Shoppers Ditch Juices For Wallet-Friendly Fizzy Drinks As Cola Wars Intensify

Consumers are increasingly shifting away from juices and nectars in favour of fizzy drinks, amid a fierce cola war that saw companies significantly slashing prices in the summer of 2024 in a move to grab market share.

"Colas have become so cheap that consumers are trading out of nectar," Dabur India Ltd. Chief Executive Officer Mohit Malhotra told analysts during a post-earnings call.

The company's beverages portfolio put up a muted show with only 2.8% growth in the April-June quarter, impacted by the harsh summers which reduced out-of-home consumption, especially for single-serve packs and heightened competition, not from category peers but from the cola giants.

Nectar or non-carbonated soft drinks are produced by muddling the flesh of fruits and are not 100% juices. They represent 70% of beverages for Dabur.

A relatively new player, Reliance Consumer Products Ltd., has reduced the prices for a 200 ml pack of Campa Cola to Rs 10. This pricing strategy, which is a 50% reduction, has sent ripples through the industry, compelling Pepsi and Coca-Cola to respond with price cuts of their own, said Malhotra. As a result, the price difference between nectar and colas has widened, leading to a notable shift in consumer preferences.

"The difference has gone up from 2.2 times to 3.25 times now," he said.

Still, Dabur, which holds a 56% market share in India's Rs 1,250-crore nectar segment, increased its 'Real' brand's market share by 332 basis points.

In contrast, PepsiCo-owned Tropicana, which is distributed by Varun Beverages Ltd. in India, saw a decline of 300 basis points in market share to 17.3%, while ITC Ltd.'s B Natural also saw a drop, losing 280 basis points, as per Nielsen data. Minute Maid, too, lost 100 basis points.

A punishing summer this year has only accentuated the problem, according to Malhotra. "In temperatures of 40-50°C outside, consumers want more hydration and more refreshment rather than nourishment and health. Fizz is typically more thirst quenching as compared to a juice or a nectar."

A recent Kantar study found that healthy new launches are becoming harder to sustain, implying the necessity for companies to accurately price their products in order to drive sales. In 2020-21, for instance, 25% of new product launches in the noodles and biscuits segments were categorised as conventionally healthy. However, both the penetration and repeat rates for these products were lower than those seen before the Covid-19 pandemic.

K Ramakrishnan, managing director of Kantar Worldpanel, attributes this decline to three main factors—intense competition, rising prices compared to standard variants, and consumer preference for taste, even as they actively seek healthier food options.