10-06-2017, 06:57 AM
MARKETING STRATEGY OF COKE
As millions of rural Indians reach for a cold soft drink in the hottest summer in years, Coca-Cola India seems to have discovered the consumers who could rescue its dismal sales record. Coca-Cola India totally misjudged rural India, home to two-thirds of the country's 1 billion population, when it re-entered the country a decade ago.
a-Cola's rise. Extravagance, unoptimistic and naive reading of the market and Yet as the country side emerges as the fastest-growing source of demand for consumer products, the local arm of the US soft drinks giant seems to have learnt its lesson. "We were just not addressing the masses, that were the problem," says Mr. Sanjeev Gupta, Coca-Cola's operations chief.
The company's new strategy of smaller bottles, price cuts and advertising that straddles cities and villages pushed turnover last year up by a quarter to nearly Rs.5000 crore. And Thumbs Up, a local brand that Coca-Cola bought and then ran down, is also recovering spectacularly. The success of Thumbs Up, whose market share is now roughly equal to that of marker leader Pepsi at 23 percent, is an embarrassment for Coca-Cola, which is in third place with 16.5 percent (from 12 percent three years ago) in India's Rs.8000 crore soft drinks market. Coca-Cola returned to India after being kicked out by the government in the mid-1970s. It paid a high price for the then
Market leader, Thumbs Up, and tried to kill it off in the mistaken belief that this would pave the way for Coconut of its new bottling assets led Coca-Cola to write down Rs.2000 crore of its Indian assets in 2000. The greatest indignity is that India is one of the few markets where Pepsi has outsmarted Coca-Cola.
"Coca-Cola came in blazing but mishandled itself and Thumbs Up. That makes its recovery all the more remarkable." says Mr. C Srinivasan, chairman of business consultant AT Kearney India. Coca-Cola's Indian management, now stable after recent flurry of departures, persuaded the US parent to persist with India, and won $100 m to fix problems such as poor distribution. Its Atlanta headquarters was won over because of India's potential. India's per capita consumption of carbonated drinks is less than hall the level in Pakistan and about 8 percent of China's. Mr. Gupta argued that closing the gap would only come by chasing the rural consumer.
"We had to address the 75 percent (that lives in rural areas) and not just the 25 percent (in cities) and that meant using small-pack innovations," says Mr. Gupta. "The only consumer goods companies that make it in India are those that sell micro-sized products at low prices."
Coca-Cola's 200 ml bottle (down from 300 ml) sells for Rs.7, half the price of a conventional sized bottle. To achieve a return on this
"low margin, high volume" strategy. Coca-Cola had to shrink its ballooning costs, while raising output in a market growing at just 8-9 percent per year. Coca-Cola added 30 assembly lines, including five plants; cut costly staff; revamped transport; shrunk Bottles and made them lighter and packed in smaller crates to increase a truck's carrying capacity; added distributors and expanded the number of outlets in towns and villages by a fifth to about 1 m. Coca-Cola's aim was to "lock in" retailers in villages of at least 1,000 people connected to usable roads. One method was to help those with no savings or access to formal credit to buy their costliest asset: a fridge. The company negotiated big discounts from fridge producers, placing an order equivalent to two months' output of the domestic fridge industry. Discounts were passed on to the retailers, cutting the average purchase price by Rs.3,000 more than three months' wages in a village.
Finally, Coca-Cola dumped a global advertising campaign that was irrelevant to the Indian market and adopted one featuring Bollywood stars. "The campaign is finally speaking to the right market." says marketing consultant Mr. Jagdeep Kapoor. The adverts also loudly proclaimed the Rs.5 price benchmark, meaning retailers could not overcharge.