India Food & Drink Report - Q3 2020 PDF

Q3 2020
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India
Food & Drink R
Report
eport
Includes 5-year forecasts to 2024
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India Food & Drink Report | Q3 2020
Contents
Key View............................................................................................................................................................................................ 4
SWOT .................................................................................................................................................................................................. 6
Food & Drink SWOT...................................................................................................................................................................................................................... 6
Industry Forecast........................................................................................................................................................................... 8
Food ................................................................................................................................................................................................................................................... 8
Drink.................................................................................................................................................................................................................................................13
Industry Risk/Reward Index ....................................................................................................................................................19

Asia Food & Non-Alcoholic Drinks Risk/Reward Index: Australia Overtakes South Korea ............................................................................19
Asia Alcoholic Drinks Risk/Rewards Index: Hong Kong Falls Dramatically In The Rankings.........................................................................32
Market Overview..........................................................................................................................................................................43
Food .................................................................................................................................................................................................................................................43
Drink.................................................................................................................................................................................................................................................48
Mass Grocery Retail....................................................................................................................................................................................................................53
Competitive Landscape.............................................................................................................................................................57
Company Profile...........................................................................................................................................................................59
Amul Dairy .....................................................................................................................................................................................................................................59
Britannia Industries....................................................................................................................................................................................................................62
Future Retail..................................................................................................................................................................................................................................65
RPG Enterprises...........................................................................................................................................................................................................................68
United Breweries ........................................................................................................................................................................................................................71
India Demographic Outlook .....................................................................................................................................................75
Food & Drink Glossary ................................................................................................................................................................78
Food & Drink Methodology .......................................................................................................................................................79
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Key View
Key View: India's food and non-alcoholic drinks spending segments will be shielded from the negative impact of the Covid-19
(coronavirus) pandemic as consumers prioritise essentials. Alcoholic drinks consumption will be weak in 2020 due to the closure of
restaurants and bars and we do not expect off-trade alcoholic drinks consumption to offset the loss in on-trade consumption. Our
medium term (2020-2024) outlook for food and drink spending is positive. Spending growth will be supported by favorable
demographics and rising disposable incomes.
Food And Drink Spending

India (2017-2024)
e/f = Fitch Solutions estimate/forecast. Source: National statistics, Fitch Solutions
Latest Updates And Industry Developments
• At the time of writing (June 12), India had reported 309,603 confirmed cases of Covid-19 (coronavirus) and 8,890 deaths. On May
5, the Indian government ended the nationwide lockdown which came into effect on March 25. Essential businesses such as
mass grocery retailers and pharmacies were permitted to remain open during the lockdown period. As of June 8, shopping malls,
hotels and restaurants were allowed to re-open.
• In line with the global spread of Covid-19 (coronavirus), we have adjusted our food and drinks forecasts for 2020 onwards. As an
essential spend segment, we believe that consumer spending on food and non-alcoholic drinks will be shielded from the
negative impact on overall consumer spending.
• Our upward revision for the 2020 food spending forecast is 9.8% y-o-y, from the pre-coronavirus forecast of 10.5% y-o-y. Over
our medium term (2020-2024) forecast period we project food spending to grow at annual average growth rate of 7.4% y-o-y.
• We have undertaken a similar revision for our non-alcoholic drinks spending, as we believe it is a product that will see increased
demand via mass grocery retail. Our upward revision for the forecast of non-alcoholic drinks spending in 2020 is 9.3% y-o-y, from
the pre-coronavirus forecast of 7.9% y-o-y. Over the medium term (2020-2024), we forecast non-alcoholic drinks spending to
grow at an annual average annual growth rate of 6.7% y-o-y.
• We believe that spending on alcoholic drinks will be negatively affected by the spread of the coronavirus. While households will
stock up on these products, the increased spending will not be enough to outweigh spending in bars, restaurants and hotels. As
such, our alcoholic drinks consumption has been downwardly revised to a contraction of -1.6% y-o-y for 2020, from 4.4% pre-
coronavirus. As such, our medium term forecast has changed to 3.3% y-o-y, from the previous 4.5% y-o-y.
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• India is the largest consumer of milk in the world, estimated at 58.7kg in 2020. Dairy spending is projected to reach INR6.4trn in
2024, up from INR5.6trn in 2020, one of the largest food spending categories.
• With the growing awareness of the health benefits associated with fruit consumption and its affordability, fruit spending will be
the fastest growing sub category. Over the 2020-2024, we forecast spending on fresh and preserved fruit in local currency
terms to grow by an annual average of 10.4%, as demand accelerates. On a per capita basis, fresh and preserved fruit sales will
reach INR5,176 by 2024 (USD63.1).
• Within the soft drinks segment (made up of carbonated drinks, mineral and spring waters, and fruit and vegetable juice), we
forecast mineral or spring waters to be the fastest growing non-alcoholic drinks spending category, expanding at an average
annual growth rate of 7.9% y-o-y over the 2020-2024 period. Fruit and vegetables spending grow will also be strong, growing at
an average annual growth rate of 6.8% y-o-y over the 2020-2024 period.
• The hot drinks sector made up of coffee, teas and other drinks is projected to be the slowest growing non-alcoholic drink sector
owing to the maturity of the market, expanding by an average of 5.6% annually over our 2020-2024 forecast period.
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SWOT
Food & Drink SWOT
SWOT Analysis
Strengths • Foreign food companies continue to target the Indian market, with sub-sectors such as soft drinks, hot
beverages and edible oils benefiting from significant investment.
• India's abundance of natural agricultural resources makes the market attractive to investors from all food
sub-sectors.
• The long-term story for Indian food consumption is promising, as a young and increasing
population coupled with rising incomes will drive growth.
• India's mass grocery retail sector is developing, with scope for considerable expansion. Online mass grocery
retail is also rapidly developing on the back of growing demand for convenience.
• There will be a growing need for premium products in some sectors (chocolate confectionery, fruit juices
and craft beers) especially in urban areas with higher incomes.
• The role of the Indian government in buying, distributing and selling food staples, such as rice and wheat,
affords the vast majority of the population the opportunity to have their needs met.
Weaknesses • The processed food industry is less developed than other comparable countries, as a result of logistical and
distribution problems.
• The country's agricultural industry, despite having huge potential, suffers from a lack of investment and
dependency on erratic climatic conditions.
• Despite rapid economic growth, India remains a very poor country, with GDP per capita lower than China.
Alcoholic and soft drinks are still considered a luxury by the majority of the population.
• New rules and regulations for the e-commerce market have had spillover effects on the online mass grocery
retail sector.
Opportunities • Consumer purchasing patterns are shifting towards essentials amid the Covid-19 pandemic which bodes
well for spending on food and non-alcoholic drinks in 2020.
• The government is actively seeking investment in the food processing and agribusiness industries,
suggesting that companies expressing an interest would be granted a very liberal investment climate.
• Rising disposable incomes and increasing urbanisation mean that higher-value food and drink products are
likely to experience strong growth rates.
• Although non-essential consumer goods are barely established at the mass market level, premiumisation is
already becoming a viable growth option, particularly among younger consumers in major urban centres.
• The relaxation of restrictions on foreign direct investment, allowing for 100% foreign direct investment in
single-brand retail via the automatic route, will boost attractiveness for investors.
• A young population with disposable incomes who are increasingly exposed to Western influences are likely
to eschew traditional vegetarianism in favour of meat consumption.
Threats • The Covid-19 pandemic poses a significant risk to food and drink supply chains and could result in
temporary closures at food and non-alcoholic drink production facilities due to virus outbreaks.
• Logistical problems, underdeveloped service networks and poor infrastructure hinder development in fresh
food industries such as dairy.
• Many consumers remain wary of modern retail, due to its perceived detrimental impact on the role of
traditional retail in society.
• Taxation by volume in the alcoholic drinks sector will continue to hinder the development of the beer sector.
• The Goods and Services Tax Council's announcement in November 2016 that aerated drinks are to be re-
categorised in the luxury category will increase the tax burden on these products, which will likely impact
sales.
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SWOT Analysis
• A failure to address growing income disparities could significantly reduce or hamper growth of the domestic
consumer base.
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Industry Forecast
Food
Key View: We forecast food spending growth in India to accelerate in 2020 as consumer purchasing patterns shift towards
essentials particularly groceries through the mass grocery retail channel due to more time spent at home amid the Covid-19
(coronavirus) pandemic. Our medium term (2020-2024) outlook for food spending growth is positive and will be supported by
favourable demographics and rising incomes as economic activity gradually recovers. Consumers in India are becoming increasingly
health conscious, as a result fresh and preserved fruits will be a spending growth outperformer.
Latest Updates
• In line with the global spread of Covid-19 (coronavirus), we have adjusted our food spending forecasts for 2020 upwards. As an
essential spend segment, we believe that consumer spending on food will be shielded from the negative impact on overall
consumer spending.
• Our upward revision for the 2020 food spending forecast is 9.8% y-o-y, from the pre-coronavirus forecast of 10.5% y-o-y. Over
our medium term (2020-2024) forecast period, we project food spending to grow at annual average growth rate of 7.4% y-o-y.
• India's fruit segment is one of the most dynamic in the food sector, with tremendous potential for long-term growth. Over the
2020-2024, we forecast spending on fresh and preserved fruit in local currency terms to grow by an annual average of 10.4%, as
demand accelerates.
• India is the largest consumer of milk in the world, estimated at 58.7kg in 2020. Dairy sales are projected to reach INR6.4trn in
2024, up from INR5.6trn in 2020, one of the largest food spending categories.
• With the growing awareness of the health benefits associated with fruit consumption and its affordability, fruit spending will be
the fastest growing sub category. Over the 2020-2024, we forecast spending on fresh and preserved fruit in local currency
terms to grow by an annual average of 10.4%, as demand accelerates. On a per capita basis, fresh and preserved fruit sales will
reach INR5,176 by 2024 (USD63.1).
Structural Trends
With the spread of the coronavirus across India, we have revised our food spending forecast for this quarter. On May 5, the Indian
government ended the nationwide lockdown which came into effect on March 25. Essential businesses such as mass grocery
retailers and pharmacies were permitted to remain open during the lockdown period. As of June 8, shopping malls, hotels and
restaurants were allowed to reopen. As an essential spend segment, we believe that consumer spending on food and non-alcoholic
drinks will be shielded from the negative impact on consumer spending on the back of the coronavirus outbreak. We believe that
food will become the focus of consumers’ purchasing habits. Therefore, we have upwardly revised our food spending forecast for
2020. This revision is driven by the fact that all restaurants and cafes in the country have closed (food delivery apps however remain
in operation), resulting in an uptick in consumers cooking at home and a greater spend on food and drink purchases through
grocery channels. We also note that prior to the lockdown there were high levels of panic buying, stockpiling and priority
purchasing. Consumers in India began panic buying and stockpiling essentials on May 24 in anticipation of the lockdown being
implemented.Our upward revision for the 2020 food spending forecast is 10.5% y-o-y, from the pre-coronavirus forecast of 9.8% y-
o-y. Over our medium term (2020-2024) forecast period, we project food spending to grow at annual average growth rate of 7.4% y-
o-y.
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Food Sales
India (2017-2024)
The continued spread of organised and modern retail coupled with a very positive consumer demand outlook, driven by strong
economic growth, favourable demographics and rising incomes, will ensure double-digit growth in food spending throughout our
2020-2024 forecast period. While the majority of the Indian population continue to load up their shopping baskets with daily
essentials and food staples, we expect to see a gradual change in consumption habits over the long term, with a wider variety of
goods and brands on the market.
We forecast the proportion of households with disposable incomes of more than USD5,000, the approximate threshold at which
consumers in emerging markets begin to purchase food products beyond everyday essentials, to increase from 36.1% in 2020 to
54.2% in 2024 (exceeding 159mn households by 2024). Similarly, the number of households with disposable incomes of more than
USD10,000 will more than double from 18.5mn in 2020 to 38.4mn in 2024. Consumers will increasingly trade up to premium
brands/discretionary food purchases as a result. The typical diet of Indian households is likely to diversify over the coming
years, incorporating more meat and confectionery products.
The continued spread of organised retail will cater to this emerging consumer base as local operators look to shore up their market
share in preparation for the imminent arrival of foreign competition. The mass grocery retail industry is expected to help drive up
food consumption by presenting consumers with a much wider range of higher value products and encouraging purchases of
items beyond those necessary. A case in point includes the expanding footprint of Walmart, which acquired a majority stake in
Flipkart in April 2018. Walmart is likely to use Flipkart to leverage on the latter's e-commerce capabilities in India.
Over the next few years, India's food industry will also benefit from the government's efforts to promote the country as a
manufacturing hub through its 'Make in India' campaign, by encouraging the development of food manufacturing clusters. The
introduction of goods and services tax in 2017 will also have a positive effect on the business environment and encourage
investment in the food sector by creating a unified, nationwide tax system.
Despite those efforts, challenges remain for food and drink companies operating in India. Per capita food spending levels in local
currency terms remain low, and growth is perhaps not as considerable as one might expect, compared with the rapid rate of Indian
economic growth. Inhibiting factors include high levels of income inequality and poor infrastructure constraining distribution in rural
areas. In order to address such a diversified audience, PepsiCo has for instance rolled out a potato chips brand Lehar, which is sold
40% cheaper than its Lay's product. In such a scenario, domestic firms with a greater understanding of regional markets win the
battle on their pricing strategies, such as Balaji Wafers with its low-cost potato chips.
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India's fruit segment is one of the most dynamic in the food sector, with tremendous potential for long-term growth. Over the
2020-2024, we forecast spending on fresh and preserved fruit in local currency terms to grow by an annual average of 10.4%, as
demand accelerates. On a per capita basis, fresh and preserved fruit sales will reach INR5,176 by 2024 (USD63.1).
Spending on fruit will not just be driven by value growth, as fresh and preserved fruit account for a growing share of consumers'
total food spend. Fresh and preserved fruit spending is projected to grow at an annual average growth rate of 10.4% y-o-y. This will
take spending to INR 7,4bn in 2024, increasing from INR5.2bn in 2020. Its share of food spending will rapidly rise to 14.6% by 2024.
We note that this is largely the result of growing awareness of the health benefits associated with fruit consumption, and will be a
trend driven by the young and urban consumers in large Indian cities.
India is the largest consumer and producer of milk in the world. Given the ubiquity of cattle, milk is an essential component of the
dietary regime, resulting in high (for the country's income level) per capita consumption, estimated at 54.1kg in 2020. However, due
to the already high levels of milk consumption in India, we project low growth in dairy spending, averaging just 4.1% annually over
our 2020-2024 forecast period. Nonetheless, in absolute terms, dairy sales are projected to reach INR6.4trn in 2024, up from
INR5.6trn in 2020, one of the largest food spending categories. As Indian consumers continue to consume higher-value added milk
products, we project robust consumption of cheese and butter in India.
Half a century ago, India was the largest net importer of milk in the world, but a drive spearheaded by Amul Dairy, dubbed 'the
white revolution', has made India self-sufficient in its dairy requirements. India's 2017 budget announced a Dairy Processing and
Infrastructure Fund of INR20bn (to be quadrupled in three years) to enable the modernisation and expansion of the country's milk
processing capacity. The impact of this fund is expected to increase India's milk production capacity by twice that of Amul's (ie, an
additional 50mn litres of milk per day).
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FOOD SALES (INDIA 2017-2024)

Indicator 2017e 2018e 2019e 2020f 2021f 2022f 2023f 2024f
Food, sales,
29,536,889.0 32,829,872.5 35,684,916.7 39,170,427.3 38,703,002.6 42,367,956.0 46,383,801.4 50,784,194.1
INRmn
Food, sales,
INRmn, % 10.1 11.1 8.7 9.8 -1.2 9.5 9.5 9.5
growth y-o-y
Bread, rice and

cereals, sales, 9,536,869.8 10,641,991.7 11,598,212.1 12,772,039.1 12,575,105.2 13,805,686.1 15,157,031.5 16,640,752.4
INRmn
Bread, rice and

cereals, sales,
10.5 11.6 9.0 10.1 -1.5 9.8 9.8 9.8
INRmn, %
growth y-o-y
Pasta products,
7,734.4 8,282.1 8,757.4 9,283.2 9,393.8 9,927.7 10,472.0 11,025.8
sales, INRmn
Pasta products,
sales, INRmn, % 6.9 7.1 5.7 6.0 1.2 5.7 5.5 5.3
growth y-o-y
Meat and
Poultry, sales, 4,784,351.7 5,412,796.6 5,961,761.2 6,640,690.7 6,528,810.6 7,245,362.1 8,037,605.1 8,912,881.8
INRmn
Meat and
Poultry, sales,
12.0 13.1 10.1 11.4 -1.7 11.0 10.9 10.9
INRmn, %
growth y-o-y
Fish and fish

products, sales, 693,433.8 758,918.0 814,535.7 881,798.6 870,107.2 939,659.0 1,014,957.3 1,096,541.9
INRmn
Fish and fish

products, sales,
8.6 9.4 7.3 8.3 -1.3 8.0 8.0 8.0
INRmn, %
growth y-o-y
Dairy, sales,
4,797,606.0 5,097,855.4 5,339,709.3 5,619,205.9 5,565,323.3 5,841,770.1 6,126,794.6 6,420,998.7
INRmn
Dairy, sales,
INRmn, % 5.8 6.3 4.7 5.2 -1.0 5.0 4.9 4.8
growth y-o-y
Oils and Fats,

2,381,460.7 2,620,703.6 2,826,151.6 3,074,522.6 3,040,068.5 3,298,272.8 3,578,496.4 3,882,751.4
sales, INRmn
Oils and Fats,

sales, INRmn, % 9.2 10.0 7.8 8.8 -1.1 8.5 8.5 8.5
growth y-o-y
Fresh and
preserved fruit, 3,798,410.9 4,411,106.9 4,953,355.9 5,630,743.0 5,521,814.8 6,243,130.1 7,047,751.1 7,943,837.8
sales, INRmn
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Fresh and
preserved fruit,
14.9 16.1 12.3 13.7 -1.9 13.1 12.9 12.7
sales, INRmn, %
growth y-o-y
Fresh
vegetables, 318,395.8 350,210.6 377,382.3 410,391.7 404,714.8 438,991.1 476,262.6 516,812.7
sales, INRmn
Fresh
vegetables,
9.1 10.0 7.8 8.7 -1.4 8.5 8.5 8.5
sales, INRmn, %
growth y-o-y
Sugar and sugar

products, sales, 1,696,834.0 1,855,309.7 2,003,564.8 2,173,899.9 2,256,741.0 2,451,954.9 2,664,870.2 2,897,261.3
INRmn
Sugar and sugar

products, sales,
8.9 9.3 8.0 8.5 3.8 8.7 8.7 8.7
INRmn, %
growth y-o-y
Other food
products, sales, 1,521,791.8 1,672,697.9 1,801,486.4 1,957,852.6 1,930,923.4 2,093,202.1 2,269,560.5 2,461,330.3
INRmn
Other food
products, sales,
9.0 9.9 7.7 8.7 -1.4 8.4 8.4 8.4
INRmn, %
growth y-o-y
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Drink
Key View: We expect India's non-alcoholic drinks spending segment to be shielded from the negative impact of Covid-19
(coronavirus) in 2020 due to shifting consumer purchasing patterns which is resulting in consumers prioritising essentials. The
alcoholic drinks segment will face significant headwinds in 2020 due to the closure of restaurants and bars as part of social
distancing measures. Over the medium term (2020-2024), we forecast non-alcoholic drinks spending growth to remain robust with
mineral waters and carbonated drinks posting the strongest growth. In terms of alcoholic drinks, we forecast spirits to continue to
dominate alcoholic drinks consumption growth during 2020-2024 while beer will post the strongest growth in consumption over
the same period.
Latest Updates
• In line with the global spread of Covid-19 (coronavirus), we have adjusted our non-alcoholic drinks spending forecasts for 2020
onwards. As an essential spend segment, we believe that consumer spending on non-alcoholic drinks will be shielded from the
negative impact on overall consumer spending.
• Our upward revision for the 2020 non-alcoholic drinks spending forecast is 9.3% y-o-y, from the pre-coronavirus forecast of
7.9% y-o-y. Over the medium term (2020-2024), we forecast non-alcoholic drinks spending to grow at an annual average annual
growth rate of 6.7% y-o-y.
• We believe that spending on alcoholic drinks will be negatively affected by the spread of the coronavirus. While households will
stock up on these products, the increased spending will not be enough to outweigh spending in bars, restaurants and hotels. As
such, our alcoholic drinks consumption has been downwardly revised to a contraction of -1.6% y-o-y for 2020, from 4.4% pre-
coronavirus. Therefore, our medium term forecast has changed to 3.3% y-o-y, from the previous 4.5% y-o-y.
• Within the soft drinks segment (made up of carbonated drinks, mineral and spring waters, and fruit and vegetable juice), we
forecast mineral or spring waters to be the fastest growing non-alcoholic drinks spending category, expanding at an average
annual growth rate of 7.9% y-o-y over the 2020-2024 period. Fruit and vegetables spending grow will also be strong, growing at
an average annual growth rate of 6.8% y-o-y over the 2020-2024 period.
• The hot drinks sector made up of coffee, teas and other drinks is projected to be the slowest growing non-alcoholic drink sector
owing to the maturity of the market, expanding by an average of 5.6% annually over our 2020-2024 forecast period.
Structural Trends
While both food and non-alcoholic drinks spending will be shielded from the negative impact of the coronavirus pandemic, we
believe that consumption of alcoholic drinks will be negatively affected. A large portion of alcoholic drinks spending, especially in
spirits, comes from on-site consumption in bars, restaurants and hotels. With India closing down these establishments on March 25
2020, we believe this portion of alcoholic drinks spending will be negatively affected. While consumers can still purchase off-site
alcoholic drinks at mass grocery retails and alcohol stores, we do not foresee the increased demand of off-site spending offsetting
the decreased demand from on-site spending. As a result, we have revised downwards our 2020 forecast for alcoholic drinks
consumption in 2020 to -1.6% y-o-y, from the pre-coronavirus forecast of 4.4% y-o-y. This will consequently affect our medium term
forecast, which has changed to an average of 3.3% per year, from the previous 4.5%.
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Total Alcohol Consumption

Total Alcohol Consumption, litres mn (2017-2024)
e/f = Fitch Solutions estimate/forecast. Source: WHO, Fitch Solutions
Alcoholic Drinks
The alcoholic beverages industry in India is dominated by spirits, followed by beer, with the wine market a distant and undeveloped
third. Despite large gains across the Indian food and beverage market, the alcoholic drinks market is not forecast to deliver the
growth that would be expected in a fairly undeveloped market with a growing, young and economically active consumer base.
We hold a favourable outlook for the spirits segment, which has traditionally been more popular than beer among Indian consumers
for several reasons. First, alcoholic drinks are taxed by volume in India, which puts spirits at a competitive advantage over beer.
Second, India has more of a spirits culture, with whiskey being the most consumed alcoholic drink by a large margin.
Therefore, we expect spirits producers to ramp up investment over our medium term forecast period (2020-2024). Both Diageo
and Pernod Ricard have categorised India as a strategic growth market, although their respective strategies have so far differed.
Diageo first focused on premium spirits in the market, in order to target the wealthiest consumers, and then acquired a majority
stake in domestic producer United Spirits. Pernod Ricard entered the market organically with a strong focus on domestic whiskies
and other affordable liquors.
Given the consumer dynamics in India, the beer industry could have been expected to take off in a big way over the past decade.
However, perhaps more so than any of the other BRIC countries (Brazil, Russia and China), India has posed real challenges to
multinational beer companies. Although India's spirits industry has boomed, the same has not been seen in the beer segment. At an
estimated 5.7 litres per capita in 2020, consumption of beer in India ranks among the lowest globally and lags considerably behind
other fast-growing economies in Asia.
We highlight a number of reasons for beer's relative underperformance:
• Culture: Beer consumption is not widespread, and advertising is not without its regulatory hurdles. It is not easy to advertise
beer through conventional channels such as television. United Breweries has previously advertised its Kingfisher brand on its
namesake airline, for example.
• Taxation: Alcoholic drinks are taxed by volume in India, making beer expensive relative to spirits in the country.
• Access: It is not easy to buy beer across much of the country. Permits are needed in some states, and in many cities on/off-
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trade outlets are often not readily accessible.

