BW Communities

Why Did Coke Commit $5 Bn To Indian Market?

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[Since its re-entry into the country in 1993, The Coca-Cola Company took a little over 18 years to invest $2 billion (about Rs 9,000 crore) in India. During his recent India visit, Muhtar Kent, chairman and CEO, The Coca-Cola Company told the  media that the company would spend an additional $5 billion in India by 2020 (Rs 28,440 crore at current exchange rates).  The investment includes everything from refrigerated trucks to plant upgradation and marketing with bottlers chipping in with a part of the investment. Why does India take away an unfair share of investment in The Coca-Cola Company's scheme of things? If you go by The Coca-Cola Company's worldwide commitment along with its bottling partners to invest nearly $30 billion over the next five years, India takes away more than 10 per cent of that share. But when it comes to sales volumes, at a little more than 600 million unit cases of non alcoholic ready to drink (NARTD) beverages sold by the company in the country, India accounts for only 2.24 per cent of the 27 billion unit cases that The Coca-Cola Company sold globally in 2011. Kent justified the decision to spend in India by saying: "We are absolutely confident this is the right decision, given the vast growth opportunities here in India." What are these growth opportunities that he's talking of? If you consider the per capita annual consumption of The Coca-Cola Company's products, India sits at the bottom of the barrel with a per capita consumption of only 12 (That translates to one serving of about 240 ml per person per month). In China, that number is 38. In Kenya, it's 40. And the global average is 92. "All of this explains why we believe this business has near limitless growth potential," says Kent. Despite that low per capita consumption, India on the strength of its large population, delivers more volume to the company than say Turkey, South Africa or Russia that have per capita consumption numbers of 173, 247 and 73 respectively. In the Eurasia and Africa Operating Group of the company, where all the four countries belong, India contributed more to the volume share than the other three. Then, for the last five consecutive years, the Indian market has delivered double digit growth to Coca-Cola. The country which was placed 16th in terms of overall volume contribution to the company six years back is now the seventh largest market for the beverage giant. Kent says the India business aspires to be among the Top 5 countries by volume in the entire Coca-Cola system. As of now, India seems to be moving in that direction. In the last ten years, according to The Coca-Cola Company's estimates, India's per capita consumption has trebled from 4 to 12.