Coke plans to break out of summer-drink mould

Coca-Cola India has decided to focus its attention on increasing the share of “in-home and in-premises” consumption of its products to reduce the risks arising out of the seasonal nature of its business.

The move comes at a time when the world’s largest beverage company has seen its volumes in India slow down dramatically, growing only eight per cent in the second quarter of this calendar year compared with 22 per cent the same quarter last year. As much as 30 per cent of the company’s beverage sales come in April-June. Sales in these months were severely affected this year because of a mild summer and early monsoon. The slowing of volumes was also partly due to a 20 per cent rise in the prices of some of its beverage packs.

Speaking on the slowdown, Coca-Cola’s India and south-west Asia president and CEO Atul Singh admitted: “We had a lot of rain this quarter versus the prior year. During the second quarter, which is the warmest, a lot of glass bottle consumption happens outside home. If the weather hadn’t been the way it was, we would have not seen such slow growth. We have very high seasonality in India. For this quarter particularly, seasonality has had a big impact.”

Singh said the company was focusing on a clear strategy to combat climatic vagaries. “Ideally, we want each quarter to account for 25 per cent of our revenue but it’s going to be a long time before that happens. The way we are doing it is to drive in-home and in-premises consumption because that doesn’t get impacted by the season. Today, we are focusing on various channels such as movie halls, malls, eat and drink channels, etc, to boost in-home and in-premises consumption.”

Singh said on average, about 40 per cent consumption of the company’s beverages happened at home or other premises. “So, our focus now is to get this number up, especially when 90 per cent of all beverages — tea, milk, water, etc — are consumed at home,” he added.

To expand its market, Coca-Cola is making a big push at the bottom of the pyramid, too, by looking at products below the Rs 5 price category.

Singh elaborates: “The opportunity and the challenge is how we get that great taste in beverages to people who can afford to spend only Rs 3-5 on it. Powder is one format We are piloting the powder format under the brand ‘Fanta Fun Taste’ in certain markets. The powder can be mixed in water and consumed. The other area is a clean form of packaged water. Light weight packaging of PET bottles can help us reduce costs.”

Coke is also looking at making India a possible hub for the supply of oranges for the company globally. Currently, oranges are supplied globally from Brazil, Florida in the US and China. “We have imported about 10,000 saplings from Brazil and are growing orange trees in Maharasthra in collaboration with Jain Irrigation. We’ll convert them into pulp and that can cater to our local needs. Later, they could be supplied to other countries in our system,” said Singh. The Cutrale group in Brazil, which is the largest producer of oranges in the world, has been roped in as a technology partner.

Based on the success of this experiment, Coke might look at doing the same with apples and grapes as well.