Coke sees big India fizz; to pump in $5 b over 10 years

New Delhi: Beverages giant Coca-Cola plans to more than double its investments in India over the next decade.

The beverages major will pump in $5 billion (around Rs 28,500 crore) over the next ten years as it ramps up capacities in India, which is likely to be the world’s largest youth market by 2020.

Since its entry into India in 1993, when it acquired Parle’s soft drinks brands Thums Up and Limca, Coca-Cola has invested close to $2 billion.

The company operates on a “hybrid model” in India, running a mix of owned and franchisee-operated bottling plants.

Announcing the investment scale-up in New Delhi on Tuesday, Coca-Cola’s global Chairman and Chief Executive Officer, Mr Muhtar Kent, said India had “near limitless growth potential.”

The revised investment is “more than twice” the previously announced $2 billion for India, Mr Kent said.

Coca-Cola expects India to be among its top five markets worldwide by 2020, Mr Kent said, adding that the India story was one of “remarkable turnaround.”

Six years back, Coca-Cola had hit the nadir in India, with growth plunging and the company’s flagship brand buffeted by the pesticide controversy.

Mr Kent declined to reveal whether the new investments will result in a change in its product mix, away from flavoured, carbonated water to more of juices and other ‘healthier’ beverages.

But that shifts appears unlikely.

Mr Kent underscored the low per-capita consumption in India — an average of 12 units a year, or a bottle a month — in contrast to China’s per-capita average of 38 and Coke’s global average of 92 units.

Observers who track the sector closely said the company, unless compelled by legislation, is unlikely to look at diversifying the mix until consumption reaches close to the global per-capita average .

Coca-Cola India President Mr Atul Singh said sales in India grew at over 20 per cent last year.

Coca-Cola to take on Rasna at 5 price point

MUMBAI: Coca-Cola India is re-entering the Rs 300 crore branded powdered ready-to drink market after it pulled the plug on its Sunfill brand six years ago.

Interestingly, the global beverage maker has chosen the Rs 5 price point to make a comeback to the space dominated by home-grown brand Rasna. Coca-Cola will hitch a ride on its orange soft drink brand Fanta for its return. However, the company plans to test market the product before going pan-India.

India is the only market where the world's largest beverage maker is getting into the concentrate category with Fanta and only the fifth market where a powdered offering of any of its brands would be made available.

Confectionery maker Cadbury India , part of Kraft Foods , has also recently upped its ante with its Tang brand in this market. The orange flavour is also the largest segment in the powdered soft drink industry where Rasna controls over 90 % of the market.

Talking to TOI, Srinivas Murthy, director, marketing (flavours), Coca-Cola India, said, "We are targeting the consumer segment at the bottom of the socio-economic pyramid as we will introduce the product at an attractive price point. Even the retail touch points chosen for the product will be the traditional FMCG outlets where you do not need refrigeration to store the product the way it is for bottled soft-drinks."

Coca-Cola introduced the Sunfill brand in 2001 to take on Rasna but withdrew the product after four years. The company said it was ahead of the time then. After taking a timeoff, it now intends to use the learnings of its past venture for the launch of this new product-Fanta Fun Times. This was also the time when the 200 ml soft-drink used to be priced at Rs 5.

"The market wasn't ready then and the segment was yet to evolve to the level where a ready-to-drink as well as powdered offering for the same brand could exist," Murthy said. The company may look at launching more brands in this category if the script goes according to plan.

Fanta has 9% share of the Rs 9,000 crore soft drink market and stacks up below Thums Up, Coca-Cola and Sprite in the Cola-Cola portfolio. Along with rival PepsiCo's Mirinda, the orange flavoured drinks have a combined market share of 15%.

Coca-Cola is globally present in the powdered beverage market with brands like Eight O' Clock juice and juice drink in Philippines and the Sunfill brand in Hong Kong, Kenya and the US.

The Rs 5 entry level price point was first introduced by soft drinks makers in early 2000 but was raised to Rs 8-9 a few years later as it put strain on their bottomlines.

"For FMCG companies, these lowunit packs have been used as a strategy to build the brand appeal. They act like brand ambassadors even as they contribute a major chunk of volume sales," said Harish Bijoor, a brand consultant. The Rs 5 entry price point has been traditionally used by pure play FMCG companies to penetrate households in the lower income group seen as a large opportunity for marketers. Categories such as tea, shampoo, biscuits, chips, soaps have proved commercially viable for companies.