• Low Profit Margins: Because of the high taxes, lack of real scale and high operating costs (including distribution and power
outages), profit margins on beer are generally relatively low in India.
Despite all this, in our view the sheer scale of the Indian consumer market is so tempting that foreign beer companies will continue
to see the country as a major opportunity. Moreover, we are starting to see a growing beer-drinking culture, particularly among the
middle class in urban areas. While spirits will continue to dominate India's alcoholic drinks market, we expect to see strong growth in
beer consumption over our 2020-2024 forecast period. We forecast beer sales in volume terms to grow by an average of 4.2%
annually over the medium term (2020-2024), reaching 6.7bn litres in total by the end of this period, up from an estimated 5.4bn
litres in 2020.
Four Key Growth Drivers In India's Beer Sector:
Growing Middle Class: A young, burgeoning middle class with rising disposable incomes will lead to greater spending on alcoholic
drinks, particularly beer, which carries premium associations in India, given that spirits are cheaper and more widely accessible for
the general population. We forecast the number of households with a disposable income of more than USD10,000 to account for
13.1% of households by the end of 2024, up from 6.6% in 2020.
Low Base Effects: While spirits will continue to dominate India's alcoholic drinks market, we expect to see strong growth in beer
consumption over our forecast period.
Emerging Craft Beer Trend: Influenced by trends from Europe and the US, India is rapidly developing its own craft beer culture
with notable companies such as B9 Beverages’ Bira 91 and White Rhino popular among Indian consumers. For the fiscal year
ending March 2018, B9 Beverages reported INR1.7bn in revenue, up from INR300mn during the previous fiscal year. Although
India’s craft beer industry is still nascent, the All India Brewers Association estimates craft beers sales to be growing at a rate of 20%
y-o-y. In October 2019, Anheuser-Busch InBev announced that it was building 15 microbreweries, in a new venture with the Indian
Hotels Co in India. The partnership will be worth INR1.5bn (USD21mn).
Changing Cultural Attitudes: Attitudes towards alcohol are changing, especially among young urban-dwellers who are gaining a
taste for Western beers and spirits. Although traditional conservative beliefs still exist in poorer rural areas, stigmatising alcohol
consumption, drinking in bars is fast becoming part of everyday social life across major cities such as Mumbai, Delhi and Bangalore.
This could also place pressure on local governments to ease regulations on alcohol licensing, which would provide further upside
support to our consumption forecasts. While this is not our core scenario, we will be monitoring developments closely, particularly
as the pro-business government continues to introduce reforms across various industries.
The wine sector in India is small, with per capita consumption of wine standing at less than 0.1 litres per capita in 2020, and this level
is projected to remain constant through to 2024. Wine consumption will decline over the medium term as consumers continue to
opt for spirits and beers. We forecast wine consumption to fall by an average of -0.4% annually between 2020 and 2024.
TOTAL ALCOHOLIC DRINKS SPENDING AND CONSUMPTION (INDIA 2017-2024)

Alcoholic drinks spending, INRbn 593.05 642.43 685.29 638.18 708.91 760.68 817.36 879.41
Alcoholic drinks spending, INR % y-o-y 21.70 8.33 6.67 -6.87 11.08 7.30 7.45 7.59
Alcoholic drinks spending, INR per household 2,192.10 2,345.37 2,471.60 2,274.42 2,497.10 2,648.86 2,814.35 2,994.81
Alcoholic drinks spending, INR per capita 443.01 474.94 501.52 462.45 508.76 540.78 575.74 613.92
Total alcohol consumption, litres mn 12,127.4 12,649.0 13,190.9 12,978.6 13,556.2 14,167.6 14,812.3 15,490.7
Total alcohol consumption, litres mn, % y-o-y 3.6 4.3 4.3 -1.6 4.5 4.5 4.6 4.6
Total alcohol consumption, litres per capita 12.5 12.8 13.2 12.7 13.1 13.5 13.9 14.3
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Beer, litres mn 4,698.3 5,050.7 5,434.5 5,369.3 5,712.9 6,044.3 6,358.6 6,651.1
Beer, litres mn, % y-o-y 7.0 7.5 7.6 -1.2 6.4 5.8 5.2 4.6
Beer, litres per capita 4.8 5.1 5.4 5.3 5.5 5.8 6.0 6.2
Wine, litres mn 63.7 63.6 63.4 62.4 62.4 62.4 62.3 62.2
Wine, litres mn, % y-o-y -0.2 -0.2 -0.3 -1.5 0.0 0.0 -0.1 -0.2
Wine, litres per capita 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1
Spirits, litres mn 7,365.4 7,534.8 7,693.0 7,546.9 7,780.8 8,060.9 8,391.4 8,777.4
Spirits, litres mn, % y-o-y 1.6 2.3 2.1 -1.9 3.1 3.6 4.1 4.6
Spirits, litres per capita 7.6 7.6 7.7 7.4 7.5 7.7 7.9 8.1
e/f = Fitch Solutions estimate/forecast. Source: National sources, Fitch Solutions
With the spread of the coronavirus across India, we have revised our non-alcoholic drinks spending forecast for this quarter. On May
5, the Indian government ended the nationwide lockdown which came into effect on March 25. Essential businesses such as mass
grocery retailers and pharmacies were permitted to remain open during the lockdown period. As of June 8, shopping malls, hotels
and restaurants were allowed to reopen. As an essential spend segment, we believe that consumer spending on non-alcoholic
drinks will be shielded from the negative impact on consumer spending on the back of the coronavirus outbreak. We believe that,
along with food, non-alcoholic drinks like bottle water and juice, will become the focus of consumers’ purchasing habits. While a lot
of non-alcoholic drinks spending is outside the mass grocery retail sector, we believe that any decrease in demand will be made up
for in increased demand for non-alcoholic drinks from the mass grocery sector. As such, we have upwardly revised our non-
alcoholic drinks spending forecast for 2020. We note that prior to the lockdown there were high levels of panic buying and
stockpiling, two normal consumer behavioural reactions during disease outbreaks. Consumers in India began panic buying and
stockpiling essentials on May 24 in anticipation of the lockdown being implemented. Our upward revision for the 2020 non-
alcoholic drinks spending forecast is 9.3% y-o-y, from the pre-coronavirus forecast of 7.9% y-o-y. Over the medium term
(2020-2024), we forecast non-alcoholic drinks spending to grow at an annual average annual growth rate of 6.7% y-o-y.
Non-Alcoholic Drinks Sales

India - Non-Alcoholic Drinks Sales (2017-2024)
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Non-Alcoholic Drinks
We hold an optimistic outlook for the Indian soft drinks sector, as sales will benefit from rising incomes and a young consumer base.
We expect fruit and vegetable juices to outperform other categories, driven by increasing investment in new brands and product
varieties by beverage majors and support by the Indian government to drive fruit consumption.
India is well placed to offer among the fastest growth in soft drinks across all markets globally. Both local and multinational soft
drinks producers have adopted aggressive expansion plans and continue to do so, with global powerhouses The Coca-Cola
Company and PepsiCo leading the way.
Within the soft drinks segment (made up of carbonated drinks, mineral and spring waters, and fruit and vegetable juice), we forecast
mineral or spring waters to be the fastest growing non-alcoholic drinks spending category, expanding at an average annual growth
rate of 7.9% y-o-y over the 2020-2024 period. Fruit and vegetables spending grow will also be strong, growing at an average annual
growth rate of 6.8% y-o-y over the 2020-2024 period.
Coca-Cola has a fruit-focused drinks portfolio in India under the Minute Maid banner and has strengthened its portfolio through the
launch of its new smoothie in September 2018, available in mango and banana variants in a 250ml bottle. This investment in the
fruit juice sector is part of Coca-Cola India's announcement in 2017 that it would invest USD1.7bn to create a range of region-
specific juice variants made from fruits native to the country. In January 2019, Coca-Cola India expanded its Minute Maid product
range by launching a grape fruit-based sparkling drink branded as Colour. The company continued its expansion into flavour in April
2019. In November 2019, The Coca-Cola Co launched Rani Float in India. The Indian version will be produced in the country and
contain local fruit, in keeping with a government directive to support Indian fruit growers.
That said, carbonates make up the bulk of soft drinks spending. The health-conscious trend affecting many markets has not
reached India yet, and consumer preferences do not show the same level of dynamism and sophistication compared with more
developed markets. Altogether, this will drive spending on carbonates. A key risk to this positive outlook stems from a proposal to
introduce a tax on sugary drinks in the country. Still, Coca-Cola and PepsiCo are extremely optimistic about the Indian soft drinks
market, with both companies pledging significant investments in the region.
In particular, both companies are targeting young, first-time consumers through smaller formats. Coca-Cola India has come up with
single-serve cans (180ml priced at INR20), while Pepsi is launching 150ml cans for Pepsi and Diet Pepsi at INR15. Smaller can sizes
and lower prices bode well for attracting consumers with lower incomes and also tend to be more cost-efficient than larger sizes in
terms of USD per product, which will be positive from a margins perspective.
In late 2016, however, the Goods and Services Tax (GST) Council in India announced that aerated drinks are being re-categorised in
the luxury category. Existing applicable tax rates on carbonated drinks average between 30% and 31%. The Indian Beverage
Association, which represents manufacturers such as PepsiCo and Coca-Cola, stated that they were disappointed at the move,
adding that the 'viability of the industry could be in grave danger because of such an adversarial tax approach'. According to
industry officials at Coca-Cola, 'If there is an additional excess on the category over and above the 28% GST rate, it is going to have a
severe impact, as that will lead to consumer price hikes as much as 20% and kill the industry.'
Within the hot drinks category, the Indian tea sector is fairly mature, given the presence of major tea manufacturers such as Tata
Global Beverages and Apeejay. While we expect solid growth, especially given the developed nature of the segment, local tea
manufacturers are beginning to look abroad for future growth opportunities, with the speciality tea markets of the US and the UK
proving to be particularly attractive.
The outlook for the Indian coffee sector is much more attractive as a result of lower levels of market saturation and continued
industry dynamism. Strong foreign presence and its associated high levels of investment is another driver behind our forecasts for
coffee. The presence of premium coffee chains Costa Coffee and Starbucks (through a joint venture with Tata Global Beverages),
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alongside domestic players such as Café Coffee Day, highlights sector dynamism.
NON-ALCOHOLIC DRINKS SALES (INDIA 2017-2024)

Non-alcoholic drinks, sales, INRmn 446,638.7 489,436.3 526,542.2 571,842.0 565,767.1 613,399.1 665,591.4 722,781.6
Non-alcoholic drinks, sales, INRmn, %

19.9 9.6 7.6 8.6 -1.1 8.4 8.5 8.6
growth y-o-y
Coffee, teas and other hot drinks, sales,

114,391.0 124,788.3 133,740.0 144,616.8 143,087.0 154,459.7 166,852.9 180,358.9
INRmn
Coffee, teas and other hot drinks, sales,

18.9 9.1 7.2 8.1 -1.1 7.9 8.0 8.1
INRmn, % growth y-o-y
Soft drinks, sales, INRmn 332,247.7 364,648.0 392,802.2 427,225.3 422,680.1 458,939.4 498,738.6 542,422.8
Soft drinks, sales, INRmn, % growth y-o-y 20.2 9.8 7.7 8.8 -1.1 8.6 8.7 8.8
Fruit and vegetable juices, sales, INRmn 134,044.4 148,253.1 160,693.8 176,049.6 173,889.7 190,178.8 208,221.9 228,208.5
Fruit and vegetable juices, sales, INRmn,

22.0 10.6 8.4 9.6 -1.2 9.4 9.5 9.6
% growth y-o-y
Mineral or spring waters, sales, INRmn 3,323.7 3,676.4 4,018.7 4,394.1 4,637.8 5,049.4 5,473.8 5,904.2
Mineral or spring waters, sales, INRmn, %

16.7 10.6 9.3 9.3 5.5 8.9 8.4 7.9
growth y-o-y
Carbonated drinks, sales, INRmn 194,879.7 212,718.5 228,089.8 246,781.6 244,152.6 263,711.2 285,042.9 308,310.0
Carbonated drinks, sales, INRmn, %

19.0 9.2 7.2 8.2 -1.1 8.0 8.1 8.2
growth y-o-y
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Industry Risk/Reward Index

Asia Food & Non-Alcoholic Drinks Risk/Reward Index: Australia
Overtakes South Korea
Key View: The projected impact of Covid-19 on the food and non-alcoholic sector is filtering into our 2020 projections and so our
RRIs. We believe that, as a priority purchase, food and non-alcoholic spending by consumers will remain shielded. In Q320, the Asia
region maintains its second place position globally in our Food and Non-Alcoholic Drinks Risk/Reward Index, with an average score
of 58.1 out of 100 behind NAWE’s (North America and Western Europe) score of 64.2. Malaysia (74.1) again tops the regional list,
offering an attractive balance between risks and rewards. China (73.5) and Australia (70.5) make up the rest of the top three, with
Australia surpassing South Korea this quarter. Hong Kong (50.3) continues its slide down the rankings, following the impact of social
unrest in the country in 2020 and the global impact of Covid-19 in 2020.
East Asia Offers Great Mix Of Risk And Rewards

Asia - Food & Non-Alcoholic Drinks Risk/Reward Heat Map
Note: Scores out of 100; higher score = more attractive market. Source: Fitch Solutions
Important Note On Covid-19: The projected impact of Covid-19 (coronavirus) on the food and non-alcoholic sector is filtering
into our 2020 projections. We believe that, as a priority purchase, food and non-alcoholic spending by consumers will remain
shielded. Across the majority of states (especially those in lockdown), we are projecting a slight uptick in spending for this segment,
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as consumers draw down their spending within other sectors and place greater importance on purchasing food products. Our RRI
reflects our forecast changes in 2020, but also highlights our medium-term projections and measures the consumer fundamentals
within the market. Given that we currently believe coronavirus will only have short-term consequences on the food and non-
alcoholic drinks sector, the virus has not yet lead to any drastic country-on-country movements in our Index.
Important Note: Our Food & Drink Risk/Reward Index (RRI) includes two Food & Drink Risk/Reward indices: our Food & Non-
Alcoholic Drinks RRI and our Alcoholic Drinks RRI. The first quantifies the risks and rewards associated with food and non-alcoholic
drink sales in each country, while the other quantifies the risks and rewards associated with the alcoholic drinks sector.
Visible Split Between Developed And Developing Countries

Asia - Food & Non-Alcoholic Drinks Risk/Reward Index
Main Regional Features And Latest Updates
• In our Q320 Food & Non-Alcoholic Drinks RRI, Asia comes in second out of the six regions. Its average regional score of 58.1 is
behind North America & Western Europe (NAWE)'s 64.2, but it is considerably ahead of Central & Eastern Europe (CEE) in third
place, with its score of 50.1.
• The top three regional markets have shifted this quarter, with Malaysia first (74.1), China second (73.5) and Australia in third with
a score of 70.5 after surpassing South Korea (). Asia has six markets in the top 15 globally, including Malaysia (second), China
(third), Australia (seventh), South Korea (ninth), Japan (12th) and Indonesia (13th).
• We divide Asia into two sub-regions: developed Asia (64.4 out of 100), made up of smaller populations with higher incomes (eg,
South Korea, Taiwan and Singapore) and emerging Asia (54.9 out of 100), containing large youthful populations with relatively
low per capita wealth (eg, China, Indonesia and India). While the differences are stark, a large number of emerging Asia markets
rank at the top of the region in our Index, due to the strong rewards stemming from the growth potential they offer.
• The Asia region, as a whole, scores well for the Rewards component of our index, with a regional average Reward score of 60.6,
the top score globally, above even NAWE (57.0). Growth prospects in emerging Asia stem from the fact that the region is not as
saturated, as some developed markets in Asia and NAWE. However, risks related to logistics and low-income populations hold the
region back.
• Social unrest in Hong Kong in 2019 and into 2020 and now the impact of Covid-19 on the country and its largest trade partner
(Mainland China) have led Hong Kong’s score within the RRI to tumble y-o-y. The country now scores 50.3 out of 100, 10.5 points
less than Q220 and 18 points less than the 68.3 it scored in Q319.
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Australia Overtakes South Korea
Australia has overtaken South Korea in Q320, to become the third most attractive market in our Asia RRI and the seventh most
attractive in the world, from the fourth in Asia and ninth in the world in Q220. This rise is attributed to the country's rising Industry
Rewards score (69.0 in Q320, from 68.2 in Q220), as Australia records an increase in food and non-alcoholic drinks spending, as well
as slightly more favourable demographics (increasing urban and young adult populations); while within Industry Risk the country is
recording an improvement in logistics and operational risk scores.
Within Industry Rewards, we highlight that food and non-alcoholic drinks spending in Australia is forecast to expand, from an already
elevated level. Australia is now forecast to have the highest food and non-alcoholic spending per capita of any country in the world,
at USD9,477.4 in 2020. In total food and non-alcoholic spending terms, Australia’s sheer market size of USD106.0bn compared to
South Korea’s USD80.3bn food and non-alcoholic spend level make it an attractive market for food and drinks companies and
investors.
Australia’s F&D Sector Attractive Due To Her Sheer Size

Australia & South Korea - Total F&D Spending, USDbn
e/f = Fitch Solutions estimate/forecast Source: National Statistics, Fitch Solutions
Improving demographics (number of urban consumers and young adults) are also aiding the Industry Rewards score in Australia.
Australia is one of the few developed states globally that will continue to see a rise in the number of young adults (aged 20-39),
which is projected to increase from 7,063,900 in 2019 to 7,093,800 in 2020. This means that the youthful segment of the
population, which are more likely to spend more on food and drink will increase, and thus food and drink companies will have
greater opportunity to pitch their innovative, higher priced products to this expanding demographic.
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Young Adult Population Set To Increase In Australia

Australia - Number Of Young Adults Aged 20-39, ‘000
f = Fitch Solutions forecast. Source: UN, Fitch Solutions
Australia’s expanding urban population will also benefit food and drink companies, as urban consumers tend to spend more on food
and drink given their proximity to shops and also because they tend to have higher disposable incomes on average to spend.
Australia’s urban population is set to increase from 217mn in 2019 to 220mn in 2020, and projected to increase further to 231mn
by 2024.
Australia’s Urban Population Continues To Rise

Australia -Number Of Urban Dwellers, ‘000
f = Fitch Solutions forecast. Source: UN, Fitch Solutions
Within Industry Risks, Australia’s regulatory environment was the main contributor to the improvement of the country’s score,
having expanded from a score of 49.5 out of 100 in Q220, to 54.3 in Q320. This was largely due to an improvement in the ease of
doing business in Australia, as Australia's World Bank Ease of Doing Business Score improved from 80.7 in 2018, to 82.2 in 2019.
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Enhancement Of Regulatory Environment Drove Improvement Of Industry Risk Score

Australia - Operational Risk Index
Note: Scores out of 100; higher score = lower risk. Source: Fitch Solutions
Malaysia Retains Top Position Despite Threats From Covid-19
In our Q320 update, Malaysia still continues to top our Asia ranking. The country offers the best balance between risks and rewards,
with its score of 74.1 in Q320, up from 73.2 in Q317. Malaysia boasts some of the highest forecasts for household spending in the
region. Over the next five years, we foresee real household spending growing by an average of 6.2% a year. Malaysia also has one of
the largest shares of young adults (20-39 years old) as a percentage of its total population in Asia at 35.3% in 2020. This consumer
group is more open to modern retailing concepts and drives trends, as well as having greater purchasing power. The country also
has the stability of a developed market with a robust regulatory environment and low levels of logistics risks to support the supply
chain of MGR chains and food and drink manufacturers. In addition, Malaysia offers a less saturated market, than some of Asia's
developed states for investors, presenting more attractive long-term growth opportunities.
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Malaysia Has An Attractive Consumer Base

Selected Asian Countries - Young Adults, % of total (2020-2024)
e/f = Fitch Solutions estimate/forecast. Source: UN, Fitch Solutions
However, while the long term fundamentals of the Malaysian market remain solid, we highlight that the country is experiencing risks
to outlook both politically and economically. We attribute Malaysia’s RRI score decline in Q320 in absolute terms from Q220 mainly
to a sharp increase in both political and economic risks. On the political front, Malaysia underwent an unexpected change of
government on February 24 2020, after Prime Minister Mahathir Mohamad abruptly resigned (see Malaysia's Eighth Prime Minister
On Shaky Ground, March 02 2020). He was replaced by a government appointed by the Sultan consisting of a new coalition formed
primarily by the Barisan National, the opposition party, which was voted out of government in the previous election. Given that the
legitimacy of this new government may continue to be challenged politically in the coming months, this instability will pose a risk for
businesses looking to invest in the short term.
On the economic front, this political infighting may hamper the new government’s policy responses to the economic downturn
caused by Covid-19, and the month long lockdown in Malaysia. Given that our real household spending forecast has already been
slashed from 6.3% to 4.3% in 2020 due to the projected impact of the virus, any political infighting that could delay or cancel much
needed welfare transfers to consumers will negatively impact the country’s consumer outlook further.
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Malaysia Consumer Spending Outlook Revised Down On Covid-19 Impact

Malaysia - Real Household Spending, % chg y-o-y
e = estimate. Source: Fitch Solutions
China Strongly Outperforms Regional Average
Five quarters ago in our Q219 iteration of our Asia Food and Non-Alcoholic Drink RRI, China overtook South Korea to move into
second place in our Index; it continues to maintain this position a year later, in our Q320 update (China scores 73.5 compared to
South Korea 68.9 and Australia, now in third place 70.5).
China remains one of the most attractive markets in the region. Its strong position can be attributed to its robust Rewards score, the
highest (not just in Asia but also high by global standards), at 80.1 out of 100, compared to a regional average of 60.5. Both Industry
(82.5) and Country (76.4) Rewards vastly outperform the regional average (59.9 and 61.4 respectively). In terms of Industry Rewards,
China has an extremely high total F&D expenditure ranking as the highest in the entire world. In terms of Country Rewards, China
has attractive consumer demographics, with a large urban population (884mn in 2020) that is set to expand even further.
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China Offers Great Rewards

China & Regional Average - Risk/Reward Scores (2020)
The strong rewards in China for food and drink investment are best illustrated by an increase in grocery investment in the country
seen over the last year. This year in 2020, we expect the grocery sector to continue to outperform despite (or perhaps because of)
Covid-19, where consumers in China have been locked down at home in February and March 2020 by the central government, and
have substituted eating out at restaurants with home-cooked food sourced from mass grocery retail. In fact, food spending was the
only category of spending that saw y-o-y growth (9.7%) in January and February 2020 in the midst of drastic contraction in all other
segments of spending.
Food Sales Expand During China’s Lockdown

China - Sales Across Consumer Categories, y-o-y growth (January & February 2020)
Source: National Bureau of Statistics, Fitch Solutions
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However, we note that China will be an even more attractive market if it improves on its Industry Risk score (47.0), which is the only
score which performs below the world average. While its vast manufacturing network and well connected supply chain, well-honed
after decades of being the production capital of the world, means that its Logistics Risk score (73.3) far outperforms the regional
average (54.7). The country still has some way to go in improving its Regulatory Environment (scoring 29.5 compared to the
regional average of 48.8).
ASIA - FOOD & NON-ALCOHOLIC DRINKS RISK/REWARD INDEX

