Coke's plans hold water

Neha Kaushik

High market share may not be a function of time alone. It is the strategy applied which makes all the difference. So proves Kinley, Coca-Cola Indias (CCI) bottled water brand in India, which has managed to garner a share of 24 per cent in the packaged water segment in a matter of a little more than an year. Says Sanjiv Gupta, Senior Vice-President, CCi, Instead of setting up manufacturing facilities for Kinley, we have tied up with existing plants and taken the contract manufacturing route for expansion. And thats the route the company is planning to take to facilitate future expansion of the brand in India.

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This strategy allows the company to save on both time and resources in the country, says a market analyst. In fact, this year Coca-Cola has managed to ink around 14 contract manufacturing agreements all over India. And it is now targeting increasing that number to 25 in the year 2002. By tying up with existing facilities, CCI has managed to score on the distribution aspect too, as the brand is now available throughout the country. And the numbers gave credence to Kinleys rising market share in India so far. The brand is already worth approximately Rs 25-30 crore in terms of annual sales. And Coca-Colas third-quarter results even mentions that its growth of 11 per cent had been led by the successful expansion of Kinley water into the convenience-driven packaged water category.

Meanwhile, the reason why Coke is so bullish about its water business is evident. Even though packaged water accounts for only around five per cent of the total ready-to-drink beverage market in India, its growth rate is the highest at 40 per cent. In fact, according to an industry analyst, the packaged water market currently estimated at Rs 800 crore is expected to grow to Rs 1,200 crore in the next two to three years.

However being a low-margin, high-volume category, it will take time before water starts making a substantial impact on the companys total turnover in India. Currently, the second-largest packaged water brand in the country (after Bisleri), Kinley has managed to take a lead over both Pepsis Aquafina and Nestles Purelife, which were launched about the same time. However, a Pepsi official says, We are not in a hurry to increase our market share. We are slowly and consistently building our brand through quality.

Pepsi is aiming to make its brand available throughout the country soon. The company has also ruled out entering the bulk water segment in India. Nestles Purelife, on the other hand, has been a slow-starter principally due to its weak distribution. So far, it is being manufactured only at one plant. However, industry sources reveal that Nestle may be working on a relaunch for the brand.

Meanwhile, the action is all in Coca-Colas bulk water business. The 20-litre bulk water packs are targeted at the institutional and the home segment, says Gupta. However, to garner market share in this segment, CCI has been acquiring the businesses of existing brands across major cities.

For instance, in Delhi and Pune, Coca-Cola India has finalised a tie-up with Nuchem Weir and Thermax Culligan Water Technologies respectively, after which the brands Krystal and Good Water were withdrawn. In Kolkata, a similar contract had been struck with Bisleris franchisee, and more recently with S.R Minerals in Chennai which was earlier marketing the Hello brand in the city. Next in line is Hyderabad where Coke has again inked a contract with the distributors of the Hello brand. It is also setting up a manufacturing plant through a tie-up with the Mittals Himjal Beverages to manufacture Kinley in the pack sizes of 500ml, l-litre, 2-litre, and 25-litre jars. Coca-Cola is providing financial assistance and technological knowhow. Production at the plant is likely to commence in the next two months.

Coca-Cola is now planning to introduce its bulk water business in Ahmedabad by taking a similar route. And the market shares for the bulk pack segment reveal that the companys strategy is working. For instance, reveals Gupta, the market share for the bulk pack segment in Delhi is already upwards of 20 per cent. While the figures for the other cities are: 15-20 per cent in Mumbai, 50 per cent in Kolkata and around 40-50 per cent in Chennai.

Coke believes that another thing that has worked for it is the brands positioning and advertising. According to Gupta, the brands positioning of trust and purity will be maintained.

With these initiatives, the company is aiming to garner a market share of 40 per cent by the year 2002. We are aiming to be either number one or a close number two within a year, says Gupta.

Coca-Cola India is now readying to enter other beverage categories in India. The company may be launching products in categories such as ready-to-drink tea, coffee, milk, juices, sports beverages and so on within the next one or two years. It has already made a foray into the energy drinks and powdered drink segment with Shock and Sunfill respectively.

Currently, tea accounts for around 69 per cent of the non-alcoholic commercial beverages in India while milk accounts for 15 per cent. However, it remains to be seen whether Coca-Cola India adopts the Kinley strategy for its new initiatives.5