 "Restructuring will make us stronger after Covid: Coca-Cola India chief")
American beverages giant Coca-Cola has weathered many storms in India but none like the one it is undergoing this time. Apart from the Covid-induced disruptions, it is also going through a massive global restructuring and is now under a new chief. Sanket Ray, the new president of Coca-Cola India and South West Asia, comes with a larger role than his predecessors as the local unit has been promoted from a business unit to an operating unit by the cola major. Ray, who finally got a homecoming after spending four-and-a-half years in China, shares his views with Arnab Dutta in an email interaction. Edited excerpts:
You have taken charge at a crucial juncture, when Coca-Cola is undergoing a massive restructuring. What is the mandate that you come with?
My endeavour is to build an agile organization, strengthen our local presence, generate positive partnerships and ensure the smooth onboarding and functioning of the new operating unit leadership team. This will pertain to leading diverse teams across multiple roles and functions to realize Coca-Cola’s business goals in the India & South West Asia region.
At the core, we want to bring consumers to our brands and choice of drinks they love, to refresh them in body and spirit. We want to do this in ways that make a difference in people’s lives, communities and our planet, to create a more sustainable business and better shared future for our local partners. At the same time, we are also clear on the vision for the next stage of our growth, to emerge stronger, guided by our purpose to ‘refresh the world, make a difference’.
My primary, long-term target is to emphasize on the following for better execution: design for India or Indian consumers based on local insights, decide in India for faster execution, deliver at faster pace, digitize the business and driving a sustainable business.
Once the restructuring is complete, how will it change Coca-Cola?
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The changes in our operating model will shift our marketing to drive more growth and put execution closer to customers and consumers while prioritizing a portfolio of strong brands and a disciplined innovation framework. The Coca-Cola company’s nine new operating units will also help streamline the organization by replacing business units and groups. The operating units will be highly interconnected, with more consistency in structure and a focus on eliminating duplication of resources and scaling new products more quickly.
Moving forward, the operational side of the business will consist of nine operating units that will sit under four geographical segments, along with Global Ventures and Bottling Investments.
The pandemic has impacted overall consumption of discretionary spending that directly affected Coke. How has been the recovery so far?
While the world is grappling with what kind of recovery will it witness, no one knows for sure. What we are hoping and working for is what we have learnt historically. In our 134 years of history, we have witnessed it all, be it health related, military conflicts or economic crisis, we have always come off that stronger. In the shorter term, we witness early signs of recovery where the Covid-19 cases are on the decline.
What are the measures Coke has taken to revive its business faster?
We continue to evolve our business models to the changing scenario while staying close to our bottling partners, customers and suppliers. We are streamlining the innovation pipeline against initiatives that are scalable regionally or globally as well as maintain a disciplined approach to local experimentation. By streamlining our portfolio, we will continue to drive availability for smaller packs, drive innovation and roll out local drinks and flavours. The company is also investing in new capabilities to capitalize on emerging, lasting shifts in consumer behaviours. For example, we are expanding our digital presence through partnerships with multiple customer platforms.
The few key actions which we have identified are: First, to optimize a portfolio of strong global, regional and scaled local brands based on local consumer insights to win more consumers. Second, to configure a disciplined innovation framework and increase marketing effectiveness. Third, to capture supply chain efficiencies and focus on local shared value creation with our partners. And fourth, to equip the organization to win, by evolving and investing in a new system with the future capabilities.
In the past three years Coke has become more dependent on its bottling partners as a number of bottling units have been hived off. How does that change Coke's business model here?
The re-alignment of bottling operations in the Northern region was designed to build regional scale, stimulate investments and growth in the northern part of the country. This realignment optimized existing capacities, supply chain, brings further investments and improves distribution routes through contiguous territories. We are happy with our current franchise arrangements in India, our growth plans, and the current Coca-Cola business system.
Now, our core focus areas are also faster replenishment cycles at retail outlets, deeper distribution and servicing in-home consumption.
The pandemic has disrupted many avenues of business like the impacted out-of-home consumption channel. How does Coke cope with these new norms?
Covid-19 and the subsequent lockdown obviously impacted all businesses and sales significantly but we have witnessed improvement in both consumer sentiment and consumption. While away from home consumption in channels like travel, restaurants, entertainment and hospitality are on the revival path it may take a little longer to come back to normal, at home consumption is robust and growing and has shown increase in mix.
We are working with our out-of-home customers to revive the business in a safe way. For the at home consumers, we are introducing new offerings and packs especially multi packs and affordable entry home packs. Now we will definitely be part of the consumer shopping cycle whether online or offline. We have seen an increase in digital commerce and we are going to concentrate our efforts in that area significantly both in urban and rural markets.
Between 2013 and 2017, Coke had to undergo a period of de-growth. With the pandemic shattering the economy, is it again facing the same risk?
One of our biggest learnings is that in tough times, one needs to invest more, not just financially but in every way and that is one of the keys to long-term success. In terms of the pandemic, at the on-ground level, consumers' path to purchase has been altered significantly. Leadership brands will be the first choice of consumers, provided the need is satisfied. Presently, core sparkling leadership brands are gaining strength. Juices (both indulgence and functional) and hydration categories are meeting consumer demands for refreshment and energy successfully. We have garnered good momentum in the second half of 2020 and believe credible differentiation is key to win in the long term.
This pandemic has also accelerated consumers to take up new habits. Digital commerce is one of them. This increases the role that Coca-Cola needs to play in the consumer’s life, by adapting itself to the changing behaviors towards the ‘new normal’ and using the merits of availability and affordability.
To ensure wider availability, we’re devising new and innovative ways to reach the consumer through digital - we are building it as an engine of growth for the future with consumer centricity as our focus. For example, through our tie-up with a common services center, we have ensured rural last-mile delivery by listing all our popular products on their Grameen e-store platform – thereby building least-expensive solutions to essential hydration needs. We’re also building a sizable presence across e-commerce marketplaces and various food aggregator tie-ups. We’re also allowing for new product and brand innovation, where we’re expanding the choices across occasions and the work done in the past 3-6 years will help us in emerging stronger.
We're ensuring that we build for consumers in their context and based on their post-pandemic needs. Our speed and agility in this effort will define future success.