‘Commercial beverages are going to explode’

Coca-Cola India has its task cut out for the next 20 years — get newer consumers to taste its products.

The country is a veritable goldmine for packaged beverages players, feels Sumanta Datta, vice-president - customer and commercial leadership, Coca Cola India.

Per capita consumption remains extremely low even though category sales have sustained double-digit growth over the last 17 quarters. In November 2011, Atlanta-based parent Coca-Cola had announced a $2 billion investment in India over the next five years.  As such, India figures among the company’s top 10 markets and it is working towards growing the category through modern retail and getting first time consumers with lower price points on a daily basis, Datta tells DNA in this interview. Excerpts:
 
How does consumption look? There’s talk of a slowdown in rural markets…
There is no slowdown. And for us it’s all about working to segmented execution strategy with our brands and our packaging. We don’t see any slowdown, we don’t expect any slowdown. When you look at rural markets, you really want to have a very affordable pack there so that consumers can try it. And we believe that Coca-Cola is an amazing product that drives people first time into the category and enables them to stay back in the category. The `8 offer is for recruiting new consumers into the category.
 
Is it a challenge to maintain low popular price points?
Though the Rs8 price point is an offer, to maintain a price point of Rs10 is a challenge. But that is also something we believe in. So right now, the 200 ml glass bottle looks perfectly priced. Going forward, in the next 5-10 years, we might have to innovate further to maintain the price point.

What innovations are possible?
Innovation could be in packaging. It could be smaller glass bottles; it could be a different form of packaging... all so we can keep costs under control in order to address pricing, because we are going to continue to recruit new consumers for the next 20 years at least. Even in urban markets where we feel we have to recruit newer consumers into the category, you will see that our coolers will have more of the lower priced products. In Breach Candy of Mumbai, for example, you will get much higher-end products going into the coolers, while outside, on the Thane-Pune road, we have a larger audience to recruit within the category so those will have many more glass bottles of Rs10 or Rs8. In rural markets, 100% of our coolers are only glass bottles and you will find very little of it in the middle of the city where people don’t want glass bottles but the convenience of a PET bottle or a can.

From glass bottles accounting for a major chunk of sales, has your sales ratio changed with demand for PET bottles?
As modern retail grows, as metros continue to rapidly grow, existing consumers graduate to PET. The ratio of contribution is still significantly in favour of glass bottles but changing as modern retail grows. PET consumption is growing much faster than returnable glass bottles, but the good thing is that returnable glass bottles continue to grow as well. 

Would you look at a price point like Rs5 that PepsiCo is using to cater to bottom-of-the-pyramid consumers?
We continue to evaluate. We have a few products there, but those are more for the social causes we are working on. We have a project for iron deficiency, which is a major concern in women and children. We have a product called Vitingo, which is a powder-based product that is given to women and children through our social network partners. We are not selling it yet. Bottom-of-the-pyramid is going to be a nice mix, but we are still looking at it. The product offering that we need to have here needs to be a little more developed compared with the regulars. 

How rural have you been able to go?
It varies from market to market, if you go to Punjab or Andhra Pradesh; we are available probably in every village. In Uttar Pradesh, Maharashtra, Madhya Pradesh and Bihar, we have got a long way to go. The real focus there is on expanding reach, while in a Punjab and Andhra Pradesh it’s about expanding our portfolio and range of products. There are different stages of development. Some of them (states) have done very well, actually hand-in-hand with the economic development in those states; in the others, as the economy gets better, we are able to increase penetration. 

Any innovation in distribution that the company is using to grow penetration?
We have through our R&D created the first solar cooler. In places where there is no electricity, we can’t sell Coca-Cola warm. The solar-powered environment-friendly cooler not just helps the retailer but also to use the power to charge mobile phones. We tested it last year in a village outside Agra first and have rolled out quite a few of them since. Though this will help us expand faster, it is just one part of the entire chain. Cooling is a solution at retail end; supply chain, where we do hub and spoke, and product innovation, whether in glass bottle or price points like `3 and `5, are factors that will enable the larger turnover from beverages. 

What kind of a balance do you expect to see between carbonated and non-carbonated drinks in your India portfolio?
Whether sparkling or juices, I think commercial beverages are going to explode. People will want to buy beverage than prepare it on their own, and all segments will grow. And why do I say that? Science. Biology. Two litres of liquid is what the human body requires every day. And if you are looking at all Coca- Cola products, the per capita is only 2-3 litre per year in India. Imagine the scope for development. It will also lead to rise in new categories. New drinks in the industry — energy drinks, flavoured water, sports drink, mixture of dairy and juice — are coming up because consumers want them. In India, the journey for most categories has just started. The focus on growing the category with modern retail and expanding the category base, and recruiting the consumers is something we are doing every single day.