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Posted: March 30th, 2025
Through secondary research on supply chain in developed markets like USA and Europe, and also in emerging markets like Africa which are huge markets for packaged coconut water, we have tried to look at aspects like sourcing, transportation and distribution. Existing distribution channel in India for FMCG goods and beverages were also studied to understand the current scenario.
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Indian retail market dynamics are different for rural and urban areas and hence both were studied in detail to find out the most suitable model for both the markets. Finally, we have proposed a hybrid model consisting of a model for urban markets and a different model for rural markets.
Contents
The supply of coconut water in India is still very much fragmented and although it is available in packed bottles and pouches in some parts of India , the supply of it is mostly on roadside shops and road vendors, which is mainly the unorganized market.
Hence we have studied the ways companies actually do business in coconut water in other countries where the supply chain is developed and has a bigger market than we have in India. There are different models which are opted for in different places of the world depending on the customer preferences, customer awareness, and the market size and growth rate.
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Although in India, mostly the production is in rural places, there needs to be developed a robust and efficient distribution channel whereby the coconuts are transported from these small rural places to processing plants and factories.
The market for coconut water beverages grew by 100 per cent in 2011, taking the retail sale value of US and European markets to over $265 million (Rs.1,457 crore). The market is slated to grow another 50 per cent this year. Bottled in exotic flavours and in stylish cartons, it’s expensive: About $4 (Rs.220) a can. But it’s still available at Rs.10-30 in Indian bazaars
Our objective is to study and design distribution strategies for packaged coconut water. We intend to examine the intricacies of the category setup in the area of distribution channel, schemes, margins, partners, and transportation from various on and off field experiences. The project will cover the scope of both the traditional general trade/rural as well as the emergent modern trade.
We plan to understand the distribution channel for existing packaged drinks and then identify the feasible options available for coconut water. We will conduct our study using primary or secondary data and design a distribution channel for the same. A detailed description of the designed channel will be given and a comparative study will also be undertaken. We will base our design keeping the following framework in mind:
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Precondition of marketing channel formation
Identification of goals of distribution
Specifications of the tasks of distribution
Provision of alternative structure of marketing channel
Analysis of factors influencing the performance of marketing channel
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Setting the optimum structure of marketing channel
Selection of marketing channel intermediaries
Source: Beroe Inc
Samyuktha S.R | Senior Research Analyst
Paradigm Shift in the Coconut Water Market
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2012
è è è
2020
Concentrated demand: The demand for coconut water is mainly from the developed countries, especially from the US. There is an increasing demand from EU and Australia as well.
Demand Focus
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Demand across the globe: Increasing per capita income, and disposable income across the developing regions will attract more demand for coconut water.
Level of Shift
Price premium: At present, coconut water is priced roughly double of other mass market sports drinks.
Price Equivalence
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Price parity: It is essential to bring the prices of coconut water to similar price points of other existing product category to sustain in the market.
Level of Shift
Expansion of product portfolio: The major beverage manufacturers are currently expanding their product portfolio comprising more naturally healthy drinks such as coconut water and RTD Tea.
Consumer Preference
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Market cannibalization: There is potential threat from naturally healthy drinks category that can cannibalize the existing traditional soft drinks. This might be eating soft drink manufacturer’s original market leading to an overall decline in sales.
Level of Shift
Lower product differentiation: There are currently very few variation introduced coconut water. Till now it has come in standard flavors primarily fruit derived.
Degree of Product Variation
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Higher product differentiation: There is high possibility of introducing multiple flavors and product enhancement in terms of introducing newer/innovative product line derived out of coconut water namely low calorie smoothies.
Level of Shift
Regional Insights – Coconut Water:
Factors
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US
Europe
Southeast Asia
Vita Coco is the largest player in the US which holds roughly 60% of the share. In the EU, Green coco is the leading player, but in Southeast Asia the market is highly fragmented.
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Southeast Asian countries are the largest coconut producing countries. Large quantities of coconut are available in these regions for extracting coconut water.
The natural beverage has a locational advantage in tropical belts in terms of widespread consumer awareness about its health and nutritional benefits due to centuries-long use unlike other regions namely the US and EU.
Increasing health awareness across the EU and US have resulted in growing demand for health focused drinks. This has paved way for the demand for coconut water in the recent past.
