 "Atul Singh")
In his first interview since taking charge as deputy president of Coca-Cola's Pacific group, Atul Singh talks to Surajeet Das Gupta & Sounak Mitra about the challenges in the Indian market and the synergies possible between India and China operations. Edited excerpts:
Now, you are responsible for two key markets, essentially the two largest populations in the world - China and India. Are synergies possible between the two?
There is a lot of potential. After all, the per-capita consumption of soft drinks in both countries is very low, though China is more evolved. China has a large research & development facility. In India, we have a small lab. We can develop a product in China and bring to India, tweaking according to the Indian taste or vice versa. There is a lot more innovation in Korea, compared to China. We can learn from that and bring the best practices.
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How do you plan to expand in India? You have a long way to go in penetrating all FMCG outlets. Do you have to cut prices further?
In India, we have covered two million big FMCG outlets. But there are about five million outlets in India. Over the next two-three years, we would like to be present in a million more outlets. Part of our problem is we don't have a Rs 5 or a Rs 3 product. For me, consumers need a certain quantity to quench their thirst. We can't go below 100 ml for a juice drink or less than 200 ml for a sparkling drink. So, we have certain limitations. And, packaging costs money. We also have returnable glass bottle. In some countries, we have 150 ml of sparkling drinks. But in India, we think 200 ml is the right pack. Otherwise, it will not be cost-viable, considering the double transport costs (bringing bottles back). For other FMCGs, it is just one-way distribution. For juices, we are trying 100 ml, priced at Rs 6-7. But I can't play in the sub-Rs 5 segment like other FMCG firms.
Would you have to set up more manufacturing facilities and reduce freight cost to the market to penetrate deeper?
We will be expanding horizontally, but by adding more lines to existing facilities. In some areas, we would be adding new factories, depending on geographies. Scale is important; we balance scale against transport costs.
Seasonality still plays a big role in your performance. This was evident in the volume growth in beverages you recorded in the first two quarters. It was poor in the peak summer season. Are you still over-dependent on the weather and the monsoon?
Yes, seasonality matters for us, as drinking habits, or the soft-drink culture, isn't there in India. It's a long-term journey. In markets where soft drinks have been present for a very long time, seasonality has less impact. About 60-70 per cent of the India sales volume is outdoor. However, the dependence on seasonality is declining. In 10 years, it would be much less. Surely, three-four months of heavy rains impact soft drink sales.
Is diversification the answer - new products like, say, dairy goods?
Diversification does help. But seasonality changes over a longer period.
You have always been conservative in terms of product launches. Except for new packaging sizes, one has not seen any new product from you in the market for a couple of years. Is that a dampener on sales?
There is so much to be done with our core products. It wouldn't make sense to launch 10 different products and invest in building those. Rather, we would stick to our core products, invest in those, and build scale. We've lots of products and we keep on testing those. We had launched our energy product 'Shock' about 10 years ago. That was too early.
In a country like India, it takes time for proper distribution in two million outlets. Even today, a lot of our products, such as Thums Up and Sprite, cannot record full distribution across the country. We would better push our existing products in more outlets and new outlets, rather than adding new products. We launch products that have the potential to be sold in a million outlets.
Would you tap the dairy product segment?
We are into dairy products; we aren't looking at that aggressively. It is a very small segment. It depends on markets. In Hong Kong, where the market size is small, we have a lot more products, as the market demands more options. We have launched these products, as these categories have developed.
As a beverage market, are there common factors between China and India?
India and China are two strategically important countries within the BRICS (Brazil, Russia, India, China and South Africa). But the per-capita consumptions in these two countries are relatively low. Through horizontal expansion, we need to increase per-capita consumption in both countries and get more people to drink packaged beverages, as urbanisation spreads. China is already getting into that phase and, slowly, India is being urbanised more. Considering the demographics in both countries and taking into account the huge young population, clearly there's a huge opportunity to be tapped.
There are also opportunities in terms of best practices. In China, we sell our products in about 3.5 million outlets; in India, it is about two million. Modern trade has already evolved and this will evolve in India as well. It is now moving from the developed world to the developing and to emerging nations.
Compared with India, we have more experience in dealing in China with global players, primarily modern retailers. We could bring some of those best practices from China to India.
There are differences, too. Some tastes and habits are different. Oranges are popular in China, while Mango is popular in India. The non-alcoholic ready-to-drink beverage packaged landscape is much more evolved in China, while it is still at a nascent stage in India.
