New Delhi: Coca-Cola Co.’s chief executive officer (CEO) Muhtar Kent said the world’s biggest beverage maker will invest $5 billion in its India business over eight years to expand capacity and improve its distribution network in Asia’s third largest economy.
“It represents an increase of $3 billion beyond what we had previously committed to investing in this market,” Kent told reporters in New Delhi on Tuesday. This was Kent’s first visit to the country since he became the chief executive in 2008 and chairman in 2009.
The beverage maker, which owns brands including Coca-Cola, Sprite, Thums Up, Limca, Powerade and Minute Maid, said the investment is based on its growth projections and goals for the country.
Continuing growth: Coca Cola chairman and CEO Muhtar Kent. Photo: Ramesh Pathania/Mint
The $5 billion investment will be used to upgrade bottling lines, distribution, marketing and logistics. “These will be investments across the value chain to capture the opportunity”, said Atul Singh, president and chief executive of Coca-Cola India and South west Asia.
Coca-Cola India, which currently ranks seventh worldwide in terms of volume, aspires to be among the top five nations by volume, said Kent, the 60-year-old chief executive of Turkish origin. Kent had spent three years studying at the American School in New Delhi in the early 1960s.
India’s demography, the large teenage population, urbanization, changing lifestyles and growing economy will be “huge drivers of growth” for the company, Kent said. Besides, the low per capita consumption of Coca-Cola products in the country also holds promise. Compared with the global consumption average of 92 bottles a year, Indians consume only 12 bottles a year, he said. “All of which explains, why we believe this business has near limitless growth potential.”
Responding to a query on the growing popularity of health drinks, Kent said that Coca-Cola offers more than 800 products that have no calories. “We have another 15% or so with medium to low calorie. All we can tell you is that the consumer decides (what he wants) and we can produce the right choices. We have active lifestyle programmes in every country that we operate in. We have to responsibly offer choice, products that have calories, medium calories, no calories and we responsibly label them,” he said. The company boasts of a portfolio of more than 3,500 beverages.
Coca-Cola will invest $30 billion globally in the next five years to “continue growth”, Kent said. Slowdown in the developed or emerging economies such as India and China does not disconcert him. “India is targeted to be in the top five markets for Coca-Cola globally and that will happen. I think it is wrong for all of us to just say that the world is slowing down and China and India are slowing down. Don’t forget that there is a law of numbers and as you go up, the options just get thinner. That’s the law of gravity and so what was produced in terms of incremental gross domestic product 10 years ago was a 10% growth and what is being created today at 6% growth is a much bigger number,” Kent said.
Sustainable growth is more important than growth that cannot be sustained, Kent said, adding that there were some issues with the world economy. Still, he said, the world was also a better place than it was 30-40 years ago with much longer life-spans, better well-being, cooperation among countries and a growing middle class.
In 2011, Coca-Cola saw a volume growth of 5% worldwide and sold nearly 27 billion unit cases. The company’s sodas volume rose 4% while products such as juices, juice-based drinks, tea, coffee and sports drinks rose more than 7%.