The non-alcoholic beverage segment in the market is expected to grow stably with more number of players entering the market and consumers preferring organic/ health drinks highly.
Whereas, the alcoholic beverage segment is expected to further slowdown in growth and revenues due to upcoming unfavourable regulation by government
- Definition / Scope
- Market Overview
- Market Opportunities
- Market Trends
- Industry Challenges
- Technology Trends
- Other Key Market Trends
- Market Size and Forecast
- Market Outlook
- Technology Roadmap
- Distribution Chain Analysis
- Competitive Factors
- Key Market Players
- Strategic Conclusion
Definition / Scope
The Indian Beverage industry has evolved beyond the traditional holy beverage ‘tea’ and at present the industry is filled with range of drinks right from alcoholic beverages such as wine, cocktails, whiskey to powdered juices, milkshakes, soft drinks and other drinks that meet the taste and preferences of variety of consumers.
At present the market can be categorized into alcoholic and non-alcoholic beverages:
- Alcoholic Beverage Market: It includes all alcoholic based drinks produced via distillation or fermentation. The segment can further be divided into:
- Spirits: These are alcoholic beverages formed via distillation of wine, fermented fruits or grains. Most common spirits sold in the market are whiskey, vodka, rum, gin and brandy.
- Beer: It is the most consumed alcoholic beverage by volume. It is fermented beverage made of malt. Beer with more than 0.5% alcoholic content lies in alcoholic segment with the one less than that it is represented in non-alcoholic or soft drinks section.
- Wine: It is alcoholic beverage derived from fermented grapes. At present it is the smallest segment in the entire beverage market in India.
- Non-alcoholic beverage market: The segment includes other sub-segments such as hot beverages, sparkling & carbonated drinks, juices, energy drinks and mineral water. They are also known as liquid refreshment beverages. More recently the segment has shifted from sugary carbonated soft drinks to no or low calorie beverages like bottled water and ready to drink coffee and tea.
- Hot Beverages: It mostly comprises of beverages served on order in restaurants and café such as coffee and tea. While it also includes, packaged tea and coffee or ready to drink tea or coffee.
- Carbonated Drinks, Powdered drinks, energy drinks: It contains different types of water based or dry drinks with added sugar. It includes, cola, lemonade and sports drinks on one had and another non-carbonated such as powdered drinks, shakes and ready to drink juices.
- Juices: It comprises of fruit nectars, fruit juice drinks, low-sugar smoothies and flavoured drinks.
- Mineral and Flavoured Water: It consists of both carbonated and non-carbonated drinks sold via bottles of water dispensers. It serves as a substitute for tap water. It is the fastest growing market in the non-alcoholic segment however, increasing concern of clean water and sustainable packaging could hinder the growth.
Alcoholic Beverage Market:
The market can further be divided into 3 broad sub-categories- IMFL (Indian Manufactured Foreign Liquor such as whiskey, rum, brandy, vodka and gin), Beer and finally, country liquor (cheaper one).
Over the past 20 years, the category has risen by almost 55%. In fact, India is the 3rd largest and one of the fastest growing liquor markets in the world. The rise of the market can be attributed to growing number of clubs, increasing pub culture and rapid urbanization.
Despite of a stable growth, there are a few obstacles on the policy part where the government is creating difficulties for the alcoholic beverage manufacturers by imposing higher tax, ban on liquor sales across several areas and cities etc. Not just the suppliers are not just losing revenues but also investors looking to invest in the sector are discouraged.
Non-alcoholic beverage market:
This beverage category comprises of 8-9% of Indian FMCG market. The market is growing at 20-23% at present and is expected to by 2020.
The government intervention in alcoholic beverage category has further turned the game in favour of non-alcoholic beverages.
The market can further be divided into four main categories: hot beverages, carbonated drinks, powdered drinks, health drinks & juices and Mineral & flavoured water.
Hot Beverages: The tea and coffee are the most popular hot beverages in the country. However, India is the largest tea producing and consuming country and the segment still rules over coffee.
Whereas, coffee is cultivated mostly in the southern part and is gradually becoming a major part of lifestyle beverage where branded coffee outlets are mushrooming across the cities.
Carbonated Drinks: The coca-cola is the most ancient carbonated drink which was introduced in India in 1970, since then other major FMCG players have introduced range of similar drinks to consumers in India.
Such as Parle has launched carbonated drinks namely, Thumbs Up, Gold Spot and Limca that are able to become a household brand names in India. Later, Pepsi forayed into Indian market and at present, almost 60% of the carbonated drinks market in India is ruled by Coke and Pepsi.