The present procurement strategy by coconut water manufacturers is by entering into a long-term contract with multiple suppliers across the major coconut producing countries like the Philippines and Indonesia to ensure supply assurance. However, there is possible shift in the style of long term sourcing strategy by the companiesin the coming years to make certain on continuous supply of coconut water by either becoming a major/minor stake holder in the suppliers firm or by vertical integration. By vertically integration the companies are bound to own coconut plantation which requires high investment and trained labor to take care of plantations. Nevertheless the companies can have assured supply through vertical integration excluding unfavorable weather conditions, which has a critical role to play in terms of supply disruption.
Procurement strategy overview and outlook
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The paper fails to mention how the emerging countries in Asia would need to do to in order to achieve a distribution system where the product is available in all small rural outlets as well, because the market structure is different in countries like India as compared to the developed supply chain system in developed western countries.
Source:www. bcg. com/CreatingDistributi onAdvantageinIndiaMay07
Authors: Vikram bhalla, Abheeksinghi, Sharad varma
India has become world’s largest markets for consumer goods Due to fast growing of retail sector, India has been host to consumer multinational companies for several decades
Indeed, quite a few Indians think of Unilever, Nestle & Philips Electronics as Indian companies Retailing density with more than 12 billion retail outlets ,India has highest retailing densities in the world Still India is relatively new territory with a number of inter-related factors that make distribution channel challenging.
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Most distribution models in India involve many intermediaries between companies and their retailers. Other distribution involves both retailers and Wholesalers who are served directly by the manufacturer. Infrastructure complexity- Only few full service distribution companies operate
The literature does not mention what should be the distribution strategy for a small price product like coconut water, which also needs to be converted from the tree into the hands of the consumer in s small period of time to avoid the product getting spoiled.
Title 3: ANALYSIS & EVALUATION OF DISTRIBUTION CHANNELS IN FMCG
Source:http: // www.beemanagement
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Authors: Bee Management consultancy private limited.
The supply chain of products in the FMCG market in India is one of the longest supply chains an industry could really have. There are as many as 5 levels of intermediaries involved in the entire supply chain.
Even though these FMCG companies are big multinationals and Indian but face a major challenge of making their products available in the market in the right quantities and in the right time
FMCG’s don’t really have a wide network of sales agents and other force which is required and is ideal for catering their products to the markets.
This aspect is taken over by distributors, wholesalers and retailer whose margins on these products actually double the price of these products when a final consumer buys it.
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These products are transported either via roadways or railways within the domestic markets and normally don’t take more than a week to reach the retailers.
The distribution activities are highly volatile and dynamic. Since it’s a volume game, manufacturers make all possible efforts to boost sales and promote their distributors to earn more and more orders from the retailers and wholesalers.
The gaps in the paper with respect to coconut water would include how the supply chain system would be different for the product as most of the sourcing takes place from the rural parts of the country and the demand lies in both the rural and urban area, hence the rural demand needs to be met with the units supplied directly from the rural areas and the rest needs to be transported to the urban processing plants.
We have taken the following research methodology:
Secondary Research- Research was carried out to understand the existing distribution system for coconut water for any player and any market. Since the product category is mainly dominated by unorganized players, beverages industry was analyzed as the product category was similar to the coconut water. Major sources for secondary research were websites, literature review and articles.
Primary research- Research was done to find out the expectation of the consumers from coconut water and to profile the customer based on data analysis to target for our product. Convenience sampling was used.
Traditionally in our country a consumer has had a particular ritual before purchasing the coconut water. The ritual begins with first selecting the best coconut and it is opened in from of him and then he drinks it. This is very much different from the experience of buying a coconut water drink from at tetra pack.
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Modern Trade/Large Chain Retailers
Direct access to the consumer
Demands contribution margins, discounts etc. from the Brand
Small Individual Retailers
Huge number of small point sales
Can also buy products directly through cash and carry or modern trade
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Indirect channel (Wholesalers)
Play a fundamental role in beverage distribution
Possess critical information regarding volumes of sales, competitors beverages etc.
Price
Cleanliness
FreshnessFactors Governing Production Location
Coconut water has been known for its natural health benefits that it offers to human kind. The benefit are well scripted in the traditional texts of Ayurveda and Unani. Coconut water has been said to provide minerals and energy, and prevent from dehydration in case of summers in the tropics. The tender coconut water has been said to improve digestion and help in the cure of UTI.
