Coca-Cola India: Winning Hearts and Taste Buds in the Hinterland India Knowledge@Wharton
After a series of missteps during recent years, Coca-Cola India has had to learn lessons the hard way. In the process, says the company, executives had to recalibrate the old kinks in its supply chain and bust a few myths about winning over Indian consumers, especially in the country's highly promising rural markets. AFP/Getty Images
File Photo of a villager drinking Coke in Navallur village, some 85 kms south of Madras, April 23, 2004. Now, the beverages of the $31 billion multinational are back on the shopping lists of Indian consumers, and Coca-Cola India is reaping the rewards. At the end of last year, its sales volume grew more than 30% and it turned a profit for the first time since it returned to the country in 1993 after a 16-year hiatus, according to Atul Singh, who was appointed the firm's Delhi-based president and CEO of Coca-Cola India and southwest Asia in 2005. Much of last year's growth for Coca-Cola -- and its rival PepsiCo -- came from urban and semi-urban markets, but experts note that Coca-Cola's rural push helped it consolidate its overall market leadership. As in previous years, the tasks ahead for Singh and his team are clear. One of the biggest challenges is introducing a greater number of people to consuming beverages in a ready-to-drink packaged form, he says. That means getting its bottles of fizzy drinks to the right place at the right time at the right price -- a tall order in a country with such a vast hinterland like India. Cold Drinks, Hot Markets
The reality is that the consumers Singh covets most are in hard-to-reach rural India. "Coca-Cola must realize that the future of its drink will be determined in the countryside because that is where the consumers are," says Z. John Zhang, a Wharton marketing professor. "Today's farmer could be tomorrow's city resident; you better capture that market quickly." It's a similar scenario in China, a country that Zhang has studied closely, which also has an enormous untapped rural consumer market. Home-grown beverage company Wahaha uses "a guerilla marketing strategy to encircle the city from the countryside, knowing those people will become city residents eventually," Zhang says. "Wahaha also knows the rural markets are where Coke is weak," helping its own beverages gain a bigger share of China's soft drinks market than Coca-Cola's Sprite and Coke, and PepsiCo's Pepsi. As in China, the dream of capturing rural consumers in India is, of course, not Coca-Cola's alone. But as Coca-Cola and its rivals know, India is a market that makes neither distribution nor inventory management easy, and is hugely diverse in terms of tastes and buying power. Indeed, even established consumer-goods companies in India have covered only about a tenth of the country's 600,000 villages, according to Jagdeep Kapoor, chairman and managing director of Samsika Marketing Consultants, a brand marketing-services firm in Mumbai. Kapoor in the past was head of marketing for a number of popular drinks, including India's biggest cola brand, Thums Up, before Coca-Cola bought it in 1993. Depending on how you look at it, he adds, it's either good news or bad news that "you have the whole rural market up for grabs." Consumer-goods experts agree that one reason why Coca-Cola's India foray faltered after it re-entered the country was that it did not pay enough attention to refrigeration. In India, consumers – urban or rural – want a "cold drink" and not just a "soft drink," says Kapoor. "For the first three or four years [after its return, Coca-Cola] was grappling with whether it should focus on Thums Up or Coke, and refrigeration took a back seat." The key to the turnaround, Singh says, is that Coca-Cola India along with its bottlers ramped up its route-to-market strategy. Part of that meant a greater focus on refrigeration. In electricity-deficient areas, such as some of the hinterland in Uttar...
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