Harsh summer, cola price war play spoilsport for Dabur's juice portfolio

According to market research firm Kantar, bottled soft drinks breached an annual penetration of 50% in the year ending March 2024

Extremely high temperatures across northern India and reduced cola prices have muted the sales of Dabur’s juice portfolio in the first quarter (Q1FY25), results for which were declared on Thursday by the Indian fast-moving consumer goods (FMCG) major.
 

While the company’s net profit rose 7.8 per cent to Rs 500 crore, its revenues increased 7 per cent to Rs 3,349 crore. According to the results, the company’s food and beverages business reported a growth of 21.3 per cent. While the overall beverages revenues saw a growth of 2.8 per cent, the juices and nectar segment remained mute.

“While market share in the juices and nectar segment improved by 330 basis points (bps), it has been muted. This is because of cola price wars, which started with the entry of a third player,” Mohit Malhotra, chief executive officer, Dabur India, told investors during a post-results earnings call.

Reliance Consumer Products launched Campa in the market in 2023, bringing a third player into the Rs 50,000 crore cola market. Priced at Rs 10 for a 200-ml pack, the company triggered a price war, compelling market leader Coca Cola and second player PepsiCo to also cut prices.

“The price gap between nectar and cola went up from 2.2 times to 3.2 times now, which is making colas more attractive to consumers. Dabur is ramping up capacity for fizz, drinks and coconut water,” analysts at InCred Equities said in a note.

Under its beverages segment, Dabur saw a 21 per cent growth in the “100 per cent juice” category, 19 per cent in drinks, and a 100 per cent growth in carbonated fruit drinks.

“With colas becoming cheaper, consumers are moving out of nectar into colas. The summer season has accentuated this problem, because the consumer wants more hydration and more refreshment rather than nourishment and health. So, it's a dual impact that we are facing,” Malhotra added.

Meanwhile, PepsiCo’s Tropicana lost market share from 19 per cent to 17 per cent, while Coca Cola’s Minute Maid shed 100 bps and ITC’s B Natural 280 bps, Malhotra told investors citing NIQ data.

According to market research firm Kantar, bottled soft drinks breached an annual penetration of 50 per cent in the year ending March 2024.

“Following up on a massive 41 per cent household growth in moving annual total (MAT) March, 2023, the category continued to add more households and expanded 19 per cent in MAT March, 2024,” it said.

Moreover, the average household has expanded its consumption by 250ml in the last two years, Kantar added.
 

Both cola giants Coca Cola and PepsiCo witnessed a strong summer quarter in the country. While Coca Cola reported double-digit volume growth in the June quarter, PepsiCo said that its beverage unit volume grew 2 per cent in the second quarter, primarily reflecting double-digit growth in India.