But, to come up with coconut water drink in packaged form and to cater regions all across India definitely requires answering some essential questions including the areas of high production of coconut, the demand of coconut water in the country, what is the current coconut production, etc.
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The following factors can be taken into consideration while determining the production location:
Today, India is one of the leading producers of coconut in the world (ranks third) producing 13 million tonnes per annum. Kerala, Tamil Nadu, Karnataka, Andhra Pradesh are the highest producing states contributing 90% of coconut production in India which can be seen from the table (for year 2006-07) shown below. Area under cultivation in India is around 1.93 million Hectare where Kerala has the highest cultivation area of 0.898 million Hectare. In India, productivity for coconut has been increasing since past decade. In 2006 -07, productivity increased from 7608 to 8165 coconuts per hectare.
Table 1: State wise production and productivity of coconut
Kerala
7046
6326
Tamil Nadu
13133
4867
Karnataka
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3139
1210
Andhra Pradesh
8577
892
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West Bengal
323.5
Orissa
274.6
Maharashtra
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914548
273.4
Assam
204.9
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Source: www.indiastat.com
From the table, it can also be seen that Maharashtra has the highest productivity for coconut. Therefore, in future, it might come up as the largest producer of coconut if more area is brought under cultivation. Hence, one can say that there is a huge potential in India as far as production of coconut is concerned which is directly linked to the potential of coconut market.
Coconut is considered as the cash crop by a lot of people living near the coastal areas. Moreover close to 7000 km of coastline in the country has given accessibility like no other in India. Any region which is in proximity (about 100-150km) to these coastal areas and is accessible by major towns and city should be considered.
Northern and Western parts of India are seen as a potential customer base as coconut availability is low in these regions. Hence the proposed region of production should be well connected with these parts of India. Moreover these parts also have ports (both ship and airports) for export of coconut water to other neighbouring countries.
The location should provide advantage in terms of low inbound costs owing to proximity to major procurement centres. In case the location lies in rural region, labour costs are cheap. Outbound cost in terms of product distribution and marketing should be low owing to the proximity to the domestic markets. Water availability should be readily available and cheap.
Availability of power supply, telephone, mobile and internet connectivity are some of the infrastructural resources of the area. Connectivity to nearest railway station and airports should be taken into account. Moreover transfer of coconut water in particular conditions of temperature should be maintained so as to increase the shelf life of the product.
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In a rural area, semi skilled labour required for manual operations is available cheaply. For the technical operations, technicians can be hired locally on as per need. Highly skilled technical labour would have to be incentivized to work in rural markets, but may also be hired on as freelancers.
Intensive Distribution is when a product is made available in many retailers. The products that are sold intensively are usually low priced or impulse purchase products.An example of the use of Intensive Distribution would be for chocolate bars. They can be found almost everywhere (grocery stores, department stores, convenience stores, gas stations, etc.) In this type of distribution the seller’s unit costs for stocking are low. The convenience for customer is critical as most of the products are impulse buy products.
In intensive distribution the product is everywhere. An example would be the retailing of gasoline. If you look at all the major retail outlets, they are on every corner. In an intensive distribution, the stocking costs are typically very low. Convenience for the customer is critical. When they decide that they need gas or toothpaste, you’d better be there. Convenience is more important to the customer, whereas in selective distribution they are willing to travel to a retail outlet and have fewer choices for that type of product.
Company
Carry and forwarding agents
Redistributing agents
Wholesalers
Rural retailers
Urban Retailers
Consumers
In this, the company directly supplies its product to the retailers which helps them to save the margin, which they give to the wholesalers and it also ensures quick availability of the product to the retailer. The flowchart above depicts the scenario. The company manufactures the product which is then sent to the carry and forwarding agents. After Manufacturing of the product, it needs to be sent to the market for sales & distribution. This is where C&F (Carry & forward) agents come into picture. They act as a link between company & distributor. They transfer stock from company to distributors. The distributors then make the product available in the market through retail & dealer channel
Since last five years beverage companies had started penetrating rural marketing also. For the rural sector these companies are working on Hub and Spoke model. To reach out to rural India, we need to start out by drawing up a hit list of high potential villages from various districts. So to ensure full loads, large distributors (Hubs) need to be appointed, and they would supply the product from the company’s depot in large towns and cities. . The hubs would appoint smaller distributors (Spokes) in adjoining area so that the goods can be distributed. Below is the diagram illustrating the same.
