Coca-Cola raises health pitch, eyes PepsiCo’s space
While latest launch Aquarius boosts Coke’s non-carbonated portfolio, rival PepsiCo is ahead of it when pushing healthy products in India
The timing took many by surprise. It was unusual to say the least. As mercury levels were falling and consumers in general were winding down their activities, it being the fag end of the 2016 calendar year, Coca-Cola India launched Aquarius. Positioned as a hydration drink, that is, one which not only quenches thirst, but is also fortified with minerals, the country’s largest beverage maker chose to advance the launch of the billion-dollar global brand in India.
Typically, a hydration drink while an all-season product, is effective, according to industry experts, in summer. By choosing to launch Aquarius ahead of the 2017 summer season, it wasn’t lost, said industry sources, what Coca-Cola India was really looking to do: It was communicating to one and all that it was serious about its non-carbonated portfolio and was therefore gearing up for the big battle ahead in summer.
The move comes as the beverage maker struggles with sales in carbonated drinks, its core business in India. Carbonated beverages, for the record, bring the bulk of Coca-Cola’s nearly ~10,000crore turnover in the country. In the last few quarters though Coca-Cola’s domestic volume sales have been muted as weather and changing consumer preferences take a toll on the business.
The crucial period of April to June, say experts, when softdrink firms get nearly half their annual sales, best reflects the declining trend for Coca-Cola. Growth in volume sales for the company was only 3 per cent for the three months ended June 2016, while the corresponding period the year before (April-June 2015) saw a nearly 5 per cent decline in volume sales.
In the last two years, CocaCola has also re-aligned production in line with demand, effecting production cuts and closing down plants as its seeks to rationalise its portfolio. At a broader level though CocaCola’s management, according to industry sources, is beginning to come around to the idea that building its non-carbonated business will be critical to its survival in the future.
To be sure, the company has invested behind juice drinks such as Maaza and Minute Maid in the last few years. It also launched readyto-drink flavoured tea called Fuze Tea in 2015, following it up quickly with the launch of a milk-based beverage called Vio in 2016. Sugar-free drinks such as Coke Zero and Sprite Zero were also introduced, besides launching a “juice with fizz” drink called Fanta Green Mango, which has 10.4 per cent fruit content, also in 2016.
While the push into the healthy domain is visible, the question is whether all of this is enough? The answer clearly is no, say experts, since rivals such as PepsiCo are ahead of Coke when it comes to occupying the health space. An Aquarius-like product called 7Up Revive was launched by PepsiCo India almost a year ago, indicating that it was quicker in identifying this category. Parallely, the company has been quietly at work as part of global chairperson and CEO Indra Nooyi’s recent road map to reduce sugar content in at least two-thirds of its beverages by 2025. The plan, say sources, is to launch low-calorie products in the near term.
Debabrata Mukherjee, vicepresident, marketing and commercial, Coca-Cola India and South West Asia, says that firstmover advantage has a limited role to play in an emerging category such as hydration. “Aquarius is targeted at young and urban consumers who lead active lifestyles. At present a high fraction of consumers are striving to accomplish a lot more in their day. They realise the importance of active healthy living and the need for being hydrated,” he says.
Mukherjee adds that the presence of multiple players will only grow this nascent category, currently restricted to urban pockets. Is the game then rapidly moving to identifying viable beverage niches?
Experts say that non-carbonated beverages increasingly will be about delivering functional benefits unlike soft-drinks which is mostly about quenching thirst. And the fight will be about who moves first into these niche segments and what they have to offer to the consumer. PepsiCo, for instance, has already stolen a march on Coca-Cola by launching India’s first stevia-based drink under 7Up last year.
Ironically, it was Coca-Cola alongwith companies such as Cargill and PureCircle, who had first applied to the Food Safety & Standards Authority of India (FSSAI) for use of stevia in their products. But PepsiCo trumped them all in the race to launch a stevia-based drink after FSSAI gave the go-ahead for use of the natural sweetener in products in November 2015.
In a conversation with Business Standard last year, Venkatesh Kini, president, Coca-Cola India and South West Asia, had said that the company was evaluating all beverage options, including stevia-based drinks as well as no-sugar variants. “Coke Zero has been launched and has a turnover of ~100 crore,” he said. “Sprite Zero is currently available in select modern trade outlets. We have the range; the question is the timing of the launch, which we are evaluating.”
While Coca-Cola India is firmly on its way to making its portfolio healthy, a ground rival PepsiCo has covered well and continues to work upon, a new battlefront could be opening up between the two beverage giants in the future.