ASSIGNMENT: BUSINESS ENVIRONMENT

TOPIC- ANALYSIS OF Soft Drinks INDUSTRY (INDIA)

SUBMITTED TO: Prof. Kulwinder Singh

SUBMITTED BY: Parmeet Singh, MBA EP (2024-25)

Key Points
 The 50-bn-rupee soft drink industry is growing now at 6 to 7%
annually.
 Coke and Pepsi have a combined market share of around 95%
directly or through franchisees.
 The per capita consumption of soft drinks in India is around 5 to 6
bottles.
 There are about 110 soft drink producing units (60% being owned
by Indian bottlers) in the country.

Indian Soft Drinks Industry Overview

Over the past two years, the soft drink industry has seen a value
growth of 11% compound annual growth rate (CAGR) and a volume
growth of 5% CAGR. In total, 1.25 billion people in the country
drink 5.9 billion litres of soft drinks in a year. This makes India’s per
capita soft drinks consumption large, but just 1/20th of that of the
U.S., 1/10th of Kuwait, one-eighth of Thailand and Philippines, and
one-third of Malaysia. 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.
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.
 SWOT ANALYSIS OF INDIAN SOFT DRINK
INDUSTRY

STRENGTHS

 With 1.3 billion people residing in a country, India provides

enormous opportunities for domestic and international beverage
industry. The non-alcoholic beverage industry has grown in India
steadily over years.
 The Indian non-alcoholic beverage market is expanding due to
favourable demographics, long summers, and higher packaging
spending.
 According to market research the carbonated soft drinks market in
India in 2015 was worth 173 million U.S. dollar the drinks market in
India is expected to reach 402.43 million U.S. dollar by 2025 raising
at a CAGR of 7.6% but per year between 2020 and 2025.
 The soft drink industry in India has a well-established distribution
network that reaches urban centres, semi-urban areas, and rural
regions. Companies leverage extensive distribution channels
encompassing supermarkets, convenience stores, street vendors,
and online platforms to ensure product accessibility.
 Soft drink companies in India continuously innovate to meet
evolving consumer preferences and market trends. They introduce
new flavours, healthier alternatives, and functional beverages to
cater to diverse consumer needs, thus staying relevant in a
competitive market.
 Beverages play a significant role in Indian culture, being consumed
during social gatherings, festivals, and celebrations. This cultural
significance drives consistent demand for soft drinks throughout the
year, contributing to industry stability.

WEAKNESS

 One of the most challenging difficulties for the Indian soft drink
industry is reaching out to rural markets, which account for roughly
67 percent of India’s total population.
 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
 In addition to the rapidly growing population, reaching rural
consumers across the country’s vast geography presents significant
distribution challenges. Making chilled carbonated drinks available
to this large population is also challenging.
 The demand for certain soft drinks, especially carbonated ones,
tends to be seasonal. Sales might peak during the summer months
but decline during the cooler seasons, leading to fluctuations in
revenue and production planning challenges for manufacturers.
 With increasing awareness about health and wellness, there's a
growing concern over the high sugar content and artificial
ingredients in many soft drinks. This has led to a shift in consumer
preferences towards healthier beverage options, posing a challenge
for traditional carbonated soft drink manufacturers.

OPPORTUNITIES

 The proliferation of e-commerce platforms and digital marketing

channels presents opportunities for soft drink companies to reach
consumers directly and engage with them through targeted
advertising, social media campaigns, and online sales channels.
Leveraging digital technologies can enhance brand visibility,
customer engagement, and sales growth in the rapidly evolving
digital landscape.
 India is a diverse country with varied culinary preferences. Soft
drink manufacturers can capitalize on this diversity by introducing
innovative flavors and formulations inspired by local fruits, spices,
and ingredients. Customizing products to suit regional tastes and
preferences can help companies expand their market reach and
appeal to a broader consumer base.
 Rising disposable incomes and changing consumer lifestyles are
creating demand for premium and value-added beverage offerings.
Soft drink companies can explore opportunities to introduce
premium products with unique packaging, superior ingredients, and
upscale branding to target affluent consumers willing to pay a
premium for high-quality beverages.

