India can become 3rd largest market for Coca-Cola, says CEO James Quincey

Mumbai: India has the potential to become the third-largest market for Coca-Cola Co., said chief executive officer James Quincey, who is on his first visit to India after taking over the top job at the world’s largest beverage maker in May.

“The most immediate challenge for KK (T. Krishnakumar, president, Coca-Cola India and Southwest Asia) is let’s become No. 5 in the foreseeable future. In the end, my vision for India is that it will be one of the top three markets in the Coke system,” said Quincey.

In 2012, Coca-Cola had announced plans to invest $5 billion in India by 2020. “These investments are on track,” said Quincey, adding that the company will continue to invest in the country.

India became the sixth-largest market by volume for the maker of Coca-Cola and Sprite in 2015 after overtaking Germany, according to a company spokesperson. The company does not disclose contribution to revenue by region.

The US, Mexico, China, Brazil and Japan are the top five markets for the company in terms of volume, contributing 50% of worldwide unit case volume, according to the company’s annual report for 2016. The US contributed 19% of overall volume while the remaining four regions contributed 31%, said the same report. Individual breakup of volume contribution to the parent is not publicly disclosed.

Quincey is optimistic about India’s potential even as the company had a rough few quarters at the end of last year and the beginning of this year. The implementation of goods and services tax (GST) and demonetization hit sales in the country in the first half of the calendar year, according to a statement on its website. In 2016, India operations registered a mere 4% volume growth, according to its annual report.

Quincey’s optimism is based on the fact that the company’s India business has already started to grow after demonetization. “GST, demonetization are bold decisions. They are good news for the businesses that operate in India,” he said, adding that his company will innovate to adapt to the rules.

Also on the cards is adapting to changing consumer demands. In the past 15 years, the contribution of carbonated drinks has reduced from 90% to 70% of Coca-Cola’s overall revenue.

By 2025-2030 the contribution from carbonated drinks could further come down to 50% as it looks to participate in more categories.

“While brand Coca-Cola will be the heart and soul of the company, the company needs to become bigger than the world’s best brand, Coca-Cola,” said Quincey, noting that while it is a great strength for the company to share the name of its top-selling brand, it has also somehow limited the firm.

In India a decade ago, the company only had Maaza as a brand outside its carbonated soft drinks portfolio. Now it is increasing focus on non-carbonated beverages such as Vio (milk-based) and Zico (packaged coconut water). “Today we are the largest juice and water player in India,” said Krishnakumar.

To be sure, both the carbonated and non-carbonated soft drinks categories have been growing for the company. However, the non-carbonated drinks portfolio is growing at a faster rate.

The Atlanta-based company is also looking at reformulating its sugary drinks amid growing demand from consumers and government to have a more healthy portfolio as most countries face issues with obesity.

Quincey said Coca-Cola has been working around the world with three levers, whether it is “smaller packages or reformulation of some of our products or innovation in new products with lower levels of sugar”, adding that even in India, the firm is looking at these three levers to reduce sugar content. An announcement can be expected shortly from the India team on this front, he added.