1.1 The growing health drinks market in India

With people turning more health conscious, the non-carbonated beverage segment has

become one of the fastest growing and most exciting businesses at the moment. For

some time now, manufacturers have experimented with some of the formulation and

taste issues, offering the consumers better tasting, more healthful alternatives.

Evolving from drinks containing a hint of herbs or vitamins, beverages have become

an important delivery vehicle for efficacious amounts of nutritional ingredients.

Beverages are unusual products in that everyone expects to try new varieties, even

from established brands.

While all segments of the beverage market are evolving, the growth seems to be

directed more towards healthy, light and low-calorie drinks, in particular organic and

fruit juice varieties. Health food drinks are nutrient supplying drinks which are

prepared by adding malt or wheat based powders to milk. Health products are the

latest fad in the food business worldwide and this trend is fast catching up in the

Indian market as well. Global food and beverage companies have developed and

introduced to the marketplace more than 20,000 healthier product choices from 2002

to 2009, doubling in the last three years, according to the Washington-based Grocery

Manufacturers Association’s (GMA) 2010 Health & Wellness survey.

Indian health drinks market is still in its infancy due to the lack of awareness among

the population. In value terms, the health food drink market is around Rs 1, 400 crore

and in volume terms around 65,000 tonnes per annum. GlaxoSmithkline (GSK) with

four brands - Horlicks, Boost, Viva and Maltova - is the leader in Indian health drink

market. Complan, GluconD from Heinz India and Cadbury India's Bournvita are also

popular among the Indian health drink brands.

According to retail audit unit ORG Marg, GSK with four brands in the category

Horlicks, Boost, Viva and Maltova - has a 70 per cent volume market share and

Complan's share is 13 per cent.

The Rs 1,100 crore health food drinks (HFD) market, classified into two categories of

white and brown segments, has remained stagnant for the last several years despite

GSKCH (GlaxoSmithKline Consumer Healthcare) and Cadbury's attempts to activate

the category. While Cadbury's Bourvita has been at the forefront of the HFD market,

GSKCH has also been active. Apart from repositioning its Horlicks brand from health

drink to a fun drink, GSKCH more recently has launched its brown drink Boost in

100gm sachets as well in Tetrapak as a ready-to-drink product. GSKCH's Horlicks

and other brands like Boost, Viva, Maltova, together have a 75 % share of the health

food drinks market. Horlicks alone, as a white beverage, is believed to have an over

50 % market share.

Nestle's Milo, however, being a brown drink faces direct competition from Cadbury's

Bournvita and GSKCH's Boost. The market has marginally moved from the white

malted beverages to the brown segment. The latest to join the race is GCMMF, which

has relaunched its health food drink branded as Amul Shakti. 

Horlicks is the leading health drink brands in India since 1930, immediately after its

launch in the country. Horlicks is sold in a number of countries across the world. In

different countries, the product has different formulations in order to cater to varying

consumer segments and serve different consumer needs. In India, the Horlicks

available has been scientifically developed and specifically caters to the nutritional

needs of the Indian diet. It helps meet the requirements of essential nutrients in

children, such as iron and vitamins that aid iron absorption. Boost is health food drink

(HFD), which is positioned on the energy platform in India. Developed by the Indian

R&D team in 1974, and launched in 1975-76 in Kerala, Boost has been one of the

fastest growing brands in the Indian GSK Consumer portfolio. Realising that the

energy segment had a huge potential, GSK India launched the brand as the

'Vitaminised Energy Fuel' with a unique chocomalt taste. The brand was launched

nationally in the early 80s and has always been targetted at 8-14 year old boys. This is

the section of population most enthusiastic about sports, and also with high-energy

needs, in India. A ccording to GSK sources, Viva is based on the belief that a good

start to the day ensures that rest of it goes well too. New Viva is Vitahelth,

combination of nine essential vitamins (vitamin A, C, D, B1, B2, B6, B12, Niacin and

Folic acid), Iron, Phosphorus and Calcium. Viva contains a natural goodness of milk,

wheat and malted barley. Maltova, a chocolate health food drink, was acquired from

Jagjit Industries in Feb 2000. According to GSK official sources, to kids Maltova is

the fun health drink, which is extreamly tasty and makes nourishment truly enjoyable

and exciting. It was relaunched in June 2002 with an enriched formulation and

improved packaging. The relaunched Maltova had active rechargers, a combination of

essential vitamins, minerals and carbohydrates. Maltova has again been restaged in

November 2004, with an attractive new packaging that connotes an extreamely high

taste appeal and a sense of fun and excitement.

