Beverages market return to pre-covid growth

Opening up of restaurants and higher at-home consumption has seen India’s packaged beverage market, among the worst performing segments during the multiple lockdowns, burst to its pre-Covid level growth.

Beverages sales jumped 26% in September on the back of increased stocking at kiranas as they anticipated higher demand due to October heat. Though temperatures did not soar as expected, the category still saw sales growth at 7% in October, according to the latest report by Bizom, a sales automation firm that transacts with 7.5 million retail stores.

Kantar data too revealed a recovery in the segment – with bottled soft drinks growing 7% in August and September bouncing back from a 44% decline in the peak lockdown months of April and May and a fall of 22% in the following two-month period of June and July.

“Minimal lockdown disruptions and reverse migration led to acceleration of demand for soft drinks in semi-urban and rural markets in the second half of the September quarter, PepsiCo’s biggest franchisee partner Varun Beverages Ltd (VBL)-owned RJ Corp’s chairman Ravi Jaipuria said.

The recovery was led by changes in consumer preferences shifting to larger in-home 1 or 1.5-litre packs from on-the-go 250 ml or 500 ml bottles, and higher consumption in rural and tier-2 and 3 markets that were spared the brunt of lockdown-induced disruptions. Both Coca-Cola and PepsiCo have been focusing on retail push of the larger packs, both in retail stores and on e-commerce platforms.

The increase in demand can also be seen in the replenishment cycles of retailers. It has changed from fortnightly or monthly cycles to weekly cycles. It is driven by the availability of products and credit in the market. Another replenishment trend observed is the higher frequency ordering with smaller volumes after mid-July, said experts.

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“An increase in travel services, especially mass carriers like trains, will play a key role for the category. That, coupled with festival gifting behaviour, signals not only a revival but also solid growth for this category,” said Akshay D’Souza, chief marketing officer at Mobisy Technologies, which owns Bizom, adding that as winter arrives, the sales of beverage companies ‘go cold’.

VBL, which makes and distributes Pepsi and Mountain Dew soft drinks and Tropicana juices, reported strong volume growth of 60.4% in the September quarter as rise in in-home consumption largely offset lower on-the-go consumption.

“In the month of July, the company reached 90% of the volumes while August was flat compared to a year ago. In September, normalcy returned to the business with a growth of 12.9% and the momentum has continued so far in the current quarter as well,” a recent report by B&K Securities noted.

Rival Coca-Cola too said it saw “meaningful improvement in the face of ongoing restrictions” in the September quarter in India.

With peak lockdown months coinciding with the single largest quarter of April-June, which contributes more than half of the packaged beverages industry’s annual sales of over Rs 20,000 crore, the segment has still lost 40% of their annual sales despite the recent recovery.



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