More lately consumers have become conscious and moved to healthy-drink options.
Powdered drinks, energy drinks and juices: Initially, the brand Rasna ruled the segment however in later years, it lost its market share to competitor Tang. The juice market is worth around $200 million and is projected to grow at 15% until 2020.
Mineral and Flavoured Water: The segment is growing faster than carbonated drinks segment. More than 60% of the sector is dominated by 5 players namely, Bisleri, Pepsi Co, Coca-Cola, Parle and Dhariwal.
The consumption has been risen by mostly rise in tourism sector, easy availability of bottled water and rise in consumption of mineral water. More lately infused water is becoming a popular product such as water infused with natural flavours such as basil, lemon, mint or other vitamins
Top Market Opportunities
Quality standards and health benefits: Indian consumers of today are increasingly seeking value and better outcomes from self-management of health and wellness. Certain customer segments do look for health benefits before buying.
With growth in supermarkets, food chains and e-commerce, the health benefits of associated packaged food and beverages are visible. Further consumers also trust branded products that have quality assured by manufacturers.
Thus, with increase in disposable income and awareness, Indian consumers are increasingly consuming beverage of high-growth segments.
Festivals: India is a country of diverse culture and festivals are spread across the entire year. The beverages are an important part of festival celebrations especially carbonated drinks, hot beverages among others.
The last two quarters of the calendar year are the time when the festive season starts with Eid and Dussehra, continues with Diwali and is followed by Christmas and the New Year.
This is when beverage companies associate with the Indian consumers with their new product offerings for the festive seasons through innovative advertisements and marketing campaigns, lucrative discounts and offers such as buy one get one free.
Affluence: India is set to become the most populated country in the world by 2024. The working class demographic is going to account most of the population with approximately 869 million by the end of 2020.
This in turn would increase the number of middle-class adults. As it is known that, India’s consumption is dominated by middle class, the rising disposable income of this class will drive the sales of beverages market.
The beverage market in India is more lately filled with healthy, organic drinks which are usually premium priced but rise in such products denote that consumer’s purchasing power in India is increasing.
Urbanization: This trend is leading lifestyle change and food habits of consumers who are shifting from traditional food to adjusting and adapting urban food habits.
Also, increasing urbanization has resulted in increasing in nuclear families, increase in percentage of working women, less time available for preparing meals and beverages at home and increasing consumption of food at eating joints, outlets, restaurants etc.
This has led to increase in consumption of high- growth segments food and beverages as consumers look for food that can be made quick and trusted for quality and health.
Awareness and accessibility: Advertisements are an important source that aid in buying-decision for consumers in India. Ads on television and social media is leveraged mostly by the high-growth segments in the market, along with new product launches that make them more recognizable among mass consumers.
Through ads, companies are also making consumers aware about the accessibility of the products from nearby stores, supermarkets or e-commerce websites.
Traditionally beverages were purchased from nearby stores, now they are also available on supermarkets/hypermarkets in urban areas wherein consumers can find everything that has arrived.
Also these stores provide lucrative promotions and offers which has led consumers seek to buy from these stores.
Cultural Sensitivities: In India, the subject of alcohol is quite sensitive, a large portion of population i.e. at least 75% are lifetime abstainers from alcohol population. The constitution of the country also contains a provision to limit alcohol consumption.
Because of this, there is history of states prohibiting the sale and consumption of alcohol in different states: Bihar, Gujarat, Lakshadweep, Manipur and Mizoram. Also there is ban on sale of alcohol within 500 meters of India’s state and national highways which was announced in April 2017.
In addition, there are dry days in entire nation during certain festivals when sale of alcohol is strictly prohibited which generally include, national holidays and major religious festivals. Notably, Independence Day (August 15), Republic Day (January 26), and Gandhi Jayanti (October 2).
Due to these cultural sensitivities, businesses of alcoholic beverages is affected to some extent in India.
Weak Intellectual protection: India has one of the largest pool of scientific and technological tools and has potential to be one of the leading markets of IP based industries.
However, at present, a lot of technological advances and outputs are generated in India without IP protection. One of the major hindrance for foreign companies to invest in the Indian market is the infringement of IP rights. This has led to several counterfeit products in beverage market too.
Logistics problem: The logistics market in India is highly disorganized with plenty of national level players in the beverage market. The infrastructure is not standard with lack of proper roads and networks.
