Functional Beverages in India

FORTIFIED/FUNCTIONAL BEVERAGES IN INDIA Euromonitor International

November 2011

F O R T I F I E D / F U N C T I O N A L B E V E R A G E S I N I N D I A P A S S P O R T I

© E u r o m o n i t o r I n t e r n a t i o n a l

LIST OF CONTENTS AND TABLES

Headlines ..................................................................................................................................... 1 Trends .......................................................................................................................................... 1 Competitive Landscape ................................................................................................................ 2 Prospects ..................................................................................................................................... 2 Category Data .............................................................................................................................. 3

Table 1 Sales of Fortified/Functional Beverages by Category: Value 2005-2010 ............................................................................................................. 3

Table 2 Sales of Fortified/Functional Beverages by Category: % Value Growth 2005-2010 .................................................................................................... 4

Table 3 Other Fortified/Functional Hot Drinks by Type: % Value Breakdown 2005-2010 .................................................................................................... 4

Table 4 Fortified/Functional Beverages Company Shares 2006-2010 ...................... 4 Table 5 Fortified/Functional Beverages Brand Shares 2007-2010 ............................ 5 Table 6 Forecast Sales of Fortified/Functional Beverages by Category: Value

2010-2015 .................................................................................................... 5 Table 7 Forecast Sales of Fortified/Functional Beverages by Category: %

Value Growth 2010-2015 ............................................................................. 6

F O R T I F I E D / F U N C T I O N A L B E V E R A G E S I N I N D I A P A S S P O R T 1


FORTIFIED/FUNCTIONAL BEVERAGES IN INDIA

HEADLINES � Sales reach Rs34.8 billion in 2010, following current value growth of 14% over 2009

� Urban lifestyles and eating habits have made people more concerned about their nutritional needs

� FF sports drinks sees the highest growth rate (72%) in 2011

� Other FF hot drinks accounts for the bulk of value sales (87%)

� Prices increased by around 5%

� GlaxoSmithKline Consumer Healthcare Ltd leads the market with a 72% value share

� Sales are expected to post an 8% CAGR in constant value terms over 2010-2015

TRENDS � The need for extra nutrition among Indian consumers is increasing day by day. People in

urban areas are concerned that they are not getting essential nutrients due to their erratic eating habits and schedules, and so they are looking for easy-to-consume fortified beverages which will provide them with those missing essential nutrients. Prior to the review period, fortified beverages were typically consumed only by children or teens, but since the start of the review period, adults have also begun consuming fortified beverages. The concern for and awareness of nutritional requirements is also increasing among lower-income groups. As a result, manufacturers have also launched products targeted towards lower-income groups.

� The growth rate of 14% in 2010 was slightly higher than the review period CAGR of 12% as the consumer base expanded from just children and teens to adults as well.

� Other FF hot drinks have long been accepted by people as providers of extra nutrition for growing children. Moreover, malt-based FF drinks actually make the milk tastier than plain milk and so Indians find it easier to drink. With increased concern for nutrition as well as the popularity of FF hot drinks generally, adults are also now consuming FF hot drinks. This trend has expanded the consumer base for other FF hot drinks.

� Most brands have a general wellbeing positioning. However, from 2008 onwards omega-3 for brain and heart health is fast becoming a new positioning and almost all FF hot drinks manufacturers claim that their brands have a higher omega-3 content than their rivals.

� The leading functional ingredients in India are protein, calcium, iron, vitamins, other minerals and omega-3. While FF concentrates are focused on general wellbeing only, FF hot drinks are focused on improving brain health, memory, bone health and boosting overall growth and health.

� There are no special regulations governing fortified beverages in India and manufacturers can launch fortified beverages with few constraints. Advertising regulations however restrict manufacturers from making unsubstantiated claims.

� Unit prices increased by 5% for FF beverages due to the increase in cocoa and sugar prices which are key ingredients in most FF beverages.

� Prior to the start of review period most FF beverages focused on claims related to boosting strength, stamina or height, but most brands during the review period changed their positioning towards complete mental and physical health encompassing sharpness, alertness,

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stamina, physical and mental growth, memory as well as immunity. However, FF concentrates were not marketed as having any FF properties and they continue to be marketed on a taste basis only.

