.
Contrary to tea, the opportunities for India’s coffee industry look very bright. A sales growth of
64.6% to INR 107.3bn in 2014 is forecast. The coffee sector has attracted significant investment
in recent months. Local players like Coffee Day have also entered the high-growth coffee sector.
Alcoholic Drinks
A growth of 77.2% is forecast between 2009 and 2014 during which the value of the industry is
expected to reach INR 1122bn. This level of value growth indicates the sums being invested by
the global companies into production capacity increases and marketing and branding initiatives.
Beer is set to witness growth of 38% by 2014 which, although very strong, still falls behind the
growth in fast-emerging wine industry, which is forecast to grow at an impressive rate of 73%
growth in volume sales by 2014.
Soft Drinks
Sales of soft drinks in terms of value are expected to increase by an impressive 66.1% over the
period 2009-2014. This will still result in only sales of INR 159bn in 2014 – a modest sum given
India’s vast population and also a comparative immaturity of many of the soft drink industry’s
subsectors, such as health drinks.
Given the low levels of disposable income in the market, major players have had to prioritize
volume sales over value sales. The real driver of growth to 2014 and beyond will be the
increased interest in non-carbonated, healthy drinks category. The sales of fruit juices and bottled
waters are expected to soar. The bottled water sales in India is forecast to increase by 118% to
reach INR 68626bn by 2014, with double digit annual sales growth likely to be sustained.
Major Players
PepsiCo India
PepsiCo India is the local subsidiary of US soft drinks major PepsiCo. The company is the
second largest player in the Indian soft drinks market, with a value sales market share of 35%
and volume sales market share of 30%.
The company continues to invest heavily in India and in November 2009, it announced that it
would invest a further $ 200m into its Indian operations. Capacity expansions, both at existing
sites and new Greenfield facilities, with greater investment in supply chain efficiency, market
infrastructure and R&D are key elements of its strategy. In 2009, PepsiCo launched a cut-price
beverage to shore up customer loyalty during a period of weak consumer demand.
Coca-Cola India
Coca-Cola India, the local subsidiary of US soft drinks giant The Coca-Cola Company, is the
market leader in India’s soft drink industry, with a 60% share of the soft drinks. It operates
across all soft drinks sectors in the country including CSDs (Carbonated Soft Drinks), fruit
juices, energy drinks and bottled water.
The company has revamped its marketing and distribution to improve its competitiveness. Coca-
Cola will now improve its focus on the high-growth non-carbonates sector and contemplate an
enhanced waters partnership with Tata Tea. However, it also plans to establish a number of small
local sales teams. In December 2008, the company unveiled its new Parivarthan programme,
which will see Coca-Cola target around 6,000 small retail outlets in second- and third-tier towns,
training shopkeepers on product display and stock-keeping best practices.
United Breweries
UB is the main brewer of alcoholic drinks major UB Group. The company is the local market
leader with a share of just over 50%, obtained primarily through its flagship Kingfisher brand.
Despite its market leadership, UB is closely pursued by SABMiller; as such it focuses heavily on
branding and expansion investments. Domestically it pursues a strategy of constant innovation,
both creating new products, such as premium lagers, and creating value-added offerings for its
existing range, ex, party kegs of Kingfisher. Internationally, the company entered into
partnership with S&N to distribute S&N’s brands in India and UB’s brands globally using
S&N’s superior distribution network, while a distribution deal with Heineken has also been
reached. With two greenfield breweries under construction and a further INR920.5mn
(US$19.2mn) from a first quarter share rights issue pegged for investment, UB looks to record
further strong results. In the financial year ending March 2010 the brewer sold over 100mn cases
of beer representing an increase of 20% compared to volume sales in the previous financial year.
The brewer expects to sell 120mn cases of beer in FY11 as a result of its new marketing
arrangement with Heineken.
SABMiller India
Anglo-South African brewer SABMiller is one of the world’s largest brewers with brewing
interests or distribution agreements in over 60 countries. It entered the Indian market in 2000
through a JV and its later acquisition of the Narag breweries, and has subsequently made several
more acquisitions, most notably its 2001 purchase of the Mysore Breweries and its Knock Out
brand, followed by the 2003 acquisition of Shaw Wallace’s beer brands Royal Challenge and
Haywards. Having established its presence in India and holding around 38% of the beer market,
SABMiller is now looking to extend its current market share through further investment.