The distribution channels are inadequate, ports are exploited and poor quality of service is one of the bottleneck that hamper beverage companies and their production. This leads high logistics costs for products produced within the country.
Upswing of healthy and organic drinks: Previously Indian consumers were more interested in packaged drinks, in contrast to present where consumers are looking out for drinks that don’t contain synthetic ingredients.
The drastic reduction in demand for such drinks in the market has boosted the organic beverage market instead. Thus, other segments in the market are challenges to brainstorm multiple channels to combat the competition brought by healthy drinks.
Complicated Government regulations: The sector is continuously monitored by reforms and regulations. The new tax regime established under GST discourages aerated beverages and other drink consumption.
The sector is further facing overlapping taxation and especially in beer market, the biggest disadvantage is that every state has different set of regulations which make manufacturers feel like operating in 28 different countries rather than different states within a single country.
Environment friendly propaganda: It is the next-leading trend in the Indian market which is owing to global warming and other weather conditions. A product that is tagged to be eco-friendly has more chance of creating a fruitful sale than a product harmful to the environment.
Thus, beverage companies have to make their manufacturing processes less harmful to the environment. , by maintaining reprocessing practices and profiting from renewable sources of energy.
E-commerce edge: The sector has been relatively slow on upkeep of technology while industries such as electronics, textiles and other domestic products have already ingrained their presence in commerce domain.
One of the major challenge for the players in the industry is to be more technologically available, sociable and not many companies are utilizing the power of social media and e-commerce to do so.
Lack of Innovation: It is one of the top challenges in the industry at present. To beat the intense competition manufacturers are required to come up with inventive products. In Indian market there is pool of products that are generally of the same character and term.
For instance, wave of organic things, so companies willing to enter the market will follow the similar footsteps rather than bending the monotony. Disruptive companies are required to bring unique and fresh products in the market.
Smart Manufacturing: Automation and Internet of things are two technologies that are helping the beverage manufacturers attain the benefits of Industry 4.0. These include, greater efficiency, reduced production costs and enhanced safety to staff due to increasing automation through robotics and smart technologies.
Also smart sensors introduced in packaging lines has made it easier to fill beverage packs in range of sizes and switch formats on fly. They also collect data that enable beverage producers to monitor their supplies as well as track the condition of filling equipment to facilitate predictive maintenance.
AI and Robotic bartenders: AI powered technology is being explored in number of unique ways in the industry. In 2017, IBM and Cornell University teamed up to explore whether it was possible to create new AI models that could help identify hazards in beverage before it broke out.
Also, AI is giving drinks a new form from hospitality point of view. The first portable autonomous bartending unit was launched in 2018 and is set to be supplied to a number of countries. The AI robot is able to take orders and payment as well as mix and serve cocktails.
Smart Packaging: There have been cases where consumers have complained about the mislabelled, diluted or tampered products. Innovative smart packaging solutions are being introduced increasingly in bid to help companies track their products validity along the supply chain.
Some of the drink brands are also tapping into smart technologies for marketing their wares. Use of augmented reality for packaging is the latest trend where using an app consumers are able to watch 3D visualization of packaging features through their smartphone camera.
Other Key Market Trends
Naturally healthy beverages: These beverages consist of products such as 100% fruit juice, natural mineral water, green tea and malt-based hot drinks. Urban India is the key driver of this segment.
With increasing lifestyle diseases and conditions, such as diabetes increasing exponentially in the country, an increasing number of Indians are opting for healthier options such as naturally healthy fruit/vegetable juice, fruit-based drinks and nectars.
The Indian bottled water industry had also witnessed boom due to improvement in lifestyle of middleclass and significant rise in their disposable incomes.
Further, in India, malt-based beverages are also called health drinks as they are fortified with nutrition and used to enhance the taste of milk. Malt has always been a part of the diet of growing children and the elderly as a nutritious supplement.
While marketers have positioned such beverages as nutritious drinks, these are also widely consumed as taste enhancers to encourage drinking of milk among growing children.
Existing tea makers are also adding green tea into their product portfolio because of its health promoting effects. Overall, the trend of the industry has shifted towards introducing healthier, organic or preservatives free beverages.
Market Size and Forecast
The market can further be divided into alcoholic and non-alcoholic drinks market:
- Alcoholic: As of 2019 end, the revenue in alcoholic drinks market is expected to be around $52.5 billion.
- The largest segment within the market is spirits segment at $36.9 billion. The per capita consumption stands at 5.5 liter and per person revenues at $27.6 respectively.
