Battle lines redrawn

The recent boom in the packaged juices segment in the country has got players reworking their marketing plans to grab a larger piece of the Rs 8,000-9,000 crore market. Regional brands are taking a trip to the city while national brands are beating the rural trail. Vadodara-based Manpasand Beverages (that started off focusing on rural and semi urban markets) is targeting urban buyers while a seasoned player like Dabur India is increasing its focus on rural geographies.

The packaged juice industry in India has been clocking an exceptional 28 per cent compounded growth over 2009 to 2014 because, driven by a growing concern about health, more and more people are turning to packaged juices. The industry looks even more attractive when per capita consumption numbers are tracked; around three litres compared to 16 litres in Pakistan and 90 litres in the US, which implies that this boom is likely to continue.

Not surprisingly several new brands have jumped in: Paperboat and B Natural (ITC) are among the most recent entrants while numerous local brands have flooded the rural markets. Now some brands are rethinking positioning and marketing strategies to make the most of the good times.

Take Manpasand, a mid-cap company and a regional player. Its bestseller is a mango drink, Mango Sip (which till date accounts for nearly 85 per cent of the company's turnover). The company wants a national role and has come up with multiple new offerings like Fruits Up (carbonated fruit juice and non-carbonated juices), Manpasand ORs (oral rehydration drink) as well as Pure Sip (bottled water). Dhirendra Singh, chairman and managing director of Manpasand feels that in the coming five years, Fruits Up will be the highest revenue grosser for Manpasand, and can potentially overtake Mango Sip.

Dabur India, which is a market leader in the category, on the other hand, is increasing its rural focus. The company already commands about 60 per cent market share of the packaged fruit juice market in India with its Real and Real Activ brands. Dabur India marketing head, foods, Sanjay Singal claimed, "Our juice brands have been growing at strong double digits over the past five years, much ahead of the industry average."

However as newer brands jostle for space on urban shop shelves, the company is turning to rural markets. It has been enhancing its rural distribution footprint under 'Project Double', which was initiated few years ago. Singal said, "We have already increased our rural footprint from 14,000 villages about three years back to 45,000 villages in 2014-15. We are now in the next phase of the project to expand the rural footprint to 60,000 high potential villages over the next 2-3 years." Dabur is now pushing its 200 ml on-the-go packs in the hinterland. Singal, however, admitted that while rural demand for packaged juices is on the rise, urban markets still account for nearly 80 per cent of all packaged juice sales across the industry.

This is precisely the reason why Manpasand is turning its gaze citywards. Singh explained that as a new entrant, he had launched his product from rural and semi urban areas of Uttar Pradesh (which is still its biggest market) in order to operate in a market that had limited competition. But now fresh with funds (about Rs 400 crore) from its initial public offering (IPO), the company feels that it could invest in capacity expansion to drive future growth.

A recent IIFL Institutional Equities report pointed out that over the past couple of years, Manpasand's revenue growth rate has been slow at 22 per cent, due to capacity constraints. It added, "Now that it has added capacity at the new plant at Vadodara (commenced in April 2015), we believe the constraint has been removed and the company can grow at a faster pace."

The market size of beverages in India, which consists of carbonated drinks, juices, and bottled water, is around 20,007.2 million litre or about Rs 653.3 bn. Ready to drink tea, concentrates, and sports drinks also form a small portion of the soft drink market. The market has grown at a CAGR of 21.2 per cent in volume terms over 2009-2014. The packaged juice segment has grown at a CAGR of 28 per cent in value terms over FY09-FY14. What has buoyed Manpasand's hopes is perhaps the fact that mango is the largest selling flavour in India accounting for 85 per cent of the packaged juice market as of end 2014.

On the other hand, the carbonated market has grown at a CAGR of 13.6 per cent in value terms during 2009 to 2014. This market is divided into cola carbonated drinks (41 per cent of carbonated drinks market) and non-cola carbonated drinks (59 per cent of carbonated drinks market). Manpasand has been operating primarily in the mango drink market, and with its new brand Fruits Up, it has now set its eyes upon the carbonated drinks market. The capacity is expected to improve from 70,000 cases per day (CPD) in FY15 to 127,466 CPD in FY16 mainly owing to capacity addition at Vadodara and a small plant acquired in Dehradun. Analysts expect the net sales of Manpasand to grow from Rs 359 crore in FY15 to about Rs 987 crore by FY17 and that it will end this year with around Rs 642 crore of revenue.

In comparison, Dabur's Real fruit juices crossed the Rs 1,000-crore mark in FY15 (including sales from overseas markets). Its food business clocked a healthy 20.2 per cent growth rate, and packaged fruit juices account for nearly 85-90 per cent of Dabur's Foods portfolio.