Company Response

To tap into rural demand and the growth of in-home consumption as a result of the pandemic,
PepsiCo and Coca-Cola partnered with Common Services Centres (CSC) to list their products on the
Grameen e-Store. Companies are addressing the need for last mile delivery services to rural areas, as
demand increases as a result of multiple factors, including reverse migration. 2020 saw numerous
launches of products with various health benefits, as players attempted to ride the trend of in-home
consumption, and the need for immunity-boosting products. Coca-Cola launched Vita Punch (with
vitamin C) and Nutri Force (with soluble iron) under its Minute Maid brand. Similarly, Dabur, ITC and
Del Monte also launched a host of immunity-boosting juice brands.

As consumer priorities shifted, companies continue to revaluate their respective portfolios.

Lockdown saw a lot of companies losing out on sales, and as a result some players decided to
discontinue their brands. Coca-Cola has decided to scrap many drinks brands across soft drinks
categories, for example.

Retail shift
The distribution model was obviously impacted by COVID-19. Face-to-face selling, the backbone of
Indian distribution, was no longer encouraged, as retailers did not want salespeople to visit their
stores. This resulted in companies making sales positions redundant. Companies increased their
presence on e-commerce platforms to maintain sales, as consumers reduced their visits to the bricks
and mortar outlets that remained open. In some cases, companies entered into partnerships with
delivery apps, or launched their own online platforms. This represents a short-term strategy, with
companies linking up with delivery platforms such as Swiggy and Zomato to extend their products to
consumers. The focus here was to ensure product availability despite lockdown restrictions, in order
to prevent consumers switching to competitors’ brands. However, this is not sustainable in the long
term, due to the high charges of these platforms.

Some companies in bottled water tried the direct-to-consumer model. Parle Bisleri launched its own
website – shop.bisleri.com – through which consumers can order bottled water. However, the
direct-to-consumer model is difficult to sustain in bottled water, as the margins in this category are
narrow.

What next for soft drinks?

Off-trade sales of soft drinks will be fuelled by in-home consumption, at least in the next few years.
The larger players in the market will seek to reduce the sugar content in their products, in an effort
to address consumers’ growing health concerns. Companies are either reformulating their products
or conveying the benefits of existing ingredients at a time when there is demand for immunity-
boosting products. Also, millennials will drive demand for categories such as 100% juice, functional
bottled water, and kombucha, which benefit from healthier attributes compared with alternative
soft drinks. The foodservice industry is expected to see slow progress. The pandemic has pegged
back the industry by a few years, and there have been closures, particularly in commercial areas. If
working from home continues to a great extent, more closures of such establishments can be
expected. Though soft drinks are being sold through online food delivery platforms such as Swiggy
and Zomato, the rates of these companies are too high for many players, and unsustainable in the
long run. With increasing health awareness among Indian consumers and a desire to lose or
maintain weight, players in the soft drinks industry will need to focus on offering products with
healthy attributes, such as low sugar content, and which are offered in convenient packaging
formats. Given the economic impact of COVID-19, consumers are also likely to be more economically
constrained, and seek products offering greater value. This is likely to benefit e-commerce sales of
bulk pack sizes, with consumers appreciating the convenience of having larger presentations
delivered direct to their home.

“How things are made” and ingredient based searches have been a growing category of interest for
Indians over the past several years. More recently, we observed a massive uptick of 500% in
“immunity” based searches as consumers leaned on local language queries for traditional
homemade supplies and remedies
D2C websites can help you provide clear product comparisons, after-sales
support, as well as value-added services such as loyalty programs,
warranty, and personalized recommendations. So while D2C websites
may be perceived as pricier in a crowded market, shoppers are willing to
pay a 20% premium for the assurance and value-added services they
offer.

Of course, D2C mobile apps play an equally important role in the shopping
journey. 80% of people already have at least one retail app installed, and
72% prefer to engage with brands via their apps. When it comes to apps,
people are looking for more than just the functionality of shopping online.
They want a full shopping experience that includes reliable customer
service, image search functions, and a wider, "one-stop-shop"
functionality.
We will innovate and launch new products aimed at the bottom of the pyramid segment,
devise suitable product distribution and retailing opportunities in conjunction with the
bottlers and market the products to this category,” Atul Singh, told TOI in an interview.

Two products from the Coca-Cola stable which have been launched catering to this segment
are Vitingo, a beverage powder enriched with vitamins, and Fanta Fun taste powder at the
Rs 5 price point which was piloted in April this year.

Interestingly, rival cola major, PepsiCo India has also launched a glucose based beverage,
Gluco Plus and Lehar Iron Chusti, a fortified iron snack in order to make inroads into the
huge, yet unexplored, consumer base in rural India. These products are priced in the range
of Rs 2-5.

As consumers are shifting their spending habits toward healthier options,

beverage makers should make sure they are transparent in their nutritional
labeling. In the beer industry, alcoholic beverages are not required to have
nutritional labels. However, in this new frontier with NA beer, it’s
important that NA breweries opt to label appropriately. One thing that is
often left off labeling is sugar content. It’s important to include how much
sugar is in your beverage so consumers can make informed decisions.
In order to build consumer trust and stay fully transparent, I’d recommend
getting your testing done at a third-party certified lab for nutritional
labeling, as well as any other health benefits that your beverage has, such as
being gluten-reduced.

