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For parched soft drink firms, water is a thirst quencher

Surajeet Das Gupta & Partha Ghosh

Soft drink companies reeling under a slowdown in growth rates of carbonated drinks have found a saviour-in water. Believe it or not, top executives at soft drink companies admit that in numerous urban markets, bottled water is displacing carbonated drinks as the thirst quencher.

Consider the figures: the carbonated drink market grew by a mere 4 per cent in May and industry sources said they did not see growth going beyond 5-6 per cent tops for the entire year, compared to a volume growth of 12 per cent last year.

But the companies expect to make up with growth rate figures for the entire industry-carbonated drinks as well as water-which is at around 10 per cent.

This is because water market volumes are expected to grow by a staggering 40 per cent this year. The total turnover of the water market is already Rs 6 billion.

Neither Coca-Cola nor Pepsi officials admit that water has been a key to market growth this year. Says a Pepsi spokesperson, "Yes, growth of the water segment has been really good, especially with the unusual rains coming as a dampener to carbonated drink sales." A Coca-Cola spokesperson also admitted that sales of soft drinks were hit due to the unusual rains.

So what has happened at the market place. Says a senior executive of a soft drink company: "Yes, in urban markets water is replacing carbonated drinks as a thirst quencher. Soft drinks are now seen more as a lifestyle product or something, which is consumed at home. Let's face it, water is seen as a more healthier product especially when the intention is to quench your thirst."

With bottled water as easily available as carbonated drinks and with it being a cheaper product (Rs 5 for 500 ml), demand and a shift is already happening.

Says Sue Evans of AT Kearney: "If sales of soft drinks have dropped, it may be because-and this is a hypothesis-other product categories are looking up. Sales of soft drinks may have reached a plateau in the country since penetration would essentially depend on lowering prices. Breaking the existing price barrier is nearly impossible with prevalent high costs and taxes. But more importantly, as is happening worldwide, and there may be a similar trend setting in India as well, soft drink sales are being hit by other emerging products."

According to Evans, consumers have become more health conscious and are shifting towards more healthier options such as fruit juices, non-aerated soft drinks, milk products and even water. "Water is light and more natural. Aerated drinks are not natural, have additives which includes oil extracts which are not considered healthy. Besides, water is the best thirst quencher and comes cheaper."

Recently, a similar view was expressed by Parle chief Ramesh Chauhan who pioneered the bottled water market by launching the country's largest water brand Bisleri, after he sold off his soft drink brands to Coca-Cola in 1993.

"I am already struggling with supplies since demand is increasing every day despite so many players coming in. Pepsi and Coca-Cola will have to resort to the water business to protect their bottomline. The global trend shows water being preferred over soft drinks and we can already see how the two soft drink firms are entering new healthier product categories," he said.

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