Daybreak - Energy drinks are the hot new category in India and PepsiCo's Sting is its king

Episode Date: June 10, 2024

Last year,  Indians collectively drank nearly 600 million litres of energy drinks. This was almost 30X more than 2018. Among all the go to drinks in India, lately energy drinks have become super popular. People seem to clearly be attracted to their appeal as stimulants.And what’s crazy is that these drinks have become an alternative to chai at tea stalls for office goers. And even for daily wage workers who have to work in this insane heat, they are often a cheaper meal replacement. For the more privileged, they’re also cocktail mixers at parties. As of 2023, PepsiCo's Sting had 90% of the market share in energy drinks in terms of volume. It's been doing so well that Varun Beverages, the company that bottles and distributes for PepsiCo in India, became the hottest FMCG stock in the country. Its saw its share price rise by more than 1000% per cent in the last five to six years.But the ones driving this growth are the country’s youth, who are often unaware of the contents of the drink and the heath risks that come along with it.Tune inDaybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. What if I told you that lately, energy drinks have become an alternative to chai in India. Last year, Indians collectively drank nearly 600 million liters of energy drinks. Among all the go-to drinks in India, late in,

energy drinks have become super popular. People seem to be clearly attracted to their appeal as stimulants. The colas and the fizzy drinks are now slowly being replaced. And the crazy thing, like I said earlier, is that these drinks have become an alternative to chai at tea stalls for office goers. And even for daily wage workers who have to work in this insane heat, they are often a cheaper meal replacement. For the more privileged, they are also cocktail. mixers at parties. Now, if you're thinking Red Bull, because for the longest time it's been synonymous with energy drinks, I'm actually not talking about it. It's way too expensive to replace your roadside chai. I'm talking about PepsiCo Sting, that bright red drink that you must have

definitely noticed at all streetside stalls and your mom and pop stores. It just costs 20 rupees. As of 2023, Sting had 90% of the market share in energy. energy drinks in terms of volume. It's been doing so well that Varan beverages, the company that bottles and distributes for PepsiCo in India, became the hottest FMCG stock in the country. It saw its share price rise by more than 1,000% in the last 5 to 6 years. But the ones driving this growth are the country's youth who are often unaware of the contents of the drink and the health risks that come along with it. Welcome to Daybreak, a business podcast from the Ken.

I'm your host, Nick Da Sharma, and I don't chase the news cycle. Instead, every day of the week, my colleague Rahal Philippozo and I will come to you with one business story that is worth understanding and worth your time. Today is Monday, the 10th of June. Last month, my colleague, the Ken reporter Akriti Bhala, ran into three kids, Chintu, Pankaj and Bhoa in Bijasin, a village near the Haryana, Delhi. border. Their ages range from 12 to 15 years. Chintu is a rich kid among the three who studies in a private school and has an iPhone. Pankaj and Bholla are the children of daily wage workers who study in a

government school. They make extra money by selling flowers near a temple on weekends. But there's one thing that unites the three of them. Their love for sting. It is their daily ritual. One of them told Akrity, Sting'en'a'apefey fail, meaning Pepsi is nothing compared to Sting. So, what about Sting makes it stand out? It is the distinctive profiles of the kind of customers that it's been attracting. First, it is teenagers like Chintu Bola and Pankaj. They make up a total addressable market of more than 120 million individuals. These are mainly students for whom affordability is the most important.

important factor. The second kind is the rural population with lower disposable incomes. Three market researchers told the ken that another factor behind Sting popularity is its bright red colour. Akrithi asked Raj Kumar, aka Rocky, an 18-year-old e-risha driver from Bihar about why he likes Sting. And after a lot of thought, he said it was the red colour that he found the most attractive part about the drink. Amolia Pandit, a senior research consultant at Euro Monitor International, explained it to us. He said that the colour has been a significant factor in rural areas, whether it is for the products or for packaging. For example, in the last decade, some economical brands in the alcohol industry

packaged their products in coloured bottles to drive sales because rural consumers equated coloured packaging with a mid-priced or a premium brand. So, what was once considered a premium category, think Red Bull that costs $125 a can, is now a great alternative to carbonated drinks thanks to its super-affordable price and bright red color. Opening the market so fast has also led to a surge of others eager to jump onto the bandwagon.

Now, as a result of this booming popularity of energy drinks, More and more young adults and rural people are vulnerable to health risks. Both these segments are barely aware of the side effects of overconsumption of energy drinks, which are both high in caffeine and in sugar. Stay tuned for more on this. Arun Gupta, a pediatrician and a public health activist at a think tank called Nutrition Advocacy for Public Interest, told again that in reality, if you have adequate nutrition and a healthy lifestyle, you do not need any of these drinks.

Talking about the advertisements selling these energy drinks, he said that they are all marketing gimmicks used by consumer companies. He said that it reminded him of what we saw in the baby food market wherein companies planted fear in young mothers' minds about them not having enough milk and creating a need to rely on milk powders. According to Gupta, it is the same with energy drinks. He told us that the marketing campaigns are creating a false sense of inadequacy in young minds that they need more energy and that they need to be more alert.

It, according to him, is a highly unethical practice. Rupal Delal, who is also a pediatrician and an adjunct faculty at the Center for Technology Alternatives for Rural Areas at IIT Bombay, helped us understand the details better. She said that ultimately the energy boost is a result of an addictive dose of high sugar and caffeine in a 250 ml serving. A single serving of energy drink has anywhere between 60 to 160 milligrams of caffeine. You can compare this with a 27mg in an espresso short, 19mg in a hot chocolate mug or 82mg in a cup of instant coffee. The concoction besides excessive amounts of sugar and caffeine, has legal stimulants like Guarana, Taurine and L. Carnotine, which act as stimulants,

giving a sense of high in the short term. She told us that it can have long-term repercussions such as irregular heart rate, high blood pressure, anxiety and impact on kidney function. Now, even though every energy drink comes with a warning on the back, advising not to consume more than 500 ml of the beverage a day, which is in two bottles, and also mentions that it is not recommended for children lactating mothers and pregnant women. Not many consumers pay heed. Sometimes, when it is not as explicit as these intimations in full-length sentences,

it is as granular words used in a phrase. Delal gave us another energy drink example, which is Ocean. And it has cricketer Virad Koli as its brand ambassador. It markets itself as an energy drink rich in plant-based, caffeine. But isn't caffeine natural in all the drinks? It comes from coffee beans after all, right? But for those working in the sun all day in this extreme summer of 2024 to make ends meet, these things don't really matter. Varun beverages is already seeing great numbers thanks to the heat wave and the elections. Its president, Raj Gandhi, said in an earnings call with

analysts earlier in May that the company should make arrangements to ensure that, Sting does not go out of stock. It has, in fact, already amped up its production adding three new facilities earlier this year. Thankfully, though, it was reported in February that the Food and Safety Standards Authority of India is re-evaluating existing regulations for energy or caffeinated drinks to make them stricter because of concerns over high consumption. Until then, though, Sting is still going to be. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform.

What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. To subscribe, head to the Ken.com and click on the red subscribe button on top of the Ken website. Today's episode was hosted by Snigda Sharma and edited by Rajiv CN.