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Introduction

The sector has witnessed continuous double-digit growth in the post-liberalisation period with the entry
of a number of foreign and domestic corporates in manufacturing, and the proliferation of products and
brands. The sector has significant forward and backward linkages and connects the entire agriculture
value chain—from farmers to consumers. Within the Indian non-alcoholic beverage sector non-
corporate manufacturers dominate (around 75%) in terms of numbers, but corporate manufacturers
dominate in terms of value, volume of sales, investment, employment generation and percolation and
use of technology. The non-alcoholic beverage sector accounts for over one per cent of India’s GDP and
its share in the GDP is rising. The performance of this sector is better than in other manufacturing
sectors and it is projected to have high double-digit growth for the next 10 years.

Key Industry Facts

1) Consumption expected to increase by 16.5 – 19% for non-alcoholic beverages (2013).


2) 75% of the demand is served by the unorganized sector.
3) Fortified/Functional beverages is expected to record a 3% retail value CAGR at constant 2015
prices to reach Rs76 billion by 2020.
4) Organic beverages is expected to record a retail value CAGR of 12% at constant 2015 prices over
the next 5 years.
5) Energy drinks’ off-trade volumes are forecast to grow by11% year-on-year between 2014 and
2019.
6) Naturally healthy beverages is likely to register a value CAGR of 18% at constant 2015 prices
over the next few years.
7) Euromonitor International estimates that higher growth forecasts will translate into an
additional 7 million litres of energy drinks consumed off-trade from 2014 to 2018.

Processing Levels in Beverages Industry

Primary Processing – Sorting, bleaching & grading

Secondary Processing - Leaf, dust & powder

Tertiary Processing - Tea bags, flavored coffee, soft drinks, alcoholic beverages

Synergy Profile - Market Activity in India

With the increase in attractiveness of the food processing industry, there has been significant deal
activity in this space with mixed contribution from corporate M&A and private equity investments.
Higher activity in beverages is driven by the deals in alcoholic beverage space involving leading
players in the segment - Diageo plc, United Spirits Ltd, Tilaknagar Industries, etc

Some key states where beverages Industry has seen the growth of organized players are –

Maharashtra, Gujarat, Madhya Pradesh, Delhi – NCR, UP and West Bengal. Andhra Pradesh and
Telangana have seen better growth in the alcoholic beverages sector owing to their large
consumption. These states have also seen the growth of bottlers and manufacturers.

Major foreign players have thus forayed in India particularly form North America to expand their
global brands and businesses.
Some Notable deals (India)

M&A
1) Diageo
2012 - Diageo Plc buys a strategic stake (25%) in United Spirits Ltd worth USD 882.00 Mn.
2014 - Diageo Plc increases its stake in United Spirits Ltd to 28.7% by further investing USD 138.00
Mn.

2016 - Delta Beverages was acquired by Varun Beverages in a deal worth UDS 26.03 Mn.

2014 - United Spirits Ltd was finally acquired by Relay BV in a deal worth USD 1,900.9 Mn.

2) P&E

2014 - Goldman Sachs, Mitsui Global Investment invested USD 50.8 Mn in Global Beverages and
Foods Pvt. Ltd to increase their investment presence in the beverages market.

3) JVs

Tata Beverages and Starbucks agreed to a JV operation in India with equal stakes (2012).

Pepsi-Cola Products Philippines Inc. (PCPPI) and Pepsi Co. Inc. reached an agreement on JV
operations in India (2015).

Government Support

1) Ms. Harsimrat Kaur Badal, Union Minister for Food Processing Industries, Government of India
inaugurated the first of its kind Rs 136 crore (US$ 20 million) mega international food park at
Dabwala Kalan, Punjab.
2) Government plans to implement 100 per cent Foreign Direct Investment (FDI) in multi-brand retail
with 100 per cent local sourcing condition, will act as a catalyst for the food processing sector,
thereby controlling inflation, uplifting the condition of farmers, and creating more jobs in the
country.
3) FSSAI has issued new rules for importing products, to address concerns over the entry of sub-
standard items and simplify the process by setting shelf-life norms and relaxing labelling guidelines.
4) The Government of India has approved the setting up of five numbers of Mega Food Parks in the
states of Bihar, Maharashtra, Himachal Pradesh and Chhattisgarh. The Government plans to set up
42 such mega food parks across the country in next three to four years.
5) The Food Safety and Standards Authority of India (FSSAI) plans to invest around Rs. 482 crore (US$
72.3 million) to strengthen the food testing infrastructure in India, by upgrading 59 existing food
testing laboratories and setting up 62 new mobile testing labs across the country.

Key Players

Below are the few key players in India

PepsiCo, Coca-Cola, Parle, Hector beverages, Bengal Beverages, United Spirits, Red Bull, Tetra Pak,
Dabur, Delmonte, Monster.
Sources

1) Euromonitor
2) MOFPI
3) ICIER and IBA report on the Indian Beverages Sector (2013).
4) http://www.livemint.com/Industry/nyCVXeL2ex9NZGWe3zxPsK/Beverage-industry-to-grow-at-
16519-report.html
5) IBEF

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