Mumbai: Coca-Cola Co. plans to invest $250 million (Rs1,040 crore) and enter into newer categories to boost operations in the Indian market.
“We will be spending around $250 million in the next three years for setting up of infrastructure and strengthening sales and distribution activities,” said Venkatesh Kini, vice-president, marketing, Coca-Cola India.
India has been one of the most difficult markets for Coca-Cola, where it managed to achieve a breakeven just last year. The cola major had re-entered India in 1993 after a gap of 16 years and, in the past four quarters, has started growing sales with the latest quarter sales up 12%. Now the company is betting big on India and plans to introduce brands from its parent company’s portfolio and expanding its newer segments.
Venkatesh Kini, vice-president, marketing, Coca-Cola India; Atul Singh, president and CEO, Coca-Cola India and Prasoon Joshi, executive chairman and regional creative director, South and South-East Asia, McCann-Erickson, at a press conference in New Delhi on Friday
“We are anticipating the future needs and exploring a wide range of products such as flavoured water and teas. The company is also evaluating getting into categories such as energy drinks, sports drink and juices,” said Kini. Coca-Cola recently acquired US vitamin water maker Energy Brands Inc. (aka Glaceau) for $4.1 billion to boost its lagging position in the race to dominate the fast growing market for non-carbonated drinks.
With an aim to boost the relatively slower growth of carbonated drinks (at 6% annually) in India, the cola major also announced the launch of Indianized drinks, such as aam panna, and the roll-out of its juice brand Minute Maid (present only in South India) across India. With these launches, the company will compete with its archrival PepsiCo India Holdings Pvt. Ltd in the non-carbonated drinks space. Earlier this year, Pepsico India announced its plans to launch traditional drinks such as nimbu-paani, aam-panna and several milk-based drinks over the next three years, besides adding new variants to its existing juice line-up under the Tropicana brand.
According to Datamonitor, a UK-based consumer research company, the carbonated soft drinks segment, which accounts for the bulk of the revenue of both companies, grew at a compound annual growth rate of only around 1% between 1999 and 2006. An analysis by the agency revealed that the soft drinks industry in India, which includes carbonated soft drinks, juices, water and other drinks, grew 6% from $3.15 billion in 2004 to $3.34 billion in 2006. Of this, the carbonated segment grew from $1.31 billion to $1.32 billion.
“Emerging markets, such as China and India, are expected to perform well and stimulate Coke’s sales and profit growth”, according to a recent report by A.G. Edwards & Sons, Inc., a US based brokerage firm. However, “continued weakness in carbonated soft drinks (greater than 80% of Coke’s volume) is a risk” to Coca-Cola’s valuation, said the report. Coca-Cola India also said that the parent company would seek India’s help for global services in area such as engineering, finance, marketing, and technical research and development. “India is already one of the sourcing hub for talent and back-office operations and we plan to take it further,” said Kini. Also on the company’s agenda is setting up a retail university in India, primarily for the unorganized retailers such as local shopkeepers and paanwallahs.