Here’s How Coca-Cola Plans To Make India Its Third Largest Market

With increasing per capita income, the demand for packaged beverages is growing exponentially in India. The per capita consumption of soft drinks in India is around 1/20^th that of the U.S., indicating the strong growth potential. The Coca-Cola Company (NYSE:KO) is looking to tap into this growth and the company is focusing on making India its third largest market (without a definitive time frame), up three notches from the current sixth position. Diversification into a wide variety of beverages is on the key focus areas for Coca-Cola to drive this growth in India. While currently carbonated soft drinks (CSD) account for nearly half of the Indian soft drink market, the fruit and dairy based beverages are growing at a faster pace. Between 2010-2015 the CSD segment in India grew at a CAGR (compounded annual growth rate) of around 13% compared to the nearly 28% number for juices. Health conscious customers and local flavors being introduced by juice manufacturers are the key drivers for this growth.

50:50 Split Between Aerated and Non-Aerated Drinks To Drive Growth

Coca-Cola plans to invest around $5 billion in India by 2020 and increase its portfolio of non-aerated drinks to attract health conscious customers. Currently around 70% of the company’s portfolio comprises of aerated beverages and by introducing more fruit and dairy based drinks Coca-Cola plans to bring this number down to 50%. Further, innovation around local flavors is another strategy the company is likely to adopt to grow sales. In December last year, the company launched a lemon flavored non-carbonated beverage termed “Aquarius” in India, under its “active hydration” category targeted towards young consumers who lead active lifestyles. Prior to this, the company had launched Vio, a flavored milk beverage in the country. In order to target the unorganized beverage sector in tier 2 and tier 3 countries in the region, the company launched “Kinley Flavors” a range of aerated drinks which is likely to be nearly 35-40% cheaper than its existing range of Coke, Sprite, and Fanta brands. Further this range is likely to be available in local flavors such as lemon and jeera. This is an attempt to break into the segment which is dominated by local brands which now command nearly 12% of India’s packaged aerated beverages market.

India is a growing market and holds strong growth potential for Coca-Cola. After dwindling sales in the region, it appears that the company’s new CEO James Quincey is looking to drive growth in India. Quincey’s key role is expected to be expanding Coca-Cola’s portfolio of beverages and this strategy can prove to be a winner in India.

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