The Hindu Business Line : Putting juice in growth

IT'S a tale with a delicious twist. Compact International promoter D. K. Mittal was to meet the Director of the Defence Research and Development Organisation (DRDO) one fine morning in Ladakh in connection with a tender for setting up some shelters for army personnel. During the meeting, the Director offered Mittal a drink made of an unheard of herb called seabuckthorn. A little sceptical at first, Mittal took several sips before gulping down the entire glass. And he asked for more.

This chance encounter with the wonder plant seabuckthorn was the reason Ladakh Foods was set up as a separate company in 2002 to manufacture and sell seabuckthorn juice as Lehberry. Ladakh Foods today claims to be one of the fastest growing fruit juice companies in a fiercely competitive environment where big names such as Dabur and Pepsi already hold substantial market shares. Says Managing Director Varun Kumar, "Even when the fruit juice/nectar market is projected to grow at a scorching pace of 40 per cent, a Tetra Pak study has found that a whopping 86 per cent of the fruit juice market is still lying untapped."

Perhaps one of the main reasons why milk major Mother Dairy last week announced it is jumping on to the bandwagon of fruit juice. The company has launched packaged fruit juices under its flagship brand, Safal. Starting from Delhi, the product is scheduled for launched on a nation-wide scale in the months to come. The company says that having pioneered the marketing of fresh and frozen vegetable products backed by a modern produce handling and processing facility, Safal is now ready to script a new success story. This time in the packaged fruit juices category. "With the market growing at a healthy rate and with changing lifestyles and rising levels of health consciousness among consumers today, the demand for healthier products like packaged fruit juice is only going to increase in the times to come."

Says the director of a top retail chain in Chennai, "The fruit juice category is rapidly growing by over 50 per cent at some stores for us; it's seen as healthy compared to soft drinks. They are more hygienic than roadside fruit juices and are a big hit with yuppies. Also, non-sugar variants find favour with fitness freaks."

For Safal, with its expertise in producing and marketing various horticultural products in India as well as overseas, juices are a logical extension of its portfolio. With the launch of Safal juices, our intention is to grow the juice market further by providing a great-tasting product to the consumer at the right value," says Paul Thachil, Chief Executive of Mother Dairy. Ask Dabur Foods CEO Amit Burman where he thinks his company will be in the next few years and pat comes the reply: "We will be a Rs 200-crore company by 2006-07. And a large chunk of this growth will come from the Real brand of fruit juices, since Real contributes as much as 85 per cent to the company's topline. It will continue to be an area of focus."

However, realising that the fruit juice category, though growing at a healthy pace, needs to be activated further, Burman has just launched fruit drinks - drinks where the fruit pulp concentration is only about 20 per cent - in typically Indian flavours of aam panna, watermelon and pomegranate. And having realised that price is still an entry barrier for a vast majority of the consumers, Dabur has priced Coolers about 15 per cent lower than Real.

Pricing is one of the major worries. Says Executive Director (New Business) at Pepsi Foods, Subroto Chattopadhyay, "Price is a barrier to this category because when you give fresh juice, packaging becomes critical. So, what the industry is now trying to do is offer different packaging to suit different price points while simultaneously working on ways to offer better quality and improved taste."

Pricing is also the downfall of fruit juice importers. Says A. V. Bhaskar, CEO, Adluri Foods, which distributes the Australian brand Berri in the South, "It is difficult to make inroads into the middle class as it finds the prices prohibitive. Sales tax on imported products is not uniform across the States. In Tamil Nadu, it is 21 per cent, much lesser in Andhra Pradesh and Karnataka." So a one-litre bottle of Berri costs Rs 110 while a Tropicana is in the Rs 75 range. PET bottles are another reason for the high prices. However, the retail prices are the same across all the States. Natural fruit juices are a growing market and all players should have a level playing field, he says.

Taking advantage of the health consciousness pervading the market, Adluri Foods has introduced cranberry juice (something that the local brands also have done) and is testing a mixed vegetable juice and a cocktail of apple, carrot and orange in the market.

Pepsi recently launched Tropicana Tropics Mango Nectar, which is made entirely from mangoes sourced from within India, as against other flavours for which sourcing has to be done from other countries. The introduction of Tropics Mango Nectar will be followed by Tropics Litchi and Tropics Guava. Says Chattopadhyay: "India is now among the top ten markets for Tropicana worldwide. Significantly India is now an approved source for mango pulp within the Tropicana worldwide system, and can soon emerge as a major sourcing base for other exotic fruits for Tropicana's international market." Which means that if the fruit juice producers work on further development of backward linkages, the pricing issue plaguing this industry can be better tackled. Besides, the industry has already begun to offer packaging solutions to address different price points like a 125 ml pack of fruit drink Maaza from Coca-Cola India at just Rs 5 and a 500 ml Tropicana blend for Rs 25.

So where is the industry headed? Says Varun Kumar of Ladkah Foods: "We expect the market to touch Rs 170 crore by next year and we are targeting break-even within the next four years." So, while it took Dabur Foods seven years to make money on fruit juices, thanks to product innovation, expanding market and increased consumer preference for healthy foods, Ladakh Foods may repeat this feat in just four years. But even as the industry players are upbeat about growth prospects, there is an undercurrent of discomfiture, with talk of the new government thinking of levying eight per cent excise on food products including packaged fruit juice. So, while profit projections are unlikely to go completely haywire just yet, there might have to be some readjustments in the time frame within which these targets may be achieved.

(Reporter Associate: Sravanthi Challapalli)

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