Coca-Cola and its bottling partners in India plan to invest $5 bn till 2020

Hindustan Coca-Cola Beverages Pvt. Ltd, the bottling arm of Coca-Cola, has identified measures around product, distribution, digitisation, capability building and training as key to achieving its vision of becoming a $2.5-billion company by 2020.

The largest bottling unit of the US-based beverages, which had announced its goal in November, has also unrolled state-wise business plans this year. For India does not behave like one country but as an agglomeration of nations when it comes to food, drinks, language and choices, says the company’s CEO Christina Ruggiero.

Hindustan Coca-Cola Beverages is among the top five FMCG companies in India by turnover (Rs 94.72 billion in 2016-17). It controls nearly 70 per cent of Coca-Cola’s distribution in India.

While analysts have mixed views on the 2020 target given the growing competition from locals and multinationals and dipping consumption growth for FMCG majors, the company believes that armed with large capital investments all it needs is to balance volume with value.

It now has products including carbonated drinks, beverages, juices and water that span the entire spectrum from mass market to premium. “In 2018, we will manufacture and distribute the widest portfolio of beverages ever done by Hindustan Coca-Cola Beverages, from premium to value,” says Ruggiero.

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For instance, Coke launched Thums Up Charged last year-end and it has sold one million cases in three months. It similarly launched Rs 10 tetrapacks of Maaza Refresh. But with consumers becoming more health conscious, it is also introducing fruit-based drinks. For instance, in the value category it introduced Maaza Gold—a premium drink made from Alphonso mangoes. It is also piloting Fanta Fruity Orange in Maharashtra. The new product has 10 per cent juice in a carbonated Fanta. Fanta did not contain orange juice earlier.

With growing demand for the category, the company has decided to scale up distribution of its juice range. “We are setting ourselves in a way that we are able to provide our consumers what they want to drink versus what we want them to drink,” says Ruggiero.

On the distribution front, by 2020 the company plans to add another million to its existing strength of two million retail outlets. It aims to sell a cross section of products from its portfolio to the existing outlets, and opt for a segmented approach as it believes every product won’t sell in one channel. It has decided to distribute juices through the mainline channels as juices have attained the required scale.

The current sales ratio (carbonated beverage: juices) in the distribution channel is 1:0.6. The company wants to make it to 1:1. Also, a premium division is being set up to focus on servicing customer (retailers/grocers/restaurants) requirements around niche and premium beverages.

The Coca-Cola Company and its bottling partners in India plan to invest $5 billion till 2020. It is also investing time and money to make the sales force and retail partners to be more tech-savvy.

Training is critical to build capabilities. So, it is skilling personnel on a segmented approach and selling premium products. The stress is on creating the right sales story for every product, familiarity and ease of use of digital tools.

To this end, the company has recently introduced a sales force automation tool that allows the “market growth operators” (sales team personnel) to take orders from retailers on their tabs online.

The company aims to digitise and connect 100 per cent of the distributors as against 65 per cent. All standardised work/transactions have been moved to Shared Services—a centre of excellence within Hindustan Coca-Cola, which functions like knowledge process outsourcing. Even at the factory level, automation is viewed as critical in helping to switch over from prescriptive to predictive maintenance. The Rs 4.5-billion factory in Sanand is the first one that is coming up with this concept, where it will be digitised to the extent to be able to predict if an equipment or a part needs attention or maintenance as against the normal practice of undertaking maintenance at a pre-scheduled time.

As far as selling products online, however, the company agrees that it has limited e-commerce presence and needs to scale it up.

The Indian soft drinks market is estimated to be worth Rs 603 billion. Of this, carbonated drinks contribute around Rs 265 billion (44 per cent), followed by juices (27 per cent), bottled water (24 per cent) and others Rs 30 billion (5 per cent).

According to India Equity Research, Coca Cola’s market share in carbonates volume stood at 58.6 per cent in 2016, while Pepsi had a share of 33 per cent. In Juices, Coca Cola's share was 34.4 per cent, while Pepsi had a share of 26.7 per cent. In the water segment, Coca Cola had 14.4 per cent share and Pepsi had 12.4 per cent.

Experts believe Coca Cola and Pepsi will extend their domination in the non-carbonates market, thanks to their superior distribution and reach compared to newer home-grown players such as Manpasand, Parle Agro and Hector Beverages.

Follow-up

• Coca-Cola India’s bottling arm will manufacture and distribute the widest portfolio of products, from mass market to premium, this year
   
• It plans to add a million to its strength of two million retail outlets, and scale up distribution of its juice range
   
• It is skilling sales force on a segmented approach and selling premium products
   
• At the factory level, automation is being viewed as critical to switch over from prescriptive to predictive maintenance