Coke's Indian arm proves a dampener in Q2

Coca-Cola's unit case volumes dropped 14% in the April-June quarter.

Raising concerns over the performance of its Indian subsidiary, Coca-Cola today said unit case volumes dropped 14 per cent during the April-June quarter in India.

"We still have considerable work ahead of us in the US and in markets like Germany, the Philippines and, in particular, India, as well as to improve our performance in the areas of innovation and marketing," Neville Isdell, chairman and chief executive officer of the company, said in a statement issued today.

In its quarterly filing with the Securities and Exchange Commission, US, the Atlanta-based beverages giant also indicated that there was little hope of performance improving in India during the rest of the year.

"To address the poor performance, the business in India has been reorganised. However, results are expected to remain weak through 2005," the company said in the filing.

It is worth noting that only three years ago, in 2002, India had been voted the best performer amongst all Coke subsidiaries worldwide.

"Price increases to cover rising raw material and distribution costs, the lingering effects of the false pesticide allegations and the de-emphasis of the powder business drove the declines," Coke's SEC filing said in an attempt to identify the reasons for the poor performance.

The company release went on to say that the unit case volume declines in Germany, the Philippines and India had offset the overall results for the quarter. In the entire East, Southasia and Pacific Rim, Coke's unit case volumes fell by 4 per cent, net revenues by 3 per cent and operating income by 5 per cent during the quarter.

Recently, Coke had brought in John Ustas, the head of one of its largest bottlers in the world, Coca Cola Hellenic Bottling Company, as the head of bottling operations in India.

A spokesperson for Coca-Cola India said the entire soft drinks industry had fared below expectations during the period. "Our share of the Indian market continues to be at 60.2 per cent," he said. The spokesperson saw the shelving of soft drink concentrate Sunfill as a big factor in the decline.