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What does Amitabh Bachchan's Pepsi statement tell us about cola makers?

'Pepsi is poison' remark is a symptom of India's rapidly changing perception about the colas.

Nikhil Inamdar Mumbai
Bollywood star Amitabh Bachchan's 'Pepsi is poison' remark has been subject of many an analytical piece - brand impact, celebrity & conscience, ambassadorial loyalty et al. So devoting more newsprint to the story might seem like an overkill, but Bachchan's statement surely warrants a look at the new realities of the market that cola companies operate in. And it seems what he said about Pepsi is only a symptom of India's rapidly changing perception about the colas.
 
Much as Bachchan's open candor might have left Pepsi 'saddened' and cringing in embarrassment, the truth is that cola giants are all too aware of the trying times ahead of them as more and more girls (and boys) think like the little girl in Jaipur whose remark led Bachchan to purportedly stop endorsing Pepsi.
 
 
The cola companies have never had it easy in India. Back in 2006, environmental groups ganged up against them for the 'alarming' levels of pesticide residue found in cola drinks. They have also become targets of activists for depleting ground water tables and dumping toxins in water bodies. This has led to bottling plants being mothballed in the past and cola factories being banned in states like Kerala. More recently though announcements by both Coca Cola and PepsiCo about their plans to invest $5 billion each in India by 2020, making it their focus market have taken the limelight away from the bad news, as a slowing Indian economy desperately seeks eye catching billion dollar foreign investment figures to prop up sentiment.
 
Masked beneath the sparkle of the dollar talk though, the new challenge for the colas seems to be less from environmental activism and more from the serious existential fear that Indians will kick the cola habit sooner than expected as health concerns take precedence.
 
"Traditionally, markets reach a certain level of per-capita consumption of sugary drinks before health concerns become widespread. We feel India might take a different route," Kamal Mishra, head of operations at data analysis firm Analytics Quotient told the Economic Times recently. "Indian consumers are switching to diet colas . We also have sugar-free versions of energy drinks available. And 100% juices or nectars with no artificial ingredients, added sugar or preservatives are gaining in popularity," Mishra added.
 
While Coke expects per capita consumption of the fizzy drink to double in the next 5-6 years, as it penetrates the rural markets via an elaborate strategy, the fact that India could prematurely shift preference to healthier drinks seems to be pushing the brand to focus equally on the health conscious segment as well. 

 
"Coke Zero is definitely on the cards. We are yet to announce the time, but it would be launched this year. Beyond that, there are a few more low-calorie innovations that we are looking at launching in India. It’s time to give Indian consumers more choices in the low-calorie beverages segment. With better awareness and increasing health consciousness, consumers are demanding more options. We had launched Sprite Zero in 2004-05, probably 10 years before its time. Today, I think, the country is ready for low-calorie products. The best zero-calorie product we have is Coke Zero, which tastes very close to Coke" Venkatesh Kini, President - India & South West Asia, Coca Cola told the Business Standard recently.
 
But if global trends are any indicator, even the low-cal strategy may not help mitigate the fundamental change in consumer preferences, as many seem to be increasingly wary of even sugar substitutes like aspartame that go into making diet colas.
 
"In the last six to nine months, there has been an accelerated decline in diet drinks as people say they don't even want artificial sweeteners. The diet slowdown has been a little more rapid than we expected...it's important in the next two to three years we come up with" innovations such as a new, more natural, low-calorie sweetener." PepsiCo chief Indra Nooyi told investors in an earnings call in October last year, sounding apocalyptic as she warned that the consumer will walk away from CSDs (carbonated soft drinks) if innovative solutions are not found to the customer's dislike for both high sugar levels & artificial sweeteners.
 
This has led Pepsi as well as others not only to diversify in the last few years from their core CSD portfolio into other beverages and foods, but even launch mid-calorie drinks like Pepsi Next and focus on natural sweeteners to cater to a class of consumers who want soda but with lesser sugar.
 
However there "may never be the high levels of consumption" for CSDs as Nooyi herself admitted in the investor call. This demonstrates how Bachchan or no Bachchan, the era of heady growth for sugary drinks has perhaps come to an end as established consumer biases & changing youth preferences sound the death knell for what were last century's biggest influencers of pop culture.
 
How long emerging markets, from where cola giants expect majority incremental sales growth to come, help alleviate this deceleration in sales in the developed world, remains to be seen. Health researchers have recently proposed a 20% tax on sugary drinks to help curb rising obesity levels in India. Coke's rural contribution to sales outpacing urban markets reflects not just better infrastructure and rapid income growth in India's villages but also growing awareness of health issues in urban India. Also, much as it may represent a minuscule mass of people, I know of a dozen people who've recently vowed to drink less cola after Jeremy Paxman's video (See here) went viral on the net. Paxman got Coca Cola Europe President James Quincey to admit that a small Coke drink available in theaters contains 23 sachets of sugar while the big can contains 44 sachets. None of this gives PepsiCo and Coca Cola much to cheer about!

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First Published: Feb 06 2014 | 3:06 PM IST

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