Industry Country Industry Country Regional Global
REWARDS RISKS RRI
Rewards Rewards Risks Risks Rank Rank
Malaysia 76.8 74.3 75.8 73.0 67.4 70.2 74.1 1 2
China 82.5 76.4 80.1 47.0 69.3 58.1 73.5 2 3
Australia 71.4 65.5 69.0 66.0 81.8 73.9 70.5 3 7
South Korea 62.2 69.3 65.0 72.7 83.3 78.0 68.9 4 9
Japan 62.2 66.9 64.1 72.1 78.6 75.3 67.5 5 12
Indonesia 74.9 77.1 75.8 38.1 54.0 46.1 66.9 6 13
Taiwan 58.4 59.3 58.8 69.5 85.9 77.7 64.4 7 16
India 69.2 76.4 72.1 35.6 53.3 44.4 63.8 8 18
New Zealand 64.1 39.3 54.2 67.3 91.7 79.5 61.8 9 24
Thailand 64.1 62.1 63.3 54.9 59.3 57.1 61.5 10 26
Philippines 70.8 73.1 71.7 24.4 50.5 37.5 61.4 11 28
Vietnam 60.6 64.8 62.3 49.8 55.9 52.9 59.5 12 34
Singapore 42.2 49.5 45.1 94.0 85.9 89.9 58.6 13 35
Bangladesh 68.3 74.0 70.6 12.7 35.4 24.0 56.6 14 40
Hong Kong 32.4 41.4 36.0 94.9 72.7 83.8 50.3 15 57
Pakistan 54.3 68.1 59.8 15.9 16.0 16.0 46.7 16 64
Cambodia 53.3 47.9 51.1 26.7 26.0 26.3 43.7 17 72
Myanmar 47.3 64.8 54.3 9.2 12.3 10.8 41.2 18 79
Laos 45.1 45.2 45.1 18.4 24.3 21.3 38.0 19 83
Sri Lanka 37.8 32.9 35.8 21.6 37.1 29.4 33.9 20 88
Global Average 50.0 50.0 50.0 50.0 50.0 50.0 50.0 ~ ~
Regional
59.9 61.4 60.5 48.2 57.0 52.6 58.1 ~ ~
Average
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ASIA - FOOD & NON-ALCOHOLIC DRINKS INDUSTRY REWARDS

F&D Spending Per Real HH Spend Total F&D
Industry Rewards REWARDS
Capita 5-Year Growth Expenditure
Malaysia 64.8 86.7 79.0 76.8 75.8
China 52.4 95.2 100.0 82.5 80.1
Australia 100.0 27.6 86.7 71.4 69.0
South Korea 62.9 42.9 81.0 62.2 65.0
Japan 84.8 4.8 97.1 62.2 64.1
Indonesia 39.0 90.5 95.2 74.9 75.8
Taiwan 56.2 52.4 66.7 58.4 58.8
India 18.1 91.4 98.1 69.2 72.1
New Zealand 96.2 53.3 42.9 64.1 54.2
Thailand 49.5 61.0 81.9 64.1 63.3
Philippines 41.9 82.9 87.6 70.8 71.7
Vietnam 17.1 97.1 67.6 60.6 62.3
Singapore 57.1 39.0 30.5 42.2 45.1
Bangladesh 23.8 98.1 82.9 68.3 70.6
Hong Kong 53.3 9.5 34.3 32.4 36.0
Pakistan 10.5 80.0 72.4 54.3 59.8
Cambodia 29.5 92.4 38.1 53.3 51.1
Myanmar 1.9 87.6 52.4 47.3 54.3
Laos 24.8 96.2 14.3 45.1 45.1
Sri Lanka 16.2 73.3 23.8 37.8 35.8
Global Average 50.0 50.0 50.0 50.0 50.0
Regional Average 45.0 68.1 66.6 59.9 60.5
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ASIA - FOOD & NON-ALCOHOLIC DRINKS COUNTRY REWARDS

Mass Affluent Urban Spending Country
Population REWARDS
Class Population Population Rewards
Malaysia 61.9 69.5 69.5 96.2 74.3 75.8
China 100.0 59.0 100.0 46.7 76.4 80.1
Australia 57.1 98.1 64.8 41.9 65.5 69.0
South Korea 74.3 93.3 80.0 29.5 69.3 65.0
Japan 90.5 82.9 94.3 0.0 66.9 64.1
Indonesia 97.1 49.5 96.2 65.7 77.1 75.8
Taiwan 56.2 78.1 63.8 39.0 59.3 58.8
India 99.0 20.0 99.0 87.6 76.4 72.1
New Zealand 17.1 80.0 21.9 38.1 39.3 54.2
Thailand 82.9 52.4 76.2 37.1 62.1 63.3
Philippines 88.6 36.2 85.7 81.9 73.1 71.7
Vietnam 86.7 22.9 78.1 71.4 64.8 62.3
Singapore 24.8 92.4 33.3 47.6 49.5 45.1
Bangladesh 93.3 19.0 90.5 93.3 74.0 70.6
Hong Kong 31.4 73.3 40.0 21.0 41.4 36.0
Pakistan 96.2 4.8 91.4 80.0 68.1 59.8
Cambodia 47.6 25.7 22.9 95.2 47.9 51.1
Myanmar 76.2 43.8 61.9 77.1 64.8 54.3
Laos 30.5 44.8 15.2 90.5 45.2 45.1
Sri Lanka 55.2 23.8 20.0 32.4 32.9 35.8
Global Average 50.0 50.0 50.0 50.0 50.0 50.0
Regional Average 68.3 53.5 65.2 58.6 61.4 60.5
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ASIA - FOOD & NON-ALCOHOLIC DRINKS INDUSTRY RISKS

Regulatory Environment F&D Formalisation Logistics Risk Industry Risks RISKS
Malaysia 81.0 61.0 77.1 73.0 70.2
China 29.5 38.1 73.3 47.0 58.1
Australia 54.3 80.0 63.8 66.0 73.9
South Korea 61.9 68.6 87.6 72.7 78.0
Japan 41.9 90.5 83.8 72.1 75.3
Indonesia 37.1 30.5 46.7 38.1 46.1
Taiwan 62.9 62.9 82.9 69.5 77.7
India 38.1 8.6 60.0 35.6 44.4
New Zealand 46.7 81.0 74.3 67.3 79.5
Thailand 78.1 21.9 64.8 54.9 57.1
Philippines 28.6 18.1 26.7 24.4 37.5
Vietnam 83.8 14.3 51.4 49.8 52.9
Singapore 97.1 99.0 85.7 94.0 89.9
Bangladesh 5.7 15.2 17.1 12.7 24.0
Hong Kong 96.2 99.0 89.5 94.9 83.8
Pakistan 12.4 12.4 22.9 15.9 16.0
Cambodia 63.8 2.9 13.3 26.7 26.3
Myanmar 17.1 6.7 3.8 9.2 10.8
Laos 22.9 11.4 21.0 18.4 21.3
Sri Lanka 16.2 1.0 47.6 21.6 29.4
Global Average 50.0 50.0 50.0 50.0 50.0
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ASIA - FOOD & NON-ALCOHOLIC DRINKS COUNTRY RISKS

Long-Term Short-Term Long-Term
Short-Term Operational Country
Economic Risk Economic Risk Political Risk RISKS
Political Risk Index Risk Index Risks
Index Index Index
Malaysia 66.7 85.7 48.6 51.0 76.2 67.4 70.2
China 82.9 87.6 51.0 83.8 55.2 69.3 58.1
Australia 81.9 76.7 87.6 73.3 85.7 81.8 73.9
South
93.3 97.1 83.8 69.0 78.1 83.3 78.0
Korea
Japan 67.6 60.0 91.4 92.4 80.0 78.6 75.3
Indonesia 61.9 71.4 42.9 54.8 46.7 54.0 46.1
Taiwan 98.1 98.6 68.6 76.7 86.7 85.9 77.7
India 62.9 68.6 49.5 47.6 45.7 53.3 44.4
New
92.4 93.3 88.6 89.5 93.3 91.7 79.5
Zealand
Thailand 72.4 74.3 31.4 61.4 58.1 59.3 57.1
Philippines 79.0 81.9 46.7 40.0 27.6 50.5 37.5
Vietnam 57.1 67.6 32.4 88.6 44.8 55.9 52.9
Singapore 69.5 64.8 81.0 100.0 100.0 85.9 89.9
Bangladesh 53.3 72.4 30.5 29.5 13.3 35.4 24.0
Hong Kong 81.0 69.5 34.3 53.3 99.0 72.7 83.8
Pakistan 21.9 14.8 13.3 10.0 18.1 16.0 16.0
Cambodia 14.3 37.1 26.7 39.0 19.5 26.0 26.3
Myanmar 11.4 21.0 6.7 19.5 7.6 12.3 10.8
Laos 6.7 3.8 24.8 80.0 15.2 24.3 21.3
Sri Lanka 41.9 36.2 43.8 26.7 37.1 37.1 29.4
Global
50.0 50.0 50.0 50.0 50.0 50.0 50.0
Average
Regional
60.8 64.1 49.2 59.3 54.4 57.0 52.6
Average
Please Note: Our Risk/Reward Indices are updated frequently and, as a result, the scores in this section may not match the scores
in the rest of the report.
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Asia Alcoholic Drinks Risk/Rewards Index: Hong Kong Falls Dramatically

In The Rankings
Key View: In Q320, the Asia region in our Alcoholic Drinks Risk/Rewards Index (RR) retains its position as second most attractive
region after NAWE (North America and Western Europe). Asia has a diverse offering, with developed Asian states providing a stable
environment, a wealthy consumer base, but reaching saturation – while many emerging Asian states offer a stronger growth
outlook, but with greater risks to navigate. South Korea and China remain the top performers in Q320. In developing Asia, Vietnam
has continued her climb up the regional rankings to third place, overtaking Japan in Q320, after overtaking Australia in the previous
quarter. However, Hong Kong has fallen dramatically in the rankings as a result of potential for long term political turmoil, as well as
the impact of the coronavirus.
China and South Korea Score Highest in the Region

Asia - Alcoholic Drinks Risk/Reward Heat Map
Note: Scores out of 100; higher score =more attractive market. Source: Fitch Solutions
Important Note On Covid-19: The projected impact of Covid-19 on the alcoholic drinks sector is already filtering into our 2020
projections. Alcoholic drinks is a non-essential spending category and as such has the potential to face downside pressure within
consumer spending. Should consumers begin to focus their spending patterns on priority purchases (food and non-alcoholic
drinks, and health products), this will decrease their spending levels across other segments. We also highlight the risk to the supply
side, due to social distancing and lockdowns, many nations have shuttered the on-trade avenue for consumption (restaurants, bars,
clubs hotels etc), which will have an impact on consumption. Consumers can still buy alcohol via the grocery avenue (with the
exception of South Africa), thus not completely stunting consumer spending in this segment. The RRI reflects our forecast changes
in 2020, but also highlights our medium term projections and measures the consumer fundamentals of a market. Given that we
currently believe Covid-19 will only have short-term consequences within the markets, the virus has not yet lead to any drastic
country-on-country movements in our Index.
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Important Note: Our Food & Drink Risk/Reward Index RRI includes two Food & Drink Risk/Reward indices: our Food & Non-
Alcoholic Drinks RRI and our Alcoholic Drinks RRI. The first quantifies the risks and rewards associated with food and non-alcoholic
drink spending in each country, while the other quantifies the risks and rewards associated with the alcoholic drinks sector.
Main Regional Features And Latest Updates
• The Asia region in our Alcoholic Drinks Risk/Rewards Index for Q320 retains its position as second most attractive region after
NAWE.
• South Korea and China remain the top performers in Q320, with a score of 66.3 and 66.1 respectively. This places them sixth and
eighth globally.
• Vietnam continues to perform well, now ranking third after overtaking Japan this quarter and Australia in Q220, with a total score
of 64.9. It also ranks 11th globally, an improvement from the previous quarter where it ranked 16th.
• Hong Kong’s score and rank continues to decline this quarter, with a score now at 53.9 from 56.3 in Q220. This score decline
highlights the impact of short term pressures on the growth rate of her alcohol spending due to the Covid-19 outbreak, as well
as longer term, fundamental issues that have the potential to trigger further protests.
Many Rewards Across The Region

Asia Alcoholic Drinks Risk/Reward Index
Hong Kong’s Ranking Plummets, Due To Potential For Future Protests And Covid-19 Woes
Hong Kong’s ranking in the Asia Alcohol RRI has dropped by two positions, from eighth in Q220 (56.3/100) to tenth (53.9/100) this
quarter in Q320. This is due to short term pressures from the Covid-19 outbreak in reducing the country’s alcohol consumption
growth rate on the Industry Rewards front, as well as a decline in the country’s long term political risk index (measured within
Country Rewards), due to unresolved political tensions internally and with China.
In the short term, the Covid-19 outbreak has lowered Hong Kong’s alcohol consumption growth rate, which has in turn lowered her
Industry Rewards score by 3.5 points from 44.6 in Q220 to 41.1 this quarter in Q320. Hong Kong decreed on 2 April that all
premises which sell alcohol are to close, to enforce social distancing. We have therefore revised down Hong Kong’s alcohol
spending to a y-o-y decline of -10.5% in 2020, from 1.43% y-o-y growth in our pre-Covid-19 forecast for 2020 and an estimated
-8.0% y-o-y growth in 2019. This is the country’s sharpest contraction for alcoholic drinks spending since 2003 (-3.7%), when
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Hongkongers avoided the city’s bars due to fears of contracting the SARS virus.
Drop In Industry Rewards Due To Contraction Of Alcohol Spending In Hong Kong

Hong Kong - Alcoholic Drinks Spending, % chg y-o-y (2001-2024)
e/f = Fitch Solutions estimate/forecast. Source: Hong Kong Census and Statistics Department, Fitch Solutions
Hong Kong’s Alcohol RRI score is also being dragged down by her declining Country Risks scores (which dropped by 5.2 points from
76.6 one quarter ago in Q220, to 71.4 in Q320), which are a longer term risk for investors to navigate. This decline was due mostly to
Hong Kong’s Long Term Political Risk Index plunging from 56.8 in Q220 to 30.5 in Q320. Our Country Risk team made this revision
based on the fact that the fundamental causes for Hong Kong’s protests in 2014 and in 2019 have not been addressed, despite
protestors staying home for the time being owing to fears of contracting the coronavirus (see Hong Kong To See Periodic Mass
Unrest In 2020s, Barring Major Reforms, March 16 2020). These fundamental causes include increased polarisation between
younger, pro-democracy protestors and older pro-Beijing supporters, increased income inequality between these two groups, and a
persistent housing shortage that disproportionately affects the younger generation. Hence, we expect that these fault lines will only
continue to deepen barring any real attempts by Beijing to address them, especially since the deadline for the special status that
Hong Kong enjoys as a Special Autonomous Region draws ever closer in 2047.
China Leads The Way This Quarter, But South Korea’s Outlook Remains Bright
This quarter, China scores highest with a total score of 66.3 in Q320. China scores particularly well on the Rewards segment (70.4
out of 100). This score is likely to increase due to mass affluent class (household disposable income of USD10,000+), which stands
at 61.1 out of 100 and which is projected to expand further. China's share of households in the mass affluent class bracket is
projected to reach 74.7% in 2024, up from 58.3% in 2020, increasing the share of households for alcohol drink majors to target.
There is a clear outperformance in value growth of alcohol, in comparison to the volume growth outlook, with alcoholic drinks
spending in China projected to rise by 11.3% between 2020 and 2024 in local currency terms, while total alcohol consumption in
volume terms will rise by a tepid 2.9% over the same period. This growth in spend indicates a premiumisation trend is playing out,
which we are already starting to witness in the beer segment, with growing investment into the craft beer market in China, being
made (see 'China's Beer Market Undergoing Premium Transformation', March 12 2019). We see a similar trend playing out in the
spirits segment, with Pernod Ricard inaugurating a new Emeishan Malt Whisky Distillery in China's Sichuan district in August 2019.
The distillery represents a 10-year USD150mn investment by Pernod Ricard, with production at the facility due to start in 2021.
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More recently, energy producer Mengtai Group has unveiled plans to build a whisky distillery in Inner Mongolia in 2020.
China Leads But Followed Closely By South Korea

China & South Korea - Rewards & Risks Scores
South Korea scores 65.9 in our Alcoholic Drinks RRI for the latest Q320 period, placing it second in the Asia region and eighth
globally. South Korea scores particularly well in the per capita consumption of alcohol component, as well as the size of the total
alcohol market. This high per capita consumption is predicated on the popularity of soju in the country, a distilled rice beverage
similar to the Japanese sake. Soju is actually the best-selling liquor in the world, ahead of more recognised products such as vodka
and whiskey. South Korea's rise toward the top of our Asia Alcoholic Drinks RRI reflects a view we have held since October 2016,
which argued that innovation in the soju space through fruit and other flavours would lead to greater consumption in South Korea
and across the world, especially due it its attractiveness within the youth demographic.
South Korea has a strong drinking culture, in particular with ‘hweshik’ which is a social obligation in Korean companies for co-
workers to go out together for after work drinks. In addition, while spirits is the alcohol of choice among South Koreans, we also note
a growing popularity for beer due to the ‘chimaek’ trend of consuming fried chicken with beer. In response to the growing demand
for beer, the expanding share of female drinkers and solitary drinking in the country, leading breweries Oriental
Brewery (OB) and Hite Jinro have unveiled smaller-sized beer cans. This demand for smaller alcohol servings is not just apparent in
the beer industry, but also the spirits sector with Diageo Korea unveiling its Johnnie Walker Red and Black Label blended whiskey
in 200ml bottles, while Pernod Ricard introduced Irish blend Jameson at 200ml. Although South Korea is the eighth most attractive
market in the world on our Index, it must be highlighted that opportunities for new products are limited, given that soju holds such a
dominant position in the country.
Vietnam Continues Her Climb Up The Rankings
In Q320 we see Vietnam continuing to perform well, now ranking third just after China and South Korea, overtaking Japan this
quarter and Australia last quarter (Q220) thanks to an improvement in her total score by 1.6 points from 63.3 to 64.9. It also ranks
11th globally, an improvement from the previous quarter where it ranked 16th and the quarter before in Q120 where it ranked
19th, highlighting its attractiveness to investors, even when compared to its global peers.
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Vietnam’s Industry Rewards stand out the most, with a total score of 73.7 out of 100 for Q320. This is mainly due to total alcohol
consumption component, which scores highly at 90.5 out of 100. We at Fitch Solutions forecast that Vietnamese alcohol
consumption will rise from by 4.9% over the medium term from 5.2bn litres in 2020 to 6.2bn litres in 2024. The high alcohol
consumption levels are due to Vietnam’s large population of nearly 100mn, making it an attractive consumer base. More
importantly, the population will continue to grow through to 2050 with strong birth rates on the horizon. The population is also very
young with the majority in the 20-39 year old bracket accounting for 32.5% of the total population in 2020, a key demographic that
alcohol companies target.
Vietnam’s Increasing Alcohol Consumption Driven By Young Population

Asia - Total Alcohol Consumption, litres
e/f = Fitch Solutions estimate/forecast. Source: National sources, Fitch Solutions
The country also benefits from strong alcohol growth rates, which are projected to perform very well over the next five years, with
alcohol spending forecast to grow double-digits, at an average annual rate of 7.8% in local currency terms over the 2020-2024
forecast period. The country scores slightly lower for both consumption per capita and F&D formalisation components at 46.3 and
12.6 respectively, which suggests that the market has by no means reached saturation yet.
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Vietnam’s Alcohol Sector Set To Grow

Alcoholic Drinks Spending, VND % y-o-y
Fitch Solutions/National Statistics
The risk that alcohol investors will need to be aware of in Vietnam and navigate is the relatively small size of the middle-income
bracket (households with a disposable income of USD10,000+), which in the Index we refer to as the mass affluent class component
and which scores at a low 13.7, with just 8.3% of total households projected to fall into this disposable income bracket in 2020. This,
combined with the fact that Vietnamese households are also heavily reliant on remittances, means that companies seeking to
break into Vietnam will need to consider low price point offerings. While disposable income levels are set to remain low, they are
improving, and project them to double over the forecast period, reaching 16.5% in 2024.
Vietnam Disposable Incomes To Grow

Vietnam - Households Disposable Incomes, USD 10,000-plus, % total households (2018-2024)
e/f = estimate/forecast. Source: Fitch Solutions
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We highlight the downside risk of growing regulatory hurdles with a growing awareness of the risks associated with increased levels
of alcohol consumption. The government enacted a new law as of January 2020, limiting the advertisement of alcohol on the radio
and TV between certain hours of the day, as well as enforcing tough laws against drinking and driving. However, although this law
only affects our forecasts for 2020 (we forecast 2020 growth to be 6.9%, lower than the 5 year average of 7.8%) because we believe
that consumers will adapt their behavior to drink more responsibly in the long run (see Vietnam: New Laws To Put Brakes On
Alcohol Sector, 17 February 2020), we highlight that growth rates in the mid to long term may have to be revised down further if
Vietnam continues to enact harsher anti-drinking laws.
Furthermore, we believe that there is further downside risk to the alcohol growth outlook in 2020 because of Covid-19. A country-
wide lockdown has shut bars, restaurants, clubs, and karaoke lounges from March 25 to April 22 2020, where alcohol is consumed
in large quantities.
ASIA - ALCOHOLIC DRINKS RISK/REWARD INDEX

Industry Country Industry Country Regional Global
REWARDS RISKS RRI
Rewards Rewards Risks Risks Rank Rank
China 65.3 78.2 70.4 45.3 68.2 56.8 66.3 1 7
South Korea 55.1 70.3 61.2 71.9 82.3 77.1 65.9 2 8
Vietnam 73.7 66.3 70.7 48.8 53.7 51.2 64.9 3 11
Japan 56.5 66.6 60.5 70.5 76.5 73.5 64.4 4 13
Australia 53.0 66.8 58.5 64.9 80.4 72.7 62.8 5 18
Taiwan 52.3 60.5 55.6 68.4 84.9 76.7 61.9 6 20
India 62.1 77.6 68.3 33.7 51.8 42.7 60.6 7 22
Philippines 60.7 75.0 66.4 22.5 48.4 35.4 57.1 8 32
Malaysia 33.7 75.3 50.3 71.9 65.4 68.6 55.8 9 36
Hong Kong 41.4 41.6 41.5 94.6 71.4 83.0 53.9 10 38
Singapore 30.5 50.0 38.3 93.5 84.6 89.0 53.5 11 40
Cambodia 76.8 48.4 65.5 25.6 23.5 24.6 53.2 12 41
New Zealand 43.2 39.7 41.8 66.3 90.9 78.6 52.8 13 42
Thailand 40.7 63.9 50.0 53.3 57.8 55.6 51.7 14 46
Indonesia 35.1 78.4 52.4 35.8 52.5 44.2 49.9 15 49
Laos 68.8 46.6 59.9 17.2 23.0 20.1 48.0 16 53
Myanmar 54.7 66.6 59.5 8.1 10.3 9.2 44.4 17 62
Sri Lanka 47.0 33.7 41.7 20.0 35.1 27.5 37.4 18 81
Global Average 50.0 50.0 50.0 50.0 50.0 50.0 50.0 ~ ~
Regional
52.8 61.4 56.3 50.7 58.9 54.8 55.8 ~ ~
Average
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ASIA - ALCOHOLIC INDUSTRY DRINKS REWARDS