- Another segment, beer has an expected market volume of $15.4 billion as of 2019 end. The per capita consumption in the country stands at 3.7 litre.
- Finally, the wine is the third largest segment with an expected market size of $0.2 billion as of 2019 end.
- Non-alcoholic: As of 2019 end, the revenue in non-alcoholic drinks market is expected to be around $13.4 billion. The per person revenues generated in the country is around $9.7 as of 2020.
- The market’s largest segment is bottled water with a market volume of $6.4 billion. The average per capita consumption stands at 17.5 litre as of 2020.
- The second largest segment in the category is juices market. The revenues in the market is around $2.2 billion. Within the market, the largest sub-segments are juices, smoothies and juice mixtures with market volume of $1.2 billion as of 2019 end.
- The third most prominent segment is soft drinks segment at $4.3 billion respectively. The per capita consumption stands at 4.1 litre and per person revenue generated at $3.4 as of 2020.
Non- Alcoholic Drinks segment growth:
- The overall market is expected to grow at 7.3% CAGR in period of 5 years i.e. 2020-2024 and reach $18.3 billion by the end of 2024.
- The largest segment bottled water are going to grow at 7.4% CAGR in the same period and reach $8.7 billion by 2024
- The juice segment is expected to grow at CAGR 5.7% and reach $2.8 billion by the end of 2024.
- Finally, the soft drinks segment is expected to grow at CAGR 7.9% and reach a market volume of $6.5 billion by end of 2024.
Alcoholic Drinks segment growth:
- The overall market is expected to grow at 6.8% CAGR in period of 5 years i.e. 2020-2024 and reach a market volume of $70.3 billion
- The largest segment spirits are going to grow at 6.6% CAGR in the same period and reach $48.5 billion by 2024
- The beer segment is expected to grow at CAGR 7.4% and reach $21 billion by the end of 2024.
- Finally, the wine segment is expected to grow at CAGR 19.8% and reach a market volume of $398 million by end of 2024.
Big data: It could become major driver for the industry when it comes to improving insights across the supply chain.
Some of the ERP software such as Sanderson’s Unity F8 system provides companies with online platform that compiles real-time information and helps identify the best possible ways to optimize the production of soft drinks, smoothies, alcohol and other beverages.
Distribution Chain Analysis
Some of the most popular channels of distribution for the beverage products in India are as follows:
- Kirana stores: Most of the beverage in India is mostly done through kirana which are traditional grocery retailers spread all over the country with their products provided to them by distributors or sub-distributors. However, more modern channels of distribution are gaining grounds more lately. There are over 15 million kiranas spread over the country in all urban and rural areas.
- Supermarkets/hypermarkets: Despite of the presence of traditional grocers throughout the country, supermarkets and hypermarkets are gaining ground in India. Most of the young adults in the urban areas place importance upon these channels. Also, Indian consumers are price sensitive and are usually attracted by discounts and deals modern retailers offer. Beverages are also availiable at much lower price at modern retailers. Some of the popular supermarkets in India are BigBazaar, D-Mart, Easyday, Foodworld, HyperCity, Lulu Hypermarket, Nilgiris among others.
- Convenience stores: These are a niche channel and are limited to larger tier cities only. They offer limited assorted brands and only cater to wealthier consumers with premium products.
- Hotels, restaurants and cafes: These are most often frequented by millennials with 60% citing that they go out for meals more than 3 times a month. They mostly visit standalone outlets and international restaurants too. There are also a number of tea and coffee joints that have spread across the country and are mostly filled with young consumers.
- Ecommerce: In India, the online grocery is still not developed to that extent and only 14% of the Indian users shop online at present. The young, urban consumers with busy lifestyles are increasingly purchasing online, mostly driven by greater convenience, broader assortments and higher discounts. In past 4 years course, the food and drink internet retailing has increased 153% in real terms which suggests that ecommerce has high scope to become one of the dominating channel of sales for beverages.
In India, consumers prefer hard liquor to beer which is why the spirits market is larger than any other alcoholic segment however, Indian wine market is growing the most among all segments (alcoholic & non-alcoholic) at 19% annually.
With an important purpose to introduce Indians to wine in 1989, entrepreneur Kanwal Grover and his business partner George Vesselle started their first vineyard at the foot of Nandi Hills, near Bengaluru.
The brand’s unique wine-making process is intricate and relies largely on machinery and barrels imported from France and Italy. Over the years, Grover Zampa leveraged its innovative wine-making to emerge as India’s second largest overall wine-maker after Sula Vineyards.
