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The Food & Beverage IndustryIn many countries, the food and
drink market is mature and competitive. The structure of the sector
has
been consolidating, as major companies use economy of scale to
gain market share, and there has also
been a strong trend towards internationalization with
acquisitions playing a major role here. Pepsico
recently acquired a Russian drinks firm, while Coke purchased
largest North American operations of its
bottler, Coca-Cola Enterprises. Whilst global brands and global
foods still largely dominate the market,
these are being blended with local preferences to meet the
growing demand for local products.
Consumer purchases in developed countries are driven by
convenience, health and pleasure. Desires for
low carbohydrate and organic foods have hit the industry over
recent years with corresponding changes
in many brands portfolios. While the shift towards organic has
been important in some markets,
globally there is increased mainstreaming of natural foods.
There is additional pressure due to increased regulation in food
safety, health and traceability and the
inherent cost of innovation as well as price erosion of the
final product, coupled with the availability and
increasing price of some key raw materials.
At the same time the rise of obesity from over-consumption is
showing little signs of slowing. However,
with nearly two billion people now significantly overweight, 800
million still go hungry every day. The
great challenge here is that there is no overall problem of
world food supply, more one of food
distribution. Food is being produced in growth markets to feed
increasingly fat people and economic
and regulatory barriers are still a major concern in many
countries. Added to this continued global
population rise and migration are adding to the challenge. As
the huge corporations such as Coca Cola,
PepsiCo, Nestl and Unilever that dominate the sector all seek to
change their developed world
portfolios, there are significant unmet needs elsewhere.
Food & Beverage Industry in IndiaThe 50-bn-rupee soft drink
industry is growing now at 6 to 7% annually. In India, Coke and
Pepsi have a
combined market share of around 95% directly or through
franchisees. Campa Cola has a 1% share, and
the rest is divided among local players. There are about 110
soft drink producing units (60% being
owned by Indian bottlers) in the country, employing about
125,000 people. There are two distinct
segments of the market, cola and non-cola drinks. The cola
segment claims a share of 62%, while the
non-cola segment includes soda, clear lime, cloudy lime and
drinks with orange and mango flavors.
The per capita consumption of soft drinks in India 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 and Mexico 605. The industry
contributes over Rs. 12 bn to the exchequer and exports goods
worth Rs. 2 bn. It also supports growth of
industries like glass, refrigeration, transportation, paper and
sugar.
The industry estimates that the beverage market should grow at
twice the rate of GDP growth. The
Indian market should have, therefore, grown by at least 12%.
However, it has been growing at a rate of
about 6%. In contrast, the Chinese market grew by 16% a year,
while the Russian market expanded at
almost four times the rate of growth of the Indian market.
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Retail companies buy finished beverages from distributers for
mass merchandisers and sale to the final
consumer. Recent trends in the industry have caused many
retailers to consolidate, resulting in smaller
number of large, sophisticated retailers with more buying power.
In addition to retailers, beverage
manufacturers also depend greatly on food service customers,
which buy syrups for fountain drinks.
Major food service companies include McDonalds, Burger King, and
Yum! Brands like KFC, Pizza Hut andTaco Bell.
PepsiCo has invested INR330bn (US$5.5bn) by 2020 to grow its
business in India, with a focus on
developing infrastructure and local manufacturing to propel
forward it packaged food products. The US-
based snacks and beverage major also intends to ramp up it s
selling and delivery infrastructure
throughout the country, with a focus on expanding in rural
markets. The diverse nature of the Indian
market, the dominance of traditional independent retailers in
the grocery market and the
underdeveloped nature of infrastructure in the country mean that
pan-Indian distribution is difficult to
achieve. PepsiCo is now focusing on new distribution
technologies and the strengthening of its
independent distribution network will help tackle these
challenges. PepsiCo plans to work with its
partners to deploy new technologies designed to enhance service
to retail customers and increase
efficiency across go-to-market systems. PepsiCo has also planned
to increase its investment ininnovation in India, expanding the
range of food it offers. The group also plans to increase
resources
allocated to its farming program in order to strengthen its
supply chain in the country.
References:1.
http://www.just-food.com/news/pepsico-plans-us55bn-investment-push-in-
india_id125065.aspx
http://www.just-food.com/news/pepsico-plans-us55bn-investment-push-in-india_id125065.aspxhttp://www.just-food.com/news/pepsico-plans-us55bn-investment-push-in-india_id125065.aspxhttp://www.just-food.com/news/pepsico-plans-us55bn-investment-push-in-india_id125065.aspxhttp://www.just-food.com/news/pepsico-plans-us55bn-investment-push-in-india_id125065.aspxhttp://www.just-food.com/news/pepsico-plans-us55bn-investment-push-in-india_id125065.aspxhttp://www.just-food.com/news/pepsico-plans-us55bn-investment-push-in-india_id125065.aspxhttp://www.just-food.com/news/pepsico-plans-us55bn-investment-push-in-india_id125065.aspx
