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Evolution Of Beverage: As A Game Changer

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Most people in India are exposed to a variety of beverages from an early age: mothers serve homemade milkshakes, sharbats, chocolate drinks, etc. However, beverages are themselves only a “sidekick” and, at best, served as fillers between meals.  Given this backdrop, the recent surge in the Indian beverage segment is exciting and can open up many retail opportunities. This emergence began with the introduction of coffee chains more than a decade ago. This was also a first in terms of organised beverage retail, since the segment was earlier dominated by small local players like juice shops. Also, restaurants that focussed solely on food have also added/expanded their beverage offerings. This has boosted the development of both alcoholic and non-alcoholic beverages at both the product and retail level

Non-Alcoholic Beverages
This segment primarily comprises coffee, tea, and aerated drinks. In the past few years, coffee has become a fashion statement among the young and upwardly mobile. With both Indian and international coffee chains mushrooming across the country, cafés with beverage sales comprising between ~55 and 85 percent of the total revenue are playing a key role in tuning customer preferences and also creating a retail space. This growth has prompted international brands such as Starbucks and Dunkin’ Donuts to foray into the Indian market.
Interestingly, the development of the coffee segment is set against the backdrop of India being primarily a “tea-drinking” nation, with the per capita tea consumption of 0.75 kilos per annum being almost 10 times the per capita coffee consumption. The tea segment, despite a surge in opportunities, is presently at a stage similar to that of the coffee segment a decade ago. However, consumers are keen on trying out new variants such as flavoured and herbal teas, and further, understand the products’ novelty and are willing to pay a premium price. The growing awareness of the health benefits attributed to tea is another factor driving the expansion of tea-based chains like Chaipatty, Passion – My Cup of Tea, Tapri, Infinitea, Chai Point, Tea Junction, Teapot Café, Tea Center, Cha Bar, and Wagh Bakri Tea Lounge. A further push to the tea segment comes from the introduction of tea options by leading coffee chains.
Brands are also experimenting with other beverage-based formats, such as juice bars and fruit cafés, especially in high footfall areas like malls, airports, and office complexes. Brands like Forest Fruit, Joost Juice, and cater to an increasingly health-conscious population through easy-to-access locations. The other similar segment, nascent yet emerging, is yogurt-based smoothies which are being offered by frozen yogurt brands like YogurBerry, Yogen Fruz, Cocoberry, among others. This has also added to the overall development of the non-alcoholic segment.

Alcoholic Beverages
The rising popularity of alcoholic beverages, especially among the youth, can be attributed to dramatic lifestyle changes which, in turn, are fuelled by rising income levels. The entry of international brands is also a factor for “social” drinking at get-togethers, which was once taboo in India. The youth, however, prefers lighter spirits, due to which white spirits such as beer, vodka, rum, gin, and tequila are seeing growth. Given that the segment on the whole was undergoing innovations even prior to the development of F&B retail formats, the emergence of new formats has given a further boost at both the retail and product level.
At the product level, there is a shift in preference from classical cocktails and straight drinks to signature spirits and personalised mixes. The infusion of flavours into spirits, for example,  tea in vodka, chili infused wine, etc is becoming popular. Cafés and casual dining chains like , , and Pizza Hut are also trying to cash in by offering beer and wine, with wine, in particular, growing at 20 to 25 percent per annum. Many Indian and international winemakers have run promotions and programmes to educate the Indian consumer in the past few years, resulting in increased sales not only in the metros and tier I cities but also in tier II cities. Another innovation in products is the introduction of diet versions of beer, vodka, and whiskey by United Spirits; these drinks cater to the health-conscious consumers.
New lounge formats and micro-breweries are among the retail level developments in the alcoholic beverages segment. Micro-breweries are a recent market phenomenon. They are limited to a few geographical locations, mainly metro cities. As the name suggests, these outlets brew fresh beer in-house and offer variants across different price points, vis-à-vis conventional outlets that only serve draught or bottled beer. The format’s set-up is open  –  the brewing machines are encased in glass, making the process visible from the seating area. To add to the experience, the staff also takes customers for a tour around the premises.
Most of these breweries draw inspiration from the American and British pub culture, right from the ambience to , with tables made of beer barrels, leather couches, wooden bar counters, neon displays, low lighting, and smaller food offerings. Players in this space include Toit in Bangalore, and Lemp Brewpub & Kitchen, Rockman’s Beer Island, Striker Pub and Brewery, and Howzatt in Gurgaon. While new formats provide an avenue for showcasing an eclectic mix of beverages, microbreweries reflect an attitudinal shift towards consuming freshly brewed beer. There are also places combining beverages with sports, for example,  Howzatt, which offers both beer and cricket. Increasing awareness has also resulted in launch of exclusive formats such as the Delhi Wine Club for wine connoisseurs.
Going forward, brands are expected to focus on the beverage segment, which offers high margins and also a point of differentiation from competitors. However, factors such as complementary food, the ambience, and engagement activities will also be crucial in determining the vitality of the business model, and will help in creating a niche for this segment.