American foods major H J Heinz's Indian arm Heinz India has a strong market

presence with brands like Complan and Glucon-D. Complan contributes 40 per cent

to Heinz's sales. Heinz's most profitable products are Complan and GluconD. Even

Glucon D has shed its health tag and repositioned itself as a fun drink. In 2001, Heinz

launched a slew of new products - coffee flavoured Complan. Complan is ideal for

convalescents and the elderly - complete nutrition when you're off your food ,

pregnant and nursing mothers provides vitamins and minerals necessary for good

health , busy people - a satisfying lunchtime snack at home or at work , athletes - who

require fluid, carbohydrate and high quality protein without the bulk of solid food.

In early 1990s Cadbury reentered the health drink market with Bournvita, the product

of essential vitamins and minerals with memorable campaigns based on the 'Tan ki

Shakti, Man ki Shakti'. The next big breakthrough happened in 1999 when the brand

was re-launched with a new RDA Balanced Formula. The brand was re-launched with

a completely new identity in 2001. Bournvita has a unique taste that combines the

goodness of malt and chocolate. It gives the child physical and mental alertness

resulting in a healthy body and an active mind. In 2001 Bournvita, complete with new

packaging and design was re-launched. A loyalty programme, in the form of a

Bournvita Nutrition Centre, dedicated to counseling mothers on her child's daily

nutritional needs was opened. Cadbury Bournvita has been advertising since the

1970s. In the early years the positioning centred on 'Good upbringing' with Bournvita

being an essential building block for children. In the 1980-82 years it was 'Goodness

that grows with you'. By 1987, it had become the more aggressive 'Brought up right,

Bournvita bright'. In the last decade of the 20th Century, competition between

children was becoming intense and Bournvita was there with its 'Extra energy to stay

ahead'. In the 1992-95 period 'Shakti har din ke champion ki' (Energy for the

everyday champion) was its payoff line. In 2000, 'Bournvita poshan, sahi poshan'

(Bournvita nutrition, right nutrition) encouraged consumption. In the following year

'Confidence kuch kar dikhane ka' (Confidence to achieve) became the reason to buy.

The current Cadbury Bournvita positioning suggests that it contains specific

ingredients that augment stamina and concentration in children. 

Health products are the latest fad in the food business worldwide and this trend is fast

catching up in the Indian market as well. Since the year 2007, the country has seen

numerous product launches in the field of nutraceuticals/ functional foods and

beverages that cater to distinct consumer brackets and ages. Food stuff meant for

cholesterol maintenance and general well being are available across all modern retail

outlets in most cities. Such wide market penetration and extensive product visibility

on retail shelves leads to improved consumer awareness about health benefits of such

value added products.

With a market value of Rs 49-50 billion for the year 2009, the total Indian functional

foods market is currently a small percentage of the Rs 4,000 billion processed foods

market in India. Despite a small base, the functional foods and beverages market is

poised for exponential growth in the forthcoming years since disease prevention and

health and wellness are the focus areas for market participants and consumers in India

and worldwide.

The Indian malt based health beverages market was estimated at Rs 2,000 Crore for

the year 2009 with an average annual growth rate of 20-25 percent. The Indian malted

health beverages segment has seen fierce competition amongst its market participants

in the recent past. Manufacturers have revamped their portfolios and emerged with

newer and better functional variants for cognition and weight management.

GlaxoSmithKline Consumer Health Care Ltd (GSKCH) and Cadbury (now a fully

owned subsidy of Kraft Foods Inc.) occupying the top rung. Tier 2 comprises

medium-sized players such as Nestle, Heinz, Wockhardt (now a part of Abbott

Nutrition) etc. Apart from these multinationals, a few domestic FMCG players are

present as well, AMUL and Hindustan Unilever Ltd (HUL) being the significant ones.