Alcohol Consumption Per Alcohol 5-Year Growth Total Alcohol Industry
REWARDS
Capita Rate Consumption Rewards
China 38.9 56.8 100.0 65.3 70.4
South Korea 49.5 32.6 83.2 55.1 61.2
Vietnam 47.4 83.2 90.5 73.7 70.7
Japan 30.5 51.6 87.4 56.5 60.5
Australia 70.5 13.7 74.7 53.0 58.5
Taiwan 31.6 65.3 60.0 52.3 55.6
India 9.5 80.0 96.8 62.1 68.3
Philippines 27.4 74.7 80.0 60.7 66.4
Malaysia 5.3 73.7 22.1 33.7 50.3
Hong Kong 36.8 55.8 31.6 41.4 41.5
Singapore 26.3 54.7 10.5 30.5 38.3
Cambodia 69.5 94.7 66.3 76.8 65.5
New Zealand 66.3 27.4 35.8 43.2 41.8
Thailand 37.9 3.2 81.1 40.7 50.0
Indonesia 1.1 75.8 28.4 35.1 52.4
Laos 72.6 88.4 45.3 68.8 59.9
Myanmar 12.6 95.8 55.8 54.7 59.5
Sri Lanka 20.0 87.4 33.7 47.0 41.7
Global Average 50.0 50.0 50.0 50.0 50.0
Regional
36.3 61.9 60.2 52.8 56.3
Average
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ASIA - ALCOHOLIC DRINKS COUNTRY REWARDS

Population Mass Affluent Class Urban Population Spending Population Country Rewards REWARDS
China 100.0 61.1 100.0 51.6 78.2 70.4
South Korea 74.7 92.6 81.1 32.6 70.3 61.2
Vietnam 87.4 22.1 78.9 76.8 66.3 70.7
Japan 91.6 81.1 93.7 0.0 66.6 60.5
Australia 57.9 97.9 65.3 46.3 66.8 58.5
Taiwan 56.8 77.9 64.2 43.2 60.5 55.6
India 98.9 20.0 98.9 92.6 77.6 68.3
Philippines 89.5 35.8 87.4 87.4 75.0 66.4
Malaysia 63.2 68.4 70.5 98.9 75.3 50.3
Hong Kong 30.5 72.6 40.0 23.2 41.6 41.5
Singapore 23.2 91.6 32.6 52.6 50.0 38.3
Cambodia 48.4 24.2 23.2 97.9 48.4 65.5
New Zealand 15.8 78.9 22.1 42.1 39.7 41.8
Thailand 84.2 53.7 76.8 41.1 63.9 50.0
Indonesia 96.8 50.5 95.8 70.5 78.4 52.4
Laos 29.5 45.3 15.8 95.8 46.6 59.9
Myanmar 76.8 44.2 62.1 83.2 66.6 59.5
Sri Lanka 55.8 23.2 20.0 35.8 33.7 41.7
Global Average 50.0 50.0 50.0 50.0 50.0 50.0
Regional Average 65.6 57.8 62.7 59.5 61.4 56.3
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ASIA - ALCOHOLIC DRINKS INDUSTRY RISKS

Regulatory Environment F&D Formalisation Logistics Risk Industry Risks RISKS
China 26.3 37.9 71.6 45.3 56.8
South Korea 58.9 70.5 86.3 71.9 77.1
Vietnam 82.1 13.7 50.5 48.8 51.2
Japan 37.9 91.6 82.1 70.5 73.5
Australia 50.5 82.1 62.1 64.9 72.7
Taiwan 60.0 64.2 81.1 68.4 76.7
India 33.7 9.5 57.9 33.7 42.7
Philippines 25.3 16.8 25.3 22.5 35.4
Malaysia 78.9 62.1 74.7 71.9 68.6
Hong Kong 95.8 99.5 88.4 94.6 83.0
Singapore 96.8 99.5 84.2 93.5 89.0
Cambodia 61.1 3.2 12.6 25.6 24.6
New Zealand 43.2 83.2 72.6 66.3 78.6
Thailand 75.8 21.1 63.2 53.3 55.6
Indonesia 32.6 29.5 45.3 35.8 44.2
Laos 20.0 11.6 20.0 17.2 20.1
Myanmar 13.7 7.4 3.2 8.1 9.2
Sri Lanka 12.6 1.1 46.3 20.0 27.5
Global Average 50.0 50.0 50.0 50.0 50.0
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ASIA - ALCOHOLIC DRINKS COUNTRY RISKS

Long Term Short Term Long Term
Short Term Operational Country
Economic Risk Economic Risk Political Risk RISKS
Political Risk Index Risk Index Risks
Index Index Index
China 81.1 86.3 48.4 84.2 54.7 68.2 56.8
South
92.6 96.8 82.1 70.5 75.8 82.3 77.1
Korea
Vietnam 52.6 65.3 28.4 87.4 44.2 53.7 51.2
Japan 64.2 56.8 90.5 91.6 77.9 76.5 73.5
Australia 80 74.2 86.3 73.7 84.2 80.4 72.7
Taiwan 97.9 98.4 65.3 77.4 85.3 84.9 76.7
India 58.9 66.3 47.4 47.4 45.3 51.8 42.7
Philippines 76.8 80 44.2 38.9 25.3 48.4 35.4
Malaysia 63.2 84.2 46.3 51.1 73.7 65.4 68.6
Hong
78.9 67.4 30.5 53.7 98.9 71.4 83
Kong
Singapore 66.3 62.1 78.9 100 100 84.6 89
Cambodia 11.6 33.7 23.2 37.9 17.4 23.5 24.6
New
91.6 92.6 87.4 88.4 92.6 90.9 78.6
Zealand
Thailand 69.5 71.6 27.4 62.6 57.9 57.8 55.6
Indonesia 57.9 69.5 40 55.3 46.3 52.5 44.2
Laos 5.3 3.2 22.1 80 13.7 23 20.1
Myanmar 9.5 15.8 5.3 18.4 6.3 10.3 9.2
Sri Lanka 38.9 32.6 41.1 26.3 35.8 35.1 27.5
Global
50 50 50 50 50 50 50
Average
Regional
60.9 64.3 49.7 63.6 57.5 58.9 54.8
Average
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Market Overview
Food
India's food industry benefits from the country's diverse agro-industrial base. Local and multinational companies are present in this
large market, yet there is still huge untapped potential. The country is a major producer of rice, wheat, liquid milk, poultry products,
fruit and vegetables, coconut, tea, spices, marine and freshwater products (including fish and shrimp) and a large variety of other
produce.
Recent Developments Relating To Covid-19
• In June 2020, India based Dairy producer Amul reported that while it initially saw its sales fall by between 10-15% depending on
the city when the lockdown began as the hotels, restaurants and catering segment which is a big consumer of dairy closed
down. The company states that gradually increasing household consumption of dairy products has helped to offset the fall in
demand from hotels. Amul reports that May 2020 sales were at par with the sales in the same period last year. The company
anticipates a 5-6% increase of milk sales despite hotels, restaurants and catering not being fully open. The sales of other dairy
products like ghee, paneer, cheese and condensed milk is expected to increase from 10-15% to 40-50%.
• In June 2020, Britannia Industries which manufactures biscuits, cheese, cakes and bread, resumed 100% of production at all
of its factories except those that are located in the red zones that have been shut for over two months due to the lockdown. The
company reported a 26% rise in net profit and a 2% increase in revenue for the March quarter.
• In March 2020, Mondelez India (which owns Cadbury India) expanded its Choco-bakery segment with the recent launch of
‘Cadbury Chocobakes’ – a scrumptious cookie filled with the taste of iconic Cadbury at its heart.
• In February 2020, American grill bar and pancake chain Applebee’s will launch its first Indian location in Bengaluru this year. The
brand will be established in the territory via a partnership with local operator Dine Brands International.
• In February 2020, homegrown snacks maker Haldiram’s is in talks with US-based private equity firm General Atlantic to sell a
minority stake of about 10%.
• In February 2020, Hindustan Unilever has decided to list popular ice cream pushcarts on food delivery platform Swiggy to tap
into the rush for ice cream and other chilled dairy products during scorching Indian summers.
• In February 2020, leading FMCG player, the Bonn Group, has expanded its biscuit portfolio by launching healthy range that
includes Americana Mexican Veggie Cracker, Americana Multigrain Cracker, Americana Digestive and American Atta Cookies in
entire North Indian states like Punjab, Haryana, Delhi
• In January 2020, Uber sold its food delivery business in India to the local rival Zomato for USD206mn.
Market Drivers And Trends
The large majority of food goods purchased by consumers are basic ingredients such as grains, vegetable oils and sugar. Only a
small amount is spent on processed food, although this is increasing in line with the country's economic development. As
disposable incomes rise, particularly in urban areas, higher-value products such as milk, meat and eggs are becoming more popular.
Despite this, consumer preferences for fresh products, as well as for local spices and ingredients, remain strong. These traditional
consumer patterns have mitigated sales of processed foods through multinational operators. However, manufacturers are
becoming increasingly aware of the need to tailor their product offerings to the local market and are acting accordingly.
Food Processing
The problems hindering India's agricultural industry have a knock-on effect on its food-processing industry, reducing supplies and
driving up ingredient costs. Nevertheless, India's food processing industry remains enormously attractive, owing to an abundance of
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natural resources, an extensive workforce and a population that can help sustain industry development. The government, led by
Prime Minister Narendra Modi, is committed to increasing investment in the sector through its 'Make in India' campaign, which
promotes India's manufacturing sector. In the food industry, it encourages the development of food manufacturing clusters, among
others.
Following the World Food India conference in November 2017, the Indian government announced that it had received investment
commitments in food processing from a range of countries and multinationals worth more than USD11.3bn. 50 memoranda of
understanding were signed, including with Japan, which aims to boost the trade of healthy and raw food products.
Some of the more prominent players in the sector include Hindustan Unilever Ltd (HUL), India's largest fast-moving consumer
goods manufacturer, which is 67% owned by Dutch company Unilever. Like its Dutch parent, the firm has a dual-pronged business
strategy to aggressively market and promote its brands, at the same time as investing heavily in distribution opportunities. This has
resulted in HUL becoming India's branded tea, detergent and soap market leader.
Over the coming years, investment in the Indian food-processing sectors is expected to rise. Several domestic and foreign firms,
such as Desai Fruits and Vegetables and Nestlé India, have already undertaken major investments. Meanwhile, US breakfast
cereal company Kellogg's is working with snack maker Haldiram's for a mega alliance. For Kellogg's, it is an opportunity to expand
into the domestic Indian market with sweet and savoury snacks, while Haldiram's will be able to scale up their domestic business
and also improve their global presence.
Global snack and beverage major PepsiCo has also recently announced significant investments in the country. It will invest
USD5.5bn in all forms of its Indian business by 2020, concentrating on improving vertical integration within the company.
PepsiCo India, owner of Kurkure snacks and Lays chips, announced its aims to double sales in the salty snacks segment. As part of
this effort, Pepsico rolled-out Cheetos Ocean Safari, a snack product for children, which comes in four 3D animation shapes
(dolphin, shark, starfish and octopus). In summer 2019 PepsiCo revealed plans to build a new snacks factory in India as part of its
goal to double the size of that side of its business in the country by 2022. Rival Coca-Cola will add to the USD4bn programme it is
already involved in, planning to invest another USD4bn between 2015 and 2017.
Confectionery
India's confectionery market is becoming increasingly competitive, especially as raw ingredients, including sugar, milk and cocoa,
can be sourced locally. High growth prospects in the confectionery sector will be another driver of competition. International
players are largely predominant in the chocolate sub-sector, while domestic companies have a strong presence in the biscuits
category.
The chocolate sub-sector is largely dominated by international companies, with Nestlé India and Mondelēz International (which
owns Cadbury India), accounting for around 70% of the chocolate market. As we forecast chocolate sales to grow by double-digit
growth rates, more international chocolate producers will enter the market.
Premiumisation has been the main trend in the chocolate category in recent years, explaining the success of foreign brands.
Chocolate consumption remains highly concentrated in urban centres, as high inequality and poor infrastructure constrain
distribution to rural areas. Premium gifting brands also have strong potential, especially during the holiday season. In November
2018, Nestlé India introduced Nestlé Les Recettes De L’Atelier, a premium collection of chocolates made in Switzerland, to the
Indian market. This follows the announcement of Nestlé India's launch of an upmarket chocolate brand Alpino in 2016.
In late 2016, Italian confectionery giant Ferrero indicated that it was looking to double its investment in the Indian market in order
to increase production and innovation capacity. The company stated that its investment approach will include product
development specifically targeting the Indian market as well as expanding its distribution network. Ferrero is planning to launch the
20 confectionery brands it acquired from Nestlé in India in January 2018. These include SweeTarts, LaffyTaffy and Nerds, and
chocolate brands Butterfinger, BabyRuth, 100Grand, Raisinets and Wonka.
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Nonetheless, while the popularity of premium chocolate will remain strong, we also see solid growth opportunities for foreign
brands to expand their products to middle-income consumers. The number of households with annual net income of more than
USD5,000 will increase from 112.8mn in 2019 to 161.5mn in 2022, symbolising the emergence of middle-class consumers.
Mondelēz offers smaller and more affordable formats of its global chocolate brands, in order to reach a large number of consumers.
We believe that other companies would benefit from pursuing similar strategies to win the loyalty of consumers, pushing for higher-
value products at a later stage. Developing wide-reaching distribution is essential to enter the country's hundreds of thousands of
independent retail outlets and gain access to a vast number of Indian households.
Other key players include American firm Hershey. Hershey entered the Indian market in 2007 through a partnership with Godrej
Beverages and Foods Ltd, which enables Hershey to benefit from the local company's distribution network, a major advantage in
such a massive market with a highly fragmented retail sector. In September 2012, after five years of collaboration with Godrej,
Hershey took full control of Godrej Hershey for more than USD45mn and set up its own subsidiary, Hershey India. In October
2018, Hershey launched its iconic Hershey's Kisses in India as part of a USD50mn investment plan to strengthen its footprint in the
Indian market. The three flavours of Milk Chocolate, Almond and Cookies & Creme will first be introduced to South India.
Perfetti Van Melle India, the Indian subsidiary of Perfetti Van Melle, is the market leader in the sugar confectionery and gum
categories, with a market share of about 25%. The company offers a wide range of candies and gums, and has developed a large
distribution network in the country.
The local biscuit market is very competitive, dominated by domestic players with huge distribution networks that have focused their
product development drives on the economy and mainstream end of the market. Biscuits have long been perceived as an
affordable everyday snack. However, considerable growth will come from steady premiumisation as higher-value products, made
using better quality ingredients and perhaps offering health advantages, are introduced to the market. Domestic companies
Britannia Industries and Parle Products control almost 80% of the biscuits market. Parle Biscuits has been investing
aggressively over the past few years and now controls about 40% of the biscuits sector. It is closely followed by Britannia Industries,
which has a similar market share.
As households climb up the income ladder over the next five years, we see strong opportunities for foreign biscuit brands targeting
middle-class and higher-income consumers. For instance, Mondelez, which owns globally popular cookie brands such as Lu, Prince
and Nutter Butter, plans to introduce some of them in India as it looks to expand its presence in this segment where it trails
established players. The company already sells brands of Bournvita and Oreo biscuits in India. The company is also looking to grow
its rural business, which makes up 20% of the company's sales (up from 10-12% previously).
Completing 100 years of operations, Britannia launched 50 new products over FY2018 (ending March 2019). The company's value-
added dairy segment also received a boost, launching products across cheese, milk drinks and dairy whitener categories in the last
two quarters of FY18.
Trade
India is a net exporter of agricultural products, and the government is committed to improving food trade. Dairy is a sector with
huge potential for export growth. India is the largest producer of milk in the world, and it consumes a great deal of dairy. As demand
for milk across Asia Pacific continues to rise at a steady pace, India sits in an excellent geographical position to take advantage of this
demand. As such, we believe that Indian dairy firms will ramp up production to try to increase exports.
Agriculture
India's food industry benefits from the country's diverse agro-industrial base. Local and multinational companies are present in this
immense market, yet there is still huge untapped potential. The country is a major producer of rice, wheat, liquid milk, poultry
products, fruit and vegetables, coconut, tea, spices, marine and freshwater products (including fish and shrimp) and a large variety of
other produce.
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Amul Dairy is operated by a cooperative body, the Gujarat Co-operative Milk Marketing Federation (GCMMF), which is jointly owned
by 3.6mn milk producers in Gujarat. Amul is the abbreviated form of Anand Milk Union Limited. Amul is credited with almost
singularly driving the 'white revolution', the programme that transformed India into the largest milk exporter in the
world. Amul Dairy began the sale of camel milk in January 2019 in select markets of Gujurat including Gandhinagar, Ahmedabad and
Kutch. Prior to this, Amul introduced camel milk chocolate.
The country's vast geography, potential agricultural output and huge population have seen it attract vast foreign direct investment
inflows into its agricultural sector in recent years, and the country's recent improvements in terms of agricultural output reflect this.
Greater efficiency, owing to local and international investment, has improved both the yield and the quality of India's agricultural
production, which has in turn increased its presence in export markets.
The country's processed food industry is relatively undeveloped when compared with other countries in the region. It remains
focused on less profitable primary agricultural output, with more recent added-value agricultural trends, such as organic food
production, still largely ignored by most farmers. Furthermore, the growth of the agricultural industry has been hampered in recent
years by loss of harvests due to, improper handling and storage, pest infestations and logistical and distribution problems.
Rice
Rice is a staple food for most of India's 1.2bn people, and the government therefore plays a prominent role in ensuring that the
whole population has adequate supply by selling it at subsidised rates. Because of this, consumption is relatively stable. Changes will
reflect population growth and sustained government support to a large part of the population in the form of food subsidies, more
than macroeconomic factors.
Dairy
India is both the largest consumer and producer of milk in the world. Given the ubiquity of cattle, milk is an essential component of
the dietary regime, resulting in high per capita consumption - at 52.2kg in 2019 - given the country's income level. Half a century
ago, India was the largest net importer of milk in the world, but a drive spearheaded by Amul Dairy, dubbed the 'white revolution',
has made India self-sufficient in its dairy requirements.
Expansion in the Indian dairy industry has been mainly led by private investors and cooperatives. Along with the rise of artificial
insemination services, herd numbers are boosted consistently. Given the ubiquity of cattle in India, milk forms a vital dietary
component, especially since most rural inhabitants own at least one cow. Buffalo are preferred for their high-fat milk content and
their adaptability to Indian agricultural conditions. According to the National Dairy Development Board, consumer demand for milk
and milk products is growing at approximately double the growth rate of production. As a result, strong dairy demand continues to
fuel herd growth and has also paved the way for improved management practices.
We believe that these gains will be fuelled by per capita income and population growth, which will lead to greater demand for high-
value dairy products such as cottage cheese and yoghurt, and higher per capita consumption of milk. Another growth driver will be
targeted marketing campaigns from large multinationals such as Walmart seeking to establish their presence in the consumer
foods market.
India's growing middle class and rising wages at lower income levels are leading to strong domestic consumption growth in the
dairy sector. Reports suggest that the double-digit growth in the demand for value-added dairy products, such as cheese, dahi
(yoghurt) and probiotic drinks, is quickly outpacing that of dairy production in India. On the back of this, Indian food conglomerate
Britannia Industries is seeking a partner to strengthen its dairy business segment and to trim down the number of brands as part of
its strategy to focus on higher margin products.
Our Agribusiness team forecasts milk production to remain strong over the next few years, fuelled by a continuous flow of
investment. Major international dairy producers have strengthened their presence in India over the past few years and in 2010, the
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government, together with the National Dairy Development Board, drew up a National Dairy Plan, which would see the investment
of USD378mn aimed at doubling the country's milk output by 2020. In June 2019 dairy cooperative Fonterra launched its first brand
in India under its joint venture with Future Consumer. The Dreamery brand range will initially include yogurt, flavoured milk drinks
and skimmed milk.
Despite being a leading producer of milk, India has an insignificant share of the global dairy trade – less than 1%. Most of the packed
liquid-milk segment in India is dominated by the cooperatives. The liquid milk contribution to total revenues of dairy cooperatives
ranges from around 60-80%. Private players, barring a few exceptions, are mainly focused on milk products other than packed liquid
milk. However, there is huge potential for processing and value addition in the organised sector, particularly in ethnic Indian sweets,
which are largely sold in unbranded form in markets.
India's then finance minister Arun Jaitley announced during his 2017 budget speech a Dairy Processing and Infrastructure Fund of
INR20bn (to be quadrupled in three years) to enable the modernisation and expansion of the country's milk processing capacity.
This is the government's first investment programme for the dairy sector in more than 20 years, when the National Dairy
Development Board's Operation Flood programme came to a close, and recognises the importance of the country's huge dairy
sector.
Food Services
As the Indian consumer reaps the fruits of the country's long-term economic boom, this is likely to translate into greater demand for
eating out and for Western foodstuffs, with Krispy Kreme, Burger King, McDonald's and Yum! Brands' Taco Bell having all
announced expansion plans or new openings in the country over the last 18 months. Much of this expansion can be attributed to
the performance of Domino's Pizza, which operates in the country through its subsidiary Jubilant FoodWorks. India is Domino's
largest overseas market, with more than 1,000 outlets. In May 2019, McDonald's India bought out its former partner Connaught
Plaza Restaurants Private Limited, acquiring the latter's 50% stake in its Indian operations.
Indian consumers have always been fond of eating out, as characterised by the huge number of bustling street food outlets across
all big cities. What has changed over the past decade is that, with more money to spend, middle-class Indian consumers have been
increasingly eating out at restaurants, with casual dining chains in particular doing well.
The growth of technology and online ordering is also playing a significant role in the success of Domino's. Access to smartphones is
growing in India, and Domino's is taking advantage of this with its mobile app and partnerships with the likes of Food Panda,
Zomato and other food aggregators. Online sales represent over a third of total deliveries, and this number will continue to grow
over the coming years
The presence of premium coffee chains Costa Coffee and Starbucks (through a joint venture with Tata Global Beverages),
alongside domestic players such as Café Coffee Day, highlights sector dynamism.
India promises plenty of opportunities with its massive, increasingly urbanised population and expanding economy. However, the
fast-food market is becoming increasingly saturated by international brands, which may pressure margins in the coming years.
On the back of growing demand for quality food and convenience, food delivery service company Swiggy's is expanding its
services into 16 new cities, joining the 28 cities where Swiggy's already has a presence in. The new cities include Thrissur, Tirupur,
Warangal, Aurangabad, Agra, Mangalore, Manipal, Jalandhar, Trichy, Udaipur, Amritsar, Varanasi, Bhubaneshwar, Vellore,
Thiruvananthapuram and Kota.
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Drink
The alcoholic beverages industry in India is dominated in equal parts by beer and spirits, with the wine market a distant and
undeveloped third. The industry experienced a major change in 2014, as global distiller Diageo took control of United Spirits,
previously controlled by United Breweries.
• In April 2020, India’s leading alcoholic drinks brewers which include United Breweries, Carlsberg, Anheuser-Busch InBev
and Bira 91 wrote a joint letter to the central government and several state governments requesting to be permitted to sell
alcoholic drinks offline and online even if the lockdown is extended. According to reports, the industry anticipates a 25% decline
in sales this fiscal year due to the Covid-19 lockdown, especially as summer which is the peak season for beer sales has started.
• Alcohol stores were closed for more than 40 days during the Phase 1 and 2 of the lockdown, which meant that alcohol sales
would have gone down. Post lockdown, alcohol sales are still expected to be depressed, as the Delhi government has imposed a
70% tax on alcohol temporarily to dissuade consumers from queuing up in close proximity to buy alcohol. This lasted for about a
month, from early May to June 10 2020.
• In March 2020, Tata Coffee, a subsidiary company of Tata Consumer Products, announced the launch of its e-commerce
platform.The website debuts with three variants of luxury single origin specialty coffees.
• In March 2020, Coca-Cola plans to double its yearly sales to 2.0bn unit cases by the next five years, even as it took the company
23 years of operations in the country to attain sales of 1.0bn unit cases in a single year, in 2019.
• In February 2020, craft beer maker Bira91 is turning to customers and other beer connoisseurs to help come up with new
releases, aiming to launch 40-50 different limited release beers in the next one year.
• In February 2020, Indian tea chain Chaayos raised USD21.5mn in a new funding round, to increase its store count to 300 within
three to four years.
• In February 2020, PepsiCo India is bringing a reformulated version of its Slice fruit drink to retail shelves this summer, in a bid to
strengthen its share in the mango-based beverages segment.
• In January 2020, Indian tea retailer Chai Kings has secured USD1.0mn in funding to launch 100 stores over the next five years
and become the nationally preferred purveyor of chai teas. It is currently operating in 40 locations and delivers tea to customers’
doorsteps within Chennai.
• In December 2019, Australian retail coffeehouse Gloria Jean’s is set to launch in India with its first outlet in Bengaluru.
Soft Drinks
India's soft drinks sector is dominated by major multinational players The Coca-Cola Company and PepsiCo. The companies
have been expanding beyond their traditional carbonates base and have entered the healthy and energy drink sectors within the
country, which they have also been doing on a global scale.
Coca-Cola has pledged to invest USD5.0bn between 2012 and 2020. In November 2013, PepsiCo announced plans to invest
USD5.5bn across all forms of its Indian business by the end of 2020. PepsiCo will use the capital to increase its vertical integration,
from the initial source of agriculture down to distribution and marketing. Such investments from PepsiCo and Coca-Cola
demonstrate the opportunities that are present in India, but also highlight the poor infrastructure that plagues the Indian economy
and hinders subsequent foreign investment. Given low levels of carbonates consumption and consumer spending, Coca-Cola
India (The Coca-Cola Company's subsidiary in the country) and PepsiCo both announced that they would start to sell smaller-sized
cans, designed to target young consumers at low prices.
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In March 2020, Coca-Cola plans to double its yearly sales to two billion unit cases by the next five years, even as it took the company
23 years of operations in the country to attain sales of one billion unit cases in a single year, in 2019.
Carbonated soft drinks account for the majority of soft drinks sales in India, both in volume and value. Together, PepsiCo and Coca-
Cola control more than 95% of the market. Although PepsiCo's flagship brand Pepsi is more popular than Coke, Coca-Cola is the
market leader owing to its brands Thumbs Up (the leader in the cola category) and Sprite. India is the sixth largest market for Coca-
Cola globally, and at present, around 50% of the company's portfolio comprises local brands.
Coca-Cola India will begin blending domestically produced fruit juice with its core carbonated soft drink brands (eg, Sprite
and Fanta) as part of wider plans to have two-thirds of its product portfolio in India made up of domestically produced brands. This
comes after Prime Minister Narendra Modi urged soft drink companies to blend carbonated drinks with at least 5% juice from fruits
produced by Indian farmers. In January 2019, Coca-Cola India expanded its Minute Maid product range by launching a grape fruit-
based sparkling drink branded as Colour. The launch is part of Coca-Cola's efforts to expand its fruit-based beverage portfolio
and expand the ‘fruit circular economy’, launching fruit-based drinks made with domestically grown fruits. Coca-Cola has launched
three new fruit-based beverages under the Minute Maid brand in April 2019, strengthening its focus on healthy food and drinks in
the country. These were Minute Maid Nutriforce, Minute Maid Fruit Punch and Minute Maid Apple Sparkle.
In November 2016, the Goods and Services Tax (GST) Council in India announced that aerated drinks are being re-categorised in the
luxury category. Existing applicable tax rates on carbonated drinks average between 30% and 31%. The Indian Beverage Association,
which represents manufacturers such as PepsiCo and Coca-Cola, stated that they were disappointed at the move, adding that the
'viability of the industry could be in grave danger because of such an adversarial tax approach'. According to industry officials at
Coca-Cola, 'if there is an additional excess on the category over and above the 28% GST rate, it is going to have a severe impact, as
that will lead to consumer price hikes of as much as 20% and kill the industry.'
As an attempt to take advantage of growth in functional drinks and bottled water, PepsiCo and Tata Global Beverages Ltd started
a joint venture, NourishCo. Its product portfolio include functional drinks and bottled water. In August 2014, the company entered
the sparkling water business. Owing to its partnership with Tata, PepsiCo has access to a vast distribution network, a strong local
brand name and local market knowledge.
Growth in the bottled water segment will be driven by the poor quality of tap water and increasing health awareness. The market is
dominated by five companies: Bisleri, Coca-Cola, PepsiCo, Parle and Dhariwal. Bisleri controls about one-third of the bottled water
market, with its bulk water bottles of 20 litres very popular. In smaller formats, Coca-Cola's Kinley is the favourite brand.
In the fruit and vegetable juice category, fruit drinks made of fruit concentrate are the most popular sub-category, accounting for
more than half of sales. The market leader is domestic producer Dabur, which controls about half of fruit juice sales. It is followed by
PepsiCo, which accounts for more than a third of the market with its Tropicana brand. PepsiCo also launched fizzy Slice, a mango
drink only sold in India with higher fruit content in March 2018. Coca-Cola launched Minute Maid in the country in 2011 and Minute
Maid Smoothie in 2018.
Other players in the soft drinks sector include Swiss food group Nestlé, which is pushing its Nestea ready-to-drink (RTD) iced tea
across India as it looks to benefit from high growth in functional soft drinks and fruit and vegetable drinks. Following the same trend,
Indian soft drinks producer Rasna launched Rasna Beverages, its new independent subsidiary, which produces and distributes
RTD beverages including energy drinks, fortified water and premium juices, in collaboration with global firms.
Hot Drinks
The Indian coffee sector is developing quickly, supported by an emerging café culture in the main urban centres. Domestic
company Café Coffee Day is one of the leading players, with a large and still-growing store network. Coffee Day also benefits from its
highly integrated operations, having started out as coffee plantation owners, giving it major efficiency and cost control synergies
throughout its supply chain. Other major players include Barista Coffee, formerly owned by Italy's Lavazza, and UK-owned Costa
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Coffee.
The most noteworthy foreign investment is perhaps that of Starbucks, which has a 50:50 joint venture with Tata Coffee. They
operate under the name Tata Starbucks and have been active since the beginning of 2012. Tata Starbucks currently operates more
than 135 stores, but frequent openings will see this figure continue to tick up. In the long term, Starbucks targets India as being as
important as China, with CEO Howard Schultz saying that the country will be the home of 'thousands' of Starbucks stores. The
company reported sales of INR3.5bn in FY2018 (ending March 2018). Tata Starbucks is also looking to expand its footprint into
lower tier cities in FY19 and increase its store count by 10 new stores in 2019. In August 2019 Tata Starbucks revealed that it plans
to achieve break-even by March 2020 and remains very optimistic about business growth in India over the coming year. The chain
now operates 157 outlets.
Given the expansionary capacity of Starbucks and Dunkin' Donuts, and their Indian ambitions, there will be considerable
dynamism in the coffee sector over the coming years. These investments will see consumers converting to higher-value, better-
quality products and demanding increased range - something that ongoing economic development has enabled them to pursue.
We believe that those already present in India will benefit from accelerating their organic expansion and entrenching their brands
deeper among Indian consumers. We believe that existing players will need to secure prime locations in the high-consuming urban
areas of Delhi and Mumbai before they are snapped up by multinationals such as Starbucks and Dunkin' Donuts.
However, over the longer term, existing coffee players could struggle against the global giants. We hold the view that existing coffee
players must prioritise the right positioning in the country in order to successfully take advantage of the growing coffee culture, in
line with the expanding middle class. Starbucks is positioning itself at the premium end of the Indian coffee market, and we believe
that it would be unwise for others to launch a challenge in this segment, given the company's well-established premium brand
appeal. Due to rising competition in the sector and the increasing presence of global giants, it has become more difficult for smaller
chains to be profitable. In December 2014, Australian coffee chain Gloria Jean's Coffee terminated its agreement with Dubai-
based Landmark Group due to high competition. However, In December 2019, Gloria Jean’s overturned their original decision, and
decided instead to launch in India with its first outlet in Bengaluru.
Existing coffee retailers could also leverage their local market expertise to secure a domestic foothold. Café Coffee Day, for instance,
has been in the Indian coffee market for more than 14 years, and its familiarity with Indian consumer preferences would
undoubtedly give it a competitive edge against Starbucks or Dunkin' Donuts, given the localised tastes of the Indian market. The
company is also looking to expand rapidly in the market, aiming to add 100 stores every year to reach 2,500 stores in 2025, up from
1,740 stores in 250 cities.
In August 2019 there were unconfirmed reports that Coca-Cola is looking at the acquisition of a large stake in coffee chain Café
Coffee Day in order to diversify from carbonated drinks into the growing coffee sector in India.
While tea overwhelmingly remains the most popular hot beverage in India, coffee consumption is slowly catching up, especially
among the aspirational, young middle class. American brands such as Starbucks and Dunkin' Donuts are likely to benefit from such
a clientele, with informal street vendors of traditional tea or chai likely to be those who lose out the most. This is especially the case
given that the traditional tea sector within India will be increasingly formalised in the coming years.
Following discussions with local government, Tata Global Beverages has put on hold plans to sell its 41% stake in Amalgamated
Plantations, India's second largest tea producer and supplier. At least two domestic tea producers, Kolkata-based
Dhunseri Group and M.K. Shah Exports Ltd, had shown interest in acquiring Tata Global’s stake. The company has 25 estates in
Assam and the Dooars region of West Bengal. Since 2015, Amalgamated Plantations has recorded three consecutive years of losses
aggregating to INR850mn.
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Alcoholic Drinks
The alcoholic beverages industry in India is dominated in equal parts by beer and spirits, with the wine market a distant and
undeveloped third. The industry experienced a major change in 2014, as global distillers Diageo took control of United Spirits,
previously controlled by UB.
The decision by the Indian Supreme Court in April 2017 to prohibit the sale of alcohol near state highways is the latest in a long line
of regulatory hurdles, highlighting the substantial risks for alcoholic drinks companies and their operations in the country.
Furthermore, in February 2018, various state governments hiked duties on liquor, with the Karnataka government announcing plans
to increase taxes by 8%, while Gujarat is also likely to increase excise duty on liquor sold through permitted shops to 100%, up from
50%.
Spirits
United Spirits is the country's leading producer of spirits. It is now controlled by UK distiller Diageo, which increased its stake in
United Spirits from 29% to 55% in July 2014. Other major players in the spirits sector are India's Allied Blenders and Distillers,
US-based Bacardi Martini and French company Pernod Ricard. Up until now Diageo has imported most of its spirits, but
following the purchase of United Spirits, it will concentrate on the premium-end of the market. Diageo firmly believes that the most
profitable strategy for operations within India is via premiumisation. Diageo will concentrate on providing premium-end whisky and
white spirits in India, projecting strong double-digit sales growth in both segments, rather than catering to the mass market.
Following the confirmation of United Spirits' takeover, Diageo has now begun exiting many of United Spirit's unprofitable mass
market brands in India.
Bacardi is already a fairly significant player in India's white spirits industry, and the company has enjoyed a compound annual growth
rate of 20% over the last few years. Bacardi may consider launching some of its RTD products, such as Bacardi Breezer in India, but
for now, premium spirits remain the priority. India is also a key market for Pernod Ricard, which has experienced rapid growth in
2014 owing to its local whisky brands.
Pernod Ricard has been given the controlling rights to roll out three major Indian whiskies globally - Blenders Pride, Royal Stag and
Imperial Blue. Though Indian distillers have been exporting whiskies to markets in the Middle East and Africa for years, they generally
operate via third-party distributors and target low-income consumers. Pernod Ricard's plans mark the first international push of
Indian whiskies on to the mass market by an alcoholic drinks major and comes on the back of growing interest in Indian whiskies.
Beer
While the beer sector will continue to face significant obstacles - including high taxes and difficult access - the category still offers
robust growth opportunities for manufacturers.
One emerging trend in the Indian beer market is the growth in sales of craft beers. According to the All India Brewing Association,
craft beer sales are growing at a rate of 20% y-o-y, with more than 80 microbreweries in operation at the end of 2016, compared
with just two in 2008. A star performer in this sub-sector is Bira 91, founded by an Indian entrepreneur who was inspired by the
success of the US craft brew movement while working in New York. Despite only launching in 2015, sales at the company have
grown from 150,000 cases in its first year to around 700,000 cases in 2016. This has sparked interest in the manufacturer of B91, B9
Beverages, from private equity firm TR Capital Partners, which is based in Hong Kong and is reportedly close to investing about
USD10mn in the company. In February 2020, craft beer maker Bira91 is turning to customers and other beer connoisseurs to help
come up with new releases, aiming to launch 40-50 different limited release beers in the next one year.
Domestic firm UB is the commanding power in the sector, with its brand Kingfisher controlling about half the Indian beer market. In
May 2018, UB launched Amstel beer in India from its parent company Heineken, as it looks to compete with Carlsberg's Elephant in
the super-premium strong beer segment. The Amstel beer will first be available in Pondicherry and Karnataka, followed
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by Telangana and Andhra Pradesh and other markets in the west. In March 2019, UB rolled out Radler soft drink in India, after
launching in Gujarat and Karnataka in October 2018. The drinks is marketed as being 100% natural and contains 30% less sugar
than carbonated soft drinks. In July 2019 UB rolled out Heineken 0.0 in India, a zero-alcohol version of the beer brand and
announced plans to hand production and distribution of its Kingfisher beer in Australia and New Zealand to Heineken.
Multinational brewers are keenly watching for opportunities. For example, Heineken has a 44% stake in UB via its regional joint
venture Asia Pacific Breweries, and is understood to be considering increasing its stake to gain majority control. UB rolled out
Heineken’s Amstel brand in India in May 2018 and is gearing up for more products launches, especially in craft and premium beer,
as it anticipates intense competition from newer brands like Bira 91 and global companies such as AB InBev.
AB InBev and Diageo are also present in the country and are seeking to grow their market share through further investment. AB
InBev and UB currently control around 80% of the market.
Canada-based beer producer Molson Coors has purchased a controlling stake in Cobra India after the Indian beer company 'ran
into capital difficulties' in mid-2011. The move will give the firm greater exposure to the high-growth Indian market and comes two
years after it purchased a 50.1% stake in Cobra's UK business.
Wine
Having proved receptive to learning from established wine-making markets, even if actual direct investment has been limited, India
now boasts a number of well-respected vintners - Sula Vineyards and Grover Vineyards among them - while United Spirits has
also forayed into the sector. This is a far cry from the market just 10 years ago, when a handful of vintners dominated; many of them
catered for the niche, premium export market only, ie, high-end Indian restaurants in Western markets.
Despite the popular opinion that the majority of wine consumed in Asia is imported from established wine-making countries, an
estimated 75% of wine consumed in India is produced locally. This reasonably well-established local market is likely to help support
and fuel future growth, owing to heightened consumer familiarity and the removal of scepticism that invariably accompanies
perceived expensive imports.
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Mass Grocery Retail

