Here’s How Coca Cola Is Looking To Revive Its India Business

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As the company struggles to grow in India, The Coca-Cola Company (NYSE:KO) is now looking at several initiatives to build a sales momentum in the region. For the July to September 2016 quarter the company reported a 4% year on year decline in unit case volume growth in the region primarily, due to slowing spends in rural areas and competition from healthier drinks in urban areas. Coca Cola is now looking to revive its sales in the region and recently carried out a significant senior level realignment in India. The company is also introducing more small packs for nearly half of its portfolio of products in the country to increase the frequency of consumption as consumers look for lower calories in each serving. To appeal to the health conscious urban population in the country, Coca Cola recently launched its beverage brand Aquarius in India, which is a low calorie non-carbonated beverage. This is the company’s first product in the nascent active hydration category in India, which is likely to drive significant growth in the coming years. Diversifying its product portfolio in the region will be key for long term growth, as the urban population in the country is shifting towards healthier beverages. However, with low penetration of carbonated soft drinks in the country, its rural areas still hold strong potential for growth in this category. According to Nielsen data in the past two years, the soft drink industry in India has seen a compounded growth rate in value of 11%  and a compounded volume growth rate of 5% CAGR.  India’s soft drink consumption is 1/20th that of the U.S., indicating the strong growth potential. While consumer preferences are shifting towards healthier beverages, 71% of the population still prefers carbonated soft drinks, making them the number one beverage in the country.

To summarize: In order to tap into this huge opportunity, Coca Cola’is introducing smaller cans, focusing on better management and alignment of its bottling units and introducing new beverages.  By these means, it aims to diversify its portfolio in the region, which should show results in the coming quarters. Soft drink consumption in the region is seasonal with a spike in demand during the hot summer months.  A strategy to make this consumption evenly distributed throughout the year through innovative products can help growth.

According to our estimates, its namesake brand accounts for nearly 25% of Coca Cola’s valuation and we expect higher volume growth in this segment to come from emerging markets.

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As developed regions such as the U.S. reach a saturation point for consumption of carbonated soft drinks, India is a growth market for Coca Cola. Initiatives to attract consumers in this market are critical for the company.  The company works to revive sales of its carbonated soft drinks through smaller attractively priced packages, it is realigning its business to build operating efficiency, while it diversifies its portfolio of products.  These initiatives should help the company to revive its sales in India in 2017.

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