FACED WITH FALLING SALES GROWTH ...

... COMPANIES ARE FIGHTING BACK WITH NEW DRINKS AND FLAVOURS COCA-COLA: Launched Sunfill, a make-at-home powdered drink at Rs 2 for a single-serve sachet. Also Shock, a non-alcoholic stimulant. Small bottles (200 ml) of Coke and Thums Up also introduced. PEPSI: Launched Aha, cola with lemon flavour. Also three new flavours (orange, litchi, guava) of Slice. Test marketing iced tea for launch this year. Plans to introduce mocktails under the Slice brand in June. PARLE AGRO: N-Joi, made of milk and fruit pulp, launched in two flavours. Also two new flavours (orange and pineapple) of Frooti. More products like fruit lassi expected this year. OTHERS: Powdered concentrates like Rasna Rozana and Tang in new flavours have come into the market, promising additional nutrient value. Stimulant drinks like Red Bull and Rox have begun to carve a niche. Figures are percentage annual growth in sales of carbonated drinks

The scorching summer is cause for celebration in two buildings within half a kilometre of each other in Gurgaon on the outskirts of Delhi. One houses the head office of Coca-Cola India, the other is Pepsi Foods' headquarters in India. After a summer of discontent for the soft drinks industry that began in Y2K and continued in 2001, the mercury's upward lunge has the cola kings on a high.

Not a week has passed since April without the launch of a new product or a new flavour. At least 10 new non-alcoholic drinks have entered the market and more are to be launched in the weeks to come (see box). From Pepsi's Aha (cola with a hint of lemon) to Coca-Cola's Sunfill and Shock (soft drink concentrate and stimulant drink) to Parle's N-Joi (fruit and milkshake), the spate of action is unprecedented and unabated.

It's not only the heat that is sizzling the drink market. The cola majors are also battling their way out of a stagnant market and rigid Indian drink habits. From a healthy annual growth of 20 per cent in the late 1990s, the fizz went out of carbonated drinks in the new millennium. In 2001, sales growth was zero per cent. That's when carbonated drinks constitute only 2 per cent of the non-alcoholic drink market in India, compared to 45 per cent in the US. A decade of an advertisement blitzkrieg and celebrity endorsements notwithstanding, the cola giants have not been able to wean Indians away from tea and coffee (75 per cent of the drinks market) towards colas. Fizzy drinks are still reserved for special occasions: festivals, marriages and family outings. Unsurprisingly, India's per capita consumption (PCC) of carbonated drinks hovers at a paltry seven units of 300 ml each when Singapore (PCC 240), Malaysia (PCC 120) and even Pakistan (PCC 15) gulp down many times that amount. No wonder, the fizz masters have inevitably been left thirsting for success. This year, they're hoping their revised strategies will take them a few steps closer to tasting more satisfying levels of sales and profits. Of course, a good measure of help comes from the soaring Celsius.

"New variants are not just about volumes, but giving consumers a choice." Vibha Rishi, Executive Director (Mktg), Pepsi

The first sign of the new approach is the wave of new flavours hitting store shelves. The strategy: quite simply, to expand the non-alcoholic drinks market by offering the consumer a wider choice. The carbonated category itself has grown beyond the cola, orange and lime troika. Subtle variations like clear lime (Sprite, 7Up) and cloudy lime (Limca, Mirinda Lime) apart, the recent launch of Pepsi Aha has paved the way for greater variety in colas. Pepsi claims the initial response was so staggering it ran out of concentrate. Earlier this year, the ultra-niche segment of non-alcoholic stimulant drinks got a shot in the arm with Coca-Cola's Shock.

"We didn't want to be restricted to carbonated drinks, which have only 2 per cent market share." Alex Von Behr, CEO, Coca-Cola India

But the popularity of fruit flavours and drinks has been the most significant development, despite the unwelcome chill that greeted offerings like Coca-Cola's Fanta Green Apple and Fanta Watermelon last year. While pure juice (drinks with at least 85 per cent juice content) remains a niche market where Pepsi's Tropicana brand is one of the few players, fruit drinks with 15 to 25 per cent fruit content are becoming big business. Coca-Cola tasted unexpected success in this category with Maaza, which remained a relatively obscure brand until 1999. Introduced in tetrapacks in 2000, the brand grew by 63 per cent that year. As the Bangalore-born Coca-Cola (India) CEO and President Alex Von Behr says, "It was the first sign that we could be brave." Maaza now comes in three flavours. Rival Pepsi has also woken up to this segment's potential by rethinking its Slice brand. A slick ad campaign directed by Farhan Akhtar of Dil Chahta Hai fame began airing recently, and three new variants-litchi, guava and orange-were launched this year to complement the basic mango. Meanwhile, Parle has also introduced Frooti in orange and pineapple this year, the first such variation since the brand was launched in the mid-1980s.

Parle Agro's season of courage does not end here. It has ventured into the difficult territory of milk. Its N-Joi uses fruit pulp in real milk. Chairman and Managing Director Prakash Chauhan is confident of N-Joi's healthy growth because the technology used allows unopened packs a six-month shelf life without refrigeration. But why a dairy-cum-juice product at this juncture? Says Chauhan: "The need of the hour is to expand the market, and we've traditionally been pioneers. We launched Frooti when carbonated colas were the rage and Thums Up the leading brand." Parle's experiments with fruit don't end here: among other surprises in store this year are "smoothies", similar to the north Indian lassi, in fruity tastes.

At the frontier of the drinks market are the powdered drink concentrates, the latest entrants being Coca-Cola's Sunfill and Rasna International. Claims Von Behr: "Sunfill combines good taste, nutritional value (through vitamin C additives) and a low price point (Rs 2 for a single serve sachet). It's the only way to attract daily consumption." The company claims that within three months of Sunfill's launch in Andhra Pradesh, the drink concentrate market grew by 30 per cent. Meanwhile, Rasna's range also promises a nutritional power-packed sip. Pepsi, however, claims the powdered drinks market is too small for it to diversify into.

But can new products alone drive the market? Not really, feels Coca-Cola, whose new mantra is to "reach the masses". The diversified portfolio fits fully into this strategy. Von Behr points out that India's market is so varied that there is no one formula to cut across regions-different flavours sell well in different areas. At the same time, Coke is depending on smaller units with lower price points to entice the Indian consumer. The company claims that rising sales of Sunfill and the "chhota Coke" of 200 ml have shown that this can work. An enhanced distributorship is also high on the agenda. The number of distribution outlets will go up from eight lakh to nine lakh by the end of 2002. Coke claims that during the first three months of this year, its sales rose 34 per cent over the same period of 2001.

Pepsi feels that the opportunities lie in building the Pepsi brand through a better and wider range of products. Says Executive Director (Marketing) Vibha Rishi: "Small units are inherently unprofitable. Our vision is more focused on offering newer flavours and tastes to the consumer and thus inspiring him to stay with the Pepsi stable." In south India, Pepsi is test marketing iced tea to be produced in a tie-up with Lipton. It also plans mocktails in three flavours under the Slice brand name in June.

A recent McKinsey report puts the potential of the Indian drinks market at $2.4 billion (about Rs 12,000 crore) by 2005, up from about Rs 6,500 crore at present. As the action hots up to attain the target, one thing is clear: we are moving towards a market where the consumer will be spoiled for choice and may no longer have to plead, yeh dil mange more.

-with Natasha Israni and Malini Goyal