India's mass grocery retail (MGR) sector is dominated by small-scale traditional retail outlets. However, this will change rapidly as
multinationals begin to seek opportunities to enter India and as local organised players accelerate their own expansion and
business-activity efforts in preparation for greater competition. We expect to see home-grown and multinational MGR players
starting to slowly chip away at the dominance of India's small, traditional retail outlets, which still account for over 90% of the
country's grocery retail sales. The country's long-term potential for organised MGR is too significant to overlook, despite the
obstacles of poor infrastructure and often burdensome administrative procedures.
• In February 2020, European wholesale group Metro Cash & Carry announced that they will launch five new locations in India
by the end of the year. The new stores will be in Karnataka, Andhra Pradesh and Telangana. It currently operates 27 such outlets
in 17 cities within the territory.
• In February 2020, JioMart is adding new retail grocery stores in Navi Mumbai, Kalyan and Thane, and is planning to open
Reliance Smart Points to increase its offline presence.
• In February 2020, Walmart India will let go around a third of its top executives at its Gurugram headquarters. The retailer has
been struggling in the territory and is now responding by laying off more than 100 top-level executives, with more terminations
expected to come later. It will also close its Mumbai fulfillment center and its largest warehouse, and will hold plans to open new
stores within the Indian market.
• In February 2020, DMart has acquired about 50,000 square feet area in the Karkardooma court area of east Delhi. This marks a
move away from its traditional stronghold of western and southern India.
• In January 2020, Walmart India has set in motion plans to convert some of its two dozen wholesale stores into fulfilment
centres for homegrown ecommerce firm Flipkart, which it owns.
• In January 2020, Metro Cash and Carry has also provided kirana stores (local independently run corner shops) with specialised
point-of-sale devices outfitted with an app to help owners order items from Metro online, as well as generate daily sales and
profit reports and track sales data.
• In January 2020, Amazon has partnered with thousands of neighborhood kirana stores across India to use them to store and
deliver goods.
Major Players
India's MGR sector is dominated by small-scale traditional retail outlets. We estimate that this fragmented offering still accounts for
around 90% of the country's grocery retail sales. However, this will change rapidly as multinationals begin to seek opportunities to
enter India and as local organised players accelerate their own expansion and business-activity efforts in preparation for greater
competition. The country's economic development has allowed for the further development of MGR, as increasingly wealthy
consumers in major towns and cities turn to modern formats in search of the convenience and quality that they desire and can
increasingly afford. It is estimated that there are some 4,900 supermarkets and 500 hypermarkets in India
The modern retail sector is dominated by a handful of players, with the largest being Future Retail (operating the Big Bazaar chain),
Aditya Birla Retail, Reliance, RPG Retail and Bharti Retail. Multinationals present in India via local partnerships/
franchises include UK's Tesco, Germany's Metro, Spar International, UAE's LuLu and US-based Walmart.
Domestic Players
Future Retail is stepping up expansion plans to cement its market leading position. The company plans to revamp and grow the
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Nilgiris supermarket banner. Nilgiris is a banner that Future Group acquired in 2014. It operates 170 stores in southern India, with
around INR7.8bn (USD121mn) in sales. Future Group plans to have 380 stores under this banner in 2017/2018. Its revenue target
will be INR40bn (USD600mn) by 2021, with INR28bn (USD440mn) from private labels. In December 2017, the board of Future
Group approved its INR6.5bn acquisition of Hypercity Retail, a chain of 19 premium hypermarkets, in a stock-and-cash deal. On
completion of the transaction, Hypercity will become a wholly owned subsidiary of Future Group, and this will take the latter's total
store count to more than 900.
In July 2019 Future Group announced it is planning a rapid launch of the country's first 7-Eleven convenience stores, aiming to tap
the massive retail market with 500 or more store openings over the next five years.
Metro Cash & Carry entered the Indian market in 2003. The company currently operates 27 wholesale distribution centers under
the brand Metro Wholesale, including six in Bangalore, four in Hyderabad, two each in Mumbai and Delhi, and one each in Kolkata,
Jaipur, Jalandhar, Zirakpur, Amritsar, Vijayawada, Ahmedabad, Surat, Indore, Lucknow, Meerut, Nasik and Ghaziabad. METRO Cash &
Carry India’s core customers include small retailers and kirana stores, hotels, restaurants and caterers, corporates, SMEs, companies
and institutions, as well as self-employed professionals. Only business customers are allowed to purchase at metro. All customers
are registered and are provided with a customer registration card.
One of the major growth stories in the Indian mass grocery retail sector is D-Mart, owned by local group Avenue Supermarkets
Ltd. This discount-focused chain was only founded in 2002 but has enjoyed rapid growth in recent years. The company became
India's most expensive retail stock after its initial public offering listing in March 2017, and as of September 2017, had a market
capitalisation of INR670bn or USD10bn. This is impressive considering the company only has 149 stores, predominantly in the
south west of the country, signalling significant further growth opportunities nationwide. The company's small-format no-frill stores,
emphasis on local supply chains and refusal to accept credit helps it deliver competitive prices while still retaining profit, something
larger players have struggled to achieve.
Multinationals
In terms of multinationals, UK's Tesco is working with Tata Group's Star Bazaar hypermarket business on a franchise basis. Tesco
provides 80% of the stock sold by Star Bazaar, both food and non-food, sourced through a distribution centre in Mumbai. This
distribution centre also provides wholesale products to traditional Indian retailers, kirana stores, restaurants and other businesses.
In 2016, leading UK wholesaler Booker (recently acquired by Tesco), announced plans to launch a joint venture partnership with
Future Group, which will see the two businesses target the opening of 60-70 cash-and-carry depots over the next three years in
India. This is likely to drive the cash-and-carry wholesale format in the Indian market, which remains an emerging format type. As of
2019 no further developments had been reported. However, in October 2019 Future has acquired a 51% stake in Booker India.
In July 2019, Future Group announced it is planning a rapid launch of the country's first 7-Eleven convenience stores, aiming to tap
the massive retail market with 500 or more store openings over the next five years, starting in Mumbai.
US-based grocery retailer Walmart re-entered the Indian MGR sector in 2014, after ending its deal with Bharti Enterprises in
October 2013. The U-turn by Walmart highlights the massive potential that the Indian MGR sector offers but also the challenges
faced by foreign retailers when expanding in India. Walmart has registered a new company called Walmart India and has decided
to focus on its cash-and-carry business. In early 2014, the company announced that it would open an additional 50 outlets by 2018.
The relaxation on foreign direct investment restrictions in multi-brand food retail will ease the operating environment for
international food retailers. The team has also has acquired about 50,000 square feet area in the Karkardooma court area of east
Delhi. This marks a move away from its traditional stronghold of western and southern India.
The company strengthened its footprint in the Indian market by acquiring a majority stake in Bengaluru-headquartered e-
commerce player Flipkart for USD16bn. Following the deal, Flipkart announced in August 2018 its plans to expand its online
grocery services to five or six cities by the end of 2018. In summer 2019 Flipkart announced plans to scale its service across India,
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including Tier-2 and Tier-3 cities over the next five years.
India's MGR sector is still not mature compared with other emerging Asian countries, and we believe that significant obstacles will
continue to weigh on sector formalisation. Indian consumers are still largely familiarising themselves with the concept of modern
retail, which accounts for around 10% of overall grocery retail sales. While all key modern formats (supermarkets, hypermarkets,
convenience and discount stores) are present in India, they are largely operated by a handful of local retailers (Aditya Birla
Retail, Reliance Retail, RPG Retail). Small-scale traditional outlets, or 'kirana' neighbourhood stores, continue to dominate the retail
landscape.
Operating Obstacles
Inefficient supply chain management is viewed as one of the biggest problems facing the Indian MGR industry today. Less
problematic for the broader retail industry, supply chain problems have been prevalent in the grocery retail industry, where the
timely distribution of perishable items is vital. Retailers have cited poor road infrastructure and complex federal and state tax laws
that make cross-state transportation difficult. India's transport networks certainly need investment, although rural infrastructure and
national highways have been identified, along with power, as the main beneficiaries of government spending. As the situation
stands, India's vast size and underdeveloped infrastructure is preventing retailers from opening stores any great distance from their
distribution hubs.
Within this environment, retailers themselves must take responsibility for supply chain inefficiencies, rather than view them as a
national problem affecting all players equally. At a company level, the primary problem is a lack of expertise. The majority of retailers
have yet to set up a separate unit for managing supply chain issues, instead treating supplies as part of the day-to-day running of a
store. This has meant a fairly unidirectional flow of information (retailers simply summon stock when they need it and then wait for
it) and a lack of investment in storage space to support the scale of most retailer ambitions.
Huge Long-Term Consumer Potential
Despite the significant regulatory and operational hurdles, the persistence of several multinational retailers highlights the long-term
growth opportunities that the Indian grocery market offers.
Moreover, we believe the decision of the government to liberalise the sector will bring significant dynamism to the industry. Since
2012, 51% foreign ownership of retailers has been allowed by law. But in June 2016, the government - which had previously
expressed strong opposition to foreign presence in the food retail sector in order to protect traditional stores - announced that it
would authorise 100% ownership in multi-brand food retail.
We expect international retailers to expand their presence in the country, resulting in greater competition and dynamism. Until now,
international retailers mostly operated in the cash-and-carry format and through joint ventures with local partners. Given the
difficulty in finding a reliable partner for investment, international retailers such as Walmart and Tesco have so far adopted a very
cautious approach in the country, relying heavily on local partnerships and subsidiaries. While greater openness will bolster sector
dynamism, this will take time. The low level of retail formalisation means it is difficult for retailers to scale their operations and to
become profitable. This has led to a reversal in expansion of branches over 2014-2016, as retailers aimed to shore up profitability.
In addition, while Indian consumers are increasing their purchases of packaged food on the back of rising purchasing power, their
food retail preferences are still relatively conservative. Anecdotal evidence suggests that traditional independent stores remain
highly popular for food purchases, benefiting from their proximity to consumers, who typically shop for food several times a week. In
addition, independent stores offer credit facilities in many cases and are considered to be more trustworthy. Given that food and
non-alcoholic drinks still account for more than 25% of total household spending, traditional preferences for food purchases will
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hamper the development of modern retail formats.
Another interesting development to look out for will be the e-commerce/convenience space. JioMart and Metro have both
launched PoS and inventory management systems for local kirana stores to use to order supplies and manage their supplies.This
directly competes against modern convenience formats like 7-Eleven, whose offering is a standardised inventory for their
franchisees. Moreover, Amazon has also collaborated with kirana stores to have them serve as its pickup points for consumers living
in more rural areas who order from Amazon. This will put further pressure on modern convenience stores like 7-Eleven in the
country, as this collaboration will bring greater convenience to consumers while cutting 7-Eleven out of the equation.
Over the longer term, rising affluence will gradually push consumers to increase their spending and turn to modern retail formats in
search of the convenience and quality that they desire and can increasingly afford, which in turn presents positive implications for
MGR sales.
Online Groceries
In the online grocery space, investment is picking up, but from an extremely low base. Flipkart, India's largest e-commerce player,
launched a trial for grocery delivery in Bengaluru in mid-2017, with plans to roll it out further to five or six cities by the end of 2018.
In summer 2019 Flipkart announced plans to scale its service across India, including Tier-2 and Tier-3 cities over the next five years.
Flipkart is playing catch-up in an ongoing battle with Amazon in India.
In 2016, the Food Safety and Standards Authority of India released draft proposals on new rules to manage food sales through e-
commerce channels. Online food businesses will be required to gain a license from the Central Licensing Authority for the 'entire
supply chain', from head office to distribution. The e-commerce grocery business will also be required to ensure that the supply
chain adheres to the rules set out under India's Food Safety and Standards Act 2006.
In 2017, Amazon received regulatory approval to begin retailing food products online and offline in India. In its application to India's
Department of Industrial Policy and Promotion, the company detailed plans to invest in supply chains, cold-storage facilities and
warehouses in order to sell fresh grocery produce 'to customers at any location through any channel, offline or online, including e-
commerce, across India.' The company began selling food items online in February 2018 and has committed to investing
USD500mn in a wholly owned venture to retail locally produced and packaged food products through offline and online channels.
Amazon offers same-day grocery delivery on its Amazon Now app, through its partnerships with grocery retail chains such as Big
Bazaar and Hypercity. It also offers a flat fee bulk delivery service to 30 cities with Amazon Pantry. Future Group reportedly has
begun listing all its brands and products across fashion, grocery and electronics on Amazon, a move seen as a precursor to the
impending stake sale deal by the Indian retailer. In August 2019 there were unconfirmed reports that Amazon is in late stage talks to
acquire as much as 10% of Future Retail. Amazon is also reportedly in talks to acquire a stake in Reliance Industries’ retail
unit, Reliance Retail. The US e-Commerce giant is reportedly looking to acquire a 26% stake in the company and has been
interested in a stake in Reliance Retail since February 2019.
Indian online grocery BigBasket raised investment capital of USD150mn in April 2019, with investors including South Korean
Mirae Asset Management, the UK’s CDC Group and Alibaba. This has allowed the company to surpass USD1bn in valuation,
becoming India's latest unicorn. Alibaba had the led the previous Series E funding round in 2018 and is the largest investor in the
company with about 30% stake.
Food delivery service provider Swiggy's announced in February 2019 that it is launching a concierge-like service called Swiggy
Stores.The new business will help users order products such as grocery, health supplements and other items from nearby
kirana stores or supermarkets.
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Competitive Landscape
KEY PLAYERS IN INDIA'S FOOD AND DRINK SECTOR
Company Sub-Sector Ownership
Hindustan Unilever Food - convenience, various Beverages - hot Parent company: Unilever (67% stake)
and soft
Coca-Cola India Beverages - soft Parent company: The Coca-Cola Company
Amul Dairy Food - dairy, confectionery, convenience Managed by Gujarat Co-operative Milk Marketing Federation
Beverages - hot and soft
PepsiCo Food - snacks Parent company: PepsiCo

