Coca-Cola and PepsiCo set up teams to track smaller regional brands that are stealing market share
Coca-Cola and PepsiCo, the world’s largest sellers of soft drinks, are viewing the growing popularity of a slew of smaller regional brands in India as a threat.
For the first time, the cola multinationals are setting up specialised groups to track these B-brands, which are stealing market share from them.
“The teams looking at these brands are separate from the ones tracking rural markets or counterfeits,” said a top official from one of the cola companies. There are at least 50 such fizzy drink brands that are sold in the country with little spending on marketing.
The regional drinks are about 20 per cent cheaper than the global cola brands. From Bovonto in Tamil Nadu and Jayanti cola made by Jayanti Beverages in Alwar to Xalta Cola made by a New Delhi-based company and Gujarat’s Hajoori & Sons, which sells drinks branded Sosyo, Ginlim and Lemee, to City Cola sold by Delhi-based Rahul Beverages — the threat is ominous.
According to industry data, the consolidated market share of these regional brands is 15-17 per cent. That’s a sizable chunk of the organised soft drink market, which is estimated at over Rs 14,000 crore.
These brands are riding on almost no marketing spends and high trade margins, with some of them supplying their products directly to retailers. A Coca-Cola spokesperson said the company was competition-aware but not competition-focussed. “We stay informed of new products, new brands and emerging consumer preferences.”
Local brands may have fuelled TN boycott
“Being a total beverage company that plays in enhanced hydration, packaged water, juice and sparkling categories, we recognise that there is need for us to do a lot more to become the beverage of consumer’s choice for all occasions,” the Coca-Cola spokesperson said.
PepsiCo declined to respond directly to a query about teams being set up to monitor regional brands and said it is stepping up customer engagement.
“We have sharpened our communication based on insights we glean from consumer interactions,” Vipul Prakash, V-P for beverages at PepsiCo, said in response to an ET query.
“We have also connected digitally with consumers with purpose-led advertising and relevant digital initiatives.” There is speculation that local brands in Tamil Nadu have fuelled the upcoming boycott of colas in the state.
A section of Tamil Nadu traders has decided not to sell Coca-Cola and PepsiCo products starting March 1, alleging that the companies were exploiting the state’s water bodies to make aerated drinks while farmers faced severe drought.
The curbs could impact as much as Rs 1,400 crore in annual sales for Coca-Cola and PepsiCo. A spokesperson for Kali Aerated Water Works, the maker of Bovonto soft drinks, did not immediately respond to an email query from ET.
Some of the indigenous soft drinks have been around even before India’s Independence. Bovonto was introduced in 1959. Sosyo was launched in 1923 and its key markets include Maharashtra, Rajasthan and Madhya Pradesh.
The Coca-Cola spokesperson added: “India is one of the lowest penetrated and lowest per capita market for packaged beverages and there is plenty of room for all players to grow. Currently, less than 200 million Indians consume packaged beverages and the per capita consumption of soft drinks is less than 20. The industry has a long way to go.”
The threat from local brands comes as both companies continue to face slowing sales.
While Coca-Cola and PepsiCo have not yet declared earnings for the October-December quarter, company officials say sales volumes have declined by 10-15 per cent from a year earlier, fuelled by the November ban on high-denomination currency notes and the overall slowdown in discretionary spending.
Sales volume growth for both companies has been in the low single digits for the previous four quarters at least.
Coca-Cola and PepsiCo have cut prices of drinks sold in 200 ml glass bottles to Rs 10 from Rs 12 in select small markets in a bid to boost sales. Coca-Cola has introduced smaller packs for regional markets priced as low as Rs 5.
SOURCE: Times of India