Case Study for Round 1 of HCCB Case Challenge Season 1

The non-alcoholic beverages market in India is approximately valued at INR 28,000 Cr and
growing at a CAGR of 5-7%, on a more or less stagnant sparkling drinks demand and 15-16%
CAGR of juices and juice based drinks. Sparkling drinks are majority and account for
approximately INR 18,000 Cr, while juices account for the other INR 10,000 Cr. The growth in
the industry has been driven by increasing affordability and higher consumption of fruit juices
and fruit based drinks.

One of the reasons India growth would be robust for at least a decade is that India’s market
size by population is large and affordability is increasing with growth in economy and the fact
that India has one of the lowest per capita soft drink consumption in the world. India’s per
capita consumption of approx. 70 bottles per annum is very low compared to 1500 bottles in
US, 1200 bottles in Germany and 550 bottles in Brazil.

Besides these, bottled water is another very big category and is estimated at approx. INR
16,000 Cr excluding the bulk water purchases for restaurants and households.

The two main players HBL Beverages and PCL India account for almost 72% of the total
market with HBL Beverages holding a 52% market share. However, there is resurgence of
some local brands like Bovonto, Jayanti Cola, Soyso, Runner and Kashmira) (24% market
share), which are able to deep distribute locally, thereby gaining shares. One of the main
challenges of this industry is to achieve deep distribution in rural areas.

In 2020, the onset of pandemic suddenly changed the operating realities of the market with
huge change in consumption behaviour.

HBL Beverages - Scenario Today

HBL Beverages is the largest pure play beverage distribution company of India, having 52%
of India’s NARTD (Non- Alcoholic- ready to Drink) volume and is distributing in close to 53%
of India’s districts.

Its brands “Cola Refresh” and “Mango Magic” are India’s TOP 2 FMCG brands. HBL enjoys a
leading market share of 52% in NARTD, with leadership across categories – Sparkling, Juice
and Water. The presence of HBL is strong in both General Trade and Modern trade. In General
trade the key channels are - Grocery, Convenience and Eating & Drinking (E&D- covers all
avenues where consumers eat out-restaurants, bars, bakery etc.)

In the year 2020, HBL was paving the way for a winning year with a 15% revenue growth until
an unexpected wave of COVID-19 hit HBL and then growth started slowing down , eventually
trending towards negative.

Impact on HBL’s business dynamics

1. Traditionally HBL’s business has always been skewed towards “Away from home / Out of
Home” occasions with 70% of business coming from the “Away from Home” occasion.

Occasions are the moments when a consumer consumes the beverage. The major occasions
are (a) Away from Home and (b) At Home (In Home). Packs are also segmented similarly
with the immediate consumption (IC packs) - all the small SKUs; On the Go (Mobile Packs)
and at Home (the large packs).
 In the current situation the occasion mix is shifting from Out of Home to -- > At Home sub
occasions’ growth as below:

Table 1

2. With consumers staying at home, and more believing in stocking up on essentials for the
pandemic, Grocery has emerged as a key channel. The Grocery channel has seen the fastest
acceleration along with Modern Trade and Pharma. HBL’s channel mix has also seen
considerable shift from Eating and Drinking (E&D) to Grocery. This is in line with Occasions
shift from “Away from Home” to “At Home”. The salience shift is as below:

Table 2

3. Further, HBL has always had the belief that execution is key and believes in market activation
to facilitate selling. By definition, Market activation would mean all the activities- execution
of an outlet store which helps shopper / consumer connect with the brands and trigger
purchase decisions.
 Since beverages is an impulse category it is extremely important to entice the shopper /
consumer with occasion based messaging* and the right marketing element**.

 An occasion based messaging* is the key message communicated to a consumer

visually, through a marketing element** owing to which a consumer engages with the
brand frequently.
 For example the communication of a “ Food with beverage “occasion at a restaurant
on a menu card

In fact, there has been a positive co-relation between activation and sales. For example, an
outlet which has combo –boards (Food+ Beverage offer) sees 24% more growth in soft drink
sales vs an outlet which doesn’t have a combo board.

The Task at Hand

Table 3 gives the construct and dynamics of the non-alcoholic beverages market excluding
bottled water. This has been constructed after analyzing sales and distribution data.

Pont of consumption dynamics pre pandemic

Availa Industry HBL One time Competit

ble Avergae Avergae cost of ion
Sales/Consumption outlets Industry HBL Sales/out Sales/out acquisition pressure Average activation cost vs Sales
point Total coverage Coverage let/mth* let/mth* ** factor# increase
Min
Threshold
for
activation Rs Sales in
lakhs lakhs lakhs Rs lakhs Rs lakhs Rs lakhs Cost Rs lakhs lakhs crease %

Grocery Urban 50 35 16 0.018 0.02 0.05 1.2 0.005 0.005 15%

Rural 70 30 5 0.004 0.005 0.01 0.8 0.001 0.001 30%
Convenience Urban 1.5 1.45 1.3 0.5 0.3 0.3 1.5 0.1 0.3 10%
Rural 0.2 0.2 0.1 0.25 0.15 0.2 1 0.02 0.1 20%
E&D (Eating & Drinking) Urban 30 15 5 0.03 0.05 0.1 1.75 0.01 0.1 5%
Rural 40 10 1.5 0.02 0.03 0.05 1 0.002 0.02 5%

* This average is across categories of sales/consumption points

** Cost of acquiring a new point sale/consumption
# Higher the factor higher is the compettion and less is the effectiveness of the activation budget

Table 3
Points to consider:

1. The company has earmarked 2% of its turnover towards activation

2. Additionally 3% of its turnover has been earmarked towards acquisition of new outlets
3. Table 3 is the scenario pre pandemic and the changes in the market post pandemic has been
illustrated in Table 1 & 2
 Deliverables:

What should HBL Beverages do in the changing consumption scenario during and post
covid?
You are part of the commercial team at HBL beverages that has to formulate the strategy for
increasing revenues back to and beyond the pre pandemic levels
Using the available information and any primary and secondary research that you may like to
conduct, provide the management with clear and supported inputs to answer the following
questions:
1. Qualitative inputs on the kind of packs to be focused on and in which segment?
2. How to expand and acquire maximum business impact outlets, given the shifting nature of
sales point and consumption?
3. Study competition activities and recommend strategies to counter them
4. What is the best way to use the available activation and acquisition budget to maximize the
revenue?
5. This would include quantitative inputs on which segments to focus on and how much of the
budget?
6. Recommend strategies to enhance the impact of activation budget through innovative
activation ideas
As a first step, you are required to submit a 2 slider pitch, excluding cover page (as per the
details mentioned at https://www.gradpartners.in/e/HCCB-India-Case-Challenge-Season-1-6)
to the evaluating team to get an idea of your understanding and direction of your strategies.
Top 20 teams qualifying Round 1 would be further assigned with the task of formulating the
detailed plan.
All the Best!