The Hindu Business Line : The fizz is back

Muhtar Kent, Coca-Cola Co’s worldwide President and Chief Operating Officer, was on a whirlwind trip to New Delhi last week. A couple of media interviews, a meeting with the Finance Minister, taking part in a panel discussion at the World Economic Forum’s India Economic Summit, keeping a dogged Delhi media at bay, participating in the inaugural of the Coca-Cola Foundation in India, a reiteration of the cola major’s commitment and a further $250-million investment in the country, a late evening interaction with Coke’s top bottlers, and then Kent was off in his private Gulfstream corporate jet.

For Kent, who celebrated his birthday in the short time he was in Delhi, it must have been a thoroughly satisfactory trip. Not only did he bring to bear the cola company’s renewed focus on the country after its image took a beating post the pesticide controversy and exit of high-profile senior managers a couple of years ago, he went back to the US to be anointed the CEO of The Coca-Cola Co to replace present CEO Neville Isdell next year.

Atul Singh, Coke’s India President and CEO, after a run-around at the summit and of the city during Kent’s 36-hour visit, is fairly relaxed the day after Kent departs. Post a panel discussion on supply chain issues at the Summit, where he was a panellist, Singh, in an interaction with BrandLine, is emphatic that Coke, among the world’s most valuable brands, has had a comprehensive makeover in the country. So, whether it is its new ‘little drops of joy’ campaign or its recently unveiled 5Ps strategic framework for India, or the Coca-Cola foundation with its focus on water and the environment, Singh says he runs a transparent ship. “I believe in engagement, that’s my style, I have had the privilege of working in many countries, in the US, China, Eastern Europe. There is so much diversity and working with people according to their ways is more acceptable; you have to adapt to their cultures.

“So, we are talking to NGOs, talking to people who in the past have been activists against us. My view is: I respect your ideology, and once you understand each other and respect each other you can do business. If you define the problem, we can find a solution together. I want to be transparent with all my stakeholders,” elaborates Singh, in response to questions on the controversies that dogged Coca-Cola earlier, such as the shutdown of a plant in Plachimada in Kerala for four years now, over charges of over-use of ground water, and the pesticides-in-colas issue.

So, in many ways Coke could well be getting it right in the Indian market. As a former Coke employee points out, “There is a cycle of ups and downs in every company’s life and now Coke’s is definitely on the upswing and Singh coming to head the company (he moved from Coke in China in September 2005) pretty much catalysed it.”

A leitmotif in Singh’s interaction with BrandLine is the phrase “inclusive growth” which, he emphasises, he believes strongly in. The ‘5-Pillar’ growth strategy, unveiled by Coke recently, takes a leaf from that thought. The strategy focuses on people, planet, portfolio, partners and performance, some Coke stakeholders and others where Coke has a stake in bettering itself, he points out. Under each of these heads, Coca-Cola India has unveiled various initiatives which it hopes will have a momentum of their own eventually. One of them is a school of retailing which Coke will midwife. Says Singh: “Retail is a big opportunity. There are millions of small stores, we want to work with them and help them. So if you have a kirana store and have a child who wants to get into retail, we want to offer a programme that gives modern techniques of merchandising. As retail trade evolves, they will have the right tools; this is about helping them in their business so they have the right techniques to help them evolve in a dynamic market.”

The model and structure are still at a concept stage but the contours that Singh shares are that it won’t be a conventional brick-and-mortar one but on wheels — vans will go to where the retailer is and impart these skills. “It will be piloted at one place and taken over. There are 10-12 million retail outlets in India, so there is a huge opportunity there for everybody,” he adds.

Coca-Cola, which has invested $1.2 billion already in India, has announced fresh investments of $250 million over the next three years. This, explains Singh, will go into creating fresh bottling capacities for new products, to execute marketing strategies, devise innovative distribution models, a result of which is creating new jobs for the entire value chain. Coke employs around 6,000 people directly and 1.5 lakh indirectly, he adds, but insists that the ripple effect of Coke on jobs as the largest buyer of mango pulp (for its Maaza), the second largest exporter of coffee from the country (for its Georgia coffee brand), and among the largest buyers of sugar, is much deeper. Chary of revealing actual numbers, Singh says the company has in the last five quarters seen double-digit growth. “We want to invest in our brands. It’s all about prioritisation, we believe in our existing portfolio there is so much of opportunity; today, there’s Thums Up in Delhi, six months ago it was not there, there are neighbourhoods in Delhi now where Thums Up is available,” says Singh, turning to Venkatesh Kini, Coke’s Vice-President, Marketing, in an aside, “We need to activate Thums Up in Chittaranjan Park!”

Clearly, he says, Coca-Cola India’s growth will be balanced between sparkling (Coke, Sprite, Fanta) and still beverages (juices such as Minute Maid, Kinley water, coffee). In the still beverages category, Coke’s focus will be on juices, water and ready-to-drink tea. “Sparkling is the bulk of our business and will remain so. But, as we broaden our portfolio it will be a good balance over time. We have a stable of 400 beverages around the world; the pipeline exists and we want to bring in appropriate products at the right time,” explains Singh. Except in water, where it competes with over 1,800 brands, Singh claims to enjoy market leadership in other categories of beverages.

Points out R. Subramaniam, Managing Director of discount retail chain Subhiksha, which stocks both Pepsi and Coke, “Coke was in the early days in a mood to trounce Pepsi in India — it spent aggressively to get back the first-mover advantage that Pepsi had. However, they struggled with a lot of bad moves — high-priced bottler buyouts, de-emphasising Thums Up and Limca and poor operational control and massive top-level churn,” Now, he says, Coke is seeing tighter operational control and the focus is on profitability rather than gaining competitive advantage over its chief rival Pepsi. However, as he says, “The category is clearly losing mindspace — it is not as salient as it was 3-4 years ago — healthy living and concerns about the effect of carbonated beverages have not been good for the category.”

A reason why both the cola companies are growing the fruit juices and water business. A former senior executive of a cola company, whom BrandLine spoke to, admits that the pesticides issues had a great impact on the cola category and fuelled a shift towards other flavoured drinks. “Now, colas are coming back slowly as both brands (Pepsi and Coke) are doing a lot around their corporate image and trying to win back consumer trust,” he elaborates. For Coke the other issue has been to balance its resources between two cola brands, Coke itself and Thums Up, which is strong in several regional pockets. With its new “little drops of joy” campaign, Kini says Coke has shifted its communication more in favour of 360-degree integrated communication. “So you will see us more out of TVCs, going beyond the 30-second TV ads — we are spending more on print, in-store, radio, outdoor, doing a lot of activities that are event-based.” The choice of celebrity will also depend on the brand. “We continue to leverage the three major passions: movies, cricket and music, and you will find that most of our major activations will be around these three.”

Brand consultant Harish Bijoor says Coke has rustled up its act together in India now. “I believe it is at the take-off stage after all these years of being the sluggish Number two in real terms. Coke and its imagery are just right for a connected India today. The nation’s population is young and Coke is indeed the young drink of the globally connected young person.” And Coke and McDonald’s are the true-blue image-boys of modernisation and globalisation. To this extent, embracing Coke for the young Indian is a no-brainer of sorts, he adds. Added to that, Bijoor is of the opinion that Pepsi has lost some of its early fizz in India as of now. “A company which used to be the innovator has today taken a wee bit of a back-burner space in terms of innovation.” So, Coke’s little drops of joy could well mean bigger things for the company in good time.

More Stories on : Beverages | Strategy | Brands

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
The fizz is back

‘Small retailers will benefit from our supply chain model’