Beverages - soft
Tata Global Beverages Food - convenience Parent company: Tata Group

Nestlé India Food - dairy, confectionery Parent company: Nestlé

Britannia Industries Food - biscuits Parent company: Wadia Group
United Breweries Beverages - alcoholic Public company: Bombay Stock Exchange
Dabur India Food - snacks and ingredients Owner: Burman Family

Beverages - soft
Hatsun Agro Products Food - dairy Public company: Bombay Stock Exchange
Parle Agro Food - snacks, convenience Private company

Beverages - soft
Radico Khaitan Beverages - alcoholic Public company: Bombay Stock Exchange
Seagram India Beverages - alcoholic Parent company: Pernod Ricard
Source: Trade press, company reports, Fitch Solutions
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KEY PLAYERS IN INDIA'S MASS GROCERY RETAIL SECTOR

Parent Company Country Of Origin Ownership Fascia Format
RPG Enterprises Retail India Parent company: RPG Foodworld Supermarkets

Group
Spencer Hypermarkets
Tata Retail India Parent company: Tata Star India Bazaar Hypermarkets
Group
Aditya Birla Retail India Parent company: Aditya More Hypermarkets

Birla Group
Supermarkets
Reliance Retail India Parent company: Fresh Supermarkets

Reliance Industries
Smart Supermarkets
Market Cash and carry
Future Retail India Parent company: Future Big Bazaar Hypermarkets

Group
Nilgiris Supermarkets
Easyday Convenience stores
Food Bazaar Convenience stores
D-Mart India Parent company: Avenue D-Mart Supermarkets

