Indian conglomerate Tatas and global cola major Pepsico today agreed to explore the possibility of a joint venture in non-fizzy soft drinks like juices.
Tata Tea, which in 2007 sold minority stake in Energy Brands (Glaceau) to Coca-Cola for $1.2 billion, said that its board has approved a non-binding Memorandum of Understanding with PepsiCo Inc for exploring a joint venture in the non-carbonated beverage business.
Globally, beverage makers are shifting focus to health and wellness drinks, and PepsiCo chief Indra Nooyi, during her recent visit to India, had said that she expects health drinks to contribute 50 per cent of the company's total sales in the coming years.
"The proposed joint venture is not intended to conflict with any existing arrangements of the parties. The transaction will be subject to corporate and statutory approvals as may be required," Tata Tea said.
The size of energy drink market in India is currently estimated at about Rs 500 crore and could double to over Rs 1,000 crore by the end of this year, as per market research firm Datamonitor Plc.
In comparison, the carbonated drinks market in India is already valued at over Rs 6,000 crore, but the growth rate there is much slower as compared to non-carbonated space.
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Tata Tea is already a leading player in the global beverages market with presence in over 40 countries. Besides tea brands, Tata Tea has under its belt natural mineral water brand Himalayan and 'T!ON', an energy drink made from fruit juice, tea extracts and ginseng.
The $60-billion PepsiCo, on the other hand, commands significant market share with its portfolio of health and wellness drinks under the brand Tropicana, Nimbooz and Gatorade.
While the energy drinks market has grown at a rate of about 50 per cent in the country over the past five-six years, the growth rate for the carbonated space is just about 1 per cent.
Tata Tea said that definitive agreements for the proposed JV could be finalised over the next few months.