THREATS
 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.
 The industry estimates that the beverage market should grow at
twice the rate of GDP growth. The Indian market should have,
therefore, grown by at least 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.
 Monopoly of only 2 major players Coca cola and Pepsi. 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.

 Increased awareness of health issues associated with excessive

sugar consumption and artificial ingredients poses a significant
threat to traditional carbonated soft drinks. Regulatory measures
aimed at curbing sugar intake or implementing stricter labelling
requirements can further exacerbate this threat.
 The rise of healthier beverage options, such as natural fruit juices,
coconut water, herbal drinks, and flavoured water, poses a threat to
traditional soft drink sales. Consumers are increasingly seeking
alternatives perceived as healthier, which could lead to a decline in
demand for carbonated soft drinks.

Market share of various non-alcoholic drinks in

India
Market Segmentation

Segment Share (%)

North 24

East 18

West 32

South 26

Rural 30

Urban 70

Market Structure

Product Variation

Company Share (%)

Cola Drinks:

Thums Up 29

Coca Cola 25

Pepsi 18

Non Cola Drinks:

Gold Spot 2

Fanta 9

Mirinda 8
Limca 9

Overall, Colas 62

BEST PRACTICE OF THE SOFT DRINKS INDUSTRY

One of the best practices in the soft drinks industry is to prioritize
consumer health and well-being while also focusing on sustainability and
innovation. Here's a comprehensive overview of some of the best
practices:
 Offering Diverse Product Portfolios: Successful soft drink
companies often offer diverse product portfolios that cater to a wide
range of consumer preferences. This includes traditional carbonated
soft drinks, natural fruit juices, flavored water, functional beverages,
and healthier alternatives with reduced sugar and artificial
ingredients.
 Investing in Research and Development (R&D): Companies in
the soft drink industry invest heavily in R&D to innovate and
develop new products that align with evolving consumer
preferences and market trends. This includes conducting market
research, product testing, and formulation optimization to create
unique and appealing beverages.
 Promoting Health and Wellness: Soft drink companies are
increasingly focusing on promoting health and wellness by offering
healthier beverage options, providing transparent nutritional
information, and engaging in public health initiatives. This includes
reducing sugar content, introducing low-calorie options, and
incorporating natural ingredients and functional benefits into their
products.
 Sustainability Initiatives: Many soft drink companies are
implementing sustainability initiatives to minimize their
environmental impact and contribute to sustainable development.
This includes adopting eco-friendly packaging materials, reducing
water usage, optimizing energy efficiency, and implementing
recycling programs to reduce waste and promote circular economy
principles.
 Transparency and Consumer Engagement: Building trust and
credibility with consumers is essential for soft drink companies. This
involves being transparent about ingredients, sourcing practices,
and manufacturing processes, as well as actively engaging with
consumers through marketing campaigns, social media, and
community outreach programs.
 Supply Chain Optimization: Optimizing the supply chain is crucial
for ensuring efficient production, distribution, and inventory
management. Soft drink companies strive to streamline supply
chain processes, improve logistics, and enhance collaboration with
suppliers and distributors to minimize costs, reduce lead times, and
ensure product availability.
 Adapting to Digital Trends: Embracing digital technologies and
online channels is becoming increasingly important for soft drink
companies to reach and engage with consumers in today's digital
age. This includes leveraging e-commerce platforms, digital
marketing strategies, mobile apps, and social media platforms to
enhance brand visibility, drive sales, and connect with consumers on
a more personalized level.
By adopting these best practices, soft drink companies can enhance
their competitiveness, strengthen their brand reputation, and meet the
evolving needs and preferences of consumers while also contributing to
sustainable growth and development in the industry.