Coca-Cola India bucks FMCG slowdown trend

Reports double-digit sales, net profit growth rates for 2014-15

A demand slowdown has jammed the engine of growth in India's fast-moving consumer goods (FMCG) market, but the domestic subsidiary of Coca-Cola, the world's largest maker of non-alcoholic beverages, seems unaffected. The company has bucked the slowdown trend by reporting robust net profit and sales growth for 2014-15.

Statutory filings by Coca-Cola India Pvt Ltd, the unlisted subsidiary of the Atlanta-based parent company, show growth of 43 per cent in net profit and of 22 per cent in sales in 2014-15, compared with those a year earlier. This was at a time when the Rs 3-lakh-crore domestic FMCG market registered its slowest growth in a decade, at 7.5 per cent, a level close to 2004-05.

The rate of Coca-Cola India's 2014-15 net profit growth was its highest in three years, while its net sales expansion was the most in four years.

In absolute terms, the company's net profit stood at Rs 509 crore, against Rs 355.5 crore a year earlier. Its net sales during the year stood at Rs 1,818 crore, against Rs 1,492 crore in 2013-14.

Coca-Cola India includes in its numbers all activities except bottling operations, which are part of another unlisted entity, Hindustan Coca-Cola Beverages. The latest financials for Hindustan Coca-Cola Beverages are not immediately available.

India remains critical to the Atlanta-based Coca-Cola's global scheme of things. The reason: The Indian unit had in 2014 overtaken Germany to become the sixth-largest market by volume sales for the parent company; the plan now is to make it the fifth-largest. The company had articulated this plan in 2012 while committing itself to investing $5 billion (Rs 30,000 crore) in the country. Venkatesh Kini, Coca-Cola's president for India and South West Asia, had told Business Standard in an earlier interaction that the company was tweaking its India strategy in line with market trends.

"Premiumisation is one such consumer trend that we are seeing," he had said. "Economic growth in the country and the creation of a wealthy, urban class of globe-trotting consumers has boosted demand for products that are truly international. An example is Coke Zero, which we launched in response to consumer demand for a zero-calorie drink. We were getting Facebook likes for Coke Zero out of India long before it was brought here."

Fuze Tea, another of Coca-Cola's billion-dollar global brands, combines tea and fruit flavours. It was launched in India recently in response to the consumer trend of premiumisation. The Indian unit of the US beverage maker is also carving out a separate channel of distribution for its premium products; it is expected to grow in the coming years. Also on the cards are more products in dairy. The firm already has a milk-and-mango-pulp-based product, Maaza Milky Delite, available in select markets. Plans are afoot to introduce global milk-based beverage Vio in India by next year.

India's importance can also be gauged from the short but crucial trip of James Quincey, Coca-Cola's worldwide president and chief operating officer, last month. The 50-year-old executive, who became COO this August, was here to take stock of the Indian operations as he surveyed some of Coke's key markets across the world.

Coca-Cola's 2014 global annual report also showed India, reporting double-digit growth, as a principal revenue-earning zone for the company in the Asia-Pacific region. This was even as revenues for Coca-Cola in China increased just four per cent and that in Japan declined one per cent during the 2014 calendar year. The Atlanta-based company follows a January-December accounting year.