SABMiller India is structured into three core operational regions, with this decentralized
organizational model allowing it to tailor its operations to the specifications of each region. It has
also sought to diversify its product range, introducing mass-market and premium brands to
support its economy products. In October 2008, it nationally launched Indus Pride, which was
created with the objective of expanding the mild beer segment in the country and is soon to be
sold in export markets as well. SABMiller also plans to launch its global Miller beer brand in the
Indian market. Recent reports suggest that SABMiller is reconsidering its emerging market
priorities with ongoing regulatory frustrations in India appearing to have pushed the company to
prioritize investments in Latin America, China and, in particular, Africa.
Pepsi in India
The post liberalization period in India saw the comeback of cola but Pepsi had already beaten
Coca-Cola to the punch, creatively entering the market in the 1980s in advance of liberalization
by way of a joint venture. As early as 1985, Pepsi tried to gain entry into India and finally
succeeded with the Pepsi Foods Limited Project in 1988, as a JV of PepsiCo Punjab government-
owned Punjab Agro Industrial Corporation (PAIC), and Voltas India Limited. Pepsi was
marketed and sold as Lehar Pepsi until 1991 when the use of foreign brands was allowed under
the new economic policy and Pepsi ultimately bought out its partners, becoming a fully-owned
subsidiary and ending the JV relationship in 1994.
Indian Regulatory Environment
The main law governing food safety in India was the 1954 Prevention of Food Alteration Act
(PFA) which contained a rule regulating pesticides in foods but did not include beverages. The
Food Processing Order (1955) required that the main ingredient used in soft drinks be “potable
water” but the Bureau of Indian Standards (BIS) had no prescribed standards for pesticides in
water. One BIS directive stated that pesticides must be absent and set a limit of 0.001 parts per
million but the Health Secretary admitted, “There are lapses in PFA regarding carbonated
drinks.”
Indian law enforcement was minimal with virtually no conviction under PFA. In the absence of
national standards, NGOs such as the CSE turned to the United States and the European Union
for “international norms.” Under EU food laws for example, milk, fruit, and basic staples such as
rice and wheat would need to be imported into India to satisfy safety standards.
CSE’s August 2003 report claimed that soft drinks were extremely dangerous to Indian citizens
based on tests conducted at the Pollution Monitoring Laboratory (PML). All samples contained
residues of lindane, DDT, Malathion, and chlorpyrifos, toxic pesticides and insecticides known
to cause serious long term health issues. Total pesticides in all Coca-Cola brands averaged
0.0150 mg/l, 30 times higher than the European Economic Commission (EEC) limit. PML also
tested samples of Coke and Pepsi products sold in the United States to see if they contained
pesticides and they did not.
Regulations on soft drinks were weak in India, even compared to bottled water, as neither the
Prevention of Food Alteration Act (PFA) nor the Fruit Products Order (FPO), aimed at
regulating food standards in India, addressed pesticides in soft drinks, and there were no
standards to define ‘clean’ or ‘potable’ water. The report called on the government to put in
place legally enforceable water standards and chastised the multi-nationals for taking advantage
of the situation at the expense of consumer health and well-being.
Impact
Increased allocation under various rural development and employment scheme will raise income
level in rural area, thereby will boost rural demand. Further, the readjustment of tax slabs will
raise disposable income, thereby will boost demand. Hike in excise duty on cigarettes and
tobacco will have marginal negative impact on cigarette manufacturers like ITC, VST and
Godfrey Phillips. Roadmap for rollout of Goods and Service tax (GST) by April 1, 2011 is a key
positive for the industry. Implementation of GST will lead to reduction of retail consumer prices
which may result in higher volumes. Further, consolidation of supply chain will result in cost
savings.
India was a founding member of GATT, the General Agreement on Tariffs and Trade so when
the Uruguay Round and the WTO came into existence in 1995 India was one of the signatories.
This further lowered the trade barriers and more and more companies were attracted towards
Indian markets. After this there have been free trade agreements with more and more countries
like Srilanka and Thailand. With the advent of free trade movement there has been a lot of
pressure on Indian government on not to dilute the ROR. Rules of origin define the minimum
local content or value addition for manufactured goods to enjoy the duty benefits of a free trade
agreement. Government wants to dilute the ROR to attract more foreign investment but Indian
FMCG companies are opposing it as this could harm their bottom line.
