BEVERAGE

TOPIC
CLASSIFICATION PRODUCT CONSUMPTION

ENTRY BARRIER

BEVERAGE AS A GAME CHANGER

Most people in India are exposed to a variety of beverages from an early age: mothers serve homemade milkshakes, sharbats, chocolate drinks etc. However, beverages are themselves only a sidekick and at best served as fillers in-between meals. Given this backdrop, the recent surge in the Indian beverage segment is exciting and can open up many retail opportunities. This emergence began with the introduction of coffee chains more than a decade ago. This was also a first in terms of organized beverage retail, since the segment was earlier dominated by small local players like juice shops. Also, restaurants which focused solely on food have also added/expanded their beverage offerings. This has boosted development of both alcoholic and non-alcoholic beverages at both product and retail level.

BEVERAGES

NON ALCOHOLIC

ALCOHOLIC

NON CARBONATED

CARBONATED

FRUIT/SAP

GRAIN

FRUIT JUICES

FRUIT DRINKS

SODA

COCA COLA

TONIC WATER

NON DISTILLED

DISTILLED

NON DISTILLED

DISTILLED

WINE

BRANDY

BEER

WHISKY

COFFEE
The most important areas of production are in the southern Indian states of Karnataka, Kerala, and Tamil Nadu which accounted for over 92 percent of India's coffee production in the 20052006 growing season. There are approximately 250,000 coffee growers in India; 98% of them are small growers.Over 90 percent of them are small farms consisting of 10 acres (4.0 ha) or fewer.
Size of holdings Less than 10 ha 10 hectares (25 acres) Between 10 and 100 ha and above Total Numbers (20012002) 175,475 2833 178,308 Area of holding 247,087 hectares (610,570 acres) 99,908 hectares (246,880 acres) 346,995 hectares (857,440 acres)

TEA
India has a vast domestic market. The Industry has achieved a production of 878 million kg in 2005 from 820.5 million Kg in 2004 with a growth of about 7 percent. Tea plantations in India are concentrated in the North-East (Upper Assam, West Bengal) and the South (Kerala, Tamil Nadu). Assam produces around 53 percent of the country's total production, but also employs more than 10 percent of the states work force or around 12 lakh people.

DEMAND OF MINERAL WATER

Demand : Past & Future

MARKET FOR MINERAL WATER

25% 25%

Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

mn cases 33 44.5 55.6 68.15 82 97 112.85 129.55 146.8 164.45

Leading Players in the Market

Parle Bisleri, Parle Agro, Coca Cola, Pepsi, Kothari Beverages, Mohan Meakin, Mysore Breweries, United Breweries, NDOB, Mt Everest, Golden, Hello, Dadi Group, S M Foods, Group Denone

10%

40% NORTH EAST WEST SOUTH

2014-15

265

WINE CONSUMPTION(BY VOLUME)

YEAR
2004 2005 2006 2007 2008 2009

TOTAL(000 liters)
550 620 750 900 1100 1400

DOMESTIC(000 liters)
470 520 630 750 920 1180

IMPORTED(000 liters)
80 100 120 150 180 220

2010 2011
2015

1700 2000
4000

1440 1700
3400

260 300
600

BY LOCATION

GREATER MUMBAI DELHI

Bangalore Chennai Kolkata Nasik Pune

STRONG ENTRY BARRIERS

1.BAN ON ADVERTISEMENT
2008
25 48 7 7 3 4 9 9

2011
13 53 12

10

UNITED SPIRITES

RADICO

JAGAJIT

UNITED SPIRITES TILAKNAGAR

RADICO MOHAN MEAKINS

JAGAJIT OTHERS

 Almost 15% of liquor sales takes place in the militarys CSD. To sell brands through CSD outlets requires prior registration, a process that takes close to nine months. Also, CSD outlets have stringent policies on quality, supply chains and distribution fee structures. In our view, if a company is not able to register a brand with the CSD, it would be unable to attract a large number of consumers. CSD is crucial for driving growth in south India, which accounts for 59% of liquor consumption in India.

2. REGISTERING A BRAND WITH THE CSD IS DIFFICULT IMPL consumption:region wise

11

15

59 15

EAST

WEST

NORTH

SOUTH

INTER-STATE TRANSFER FEES ON MOLASSES, A KEY RAW MATERIAL

Molasses is the key raw material in manufacturing liquor in India. Maharashtra and Uttar Pradesh account for over 50% of sugarcane production in India. However, most states have levied taxes on import of molasses. This results in far lower profitability for liquor manufacturers. We believe this acts a key entry barrier, since giving licenses to manufacture liquor is at the discretion of state governments.

IMPORT DUTIES ON INTER-STATE TRANSFERS

Selling liquor across states attracts higher excise duty. Liquor manufactured and sold within a state attracts lower excise duty. The higher excise duty on liquor from other states results in a higher price, which leads to lower off-take. Also, these imports are allowed only through a quota system, which restricts the quantity being imported. As a result, almost all liquor manufacturers are compelled to set up distilleries in every state. Higher state taxes also result in higher prices.

PRODUCT DISTURBTION

DISTRIBUTION IS A KEY ENTRY BARRIER

Structure I: Distributor -- Government; Retail -- Government

Kerala Tamil Nadu Delhi

Structure II: Distributor Government; Retail Free

Andhra Pradesh Orissa Uttar Pradesh Bihar Rajasthan Karnataka Chhattisgarh Uttaranchal Bihar
Structure III: Distributor -- Free; Retail Free

Assam West Bengal Daman Pondicherry Goa Tripura Jharkhand Maharashtra

States that have banned liquor

Gujarat Manipur Mizoram Nagaland

LIMITED SKUS RESULT IN SLOWER DISTRIBUTION EXPANSION

There are only five stock-keeping units (SKU) allowed in liquor. Market creation can be done through offering different pack sizes. For instance, smaller packs at affordable prices, smaller packs for new trials and to attract fresh consumers to a category; larger packs for loyal customers. Consumer companies can also launch gift packs as well as festival packs such as for Diwali. The prohibition against the launch of different SKUs has resulted in lower branding power.