BUSINESS OF BRANDS. Staying ahead of the pack

India seems to be thirsty for new packaged drinks. Coconut water is the new darling of the grocery shelves. Ethnic drinks led by Paperboat, Dabur Yoodley and Hamdard’s Rooh Afza are taking the fizz out of carbonated drinks. The milk market is witnessing another white revolution – in flavoured drinks and buttermilk.

All these trends spell good news for Tetra Pak, the Swedish liquid foods processing and packaging company, which is powering many a beverage’s growth in India. “We have trebled our sales in the last 5-6 years,” beams Kandarp Singh, Managing Director, South Asia Markets for Tetra Pak.

Last year Tetra Pak sold around 7 billion packs in India. This year it will be 8 billion packs in India for the company that sells 180 billion packs every year globally. “We are adding a billion packages a year now,” says Singh. And yet, as Tetra Pak completes 30 years in India, Singh feels the company has only touched the “tip of the iceberg” here.

A juicy story at thirty Singh feels Tetra Pak is poised for big growth. The first ten years here were spent seeding the market, building awareness and capacity even as it scripted a case book success story for Parle’s Frooti, its first customer here.

In 1997, it set up its first manufacturing plant in Takwe near Pune. “Until eight or nine years ago we were just chugging along – growth was just 2X in terms of packaging materials volume,” says Singh. “But between 2006 and 2016, growth was 8X,” he says. The inflection point was 2011 when local innovations in terms of pack sizes and shapes, new brands entering the fray as well as new category creation all perked up growth for Tetra Pak. “Almost 70 per cent of our growth in the juice segment in the last few years has come from local juices such as guava, lychee, pomegranate, jamun , pomegranate,” points out Singh.

Growth also came through new customers. In 2011, Tetra Pak had 60-odd customers. Today, it has 125. “In the next four to five years we will add another 100 new customers,” he says confidently, pointing to how ethnic drinks maker Hamdard has recently joined the pack.

Singh’s confidence may not be misplaced. According to a report in the Progressive Grocer, the market for non-alcoholic beverages in India is close to ₹195,000 crore and is growing at 20–23 per cent. “This growth rate will take the category at three-and-a-half times of its present size by 2020,” says the report. Tea and coffee form the bulk of the beverages market. The penetration of packaged drinks is still minuscule and juices are barely 4 per cent of this market, mainly concentrated in SEC A urban markets. Indians spend an average of just ₹6 per month on juices. “There is so much opportunity just by expanding distribution,” says Singh. Meanwhile, the value-added branded dairy market currently estimated to be around ₹80,000 crore is flowing along strongly with flavoured milk alone growing at a CAGR of 28 per cent.

Even as juice and dairy is growing, the rise of ethnic drinks excites Kandarp Singh. Paperboat has recently come on board having scaled up its small doy packs to shareable 500 ml Tetra Paks. And then a whole new clientele is opening up in pharma. Johnson & Johnson’s ORSL (not to be confused with oral rehydration salts) in Tetra Paks is a case in point. Liquor is the fastest growing category with big clients United Spirits and John Distillieries offering spirits in 200 ml packs.

Thinking out of the carton For a long while in India, Tetra Pak was stuck in the traditional construct of its brick packs. The next achievement came from researching local needs and what the bottom of the pyramid wanted.

The ₹5 chain dangler packs for Frooti – incidentally the first such in the world – came about when Tetra Pak mapped retail points in clusters such as Dharavi and realised shops had no space. “Before the market even asked for it we had delivered it,” says Singh, pointing out that it was one of the major factors responsible for Frooti’s sustained growth. Now others such as Patanjali and Sip On use such packs.

Similarly, when Tetra Pak surveyed consumers of Karnataka Milk Federation’s Nandini pouches, it found that users included migrant workers and fisherfolk with no refrigeration facilities. Thus came the 100 ml Tetra Fino aseptic milk packs, priced at just ₹4, although it was technically not an India innovation. The idea was transported from Egypt.

Even at the top of the pyramid, Singh says they are constantly innovating, such as with the new Amul Masti buttermilk pack with an angled cap for easier pouring and drinking experience.

And now to cater to the growing startup clientele, Tetra Pak has set up a dedicated team as “it requires a different mindset – more support and dialogue is needed.”

Unpacking sustainability Globally, a big area of investment for Tetra Pak is biodegradable packs. Last year, the company launched Tetra Rex, made entirely from plant-based materials and 100 per cent renewable. Singh says it is seeing great traction in Europe.

“We have also looked at biopolymers for our caps. We started the process in Brazil using caps made out of biofuel,” he says.

The challenge, says Singh, is that biodegradable packs require quite a bit of work. It’s one thing to create them in labs. But to produce billions of packages, there are several barriers ranging from raw material supply to cost. “It’s noble to do biodegradable but should not come at a cost to the consumer,” he says.

The other big investment is going into digitalisation. India is going to be a pilot market in the digitalisation process that could see dynamic QR codes to traceability codes, says Singh. But that journey is still a few years away.