Beverage players take a big sip to quench market share thirst

Kolkata | Bengaluru: Beverage companies such as PepsiCo's bottler Varun Beverages, Dabur and Tata Consumer Products will focus on distribution, putting up bottle chillers in stores and expanding product portfolio to join the cola war unleashed by Reliance Retail's Campa, according to announcements on their latest earning calls.

It comes after companies such as Tata Consumer and Dabur matched the higher retailer margins offered by Reliance Retail which had impacted their sales.

Varun Beverages chairman Ravi Jaipuria said the company is spending more money than ever before and has expedited its go-to-market by putting in more chilling equipment than it did in the past two years. He said the company will introduce new products after having just launched a new energy drink in malt-based flavour.

Tata Consumer managing director Sunil D'Souza said after addressing retailer disconnect by re-indexing its margin to Reliance Retail's higher margin, it's time to rebuild the distribution.

"We are back to our original thesis of expanding portfolio, expanding distribution, making sure we grow the business," said D'Souza.

Beverage companies have been flagging the competition from Campa in their past two-three earnings calls. Reliance Retail started a price war by selling 200 ml bottles at '10 and offering higher retail margins. This took a toll on out-of-home beverage sales for the competition, forcing them to launch promotional offers and reduce prices in some markets. Out-of-home consumption accounts for about 40% of the business.

Dabur chief executive officer Mohit Malhotra told analysts on Wednesday that after correcting retailer margins and product portfolio with packs starting from '10, the focus will be on expansion into rural and semi-urban India. The company has launched its coconut water in rural markets and a new beverage range at '99 which has improved the price index vis-a-vis colas.

"The cola war is a cyclical storm with competitive intensity going up. We will gradually ramp up distribution and leave no stones unturned. The nectar range we have to execute well. It will be a slow and gradual recovery in beverages," he said.

James Quincey, CEO, The Coca-Cola Co, told analysts on an earnings call last week that about 350,000 outlets were added in India in the March quarter, the company increased household penetration, stepped up cooler placement, and added almost 100,000 customers to its digital platforms.

"In India, we had strong volume growth across our portfolio of global and local brands," he said.

Reliance had said on its last earnings call that Campa had achieved double-digit market share in the key markets where it was available.