Atul Singh became president of Coca-Cola’s India and South West Asia business unit in 2005, when a lot of things were going wrong for the company. Controversy was at its height over allegedly high levels of pesticides in soft drinks; Coca-Cola faced accusations of overexploiting groundwater resources in the state of Kerala; revenues were down from the previous year; and not everything was running smoothly among the subsidiary’s senior management team. To boot, archrival Pepsi was gaining ground in the marketplace. Today, the story is different, according to Singh, who joined the company in 1998. “Coca-Cola in India over the past few years has clearly turned the corner,” he told India Knowledge at Wharton in a recent interview.
An edited transcript of the conversation follows.
India Knowledge at Wharton: Could you describe the businesses that make up Coca-Cola?
Atul Singh: The Coca-Cola Company is the world’s largest beverage company, [offering] more than 500 sparkling and still [non-carbonated] brands. Coca-Cola in India has a diverse portfolio of sparkling beverages including Thums Up, Coca-Cola and Sprite, and still beverages like juice drinks Minute Maid and Maaza, packaged water, tea and coffee.
India Knowledge at Wharton: For the first time since it returned to India in 1993, Coca-Cola India is profitable. Why did it take 16 years?
Singh: After re-entering India in 1993, our focus was to settle in and invest in brands, bottling infrastructure and local talent. In a short time, Coca-Cola India became the country’s largest soft drink company. In 2005, we did a complete assessment of our business, capability and portfolio and set an ambitious vision for the company in India [called “2020 Vision”]. There were changes in the management team. We focused on what we call the “manifesto for growth” and we aligned our system to six P’s — people, portfolio, partners, profit, planet and productivity. This renewed focus helped Coca-Cola India grow its business in a sustainable manner.
Over the past three years, we have made significant progress in building a locally relevant, growth-oriented and profitable business in India. We have delivered consistent growth in the past 13 quarters, with double-digit growth in eight of them and gains in market share across all categories. In fact, in each of the past four quarters, we have recorded more than 30% growth. We have generated revenues by focusing on the fundamentals of the business. Working in close collaboration with our bottling partners, we refocused investments and intensified execution.
We continued to invest in marketing initiatives around the quality and safety of our products and focused on bottling. Improvement in our route-to-market [operations] and organizational capabilities also helped.
India Knowledge at Wharton: Competition in soft drinks is fiercer between Coca-Cola and Pepsi than with other products. What makes the Coke vs. Pepsi rivalry worthy of so much attention?
Singh: While it would not be appropriate for me to comment on competition, I can say competition is good for both the industry and consumers.
India Knowledge at Wharton: How is the Indian market different from other markets you have worked in — the U.S., Africa, Eastern Europe and China?
Singh: India is a country of over a billion people with very low per-capita consumption of soft drinks. Physical infrastructure, too, is a challenge in India. An independent study shows that of the 120 billion liters of non-alcoholic beverages consumed in India, only 4% is ready-to-drink. Herein lies the opportunity. With increased urbanization and growth of the middle class, more people are getting introduced to ready-to-drink packaged drinks, which is very encouraging.
India Knowledge at Wharton: What are your strategies and targets for the Indian market?
Singh: Coca-Cola is committed to refreshing its consumers on an everyday, all-day basis. Our entire brand portfolio has been designed to satisfy the various mapped-out needs of consumers — hydration, energy, enjoyment or simply having fun. Over the past few years, we have further expanded our portfolio by launching Minute Maid Pulpy Orange [drink] and, more recently, our globally successful energy-drink brand Burn.Over the past decade, we have invested more than US$1.2 billion in India. In 2006, we announced additional investments of US$250 million over the [following] three years. We are well on track in making those investments in manufacturing, transportation, logistics and cold drink equipment — such as refrigerators — and consumer marketing.
Coca-Cola India has made sustainability central to its business strategy and practice. As a beverage company, water is the primary ingredient for our products, and we recognize it is a precious natural resource under severe duress. We have set a target of replenishing the groundwater we extract to produce our beverages — as a company, we want to achieve “water balance” in India in groundwater use.
We are actively undertaking rainwater harvesting projects in partnership with government departments, NGOs and local communities across the country. We have already installed more than 500 rainwater-harvesting structures in 22 states. Likewise, as a responsible user of PET [polyethylene terephthalate, a plastic resin] for product packages, we are working with industry associations, other corporations and stakeholders to evolve an end-to-end economic value chain for collecting and recycling them. We are working toward becoming one of India’s most-respected companies.
