Health drinks under scanner may lose customer love

New Delhi: The Centre's advisory to e-commerce companies directing them to remove the label of ‘health drinks’ from some popular brands, including Bournvita, may impact sales of the broader health food drinks category, said market experts.

In an advisory issued on 10 April, the commerce and industry ministry’s department for promotion of industry and internal trade (DPIIT) said that some drinks and beverages are categorized as health drinks on e-commerce sites and platforms. 

It directed all e-commerce platforms to remove such drinks and beverages sold under the category citing lack of standards and definition of ‘health drinks’ under India's food laws.

“National Commission for Protection of Child Rights, a statutory body constituted under section (3) of the commission for Protection of Child Rights (CPCR) Act, 2005 after its inquiry under Section 14 of CPCR Act, 2005, concluded that there is no “Health Drink” defined under FSS Act 2006, Rules and Regulations as submitted by FSSAI and Mondelez India Food Pvt Ltd,” the ministry said in its notification dated 10 April.

The move follows a 2 April notice by the Food Safety and Standards Authority of India asking all e-commerce portals to ensure appropriate categorization of certain products being sold under the health and energy drinks category on their websites. 

The FSSAI clarified that the term ‘health drink’ is not defined or standardized under the food regulator’s rules or regulations.

Market experts Mint spoke to said the move could have some impact on the category that is anyway witnessing a slowdown following high input costs.

“While the news has become big; we are not seeing companies reacting yet, but won’t be surprised if trade slows down on stocking such brands following the news,” said a trade marketing expert on condition of anonymity. “The impact may be far greater in tier-I markets. However, companies may double down their presence in tier-II and rural markets. So, temporary down-stocking is a clear possibility.”

Health food drinks in India are primarily malt-based milk drinks that act as taste enhancers along with offering some nutrition benefits. For years, such mixes have been sold in the market to both kids and adults—making health food drinks an over $1-billion category.

However, companies use different tags to market their products. For instance, Bournvita (from Mondelez) calls itself a cereal-based beverage mix, while Horlicks (from Hindustan Unilever) calls itself a malt-based food. Meanwhile, Complan (from Zydus Wellness) markets itself as a nutritional drink. Overall, they are largely marketed to consumers offering some form of nutrition.

Email queries sent to Mondelez, Hindustan Unilever Ltd, Danone and Zydus Wellness did not elicit a response.

Analysts tracking the fast-moving consumer goods sector said the impact on the overall category may not be “big”, adding that consumers consume these knowing about their benefits and nutrition profile mentioned on the packaging.

Consumers buy products based on the brands they wish to buy versus buying it under the category of “health food drinks”, said Abneesh Roy, executive director & head of research committee, Nuvama Institutional Equities. “Companies don’t label it on packaging as a health product. Some change in advertisement may be needed on a case-to-case basis. In any case, sales volumes have been slow for this category due to price hikes,” said Roy.

Meanwhile, others said the advisory for removal of health drinks and beverages such as Bournvita and other drinks from the category of health drink will have a “significant impact”, potentially leading to a dip in sales and heightened regulatory scrutiny.

“By asking e-commerce platforms to remove Bournvita, the government aims to limit the accessibility of products with high sugar content and misleading health claims, particularly those targeted at children,” said Alay Razvi, partner at law firm Accord Juris LLP. “It is unfortunate that the FSSAI Act does not define a healthy drink, which helps the companies to find a loophole in the act. This notification will regulate the market.”

Some others said the broader market for the category has also seen a slowdown over the past several quarters in line with a slump in FMCG volumes. 

“The category has been a bit slow the last few quarters. The concerns around health have only added to it,” said Dhairyashil Patil, president, All India Consumer Products Distributors’ Federation.

Last year, Mondelez was caught in a legal tussle with a food blogger, Revant Himatsingka, after the latter claimed that its brand of Bournvita contains high sugar content apart from using cancer-causing colorants. The company dismissed the claims, and the video was suspended by Himatsingka after he was served a legal notice by the chocolate maker.