Since we are coming up with a product at the national level, therefore, it is important to identify the industry. Customers’ and consumers’ behaviors help to correctly define one’s industry. Therefore, we conducted survey to identify the industry where our product will have an existence. The sample size was around 80 people out of which 96% people drink coconut water. Convenience sampling was used because of the time constraint.
From this it can be seen around half of the people in the sample perceive coconut water as health drink and around 45% people perceive it as refreshing drink. From the survey, it has also been seen that people mainly prefer coconut water when they are thirsty, tired or when they want some health drink. As an overall perspective we can see that close to 80% consumers perceive coconut to be related to nutrition and wellbeing of their body.
Others
Thirst quencher
Refreshing
Drink
Health drink
No response
100
80
60
40
20
0
Thus, from the survey results, it can be clearly seen that the product should have an existence in Health and refreshing industry which we, here, are considering it to be fruit juice industry as fruit juices are also perceived in the same way. Here, one might argue why not (Carbonated) soft drink industry? The reason why we are not placing our product in the same is that people do not consider carbonated drinks as health drinks, but thirst quenchers. Since we are positioning our product as health and refreshing drink so fruit juice industry suits the best which is also backed up by the survey so conducted.
Demographic: The youth (Age: 15-30) will be the main target segment whereas the people of middle age will be the spillover segments.
Geographic: We will target both rural and urban areas.
Psychographic: Socioeconomic classification is done in rural and urban areas.
Behavioural: This will be done taking into account the benefits and usage rate, as required by target customers.
Targeting: Our target group of consumers would comprise people from SEC A and SEC B in urban areas and R1 & R2 in rural areas, health conscious people, the youth who consider going natural as fashionable and also institutional buyers like airlines, railways, upmarket restaurants and hotels. We would also target doctors who would recommend our product to their clients. This would provide an immense opportunity to us to create a stronghold in the market and generate higher revenues and superior economic profitability.
Positioning: We are positioning our product as a natural health drink that is extremely nutritive and also highly refreshing.
Its tagline will be ‘Naturally Refreshing’
Product: Product is different from what we get from roadside coconut vendors since the shelf life of such products is very low. Our product has a shelf life of 9 months and hence making it available to a wide range of markets becomes easier since customers would rest assured of the quality of this product. We would also apply for accreditation by authorized food agencies like FPO and other quality control certifying agencies like HACCP.
Packaging: Tetra packs will be made available both for small as well as large SKUs. The colour of the packs will be palm green and there will be images of green cocounuts, prominently displayed to reinforce the positioning of the brand.
In the urban centers, especially in modern trade, plastic bottle packs will also be made available for SKUs greater than 500ml.
Price: We would price our product competitively. We would initially launch the product in tetra packs of 200 ml and 1 lt capacity priced at Rs. 20 and Rs. 95 respectively. This is almost in line with our competitors’ pricing strategy.
For rural areas, focus will be on Rs.5 and Rs. 10 SKUs. These packs will drive penetration through trials. This would ensure greater returns to us and also project a high end quality image of the product in the eyes of consumers.
Place: Our processing unit would be located in Tamil Nadu since the procurement would be done from nearby places. So, we would be saving on inbound transportation costs. We are launching the product throughout the country in one go, mainly targeting the northern, western and eastern market.
Focus will be on Traditional trade, for intensive distribution. This will include paan shops, LEG, HEG and chemists as well.
Modern trade: In urban areas, there is huge potential of modern retail formats and our product will be made available in Hypermarts, Supermarts and Food Stores.
We will also focus on convenience aspect of marketing channel. The packaged coconut water will be sold in various bus depots, airports, transit points and railway stations. The on-the-go proposition of the product makes it an ideal option for consumers to get instantly refreshed when they are travelling.
Promotion: We would take up heavy promotional campaign to build awareness about our product and to push it in the market. We would keep track of activities that our competitors would be doing so that we can strategize further.
We would incentivize our channel partners and create a push strategy to gain more shelf space. Heavy advertising and brand promotion activities would be taken up to increase visibility of our product. Since we are new players and unknown to consumers, we need to spend heavily on the above mentioned activities so that we can sustain competition from giants in the industry and eventually overtake them. We would also consider sponsoring T.V. shows, sports events and cultural nights so that our target consumers can be made more aware of our brand. We understand that building good relationship with our suppliers, channel partners and customers would be the formula for our success in the market.
