A juicy opportunity

As soft drinks manufacturers wage a public relations battle to counter accusations of

poisoning consumers, fruit juice sellers sieze an unexpected boon. Ranjit Devraj reports.

September 2003 - With Coca-Cola and Pepsi bogged down in a losing publicity battle
over pesticide residues in their bottled products, consumers are rediscovering the value of
fruit juices and natural thirst-quenchers that are abundantly available.

Ever since the U.S. colas began flooding the markets as the most visible part of the
decade-old economic liberalization process, nutritionists have agonized over the dangers
posed by "empty calories" in soft drinks. But pushed by relentless advertising campaigns
involving top film stars and sports personalities on television and other media, both Pepsi
and Coca-Cola have been steadily notching up sales to well over six million bottles
annually. It is amid such a scenario that the New Delhi-based environmental group
Centre for Science and Environment (CSE) sprung on an unsuspecting public on Aug. 5
the discovery by its laboratories that most soft drinks sold in India, including Pepsi and
Coca Cola, were contaminated with large doses of commonly available pesticides.
Among these pesticides are Lindane, DDT, Chlorpyrifos and Malathion.

Vandana Shiva, internationally known campaigner for chemical-free organic agriculture

and 'people's food rights and food sovereignty', said that from the point of view of
nutrition, colas were already bad but colas laced with pesticides were "doubly bad".
Shiva, who runs the return-to-basics 'Navdanya' movement, which promotes traditional
Indian thirst-quenchers, said the pesticides controversy would not have risen in the first
place if people had stuck to sustainable, organic farming.
Also see: Interview with Vandana Shiva

Leading nutritionists have opined that the soft drink controversy may have not only
served to sensitize people to the serious problem of pesticides contaminating drinking
water and the environment, but to issues like "empty calories" and the "chip-and-cola"
diet that are relatively new to the country. "Nutrition awareness is generally low in this
country and there is a need for the right kind of knowledge on the value of fresh fruit and
vegetables to reach people who may be easily swayed by advertisement campaigns," said
Santosh Jain Passi, reader in nutrition at the Institute of Home Economics at Delhi
University.

Passi said ignorance concerning the right type of diets may affect the well-to-do just as
easily as poor and illiterate people. "Broadly speaking, for all groups, money spent on
soft drinks is better utilized on fresh fruit or fruit juices because they carry the benefits of
valuable micronutrients, bio-active compounds and
"Money spent on soft drinks is
phyto-chemicals," Passi added.
better utilized on fresh fruit or
fruit juices because they carry the
Most nutritionists say while there was nothing
benefits of valuable
wrong with an occasional cola or the pizzas and
micronutrients, bio-active
burgers packaged alongside it at fast food outlets,
compounds and phyto-chemicals".
excessive and habitual consumption of such items in place of age-old dietary practices
are bound to have a negative impact in terms of early incidence of chronic degenerative
diseases.

But following the 'pesticides-in-cola' controversy, fastfood outlets have begun advertising
their burgers and pizza packages with fresh fruit juice. Cola manufacturers reported a
massive 40 percent drop in sales in August, the slack being taken up by unfashionable
fruit juice vendors who ply their business on the street corners and the more trendy 'juice-
bars' that have suddenly sprouted up in India's cities. Amoretto's, a firm which operates
eight juice bars in Mumbai, Delhi and Calcutta, now has plans to increase them to 21
outlets by the end of the year, thanks to a growing fad for all kinds of fruit juice among
the well-heeled.

The switch from colas to fresh fruit juice is easy given that India is among the world's
biggest fruit juice producers. It has an annual output of around 50 million tonnes,
although the packaging industry is still lagging and lacks the technology of the advanced
countries. Meanwhile, the central government has announced that it would shortly pass
an ordinance to fix standards for drinking water, including that used by the bottling
industry. So far, the cola companies seem to have avoided costly purification processes
because of a total lack of standards.

In reaction to the outcry over CSE's findings, Union Health Minister Sushma Swaraj
released the results of tests carried out by the government on 12 brands of soft drinks,
which showed nine of them failing to meet European standards for pesticide residues.
Swaraj declared the beverages safe by present standard. However, all the samples tested
by the Central Food and Technological Research Institute (CFTRI) were found to contain
lindane, a pesticide banned for agricultural use in the European Union and several other
countries because of its proven toxicity to the liver and kidneys.

