BENGALURU: Branded ethnic beverages currently form only a small part of the overall ethnic beverages market in India – and an even smaller proportion of the total soft drinks market – but one investor believes they could outstrip colas in the future.

"It [branded ethnic beverages] is a category that is waiting to explode and has the potential to break the back of the cola market," V.T. Bharadwaj, managing director at Sequoia Capital, told Knowledge@Wharton.

He is one of the investors in Hector Beverages, maker of the Paper Boat brand, which is a leading player in this niche market and which he sees as "tapping into a sense of a confident India that is now comfortable with its roots and product history".

It's a view supported by Devendra Chawla, president, food and FMCG brands at Future Group, who has noted that "Traditional drinks and tastes have come out of the shadows … consumers are going back to favouring what they perceive are healthier and traditional flavours".

That means creating drinks using ingredients like mangoes, jamun, kokum, tamarind and cumin.

But, wary of tradition and authenticity being seen as old-fashioned, Paper Boat has utilised modern design and contemporary packaging to offer the convenience, safety and shelf life that consumers have come to expect.

Distribution and pricing, however, are perhaps the biggest challenges Paper Boat faces in reaching a wider market: it is available in less than 3% of a potential universe of 5m outlets, and costs more than twice the price of standard Pepsi and Coca-Cola products.

Mainstream rivals who do possess extensive distribution facilities are also moving in on its territory – Dabur, for example, recently launched a range of traditional drinks under the Hajmola Yoodley brand.

The presence of such companies, combined with changing consumer sentiment, suggests that the category is indeed set to grow significantly, but price will ultimately determine whether it can really challenge the cola market.

Data sourced from Knowledge@Wharton; additional content by Warc staff