Coca-Cola's Top Brass' Upcoming India Visit Signals Market Focus
As per media reports, James Quincey, Global Chairman and CEO of The Coca-Cola Co, is set to lead a 220-member leadership team on a significant visit to India this week, according to executives familiar with the plans. This underscores New Delhi's increasing significance for the Atlanta-based beverage company as it aims to boost sales in mature markets like the US and Europe.
As the world's most populous and youngest country, India ranks among the top five priority markets for volume growth for Coca-Cola. The company produces popular beverages such as Coke and Sprite aerated drinks, Minute Maid juice, and Kinley bottled water.
One of the executives emphasised the team's eagerness to meet government officials during their visit. Additionally, they are scheduled to interact with bottling partners, who currently manage nearly half of Coca-Cola's bottling operations in India. These partnerships are pivotal as they play a crucial role in injecting capital into the business.
The meetings are slated to take place in Goa, with Quincey, who will be joined by the company's President and Chief Financial Officer, John Murphy, and Global Chief Marketing Officer, Manuel Manolo Arroyo, leading the Coca-Cola teams. Highlighting India's increasing significance in the global system, one of the executives mentioned the country's robust earnings in the past two years. Emphasising substantial investments in expanding capacity, the current focus is on achieving a balanced growth approach that integrates profitability.
Taxation Rate Raises Worries
India is identified as a crucial growth target due to the low penetration of packaged soft drinks in the country. Nevertheless, beverage manufacturers are troubled by the taxation on aerated drinks. Despite soft drinks being priced at Rs 10 and above, they fall into the same tax category as alcohol. Under the GST regime, carbonated drinks are subject to a peak GST rate of 28 per cent, along with an additional 12 per cent compensation cess. Quincey mentioned in an earnings management commentary after the December quarter that Coca-Cola's India business experienced "robust growth throughout 2023," despite disruptions in the climate. Murphy, during the fourth-quarter and full-year earnings call two weeks ago, highlighted that a significant portion of the expected capital investment increase is dedicated to expanding capacity for the India business and Fairlife (Coca-Cola's dairy business).
Investments from Partners
In December 2023, Hindustan Coca-Cola Beverages (HCCB), the local bottling partner of Coca-Cola, declared a substantial investment of Rs 3,000 crore in Gujarat for the production of juices and aerated drinks. Coca-Cola Co, in its full-year earnings presentation, highlighted that India and Brazil spearheaded growth in developing and emerging markets throughout 2023. The company reported an increased value share in the Asia-Pacific region, primarily driven by India, the Philippines, South Korea, and Japan. Although specific market share gains were not disclosed, the overall developed markets saw a one per cent growth, marked by declines in the US and Chile. Developing and emerging markets exhibited a two per cent expansion, fuelled by growth in India and Brazil.
Coca-Cola India's consolidated profit for FY23 surged by 57 per cent to Rs 722 crore, while revenue from operations witnessed a 45 per cent increase to Rs 4,521 crore, as per data accessed from the business intelligence platform Tofler. A report from the economic policy think-tank ICRIER projected that India's non-alcoholic beverage market would reach Rs 1.47 lakh crore by 2030, up from Rs 67,100 crore in 2019. The report emphasised that carbonated soft drinks and bottled water dominate the non-alcoholic beverages sector, and it noted a growing market for juices, energy drinks, tea, milk, and coffee-based beverages, presenting substantial potential for increased consumption of packaged drinks.
