Vol. 2 :: No. 08 July, 2000 (Asadh-Shrawan)

Marketing

Hard War of Soft Drinks

With the change in the lifestyle of people and modernization getting in vogue, Nepali market place has became a battlefield for various beverage brands. As the weather now is hot and humid, the war seems to be more intense among soft drinks.

For the last one year or so, Pepsi has been very aggressive. Pepsi’s bottling company here installed pet bottle plant early February 2000 investing one hundred million rupees for it and introduced some of its brands in 1.5 liter and 500 ml pet bottles. Then it introduced 200 ml Phuchhe Pepsi at the right time and the product is doing well in the market. As a result, its earlier market share of 18 percent has gone up by another 4 percentage points to some 22%. Phuchhe Pepsi has also helped in expansion of the market volume of soft drinks.

Pepsi’s global competitor, Coke, meanwhile has not stayed a silent spectator. It also introduced its brands in pet bottles though by importing the bottles. And it now has been busy in promotional campaigns of its own, one recent example being the offer of CD players as prizes to the ‘Lucky Winner’ of a consumer scheme called ‘Coca-Cola Music Mania’. However, it seems that recently Pepsi is successful in keeping itself ahead of Coke in Nepal in terms of introducing its soft drink in different sizes of packaging and devising innovative marketing strategy. The fight for a prestigious berth in the market between these two cola giants has been growing ever since Pepsi came to Nepal 1986. Coke had a sort of monopoly in the market till then. And the war in the market between the two global giants is going on to benefit consumers. What is now more interesting for the Nepali consumers is that the war has started among fruit drinks also.

Till few months ago, ‘Frooti’ was enjoying the advantage of being the only fruit drink in the market without any competitor. Now with the entry of ‘Rio’ from Gold Beverages (P) Ltd. of Chaudhary Group, ‘Real’ from Dabur Nepal and ‘Frujo’ from Raybot Beverages, ‘Frooti’ from Dugar Beverages (P) Ltd. has lost its past privilege. Only recently, ‘Pran’ brand of orange juice has been launched by importing it from Bangladesh. Therefore, now Dugar Beverages started providing two extra packs of Frooti on the purchase of every tray. The company has also started to provide credit to its wholesalers and retailers, which was unimaginable till the recent past. And it has changed its slogan which says "Juice up your life" from the earlier "Mango Frooti, Fresh ‘n Juicy". It had also changed Frooti’s old TV commercial which had been on air since last one decade or so. TV viewers bored of watching the same commercial year after year have felt some change.

As a result of the new developments, companies are working hard to gain more market share, be it through advertising, merchandizing or consumer schemes. Dabur Nepal has reduced the price of its ‘Real’ juice from Rs. 19 to Rs. 14 to make it more competitive. Though it is still one rupee higher than Frujo, two rupees higher than Frooti and Rio, and three rupees higher than ‘Slice’ of Pepsi, Real has 50 ml more than all the competing brands except Frujo. The company has said that the reduced price offer is only for Real Orange Juice and is valid only till the stocks last.

The fruit drink market in Nepal is highly segmented quality-wise as well as market-wise. But general consumers are seen to regard them all as equal in quality. Quality-wise consumers can get essence based so called fruit drinks like Popayee at Rs. 6 or even lower as well as other brands for as high as Rs. 45 for 250 ml. Claimed to be the only carbonated soft drink with fruit juice flavour in Nepal, Frujo has one other advantage over all other brands, i.e. it is packed in a ‘see through’ pet bottle. Rest of the fruit drinks are in Tetra Pack except Pepsi’s ‘Slice’, which is in glass bottle and is not carbonated.

Content-wise too these fruit drink brands have a lot of differences. Most of them are mango-based. But, Dabur’s ‘Real’ is in orange and pineapple. It is also said to be 100% pure juice (40% pulp content) with no preservatives added. Other fruit drinks like Slice, Frooti and Rio are said to be nectar based (see box for required contents of different categories of beverages). "These brands are synthetic drinks, not real juice as Real", says T.K. Gupta, General Manager of Dabur Nepal. But most of the general consumers do not know or don’t care to know about the contents. They regard all these brands to be real fruit juice.

The fruit drink market has grown by almost 30% this year, according to estimates by the companies. The growth is also there for carbonated drinks as people, especially of the new generation, go for it. However,it is estimated that carbonated drinks market is growing slower - between 10 and 15 percent a year. "With the entry of Rio, the total market for fruit drink has now tremendously gone up", says Manoj Loya, General Manager of Gold Beverages (P) Ltd. of Chaudhary Group that owns the brand. But the interesting thing is that after the Phuchhe Pepsi was launched in the market it snatched away some of the market of carbonated drinks (including that of its own big brother 300 ml. Pepsi) and also that of fruit drinks like Frooti and Rio, though Real was not so affected because of its premiumness. Phuchhe Pepsi has become popular among school kids who otherwise used to have Frooti and would have gone for other fruit drinks as well. "Almost 50% of such school kids have shifted from fruit drinks to Phuchhe Pepsi", says a fruit drink company executive in frustration. The reason is that Phuchhe Pepsi is five rupees cheaper than other carbonated or fruit drinks. This shows how Phuchhe Pepsi has helped to increase the volume of carbonated drinks industry. Even those who had no habit of consuming carbonated drinks have started to consume cola thanks to Phuchhe Pepsi. In small shops, instead of offering a cup of tea, which generally costs five rupees, people now offer Phuchhe Pepsi to friends, because it is only two rupees costlier and gives a better image.

