Non Alcohlic Carbonated Beverages

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FMCG An IntroductionFast Moving Consumer Goods (FMCG), also known as ConsumerPackaged Goods (CPG) are products that have a quick turnoverand relatively low cost.Though the absolute profit made on FMCG products is relatively

small, they generally sell in large numbers and so the cumulativeprofit on such products can be large.Unlike other economy sectors, FMCG share float in a steadymanner irrespective of global market dip, because they generallysatisfy rather fundamental, as opposed to luxurious needs.The FMCG sector, which is growing at the rate of 9% is the fourthlargest sector in the Indian Economy.It is predicted that by the end of 2010, the FMCG sector will beworth Rs.143000 crores and will provide up to 4 million jobs



H air care,cosmetics and toiletries,deodrants,paperproductsMajor players - H UL, P&G, Godrej,Dabur,Palmolive

H air care,cosmetics and toiletries,deodrants,paperproductsMajor players - H UL, P&G, Godrej,Dabur,Palmolive

Personal care

Fabric wash,insecticides,household cleanersMajor players - H UL, Ricket coleman

Fabric wash,insecticides,household cleanersMajor players - H UL, Ricket coleman

H

ouseholdcare

Ciggrattes,alcohal

Major players - UB,Mohan meakins,ITC,Godfrey philips

Ciggrattes,alcohal

Major players - UB,Mohan meakins,ITC,Godfrey philips

Spirits andTobacco

Bakeryproducts, icecream, tea, coffee, snacks, cereals, chocolates, proccesed fruits and vegetables,juices etc.Major players - Coke, Pepsi, H UL, Nestle, Cadbury

Bakeryproducts, icecream, tea, coffee, snacks, cereals, chocolates, proccesed fruits and vegetables,juices etc.Major players - Coke, Pepsi, H UL, Nestle, Cadbury

Packaged food

and Beverages

Segmentation of FMCG Industry



Beverages An introductionA beverage is a drink specifically prepared forhuman consumption and almost alwayslargely consist of water.



Beverages industry Key figuresTotal Indian Beverage Consumption everyyear:120 billion litresIndia is ranked 3rd in largest beverageconsumption, after USA and China and alreadyaccounts for about 10 percent of global beverage

consumption today.Indian Beverage Market CAGR[2007-2010]:21%Majority of Indian consumers that is 75%consume Non-alcoholic beverages and 25%

Alcoholic BeveragesAnnual per capita consumption of packagedbeverages is supposed to triple from 2.6 litres in2000 to 8.7 litres in 2012.

Milk based beverages (still) account for the majorortion



Non alcohalic carboneted beverages

Market size: $1.5 Billion with a growth of around7%.Contribution to GDP Meagre(6.2 for food

processing and beverages collectively)PLC Stage-Given its size, the Indian market is stillin its infancy.The total carbonated beverages market is

estimated at 284 million crates a year.Peak season soft drink consumption : 25 millionper monthOff-season soft drink consumption: 15 million per

month



The market is predominantly urban with only

25 per cent contribution from rural areas.The per capita consumption of soft drinks inIndia 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 andMexico 605.It also supports growth of industries likeglass, refrigeration, transportation, paper andsugar.There are about 110 soft drink producing units(60% being owned by Indian bottlers) in the

country, employing about 125,000 people.



Market share

There are twodistinct segments of the market, cola andnon-cola drinks. Thecola segment claimsa share of 62%While the non-colasegment includessoda, clearlime, cloudy limeand drinks withorange flavours .

Company Share (%)Cola Drinks:

Thums Up 29

Coca Cola 20

Pepsi 13

Non Cola Drinks:

Gold Spot 2

Fanta 9

Mirinda 8

Limca 7

Overall Colas 62

Lemon:

Cloudy(limca, mirinda lemon) 7

Clear(7up, dew, sprite) 3

Orange(fanta, Mirinda) 17



MARKET SH ARE

Coke brands-

Pepsi brands-

52.542.5

14

COCA COLA

PEP SI

CAMPA COLA

LOCA LA ND FAKE PR ODUCT S



P orter five forces analysis



Threat of New EntrantsEconomies of Scale pose a high entry barrier

Capital Requirements also pose high barrierLearning Curve isn t a great barrier for new entrantsAccess to Inputs is also easyAccess to Distribution poses a threat to new entrants

Bargaining power of suppliersThere are a lot of substitutes for packaging but not for sweetenersbecause these sweeteners must have government approval .This makes suppliers have power over the industry. This will most likelychange drastically when Nutrasweet (a healthier substitute to saccharin)loses its patent in a few years.



