T Krishnakumar, President, Coca Cola India & SW Asia, says the company is ready with several growth engines
The view from the large windows of T. Krishnakumar’s 16th floor corner office in one of Gurgaon’s skyscrapers is a bit stark. Similar skyscrapers all around in the ‘concretopolis’ shimmer in the harsh morning sun, making you want to reach for, well, what else, a chilled Coke. The President for India & SW Asia, The
How has this summer been for the company, given the impact of various factors such as a slowdown in rural demand, demonetisation and GST?
This year for us was more about preparation for the long term. Over the many years that I have been in the system, the importance of a (particular) season is coming down quite a bit because of two things: one, our own lower dependence on a season being the time when we do good business. And, two, the business is tending to flatten out as products such as juice drinks are consumed throughout the year.
We were a bit cautious ourselves this year due to the external environment and changes around GST. I would say the season was tempered by this approach which we had jointly decided on and taken with our trade partners. Having said that we are well-prepared and we should now see the year start to pick up.
With GST for CSDs at the peak, the tax structure looks loaded against you. Are you looking at hiking prices?
I would not completely agree that things are loaded against us. 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.
In terms of pricing, we are very clear that our job is to delight the consumer and ensure that every consumer gets value, so we are restructuring our portfolio. Would that mean some 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 consumers.
After witnessing tremendous growth for over 30 quarters, the past few quarters for the company have seen only single-digit growth. What’s on your agenda to bring back growth and push Coke India to be among the top five markets globally? (It’s sixth now).
We saw very good growth for almost a decade. We saw macro-changes, some of them linked to taxation and some to consumer preferences and tastes. One of the things we are working on, to ensure that we go into the next phase with an equally powerful growth engine, is to start broadening our portfolio.
Our CEO James Quincey has said to the world that we are going in the direction of what he calls ‘Beverages for Life.’ Our approach is how we can fill each drinking moment of an individual in a day. We will keep expanding our portfolio to ensure we cover these spaces. This will broad-base our business. We have been focusing on this strategy in the past few years. But now we will be doing it in an accelerated manner and believe our responsibility now is to get there as fast as possible while providing robust choice to the consumer. And, yes, our goal is be among the top five markets as fast as possible.
By when do you think you will go back to double-digit growth?
We have analysed all consumer trends. Ultimately, you get good growth only when you start positioning yourself directionally with the way consumer trends are evolving. That exercise, I believe, will take the next few quarters for us. As we do that we get the traction to start returning to it. I will not ever predict the time, as I am humble enough to know that the consumer is judge and jury. As the consumers see my alignment, they are going to decide when this growth will come. From my side, I am confident that we will get ourselves aligned and we will humbly wait for the consumer’s verdict.
Isn’t it a fact that the entire carbonated soft drink market is shrinking?
Globally, the non-alcoholic ready-to-drink (NARTD) beverage industry remains vibrant from a revenue point of view. It grew revenue 4 per cent (globally) over the last few years and is likely to keep growing at the same pace over the coming years. Growth is broadly spread across a range of categories. Sparkling remains the largest in terms of value and incremental value. In India, the sparkling business has not shrunk heavily. We have had a flattish situation possibly for 14-15 months. We believe there is a serious opportunity still, because we have not really penetrated in terms of the distribution. At the same time, we have to enlarge the portfolio to ensure we straddle all segments.
India has some 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 that by expanding this portfolio we will be adding more and more consumers. We 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 brands to straddle all the segments. So we are getting into greater segmentation and creating appropriate brands to carry the portfolio for that segment.
Your dairy brand VIO has not seen much traction?
It has been a pilot from our side in the dairy space. We are often judged at what we do over a short period. If I take the analogy of cricket, you start playing within your room, then you go out and play on the street with a tennis ball. Before you really play the real game, you spend five or six years preparing for the real game. Similarly, the VIO brand is at a very nascent stage. We are in the learning phase. Most times we learn the business by just seeding in things and seeing how consumers respond. When you go for a limited play in any segment, it gives you the ability to learn without spending too much; when you know you are in the right space, you scale up.
VIO is in that stage where we are really trying to find our niche with the consumer, because there are several players in the space. You will see a concerted and clear approach only in the next 12-18 months. We will keep trying in small pockets.
You are making a big push in fruit-based drinks in the Minute Maid brand?
I always believe that, in any business you do, you should link it to some stakeholder who will benefit from it; that’s how you link yourself to the economic engine of the country. Ten years back, I had taken up a project to work with mangoes and we have seen good success with Maaza. We worked with the farmers and helped them increase their yields. That was one of the concerns regarding the mango crop and continues to be a concern for every fruit in India -- that your yield per acre is not the best in class and neither is the yield per fruit. So when you use fruit juice as a raw material in a product you really don’t get the advantage of giving good value to the consumer at the right price.
But we have been able to grow our business in Maaza by five times over the last decade; the fruit buying has increased by four times. So it has been a 360 degree win, for the farmer and us. We have been emboldened by it. We have developed varieties of oranges in partnership with Jain Irrigation and, last year, we signed an MoU with the Government of Maharashtra on Orange Unnati. This year we have also launched Minute Maid Mosambi, with fruit locally sourced from Maharashtra.
As Prime Minister Modi had said we should add more fruit to sparkling drinks to help the farmers, we decided to buy oranges in Maharashtra and launched the Fanta Fruity Orange with 5 per cent juice; now we will increase it to 10 per cent. Fanta will come with juice over a period of time. All the juice for Fanta will be sourced from India over the years.
So we are focusing on the concept of a ‘Fruit Circular Economy.’ We will pick up fruits which have substantial cultivation and create raw material of it and put it in our products. We believe this will increase our fruit buying significantly. We will use it to add juice to the sparkling portfolio; enhance local fruit variants within our existing juice portfolio, launch a new range of value-added products, and export Indian fruits to the global system. We will make it a very important part of our existence. We are working on different varieties of mangoes, litchi, anar (pomegranate) and santra (orange).
What will be the break-up of your announced investment of ₹11,000 crore in five years?
In five years, of the ₹11,000 crore, about ₹6,000 crore is the incremental raw material and ₹5,000 crore will be spent by us and other partners to set up processing facilities, get yields up and increase bottling capabilities.
This article was originally published in BusinessLine on Campus