While the novelty of these products could help them cut through the clutter of ‘better-
for-you’ carbonated drinks, pricing is what will determine how quickly they achieve
scale in India. “These brands are nowhere close to competing with the cola makers
on price,” observes Prabhtej Singh Bhatia, founder, Simba, a craft beer company.
In terms of price, these brands have slotted themselves snugly between cola drinks
in cans and bottled beers. For example, a 300 ml can of Kingfisher Radler costs Rs
45 — Rs 5 more than the price of a 300 ml can of Diet Coke. Svami’s ready-to-drink,
zero-alcohol beverages are priced at Rs 95 per 200 ml bottle. “We expect our
products to be consumed occasionally, and not as frequently as carbonated drinks.
We have chosen to put ourselves in the same bracket as Red Bull and non-alcoholic
beer,” says Aneesh Bhasin, co-founder, Svami.
Kingfisher Radler and Budweiser 0.0 claim to have 30% less sugar, and Heineken
0.0 60% less sugar, than carbonated soft drinks. Despite this, these beverages are,
by and large, positioned as alternatives to alcoholic drinks. Hence, their pricing is
competitive when compared to alcoholic beers. “As the demand for LNA beers
increases and more mainstream beverage brands enter this category, non-alcoholic
beers can start competing with adjacent categories such as carbonated soft drinks
and juices,” says Rushikesh Aravkar, food and drink analyst, Mintel India.

To make room for more categories, retailers are prioritising on two

levels. Firstly, they are dealing with a lesser number of SKUs per
category. Secondly, they are stocking a lesser number of units for
each SKU. This would have substantial implications for FMCG
manufacturers in terms of which SKUs to push for and finding the
optimum frequency for servicing stores.”
A spokesperson for PepsiCo India said, “There has been a huge
uptick in demand for in-home consumption and with the recent
restrictions, this has accelerated. With beverage category pivoting
on multi-serve packs at discounted prices across SKUs (1.25 ltr at
₹50) and Lay’s new “at home” packs (at ₹30, ₹50 and ₹80).”

Hyper-localised flavours, trade push in smaller markets where Coca-Cola and PepsiCo are still under
penetrated, direct-totrade incentives, lower pricing for some brands, and minimal overheads on
marketing are helping regional brands to boost market share in spite of the two cola majors’
hyperlocalisation drive, said a top official at a leading bottling company in the country. “Despite the
rollout of the goods and services tax (GST), we grew significantly over the previous year,” said J
Ramesh, joint managing director at Chennai-based Kalimark Group that makes Bovonto soft drinks.

“While we don’t have bandwidth of multinationals in terms of budgets, growth indicates the
potential of regional brands.” Presently available only in Tamil Nadu, the Bovonto brand is being
extended to other markets in South India, Ramesh said. A spokesperson for Coca-Cola India said the
company is committed to portfolio expansion. “We recognise that there are diverse consumers
across the country and continue to focus on building a consumer-centric portfolio, including catering
to regional and

hyperlocal tastes.” He cited examples such as jeera drink RimZim and Minute Maid Colors.

Our data suggest that product expiry is one of the most critical short-
term impacts, given that the respondents repeatedly mentioned this issue
during the interviews. Even in normal times without any disruptions,
product shelf life is generally considered to be one of the greatest challenges
and constraints in the fresh food and beverage industry (Soman et
al. 2004).

companies need to undertake appropriate measures to control the problem

of product expiry. To this end, companies can develop an online ordering
platform and introduce a fast delivery system to get the products to end
consumers in a timely fashion. Alongside this policy, managers need to
ensure that they dispatch the food and beverage products that are expiring
first. age products that have imminent expiry dates. Our findings show that
rotation can be made within stores, from the back to the front of the shelf,
or between stores, from low-traffic retail stores to higher-traffic retail
stores. However, the field force needs to play an active role here to ensure
proper rotation..

With respect to other short-term impacts, it is clear that companies are

currently suffering from a lack of working capital, given that their operating
cost is higher than sales revenue. Therefore, managers should identify and
implement every possible strategy for increasing sales. According to our
findings, the most promising option is to focus on online sales.

Our study also reveals that distributors are struggling to operate their
businesses due to low sales volume, and that some of them have either shut
down their operations or are in the process of shutting down. Given that, in
the food and beverage industry, distributors play a crucial role in ensuring
product availability in the market (Lee & Klassen 2008), managers should
give short-term incentives to distributors based on the volume of product
ordered, so that they can sustain their operations and cover the products’
delivery cost.

. Hence, managers should take the required steps to minimize all non-
emergency costs. Given that trade and promotion cost is generally high in
the food and beverage industry (Budd et al. 2017), we recommend that
managers reduce or postpone trade promotion costs during and after the
crisis period. However, to ensure that taking such actions does not affect
their trade relationships, companies can assure their trade partners that
this strategy is temporary and that it will be reversed once the companies
recover from the pandemic.

Our findings confirmed that the reduction of trade relationships will be a

medium-to-long-term impact on the food and beverage industry. As
COVID-19 pandemic impacts supply chain infrastructure, trade
relationships may be undermined. Therefore, managers need to focus on
how to build strong trade relationships with different partners in order to
ensure supply chain sustainability. pandemic.

The need to rebuilding and restructure the supply chain network is likely to
be another medium-to-long-term impact of COVID-19 pandemic. Since
COVID-19 is an infectious disease, the pandemic has made it very difficult
to run business operations in a normal way. Our study suggests that
managers should take steps to build a more resilient supply chain network
for the food and beverage industry.

While for business-to-business (B2B) institutional sales, PepsiCo further

strengthened its existing distributor model with the e-B2B model (B2B e-
commerce) where it partnered with Udaan and BigBasket to help small
and medium businesses.

to ensure uninterrupted supply and last-mile availability in rural India,

PepsiCo India also partnered with CSC e-Grameen to provide our
products at the doorsteps.
being people-centric, being consumer-centric, being customer-centric,
being agile, being prudent and also being community-driven, he said.