Small packs at affordable prices will be a big growth driver: Venkatesh Kini, President, Coca-Cola India

Country's largest beverage company Coca-Cola India has been providing hydration and nutrition choices to consumers with a wide portfolio of sparkling and still brands. Ranked sixth globally in the Coco-Cola system in terms of volume, the India unit provides direct employment to 25,000 people, operates 57 manufacturing plants and has committed to invest $7 billion by 2020. The company distributes its range of products through a strong network of 7,000 distributors and over 2.6 million retail outlets. Venkatesh Kini, president, Coca-Cola India and South West Asia, in conversation with Ashish K Tiwari speaks about the company's product portfolio, consumption behaviour, distribution, new products, expansion etc.

Q. Between the brands being offered in India, how does the overall portfolio stack up?

A. We have seven brands viz. Coke, Sprite, Thums Up, Fanta, Limca, Maaza and Kinley (water) that are in the Rs 1,000 crore club. In terms of which is the biggest, all I can say is that they are all big brands and each of them are leaders in their respective segments.

Q. And how is the consumption behaviour looking like?
A. I'd say it is directly proportional to the population of the various states in the country. For instance, our Rs 2,500 crore mango juice brand Maaza appeals to consumers across all states. It's a brand that's 100% sourced and made in India, and is the leader virtually across the country. So states like Andhra Pradesh, Karnataka, Maharashtra, Gujarat, Uttar Pradesh, Punjab and Bengal will obviously have larger consumption versus the others.

Q. What are your plans in expanding the fruit juice offerings? How big are these brands today?

A. We have another brand called Minute Maid that stands for best fruit experience across all flavours. It is the world's largest juice drinks brand and we have been offering it in the Indian market for seven years now. While Minute Maid Pulpy Orange is the top selling orange juice in India, we also have various other flavours – apple, mixed-fruit, guava, mango, etc. While Maaza has been in the market for nearly 40 years now, Minute Maid has just completed seven. Our aspiration is to have Minute Maid become one of our Rs 1,000-crore brands in India within the next few years. I won't be able to give exact details, but I certainly can tell you that it is over Rs 500 crore as we speak.

Q. Lately there is more focus on health drinks by beverage companies. Will it be a major growth driver category?

A.Our entire portfolio of brands registered good growth. In fact, during our fourth quarter results last year, we announced double digit growth, which was driven by our entire portfolio i.e. carbonated drinks, juices and water. Today, non-carbonated drinks are about one-third of the business and all of them are growing double digit over the last eight years.

Q. The market has been abuzz with slowdown in rural consumption. What is your view?

A.Our observation, across consumer product companies, is that rural demand has been slow for the last 18-24 months. That's due to the two successive weak monsoons as a result of which income growth in rural India has slowed down and that has impacted rural consumption. We are optimistic about a possible reversal of this scenario this year. We are launching smaller packs at more affordable price points to deal with this situation in the market. This will ensure rural consumers will continue enjoying our products at prices they are comfortable with.

Q. Are smaller packs contributing to the larger portion of company's sales?

A. We have always had majority of our business come from smaller packs. The largest selling pack for us is the 200 ml returnable glass bottle. More than half the consumer transaction comes from that pack both for carbonated drinks as well as Maaza. In addition, we offer small PET and tetra-pack packages. So if you add all of it together, the majority of it is small packs at affordable price points because that's what the mass Indian consumer market needs. Small packs will definitely continue to be a big driver of growth. We will also continue to innovate in new ways to offer affordable, small, single serves to our consumers. That is to our mind the best way to have consumers enjoy our beverages.

Q. What changes are you seeing in the distribution area, especially with e-commerce playing a meaningful role?

A. We have pioneered a lot of internet-based distribution in India. When we launched Coke Zero in India, it was exclusively made available via an e-commerce partner for the first 15 days. We have partnerships with a lot of e-commerce firms to offer unique product experiences and first time offers through their respective platforms. Now, whether e-commerce will replace traditional distribution? We don't believe so. That's because the traditional trade or the small kirana shop will always be the one with widest reach and e-commerce, just like modern trade, will only add to the options that consumers will have. In India, even now and for the foreseeable future, the kirana or paan shop operators will remain a big driver of sales.

Q. You'd earlier talked about growing Maaza over two-and-a-half times by 2023? How do you plan to achieve it?

A. Even today, the average consumer in India drinks may be one packet once a month or once in two months. We think there is an opportunity to get more frequency. So if the consumer starts drinking once a month, that is one source of growth. Secondly, only 20% Indians would have tried Maaza even now after 40 years. So there is still 80% of India that is yet to be reached. That will happen when we increase the distribution and offer affordable small packs to the market.

Q. What kind of investments are you planning in the Indian market?

A.We have announced investment of Rs 30,000 crore for the period 2012 to 2020 for the entire portfolio of products. In fact, just in the last three years, we have put six greenfield factories across the country to produce juice, sparkling drinks and water. Each of the new factories required an investment of between Rs 100 crore to Rs 150 crore including land, building, equipment and manufacturing lines. In fact, at the recent Make in India event, we had announced another unit in partnership with Jain Irrigation. We have plans in place for many more in the coming years.

Q. Will it be possible to segregate investments brand-wise?

A. All the investments we make have the ability to support the entire portfolio. For example, when set up a new warehouse, it can store all our brands. So it's hard for us to separate investments behind each of the brands.

Q. You have also shut down three units…

A. It wasn't really a shut-down. We have 57 factories in the country. Adding to it, we have set up six new factories and are in the process of setting up four more. The new factories are more efficient and reduce the requirement of water, electricity, etc. The idea is to first maximise production in the new factories post which production is suspended temporarily in some of the older factories. And when demand picks up, we start production in these factories all over again.

Q. So with newer factories coming along, does that mean more older factories will go out of the system?

A. Not necessarily. In fact, once the factories get to maximum capacity utilisation, we will need to go back to the older factories. We retain the factory licenses there and continue to have staff employed in those locations. The machines are still there and ready to run at short notice. So the new support is really about our suspending production temporarily.

Q. Is there a specific tenure to that temporary suspension of production?

A. See, when you have that many factories, you are always balancing production. And remember, our business is highly seasonal in nature with more business in summer and comparatively less business in winter. So during winter, there are many places where we suspend production and put the plant through maintenance. It is more efficient for us to produce at one location in the state instead of four locations. That happens all the time. So it's not unusual, it's just that in some of these places we have said that we will have a longer suspension of may be a few more months.

Q. You recently forayed into dairy products segment.

A. Yes, we have partnered Schreiber Dynamix Dairies in the Baramati district for flavoured milk products under the brand Vio, which Schreiber is producing it for us. We have launched it exclusively with Reliance Retail and are hoping to scale it up gradually. We currently have two flavours viz kesar and badam and we will be launching more flavours. What will those flavours be and when will they be introduced in the market… I'd say watch the space for it.