It is increasingly seen that the FMCG companies are becoming more responsive to health and
environmental concerns. This is due to increased consumer awareness and strict government
regulation. The Food Safety and Standards Authority of India (FSSAI) has imposed strict
regulations to fix ingredient levels and caffeine content, as well as deal with other risk factors
and deliver appropriate regulation of the products. In cognizance of these regulations carbonated
beverage majors like Coca Cola and Pepsi Co. have put strict standards for water being use in
their plants. Pepsi Co. has even gone a step further and has taken various initiatives to replenish
the ground water resources. The FMCG companies like HUL and P&G are taking their CSR
initiatives to new levels and are also using these as tool for marketing their products.
Innovative products entering the market:
• Nimbooz by 7-Up (PepsiCo India) targeted local Indian taste with lime flavour and this has
helped the company retain its leading position in terms of off-trade value sales.
• Carbonates:
o Parle Agro Pvt Ltd launched a new product in carbonates named Grappo Fizz.
o Coca cola launched Fanta Apple nationally.
o Aqua Montana has launched diet carbonated energy drink Explode.
• There was also experimentation with green tea in soft drinks: Tata Tea’s T!ON and Nestlé
India’s Nestea Iced Premix Mint Flavour with Green Tea were launched in 2009.
• Dabur India Ltd launched Real Burrst in mango, apple, orange and mixed fruit flavours.
• Coca cola has ventured into dairy segment launching Maaza Milky Delite.
• Owing to India’s complicated state-by-state taxation and distribution laws, generally high
taxes and minimum control over retail pricing, Beverages strong market share has not
translated into strong profitability. Coca-Cola has revamped its marketing and distribution
strategies in order to offset its recent profitability losses in India and to improve its
competitiveness. It will now improve its focus on the high-growth non-carbonates sector:
investing more in promoting its Kinley bottled water and Georgia tea and coffee ranges;
launching a number of new products in the noncarbonated sector – namely Minute Maid fruit
juice, ready-to-drink wellness tea range and Burn energy drink; and contemplating an
enhanced waters partnership with Tata Tea.
• The division between the urban rich and the rural poor is as great as ever, meaning drink
manufacturers do not have access to the entire population – in fact, not even the majority of
it. Rising commodity costs are a threat to beverage processors, pushing up operating costs
and undermining profits in an environment in which it is hard to pass costs on to consumers.
Rising raw ingredient and distribution costs threaten to undermine HUL’s efforts to keep
consumer prices low, with the firm recently announcing a drop in profits, despite rising sales.
Despite an extensive nationwide sales network, undeveloped supply chain infrastructure
continues to make distribution costly for beverage industry.
• In late January 2010, India's largest consumer products company Hindustan Unilever Limited
(HUL) announced the launch of its vitamin loaded tea brand – Brooke Bond Sehatmand – in
Uttar Pradesh, Madhya Pradesh, Bihar, Jharkhand and Chhattisgarh.
• In January 2010, Coca-Cola India, the local subsidiary of US soft drinks giant The Coca-Cola
Company (TCCC), launched its non-carbonated lemon juice drink Nimbu Fresh in India.
• Through the launch of the Nimbu Fresh brand, the company aims to challenge PepsiCo
India’s Nimbooz brand, which was launched in 2009.
• In early January 2010, bottled water major Bisleri launched its new premium water brand
Vedica in India.
• Coca-Cola India launched its global energy drink brand Burn in India on December 1 2009.
• In early November 2009, US beverage and snack food giant PepsiCo announced that it would
invest a further US$200mn into its Indian operations.
• In early November 2009, leading Indian biscuit producer Britannia Industries announced the
launch of its milk-based health drink ‘Actimind’.
SABMiller India
Paolo Lanzarotti
Managing Director
Shalabh Seth
Director - Supply Chain
Martin Lehmacher
Director – Technical
Hari Krishna
Director - Human Resources
Kevin Heydenrych
Director – Finance
Sundeep Kumar
Director - Corporate Affairs & Communication
T. J. Venkateshwaran
Director- Sales
Derek Jones
Director- Marketing
Promoters
The promoters of the various companies are listed below :
Market Capitalisation
Pepsico - $ 107.21 Billion
SABMiller - $ 8 billion