Coca-Cola doesn’t plan straight price hikes: India president T. Krishnakumar
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Mumbai: On Monday, Coca-Cola India announced an investment of $1.7 billion to grow its fruit and beverage portfolio and the entire ecosystem (from farm to table) over the next five years, starting January 2017.
Earlier in 2014, the company had committed to invest $5 billion by 2020. This investment is over and above that, says T. “KK” Krishnakumar, president, India and South West Asia operations at the company.
KK, who recently took over the role, was previously the chief executive officer of Hindustan Coca-Cola Beverages Pvt. Ltd, the company-owned bottler.
In an interview with Mint, KK also spoke about the implementation of the goods and service tax (GST) and getting back to growth after a year of tepid performance, which led to a top management shake-up less than a quarter ago. Edited excerpts:
Still, or non-carbonated, beverages such as fruit-based drinks contribute about 35-40% of your overall revenue in India. Does this $1.7 billion investment signify a larger trend of moving away from carbonated drinks?
For us, carbonated is growing. From our side, we will have a broad portfolio which will include every category that evolves based on consumer trends. How the mix evolves will be dependent on the consumer and what he picks up. We have sparkling, active hydration, we have made a foray into iced tea and dairy. We have already expanded our Minute Maid juice range from one variant in 2007 to 11 variants in 2017.
What will this $1.7 billion be used for?
Our business is now all about scaling up what we have been doing in the past 18-24 months, and we will also keep pushing more innovations.
Of the $1.7 billion, we will use $800 million to procure fruit-based ingredients and $900 million in infrastructure building. This will be co-invested by us and our bottling partners and processing partners.
What is the task at hand now?
The big advantage is that I have been a part of this journey for the past decade, along with whoever was at the helm at the business unit. I believe that we were working and we were learning. There is a whole lot of work that is to be launched. My role is to facilitate the acceleration of the pipeline of innovations that we have.
The possible advantage is that I have been on the execution side of the business; so I can really accelerate it. The big change, if at all, to the external world, will be the speed with which we will expand our portfolio in the next few years. It will be much faster than what it was in the past decade.
What caused the tepid growth last year?
For us, last year was all about learning and structuring ourselves. We continue to do that and are now executing some of the work from last year. This will take us back to our old levels of growth.
So, are you looking at double-digit growth?
We are in the process of still setting up ourselves. I don’t want to venture any guess on the numbers. But I know that it will be good growth.
With GST coming in, do you feel that it could be tough to get back to the double-digit kind of growth rates?
Let me dwell on this for two minutes. Are we disappointed?
Yes, a bit in terms of the rate.
The rate on sparkling is more than what we anticipated. We were of the view that it would be of the same rate what it is now. Also, the higher taxation on non-aerated sweetened beverages came as a surprise. But having said that, we are prepared to work and try to see what we should do to the hurdle of the GST rates and also give the consumers the right value.
Are you looking at price increases?
We don’t plan straight price increases. Our model is very complex. We use back-price architecture to give better price realization. At this point in time, we are not looking at straight price increases.
One of the reasons for muted growth was weak demand. Has that improved?
I always look internally. I believe we should be doing a lot more things and getting demand up. If we get our innovation funnel out in the market and go in a focused manner, there is a huge opportunity for us to grow. I don’t see this as a worry.
How important is India to the parent?
India has always been important to the parent. We are the sixth largest country in terms of volumes contribution. We will continue to be an important value driver for the system.