INDIA'S SOFT DRINK INDUSTRY

Porter's Diamond Model: India's Soft Drink Industry

Porter's Diamond Model: India's Soft Drink Industry

Introduction

The Indian consumer sector is gaining positive momentum both in the near and long term. It has a number of factors in its favor, including a youthful population, massive domestic consumption base and rapid middle-class expansion, and these domestic demand credentials can be set to keep multinational investments, particularly in the consumer-facing sectors, intense. Indeed, big multinationals such as Carrefour, Wal-Mart, The Coca-Cola Company and Starbucks are already inching their way into the Indian consumer-facing sector to take advantage of the sector's enormous growth potential. In this paper the soft drinks market will be analyzed taking manufacturers of soft drinks as players. The principal buyers can be taken as distributors and retailers of soft drinks, and producers of packaging, soft drinks ingredients and other raw materials as the key suppliers (Penteado, 2008, 10).

Indian Soft Drink Market Analysis

The Indian soft drinks market is concentrated, with the top three players holding 74.1% of the total market volume. The market has the presence of leading players like The Coca-Cola Company, PepsiCo, and Parle Bisleri Ltd. Independent retailers are the most significant distribution channel in the Indian market. Players in this market may opt for an integrated business, in which they sell ready-to-consume drinks to retailers, or they may adopt a business model in which they sell raw materials (concentrates) to a network of bottling companies, which may be private companies or owned to some extent by the players. The buyer power of retailers in this market is moderate. Supplier power is not great, as most inputs are readily available commodities. New entrants must contend with the reach and strong brands of the incumbents. There is not a great threat imposed by the substitutes such as traditional coffee and tea or homemade juices. Although leading players are fighting for the dominant position, the rivalry level is moderate and there is scope for growth in niche categories (Mockler, 2002, 15).

The Indian soft drinks market grew at a double digit rate during the period 2006-2010, as a result of strong sales growth across all the products categories. Although the overall market growth can be expected to accelerate in the forecast period, the annual rate of growth is set to fall from a high of 10.1% in 2011 to a low of 7.6% in 2015. The Indian soft drinks market generated total revenues of $3.8 billion in 2010, representing a compound annual growth rate (CAGR) of 11% for the period spanning 2006-2010. In comparison, the Chinese and Japanese markets grew with CAGRs of 14% and 0.4% respectively, over the same period, to reach respective values of $28.6 billion and $54.1 billion in 2010. Market consumption volumes increased with a CAGR of 10.7% between 2006 and 2010, to reach a total of 6.7 billion liters in 2010 (McKay, 2007, 2).

The market's volume is expected to rise to 10.1 billion liters by the end of 2015, representing a CAGR of ...