In the race for catching a respectable market share of the growing soft drink market of Nepal, there are imported soft drinks as well, which range from different fruit juices to canned cola. The fruit drinks are imported from as far away places as Philippines, USA, Singapore and Thailand as well as from the nearby markets of India and more recently, from Bangladesh. They are in Tetra Packs, in cans, in pet bottles, and in plastic jars. In taste they are in mango, orange, apple, tomato, mixed juices and in many flavours containing nectar, 15 percent to 40 percent fruit pulp or 100% natural juice. Though sales volume of imported juices has no record at all, estimation shows that about 20 MT of fruit juice (that includes imports in various packaging) is sold in Nepal every year. That gives a market share of less than 1%. Sales of canned cola and tonic water are more difficult to estimate as these items are imported from many countries like China, Hong Kong, Singapore etc. RNAC and Necon air also import these products for their in-flight service.

Since Coke entered Nepal in 1979 it has been enjoying market leadership in soft drink industry. Pepsi came to Nepal only in 1986. Being a late entrant, Pepsi has been trailing far behind Coke. Pepsi could have expanded its market share, but the bottling company of Pepsi in Nepal had frequent changes in ownership and management. Similarly, trying to take all responsibility for sales and distribution directly and lacking enough advertising and promotional campaigns, initially the company could not attract more consumers to its brands. Even some very successful promotional campaigns in past could not sustain the increased demand because of limitation in production capacity. In recent times the company seems to be more serious. Its marketing has become more aggressive. But that is not going to be enough as yet, since its rival is far stronger in many respects. For example, Pepsi’s installed bottling capacity here is only 2,250,000 cases per year and that was achieved only after the commissioning of the pet bottling line about six months ago. Of this capacity, the company has been able to sell only about 1,200,000 cases a year whereas Coke’s sales volume is estimated at over 4,300,000 cases a year. Similarly, Pepsi has no production facility in the terai region, but Coke does. Because of this the distribution cost of Pepsi is higher, and quick response to increased demand in some market places is difficult. Still, Pepsi has chances of high growth provided it strengthens its distribution and sales and marketing team. This will further help Nepal’s soft drink market to grow.

Market-wise, in Kathmandu valley one finds growth both in the absolute quantities consumed and in the varieties available. But outside the valley the situation is not so bright. On the one hand, almost 50 percent of fruit drink sales is said to be within Kathmandu valley alone, on the other hand brands like ‘Real’ and ‘Frujo’ are not available yet outside the valley. Even the remaining brands like ‘Slice’ and ‘Rio’ are yet to penetrate some markets.

Fruit drinks market is not yet mature enough as that of cola, as the estimated growth rates for these products indicate. Consumption of any product depends on the country’s overall economic condition and also on the habit of the consumers. In the case of soft drinks, Nepali consumers are more used to cola than to fruit drinks. The reasons are numerous.

One is the price. Fruit drinks are one to four or five rupees costlier than colas. Second, consumers seem to feel more comfortable with cola than fruit drinks, because rumors of foreign objects found are more frequent in packed fruit juices than in colas irrespective of the veracity of such rumors.

Whatever the perception of consumers at present, there are still very good opportunities for soft drinks especially fruit drinks industry to expand in Nepal, because the average per capita consumption here of non-alcoholic beverages is considered to be still very low. And if the manufacturers of fruit drinks become aware of the tastes and pockets of the consumers and maintain quality and availability of their products, there is a very good chance of high growth in the volume however tough the competition may be. Fruit drinks also have one more advantage over cola, as the former can use the locally produced fruits whereas colas are mainly concentrates that are imported. While the opponents of consumerism may find strong logic against colas, they may be supportive of fruit drinks. However, it is also a bitter fact that fruit juices produced in Nepal are mostly from fruits that are imported. Perhaps it is because the industry is still not grown up enough to encourage sufficient fruit production on commercial basis.

Imported Fruit Drinks (Major Brands)

Fruit Drink Industry

NB :One case = 27 Pktsx 250 ML
*It includes locally produced 'Real' juice sold in jars and other different bulk packaging and also other brands imported in various packaging

Carbonated Soft Drink Industry

* Recently Launched
Source : Business Age estimation on the basis of market survey and expert opinions

Analysis of Fruit & Vegetable Products

Source: Handbook of Analysis and Quality Control for Fruit and Vegetable Products
(second Edition) by S. Ranganna

Corporate | Cover Features | Column | Opinion Poll | Economy & Policy | Sectoral | Marketing | Inner-view | Entertainment | Stock Market | Management | Business News | Health | Tourism | World Brief | Main

Send your feedback to the editor: bizage@ecomail.com.np
1999 © Mercantile Communications Pvt. Ltd. P.O. Box 876, Durbar Marg, Kathmandu, NEPAL. Tel : 977 1 220 773, 243 566 . Fax: 977 1 225 407. Reproduction in any form is prohibited without prior permission. No part of the articles which appear in the internet version on BUSINESSAGE may be reproduced without the permission of Mercantile Communications Pvt. Ltd. For reprinting rights, please write to us.  Send us your feedback:contact us . CLICK HERE FOR PAST ISSUE. This site is best viewed at : 800 X 600 resolution

Back to the top