GSKCH is by far the largest player in this category with four of its major brands -

Horlicks, Boost, Viva and Maltova occupying nearly 72 percent of the total market.

Horlicks is the single largest brand with a market share of 53 percent making it a clear

leader. GSKCH is followed by Cadbury, which holds a market share of 12 percent,

with its brand Bournvita. Heinz India, AMUL, Nestle India, Wockhardt (now a part of

Abbott Nutrition) are some of the other significant players. HUL and Dabur India are

new entrants with their products Amaze and Chywan Junior launched in select cities

and metropolitans. The following chart depicts market share split of participants in

Indian malted health beverage market.

Product nutrient profile, health claims, marketing strategies and prices are some of the

key competitive factors in this market. GSKCH has been an aggressive player in

media and print ad campaigns leading to widespread awareness about product health

benefits and ingredient usage in the same. Horlicks was previously promoted as a

generic health drink for all ages leading to a slump in sales for GSKCH. The company

later abandoned the “one-size-fits-all” positioning and launched a whole new product

portfolio targeted at specific consumer brackets. Media and print ads were developed

keeping in mind target consumers and these efforts benefited as sales of Horlicks

gradually started improving making it the single largest selling health beverage brand.

Other players such as Heinz and Cadbury are also heavily advertising their products

nutrient labels, health claims and clinical trials that were undertaken to prove these

claims. With players such as HUL, Dabur entering this space, competition is likely to

intensify. The market might also see a substantial fall in retail prices as participants

compete on price points.

1.2 Consumer Behavior Profile on Health Drinks

The recent years have witnessed rapid transformation and vigorous profits in Indian

retail stores across various categories. This can be contemplated as a result of the

changing attitude of Indian consumers and their overwhelming acceptance to modern

retail formats. The Indian consumption patterns are slowly converging with global

norms. The Indian consumer is now spending more on consumer durables, apparel,

entertainment, vacations and lifestyle related activities. A consumer is attached with a

brand or new innovate product for self actualization as the time passes and the product

moves towards its generic behavior the needs of consumer shift to basic requirement.

In 1980s mineral water was for NRIs and high profile people but what now; mineral

water is serving the mass as healthy water for safety requirement, no more a status

symbol.

Consumer behavior is divided into three sub categories; consumption behavior,

purchase behavior and attitude perception. The consumer behavior differs with age-

group and the lifestyle. A busy professional life left no space for exercise so a drink

which contains low calorific value is a health drink. For kids health drink is a

supplement with added calcium, minerals and vitamins. Non-carbonated drink

segment though does not challenge the health drink segment but indirectly competing

with other health drinks. If we speculate the total non-carbonated drink segment

sequentially, fruit drink takes 60% market share, Juices with 30% and nectar with the

remaining 10% market share constitute the total Rs 500 market of non-carbonated

drink. The brands chasing the market are Parle's Frooti, Godrej's Jumpin, Coca Cola's

Maaza, Pepsi's Tropicana, and Dabur's Real, Nestlé’s Milo, Soy milk from ProSoya.

Horlicks took height issue as its benefit based brand position. On the other hand

Dabur took attribute based position. Bourn vita is smart enough to position on

chocolate taste. It wider the consumer segment for all age group (Who hates chocolate

milk) as the age increases and life style through friend circle infect one another, the

psyche takes a new shape. It is the time when the decision maker is the consumer

itself. The meanings change for a health drink. Now the health drink is one which is

low calorific and high as a social drink.

1.3 Factors that motivate consumers to buy Health Drinks

A number of factors have contributed to the persistent rise in demand for health

drinks. The most perceptible ones include the mounting income levels, emergence of

dual-income families, availability of disposable income, changing lifestyles. These

factors have led to the emergence of a highly aware and demanding consumer base.

The factors are as following:

. Population: As there is increase in population demand for health drinks is

increasing. There is shift from aerated cola drinks to health drinks and energy drinks.

