Coca-Cola India’s (Coke) second innings in India during the past 10 years or so has been largely uninspiring. In a country with one billion plus consumers and where the climate’s really hot Coke’s score card is somewhat miserable. Mounting losses, bitter battles with bottlers, fighting government officials, lacklustre advertisements mimicking its arch rival Pepsi cola’s style, frequent changes at the top – have all pushed the company to a corner. Even though Coke’s various other beverages have more than half the market share but its flagship brand Coca Cola remains at a distant third. It is embarrassing to note that at No.2 is Thums Up, a sweeter local cola that Coke acquired in 1993 and then proceeded to neglect it. Things started to look better only after the new CEO took over in early 2000 as the President and CEO.
The division’s new Vice President is collaborating with human resources’ head, to create a new system for managing the 51 bottling plants. Management trainees joining Coke can now aspire to run their own small enterprise soon. If the system works, Coke may adopt it globally.
When a portfolio of 10 brands includes three orange and two clear lemon drinks, you start wondering. But one thing is for sure: for a change, Coke is going to promote all its brands and above all Thums Up to crowd out Pepsi. Already, it is putting in place a new identity for Thums Up by associating it with adventure sports. Also, for the first time it is directly targeting Pepsi in its advertising campaigns. It is also stressing on ‘Indianizing’ its campaigns to directly sell the drink to the Indian customers.
Rules and codes are being framed to culturally integrate people who come from bottler companies that Coke has bought out. The company is now trying to create an Indian culture next year based on the feedback from the employees. Meanwhile the ranks of the top management, denuded by the exit of senior executives are going to be filled up again.
Coke had acquired a load of inefficiencies from the bottlers it had bought in terms of cost, structures, number of people on the rolls, procurements and so on. Indeed these plants were anything but state of the art with an average capacity to produce about 200 bottles per minute compared to Coke’s global standards of 1200 to 1600 bottles per minute.
Procurement: To begin with Coke started benchmarking its cost structure with that of its rivals. It consolidated the procurements of all the bottling plants. Before this the bottlers were buying inputs like sugar on their own. The company saved substantial amounts and made improvements.
Manpower Costs: A voluntary retirement scheme was put in place to get rid of excess manpower; inefficient plants were shut down, retailers were not given any refrigerators free of cost and the company went in for outsourcing transportation when its own trucks could not serve to the remote areas of the country.
Thums Up led the market in 1993 with more than 60% of carbonated beverage sales but then slipped to just 15% by 1998. After receiving the green signal to push local brands as much as possible, Coca-Cola increased the advertising expenditure and distribution for Thums Up and within a year it managed to make it India’s No. 2 soda.
In 2001, the marketing director launched a new 200ml size bottle that was sold for Rs. 5 and it aimed at the rural areas and the low income urban markets. The price of the 300ml bottle was also cut down to Rs. 7. The little bottle proved to be a mega hit which boosted sales by over 50 per cent by volume.
In 2002, after years of lacklustre ad campaigns, the Coca-Cola team settled on an advertising strategy that caught the imagination of the Indians. Breaking the Coke tradition they hired a celebrity spokesman who was none other than the Bollywood movie star, Amir Khan. The campaign equated Coke with the concept of ‘thanda’ which is the Hindi word for cold a commonly used generic term for any soft drink. Coke had to break a lot of its rules for India, in India, who quit Schweppes after Coke bought it in 1999. The 200ml campaign endorsed by Amir Khan paid off in a big way.
Coca- Cola (India) have every reason to celebrate after winning several awards for outperforming the dozen odd emerging markets of Coca-Cola worldwide in terms of volume, growth as well as profitability. Coke has finally managed to get everything right in India.