Supermarkets
Lulu Hypermarket UAE LuLu Group International Lulu Hypermarket Hypermarkets
Metro Cash & Carry Germany Metro AG Metro Wholesale
Source: Trade press, company data, Fitch Solutions
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Company Profile
Amul Dairy
SWOT Analysis
Strengths • An increasingly diverse product portfolio has broadened Amul's customer base.
• Successful entry into export markets has slightly reduced Amul's reliance on the intensely price-sensitive
market of India.
• Amul enjoys strong brand recognition and has a reputation for high quality products.
Weaknesses • As a cooperative, Amul is arguably not as responsive to the changing needs of the market as many of its
rivals, although this has not prevented it from expanding rapidly.
• Due to the perishable nature of its dairy products, Amul will need to continue investing in the development
of its distribution network to enhance distribution efficiency and increase sales opportunities.
• Amul's higher-value products such as ice cream face a limited consumer base, given the country's low
existing incomes.
Opportunities • Ammul will benefit from the increased demand for essentials as consumer purchasing patterns shift amid
the Covid-19 pandemic which is resulting in increased grocery spending as consumers spend more time at
home.
• The higher-value processed dairy sub-sector represents an excellent growth channel for Amul.
• Investment in new product development in new sub-sectors will improve Amul's chances of poaching
market share from its competitors, such as its latest venture into the ice cream parlour business.
• Expansions in high-value sectors can allow Amul to tap into the growing affluence among India's middle
classes.
• Amul is committed to driving international expansion.
Threats • An outbreak of Covid-19 at production facilities could result in temporary closures while employees are
tested and and the facility is disinfected.
• Competition is rising, with multinationals increasingly entering the market and with local food producers
turning to dairy in search of a combination of existing demand and high-growth opportunities.
Company Overview
Amul Dairy is one of India's largest food companies and one of its best-known brands. The brand is operated by a cooperative body,
the Gujarat Co-operative Milk Marketing Federation (GCMMF), which is jointly owned by 3.6mn milk producers in Gujarat. Amul is the
abbreviated form of Anand Milk Union Limited. Amul is credited with almost singularly driving the 'white revolution' – the
programme that transformed India into the largest milk exporter in the world.
The company produces spreads, cheeses, UHT milk, milk powder, fresh milk, curd and ice cream, and it has been pursuing
diversification into the confectionery, beverages and snack foods sub-sectors in recent years. As well as selling its products in India,
Amul is also the largest exporter of dairy products in the country, with key markets including Singapore, the US and Gulf countries.
Strategy
Product diversification has been integral to Amul's growth strategy in recent years. The company's foray into the ice cream sector
was particularly notable, putting it into direct competition with major multinationals such as Unilever, and plans to enter the
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confectionery and snack foods segments quickly followed. In September 2014, the company announced that it would enter the
value-added nutraceuticals sector in India. Like its rivals, Amul is struggling in the face of elevated sugar, cocoa and milk prices.
Although the company is a cooperative and buys directly from its members, it is arguably more immune to rising milk prices than
most. Nonetheless, Amul is seeking ways of moving into higher-margin areas that better offset higher commodity costs, including
growing its export business. This will be all the more important following the company's recent decision to implement an aggressive
pricing approach that will keep prices in a number of categories at their current levels. More recently, looking to beef up its presence
in India, Amul plans to create co-operative farms in several states including West Bengal, Bihar and Rajasthan, which would raise its
milk output by a fifth.
Another way Amul is growing their brand is to tap into demand from tier two towns and smaller villages all across India, apart from
concentrating their efforts in larger cities.
Amul is now concentrating its efforts on international expansion, having added 306 new distributors, 65 new super-stockists and
900 new sub-stockists. Following Russian sanctions against EU and American producers, the company was seeking approval from
the Russian government to export to the country. In addition, it reported in September 2014 that it was planning to start producing
in Europe and Singapore by 2016.
Amul achieved a compound annual growth rate in revenues of more than 18% between 2010 and 2018 on the back of higher milk
procurement, continuous expansion in markets, launching of new products and adding milk processing capacities. The company is
committed to achieving sales turnover of INR500bn (USD9.3bn) by 2020-2021, more than double the revenue achieved in
FY2017/18 (ended March 2018).
Latest Developments
2020
In June, India based Dairy producer Amul reported that while it initially saw its sales fall by between 10-15% depending on the city
when the lockdown began as the hotels, restaurants and catering segment which is a big consumer of dairy closed down. The
company states that gradually increasing household consumption of dairy products has helped to offset the fall in demand from
hotels. Amul reports that May 2020 sales were at par with the sales in the same period last year. The company anticipates a 5-6%
increase of milk sales despite hotels, restaurants and catering not being fully open. The sales of other dairy products like ghee,
paneer, cheese and condensed milk is expected to increase from 10-15% to 40-50%.
In February 2020, Amul has acquired Heritage Foods' dairy plant in Punjab for IDR212mn.
2019
Amul Dairy has begun the sale of camel milk in January 2019 in select markets of Gujurat including Gandhinagar, Ahmedabad and
Kutch. Prior to this, Amul had introduced camel milk chocolate.
In March 2019, Amul expanded into the fruit juice category with its Amul Tru range of fruit juices. Amul launched packaged fruit
drink brand ‘Amul tru’ in mango, orange, apple and lychee variants and is set to compete with Frooti, Maaza and Minute Maid.
2018
In February, Amul announced plans of a '12-cattle scheme', which provides incentives for cattle rearing. It could generate interest of
rural youth in farming and animal husbandry at a time when most turn to the cities for lucrative careers. The scheme has an earning
potential of INR35,000-40,000 a month per family.
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Amul Dairy announced in September 2018 that it was acquiring a a dairy plant in Wisconsin, US. This is a move that helps
Amul better serve its consumers in the US.
Banas Dairy, a member of GCMMF that owns Amul, launched its packaged milk at Jamshedpur in Jharkhand in October 2018. The
company also announced that it has set up a milk packaging plant and distribution plant in Jamshedpur.
2017
In response to demonetisation and increases in cattle feed prices, Amul Dairy announced in February that it was increasing the price
paid to its milk suppliers to INR610 per kg of fat. This followed earlier increases and means that Amul's milk producers are now being
paid INR30 per kg of fat more than they were in November 2016.
2016
In late 2016, Amazon announced that it will ship Amul products to consumers in the US, a move that will help the company increase
its exports.
At the same time, Amul opened its first mall in India, Amul Green. The mall will sell 6,500 food lines with a restaurant, Amul Foodland,
next to the mall.
Financial Data
Total Revenue (fiscal year ending March 31)
• 2019: USD5.50bn
• 2018: USD4.39bn
• 2017: USD4.16bn
• 2016: USD5.00bn
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Britannia Industries
SWOT Analysis
Strengths • Britannia's commitment to expanding its geographic footprint is supportive of its top-line growth.
• Britannia's vast distribution network and nationwide sales force remain a high barrier for potential market
entrants, thus securing its leading position.
• Expansions in production capacity should see Britannia better cater to rising domestic demand.
• Britannia's continued expansion of its health and functional food offerings leaves it in a strong position to
capitalise on growing health awareness among Indian consumers.
• The company has a leading 30% share of India's biscuit market.
Weaknesses • Lower pricing power amid rising competitive pressure could prove a further drag on its financial
performance.
• Numerous price hikes on the back of Britannia's failure to contain rising raw material prices are detrimental
to the company's sales growth.
Opportunities • Consumer purchasing patterns are shifting towards essentials amid the Covid-19 pandemic, resulting in
increased demand for food products.
• India's favourable demographics and rising per capita incomes ensure a growing audience for Britannia's
brands.
• A growing health-awareness trend represents a rapidly enlarging opportunity for Britannia to diversify into
health and functional foods.
• The continued spread of modern retail in India will ease distribution challenges for Britannia, allowing the
company to further extend its reach into underdeveloped rural areas.
• Britannia is aiming to develop into a complete food business.
• Britannia is looking to ramp up its export potential.
Threats • The company's production could be disrupted by the outbreak of Covid-19 at its production facilities which
will result in production being halted as employees are tested and disinfection is carried out.
• India's inadequate distribution infrastructure, coupled with the perishable nature of dairy products, reduces
sales opportunities for Britannia.
• An increasingly competitive confectionery market as a result of the continued arrival of multinationals could
lead to an erosion of Britannia's market share.
Company Overview
Britannia Industries is a leading Indian confectionery and dairy producer. The company's product portfolio consists mainly of bakery
products including biscuits, cakes and bread, as well as dairy products such as milk, butter and cheese. Besides its dominance in
India, Britannia has a geographically diverse footprint through its exports across various countries, including Singapore, the US,
Canada, Australia and New Zealand. The company has shortlisted Myanmar, Bangladesh, Egypt and Nigeria for the expansion of its
overseas operations in the next financial year.
Strategy
Given the immense potential of India's confectionery sector, it is unsurprising that Britannia is looking to expand its manufacturing
footprint in a bid to grow its domestic presence and cement its leading position amid rising competitive pressures from industry
giants such as Cadbury (acquired by US major Mondelēz International, the spinoff of Kraft Foods), Nestlé and Amul.
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The booming Indian economy will continue to fuel the expansion of the country's middle- and upper-income consumer base, which
will in turn fuel Indian food and drink sector growth. Specifically, India's consolidating, increasingly competitive (and thus
dynamic) confectionery market continues to carry great promise as a strong long-term growth engine.
Considerable growth in India's food sector will also come from the rapid acceleration of the premiumisation trend as higher-value
products, offering healthy and functional benefits, are constantly being introduced to the market and adopted by higher-spending
Indian consumers. Britannia's move to enhance its domestic production capacity could be oriented towards the further
development of its strategy to harness the consumer health trend. The leading Indian biscuit producer has introduced a number of
healthy products, including NutriChoice 5 Grain biscuits. Britannia has also launched a range of breakfast products.
Britannia's strategy of organically expanding its nationwide presence, its innovative approach to products and marketing and its
commitment to further growth through mergers and acquisitions have proved effective in generating strong top-line growth. The
company's revenues have increased steadily in recent years. From 550,000 direct retail outlets in 2012, Britannia now has access to
more than 5mn outlets according to the company's website. This has helped the company expand in rural areas, with particular
focus in Rajasthan, Madhya Pradesh, Uttar Pradesh and Gujarat. In late 2016, the company announced plans to launch new brands
with the aim of becoming a complete food business, as well as expanding its sales and distribution network in the northern and
western states of India and increasing its sales in rural areas. To attract more customers in rural markets, Britannia will come up with
more low-price offerings in these areas. According to Britannia Managing Director Varun Berry, the company is planning to bring in
new products, especially in the bakery segment, to fill gaps in its portfolio.
Britannia Industries has also announced that it is seeking a partner to strengthen its dairy business segment and to trim down the
number of brands, as a part of its strategy to focus on higher margin products. In 2017, it also entered new areas such as croissants
in collaboration with Greek snack company Chipita, which is set to be unveiled in the first quarter of 2019. The company is also
looking to invest INR3.0bn-3.5bn in the eastern Indian state of Bengal to set up a production facility.
The company plans to strengthen its dairy and snacks portfolios through new product launches and by ramping up its supply and
distribution network. Completing 100 years of operations, Britannia launched 50 new products over FY2018 (ending March 2019).
The company's value-added dairy segment will also receive a boost, launching products across cheese, milk drinks and dairy
whitener categories in the last two quarters of FY18.
Furthermore, Britannia continues its expansion plans, investing INR3mn recently to grow in Bengal. The expansion is part of the
company’s plans to rapidly scale up operations and increase volumes in key markets, including eastern India. The Bengal cabinet
sub-committee on industries and infrastructure in mid-January 2019 cleared a proposal moved by the state industries department
to allot 75.4 acres of land and a 506sq ft module to eight investors, including Britannia Industries. In June 2019 Britannia ramped up
its international business focus with the development of its first export oriented factory in Gujarat.
Britannia is looking to continue its focus on brand building activities, introducing new categories and pushing for dominance in
markets where it has lesser presence.
Latest Updates
2020
In June, Britannia Industries resumed 100% of production at all of its factories except those that are located in the red zones that
have been shut for over two months due to the lockdown. The company reported a 26% rise in net profit and a 2% increase in
revenue for the March quarter.
In February 2020, Britannia Industries has filed a trademark infringement case against Future Consumer alleging that the company
has copied the packaging of several of its biscuit brands.
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In February 2020, Britannia announced that they will reduce the number of product launches in 2020 amid a slowdown in India,
despite having products like croissants and salty snacks in the test phase. This is because they believe that consumers experiment
less during a slowdown.
In March 2020, Britannia Industries was the highest-scoring India-headquartered company in the second iteration of India Access to
Nutrition Spotlight Index 2020, an index which tracks the contribution of India’s largest foods and beverages manufacturers towards
meeting the health and nutrition needs of consumers.
Financial Data
Total R
Reevenues (fiscal year ending March 31)
• 2019: INR100.4bn
• 2018: INR92.8bn
• 2017: INR85.8bn
• 2016: INR78.8bn
Net Income (fiscal year ending March 31)
• 2019: INR10.1bn
• 2018: INR9.5bn
• 2017: INR8.4bn
• 2016: INR7.6bn
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Future Retail
SWOT Analysis
Strengths • In January 2020, its partnership with Amazon to tap into the online e-commerce stands it in good stead to
maximise growth
• Its rapid expansion prior to the arrival of multinationals allows it relatively free access to India's wealthiest
towns and cities.
• Continued innovation and expansion of its product offerings could help the company secure a stronger
market share.
• Future Retail's lower-value private label offerings will very likely garner strong appeal among Indian
consumers and support its ambitions of building up a stronger market share.
• A multi-format operation allows Future Retail to cater to a wider range of Indian consumers and a broader
range of shopping needs.
Weaknesses • With India as its sole location, Future Retail is unable to call on profits from elsewhere to fund Indian
expansion and is dependent on remaining profitable.
• Remaining profitable and pursuing expansion are challenging in a price-sensitive market.
• The retailer's ambitious expansion plans will require major investment in distribution and new stores.
Opportunities • The company's mass grocery division will experience increased consumer demand in 2020 as spending
patters shift towards essentials in response to growing levels of uncertainty and more time spent at home
due to the Covid-19 pandemic.
• Discount stores provide access to lower-income groups.
• Convenience stores allow for expansion opportunities once major towns and cities start to crowd, in line
with current development rates.
• A rural retailing partnership with Godrej's Aadhar network will give the company very early, competition-free
access to an enormously promising sub-sector.
• By being among the first to establish a multi-format grocery network and a multi-tiered private label range,
Future Retail can position itself at the forefront of domestic retail innovation.
• The merger of retail activities with Bharti Retail will increase the group's market share and bargaining power.
• The joint venture with Booker will allow for the growth of the cash & carry format in India.
• Amazon may be looking to acquire a stake in Future Retail.
Threats • Food and drink supply chains could be disrupted due to Covid-19 outbreaks at production facilities which
could result in a halt in acitivies.
• With the further relaxation of foreign direct investment regulations, Future Retail can expect to have its
market share pressured and could even become a takeover target.
• Future Retail needs to find efficiencies and improved funding if it is to sustain this pace of growth and ward
off the threat of increased competition.
Company Overview
Future Retail (formerly Pantaloon Retail India) is India's largest diversified retail company, operating an extensive range of food and
non-food retail interests. Future Retail operates grocery retail outlets under the Big Bazaar hypermarket, Food Bazaar supermarket,
Value discount store and KB's Fair Price supermarket banners. Its operations currently cover 80 cities.
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Strategy
Future Retail, the leading mass grocery retail player in India, is likely to look forward to years of strong growth. Increasing affluence in
India over the coming decade will encourage more consumers to turn to modern retail formats in search of the convenience and
quality they desire and can increasingly afford. This will mean a rapidly growing appetite for Future Retail's modern retail offerings.
On another positive note, Future Retail's continued expansionary activities, in terms of product development and store expansion, as
well as improving distribution infrastructure, will provide the retailer a stronger platform to leverage the growth prospects of the
Indian mass grocery retail sector.
In March 2015, Future Retail merged its retail operations with Bharti Group's retail business, creating a strong entity with a
nationwide presence and with increased bargaining power with suppliers. Another entity will be created for its infrastructure
business and other non-core activities, allowing Future Retail to fully invest in expanding its retail activities.
By being among the early mass grocery retail players to establish a multi-format grocery network and a multi-tiered private label
range, Future Retail can position itself at the forefront of the domestic retail spending boom. Rapidly growing consumer affluence in
India is expected to have a strong effect on the domestic sector, with consumers increasingly equipped with the purchasing power
to trade up to higher-value modern retailing formats. We believe that the massive breadth of Future Retail's brand portfolio and the
retailer's strong expansionary focus will put it in a particularly strong position to cater to a broader range of shopping needs and
exploit the country's dynamic mass grocery retail growth.
Besides expanding store space, continued innovation and expansion of its product offerings will remain another priority for Future
Retail. In line with increasing purchasing power, purchasing determinants such as product quality, product variety, and a
conducive shopping environment will continue to grow in prominence over the coming years. With this in mind, Future Retail will
retain a strong focus on improving the variety of its product assortments at its Big Bazaar and Food Bazaar outlets, such as including
more ethnic brands tailored to local consumer tastes.
Expanding its fresh grocery produce and private label offerings are key focus areas in this regard. As consumers familiarise
themselves with modern retail formats and as modern retailers improve their efficiencies in fresh food distribution, consumers are
increasingly relying on modern retail stores to meet their fresh food needs, thus implying growing demand for Future Retail's fresh
food produce.
Developments
2020
India’s nationwide lockdown that was implemented on March 25 has had a negative impact on diversified retailer future group
which saw sales at more than 2,000 stores across 437 cities fall following a government order for stores selling non-essential items
to close. Prior to the Covid-19 (coronavirus) pandemic the company was facing challenges due to rising debt levels which have
been exacerbated by the negative impact that the virus is having on economic activity and by extension the company’s sales.
In January 2020, Amazon strengthened their partnership with India’s Future Retail by co-hosting Future Group’s flagship Republic
Day shopping fest. The shopping festival hosted by Big Bazaar every year around January 26, is a five-day-long affair.
In January 2020, Future Retail Ltd on Saturday said that its board has approved a fundraising plan to raise up to USD500mn through
dollar denominated bonds.
In January 2020, Amazon is partnering with Future Retail, which has more than 1,500 stores across 400 Indian cities. The deal will
make Amazon the official online channel for Future Retail's hundreds of stores, and Amazon will add Future Retail's grocery
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products to its two-hour Prime Now delivery programme in India.
2019
In August, Amazon agreed to acquire a 49% stake in a unit of India's Future Group which owns 7.3% of Future Retail, giving the U.S.-
based company a 3.58% stake in the retailer. India's antitrust body has sought more information from Amazon about its planned
acquisition. The deal was approved in November 2019.
In July, Future Group announced it is planning a rapid launch of the country's first 7-Eleven convenience stores, aiming to tap
the massive retail market with 500 or more store openings over the next five years.
Future Group has begun listing all its brands and products across fashion, grocery and electronics on Amazon, a move seen as a
precursor to the impending stake sale deal by the Indian retailer. The US-based online giant was earlier in talks to acquire a stake in
Future Retail, which runs more than 1,600 stores across food, grocery and general merchandise. After the amended foreign
ownership rules that bar e-commerce companies from holding shares in entities selling on their platforms, Amazon is now in talks
to buy a stake in Future Coupons, a firm owned by Future Group promoter Kishore Biyani, to ensure that the US retailer is in
compliance with the new norms.
2018
After missing out to Walmart in a deal to buy Indian e-commerce giant Flipkart, Amazon is said to be in talks with Future Retail to
acquire a minority stake of 9.5%, giving it access to a larger retail client base through the Big Bazaar and Nilgiris supermarket chains
and other outlets. Internet search giant Google and Alibaba-funded Paytm Mall are all reportedly also queuing up for a stake of up to
10% that Future Retail is looking to sell.
Financial Data
Total Revenue (fiscal year ending March 31)
• 2019:INR203.3bn
• 2018:INR184.8bn
• 2017:INR170.8bn
• 2016:INR68.5bn
Net Profits (fiscal year ending March 31)
• 2019: INR7.3bn
• 2018: INR112mn
• 2017: INR3.7bn
• 2016: INR150mn
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RPG Enterprises
SWOT Analysis
Strengths • A diverse multi-format retail offering allows the company to cater to a wide range of Indian consumers and
shopping occasions.
• Local market knowledge gives it an advantage over international retailers arriving in India.
• RPG has not accrued great debts to finance its growth, and this strong financial capacity will leave it poised
for future expansionary investments in the country.
Weaknesses • In 2019, Spencer's suffered 2 consecutive quarters of losses. This bears watching, to ensure that the brand is
not losing its footing or appeal to Indian consumers.
• With such a diverse range of business interests, there are fears that the RPG conglomerate could lose focus
on its retail division, should the division start to underperform.
• RPG will have to invest heavily in infrastructure and not just new store openings if it is to almost quadruple its
Indian city presence at the rate it is targeting.
• Existing low incomes in India mean that there is only a limited appetite for RPG's modern retail stores.
Opportunities • Consumer purchasing patterns are shifting towards essentials in 2020, particulalry groceries amid the
Covid-19 pandemic which bodes well for the sales at the company's Spencer's stores.
• A commitment to private labelling is likely to broaden RPG's appeal among price-sensitive, though modern-
retail-susceptible consumers.
• Expansion into the underdeveloped online groceries market will present substantial growth opportunities
over the long term.
• Added-value products and home-delivery services will improve loyalty among India's growing aspirational
middle classes.
• RPG can leverage its local knowledge to tailor offerings specifically.
• The mass grocery retail sector is set to experience phenomenal growth, and RPG is set to be a major
beneficiary with its wide and diverse store network.
• The acquisition of Nature's Basket in summer 2019 strengthen Spencer's geographical and store portfolio
basis.
Threats • The company will be faced with increased costs as it intensifies its efforts to meet Covid-19 social distancing
and hygiene standards which could reduce its margins in 2020.
• Widespread poverty and the country's size and regional diversity act as impediments to the development of
the mass grocery retail sector and keep the consumer base small.
• Fast-expanding multinationals could undermine RPG's gradually built-up market share.
• RPG's hypermarket division requires significant further growth, which means enormous long-term outlay by
the company.
• The inevitable entry of multinationals and their massive investment potential could seriously undermine
RPG's growth plans, with such investments already underway.
Company Overview
RPG Enterprises operates four grocery retail networks under the Spencer's banner, Daily, Express, Super and Hyper. The firm, which
is part of the leading Indian conglomerate RPG Group, also operates Music World music stores and Books and Beyond books, gifts
and stationery outlets in the country. Commencing retail operations in 1996, RPG parted ways with its retail partner Hong Kong's
Dairy Farm International in 2005. For RPG, this meant the branding of the Foodworld supermarkets returned to its Spencer's grocery
retail banner.
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Strategy
RPG plans to invest a total of USD628mn in expanding its existing retail operations and rationalising its four-format grocery retail
offering into three clear-cut brands. RPG is likely to drop one of its mid-sized formats to retain one large-scale, one medium and one
smaller convenience format. Expansion is also integral to the firm's plans, and it is looking to build its presence from 32 cities
currently to 119 cities. Expansion in terms of store numbers is not RPG's sole aim, the company will also look to continually improve
its existing offerings by adding extra in-store services, as well as investing in information technologies for its supply chain and
logistics. These expansions will very likely leave RPG in a good position to benefit from the ongoing spread of modern retail in India.
Although modern retail currently accounts for only a small part of overall grocery retail sales in India, there are going to be
tremendous opportunities for growth, given the underdeveloped nature of the Indian mass grocery retail sector. As affluence in
India rises steadily over the coming years, consumers are expected to increase their spending and turn to modern retail formats in
search of the convenience and quality that they desire and can increasingly afford, which in turn presents very positive implications
for mass grocery retail sales.
RPG made its first move into the e-commerce market in December 2015, following the acquisition of Indian start-up Omnipresent
Retail, which runs Meragrocer.com. The company, which allows customers to purchase groceries online or through its mobile app,
will be incorporated as a subsidiary of Spencer Retail, and to begin with, will only be available in the cities of Delhi and Kolkata.
Although online grocery orders in India account for less than 1% of total sales, Spencer's expects this new online division to
contribute INR500mn in revenues by 2019.
In late 2016, Spencer's Retail announced that it was piloting its own grocery e-commerce venture in the national capital region and
Kolkata. The retailer will then scale up the venture in the south in another six cities. As part of the strategy, the company is
revamping its supermarket stores to focus on smaller packs that consumers buy for their weekly or daily needs, as well as turning
stores into fulfilment centres for e-commerce.
To strengthen its e-commerce strategy, RPG is speculated to be looking to divest 10-15% of Spencer Retail to Chinese e-commerce
major Alibaba. The company will be able to leverage on Alibaba's expertise in e-commerce and omnichannel retail to strengthen its
foothold in the Indian market.
The company is also strengthening its expansion outside of metropolitan cities, with a focus on expanding its store count in existing
clusters in east, south and north India. In this effort, Spencer’s opened one store every 10 days and thereby augmented the retail
network of the chain. With this expansion, the store count of Spencer’s has now reached 156 across 39 cities.
In July 2019 Spencer’s Retail completed the acquisition of Nature’s Basket from Godrej Industries in a deal worth USD43mn.
Nature’s Basket is a neighbourhood convenience store format with 36 stores. The acquisition will provide Spencer’s with access to
the western markets of India.
2020
In February 2020, RPG Enterprises' infrastructure company KEC International has acquired a transmission tower manufacturing
facility with a capacity of 50,000 tons a year in Dubai for IDR1bn.
In February 2020, Spencer’s Retail will raise IDR800mn via rights issue to its eligible shareholders, as per the company’s regulatory
filing to the stock exchanges.
2019
In December, the company also announced its financial result for third quarter ending December 31 2019. While revenue from
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operations went up by 5.8% to Rs IDR6.1bn, Spencer’s posted a net loss of IDR170.9mn in the period under review as compared to a
net profit of IDR14.6mn in Q3 2018.
In September, Spencer’s Retail on Thursday reported 8% growth in its revenue from operation at IDR6.1bn for the second quarter
ending September 30, 2019. The Kolkata-based retail chain, however, reported a net loss of IDR156.2mn during the period under
review as compared to a net profit of IDR14.7mn in the same period last year.
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United Breweries
SWOT Analysis
Strengths • In February 2020, UB will aggressively increase their adspend up 20% in 2020, with a focus on TV and
digital. Digital, which made up 25% of the company's adspend last year, will be increased to 30% this year.
This will help them expand their brand and market share amidst heavy competition from international
players
• Being part of the expansion-oriented UB Group greatly enhances United Breweries' (UB) capacity for brand
building and reinvestment.
• A diverse brand portfolio allows UB to target both the lower income mass market and the emerging
premium sector, with its product portfolio further diversified following the Heineken takeover.
• UB's dominance in India's beer sector and its robust growth leaves it in a better position than its beer rivals
to capitalise on the premiumisation trend with its Kingfisher Ultra and Heineken beer brands.
• In December 2019, UB has started started to capitalise on the premiumisation trend, launching their first
specialty beer, the Ultra Witbier
• A local heritage should help UB avoid the negative price connotations associated with international brands
in this price-sensitive market.
• A strong local brand heritage should help UB offset international competition.
Weaknesses • UB will need to continue investing in new product launches and building its market presence before it can
fully benefit from the growing premiumisation trend, particularly with current incomes remaining at very low
levels.
• An overarching reliance on the Indian beer market leaves UB particularly vulnerable to demand fluctuations.
• Existing low incomes in India mean that UB still faces a relatively small consumer base, compared with some
of the regional brewers.
• High taxation on beer products in India means that for many consumers, beer is too expensive to purchase
regularly. This is especially so when different states levy increasing taxes year on year on beer as an easy way
to generate revenue.
Opportunities • The increase in the demand for e-Commerce services amid the Covid-19 lockdown could accelerate the
adoption of e-Commerce for alcoholic drinks.
• Two-way sales opportunities are important for UB, with Kingfisher representing a premium brand
internationally, despite having a lower price domestically.
• UB could leverage on Heineken's distribution network to gain improved access to its export markets.
• Increasing consumer affluence will encourage a growing number of consumers to trade up to UB's higher-
value brands over the long term.
• Current per capita consumption of beer in India is one of the lowest in the world, resulting in significant
room for growth.
• Both low alcohol/non-alcoholic variants and craft beer are sectors with strong potential in India, where UB is
attempting to build a presence.
Threats • The restrictions on the sale of alcoholic drinks and the closure of bars and restaurants due to the Covid-19
lockdown will have a negative impact on alcoholic drinks consumption in 2020.
• Dealing with the red tape associated with individual state-by-state transportation and taxation laws makes
distribution challenging and time consuming.
• Distribution remains a challenge in India, and few brands have a truly nationwide presence.
• There are limited opportunities for growth through premiumisation at present, due to low disposable
incomes of most of the population.
• Potential fines relating to a collusion case will impact cash flow.
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Company Overview
UB is the main brewer of alcoholic drinks major, UB Group. The company is the local market leader, with a share of around 55%,
obtained primarily through its flagship Kingfisher brand. Kingfisher has also proved popular internationally and represents a key
export product for the company. Heineken holds a 42.0% stake in UB. It acquired the stake in its asset split with Danish firm
Carlsberg, following the two brewers' acquisition of former UB stakeholder Scottish & Newcastle. In autumn 2016, Heineken raised
its stake to 43%. According to media reports, Heineken is aiming to boost its presence in the Indian market by buying another 15%
stake in the country's largest brewer, UB, which will give the Netherlands-based brewer majority control.
Strategy
India's leading brewer UB is set for dynamic growth in the near term and over the long run. Volume gains and product capacity
expansion remain at the heart of UB's growth strategy in the near term, as it builds its foothold in the mass market segment of the
Indian alcoholic drinks industry. Over the long term, UB will sharpen its focus on value growth as affluence and demand for premium
products rises.
With premiumisation having some way to go before it becomes fully entrenched among Indian consumers, mass market volume
gains will continue to form the bulk of UB's revenues in the near term. In recent years, UB has continued to gain ground on its
strongest competitor, AB InBev India, and is now estimated to have a market share of 55%. This compares very favourably with
AB InBev India's market share of 23%.
A large population and a vast low-to-middle class underlines the abundance of opportunities in the mass market segment of the
alcoholic drinks market, and UB's market dominance means that it is in pole position to capitalise. Food staples and basic essentials
still form a large chunk of Indian household budgets, and rising incomes among the lower-tier households will very likely continue
to deliver steady advances in UB's mass market sales growth.
Given UB's portfolio diversification ambitions, expansions in product capacities will remain central to UB's near-term growth strategy
as well. Capacity expansion also has the added benefit of allowing UB to avoid the high import taxes that are applicable to alcoholic
drinks in India. Import duties in the country start at 150%, and state taxes can increase the price of a bottle by another 150% or
more. By expanding its domestic production capacity, UB will be able to circumvent the high import taxes and thus lift its profit
margins.
While we see massive growth opportunities at the lower spectrum of the alcoholic drinks market, we expect UB to gradually reshape
its product portfolio towards the premium end of the market. Prolific wealth accrual over the next few years, buoyed by the
country's strong economic momentum, will lay the groundwork for the calibration of consumption habits towards the premium
end and prompt an increasing number of consumers to graduate to higher-priced, better-tasting brands.
Over the longer term, UB is likely to join the fledgling trend of emerging market-based companies looking outward for new and
more profitable growth opportunities. With UB's current market share of 55% and intensifying competition from multinational
brewers such as AB InBev, Diageo and Carlsberg, opportunities for gaining market share in India are quickly depleting, and UB will
need to look further afield for sustainable long-term growth prospects.
UB is also moving into the craft beer territory, as premiumisation is beginning to take hold in urban India. It has launched its first
specialty craft beer, Ultra Witbier. We expect that this trend will only continue to develop in the future, both as Indian incomes
continue to rise and also on the back of the general worldwide trend of premiumisation in alcohol.
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Recent Developments
2020
In April, India’s leading alcoholic drinks brewers which include United Breweries, Carlsberg, Anheuser-Busch InBev and Bira 91 wrote
a joint letter to the central government and several state governments requesting to be permitted to sell alcoholic drinks offline and
online even if the lockdown is extended. According to reports, the industry anticipates a 25% decline in sales this fiscal year due to
the Covid-19 lockdown, especially as summer which is the peak season for beer sales has started.
In February, United Breweries announced that they will increase their adspend up 20% in 2020, with a focus on TV and
digital. Digital, which made up 25% of the company's adspend last year, will be increased to 30% this year.
In January, United Breweries reported a net profit decline of 2.56% at INR1.1bn for the quarter ended December, as net sales was
impacted by economic slowdown and new excise policy in Andhra Pradesh. The maker of Kingfisher reported a 2.05% increase in
net sales in the third quarter at INR32.6bn.
2019
In December, India’s largest brewer, United Breweries Limited announced the rollout of speciality beer-- Ultra Witbier--under its
flagship Kingfisher brand, riding on the growing popularity of craft brews in India’s top metros.
In October, The investigations unit of India’s Competition Commission concluded that Anheuser-Busch InBev, Carlsberg and United
Breweries colluded to fix beer prices. The Competition Commission of India (CCI) launched the investigation after AB InBev told the
watchdog it had detected an industry cartel, leading in 2018 to dawn raids at the three brewers’ offices to collect evidence. The
investigation has found that 15-20 executives from the three brewers were involved in discussions of beer prices before they were
submitted to Indian state regulators, thereby violating antitrust laws.
In July, United Breweries rolled out Heineken 0.0, a zero-alcohol version of the beer brand and announced plans to hand production
and distribution of its Kingfisher beer in Australia and New Zealand to Heineken.
In May, United Breweries revealed that it plans to sell about 2mn cases of Amstel beer this fiscal year and confirmed its plans to
enter the craft beer segment.
In March, UB rolled out Radler soft drink in India, launching in Gujarat and Karnataka in October 2018. The drinks is marketed as
being 100% natural and containing 30% less sugar than carbonated soft drinks, thereby wooing health-conscious Indians with its
blend of fresh barley malts and natural lemon juice.
2018
In mid-2018, UB launched its Amstel beer from its parent Heineken's global portfolio. Amstel joins Kingfisher Ultra, Ultra Max,
Heineken and Storm. The company announced that it plans to launch an Indian craft beer brand by the end of 2018 and has
moved to position Heineken at the higher end of the market as it readies itself for the re-emergence of premiumisation momentum
in the country. The company will also look to carve out greater market share by expanding its portfolio into non-alcoholic beers,
which will be produced in the state of Bihar (a dry state) and is set to launch by the end of 2018.
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Financial Data
Gross Revenue (financial year ending March 31)
• 2019: INR141.4bn
• 2018: INR124.3bn
• 2017: INR102.3bn
Net Turnover (financial year ending March 31)
• 2019: INR64.7bn
• 2018: INR56.3bn
• 2017: INR47.8bn
Net Profits (financial year ending March 31)
• 2019: INR5.6bn
• 2018: INR3.9bn
• 2017: INR2.3bn
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India Demographic Outlook

Demographic analysis is a key pillar of our macroeconomic and industry forecasting model. Not only is the total population of a
country a key variable in consumer demand, but an understanding of the demographic profile is essential to understanding issues
ranging from future population trends to productivity growth and government spending requirements.
The accompanying charts detail the population pyramid for 2017, the change in the structure of the population between 2017 and
2050 and the total population between 1990 and 2050. The tables show indicators from all of these charts, in addition to key
metrics such as population ratios, the urban/rural split and life expectancy.
Population
(1990-2050)
f = Fitch Solutions forecast. Source: World Bank, UN, Fitch Solutions
India Population Pyramid

2017 (LHS) & 2017 Versus 2050 (RHS)
Source: World Bank, UN, Fitch Solutions
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POPULATION HEADLINE INDICATORS (INDIA 1990-2025)

Indicator 1990 2000 2005 2010 2015 2020f 2025f
Population, total, '000 870,133.5 1,053,050.9 1,144,118.7 1,230,980.7 1,309,054.0 1,383,197.8 1,451,829.0
Population, % y-o-y 1.79 1.60 1.38 1.17 1.06 0.92
Population, total, male, '000 450,351.8 545,513.6 593,062.0 638,471.9 678,564.3 716,370.8 750,945.2
Population, total, female, '000 419,781.7 507,537.3 551,056.7 592,508.8 630,489.7 666,827.0 700,883.8
Population ratio, male/female 1.07 1.07 1.08 1.08 1.08 1.07 1.07
na = not available; f = Fitch Solutions forecast. Source: World Bank, UN, Fitch Solutions
KEY POPULATION RATIOS (INDIA 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Active population, total, '000 506,787.4 640,951.0 714,450.9 787,765.4 860,127.6 924,931.8 983,415.0
Active population, % of total population 58.2 60.9 62.4 64.0 65.7 66.9 67.7
Dependent population, total, '000 363,346.1 412,099.9 429,667.7 443,215.3 448,926.4 458,265.9 468,414.0
Dependent ratio, % of total working age 71.7 64.3 60.1 56.3 52.2 49.5 47.6
Youth population, total, '000 330,035.9 365,773.8 375,114.2 380,274.3 375,144.9 367,656.9 359,641.6
Youth population, % of total working age 65.1 57.1 52.5 48.3 43.6 39.7 36.6
Pensionable population, '000 33,310.2 46,326.1 54,553.5 62,940.9 73,781.5 90,609.0 108,772.4
Pensionable population, % of total working age 6.6 7.2 7.6 8.0 8.6 9.8 11.1
URBAN/RURAL POPULATION & LIFE EXPECTANCY (INDIA 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Urban population, '000 222,293.0 291,347.6 334,483.1 380,742.3 428,675.9 481,117.7 537,713.9
Urban population, % of total 25.5 27.7 29.2 30.9 32.7 34.8 37.0
Rural population, '000 647,840.5 761,703.3 809,635.6 850,238.4 880,378.1 902,080.1 914,115.1
Rural population, % of total 74.5 72.3 70.8 69.1 67.3 65.2 63.0
Life expectancy at birth, male, years 57.6 61.8 63.7 65.5 66.9 68.0 68.9
Life expectancy at birth, female, years 58.3 63.4 65.4 67.8 69.9 71.2 72.3
Life expectancy at birth, average, years 57.9 62.6 64.6 66.6 68.3 69.5 70.5
POPULATION BY AGE GROUP (INDIA 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Population, 0-4 yrs, total, '000 121,428.3 127,607.0 129,579.4 128,484.5 121,415.3 121,159.4 119,816.8
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Indicator 1990 2000 2005 2010 2015 2020f 2025f
Population, 85-89 yrs, total, '000 911.1 1,479.8 1,850.2 2,305.2 3,000.5 3,803.2 4,628.4
Population, 90-94 yrs, total, '000 249.9 417.9 531.5 686.3 917.5 1,224.1 1,567.7
Population, 95-99 yrs, total, '000 37.8 72.2 103.2 137.2 193.6 265.8 357.1
Population, 100+ yrs, total, '000 4.8 9.0 12.0 17.9 26.8 39.0 53.9
POPULATION BY AGE GROUP % (INDIA 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Population, 0-4 yrs, % total 13.96 12.12 11.33 10.44 9.28 8.76 8.25
Population, 100+ yrs, % total 0.00 0.00 0.00 0.00 0.00 0.00 0.00
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Food & Drink Glossary

