Major policy changes, such as demonetisation and the roll-out of the goods and services tax (GST), hit beverage sales in the country said Coca-Cola on Wednesday. The volumes of the global beverage major fell 4 per cent in the March quarter this year, and its bottling operations declined in the quarter ending June.
“While we believe India has taken the right steps by modernising its monetary and tax systems, new policies have resulted in near-term uncertainties for retailers and consumers that impacted the beverages industry in the first half of the year,” James Quincey, chief executive officer of The Coca-Cola Company, told the firm’s investors in a conference call.
According to Quincey, the company’s operation in developed markets such as the US was up to the mark, but certain “regions around the world saw political instability and challenging economic conditions”.
“In all these instances we are responding to the volatile external environment and building strategies, which will allow us to add value for customers,” he said.
The government demonetised the old Rs 500 and Rs 1,000 notes, which then amounted to 86 per cent of the money in circulation, in November last year. It nearly brought the retail market to a halt. Most major consumer goods companies in the country bore the brunt of the note ban, as they lost sales.
Even before the impact of the note ban could dissipate, the GST was rolled out on July 1. This led to destocking of old inventory in June, and most distributors postponed purchases from manufactures, as they waited to understand the full impact of the new tax regime.
The Rs 22,000-crore beverage market in the country has been under stress, as sales of large scale organised players such as Coca-Cola and PepsiCo have witnessed a decline for several quarters in the past two years.
Coca-Cola’s volume sales, in fact, declined in six quarters out of the last 10.
Increased awareness about negative health effects of sugary drinks have been cited as a key reason for this. Quincey on Wednesday said the firm will increase focus on smaller packs and zero-sugar drinks in its key markets. India is the sixth largest market for Coca-Cola.