Venkatesh Kini is no stranger to India. After all, it’s the country where he oversaw the company’s earlier marketing foray. Just a few months after he took over as President, India and South West Asia, Coca-Cola, he is focusing on rural markets and looking at some big launches for the year. In an interview with Surajeet Das Gupta & Sounak Mitra, Kini talks about his experiments to make consumers taste Coke for a mere Rs 5 as well as the launch of a string of zero- and low-calorie products for the health-conscious. Edited excerpts:
The next big challenge for you is to penetrate the rural markets. Will you address this by introducing differentiated products from what you sell in urban markets and how will you break the price barrier before your products? What are the distribution challenges?
During the past two-three years, rural contribution has been growing faster than that of the urban markets because of an improvement in infrastructure, which has made delivery easier, and an increase in prices of farm output leading to higher incomes. First, the rural consumers don’t look for different products or brands. They want the same thing that you are serving to the urban consumers. However, we have to find ways to serve them cost-effectively.
So what are you doing to ensure affordable prices?
We are experimenting with new models. One of them we are trying is the Splash Bar. This was pioneered by Hindustan Coca-Cola. It has developed a piece of equipment — a dispenser that does not require expensive devices. A two-litre bottle can be placed, through which we can serve in smaller cups of 100-150 ml without compromising the quality and chilling of beverages. These can be put in small retail outlets. We have tested this in Gujarat. Then we have ‘Happiness on the go’. An open truck with a fountain machine will offer 100-150 ml beverages in small cups at Rs 5 and 200-300 ml at Rs 8-10, depending on the location. We have tested this in three states, including Gujarat and Karnataka, and will scale it up. This is a good way to offer consumers the first taste of Coca-Cola, Sprite or Thums Up at Rs 5.
What is your target from the rural market in terms of sales?
Today, rural markets account for one-third of our total volume. Going by the urbanisation trends, at one point in time rural contribution will go up to 40-45 per cent of our total volume as it is growing faster than the urban. After all, per capita consumption there is about six times lower than in urban areas.
The health-conscious market seems to have become important even though in terms of volumes it is small. Will you launch Coke Zero and what about dairy-related products?
Coke Zero is definitely on the cards. We are yet to announce the time, but it would be launched this year. Beyond that, there are a few more low-calorie innovations that we are looking at launching in India. It’s time to give Indian consumers more choices in the low-calorie beverages segment. With better awareness and increasing health consciousness, consumers are demanding more options. We had launched Sprite Zero in 2004-05, probably 10 years before its time. Today, I think, the country is ready for low-calorie products. The best zero-calorie product we have is Coke Zero, which tastes very close to Coke.
Dairy is also being evaluated. We will take Maaza Milky Delite across the country. Globally, we have a range of dairy-based products. In India, dairy is yet to develop as an on-the-go refreshing consumption category. We are experimenting with dairy products in different developing markets, like Vietnam and China. We’ll take a call about India depending on our global learnings.
Coke has announced large investments. Does that mean you will expand your retail outlet reach from three million substantially?
It’s difficult to put a number as we are getting into new channels of distribution; for example, serving the needs at railway stations or even stationery shops. Currently we reach outlets that serve 200 to 1,000 people. We want to reduce this.
You are looking at hub and spoke distribution for rural India, which entails having large distributors who will then sell your products rather than you sending your trucks. Will this not impact your margins, and why are you doing so?
This will reduce cost of distribution in rural markets as the distributors can manage their operations at a much lower cost of running trucks, building their warehouses, etc. So expansion in rural markets will not be less profitable. But the distribution will be collaborative. And, obviously, they will also earn good margins.
Seasonality still plays a big role in your performance. This was evident in the poor volume growth in beverages you recorded in the past year during the summer season. How challenging is seasonality for you?
Seasonality is an issue in only a few states. In Punjab and Delhi, the sales volumes are 50-50 in the first and second half of the year, so there is no real impact of seasonality. Dependence on seasonality is coming down except for in four or five northern states, such as UP and Rajasthan, and this needs to be addressed. The reason for this is that in most of these states, the bulk of the sales is on the go and home consumption is low. That has to change.