Warc Blog

Slowdown of Indian soda market

30 July 2013
NEW DELHI: Soft drink giants Coca-Cola and PepsiCo are introducing consumer promotions and trade discounts in a bid to push sales in India, which have slowed considerably this year because of early heavy rains and indications that consumer habits are changing.

Coca-Cola India witnessed volume growth of only 1% during the important April to June quarter, which accounts for almost 40% of annual sales, a dramatic fall since the 20% robust growth recorded during the same period in 2012.

Meanwhile, even though PepsiCo's sales volumes grew 11% during March to May, this still compared poorly with the strong double-digit growth it recorded last year.

The onset of an early monsoon season has been cited to explain some of the slowdown, but Atul Singh, deputy president of Coca-Cola's Pacific group, also pointed to slowing consumer sentiment – a view shared by brand consultant, Harish Bijoor, who said "in many markets, fizzy drinks with sugar have hit a glass ceiling".

Bijoor pointed to the rising popularity of tea parlours, frozen yogurt chains and cafes that sell smoothies and iced teas as well as demand for packaged water. Most schools, he added, have also stopped stocking aerated drinks as health awareness increases.

In its bid to revitalise sales, Coca-Cola plans this month to drop the price of its 200-ml bottles from Rs 11-12 to a flat rate of Rs10 and will back the strategy with 'aggressive' advertising.

Despite the cost to profitability – likened by one trade official to a panic measure – the company hopes to make up the difference in volumes.

PepsiCo, too, is refocusing its strategy. Gautham Mukkavilli, CEO at PepsiCo India, said the company will concentrate on increasing distribution, especially for its newer products, such as Pepsi Atom, Tropicana Coconut and Nimbooz Masala Soda.

He also expects the forthcoming festival season and increased rural demand to continue to drive consumer sales.



Data sourced from Economic Times; additional content by Warc staff

 
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