India is high on a liquid diet!

Indian consumer’s expenditure on beverages has seen a rise over the last decade.

Ankita Chakrabarty/ Zee Research Group

Indian consumers are increasingly happy being on a liquid diet. This trend transcends the urban rural divide, according to the latest National Sample Survey Office or (NSSO) study on household consumer expenditure in India with traditional food category being no longer the hot favourite.

The consumer’s expenditure on beverages has seen a rise over the last decade while as the expenditure on other food items has declined. Overall, the household expenditure on food too has registered a fall.

According to NSSO study rural households’ expenditure on beverages accounted for 3.9 percent in 1987-88; it rose to 4.2 percent in 1993-94 and further increased to 4.5 percent in 1999-2000. During 2009-10 it stood at 5.6 percent.

Similarly, urban households too exhibited a growth trajectory for beverage consumption. The share of the urban households’ expenditure on beverages in 1987-88 was 6.8 percent; it rose to 7.2 percent in 1993-94 but declined in 1999-2000 with the figure being 6.4 percent. The figure further dropped to 6.2 percent in 2004-05 but managed to grow again to 6.3 per cent in 2009-10. However, the break-up of the expenditure on other food products brings out a different picture. The share of food in total consumption has declined in the past ten years. The average spending of rural households on food products is down from 64.0 percent in 1987-88 to 53.6 percent in 2009-10. The figures continuously declined from 63.2 percent in 1993-94 to 59.4 percent in 1999-2000; it further dropped to 55.0 percent in 2004-05 and finally to 53.6 percent in 2009-10.

Also, the figures of urban households hold a similar picture. The average spending of urban households on food products declined from 56.4 percent in 1987-88 to 54.7 percent in 1993-94; it further declined to 48.1 percent in 1999-2000. The figure further dropped to 42.5 percent in 2004 -05 and 2009-10 figure stands at 40.7 percent.

Coca Cola, a key player in the growing beverages market, is excited. Deepak Jolly, vice president, public affairs and communications, Coco Cola India said, “The growth has been across markets and across the country. There is so much potential in the market for beverages in India that growth will continue to come from all segments.”

Coco Cola and arch rival PepsiCo are aiming to position India among the top five markets globally. Pepsi said it wanted more time to participate in the story. Tata Tea, a leader in the tea segment, did not comment.

Sameer Barde, secretary general, Confederation of Food Trade Industry Association of India (CIFTI) said, “The rise in expenditure on beverages is attributed to rise in awareness level and the role of the media to highlight the brands. Moreover, urban markets are becoming saturated so the FMCG companies are trying harder to make their products available to rural markets in the best possible way.” While the overall food category declined, NSSO study said in rural households, cereals accounted for only 15.6 percent of expenditure in 2009-10, down from 26.3 percent in 1987-88. The figures have continuosly shown a decline from 24.2 percent in 1993-94 to 22.2 percent in 1999-2000 to 18.0 percent in 2004-05 and the current figure of 2009-10 stands at 15.6 percent.

Also, in urban households, cereals accounted for only 9.1 percent of expenditure, down from 12.4 percent in 1999-2000. The figures have continuosly shown a decline from 15.0 percent in 1987-88 to 14.0 percent in 1993-94 and further to 12.4 percent in 1999-2000 .The figure further degraded to 10.1 percent in 2004-05 and finally it pegged down to 9.1 percent in 2009-10.

Another traditional food product, edible oil has shown a decline in both rural and urban household expenditure. In 1987-88, the rural Indians’ expenditure on edible oil was 5.0 percent; it got reduced to 4.4 percent in 1993-94, and further to 3.7 percent in 1999-2000. It rose to 4.6 percent in 2004-05 but again pegged down at 3.7 percent in 2009-10.

Similarly, the urban households show a similar picture. Their expenditure in 1987-88 was 5.3 percent; it dropped to 4.4 percent in 1993-94 , further to 3.1 percent in 1999-2000. The figures improved in 2004-05 to 3.5 percent , but again declined in 2009-10 to 2.6 percent.

Barde of CIFTI said, “The market of primary food products especially the traditional market has seen de-growth because of the rise in selling of ready to eat food products.” The growth in beverages on the contrary has happened across segments including soft drinks and juice category, said Coke’s Jolly.

The 2010 FICCI-KPMG food report predicted that the beverages market is expected to grow at a compounded annual growth rate of around12% over the next 5 years from the base of 2009-10. Also, the report of PwC argued that beer, carbonated drinks and branded sports drinks would be the beverage market drivers in the coming years.