Present population prefers more health drinks than others. There will, for sure, be an

increase in health foods so as to cater to the demand of the potential customer. For

kids health drink is a supplement with added calcium, minerals and vitamins.

. Teenagers: Today teenagers prefer smart healthy drinks rather than carbonated

drinks. The concentration is more on health. They are consuming more health drinks

and energy drinks rather than carbonated ones.

. Health consciousness: Health is going to be a major consideration that is going to

influencing the drinking habits. People are becoming health conscious daily weather

the youngsters or the middle aged group. So concentration is again on health drinks

and energy drinks. The recent National Food Survey 4 by IMRB International

(formerly Indian Market Research Bureau) gives a very good insight into the shift in

consumer preference for this segment.

. Lifestyle: Today most of the population is working .Lifestyle is changing day by

day. Earlier the term was ready to eat; now the term Ready to drink is becoming

popular. A busy professional life left no space for exercise so a drink which contains

low calorific value is a health drink. Moreover they prefer readymade cans, bottles so

they can save their time. They like to carry those with them to their work places.

. Income: As per capita income is increasing purchasing power of consumer is also

increasing. As income is increasing people prefer to spend their income more on heath

drinks to make their living healthy and smart. The following table shows change in

consumption on consumer durables from 1990 to 2007-08 which includes health

drinks also.

. Social class: One of the key reasons for the increased consumption is the impressive

growth of the middle class. Today people spend more on consumer goods. They

believe in smart spending. So in case of drinks they are spending more on health

drinks. The rate of growth of spending on health drinks items has been growing at an

average of 9 per cent per year over the past five years.

. Western influence: Indian consumer buying behavior to a large extent has a western

influence. Rather now they prefer ready to drink i.e. cans, tins of health drinks and

energy drinks. They find it smart to carry tins, bottles of any kind of heath drinks with

them as a perfect substitute for aerated colas. With people getting busier by the day

and having very little time on hand, it is important to have more options for ready to

eat meals as well as ready to drink also.

. Personality: Because of personality demand for health drinks differ. Today

youngsters are young, dynamic and adventurous. They prefer smart living and are

becoming more health conscious. They have more interests for sports etc so prefer

health drinks and energy drinks like Horlicks, boost also red bull.

. Packaging :it matters! With growing consciousness, it is important that the drinks

have a good and eco-friendly packaging and have all details specified on the label.

These are definitely going to be the ones that would be preferred.

Indian consumer spending basket (2011):

Consumer goods include durables, health drinks and food items. – 53%

Books & Music – 32%

Movies & Theater – 38%

Vacation – 32%

Home Textiles – 29%

Mobile phones – 96%

Payment Household help – 48%

Computer / peripherals – 10%

As per the survey done consumer is spending more on consumer goods which

includes durables, health drinks, food items etc. Health drinks are preferred more

these days by most of the Indian population in urban and rural areas.

Source: www.indianmba.com, The economic times, www.daburindia.com, The

Times of India.

1.4 Challenges for health food drinks market

The malted health beverage market has fared well as far as beverages for kids are

concerned. However, other niche segments, such as malted beverages meant for

women’s health or for cholesterol management, are not witnessing much growth. The

market is still plagued by low levels of consumer awareness in some specific sectors.

Rural reach for such products is also low due to premium pricing. Consumers in such

markets have a conservative mindset and prefer traditional foods that are home-made

over processed packaged foods for their daily nutrients and calorie requirements thus

limiting the growth for such health beverages.

Lack of product differentiation in terms of ingredient usage also limits market growth.

Most of the malted health beverage products available off-the-shelf have similar

nutrient profiles and the same ingredients are being experimented with. However,

companies are increasingly spending on R&D and product development and are likely

to innovate new products with broader ingredient coverage.