India Knowledge at Wharton: Coca-Cola in India started a price war and profitability suffered as a consequence. With hindsight, was that a wrong strategy?
Singh: The Rs. 5 [10-cent] bottle that we introduced was part of an affordability strategy. It helped the entire industry bring more consumers into the ready-to-drink beverage category. But rising input costs made it difficult to sustain that pricing for long and we had to increase prices. As elsewhere in the world, in India we follow an OBPPC [occasion, brand, pack, price and channel] strategy. It is all about selling the right brand, on the right occasion, in the right package, at the right price and in the right channel.
India Knowledge at Wharton: Does Coke still lag Pepsi in market share? Is it a problem to have two cola brands, including market leader Thums Up, which Coca-Cola bought from Parle in 1993? Can you ride two horses indefinitely?
Singh: According to independent market research, we have the leading brand in every category of the soft drink business, juices and retail water. Our dual-cola strategy in India has worked very well for us. We plan to strengthen both Thums Up and Cola-Cola, further enhancing our leadership in that segment.
India Knowledge at Wharton: Is it true that Coke tried to kill Thums Up but market demand didn’t allow it to do so? Will India always be Thums Up territory rather than Coke country?
Singh: Thums Up continues to attract the “Gen-Next” audience. Thums Up is possibly India’s most resilient iconic soft drink brand.
India Knowledge at Wharton: Globally, Coca-Cola currently has about a dozen US$1 billion brands and aims to have 30 in the next 10 years. Could Thums Up be one of these brands?
Singh: Having worked in the Coca-Cola system for so many years, all I can say is, anything is possible.
India Knowledge at Wharton: You recently introduced the energy drink Burn in India. Its market size of US$40 million is rather small. Your price of US$1.50 for a 250 ml, or 8.5 fl oz, can is rather high for the Indian market. Your last attempt — Shock in 2002 — was a failure and the product had to be withdrawn. What’s different now?
Singh: The mix Shock offered — the formula, packaging and communication — was well received by consumers. We did receive a positive response in the initial stages when it was sold through a limited number of premium outlets targeting a small niche audience. However, as we tried to build scale, we realized the market was not ready and decided to pull out.
India’s energy drink market is bound to grow rapidly as it has done across the world [16% compounded annual growth from 1998 to 2009] and hence we see growth potential for Burn. It is a highly differentiated brand, and has taken share from competition in many global markets.
India Knowledge at Wharton: What are your plans for bottled water and enhanced water brands?
Singh: The company is continuously evaluating its product portfolio to provide consumers with the right beverage solution for every occasion. Our flagship packaged water brand in India, Kinley, has done well in an extremely competitive segment. We plan to strengthen it. Last year, we launched it in more-appealing packaging that has been received well.
We are always on the lookout for new opportunities to expand our portfolio. At the appropriate time, we will consider getting into new beverage segments.
India Knowledge at Wharton: Coca-Cola has often been the focus of public protests — accused of exhausting groundwater resources, contaminating groundwater, contributing to climate change and having high levels of pesticides in its drinks, among other issues. In some respects, the company is the public face of “the ugly American.” Why is Coke always a target?
Singh: As one of the world’s most valuable brands, Coca-Cola does attract attention from all quarters. We are committed to growing our business sustainably and encourage dialogue with all stakeholders. The endeavor to achieve “water balance” specific to groundwater use is one example. Recognizing the need for climate protection and energy management, we are now placing energy-efficient coolers in the market, which consume up to 35% less energy than traditional coolers. We have also converted our distribution fleet in Delhi from diesel-run vehicles to [compressed natural gas]-based trucks. We have taken several other steps for environment preservation and community development.
India Knowledge at Wharton: Coca-Cola is perceived to be a stodgy player in India. The Economic Times says: “While rival Coca-Cola has struggled to connect with Indian consumers, Pepsi has done so with ease — a fact that is reflected by the success it has had in the marketplace.” Why?
Singh: Coca-Cola in India has clearly turned the corner. Over the last 13 consecutive quarters, we have delivered growth in unit case volume. To quote ET again, in December 2009, it ranked us among the top 10 marketing companies in India.