Parliament, which has already banned colas and soft drinks from its premises, said
reinstatement will happen only after an all-party parliamentary committee clears this.
That must be bad news for those who would 'cola-nize' the country.

Ranjit Devraj
September 2003

TRENDS

• Already contributing 68% of fruit/vegetable juice off-trade value sales in 2010,

juice drinks was also the fastest growing category in 2010. Lemon-based juice
drinks made their presence felt within one year of introduction. In 2010, the
brands Nimbooz by 7-Up (PepsiCo), Minute Maid Nimbu Fresh (Coca-Cola ) and
LMN (Parle Agro) together accounted for 10% of off-trade value sales of juice
drinks. The “homemade nimboo pani” centric marketing followed by these
players seems to have worked wonders in introducing the product. This is in spite
 of tremendous growth shown by mango-based established brands such as Maaza,
Frooti and Slice.

COMPETITIVE LANDSCAPE

• The leading company in terms of off-trade value sales in 2010 was Coca-Cola
with a 31% share of value sales. It was followed by Parle Agro with 26% and
PepsiCo with 21% of sales in 2010. As juice drinks continues to be a driver for
both Coca-Cola and PepsiCo, they have seen their share of throat within
fruit/vegetable juice rise dramatically in the review period. Dabur ’s juice drinks
portfolio is yet to provide serious competition to Coca-Cola and PepsiCo in this
category. Parle Agro’s flagship brand Frooti also registered slower growth than
that of other mango-flavoured juice drinks in 2010.

PROSPECTS

• Constant unit prices for 100% juice and nectars are expected to rise towards the
end of the forecast period. There was a reduction in the same throughout the
review period in order to avoid astronomical unit prices in current terms due to
high inflation. However, as consumers accept the health benefits of juices in the
forecast period and inflation rates cool down, national juice manufacturers will be
able to hike constant unit prices without a severe backlash from consumers.

Putting juice in growth

Sindhu J. Bhattacharya

IT'S a tale with a delicious twist. Compact International promoter D. K. Mittal was to
meet the Director of the Defence Research and Development Organisation (DRDO) one
fine morning in Ladakh in connection with a tender for setting up some shelters for army
personnel. During the meeting, the Director offered Mittal a drink made of an unheard of
herb called seabuckthorn. A little sceptical at first, Mittal took several sips before gulping
down the entire glass. And he asked for more.
This chance encounter with the wonder plant seabuckthorn was the reason Ladakh Foods
was set up as a separate company in 2002 to manufacture and sell seabuckthorn juice as
Lehberry. Ladakh Foods today claims to be one of the fastest growing fruit juice
companies in a fiercely competitive environment where big names such as Dabur and
Pepsi already hold substantial market shares. Says Managing Director Varun Kumar,
"Even when the fruit juice/nectar market is projected to grow at a scorching pace of 40
per cent, a Tetra Pak study has found that a whopping 86 per cent of the fruit juice market
is still lying untapped."
Perhaps one of the main reasons why milk major Mother Dairy last week announced it is
jumping on to the bandwagon of fruit juice. The company has launched packaged fruit
juices under its flagship brand, Safal. Starting from Delhi, the product is scheduled for
launched on a nation-wide scale in the months to come. The company says that having
pioneered the marketing of fresh and frozen vegetable products backed by a modern
produce handling and processing facility, Safal is now ready to script a new success
story. This time in the packaged fruit juices category. "With the market growing at a
healthy rate and with changing lifestyles and rising levels of health consciousness among
consumers today, the demand for healthier products like packaged fruit juice is only
going to increase in the times to come."

Says the director of a top retail chain in Chennai, "The fruit juice category is rapidly
growing by over 50 per cent at some stores for us; it's seen as healthy compared to soft
drinks. They are more hygienic than roadside fruit juices and are a big hit with yuppies.
Also, non-sugar variants find favour with fitness freaks."
For Safal, with its expertise in producing and marketing various horticultural products in
India as well as overseas, juices are a logical extension of its portfolio. With the launch of
Safal juices, our intention is to grow the juice market further by providing a great-tasting
product to the consumer at the right value," says Paul Thachil, Chief Executive of Mother
Dairy. Ask Dabur Foods CEO Amit Burman where he thinks his company will be in the
next few years and pat comes the reply: "We will be a Rs 200-crore company by 2006-
07. And a large chunk of this growth will come from the Real brand of fruit juices, since
Real contributes as much as 85 per cent to the company's topline. It will continue to be an
area of focus."