� FF beverages are usually purchased from small grocers including chemists/pharmacies, neighbourhood grocers, kirana shops, food and drink specialists as well as supermarkets and hypermarkets. While traditionally hot FF beverages were sold primarily through chemists/pharmacies, now their wider consumer base has resulted in their increased availability across other distribution channels as well. FF concentrates are usually bought from kirana shops, food and drink specialists and other small grocers.

COMPETITIVE LANDSCAPE � GlaxoSmithKline Consumer Healthcare Ltd is the leading company with a 72% value share in

2010 due to well-established trust among Indian consumers in its FF beverage brands, namely Horlicks and Boost.

� Manufacturers are positioning FF drinks as beneficial for overall development. However, the strategy of GlaxoSmithKline Consumer Healthcare Ltd is quite different from rival Cadbury India Ltd’s strategy. While GlaxoSmithKline promotes Horlicks as suitable for everyone and even has variants for the special needs of women, children between one and three years old and children between four and six years old, Cadbury’s Bournvita is promoted as a drink for children and teens only, with just one special variant for two to five year-old children. Due to its positioning and its variants for specific needs, GlaxoSmithKline has maintained its leadership position throughout the review period.

� Fortified beverages in India face competition from consumer healthcare brands such as Complan and Boost which are positioned as health and wellness beverages in India. However, Complan in India has always limited its claim to that of boosting height growth and Boost is positioned as a stamina-boosting beverage. However, in order to counter the competition from Boost and Complan, most FF hot drinks claim to provide all-round development including mental as well as physical growth.

� Fortified/functional beverages in India are health driven. Most common functional ingredients are vitamins, proteins, iron, calcium, other minerals, omega-3, and herbal and ayurvedic extracts.

� The market is dominated by multinationals GlaxoSmithKline Consumer Healthcare Ltd and Cadbury India Ltd (now a wholly-owned subsidiary of Kraft Foods). However, in 2007, leading Indian fmcg player Dabur India Ltd entered FF beverages with its herbal and ayurvedic extract based beverage Dabur Chyawan Junior which is positioned as an immunity booster beverage for growing children.

PROSPECTS � While children and teens will continue to be the major consumer base for FF beverages, the

adult consumer base for FF beverages, especially among women, will increase steadily. This is because women are now more conscious about their health, and because of the increase in the number of working women, more women are financially capable of taking care of themselves.

� Consumer acceptance of FF beverages will continue to increase due to increased concern about missing nutritional needs. The launch of economy brands and low-priced SKUs will also make FF beverages more accessible to lower-income groups and further boost sales.

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� A steep increase in prices may hamper future growth as many consumers would find such products unaffordable. Otherwise, FF beverages do not face any major threat during the forecast period in India.

� All-round development positioning is likely to have the biggest potential in India as most parents are keen to develop their children as all-rounders who excel in academia, sports, music and extra-curricular activities.

� The forecast period may see more brands and variants to cater to special needs of different age groups. Up to 2010, FF beverages offered special variants for one to three year-olds, four to six year-olds, up to twelve year-olds, and women. Over the forecast period, special variants for teenagers dealing with examinations and competitive pressures, and Indians over 40 years old may also become available. This is likely to happen in order to expand the consumer base to cover the entire Indian population.

� GlaxoSmithKline Consumer Healthcare Ltd is best suited to meet the demand for FF beverages in the future as it already offers products for different needs and income groups, and is constantly innovating to make its products more beneficial to consumers. On the other hand, Cadbury India Ltd will have to rework its strategy and move beyond its focus on children and tweens to cover a wider consumer base.

