24 October 2006 - Observers of global health and wellness trends in the beverage sector are beginning to notice an increasing level of activity in India, a country that traditionally did not promise the level of awareness or uptake of health and wellness beverages that has been associated with some other markets.
Why India?
Economic drivers: With strong economic drivers of consumer spending, India is a very different market from that of the 1980s or 1990s.
With a GDP of USD800 billion and a GDP growth rate in 2005-06 of over 8 percent, India is now the third largest economy in Asia. And this has not been the result of some freak surge in growth. Average GDP growth of the last 10 years has been 6.5 percent per annum. And most significantly, the stepping up of GDP growth is driven primarily by domestic demand rather than exports.
Demographic drivers: Macro economic factors tell only one part of the story. There are compelling demographic trends in the country that promise new and sustained opportunities for beverage product suppliers who can read right the signals.
The country boasts an expanding middle class that is currently 350 million strong (a population larger than the total population of the United States or the European Union). Increased urbanization and rising disposable incomes are creating new and large target markets for food and beverage products that go beyond commodity status and command higher prices. The rapid growth in the retail sector (over 20 percent per annum) is just one confirmation of the increasing buying power of this middle class.
There is today a growing health and wellness consciousness among consumers and an increasing importance given to fitness and healthy lifestyle choices. Changing work and lifestyle habits leave less time for home cooking and therefore spur demand for convenience and ‘complete nutrition’ from meal replacements. There is a greater inclination to ‘self-care’ rather than ‘medicate’, a greater awareness of the ‘functional’ benefits of health beverages and a greater willingness to pay a premium for such beverages.
Scientific research findings: If these trends were not enough, then the results of recent scientific studies must surely confirm the bigger role that beverages are expected to play in the improved health and wellbeing of the masses. A 14-month study of 869 school children (6-16 years of age) in Hyderabad, conducted by the National Institute of Nutrition, Hyderabad, (using beverage fortified with 100 percent Codex RDA of iron and vitamins B2, B6, B12, folate and C; 50 percent of vitamins A, D and B1, and niacin, calcium and iodine; and 15 percent of Zn) confirmed the "dramatic functional influence of multiple micronutrients on growth and development in children". Another study, across 24 months, of 634 pre-school children (1-3 years of age) in Delhi, funded by New Zealand Milk Limited, used milk fortified with prebiotics and probiotics. This confirmed that "fortified milk can be an effective means of reducing the incidence and prevalence of common childhood illnesses".
The beverage industry’s response
With these strong drivers of growth, it is not surprising that the beverage industry in India has begun to respond with products that are marketed clearly on a health and wellness platform.
However, to set the record straight, ‘health and wellness’ is not a wholly new platform for the Indian market. India has, for decades, had a thriving health food drinks market. Market leader, GlaxoSmithKline Consumer Healthcare (GSKCH), has had iconic brands ‘Horlicks’, ‘Boost’, ‘Viva’ and ‘Maltova’ create 'top-of-the-mind' recall across generations of Indians. Other suppliers, Cadbury (with ‘Bournvita’), Nestle (with ‘Milo’), Heinz (with ‘Complan’) and Gujarat Co-operative Milk Marketing Federation (GCMMF) (with ‘Nutramul’ and now ‘Amul Shakti’) also enjoy a loyal following. In the non-carbonated beverages sector, Parle Agro's ‘Frooti’ remains the largest brand in the fruit drink segment, while Dabur's ‘Real Fruit Juice’ leads the juice segment. The fact is that there has all along been a strong multinational presence in the food and beverage market and more recently we have been witnessing the emergence of Indian ‘multinationals’ across this sector.
However, much of the marketing for health food drinks in the past has been general health and energy positioning, rather than the focus on specific benefits or ingredients that is characteristic of most mature health food markets. This is now changing and the specific initiatives of some companies are going a long way to creating a truly dynamic health and wellness beverage sector in India.
Global market leader in probiotic fermented milk drinks, Yakult, has teamed up with Danone to start manufacturing its probiotic fermented milk drink in India from 2007. Calcium-fortified beverages are a rapidly growing market. Some examples of brands that have introduced calcium-fortified products are ‘Amul Shakti’, Coca-Cola India’s ‘Mazza’, and malted drinks such as ‘Horlicks’ (GSKCH), ‘Milo’ (Nestle), ‘Complan’ (Heinz), ‘Anlene’ (Britannia New Zealand Foods) and ‘Protinex’ (EAC Nutrition). GCMMF launched sports drink 'Stamina' in early 2006. ‘Red Bull’ was launched in India in 2003. Carbonated beverage giants Coke and Pepsi have also planned to widen their product portfolio with ‘health-based’ beverages (non-carbonated). Pepsi’s ‘Gatorade’ is already on the market. And in what must be among the most significant recent commercialization efforts of a traditional Indian drink, ‘Amul Masti’ Spiced Buttermilk was launched (in a 200 ml tetra pack), marketed on the platform of being free of colour, preservatives, acids and sucrose sugar.
Barriers to taking ‘functional’ beverages mainstream
Despite this flurry of activity, the market is still plagued by low levels of awareness and a lack of sophistication in consumer choices. Price remains a stumbling block. Public concerns over safety and quality of beverages have been aggravated by research findings (and the subsequent controversy) over alarming levels of pesticide residues in bottled water and soft drinks. Skepticism from the scientific community continues to limit product endorsement. Furthermore, there is a lack of detail and clarity in food safety regulation regarding nutraceuticals and functional food and beverages, and regarding health claims.
Within the beverage industry there is inadequate understanding of how to take traditional ingredients into the modern food processing environment. And then of course, there is competition from other products such as dietary supplements. Finally, the retail sector, despite its growth, is still mostly unorganized and this limits the ability to differentiate health and wellness products through the allocation of exclusive shelf space devoted to this category.
Converting opportunities into sustained demand
To overcome these challenges, beverage suppliers need to approach the market with a multi-pronged strategy for increasing penetration.
· Price resistance can, to some extent, be overcome by moving from ‘imported’ to ‘manufactured in India’ products. For example, imported ‘Gatorade’ cost INR45 per 200 ml bottle. Now, made in India, it costs INR25.
· Substitution or modification is in some ways easier to execute than addition. (Examples of substitution would be herbal tea replacing regular tea or soy milk replacing regular cow’s milk. Examples of modification would be ‘low-fat’, ‘no-fat’, ‘lite’ variants of established beverage brands).
· The growing trend towards on-the-go consumption/out-of-home consumption (at the workplace, in schools, colleges and gyms) presents suppliers with new place and form of consumption options (for example, vending machines for dispensing health drinks at schools).
· Abandoning the ‘one-size-fits-all’ positioning and generic selling points of the past, in favour of targeted and specific messaging based on validated health benefits is likely to be more effective to the better informed middle class today.
· Leveraging the intrinsic appeal of traditional Indian ingredients such as ayurvedic, herbal or oleoresin ingredients, but delivered in a modern, safe, convenient and consistent form, or packaging and branding traditional Indian health drinks such as buttermilk and lassi, could create whole new markets that derive their strength from known and trusted traditional ingredients or drinks.
In the end, beverage suppliers who unlearn many of the long-held misconceptions about Indian consumers and respond instead to their changing needs and priorities will be best placed to maximize the health and wellness opportunity in this large and growing market.
Media Contact:
Europe:
Janina Hillgrub
Corporate Communications
P: +49 (0) 69 770 33 11
EMail: janina.hillgrub@frost.com