The Hindu Business Line : Sabol to enter soft drinks, ready-to-eat foods market

Coimbatore, Feb. 11 At a time when many domestic soft drinks manufacturers are finding competition from MNCs too hot to handle, a Coimbatorebased packaged drinking water manufacturer Sabol Associatess has dared to enter the soft drinks market.

The company has decided to become a full-fledged food products company and to spread its reach in the South in the current year and then expand to other parts of the country next year. It is confi- dent of its performance in the market and mulls floating a public issue in another 5 or 6 years.

Speaking to Business Line here, Mr K.M. Senthil, Chairman and Managing Director, Sabol Associatess, Coimbatore, said the company, which entered the mineral water segment by launching `Sabols' packaged drinking water in 1999, has a 25 per cent market share. While in the 20-litre jar mineral water segment, it is the dominant player in Tamil Nadu, in the bottled water segment (such as 500 ml-2 litres), it occupies the third slot in the State. The company has launched 500 ml Sabols Club Soda in Tamil Nadu, Karnataka, Kerala and Puducherry at a price of Rs 12 per bottle and will be entering the carbonated drinks and fruit juices market by the end of this month.

Asked about the decision, he said some of the domestic brands have been squeezed out because they did not expand their product profile and market reach and some companies even chose to move into unrelated areas, losing focus. In the FMCG business, manufacturers should keep expanding and launch newer products to safeguard their market share.

Some of the weaker players sold out their businesses to the MNCs or simply allowed their business to wither.

STRATEGY

Mr Senthil said the disadvantage of being a big MNC player was that having a single plant for an entire State, these units suffered from high overheads and marketing expenses.

But smaller players could have smaller plants at different locations that would bring down the distribution cost and give them pricing advantage, which Sabol has been able to use for its advantage in its mineral water business. He said Sabol is expanding its product range by entering the carbonated drinks and juices business to begin with this month and will be launching food products such as biscuits, noodles and even parathas subsequently. He said the water business was only a platform for Sabol on which it would build its FMCG business' growth.

PRODUCTS EXPANSION

During this year, the company would spread its presence in the entire South in mineral water, soda and juices segments and before the end of this year, would enter other food products segments. The company would adopt the policy of having its own plants or take over existing plants or rope in franchisees depending on market conditions.

After consolidating its position in the Southern markets during this year, Sabol would venture into the North Indian markets next year. The company has invested about Rs 10 crore in its mineral water business and plans to invest about Rs 15 crore in the next two years as it seeks to expand its product range and become a full-fledged food products company and the investment would be stepped up as more and more products are added.

He estimated the size of the soft drinks/mineral water market in Tamil Nadu at about Rs 500 crore annually and the share of the mineral water business alone is around Rs 200 crore per year. His company would restrict its juices to popular flavours such as orange, apple and mango and leave out exotic flavours such as strawberry and peach because of low market demand.

Future plans

Asked about the future, Mr Senthil said mergers and acquisitions were possible and even he could take over some small company. He would like to reach a turnover of about Rs 100 crore per annum before going public in another 5 or 6 years.

He expected to reach the fiscal target, however, in another three years. All the products would be sold under the `Sabols' brand name. He said nearly 75 per cent of the soft drinks market is controlled by the MNCs. But this is a `transitional period'. It is only in India that Coca Cola and Pepsi are monopolising the market whereas in other countries, people have so many choices. Seeing Sabol's success, more companies would come, he said.

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