Thursday, October 10, 2013

Parle Agro Plans Revolution In Carbonated Drinks Space With 'Cafe Cuba'

After exiting the carbonated soft drinks (CSD) category around two decades ago, Parle Agro is once again hopeful about prospects in this segment and is all set to enter the market with a new coffee flavoured fizzy drink christened Café Cuba. In 1993, the company surrendered to the vice-like grip of beverage multinationals in India, and sold iconic brands such as Thums Up, Limca, Gold Spot and Citra to the Coca-Cola Company. A non-compete clause which was part of the arrangement ensured that Parle Agro stayed out of the carbonated segment for a good many years. In the meantime, the company focused on its fruit based drinks portfolio and built brands such as Frooti, Appy and Appy Fizz. Apart from its beverages portfolio, the company also sells packaged water Bailey, Softease toffees and baked chips Hippo. Parle Agro today has a turnover of R2000 crore, up from R300 crore in year 2003.

Parle Agro now aspires to be an R5000 crore worth company by 2015. Café Cuba is aptly titled and draws inspiration from the revolution in Cuba. “This beverage is a revolution in the carbonated drinks space. We are excited to be creating a completely new category for the CSD segment and are proud to be the leaders when it comes to innovations and trends in this segment. Having been in the industry for nearly 30 years, Parle Agro has always believed in refreshing India with innovative products and refreshing the market with new categories,” said Prakash Chauhan, chairman and managing director, Parle Agro, adding that a unique product such as this one is a first, not just for India, but for many countries.
“The carbonated coffee flavour is distinct from the three flavors— lemon, orange and cola—that beverage companies usually focus on. We did a market test launch of 3 million units and the response was very positive. Café Cuba will generate R1000 crore in the first 12-18 months,” he said. The company has earmarked R50 crore for the marketing and promotion of the drink, and it is slated to be available in the January-February period of 2014. The company is not likely to sign up a celebrity endorser. “The drink is the best brand ambassador,” quips Chauhan.

Nikhil Vora, managing director and research head of IDFC Securities, said that the overall size of the carbonated drinks market in India is R150 billion. The leading brands in this segment go as follows: Thums Up is the largest brand with a 15% market share, followed by Sprite with 14% share. Pepsi has market share of approximately 12% followed by Coca-Cola with 8%. Vora says that it’s encouraging that there is a re-emergence of entrepreneurship, from one of India’s first entrepreneurs in the carbonated drinks space. “Prakash has had reasonable success in building a beverages business after his brother and he sold the carbonated drinks business.
The company is expected to achieve revenues of R20 billion in the current fiscal,” says Vora. According to him, the fruit based drinks market is R50 billion. “Frooti is the largest brand in this space with a 25% share followed by Maaza and Slice. Mango drinks constitute around 85% of the fruit based drinks space. Within the apple drink segment, Appy has close to 65% share but that segment remains small,” added Vora.
With the new launch, Parle Agro hopes to capture a 7% market share within the first year of launch. The brand will also expand its distribution from the current 8 lakh outlets to 1.5 million outlets.
It’s interesting that Parle Agro’s coffee drink is a hybrid brand and the competition could be coming from anywhere. It could compete with other colas and fizzy drinks, as also energy drinks. It could potentially eat into the share of its own siblings. “As long as they buy from the same company (us), we don’t have a problem. The product will create its own niche. We are looking at young and urban consumers in the 17-30 years age group. They are our major consumers and our success will come from there. Most companies are looking at rural India to give them growth. But I need to build my base first. We will first concentrate on the major urban markets,” said Chauhan. He, however, takes umbrage to his product being compared with the iced tea brands. “Coffee is stronger and bolder. Tea is mild and delicate. I come from a Thums Up background. I like products with a bold personality.”
Ramanujam Sridhar, chief executive of Brand-Comm, a marketing consultancy, said that the beverage market had not reached saturation. “Unlike the West, the consumers in India don’t drink colas all day long. So there is a lot of legroom to grow. Parle Agro is also no stranger to this business. They will have done their due diligence and are likely to make a good fist of it. If Pepsi and Coca-Cola have built share, they did it by acquiring indigenous cola brands. Parle Agro was here much earlier than most of the global beverage makers and knows just about everything in the business,” Sridhar said. He added that the younger generation particularly liked to experiment with new flavors and products. “The brand will find its own niche,” he said.
Cafe Cuba will be priced at R20 for a 250 ml can and R15 for 250 ml in a PET bottle.


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