 "Why Coca-Cola is losing fizz in India")
As the calendar year ends, changes at the country’s largest beverages entity, Coca-Cola, continues to attract the attention of various stakeholders of the sector.
While key reorganisation at the management was the recent trigger, the past few quarters have been eventful, too. After a sales fall during the summer months last year, followed by a moderate four%growth in the September 2015 quarter, Coca-Cola began this year on a high note. Its volume sales grew by double-digits, year on year, in January-March. And, with expectation of a harsh summer this year, it seemed to be regaining its energy. The April-June period is considered crucial in India for any cold beverages maker; it comprises 40%of yearly sales.
However, performance was below expectation, growing three%by volume in April-June. During the next three months, volume dipped four per cent, thanks to a regular monsoon.
There were other challenges. Coca-Cola gets its supply of beverages from 54 manufacturing facilities or bottling plants in India. It faced continuing issues with these units since the beginning of the year. In January, it had to shut a bottling plant at Kala Dera, Rajasthan, as groundwater levels depleted. Labour protests emerged as the firm prepared to relocate its officials. The management maintained the shutdown was temporary; labour unions alleged the company had moved out key machinery and planned to close permanently.
Its plants at Visakhapatnam (Andhra) & Brynihal (Meghalaya), shut in the following months, due to poor demand. Bottling units in Hapur and Dasna (UP) had to be closed as the National Green Tribunal probed alleged violation of pollution norms. In Kerala, the state police registered a case against Coke’s management for similar reasons.
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After its poor performance last summer, Coca-Cola came up with smaller packs at lower prices, weeks before the beginning of the season this year. However, competition from smaller players such as Xalta, RC Cola and Bisleri Pops did not fade away, as their products continue to sell at 50%less. Substitute drinks like juices and fruit-based carbonated drinks rocked the boat, with new brands entering the market.
Coca-Cola shot back with a new range of non-carbonated drinks like Vio (a milk-based brand) and Fuze Tea (fusion of tea and fruit flavours). To revamp its new products portfolio and build an effective channel, veteran Deepak Jolly was reassigned as a vice-president for venturing and emerging brands (VEB) for Coca-Cola India and Southwest Asia. Sanjeev Kumar, who was head of finance for India and Southwest Asia, was replaced by Sarvita Sethi in the second half of the year.
Recent changes included the exit of D Jayakumar, zonal head of human resources, Tamil Nadu and Karnataka, at Hindustan Coca-Cola Beverages, the bottling arm. Sumanta Datta, vice-president, bottling, and Bhupendra Suri, the VP for franchise bottling have been reassigned. Industry insiders say more such changes or exits seem likely in the coming months.
Sector experts point to the limited portfolio of the Cola major as a reason for its poor volume growth in the past two quarters. While arch-rival PepsiCo (which owns brands like Lays, Uncle Chips and Kurkure) gets a significant part of revenue from its vast ready-to- eat snacks products, Coke is heavily dependent on beverages. At a time when substitute products and health concerns over aerated sugar-based drinks continue to put pressure on their sales in the country.
Price increases have been a spoiler, too. Coke had to raise these in 2015 and in 2016, due to margin pressure and increased taxes.
The company is aiming to revamp its brands and portfolio in the year ahead. It recently got rising Bollywood star Ranveer Singh, in place of Salman Khan to promote its Thums Up brand.
Brand expert Harish Bijoor says this might help reposition the brand as a youth-oriented one. “Sale of cola drinks are driven by youth all over the world. So, it’s important to have a young face who looks fit. It also sends out a message that the product is consumed by healthy stars,” he said.