Threat of substitutesTraditionally, coffee and tea would be considered substitute

products.In recent years, carbonated beverages have seen the emergence of many new substitute products that wish to reduce softdrink's market share such as packaged fruit juices , energy drinks"In other words, Pepsi isn't Coke's biggest competition, Tap water

is." (Gleason, 1996).Bargaining power of buyers

All of the leading carbonated beverage producers, believe that theirbuyers (distributors) are an important step in taking their productsto the end consumer.The service, which their distributors provide to the retailers, makesa difference to the retailers who sell the product to the endconsumer. Thus the actions of distributor reflect on the soft drinkcompany s image



Competitive rivalry

Coke and Pepsi have a combined marketshare of around 95% directly or throughfranchisees. Campa Cola has a 1%share, and the rest is divided among local

players.This market dominance makes the industrya fiercely competitive and dynamicbusiness environment to operate inIt s a duopoly industry with intense rivalry

between coke and pepsiThough Coca-Cola dominates the industryin sales volume and market share, it doesnot dominate when it comes to innovativemarketing and business strategy efforts.



SWOT Analysis

STRENGTH

Caters to basic human need that is thirst

Strong and reliable Distribution Network in urban areas.

Low production cost

WEAKNESSES

Lots of substitutes are present.

Lack of proper distribution in rural areas.

Still considered to be luxury drink in rural markets

OPPORTUNITIES

Penetration level in rural India is low

Large population to cater to

Export Potential

THREATS

Intense Competition

Dependence on Bottling Partners

Government Policies (glass bottles)

Health issues associated with consumption.

SWOT A NA LYSIS



Value chain analysis

A value chain is a model used to disaggregate a firm into itsstrategically relevant value generating activities, in order toevaluate each activity's contribution to the firm's

performance



Inbound logistics(suppliers)Carbonated water constitutes up to 94% of a soft drink.Carbon dioxide adds that special sparkle and bite to thebeverage and also acts as a mild preservative.Other main raw materials used by industry are nutritiveand non-nutritive sweeteners.

The principal nutritive sweetener is sucrose, which isavailable from numerous domestic sources.Aspartame, an important non-nutritive sweetener inlow-calorie sparkling beverage products, is suppliedprimarily by The NutraSweet Company and AjinomotoCompany , which are consider to be only viable sources forthe supply of this product.Very small quantities of other additives enhancetaste, mouth-feel, aroma, and appearance of thebeverage.Packaging materials are also available in domestic



Operations

Core operations of companies consist of manufacturingconcentrate and syrup which is supplied to bottlingpartners

Rest of the manufacturing operations are done bybottlers, who hold territorially exclusive contracts withthe company. Process involves following steps

± Clarifying the water ± Filtering, sterilizing, and dechlorinating the water ± Mixing the ingredients ± Carbonating the beverage ± Filling and packaging



Outbound logistics

The activities required to get finished products tocustomers include warehousing, orderfulfillment, transportation, and distributionmanagementIndian beverages industry has a one of the largestdistribution network in the worldGrocery stores such as Spencers ,fast foodrestaurants such as McDonalds (fountainsodas), and vending machines are just a few of the distribution units used to ultimately reachconsumers.



MarketingTo connect the brands to the consumers focus is onmarketing activities such as print and televisionadvertisingOnline programs , retail store

displays, sponsorships, contests and package designsare other modes of marketing done by firms in theindustry

ServicingActivities that maintain and enhance a products valueinclude customer support, repair services, installationand training of fountain machines.Support is also provided to customers by providingthem with the training necessary to help their



Thank you



T he ControversiesP resence of P esticides :

In 2003, the Centre for Science and Environment (CSE) findings stirred the beverage industryin India. CSE claimed to find dangerous levels of pesticides in all the 57 samples of 11 softdrinks brands collected by the organization from 25 different manufacturing units of Coca-Cola and PepsiCo spread over 12 states. The study found a cocktail of three-five differentpesticides in all the samples - on an average 24 times higher than norms laid down bygovernmentRajasthan, Madhya Pradesh, Chhattisgarh, Gujarat and Kerala banned the sale of Colas inschools, colleges and government departments, and other states also took adversarialmeasures.The day after the CSE s announcement, Coke and Pepsi came together attacking thecredibility of the CSE and their lab resultsThey roped in major film stars to explain their purity to public. Despite all these measures,sales dipped by as much as 80% in some regions. The soft drinks industry took over a year toget back on the growth track.

G round Water C risis :Coca-Cola was recently accused of ground water depletion in many areas of the country.The company was also accused of indiscriminately dumping its toxic waste into thesurrounding areas polluting the water as well as the land. The Coke reiterated itscommitment to trim down water usage and take steps towards environment sustainabilityand farmer s welfareH owever, activists retort that Coca Cola is in the business of waterwasting, creating a luxuryproduct largely for the middle class. They are unlikely to put water concerns over profits,

until they are forced to .



T he road aheadAmidst various allegations and controversies, thesoft drinks industry in India, supported by itsbooming economy, strengthening middle class

and low per capita consumption, is growing at acruising pace.The companies are likely to take more steps todeal with environment sustainability. But the Cola

wars are here to stay. We as customers can beassured of superior products and hilarious ads inthe process.



TH ANK YOU

Non Alcohlic Carbonated Beverages

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