Saturday, May 18, 2024

Coca-Cola to bet on rural demand for chilled drinks

Lucknow: Coca-Cola Co. is investing significantly in India along with its bottling partners, a top company executive said, as rural electrification and falling poverty open up new markets for its beverages in the country’s vast hinterland.

India is at an inflection point with its rapidly developing infrastructure, John Murphy, president and chief financial officer at Coca-Cola, said at a bottling facility operated by a local partner on the outskirts of Lucknow, Uttar Pradesh.

“The infrastructure development that’s taking place in a systemic way across India is a key driver. A specific point in the case of India is electrification, and how that has transformed the landscape not only in large cities and towns, but (also) in the rural parts of India; it’s extraordinary progress that’s under way,” Murphy said.

Rural electrification helps Coca-Cola sell cold beverages by installing chillers in stores. Murphy said digitization is another plank where India is leading some developed markets.

India is the fifth largest market for Coca-Cola globally, a market it re-entered in the 1990s, and where it sells brands such as Thums-Up, Sprite, Fanta and Limca, apart from Coca-Cola or Coke.

Murphy said there is “plenty of reason” to believe that India will continue to move up the global rankings.

Coca-Cola works with bottling partners who manufacture and distribute its beverages in designated markets.

In India, it also operates Hindustan Coca-Cola Beverages Pvt. Ltd, its own bottling business.

Hindustan Coca-Cola operates an estimated 25 plants in south, west and east India. In 2019, it announced plans to sell its bottling operations in four territories in north India to local bottlers.

Murphy said the company would continue to divest its bottling operations in the market over time.

“We are on record to say that our aim as a company is to focus on the things that we think we’re good at—that is building brands, being a good franchise partner with our bottlers around the world, and developing the ecosystem that we are so privileged to be at the centre of. So over the coming years, we will divest; we will do it in a very thoughtful and a very deliberate manner,” he added.

For Coca-Cola India, 2022 was the strongest year on record, top company executives said recently. In fact, multiple brands owned by the company also crossed the billion-dollar mark in terms of sales.

Murphy said a “flywheel” of development had been unleashed in India, and it promises tremendous opportunity for investors for many years to come. For the company and its bottling partners, this translates into ramping up investments on the ground. “When you have an economy growing, our industry typically benefits from economic growth…You have an emerging middle class that will be a huge driver of growth for the economy for many years to come. The progress that’s under way at the moment is enormous. For us, they are tremendous ingredients to the growth equation that we’re developing, and to manage that growth, you have got to invest,” he said.

Murphy said, “A lot of investment is under way. I’m reluctant to give numbers…but we are very confident that the growth equation for India will be in the top quartile in the world, and from there, we have partners who, along with the company, are willing to and are capable of investing in whatever it takes to stay relevant, and hopefully, have our fair share of the pie that’s been developed here.”

Murphy’s visit comes at a time billionaire Mukesh Ambani’s Reliance Consumer Products Ltd entered the fizzy beverages market after acquiring the Campa Cola brand and reviving it with new branding and distribution.

Murphy said new entrants validate the opportunity that exists in the country; Campa’s entry does not translate into a price war in the beverages segment, he said.

The author was in Lucknow at the invitation of Coca-Cola India.

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