Focus will be on ATL as well as BTL campaigns.
ATL: An ad campaign with a southern actor with mass appeal can be launched to popularize the brand.
BTL: This will be the prime focus area especially for promotions in alternative channel routes. Such campaigns will help in boosting sales and make the product a quick-recall refreshing option for the customers.
We would be placing our product mainly in modern format retail stores, hypermarkets where new ideas are more readily accepted by consumers. Here we would have a greater chance of showcasing ourselves and increasing our visibility. Besides, these are places which are frequented by our target group of customers. We would like to ensure that the quality of our product is intact when it is in the market and hence we would like to sell it through stores that take good care of inventory, have good and adequate storage facilities. Also, we would be able to track not only our sales and turnover but also that of our competitors. This data would be available through the store manager because unlike traditional retailers, he would be engaged in systematic data management and record keeping.
Limitation: The research on channel design is qualitative rather than quantitative. It is very difficult to assign weightage to different parameter for choice of channel design. The research suffers from the perception of service output with respect to another. A different set of researcher may have given different weightage to different parameters and hence could have come out with different recommendations.
Current market is unorganized and there are very few and small organized players. The research is heavily borrowed from the experience of beverage industry as the product characteristics are perceived to be more or less similar.
We haven’t considered e-commerce as the channel for the product
Future Scope of research: As the market is naïve, so there is a lot of scope for new players. In future, if the intermediaries happen to be removed from the distribution channel with companies directly selling the product to the consumers like in US and the coconut water market gets more organized, the distribution channel strategy might have to be revamped.
As there is no current established market leader in this category, we are trying to replicate distribution strategy of current beverages industry in India. So again if the market grows substantially in future, the present distribution needs to be changed drastically and a completely different distribution model might have to be designed.
We can also think of selling directly to consumers through e-commerce.
Setting up a distribution channel for coconut water requires some strategies which are different from traditional distribution methods for other products like aerated drinks, mineral water etc.
There is huge potential for a product like packaged coconut water to work in a country like India. Coconut is already seen as a product which is very useful in daily requirements of households in southern parts of the country, and coconut water is seen as a product which would essentially quench thirst for the people as well as have some nutritional value.
Designing a packaged coconut water drink has some unique challenges in itself. To market the product, we not only have to look at the aspect of providing just coconut water to the end consumer, but provide a solution to him, so that he can quench his thirst, and also get the nutritional benefits provided by coconut water. For this purpose we have used a systematic approach to design the distribution channel for coconut water.
Despite coconut water’s potential as a competitor in the bottled beverage market, attempts to capture those qualities in a commercial product have been largely unsuccessful. Once exposed to air, coconut water begins to ferment, and rapidly loses most of its organoleptic and nutritional characteristics. To eliminate the risk of bacterial growth, commercial bottlers are forced to sterilize the product using high-temperature/short-time pasteurization, which destroys some of coconut water’s nutrients and almost the entire flavor.
We have studied some of the current channel designs currently being used for distribution of aerated drinks, and figured out how different strategies are being used to distribute the products in rural as well as urban areas. Also, while designing a new channel we have to keep in mind that the Indian retail setup is such that still only 2 % of all retail takes placed through organized retail. The rest of the retail still takes place through unorganized channel and this leads to a lot of intermediaries being involved in the traversal of the product from the manufacturer to the end consumer, which provides its own unique challenges.
According to our consumer survey, we have figured out that the ideal way to position our product is as a health drink which refreshes, so it is placed on a pedestal where it might be put by the consumer in the same category as a packaged fruit juice. This particular product category is growing at a very fast pace, with more and more people becoming health conscious and going for products which are healthy and refreshing. There has also been a general trend of people going for substitutes of aerated drinks as thirst quenchers as opposed to say 10 years ago.
We intend to use an intensive distribution strategy mostly in northern parts of the country, because in those parts there might also be some novelty factor attached to coconut water, as it would not be as readily available as in the southern parts of the country.
In the end we would like to add that in a market like India, no particular channel can be said to be an ideal distribution channel. Multinationals which have been operating in India for many years now have seen that even for marketing the same SKU to different sections of consumers, altogether new channels need to be setup in some cases, whereas some modifications need to be made in other cases. Hence we would initially target those segments of the consumers where we feel that maximum chances are there for innovators segme
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