Challenges faced while introducing new formulations

The consumer demands functional ingredients in products; however, introducers face

certain challenges in the introduction of the same. Key technical challenges are

involved with the incorporation of novel ingredients like their interaction with other

components within the food matrix and their potential impact on taste. Other key

challenge is in assessing safety & scientific substantiation of benefit claims and

regulatory approval. Success mantras of GSKCH Horlicks is the flagship brand from

GSKCH and is a market leader in the health food drinks category. It has always been

synonymous with good health and has continued to remain relevant to the Indian

households over the years. At GSKCH, it is our constant endeavour to provide our

consumers with products that help them do more, feel better and live longer. Health

Drink – Horlicks has been in India for more than 130 years now and the equity that it

enjoys with the consumers is a testimony to its success over the years.

Opportunities

Malted beverages have always been positioned as regular heath drinks targeted at

children and the elderly population; however, in the recent past companies have

focused on products for other consumer brackets as well. In the process, a number of

products were launched for women and kids for cognition and general well being.

This category of health product offers immense opportunity since malted beverages

are a part of every child's staple diet. There is a rise in consumption amongst children

for improvement in concentration and memory power.

Clinical studies suggest such malt based products can be used for not just general well

being but can also be a part of post treatment nutrition in specific memory and brain

disorder cases such as Alzheimer's disease, Schizophrenia, etc.

According to Indian Council of Medical Research (ICMR), incidences of such brain

disorders are on the rise in India due to extreme stress and a disrupted lifestyle in

urban Indians. This presents good scope and opportunity for growth of these cognitive

health drinks in the long term. The following chart represents reported incidences of

Alzheimer's disease in India.

Market future outlook

The malted health beverages market is currently worth INR 2000 Crore with strong

double digit growth rates. This segment is poised for wide expansion in terms of both

product and infrastructure. The FMCG giants have now started to develop functional

foods, which are not of conventional origin: for instance, beverages that are sugar-

free, low cholesterol, foods such as granola bars, etc. The functional and health trend

in processed foods is fast catching up in India. The domestic malted health beverage

and overall functional foods market is expected to witness exponential growth in the

next 4-5 years with increasing products available off-the shelf, new entrants in the

form of FMCG multinationals and domestic business groups venturing into the

market and also an increasing consumer base. There is a distinct change in the

regulatory space as well with organizations such as Foods Safety and Standards Act

(FSSAI) framing set rules for governing production, labeling, packaging and

marketing of such new age products. Increasing consumer awareness coupled with

market development efforts from manufacturers and government agencies is likely to

pave way for better growth in this space.

Scientific research findings: 

If these trends were not enough, then the results of recent scientific studies must

surely confirm the bigger role that beverages are expected to play in the improved

health and wellbeing of the masses. A 14-month study of 869 school children (6-16

years of age) in Hyderabad, conducted by the National Institute of Nutrition,

Hyderabad, (using beverage fortified with 100 percent Codex RDA of iron and

vitamins B2, B6, B12, folate and C; 50 percent of vitamins A, D and B1, and niacin,

calcium and iodine; and 15 percent of Zn) confirmed the "dramatic functional

influence of multiple micronutrients on growth and development in children".

Another study, across 24 months, of 634 pre-school children (1-3 years of age) in

Delhi, funded by New Zealand Milk Limited, used milk fortified with prebiotics and

probiotics. This confirmed that "fortified milk can be an effective means of reducing

the incidence and prevalence of common childhood illnesses".

The beverage industry’s response

With these strong drivers of growth, it is not surprising that the beverage industry in

India has begun to respond with products that are marketed clearly on a health and

wellness platform.

However, to set the record straight, ‘health and wellness’ is not a wholly new platform

for the Indian market. India has, for decades, had a thriving health food drinks market.

Market leader, GlaxoSmithKline Consumer Healthcare (GSKCH), has had iconic

brands ‘Horlicks’, ‘Boost’, ‘Viva’ and ‘Maltova’ create 'top-of-the-mind' recall across

generations of Indians. Other suppliers, Cadbury (with ‘Bournvita’), Nestle (with

‘Milo’), Heinz (with ‘Complan’) and Gujarat Co-operative Milk Marketing

Federation (GCMMF) (with ‘Nutramul’ and now ‘Amul Shakti’) also enjoy a loyal

following. In the non-carbonated beverages sector, Parle Agro's ‘Frooti’ remains the

largest brand in the fruit drink segment, while Dabur's ‘Real Fruit Juice’ leads the

juice segment. The fact is that there has all along been a strong multinational presence

in the food and beverage market and more recently we have been witnessing the

emergence of Indian ‘multinationals’ across this sector.

