Is the trade war for real?
In terms of trade disputes though, there is no perfect trade agreement out there, so it could always improve.
But from our company’s point of view, the reality is that in terms of global companies, the brand is ultimately a local business. The cokes in India remain in India. The coke in China remains in China.
The coke for the US is made in the US. So, when there are trade disputes… it tends to flow more through indirect consumer channels. So, if the trade dispute reduces overall consumer demand, it is less money in the economy and, eventually, that will flow through us.
But I don’t think we are in the centre of the dispute because as we are slightly insulated from the global kind of disputes.
The nationalistic fervour is stronger than ever and companies continue to turn inwards; so as a multinational how do you do business?
The global political environment tends to impact the global economic environment and how it progresses. But as our business is really so local, in terms of the manufacturing production, that’s where we are investing.
So, we have a perspective that we have been into these countries.
We have been there for a long time, we are there now, and we are going to be there long into the future. So, it is about how we adapt the business in each country to the local circumstances and the best decisions for that marketplace.
Clearly, the world looks a little more volatile and noisy now than perhaps it did pre-financial crisis. But, over the 150 years, there have been some bigger ups and downs, in the Coca-Cola Company, and I think we have always focused on saying that, look, we can have local businesses that celebrate local difference and local characteristics and still be part of the global community...
And you’ve also said that you want India to be in the top 3 markets?
How will you do that?
I think, absolutely, the vision for India continues. In volume terms, it is 6th at the moment and probably will be 5th by the end of this year. So, we think there is a lot of potential for the local business in India to grow to get into the top 3.
Obviously, there is a large population in India but it is about building the local businesses. One of the things, the component of that portfolio, will grow…
The business will not be just sparkling but also fruit drinks and fruit-based drinks… where really it is about clarity of saying the chances of being successful are if we can tap into a lot of the local fruits and a lot of the fruits that people know.
You are not going to decide on what fruits and fruit drinks people drink from one place in the world with however much information you have.
So being able to develop and sell such drinks—whether it is mosambi or any of the other local fruits - is clearly a part of providing a portfolio of beverages that people want because today they might be able to squeeze it, but when it is not in season, they don’t get it. And so, we see the opportunity and value around, which will benefit the consumer.
Why is there so much of reservation against snacks? Why are you not in that segment? Indians love snacks.
Indian love snacks, Indians love lots of things. Indians love cricket but that does not mean that I should start a cricket team. I think the reality is, seeing an opportunity, you also ask yourself a question, why is it that I am gonna win? What is it about what I know? Or the business system we have, that will allow us to be the most successful in addressing the opportunity? And the reality is we are a beverage business and other beverages are clearly much easier for us to do. We are clearly more about them and we have a business system that is more able to manufacture, distribute, sell, market and make them interesting than entering other food categories.
So, you probably have heard me say ‘never say never’, but it is just not the most logical next thing to do.
Do you see a future for Costa Coffee in India?
Clearly, the Indian marketplace is more tilted towards tea and other beverages. I think there is long-term potential for coffee. Is it going to happen overnight? I don’t think so.
If you had to identify three growth areas for India, what would they be?
Sparkling beverages is going to continue to grow in India. There are global brands and there are great Indian brands in sparkling— Thums Up is one of them.
They really have long-term potential to keep growing. Sometimes, we talk about drinks in the fruit category and people think we are going to abandon them. No, it is a portfolio approach.
There is great potential for sparkling beverages to grow with people who are just entering into the disposable income, the lower-middle class, and competing more in this space.
And other is to enter into some of these other categories with innovation, whether it be local innovation like Minute Maid Colors or imported ideas from around the world like Smart Water. Innovation is going to be the third pillar that is going to drive our ability in the business. Some of them need to be premium and some of them need to be entry point products.
You have spoken about cost optimization and changing the culture at Coca-Cola, where you want the company to take more risk. What do you mean when you say that?
If you go back 10-20 years, your marketing campaign consisted of making a few commercials and given that there were going to be a couple of commercials, it logically made sense to perfect that ad. Because you are only going to make 2-4 ads. So, you spend a lot of time perfecting.
While fast forward 20 years, Instagram photos are going out every day. If you spend days, weeks and months trying to perfect it, you would’ve lost the moment. It is much more instantaneous. Rather than spending all our time to perfect things in research, let’s just test.
In the past, we took months to research a product. Now, you can design a product, develop it and test it in the marketplace and see what the reaction is. It is not just about crazily taking more risk, it is about driving and learn faster and make the service better at a much faster pace than we would do in a set piece that take a really long time.
But isn’t cost optimization strategy in contrast to what you are saying?
No. If you iterate then the first test is much cheaper. If you spend months or years, then do a big-bang launch and then it doesn’t work, you’ve wasted a tremendous amount of money. Whereas if you design something and test it small-scale in the marketplace, if it doesn’t work, you spend far less money and if it does work, then you can learn quicker, then you can optimize it.
The other part of going through cost optimization is going through refranchising in other parts of the world and have a small head office. When you have a small office, there are less people and decision making is faster, which helps in cost optimization.