By Dr. Vikas V Gupta, EVP-Traded Markets and Investment Research Ashwini Shami, Lead Research Analyst

This article is one of many which will emphasize the need to invest in global equities. As Indian consumers we buy a number of foreign-owned brands that we thoroughly believe in, genuinely appreciate and are loyal to.

As per ArthVeda’s estimates, for the affluent classes the dollar-dependent spend is as high as 40% of their total expenditure basket.

A large number of these foreign-brand companies are either not listed in India or the India-listed subsidiaries only manage a limited number of product lines, while the remaining are part of unlisted subsidiaries.

The question then is – How can we move up the economic food chain to become a predator (i.e. an investor gainer of wealth) from a prey (i.e. a mere consumer and spender of wealth), and own a piece of their success story as well?

Let’s consider the interesting case of the Indian beverage market. As per Household Consumer Expenditure survey, 2011-12 conducted by NSSO, the category of beverages, refreshments processed food accounts for 9% of total monthly per capita expenditure in urban India.

This implies that beverages represent a significant portion of your expense budget. The total beverage market in India is around Rs 30,000 crore.

According to Warren Buffett’s basic investment screening framework, a business is attractive if (1) The Business is easy to understand, (2) has favorable long-term prospects, (3) operated by honest and competent people, and (4) priced very attractively.

The Indian beverage business fits well on parameters 1, 2 and 3 in this framework. The products are simple, and consumed on daily basis. The market is substantially big and has attractive growth potential.

Major players are very large corporates with best corporate governance practices in place. The price an investor pays to buy this Indian beverage market opportunity will eventually determine his returns.

Notably, in the current scenario, there are hardly one or two listed companies in this space, and their valuations have gone through the roof. So even though they might meet criteria 1,2 3, they do not fit criteria 4, i.e. an attractive price.

Let us analyze the Indian beverage market. The three major segments are carbonated drinks (50%), Bottled water (33%) and Fruit Juices (17%). The largest chunk, carbonated drinks segment, is completely dominated by the two global giants, Coca-Cola and Pepsi. Both these companies are not listed in India and hence an investor cannot invest through a domestic market route.

In the bottled water segment 40% market share is held by Coca-Cola and Pepsi through Kinley and Aquafina brands and more than 40% market share is held by Parle group companies which again are privately held.