However, much of the marketing for health food drinks in the past has been general

health and energy positioning, rather than the focus on specific benefits or ingredients

that is characteristic of most mature health food markets. This is now changing and

the specific initiatives of some companies are going a long way to creating a truly

dynamic health and wellness beverage sector in India.

Global market leader in probiotic fermented milk drinks, Yakult, has teamed up with

Danone to start manufacturing its probiotic fermented milk drink in India from 2007.

Calcium-fortified beverages are a rapidly growing market. Some examples of brands

that have introduced calcium-fortified products are ‘Amul Shakti’, Coca-Cola India’s

‘Mazza’, and malted drinks such as ‘Horlicks’ (GSKCH), ‘Milo’ (Nestle), ‘Complan’

(Heinz), ‘Anlene’ (Britannia New Zealand Foods) and ‘Protinex’ (EAC Nutrition).

GCMMF launched sports drink 'Stamina' in early 2006. ‘Red Bull’ was launched in

India in 2003. Carbonated beverage giants Coke and Pepsi have also planned to widen

their product portfolio with ‘health-based’ beverages (non-carbonated). Pepsi’s

‘Gatorade’ is already on the market. And in what must be among the most significant

recent commercialization efforts of a traditional Indian drink, ‘Amul Masti’ Spiced

Buttermilk was launched (in a 200 ml tetra pack), marketed on the platform of being

free of colour, preservatives, acids and sucrose sugar.

Barriers to taking ‘functional’ beverages mainstream

Despite this flurry of activity, the market is still plagued by low levels of awareness

and a lack of sophistication in consumer choices. Price remains a stumbling block.

Public concerns over safety and quality of beverages have been aggravated by

research findings (and the subsequent controversy) over alarming levels of pesticide

residues in bottled water and soft drinks. Skepticism from the scientific community

continues to limit product endorsement. Furthermore, there is a lack of detail and

clarity in food safety regulation regarding nutraceuticals and functional food and

beverages, and regarding health claims.

Within the beverage industry there is inadequate understanding of how to take

traditional ingredients into the modern food processing environment. And then of

course, there is competition from other products such as dietary supplements. Finally,

the retail sector, despite its growth, is still mostly unorganized and this limits the

ability to differentiate health and wellness products through the allocation of

exclusive shelf space devoted to this category.

Converting opportunities into sustained demand

To overcome these challenges, beverage suppliers need to approach the market with a

multi-pronged strategy for increasing penetration.

· Price resistance can, to some extent, be overcome by moving from ‘imported’ to

‘manufactured in India’ products. For example, imported ‘Gatorade’ cost INR45 per

200 ml bottle. Now, made in India, it costs INR25.

· Substitution or modification is in some ways easier to execute than addition.

(Examples of substitution would be herbal tea replacing regular tea or soy milk

replacing regular cow’s milk. Examples of modification would be ‘low-fat’, ‘no-fat’,

‘lite’ variants of established beverage brands).

· The growing trend towards on-the-go consumption/out-of-home consumption (at the

workplace, in schools, colleges and gyms) presents suppliers with new place and form

of consumption options (for example, vending machines for dispensing health drinks

at schools).

· Abandoning the ‘one-size-fits-all’ positioning and generic selling points of the past,

in favour of targeted and specific messaging based on validated health benefits is

likely to be more effective to the better informed middle class today.

Leveraging the intrinsic appeal of traditional Indian ingredients such as ayurvedic,

herbal or oleoresin ingredients, but delivered in a modern, safe, convenient and

consistent form, or packaging and branding traditional Indian health drinks such as

buttermilk and lassi, could create whole new markets that derive their strength from

known and trusted traditional ingredients or drinks.

In the end, beverage suppliers who unlearn many of the long-held misconceptions

about Indian consumers and respond instead to their changing needs and priorities

will be best placed to maximize the health and wellness opportunity in this large and

growing market.