Food & Drink
Food Consumption: All four food consumption indicators (food consumption in local currency, food consumption in US dollar
terms, per capita food consumption and food consumption as a percentage of GDP) relate to off-trade food and non-alcoholic
drinks consumption, unless stated in the relevant table/section.
Off-trade: Relates to an item consumed away from the premises on which it was purchased. For example, a bottle of water bought
in a supermarket would count as off-trade, while a bottle of water purchased as part of a meal in a restaurant would count as on-
trade.
Canned Food: Relates to the sale of food products preserved by canning. This is inclusive of canned meat and fish, canned ready
meals, canned desserts and canned fruits and vegetables. Volume sales are measured in tonnes as opposed to on a unit basis to
allow for cross-market comparisons.
Confectionery: Refers to retail sales of chocolate, sugar confectionery and gum products. Chocolate sales include chocolate bars
and boxed chocolates; gum sales incorporate both bubble gum and chewing gum; and sugar confectionery sales include hard-
boiled sweets, mints, jellies and medicated sweets.
Trade: In the majority of Fitch Solutions' Food & Drink reports, we use the UN Standard International Trade Classification, using
categories Food and Live Animals, Beverages and Tobacco, Animal and Vegetable Oils, Fats and Waxes and Oil-seeds and Oleaginous
Fruits. Where an alternative classification is used due to data availability, this is clearly stated.
Drinks Sales: Soft drinks sales (including carbonates, fruit juices, energy drinks, bottled water, functional beverages and ready-to-
drink tea and coffee), alcoholic drinks sales (including beer, wine and spirits) and tea and coffee sales (excluding ready-to-drink tea
and coffee products that are incorporated under Fitch Solutions' soft drinks banner) are all off-trade only, unless stated.
Mass Grocery Retail
Mass Grocery Retail: Fitch Solutions classifies mass grocery retail (MGR) as organised retail, performed by companies with a
network of modern grocery retail stores and modern distribution networks. MGR differs from independent or traditional retail, which
relates to informal, independent-owned grocery stores or traditional market retailing. MGR incorporates hypermarket, supermarket,
convenience and discount retailing, and in unique cases cooperative retailing. Where supermarkets are independently owned and
not classified as MGR, Fitch Solutions will state so clearly within the relevant report.
Hypermarket: Fitch Solutions classifies hypermarkets as retail outlets selling both groceries and a large range of general
merchandise goods (non-food items) and typically more than 2,500sq m in size. Traditionally only found on the outskirts of towns,
hypermarkets are increasingly appearing in urban locations.
Supermarket: Supermarkets are the original and still most globally prevalent form of self-service grocery retail outlet. Fitch
Solutions classifies supermarkets as more than 300sq m, up to the size of a hypermarket. The typical supermarket carries both fresh
and processed food and will stock a range of non-food items, most commonly household and beauty goods. The average
supermarket will increasingly offer some added-value services, such as dry cleaning or in-store ATMs.
Discount Stores: Although most commonly between 500sq m and 1,500sq m in size, similar to supermarkets, discount stores will
typically have a smaller floor space than their supermarket counterparts. Other distinguishing features include the prevalence of
low-priced and private label goods, an absence of added-value services, often called a no-frills environment, and a high product
fitchsolutions.com
turnover rate.
Convenience Stores: Fitch Solutions' classification of convenience stores includes small outlets typically less than 300sq m in size,
with long opening hours and located in high footfall areas. These stores mainly sell fast-moving food and drink products (such as
confectionery, beverages and snack foods) and non-food items, typically stocking only two or three brand choices per item and
often carrying higher prices than other forms of grocery store.
Cooperatives: Fitch Solutions classifies cooperatives as retail stores that are independently owned but club together to form
buying groups under a cooperative arrangement, trading under the same banner, although each is privately owned. The
arrangement is similar to a franchise system, although all profits are returned to members. The term is becoming more archaic, with
fewer cooperatives remaining that conform to this model. Most cooperative groups now have a more centralised management
structure, operate more like normal supermarkets, and are thus classified as such in Fitch Solutions' reports.
Food & Drink Methodology

Connected Thinking
We use a simple and transparent forecasting model as a base for our Industry forecasts, but rely heavily on our analysts’ expert
judgment to ensure our forecasts capture all of the insights we derive from our unique Connected Thinking approach. We believe
analyst expertise and intervention are the best way to provide the most accurate, up-to-date and comprehensive insight to our
customers.
Our Connected Thinking approach to forecasting and analysis integrates macroeconomic variables from Fitch Solutions Country
Risk to provide our customers with unique and valuable insight on all relevant macroeconomic, political and industry risk factors
that will impact their operations and revenue generating potential in the industry(ies) they operate in.
Food & Drink Methodology
Fitch Solutions Food & Drink Forecasting & Sourcing
For the Food and Drink sector we have historical data and 5 year forecasts for 85 market-level core industry variables.
We use household spending figures that show spending on food and drink, for consumption at home. We divide food and drink into
two categories: (i) spending on Food and Non-Alcoholic Drinks, and, (ii) Alcoholic Drinks.
For the Alcoholic Drinks sub-categories we use volume (in liters) consumption by household and per capita, in each market.
Our forecasts are a combination of regression modelling and analyst expert judgment.
Our Food and Drink analysts interact with other analytical teams in Fitch Solutions, including Country Risk, Agribusiness and
Consumer and Retail. This is to ensure they have a comprehensive understanding of external factors that may impact the Food and
Drink industry outlook either on a market, regional or global level.
There is a constant rolling cycle of data monitoring, with databases being updated on a quarterly basis. Analysts will intervene
outside of these cycles to implement forecasts changes when necessary.
fitchsolutions.com
Food and Non-Alcoholic Drinks
Spending on Food and Non-Alcoholic Drinks is expressed in nominal terms.
We define spending on Food and Non-Alcoholic Drinks as the amount households spend on food for domestic consumption only.
This reflects items bought through all sales channels, based on the UN classification of individual consumption by purpose
(COICOP)
Historical figures for spending on Food and Non-Alcoholic Drinks are based on household survey data, following the UN COICOP
classification.
Where spending data is not readily allocated into the COICOP format, Fitch Solutions applies a rigorous and logical approach in
allocating data to align with these categories, and if needed, apply aggregation methods or other techniques to achieve category
level data.
Our food and non-alcoholic drinks on forecasts are based on a regression model, using a market’s own historical time series and key
macroeconomic explanatory variables from Fitch Solutions Country Risk and Consumer and Retail services. In addition, we also
apply analyst expert judgment to refine and finalise the food and non-alcoholic drinks spending forecast based on exogenous and
endogenous variables or events, not captured by our regression model.
Alcoholic Drinks
Spending on Alcoholic Drinks is expressed in nominal terms and volume terms. All sub-segments are expressed in volume terms
only.
Alcoholic drinks is defined as the total recorded volume of alcohol drinks consumed in a market. Data is presented in volumes
consumed as opposed to pure alcoholic volume. Refers to consumption by people aged 15+ years and all sales channels of
consumption, including out-of-home consumption, eg bars, restuarants etc.
We divide the Alcoholic Drinks category into Beer, Wine and Spirits, as well as further breakdowns, where data is available, into sub-
categories of these segments.
Our food and non-alcoholic drinks on forecasts are based on a regression model, using a market’s own historical time series. In
addition, we also apply analyst expert judgment to refine and finalise the alcoholic drinks spending forecast based on exogenous
and endogenous variables or events, not captured by our regression model.
Food & Drink (Non-Alcoholic Drinks) Risk/Reward Index
Our Food & Drink (Non-Alcoholic Drinks) Risk/Reward Index (RRI) quantifies and ranks a country's attractiveness within the context
of the Food & Drink (Non-Alcoholic Drinks) industry, based on the balance between the Risks and Rewards of entering and
operating in different countries.
We combine industry-specific characteristics with broader economic, political and operational market characteristics. We weight
these inputs in terms of their importance to investor decision making in a given industry. The result is a nuanced and accurate
reflection of the realities facing investors in terms of:
1) the balance between opportunities and risk; and
fitchsolutions.com
2) between sector-specific and broader market traits.
This enables users of the index to assess a market's attractiveness in a regional and global context.
The index uses a combination of our proprietary forecasts and analyst assessments of the regulatory climate. As regulations evolve
and forecasts change, so the index scores change providing a highly dynamic and forward-looking result.
The Food & Drink (Non-Alcoholic Drinks) Risk/Reward Index universe comprises 107 countries.
Benefits of using Fitch Solutions' Food & Drink (Non-Alcoholic Drinks) RRI
• Global Rankings: One global table, ranking all the countries in Fitch Solutions' universe for Food & Drink (Non-Alcoholic Drinks)
from least (closest to zero) to most attractive (closest to 100).
• Accessibility: Easily accessible, top down view of the global, regional or sub-regional Risk/Reward profiles.
• Comparability: Identical methodology across 107 countries for Food & Drink (Non-Alcoholic Drinks) allows users to build lists of
countries they wish to compare, beyond the confines of a global or regional grouping.
• Scoring: Scores out of 100 with a wide distribution, provide nuanced investment comparisons. The higher the score, the more
favourable the country profile.
• Quantifiable: Quantifies the rewards and risks of doing business in the Food & Drink (Non-Alcoholic Drinks) sector in different
countries around the world and helps identify specific flashpoints in the overall business environment.
• Comprehensive: Comprehensive set of indicators, assessing industry-specific risks and rewards alongside political, economic
and operating risks.
• Entry Point: A starting point to assess the outlook for the Food & Drink (Non-Alcoholic Drinks) sector, from which users can dive
into more granular forecasts and analyses to gain a deeper understanding of the market.
• Balanced: Multi-indicator structure prevents outliers and extremes from distorting final scores and rankings.
• Methodology is a combination of proprietary Fitch Solutions forecasts, analyst insights and globally acceptable benchmark
indicators (for example, World Bank's Doing Business Scores, Transparency International's Corruption Perceptions Index).
Weightings Of Categories And Indicators
Source: Fitch Solutions
fitchsolutions.com
The RRI matrix is divided into two distinct categories:
Rewards
Evaluation of an industry's size and growth potential (Industry Rewards), and also macro industry and/or country characteristics
that directly impact the size of business opportunities in a specific sector (Country Rewards).
Risks
Evaluation of micro, industry-specific characteristics, crucial for an industry to develop to its potential (Industry Risks) and a
quantifiable assessment of the country's political, economic and operational profile (Country Risks).
Assessing Our Weightings
Our matrix is deliberately overweight on Rewards (60% of the final RRI score for a market) and within that, the Industry Rewards
segment (60% of the final Rewards score). This is to reflect the fact that when it comes to long-term investment potential, industry
size and growth potential carry the most weight in indicating opportunities, with other structural factors (demographic, labour
statistics and infrastructure availability) weighing in, but to a slightly lesser extent. In addition, our focus and expertise in emerging
and frontier markets has dictated this bias towards industry size and growth to ensure we are able to identify opportunities in
countries where regulatory frameworks are not as developed and industry sizes are not as big (in USD terms) as in developed
markets, but where we know there is a strong desire to invest.
Indicators - Explanation And Sources
FOOD & DRINK (NON-ALCOHOLIC DRINKS) RISK/REWARD INDEX, INDICATORS

Source Rationale
Rewards
Industry Rewards
Denotes per capita spending on food & non-alcoholic drinks in USD.

F&D Spending Per Capita Fitch Solutions Forecast
Wealthier populations spend more on F&D products.
Denotes food & non-alcoholic drinks sector dynamism as a %. Scores

F&D Five-Year Growth Rate Fitch Solutions Forecast
based on annual average growth over our five-year forecast period.
Denotes total household spending on food & non-alcoholic drinks in

Total F&D Expenditure Fitch Solutions Forecast
USDbn. Large markets score higher than smaller ones.
Country Rewards
Size of the population in millions as a measure for the total addressable

Population Fitch Solutions Forecast
market.
Proportion of households with an income that exceeds USD10,000.

Mass Affluent Class Fitch Solutions Forecast Excludes those in poverty but demonstrates potential demand for
branded products.
Size of the urban population in millions. Higher urban population size is a

Urban Population Fitch Solutions Forecast positive for distribution, higher economic development and accessing
products through a network of retailers.
Proportion of the population between 20-39 years old as a %. This is

Spending Population Fitch Solutions Forecast typically the range that companies target as a high spending/
trendsetting generation.
fitchsolutions.com
Source Rationale
Risks
Industry Risks
Fitch Solutions Operational Uses Operational Risk's Economic Openness as a proxy for determining
Regulatory Environment
Risk Index the ease of entering and doing business in a market.
Uses our urban/rural split (%) data as a proxy for determining the level of
F&D Formalisation Fitch Solutions Forecast retail/hospitality formalisation in the market. Highly urbanised markets
allow companies to easily serve more consumers.
Uses Operational Risk's Logistics Risk to determine the risks and costs
Fitch Solutions Operational associated with moving products around a market. Higher scores
Logistics Risk
Risk Index indicate quality transport, cheap fuel/electricity and high levels of tech
adoption
Country Risks
The Long-Term Economic Risk Index takes into account the structural
Long-Term Economic Risk Fitch Solutions Country Risk characteristics of economic growth, the labour market, price stability,
Index Index exchange rate stability and the sustainability of the balance of payments,
as well as fiscal and external debt outlooks for the coming decade.
The Short-Term Economic Risk Index seeks to define current

Short-Term Economic Risk Fitch Solutions Country Risk vulnerabilities and assess real GDP growth, inflation, unemployment,
Index Index exchange rate fluctuation, balance of payments dynamics, as well as
fiscal and external debt credentials over the coming two years
The Long-term Political Risk Index assesses a country's structural political

characteristics based on our assumption that liberal, democratic states
Fitch Solutions Country Risk
Long-Term Political Risk Index with no sectarian tensions and broad-based income equality exhibit the
Index
strongest characteristics in favour of political stability, over a multiyear
timeframe.
The Short-Term Political Risk Index assesses pertinent political risks to

Fitch Solutions Country Risk
Short-Term Political Risk Index investment climate stability over a shorter time frame, up to 24 months
Index
forward.
The Operation Risk Index focuses on existing conditions relating to four

Fitch Solutions Operational
Operational Risk Index main risk areas: Labour Market, Trade and Investment, Logistics, and
Risk Index
Crime and Security.
Food & Drink (Alcoholic Drinks) Risk/Reward Index
Our Food & Drink (Alcoholic Drinks) Risk/Reward Index (RRI) quantifies and ranks a country's attractiveness within the context of the
Food & Drink (Alcoholic Drinks) industry, based on the balance between the Risks and Rewards of entering and operating in
different countries.
We combine industry-specific characteristics with broader economic, political and operational market characteristics. We weight
these inputs in terms of their importance to investor decision making in a given industry. The result is a nuanced and accurate
reflection of the realities facing investors in terms of:
1) the balance between opportunities and risk; and
fitchsolutions.com
2) between sector-specific and broader market traits.
This enables users of the index to assess a market's attractiveness in a regional and global context.
The index uses a combination of our proprietary forecasts and analyst assessments of the regulatory climate. As regulations evolve
and forecasts change, so the index scores change providing a highly dynamic and forward-looking result.
The Food & Drink (Alcoholic Drinks) Risk/Reward Index universe comprises 90 countries.
Benefits of using Fitch Solutions' Food & Drink (Alcoholic Drinks) RRI
• Global Rankings: One global table, ranking all the countries in Fitch Solutions' universe for Food & Drink (Alcoholic Drinks) from
least (closest to zero) to most attractive (closest to 100).
• Accessibility: Easily accessible, top down view of the global, regional or sub-regional risk/reward profiles.
• Comparability: Identical methodology across 90 countries for Food & Drink (Alcoholic Drinks) allows users to build lists of
countries they wish to compare, beyond the confines of a global or regional grouping.
• Scoring: Scores out of 100 with a wide distribution, provide nuanced investment comparisons. The higher the score, the more
favourable the country profile.
• Quantifiable: Quantifies the rewards and risks of doing business in the Food & Drink (Alcoholic Drinks) sector in different
countries around the world and helps identify specific flashpoints in the overall business environment.
• Comprehensive: Comprehensive set of indicators, assessing industry-specific risks and rewards alongside political, economic
and operating risks.
• Entry Point: A starting point to assess the outlook for the Food & Drink (Alcoholic Drinks) sector, from which users can dive into
more granular forecasts and analysis to gain a deeper understanding of the market.
• Balanced: Multi-indicator structure prevents outliers and extremes from distorting final scores and rankings.
• Methodology is a combination of proprietary Fitch Solutions forecasts, analyst insights and globally acceptable benchmark
indicators (for example, World Bank's Doing Business Scores, Transparency International's Corruption Perceptions Index).
Weightings Of Categories And Indicators
fitchsolutions.com
The RRI matrix is divided into two distinct categories:
Rewards
Evaluation of an industry's size and growth potential (Industry Rewards), and also macro industry and/or country characteristics
that directly impact the size of business opportunities in a specific sector (Country Rewards).
Risks
Evaluation of micro, industry-specific characteristics, crucial for an industry to develop to its potential (Industry Risks) and a
quantifiable assessment of the country's political, economic and operational profile (Country Risks).
Assessing our Weightings
Our matrix is deliberately overweight on Rewards (60% of the final RRI score for a market) and within that, the Industry Rewards
segment (60% of the final Rewards score). This is to reflect the fact that when it comes to long-term investment potential, industry
size and growth potential carry the most weight in indicating opportunities, with other structural factors (demographic, labour
statistics and infrastructure availability) weighing in, but to a slightly lesser extent. In addition, our focus and expertise in emerging
and frontier markets has dictated this bias towards industry size and growth to ensure we are able to identify opportunities in
countries where regulatory frameworks are not as developed and industry sizes are not as big (in USD terms) as in developed
markets, but where we know there is a strong desire to invest.
Indicators - Explanation And Sources
FOOD & DRINK (ALCOHOLIC DRINKS) RISK/REWARD INDEX, INDICATORS

Source Rationale
Rewards
Industry Rewards
Denotes per capita consumption of Alcoholic Drinks in litres. Measures

Alcohol Consumption Per
Fitch Solutions Forecast which populations consume more on alcohol products at the individual level
Capita
rather than total size.
Denotes Alcoholic Drinks sector dynamism as a %. Scores based on annual

Alcohol 5-Year Growth Rate Fitch Solutions Forecast
average growth over our five-year forecast period.
Denotes total consumption of Alcoholic Drinks in millions of litres. Large

Total Alcohol Consumption Fitch Solutions Forecast
markets score higher than smaller ones.
Country Rewards
Size of the population in millions as a measure for the total addressable

Population Fitch Solutions Forecast
market.
Proportion of households with an income that exceeds USD10,000. Excludes

Mass Affluent Class Fitch Solutions Forecast those in poverty but demonstrates potential demand for branded alcohol
products.
Size of the urban population in millions. Higher urban population size is a

Urban Population Fitch Solutions Forecast positive for distribution, higher economic development and accessing
products through a network of retailers.
Proportion of the population between 20-39 years old as a %. This is typically

Spending Population Fitch Solutions Forecast
the range that companies target as a high spending/trendsetting generation
fitchsolutions.com
Source Rationale
and are generally over the legal drinking age.
Risks
Industry Risks
Fitch Solutions Operational Uses Operational Risk's Economic Openness as a proxy for determining the
Regulatory Environment
Risk Index ease of entering and doing business in a market.
Uses our Urban/Rural Split (%) data as a proxy for determining the level of
F&D Formalisation Fitch Solutions Forecast retail/hospitality formalisation in the market. Highly urbanised markets allow
companies to easily serve more consumers.
Uses Operational Risk's Logistics Risk to determine the risks and costs
Fitch Solutions Operational
Logistics Risk associated with moving products around a market. Higher scores indicate
Risk Index
quality transport, cheap fuel/electricity and high levels of tech adoption
Country Risks
The LT ERI takes into account the structural characteristics of economic

Long Term Economic Risk Fitch Solutions Country growth, the labour market, price stability, exchange rate stability and the
Index Risk Index sustainability of the balance of payments, as well as fiscal and external debt
outlooks for the coming decade.
The ST ERI seeks to define current vulnerabilities and assess real GDP
Short Term Economic Risk Fitch Solutions Country growth, inflation, unemployment, exchange rate fluctuation, balance of
Index Risk Index payments dynamics, as well as fiscal and external debt credentials over the
coming two years
The LT PRI assesses a country's structural political characteristics based on

Long Term Political Risk Fitch Solutions Country our assumption that liberal, democratic states with no sectarian tensions
Index Risk Index and broad-based income equality exhibit the strongest characteristics in
favour of political stability, over a multiyear timeframe.
Short Term Political Risk Fitch Solutions Country The ST PRI assesses pertinent political risks to investment climate stability
Index Risk Index over a shorter time frame, up to 24 months forward.
Fitch Solutions Operational The ORI focuses on existing conditions relating to four main risk areas:
Op Risk Index
Risk Index Labour Market, Trade and Investment, Logistics, and Crime and Security.
fitchsolutions.com
Fit
Fitch
ch Solutions, 30 North C
Colonnade
olonnade,, Canary W
Wharf
harf,, L
London.
ondon. E14 5GN, UK
Tel: +44 (0)20 7248 0468
Fax: +44 (0)20 7248 0467
Web: www.fitchsolutions.com
IS SN: 1749-2742
ISSN:
Copy Deadline: June 2020

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2020
20 Fit
Fitch
ch Solutions Gr
Group
oup Limit
Limited.
ed. All rights rreserv
eserved.
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All information, analysis, forecasts and data provided by Fitch Solutions Group Limited is for the exclusive use of subscribing persons or organisations (including those
using the service on a trial basis). All such content is copyrighted in the name of Fitch Solutions Group Limited and as such no part of this content may be reproduced,
repackaged, copied or redistributed without the express consent of Fitch Solutions Group Limited.
All content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliable at the time of publishing. Fitch
Solutions Group Limited makes no representation of warranty of any kind as to the accuracy or completeness of any information provided, and accepts no liability
whatsoever for any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part of the content.
This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 (‘FSG’). FSG is an
affiliate of Fitch Ratings Inc. (‘Fitch Ratings’). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. Copyright © 2020 Fitch
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Industry Risk/Reward Index ....................................................................................................................................................19

India Demographic Outlook .....................................................................................................................................................75

Food & Drink Glossary ................................................................................................................................................................78

Food & Drink Methodology .......................................................................................................................................................79

Food And Drink Spending

e/f = Fitch Solutions estimate/forecast. Source: National statistics, Fitch Solutions

Latest Updates And Industry Developments

e/f = Fitch Solutions estimate/forecast. Source: National statistics, Fitch Solutions

FOOD SALES (INDIA 2017-2024)

Bread, rice and

Bread, rice and

Fish and fish

Fish and fish

Oils and Fats,

Oils and Fats,

Indicator 2017e 2018e 2019e 2020f 2021f 2022f 2023f 2024f

Sugar and sugar

Sugar and sugar

Total Alcohol Consumption

e/f = Fitch Solutions estimate/forecast. Source: WHO, Fitch Solutions

We highlight a number of reasons for beer's relative underperformance:

trade outlets are often not readily accessible.

Four Key Growth Drivers In India's Beer Sector:

TOTAL ALCOHOLIC DRINKS SPENDING AND CONSUMPTION (INDIA 2017-2024)

Indicator 2017e 2018e 2019e 2020f 2021f 2022f 2023f 2024f

Non-Alcoholic Drinks Sales

e/f = Fitch Solutions estimate/forecast. Source: National statistics, Fitch Solutions

NON-ALCOHOLIC DRINKS SALES (INDIA 2017-2024)

Non-alcoholic drinks, sales, INRmn, %

Coffee, teas and other hot drinks, sales,

Coffee, teas and other hot drinks, sales,

Fruit and vegetable juices, sales, INRmn,

Mineral or spring waters, sales, INRmn, %

Carbonated drinks, sales, INRmn, %

Industry Risk/Reward Index

East Asia Offers Great Mix Of Risk And Rewards

Visible Split Between Developed And Developing Countries

Main Regional Features And Latest Updates

Australia Overtakes South Korea

Australia’s F&D Sector Attractive Due To Her Sheer Size

e/f = Fitch Solutions estimate/forecast Source: National Statistics, Fitch Solutions

Young Adult Population Set To Increase In Australia

f = Fitch Solutions forecast. Source: UN, Fitch Solutions

Australia’s Urban Population Continues To Rise

f = Fitch Solutions forecast. Source: UN, Fitch Solutions

Enhancement Of Regulatory Environment Drove Improvement Of Industry Risk Score

Malaysia Retains Top Position Despite Threats From Covid-19

Malaysia Has An Attractive Consumer Base

e/f = Fitch Solutions estimate/forecast. Source: UN, Fitch Solutions

Malaysia Consumer Spending Outlook Revised Down On Covid-19 Impact

e = estimate. Source: Fitch Solutions

China Strongly Outperforms Regional Average

China Offers Great Rewards

Food Sales Expand During China’s Lockdown

Source: National Bureau of Statistics, Fitch Solutions

ASIA - FOOD & NON-ALCOHOLIC DRINKS RISK/REWARD INDEX

Malaysia 76.8 74.3 75.8 73.0 67.4 70.2 74.1 1 2

China 82.5 76.4 80.1 47.0 69.3 58.1 73.5 2 3

Australia 71.4 65.5 69.0 66.0 81.8 73.9 70.5 3 7

South Korea 62.2 69.3 65.0 72.7 83.3 78.0 68.9 4 9

Japan 62.2 66.9 64.1 72.1 78.6 75.3 67.5 5 12