A new-age thirst for beverages is emerging as a key force in India's consumer goods market

India's biggest consumer goods companies are increasingly finding their growth in what consumers drink rather than what they eat, as coffee, ready-to-drink (RTD) beverages, protein-based products and low-sugar juices emerge as some of the fastest-growing categories in the country's FMCG market.

Recent quarterly earnings from Nestle India, Hindustan Unilever (HUL), Tata Consumer Products, Dabur India and Varun Beverages point to a common trend: beverages are consistently outpacing broader portfolio growth, prompting companies to expand product offerings, launch new formats and invest heavily in premium and functional drinks aimed at younger consumers.

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The shift comes as younger consumers increasingly gravitate towards products that combine convenience, health and premium positioning, pushing companies beyond traditional soft drinks and juices.

For FMCG companies grappling with uneven rural demand and slowing growth in some staple categories, beverages offer multiple avenues for expansion — from premiumisation and innovation to out-of-home consumption and convenience-led purchases.

Coffee cups & no-sugar cans

Nestle India said its powdered and liquid beverages business delivered another year of high double-digit growth, helped by rising coffee penetration, premiumisation and deeper category relevance across consumer segments. Nescafe continued to gain market share, while premium coffee brand Nespresso expanded its presence with a second boutique in Gurugram.

At HUL, coffee maintained strong double-digit growth momentum during the March quarter, while lifestyle nutrition brands Horlicks and Boost also posted double-digit growth. The company recently extended the Horlicks brand into the protein segment with the launch of Horlicks Protein Ready-to-Drink beverages, underscoring how traditional nutrition brands are adapting to changing consumer preferences.

Meanwhile, its packaged foods business, which includes ketchup and mayonnaise reported mid-single digit growth during the period.

Tata Consumer Products reported 20% growth in its coffee business during the quarter, while its RTD portfolio expanded 23%, marking a third consecutive quarter of double-digit growth. The company has expanded into newer categories such as electrolyte beverages while simultaneously pushing premium coffee formats, kombucha, matcha teas and functional hydration products.

"We believe there is strong market potential for the beverages business," a Tata Consumer spokesperson told ET Online. "Consumer trends such as health and wellness, premiumisation and convenience are expected to spur demand. Given that per capita consumption in India for coffee and RTD beverages remains relatively low, there is significant runway for growth."

Dabur, traditionally known for juices, is also sharpening its focus on premium beverages. The company's Real Activ 100% juice portfolio grew 26% during the fourth quarter, while its coconut water business more than doubled.

"Our beverages business has been a key driver of growth for years," Dabur Chief Executive Officer Mohit Malhotra told ET Online. "We are strengthening our play in the premium segment and focusing on aggressively scaling up coconut water and 100% juices with no added sugar."

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The growing emphasis on healthier formulations is visible across the industry. Varun Beverages, PepsiCo's largest franchise bottler outside the United States, said low-sugar and no-sugar products accounted for nearly 63% of its consolidated sales volumes during the March quarter. The company has also introduced new products in energy and juice-based drink segments while expanding affordable pack sizes to attract first-time consumers.

A new-age demand

Recent launches and management commentary suggest beverage makers are increasingly focusing on functional ingredients, protein-based products, low-sugar variants and customised drinks as they seek to capture younger consumers.

At Tata Starbucks, protein cold foam, zero-added-sugar syrups and beverage customisation options are being positioned to attract younger consumers. Customers can now choose between regular, low-sugar and zero-sugar options for hot beverages, while the chain continues to expand beyond major metropolitan markets.

Arun Kejriwal, industry expert and founder of Kejriwal Research and Investment Services, said health-oriented positioning is becoming a powerful differentiator among younger consumers.

"Using words such as protein, health and wellness clearly attracts Gen Z consumers," he said. "They are willing to pay more for such products compared with conventional offerings. That suits FMCG companies because they get better value realisation, better margins and are able to push more premium products within their portfolios."

Coffee, in particular, is emerging as one of the most significant long-term opportunities for consumer companies.

Tata Consumer said increasing household penetration beyond South India, product innovation and premiumisation are helping expand the category. New launches now range from dessert-inspired flavours and cold coffees to ready-to-use coffee decoctions and affordable premixes, reflecting a broadening consumer base.

The rise of quick-commerce platforms is adding another layer to the trend. Kejriwal said younger consumers frequently add beverages, protein products and snacks to online orders to meet minimum cart values, helping drive higher volumes across impulse consumption categories.

Premium, functional products mix

The broader market opportunity remains substantial. According to consultancy firm Ken Research, India's beverage market was valued at about $17.2 billion in FY24 and is projected to grow at a compound annual rate of nearly 10% through 2030, driven by demand for premium, functional and health-focused products.

What began as a high-growth segment is increasingly evolving into a strategic battleground. As companies race to dig into the wallets of younger consumers through coffee, protein drinks, electrolyte beverages and low-sugar offerings, beverages are becoming more than just another category — they are emerging as a key moat in India's next consumer growth cycle.