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Coca-Cola India on Friday said that along with its bottlers, it will be investing $300 million in capacity building over a period of time. The company’s home grown brand Thums Up has now become a billion-dollar brand. In 2022, the beverage major will be stepping up focus on innovations, rural markets and the e-commerce B2B channel. In an interview with BusinessLine, Sanket Ray, President, Coca-Cola India and Southwest Asia, said that the company will focus on smart experimentation to get more effective innovation and focus on strategic bets in the emerging categories. Excerpts :
How have recovery trends panned out in the past year and how critical will the upcoming summer season be?
We have reported a 30 per cent growth in transactions in Q4 (October-December 2021 quarter). We are also growing at double the industry growth rate in terms of revenue. The good news is that some categories and brands have seen growth over 2019-levels. We are in a very good space of creating a stronger foundation and moving forward. We feel that we are emerging stronger in terms of share gain, margin expansion and other parameters.
In the past year, we decided to put more marketing money in H2 compared to H1 .Now, while the first half of the year contributes about 55-60 per cent to our business, the contribution of the second half of the year is closer to 40-45 per cent. So the summer season is not the only quarter we will be depending on. Our focus on growing at-home consumption penetration during the pandemic and putting more marketing money in H2 is helping us de-seasonalise our business. We did similar experiments in smaller markets in the South West Asia region and last year, we reached our ambition of having equal H1 and H2 contribution in these markets. We believe we can achieve a similar goal in India.
In terms of portfolio expansion, what will the strategy be?
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Over the last few years, there has been the emergence of new categories and white spaces where we have not taken a bet. So, one of our strategies will be to focus on rolling out new products in the white spaces. For instance, we are adding the new flavor of Aam Panna to the Maaza portfolio. We are also taking our jeera-flavoured sparkling drink RimZim national and are looking at the sports drink space. We have already launched Coke Zero Sugar in December. In line with our “Beverages for Life” strategy, innovation will play a key role. Broadly, we expect between 15-20 per cent of growth to come from innovations going forward. We are going to do smart experimentation to get more effective innovation.
There have been concerns about rural demand slowdown. What is your outlook for rural demand?
Last year we added nearly 600,000 new outlets as a part of our distribution network expansion strategy. Of this, nearly 400,000 outlets are in rural regions. We are also reinvesting in returnable glass bottles portfolio as during an inflationary environment, the glass bottle portfolio sees the least impact. Due to pandemic-related challenges, we stepped up focus on urban markets last year. But this year, we are gearing up for a stronger focus on rural markets and as the segment picks up again, we will ride on that momentum. We are already seeing green shoots in terms of rural demand.
What measures have you taken to tackle inflationary pressures?
We expect inflationary pressures to continue. We are taking various measures to manage costs. For instance, we are strongly leveraging on our innovative ASSP (affordable small sparkling package) technology which helps reduce plastic usage in the production of plastic bottles for sparkling products. We are also using revenue growth management tools to adjust to inflation. We are working around the pack mix such as renewed focus on glass bottles to manage these inflationary pressures.
How is the e-commerce channel growing for the company?
We are focusing on a strong omni-channel presence. We have taken the lead position in having strong partnerships with all the e-commerce players. We are also strengthening our partnerships with B2B e-commerce players to drive distribution using the digital channel. The e-commerce channel is still a small component for us but we are witnessing strong growth. We have in fact set up a dedicated team in place to manage our top 50 customers directly across QSR, modern trade, eB2C and eB2B.
Are you looking at divestments of company-owned bottling operations?
At this moment we are not looking at any changes in the current structure.
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