Coca-Cola Enters The Dairy Segment In India: Diversifying Its Portfolio

+7.77%
Upside
60.13
Market
64.80
Trefis
KO: The Coca-Cola Company logo
KO
The Coca-Cola Company

The Coca-Cola Company (NYSE:KO)  recently announced that it will roll out its flavored milk brand called “Vio” across India in 2016, a product which has been customized to suit the needs of the local consumer. [1]. While the company plans to invest $5 billion in India by 2020, it appears to be targeting the healthy drinks market in the region along with the carbonated soft drinks segment.  The Indian flavored milk market has seen exponential growth in the past few years as young consumers move towards healthy drinks, and is expected to grow at a CAGR of 20% during 2015-2020. [2]. We believe that as an increasing number of consumers prefer healthy drinks to carbonated soft drinks, Coca-Cola’s attempts to diversify its portfolio by including healthy beverages in all regions will be a key revenue driver for the company in the future.

 

See our full analysis for Coca-Cola

Relevant Articles
  1. Should You Pick Coca-Cola Stock At $60 After Q4 Beat?
  2. Down 10% This Year Is Coca-Cola Stock A Better Pick Over AbbVie?
  3. What’s Next For Coca-Cola Stock After 4% Gains In A Week Amid Q3 Beat?
  4. Down 15% This Year Will Coca-Cola Stock Rebound After Its Q3?
  5. Which Is A Better Beverage Pick – Coca-Cola Stock Or Monster Beverage
  6. Pricing Actions To Bolster Coca-Cola’s Q2?

 Asia Could Drive Flavored Milk Beverages Growth

Research by Tetra Pack in 2013 had revealed that consumers in Asia were turning to flavored milk as an alternative to other beverages. Factors such as economic growth, urbanization and rising prosperity in countries such as India and China led to the increase in demand for convenient, on-the-go healthy drinks including flavored milk. The research stated that while white milk is consumed in almost all households in India, flavored milk has plenty of room to grow. [3]. The dairy industry in Asia Pacific is expected to grow faster than the U.S. and Western Europe as the younger population in the region incorporates dairy in its daily diet, due to an increase in awareness of health benefits from dairy. India is the world’s largest producer of milk and had produced around 18% of the total world milk production in FY 2014. [4]. Most of its production is consumed domestically as milk is a traditional beverage in the region, while consumption of aerated drinks is considered an indulgence. Health conscious consumers in the region are now shifting away from carbonated soft drinks to healthier beverages such as flavored milk. These factors will give Coca-Cola’s “Vio” access to a wider market in India, broadening the company’s consumer base in the region. “ Vio“  is primarily targeted towards young consumers and is positioned as an on the go convenient, healthy beverage. While the value added dairy products segment in the country is currently small, it has a huge growth potential. As per industry estimates the share of value added dairy products in the milk and milk derivatives will grow at around 25% until 2019-2020. [5].

As the market for carbonated soft drinks shrinks, we believe Coca-Cola’s efforts to diversify its portfolio to include healthier drinks will be key for its future growth. Customizing these drinks according to the regional markets appears to be the right strategy. For Asian markets, especially India where milk consumption is higher than global averages, “Vio” appears to be the right product to capture the growth potential in the value added dairy products segment.

See the links below for more information and analysis:

View Interactive Institutional Research (Powered by Trefis):
Global Large CapU.S. Mid & Small CapEuropean Large & Mid Cap
More Trefis Research

 

Notes:
  1. Coca Cola Sees Indian Milk Potential, WARC, January 27, 2016 []
  2. India Flavored Milk Industry Exhibiting Promising Growth, RNCOS, May 2015 []
  3. Asia leading the global flavored milk charge, reveals report, Food Navigator, June 2013 []
  4. India Dairy Products Market Outlook to 2019, News Voir, June 2015 []
  5. Beyond Milk, Value Added Dairy Products To Boost Up Profits, CARE Ratings, July 2014 []