Sales & Distribution of Coca-Cola & Hector Beverages

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Figure 23: Hub and Spoke Model in the simplest form

Figure 24: Hierarchy for the Direct Selling Model

Introduction

The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year. In India, the food sector has emerged as a high-growth and high-profit sector due to its immense potential for value addition, particularly within the food processing industry. It comprises of various segments like fisheries, plantation, fruits and vegetables and confectionery etc.

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Figure 1: Food Industry Production

The reasons for growth of Food Industry in India are

- Increased urbanization in the country has given a boost to the food industry in India.

- Majority of the women in the country are working as a result of which families have extra income which they are spending in buying food.

- The standard of living in the country has improved as a result of which there has been an increased demand for food.

- Supermarkets and malls have opened all over the country and this has helped in making shopping for food a pleasurable experience.

- The consumers can select, inspect and pick up food items that they like in an ambience that is comfortable. This too has helped to boost the sale of food products in the country.

Soft Drinks Industry in India

India is a major manufacturer and importer of soft drink beverages. The Indian soft drink industry is vast and it has been rapidly growing by the day and consumed in great volume.

According to official reports, the volume of soft drinks consumed in India stood at a whopping 12,081 million litres in 2015 which has been increased of about 128 percent in the consumption of soft drinks in comparison to 2010. It is further expected that the sale of soft drinks may go up by an annual 14 percent till until 2018.

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Figure 2: Off Trade & On Trade Sales

The key insights are

- Value growth slows slightly in soft drinks: Soft drinks in India witnessed slightly lower value growth in 2015. Unseasonal rainfall affected sales across the country. This led to a small decline in the carbonates’ growth rate.

- Energy drinks face challenges as the FSSAI declare them unfit for consumption: Energy drinks in India faced a challenging year due to FSSAI regulations. Many energy drinks brands like Monster Energy Drinks, Tzinga and Cloud 9, were also withdrawn from the market for being unsafe for consumption leading to losing their foothold in the category.

- International brands continue to dominate soft drinks: With several new brand launches and the expansion of comparatively new players such as Hector Beverages, the competition in soft drinks became even more intense during 2015. However, the category is still dominated by Coca-Cola.

- New launches drive consumers’ interest in soft drinks: Many new launches across soft drinks. Paper Boat, a brand by Hector Beverages, is looking to strengthen its distribution and brand presence in Tier II cities and some rural pockets by launching small pack sizes of 200ml, which will be exclusively retailed by Indo Nissin Foods.

- Soft drinks will continue to grow over the forecast period: Long summers and higher spending on packaged products will fuel the growth. Increased marketing efforts and communications from soft drinks manufacturers are expected to continue playing an important role in terms of pushing sales in most soft drinks categories.

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Figure 3: Market Share of Juices - 2015

Trends responsible for changing Market Share

- Indian consumers are becoming increasingly aware of the ill effects of sugar-based carbonates and caffeine.

- The fruit beverages witnessed off-trade value growth of 11% in 2015. This was slightly lower than the review period CAGR, which was mainly due to growth from a smaller base.

- Reduced sugar cola carbonates recorded the fastest off-trade value growth of 11% in 2015. Consumers are increasingly conscious of their weight and many continued to move away from sugar-based beverages to opt for reduced sugar carbonates or a reduced intake of these beverages.

Juice Industry in India

Within the beverages market, the fruit-based beverages category is one of the fastest growing categories, and has grown at a CAGR of over 30% over the past decade. At present, the Indian packaged juices market is valued at INR 1100 crore (~USD 200 million) and is projected to grow at a CAGR of ~15% over the next three years. The packaged fruit juices market can be divided into three subcategories, viz. fruit drinks, juices, and nectar drinks.

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Figure 4: Forecast Off-trade Sales of Juice by Category

Changes in Target Market Profile and Consumer Behavior

- Indian farmers are reluctant to grow fruit due to their perishable nature. The better distribution system with cold chain storage and transportation conceptualized by the Ministry of food processing industries can make the fruit juice industry flourish in the near future.

- Juice in India, although at a stage where it can witness drastic growth, comes with many challenges like the reluctance of local farmers to go in for fruit farming, the current volatility in the price of fruit and the lack of cold storage and inadequate processing facilities for fruit-based products.

- In some urban households, fruit juices have gradually created a space as a refreshment drinks; as the beverage at social gatherings and most importantly a delicious, wholesome drink. Moreover, conscientious mothers have taken to stocking juices in a bid to discourage children from colas and other fizzy drinks. These are expected to drive the category.

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Figure 5: Consumer Expenditure on Food and Non Alcoholic Beverages

Supply Side Drivers

- Infrastructure development: As an offshoot of

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