In the year 2000, Shri Bankey Behari Foods was established in India to cater to airlines’ growing demand for welcome drinks.
The brand continued supplying juices to airlines for years, but by 2010 identified a demand-supply gap in the juices and packaged fruit drinks market: there were not many big players with a wide range of flavours, cost-effective offerings and robust presence operating in small cities.
The company leveraged the gap and continued introducing brands under categories of drinks which are still popular among consumers today despite of entry of number of giant players such as Dabur and Coca-cola in the market post 2010.
The young founders of Shakos milkshakes entered the market long after there were established companies operating in the market such as, Amul, Cavin’s, Hersheys, Keventers, and more.
Shakos was able to disrupt the market and become successful because it met the price point consumers were looking for. With its range of food products and pricing model, Shakos recorded $1.3 million revenue just over a year after launch, and is targeting $6.9 million by the end of 2020.
Storia Foods & Beverages Pvt. Ltd was established as an independent company in 2016 in Mumbai. They are harbingers of speciality spray-dried ingredients in India.
The products are developed through hygienic technique and there are no preservatives added in the liquid that can be consumed within six months from the date of packaging without refrigeration storage.
The company currently sell products from two main channels: B2B which includes institutions and hotel, restaurant, and cafe (HoReCa) segment, and B2C which includes traditional trade, modern trade, and ecommerce.
In a span of 24 months, the company has entered 52 cities in India hitting 50,000 outlets in retail. In 2019, it was able to earn $34 million dollars in revenue.
Key Market Players
Around 70% of the market share in the beverage industry in India is held by top 5 players which include:
- Bisleri: It was established in 1969 and sells mostly bottled water. IT conducts majority of its business in India with 135 plants and a large distribution network. Besides bottled water, it also sells flavored drinks. Some of the core products are bisleri water and bisleri soda. As of 2019, the company’s revenues amounted to $69.9 million.
- PepsiCo. It is an American multinational food, snack and beverage cooperation established in 1898 however it entered India in 1989. The company has around 62 manufacturing plants within India. Some of its core beverage products include, Pepsi, Diet pepsi. Mountain Dew, Lipton Tea, Sierra Mist, Mirinda, Aquafina bottled water etc. Annually, the company’s sales/revenues are estimated to be around $13.9 million.
- Coca-Cola: The company started operating in India in 1950 but withdrew their operations in 1977 due to government regulation and protests. However, the company decided to re-enter the Indian market in 1993 and have been able to mark a strong presence in India ever since. The core products sold by the company include, Coca-cola, Sprite, Fanta,Schweppes,Appletiser, Dasani bottled water, Minute Maid, Costa Coffee, fuzetea, Zico, Gold Peak Tea, Fresca among othrs. As of 2019, the company had $33.2 million in revenues.
- Parle: The company is based in India and was established in 1929. The company mostly specializes in confectionary and biscuits however before the entry of Pepsi and Coca-Cola, Parle alone dominated more than 90% of the beverage market in India. At present the Parle Agro exclusively manages the beverage portfolio of the company which include brands such as, frooti, appy, fizz, Bailley, Café Cuba, Frio, Dhishoom etc. As of 2019, the company revenues were expected to be $30.7 million.
- Dabur: The Company is one of the leading FMCG companies in India and is one of the most trusted brands on Ayurveda and natural healthcare. The portfolio of beverages includes a range of leading brands to choose from – Réal Fruit Juice, Réal Activ Fruit & Vegetable Juice (with no added sugar), Burrst Fruit Beverage among others. The company was able to earn around $5.6 million of revenues from its beverage segment exclusively as of 2019.
Other Notable companies in the Market Include:
- Amalgam Enterprises
- UB Group
- Vinbors & Co.
- Apple Valley Group
- Adluri Foods
- Tata Tea
The Indian beverage market is witnessing an interesting transformation. On one side there is alcoholic beverage market that is trying to grow against the SC ban shock while on the other hand there is non-alcoholic market where the traditional tea, coffee are still able to retain their unique appeal.
While the earlier popular categories such as carbonated drinks are being won over by juices, health drinks and flavoured water. Overall, the Indian market is definably a critical market for the global players in the fast growing beverages segment.
Further, India’s strong macro-economic indicators, strategic location, India transforming into a manufacturing and research and development hub for global players, availability of labour at low cost are all contributing to making India an attractive destination for global players.