CATEGORY DATA

Table 1 Sales of Fortified/Functional Beverages by Category: Value 2005-2010

Rs million 2005 2006 2007 2008 2009 2010 FF Hot Drinks 17,681.9 20,026.4 22,178.2 24,063.0 26,848.6 30,173.9 - FF Chocolate-Based - - - - - - Flavoured Powder Drinks - FF Instant Coffee - - - - - - - FF Tea - - - - - - -- FF Fruit/Herbal Tea - - - - - - -- FF Instant Tea - - - - - - - Other FF Hot Drinks 17,681.9 20,026.4 22,178.2 24,063.0 26,848.6 30,173.9 FF Soft Drinks 2,310.5 2,548.1 2,854.1 3,213.9 3,716.7 4,604.9 - FF Bottled Water - - - - - - - FF Carbonates - - - - - - -- FF Cola Carbonates - - - - - - -- FF Non-Cola Carbonates - - - - - - - FF Concentrates 2,213.8 2,287.0 2,403.6 2,483.0 2,602.1 2,948.2 - FF Energy Drinks 96.6 193.7 356.1 605.1 942.2 1,361.1 - FF Fruit/Vegetable - - - - - - Juice -- FF 100% Juice - - - - - - -- FF Fruit-Flavoured - - - - - - Drinks (No Juice Content) -- FF Juice Drinks (Up - - - - - - To 24% Juice) -- FF Nectars (25-99% - - - - - - Juice) - FF RTD Coffee - - - - - - - FF RTD Tea - - - - - - - FF Sports Drinks - 67.4 94.4 125.8 172.3 295.6 Fortified/Functional 19,992.3 22,574.5 25,032.3 27,276.9 30,565.3 34,778.8 Beverages

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Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 2 Sales of Fortified/Functional Beverages by Category: % Value Growth 2005-2010

% current value growth 2009/10 2005-10 CAGR 2005/10 Total FF Hot Drinks 12.4 11.3 70.6 - FF Chocolate-Based Flavoured Powder - - - Drinks - FF Instant Coffee - - - - FF Tea - - - -- FF Fruit/Herbal Tea - - - -- FF Instant Tea - - - - Other FF Hot Drinks 12.4 11.3 70.6 FF Soft Drinks 23.9 14.8 99.3 - FF Bottled Water - - - - FF Carbonates - - - -- FF Cola Carbonates - - - -- FF Non-Cola Carbonates - - - - FF Concentrates 13.3 5.9 33.2 - FF Energy Drinks 44.5 69.7 1,308.7 - FF Fruit/Vegetable Juice - - - -- FF 100% Juice - - - -- FF Fruit-Flavoured Drinks (No Juice - - - Content) -- FF Juice Drinks (Up To 24% Juice) - - - -- FF Nectars (25-99% Juice) - - - - FF RTD Coffee - - - - FF RTD Tea - - - - FF Sports Drinks 71.5 - - Fortified/Functional Beverages 13.8 11.7 74.0


Table 3 Other Fortified/Functional Hot Drinks by Type: % Value Breakdown 2005-2010

% retail value rsp 2005 2006 2007 2008 2009 2010 Malt-based Hot Drinks 100.0 100.0 100.0 100.0 100.0 100.0 Non-Chocolate Based Hot - - - - - - Drinks Other Plant-based Hot - - - - - - Drinks Total 100.0 100.0 100.0 100.0 100.0 100.0


Table 4 Fortified/Functional Beverages Company Shares 2006-2010

% retail value rsp Company 2006 2007 2008 2009 2010



GlaxoSmithKline 66.9 66.9 70.4 72.8 71.7 Consumer Healthcare Ltd Cadbury India Ltd 11.5 11.4 11.0 12.0 12.6 Rasna International 9.6 9.0 8.5 7.9 7.8 Red Bull GmbH 0.8 1.3 2.0 2.6 3.2 PepsiCo India Holdings 0.3 0.3 0.4 0.5 0.6 Pvt Ltd Hamdard (Wakf) 0.4 0.4 0.4 0.4 0.5 Laboratories Goldwin Healthcare Pvt - - - 0.2 0.2 Ltd Kraft Foods Inc 0.1 0.2 0.2 0.2 0.2 Nestlé India Ltd 5.0 5.0 3.8 0.7 - Others 5.4 5.5 3.3 2.7 3.2 Total 100.0 100.0 100.0 100.0 100.0


