‘Transition is to become a total beverages company’

06-10-2017

Having witnessed flat sales due to factors such as Goods and Services Tax (GST) and demonetisation, Coca-Cola India is gearing up for growth phase. Its newly-appointed president T. Krishnakumartalks about the roadmap and challenges among other things.

You have been with Coke for long. How challenging is your new task?

While I am new to Coca-Cola India Business Unit, I’ve been in the Coca-Cola system for quite some time. I have been leading the company-owned bottling unit, Hindustan Coca-Cola Beverages, for over a decade. So, I am not completely new to the business, but yes, I am new to this job.

Basically, my thought process is very simple. In the past, we have seen good growth for many years. In the recent past some macro-economic factors did create a bit of a slowdown in our business. However, I think we are now over all of that and poised for growth. My responsibility is to facilitate the acceleration [of] a lot of initiatives that have been started a few years back to reach next level of success.

Can you elaborate on your new approach?

At a global level, there is a new strategic direction given by our global CEO James Quincey.

We are evolving into a company that can provide ‘beverages for life.’ We will continue to focus on our consumer-centric portfolio. The idea is to have a portfolio and not just a collection of brands. That’s going to be my big role now in working with the team to ensure that we move the company quickly in all the spheres.

What kind of transition is Coke going through?

This transition is to become a total beverages company by enhancing our offerings to the world. We will continue to focus on our consumer-centric portfolio. Brand Coca-Cola will always be the heart and soul of The Coca-Cola Company but the company is much bigger than the core brand. I believe this transition is a very positive one.

What are your short and long-term priorities?

Both would be to give best choice for the consumers and in India, we will localise these choices. The second priority is to create a ‘Virtuous Fruit Circular Economy’ of sustainable agriculture (horticulture), a Coca-Cola India’s flagship initiative by using a variety of Indian fruits in its beverages under the juice and aerated drinks categories. Through this initiative The Coca-Cola Company, its bottling partners and its fruit suppliers and processors in India, will contribute over $1.7 billion in the agri ecosystem of the country over the next five years, spanning the entire supply chain from grove to glass. We believe this is a transitional initiative which will make us an important stakeholder in the Indian economy.

Were you affected by demonetisation?

We had a short-term slowdown in demand because of lack of liquidity with customers on account of demonetisation since most of our consumers buy our products at small stores. We actually used this as an opportunity to introduce digital payments and e-payments through a partnership with SBI.

Did cola majors witness a slump in Tamil Nadu sales last year?

Yes. It was due to a call by Tamil Nadu traders to boycott soft drinks. It was a learning for us and we are now more aware and making efforts at communicating on the role we play in enabling the local community.

While there is a much better appreciation and understanding of the role we play in the local economy, we are also making all efforts to connect better with the State.

We are evolving into a company that can provide ‘beverages for life’

How was your growth in the last few quarters?

We had a fantastic 10 years and grew very well. Last few were flattish but I believe that every company has the process of renewing it and now we are in it. This year for us was more about preparation for the long term.

However, we believe there is serious opportunity that exists simply because we could penetrate a lot more in terms of distribution. But at the same time, we have to provide larger choice to the consumer to ensure that we are present across all segments.

India has close to 800 million consumers who are not exactly middle class, and another 450 million who are middle class, and then you have 50 million people who are very affluent. We believe by expanding our portfolio we will be recruiting more people into our portfolio. We also believe our sparkling portfolio will grow. But to grow faster we need to have a larger portfolio and we don’t want to use the same offerings to cut across all segments. So we are getting into more segmented portfolio approach.

We are well-prepared and we should see the year now to start picking up.

Besides, cola producers were prevented to draw water from Thamirabarani river. What is the current status?

That was under litigation. It has been sorted out and the matter has reached a suitable conclusion. We usually take water from SIDCO which is an industrial association and follow all rules and regulation. So there is no issue as such.

People are now getting more health conscious. In this scenario do you think your goal of increasing the number of customers can be achieved easily?

I must first state that none of our beverages are unhealthy. What we provide is choices, for different occasions and different priorities. Some of our products are indulgence, some others are nutrition, some provide functional benefits etc. We will play our part in offering choice and shaping choice but eventually, it is for the consumers to decide. We believe there is a serious opportunity as there is a lot to penetrated in terms of the distribution. At the same time, we have to enlarge the portfolio to ensure we straddle all segments. We believe that by expanding this portfolio we will be adding more and more consumers. We are getting into greater segmentation and creating appropriate brands to carry the portfolio for that segment. As far as sparkling beverages are concerned, there is room to grow.

Was there a price raise due to Goods and Services Tax?

We have our own ways of managing these sorts of situation. We call it the OPPBC (Occasion Brand Pack Price and Channel). We always have to ensure that the consumer gets the right value. We can’t straight away jump into a price hike. We have to ensure that the consumer sees much lesser impact. In terms of GST, it’s a great thing and it improves agility, while ensuring that we can go from anywhere in India. It’s now a unified large market. But, having said that, we would have perhaps been better off if the tax was slightly lower.

What are your views on taxing aerated drinks by 40%?

Am I disappointed with a higher tax rate for a certain part of the portfolio? Yes, everybody likes to have favourable taxation. We believe GST is a great legislation, which will give us a lot of efficiencies and a lot of freedom to operate. So we see great opportunities coming out of it. But I am a person who respects decision taken by any government. I manage my business with taxation.

Would that mean a few pricing changes on a few packs or brands? Yes. But at the same time would there be value offerings that will offset this pricing? Absolutely yes! So you will see us emerge in the coming months with a very balanced portfolio which addresses the needs of all kinds of consumer - from a consumer who is at the bottom of the pyramid to a consumer who is affluent. So we will ensure everybody gets a high quality product at a price they can afford.

What is your global standing vis-à-vis competition?

India is ranked sixth in terms of volume sales in the Coca-Cola system. We would like to see India as the fifth largest market in the near future. As our global President and CEO, James Quincey recently announced, in the longer term, India has the potential to be amongst top three Coca-Cola markets worldwide,

Your market share in India?

We want to be a significant player in India. We are the leaders in non-alcoholic beverages. We are not at liberty to give the exact numbers.

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