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Nestlé and Coke ice Indian tea JV

By Ankush Chibber , 09-Jan-2012

After being put on the backburner in October last year, it appears that the joint venture between Nestlé and Coca-Cola for the ready-to-drink (RTD) tea segment in India has been put permanently on ice.

FoodNavigator-Asia reported in October last year that the Indian units of the two multinational companies had delayed the nationwide rollout of Nestea, a RTD iced tea.

It now appears that Nestea may not see the Indian market after Nestlé said in a January 6 statement that the companies had agreed to focus the scope of their joint venture, Beverage Partners Worldwide, only on Europe and Canada.

“In all other territories the joint venture will be phased out in a transition to be completed by the end of 2012 subject to any regulatory approval,” the company said in the statement.

Beverage Partners Worldwide, a 50-50 joint venture, was created in 2001, following a period of 10 years during which the two companies cooperated in a joint venture called Coca-Cola and Nestlé Refreshments.

One of the stated aims of this joint venture was to crack the Indian non-aerated beverages market, which is expected to boom over the coming years; Nestea was the first and only product out of the joint venture’s Indian stables.

Nestea was trialed in the financial capital of Mumbai and was then to be rolled out pan-India in early 2011 but it only made it to shelves in Mumbai finally, where it appears to be finished.

“Weak consumer response”

An official within Nestlé, speaking on the condition of anonymity, told FoodNavigator-Asia that the joint venture in India is probably cancelled and Nestea may be pulled out because of “weak consumer response.”

“Nothing stopped the companies from keeping Nestea in the market even if the joint venture is cancelled elsewhere,” he said, pointing to the fact that Coca-Cola has entered into a license agreement with Nestlé for the Nestea brand in Taiwan and Hong Kong, where the uptake was good.

A Mumbai-based distributor for both aerated and non-aerated beverages, who told this publication in October that the response for canned or bottled iced tea has generally been lukewarm, corroborated the executive's comments.

“I can't say much given my association with beverage companies, but I would just like to say that maybe they are over estimating the market for non-fizzy drinks. I think Indians still love their colas,” he had said earlier.

But Kamlesh Sharma, general manager of public affairs and communications disputed that perception and remained upbeat about the category: “We are very positive about the potential of Iced tea as a category in India which was also reflected in the consumer response to Nestea. We will continue to be focused on the category,” he said.

Back in October, Sharma told FoodNavigator-Asia that the rollout was in the test phase and Coca Cola was studying the feedback before moving ahead.

According to Sharma, the company had introduced Nestea Lemon in an ‘on-the-go’ 400 ml PET bottle in select channels and outlets in Mumbai in November 2010, and it had “seen evidence of a growing, loyal consumer base.”

The Coca-Cola and Nestlé partnership for Nestea is not the sole such initiative in India. Last year, PepsiCo and Tata Global Beverages also announced that were entering the functional beverages market together, even as PepsiCo had been in an edgy alliance with Indian FMCG giant Hindustan Unilever for Lipton ice tea.

A report from the Associated Chambers of Commerce and Industry (ASSOCHAM) in India has said that Indian nonalcoholic beverages market would grow to US$2.3bn by 2015, up substantially from the current size of U$1.2bn.

The market is expected to grow at an annual rate of 20% year-on-year thanks to a rise in income levels and the concurrent change in lifestyle patterns, especially in the Indian middle class segment, the report said

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