 "Our big challenge is going to be the rural market: Atul Singh")
With Coca-Cola completing 20 years since it re-entered India, the beverage major's India and South West Asia President and CEO Atul Singh, in an interview with Surajeet Das Gupta & Sounak Mitra, talks about investments, challenges, changing consumption patterns and ups-and-downs of Coca-Cola's journey in the world's second largest population. Edited excerpts:
You have announced plans for investments worth $5 billion in India. What is your vision for the next five years?
Clearly, India is a strategic market for Coca-Cola, and when you look at the company's vision of doubling revenues by 2020, what it has done over the past 100 years, it is now going to do in just 10 years. That's the company's global vision. And in that vision, clearly countries like India, China, Brazil and Russia, have to play a strategic role. So, the company has decided, as a system, to invest $5 billion over the next seven to eight years, through 2020, to capture the opportunity that we believe there is, and clearly India is a nation with over a billion people. Looking at the demographics, it is a young country. When consumption increases, there will be a need for additional equipment, bottling lines and other infrastructure. In order to capture that opportunity, we are investing this money.
What is the growth you are targeting through 2020?
You have increased prices but there was no fall in growth in recent times. Earlier, it was different. With price hikes, there used to be fall in sales numbers.
Prices have gone up in everything. We take a price hike when our costs go up, when ingredients cost more. Salaries of consumers have gone up also. So, consumers have more disposable income.
You have been the longest serving CEO at Coca-Cola India. What was the biggest challenge you had faced?
Ensuring a sustainable business model was one of the key challenges we had. For example, the Rs 5 price point strategy was totally unviable. The system was losing money. We had to take a tough call to raise prices. We had to ensure sustainability and return on investment in the entire value chain. We need to ensure that there was enough for the bottlers, suppliers and all other stakeholders.
What are the things that you could have done differently?
I could have done things faster. India is such a good opportunity that you get tempted to do a lot more. So, there is a balance that do you move fast or do you move at a calculative space. I don't take a chance where you get into a situation where you get into an unsustainable model where your system is not making money. Yes, we could have done things a bit aggressively. But, it's better to build a model that is more sustainable rather than a high risk model, as I am dealing with other people's money.
What do you think will be the biggest challenge for the beverage industry and Coke in the next three to four years?
One big challenge is going to be our penetration into the rural market, given the infrastructure and the lack of power and electricity. We need our products to be served chilled. And, that is a real issue. We sell to 2-2.5 million FMCG outlets, and there are over five million outlets. That is a big challenge. We are making big strides, but in the grocery channel, we don't have the higher penetration, even in big cities because of chilling equipment.
So, the rural market will be the future challenge.
As a consumer, you will want convenience. We know there will be growth both in sparkling areas as well as the still area. Globally, we have over 3,000 products. So, we have enough and more choice that we can pick and choose from.
But, for rural market, none of the 3,000 products will work for you.
May be. The good news is we have the R&D facility in India. The Nimboo fresh is one example that was developed entirely in India.
What is your plan on energy drinks? When will you start productions in India, as you already have the government nod for that?
We do have plans. We have actually started the pilot in Delhi, Bangalore and Mumbai. It's in certain markets right now. We will see depending on the results and depending on the performance in these markets. I can't speculate on when we will do production or if at all we will do production here. We have the opportunity if we see the demand, we may.
You have announced plans for investments worth $5 billion in India. What is your vision for the next five years?
Clearly, India is a strategic market for Coca-Cola, and when you look at the company's vision of doubling revenues by 2020, what it has done over the past 100 years, it is now going to do in just 10 years. That's the company's global vision. And in that vision, clearly countries like India, China, Brazil and Russia, have to play a strategic role. So, the company has decided, as a system, to invest $5 billion over the next seven to eight years, through 2020, to capture the opportunity that we believe there is, and clearly India is a nation with over a billion people. Looking at the demographics, it is a young country. When consumption increases, there will be a need for additional equipment, bottling lines and other infrastructure. In order to capture that opportunity, we are investing this money.
What is the growth you are targeting through 2020?
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There is a huge opportunity yet to be tapped, given the demographics. It's difficult to predict exactly what we are targeting. We have reported 26 consecutive quarters of growth, of which 19 are double digit. I don't know what the growth will be. What we know is the Indian economy will grow, consumption will increase, and we want to be there in order to capture that growth. In 2020, per capita consumption will be surely higher than what it is today.
You have increased prices but there was no fall in growth in recent times. Earlier, it was different. With price hikes, there used to be fall in sales numbers.
Prices have gone up in everything. We take a price hike when our costs go up, when ingredients cost more. Salaries of consumers have gone up also. So, consumers have more disposable income.
You have been the longest serving CEO at Coca-Cola India. What was the biggest challenge you had faced?
Ensuring a sustainable business model was one of the key challenges we had. For example, the Rs 5 price point strategy was totally unviable. The system was losing money. We had to take a tough call to raise prices. We had to ensure sustainability and return on investment in the entire value chain. We need to ensure that there was enough for the bottlers, suppliers and all other stakeholders.
What are the things that you could have done differently?
I could have done things faster. India is such a good opportunity that you get tempted to do a lot more. So, there is a balance that do you move fast or do you move at a calculative space. I don't take a chance where you get into a situation where you get into an unsustainable model where your system is not making money. Yes, we could have done things a bit aggressively. But, it's better to build a model that is more sustainable rather than a high risk model, as I am dealing with other people's money.
What do you think will be the biggest challenge for the beverage industry and Coke in the next three to four years?
One big challenge is going to be our penetration into the rural market, given the infrastructure and the lack of power and electricity. We need our products to be served chilled. And, that is a real issue. We sell to 2-2.5 million FMCG outlets, and there are over five million outlets. That is a big challenge. We are making big strides, but in the grocery channel, we don't have the higher penetration, even in big cities because of chilling equipment.
So, the rural market will be the future challenge.
As a consumer, you will want convenience. We know there will be growth both in sparkling areas as well as the still area. Globally, we have over 3,000 products. So, we have enough and more choice that we can pick and choose from.
But, for rural market, none of the 3,000 products will work for you.
May be. The good news is we have the R&D facility in India. The Nimboo fresh is one example that was developed entirely in India.
What is your plan on energy drinks? When will you start productions in India, as you already have the government nod for that?
We do have plans. We have actually started the pilot in Delhi, Bangalore and Mumbai. It's in certain markets right now. We will see depending on the results and depending on the performance in these markets. I can't speculate on when we will do production or if at all we will do production here. We have the opportunity if we see the demand, we may.