Table 5 Fortified/Functional Beverages Brand Shares 2007-2010

% retail value rsp Brand Company 2007 2008 2009 2010 Horlicks GlaxoSmithKline 49.2 52.2 54.7 54.1 Consumer Healthcare Ltd Boost GlaxoSmithKline 12.3 12.6 12.9 13.0 Consumer Healthcare Ltd Cadbury's Bournvita Cadbury India Ltd 11.4 11.0 12.0 12.6 Rasna Rasna International 4.7 4.4 4.2 4.2 Maltova GlaxoSmithKline 3.8 4.2 4.1 3.7 Consumer Healthcare Ltd Red Bull Red Bull GmbH 1.3 2.0 2.6 3.2 Viva GlaxoSmithKline 1.5 1.5 1.1 0.9 Consumer Healthcare Ltd Gatorade PepsiCo India Holdings 0.3 0.4 0.5 0.6 Pvt Ltd Roohafza Hamdard (Wakf) 0.4 0.4 0.4 0.5 Laboratories Cloud 9 Goldwin Healthcare Pvt Ltd - - 0.2 0.2 Tang Kraft Foods Inc 0.2 0.2 0.2 0.2 Milo Nestlé India Ltd 5.0 3.8 0.7 - Others 9.8 7.4 6.4 6.8 Total 100.0 100.0 100.0 100.0


Table 6 Forecast Sales of Fortified/Functional Beverages by Category: Value 2010-2015

Rs million 2010 2011 2012 2013 2014 2015 FF Hot Drinks 30,173.9 32,126.7 34,233.3 36,504.5 38,956.7 41,652.4 - FF Chocolate-Based - - - - - - Flavoured Powder Drinks - FF Instant Coffee - - - - - -



- FF Tea - - - - - - -- FF Fruit/Herbal Tea - - - - - - -- FF Instant Tea - - - - - - - Other FF Hot Drinks 30,173.9 32,126.7 34,233.3 36,504.5 38,956.7 41,652.4 FF Soft Drinks 4,604.9 5,175.5 5,919.5 6,848.5 8,005.0 9,449.1 - FF Bottled Water - - - - - - - FF Carbonates - - - - - - -- FF Cola Carbonates - - - - - - -- FF Non-Cola Carbonates - - - - - - - FF Concentrates 2,948.2 3,021.9 3,130.7 3,259.1 3,412.3 3,589.7 - FF Energy Drinks 1,361.1 1,762.1 2,256.9 2,852.9 3,558.4 4,389.3 - FF Fruit/Vegetable - - - - - - Juice -- FF 100% Juice - - - - - - -- FF Fruit-Flavoured - - - - - - Drinks (No Juice Content) -- FF Juice Drinks (Up - - - - - - To 24% Juice) -- FF Nectars (25-99% - - - - - - Juice) - FF RTD Coffee - - - - - - - FF RTD Tea - - - - - - - FF Sports Drinks 295.6 391.5 531.8 736.5 1,034.3 1,470.1 Fortified/Functional 34,778.8 37,302.1 40,152.8 43,353.0 46,961.6 51,101.5 Beverages

Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Table 7 Forecast Sales of Fortified/Functional Beverages by Category: % Value Growth 2010-2015

% constant value growth 2010-15 CAGR 2010/15 TOTAL FF Hot Drinks 6.7 38.0 - FF Chocolate-Based Flavoured Powder Drinks - - - FF Instant Coffee - - - FF Tea - - -- FF Fruit/Herbal Tea - - -- FF Instant Tea - - - Other FF Hot Drinks 6.7 38.0 FF Soft Drinks 15.5 105.2 - FF Bottled Water - - - FF Carbonates - - -- FF Cola Carbonates - - -- FF Non-Cola Carbonates - - - FF Concentrates 4.0 21.8 - FF Energy Drinks 26.4 222.5 - FF Fruit/Vegetable Juice - - -- FF 100% Juice - - -- FF Fruit-Flavoured Drinks (No Juice Content) - - -- FF Juice Drinks (Up To 24% Juice) - - -- FF Nectars (25-99% Juice) - - - FF RTD Coffee - - - FF RTD Tea - - - FF Sports Drinks 37.8 397.4 Fortified/Functional Beverages 8.0 46.9

Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources



Documents

Functional Beverages in India