Coca Cola taps ethnic drinks market in face of slowing demand for fizzy drinks

Recognising the gradually changing consumer preference for healthier beverages over fizzy drinks, Coca Cola has been moving into the nutrition space for a while now. After launching several products such as Minute Maid Vitingo for micronutrient deficiency, Vio dairy drink and Zico coconut water, among others, the Atlanta-based giant is reportedly now turning to 'desi' drinks like jal jeera and aam panna.

"You have 29 states, which are virtually 29 countries. People speak different languages, have different food and beverage habits, have different motivations for consuming food and beverages," T. Krishnakumar, chief executive of Coke's business in India and Southwest Asia, told Bloomberg.

So Coca-Cola's strategy in India is start localising its product portfolio, tapping the growing demand for packaged ethnic drinks - beverages traditionally brewed at home using local spices and fruits. According to Technopak Advisors, a New Delhi-based consultancy, the demand for packaged ethnic drinks has grown 32% over the last three years, three times the pace of carbonated beverages like Coke.

Little wonder then that Coca Cola's push into this niche space - hitherto dominated by small start-ups - will match its usual scale. According to Krishnakumar, first up is its carbonated version of jal jeera, currently being launched around the country. Coca Cola's aam panna drink will be on shelves in time for summer while an expansion into dairy products like spiced buttermilk and lassi is expected in 2020.

With this development, Coca Cola will be going up against incumbents such as Bengaluru-based Hector Beverages, which owns the Paper Boat brand, Mumbai-based Xotik Frujus and Rajasthan-based Jayanti Group, whose slogan reads 'Be Indian Buy Indian'.

"Years back, the fight was what is Pepsi's share and what's Coke's share," Harsha Razdan, head of the consumer markets practice at KPMG's India unit, told the news agency. "Now you're competing with everyone else."

This explains why Coca Cola has planned a product blitzkrieg in the country over the next few years. "We have embarked on an incubator approach for future launches which will reduce the time taken from ideation, execution and eventual launch in the market. We will also launch products nationally and not regionally as we do now, so within 3 months every product will be available across the country," Krishnakumar had announced last year. "Against last year's five, I hope to launch at least 10 products from this year. Eventually I want to scale it up to 25-30 products every year," he had optimistically added.

The new ethnic drinks foray is a part of that plan and is paired with the company's $1.7 billion foray into locally-grown fruit juices. It's reportedly building vast plantations of fruits like mango and litchi to produce industrial levels of concentrate to make these juices available at low prices - perhaps even export them - keeping an eye on the lucrative pie. A recent Goldstein Research report predicted that the India packaged non-alcoholic beverages market will grow at a CAGR of 16.2% between 2016 and 2024, crossing the $20 billion milestone by the end of the forecast period.

Also read: Coca Cola to launch its first ever alcoholic drink in Japan; India unlikely to get it

Also read: At last, Coca Cola gives its due to desi Thums Up and Maaza