Mumbai: An average Indian consumer drinks a soft drink once a month and Coca-Cola may be twice a year on an average. And in times of a slowdown, even less. The two years of consecutive droughts then was more than an economic cycle, it was almost like a natural disaster, says a Venkatesh Kini, president, Coca-Cola India Pvt. Ltd on the sidelines of the India Retail Forum in Mumbai. Edited excerpts:
Are you seeing a recovery in consumer demand?
The last two years has been marked by two successive droughts that has harmed rural demand, especially farmers that combined with the worldwide slowdown, has dampened demand for all consumer companies.
We are seeing green shoots in the rural economy. According to some data I have seen the mood is shifting, and we are very optimistic thanks to the good or normal monsoon we are expecting a bumper harvest this year that will result in a good festive season.
What was the impact of the droughts on your categories?
What we saw is impulse categories as a whole did get impacted because it’s a discretionary spend. Low value impulse categories that are mass consumed like ours, they rarely get impacted by economic cycles. But the learning this time was it was more than an economic cycle; it was almost like a natural disaster of national proportions. With nearly one third of the country struggling with the drought, there was a lot of rural distress. Through our foundation we have observed it first hand—the impact it had on marginal farmers, especially those living off the land.
What did you do to remain relevant in the changing consumer environment?
The one thing we did was creating smaller packages. For instance, the 330 ml priced at Rs30 is for metros, five star hotels and modern trade. We launched a smaller size of 180 ml for Rs20. This resulted in more consumers being able to afford it. Similarly, we launched a small PET bottle of 300 ml for Rs20. So, magic price points and smaller packs worked well for us in maintaining our growth. In fact, we had a mid-single-digit growth in volume and double-digit growth in consumer spend in the recently concluded summer quarter.
What will be area of focus for growth in the coming year?
We see growth in the core portfolio and also in new products. We have accelerated the rate of innovation in the last couple of years starting with Coke Zero, launch of Fuze tea last year and variants of Minute Maid. We are expanding our footprint in the juice category. We are leaders with Maaza and Pulpy Orange and now with range of litchi, guava and mixed fruit we are expanding.
There is disruption happening in the beverage space with new companies like Hector Beverages Pvt. Ltd gaining rapid acceptance.
We feel India is poised to see an explosion of consumer demand for new and innovate beverage formats. A vibrant beverage industry will grow the market for everyone. Today the competition is not really any other company. The competition is things like chai, fresh squeezed juice.
Covering all that to packaged and hygienic solutions with modern manufacturing practices that is the opportunity.
Coke and Thums Up—What’s the millennial consumer drinking in India?
Coke only entered the country in 1994, so most of us went through teens and college years with taste of Thums Up and other drinks. So there certainly is more loyalty to Thums Up among the older generation. The younger generation is more globally aware and has greater awareness of Coke. But what we are finding is that both brands are growing. Even though Coke has been one of the fastest growing brands for is for the last five years. Thums Up continues to grow the reason is that there is an audience for the macho image and taste of Thums Up.
How is the Indian consumer responding to your global offerings like Coke Zero?
Within one year of launch in October 2014, it’s become a Rs100 crore brand. There is a latent demand for our international product portfolio. The challenge is to get to those consumers because they are thinly spread across the country. We are looking at modern trade, e-commerce, bottling partner Hindustan Coca-Cola (Beverages Pvt. Ltd) direct to home channel.
But the diet category has failed to take off...
Typically, people move to diet or zero when they want an option without sugar. But the consumption of Coke is so low in India. The average consumer drinks one soft drink a month and Coke once or twice a year on an average.
So, indulging once or twice a year you don’t mind the calories or the sugar. It’s only when consumption rises consumers look for alternatives without sugar.
Therefore, in India, this segment hasn’t developed very much outside of the metros.