However, realising that the fruit juice category, though growing at a healthy pace, needs
to be activated further, Burman has just launched fruit drinks - drinks where the fruit pulp
concentration is only about 20 per cent - in typically Indian flavours of aam panna,
watermelon and pomegranate. And having realised that price is still an entry barrier for a
vast majority of the consumers, Dabur has priced Coolers about 15 per cent lower than
Real.
Pricing is one of the major worries. Says Executive Director (New Business) at Pepsi
Foods, Subroto Chattopadhyay, "Price is a barrier to this category because when you give
fresh juice, packaging becomes critical. So, what the industry is now trying to do is offer
different packaging to suit different price points while simultaneously working on ways
to offer better quality and improved taste."

Pricing is also the downfall of fruit juice importers. Says A. V. Bhaskar, CEO, Adluri
Foods, which distributes the Australian brand Berri in the South, "It is difficult to make
inroads into the middle class as it finds the prices prohibitive. Sales tax on imported
products is not uniform across the States. In Tamil Nadu, it is 21 per cent, much lesser in
Andhra Pradesh and Karnataka." So a one-litre bottle of Berri costs Rs 110 while a
Tropicana is in the Rs 75 range. PET bottles are another reason for the high prices.
However, the retail prices are the same across all the States. Natural fruit juices are a
growing market and all players should have a level playing field, he says.

Taking advantage of the health consciousness pervading the market, Adluri Foods has
introduced cranberry juice (something that the local brands also have done) and is testing
a mixed vegetable juice and a cocktail of apple, carrot and orange in the market.

Pepsi recently launched Tropicana Tropics Mango Nectar, which is made entirely from
mangoes sourced from within India, as against other flavours for which sourcing has to
be done from other countries. The introduction of Tropics Mango Nectar will be followed
by Tropics Litchi and Tropics Guava. Says Chattopadhyay: "India is now among the top
ten markets for Tropicana worldwide. Significantly India is now an approved source for
mango pulp within the Tropicana worldwide system, and can soon emerge as a major
sourcing base for other exotic fruits for Tropicana's international market." Which means
that if the fruit juice producers work on further development of backward linkages, the
pricing issue plaguing this industry can be better tackled. Besides, the industry has
already begun to offer packaging solutions to address different price points like a 125 ml
pack of fruit drink Maaza from Coca-Cola India at just Rs 5 and a 500 ml Tropicana
blend for Rs 25.

So where is the industry headed? Says Varun Kumar of Ladkah Foods: "We expect the
market to touch Rs 170 crore by next year and we are targeting break-even within the
next four years." So, while it took Dabur Foods seven years to make money on fruit
juices, thanks to product innovation, expanding market and increased consumer
preference for healthy foods, Ladakh Foods may repeat this feat in just four years. But
even as the industry players are upbeat about growth prospects, there is an undercurrent
of discomfiture, with talk of the new government thinking of levying eight per cent
excise on food products including packaged fruit juice. So, while profit projections are
unlikely to go completely haywire just yet, there might have to be some readjustments in
the time frame within which these targets may be achieved.

Financial Daily from THE HINDU group of publications

Thursday, Jul 01, 2004

India has witnessed radical shift in consumption of non-alcoholic drinks over the
recent past. Fast expanding middle class population that is currently around 350
Million, increased urbanization and rising disposable income are some of the
major reasons contributing to this change. Besides this, growing health
consciousness among India’s young population has brought about a revolution in
the Indian non-alcoholic drinks market. It has been seen that cola sales have
fallen dramatically due to rising health concerns and this seems to have
benefited the country’s non-carbonated drinks market such as energy drinks and
juices.

According to our recent report “Indian Non-Alcoholic Drinks Forecast to

2012”, the Indian non-alcoholic drinks market was estimated at around Rs. 216
Billion in 2008 and is forecasted to grow at a CAGR of around 15% during 2009-
2012. The report covers various factors driving the growth of non-alcoholic drinks
market in India.

The segment level analysis shows that the highest growth will be seen in the
fruit/vegetable juice market, which is forecasted to growth at a CAGR of around
30% in value terms during 2009-2012. It will be closely followed by the energy
drinks segment at a CAGR of around 29% during the same period. There is a
greater awareness of the ‘functional’ benefits of health beverages and a greater
willingness to pay a premium for such beverages. With these strong drivers of
growth, it is not surprising that the beverage industry in India has begun
responding with products that are marketed clearly on a health and wellness
platform.