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Jun 18, 2012, 03.52 PM IST | Source: CNBC-TV18

Room for growth across mkts for portfolio brands: Coca Cola

Atul Singh, who heads India and the southwest part of Asia for Coca Cola, took over about seven years ago and under his watch, Coke's share in Coca Cola's global sales have grown from a small 1% to almost 2.5% today.

Atul Singh, who heads India and the southwest part of Asia for Coca Cola, took over about seven years ago and under his watch, Coke's share in Coca Cola's global sales have grown from a small 1% to almost 2.5% today. Recently, he has been given an extension and a war chest of USD 2 billion to invest and make India from Coca Cola's 10th largest market into maybe the top five in the group.

Below is an edited transcript of Singh's exclusive interview on CNBC-TV18.

Q: You want to take Coke to the top five, isn't that true?

A: That is our aspiration - to be among the top five Coca Cola businesses around the world.

Q: How easy is that?

A: It is going to be a challenge clearly.

Q: You are competing with countries like China which grew 20% last year, Mexico and all of these are large bases. So you are going to break into that club?

A: Clearly, India has the opportunity given the demographic dividend that India has to offer with a population of over a billion with another 300-400 million people, which will move in the next 10 years from below the poverty line or at the edges of the poverty line to the emerging consuming class. So there will be a lot of consumption happening, there is going to be urbanisation happening, the teen and young adult population is going to grow. So I think that India has the opportunity to get into that league of the top five Coca Cola businesses.

Q: 2011 was slightly slower year. How has 2012 been so far? You had a very hot summer so that's good news for you?

A: We have had a first quarter growth of 20% in the first quarter of last year.

Q: Compared to what last year?

A: Last year, we actually have had a 13% growth for the year. But if you look at the last three quarters, which is the first quarter of 2012 and the last two quarters of 2011, they have all been 19-20% growth. So we have got strong momentum, more importantly, when you look at the last six-seven years. We have had 23 consecutive quarters of growth and 17 of them would be double digits.

Q: You took over in 2005, which was a difficult year. I think your bottler lost money, Coke sales dropped about 14%, there was the controversy over alleged pesticide content in the water that was used in Kerala. So it was a tough year to take over. You have grown it from 1% to 2.5% - that’s no mean task. What did you do right that is different from year before that?

A: There were a lot of challenges. There was lower employee morale. When the business was not doing well, there was very high attrition. Clearly, the bottling system was broken so to speak because our bottlers were not willing to invest and there was a lack of confidence.

Q: The whole model works around the bottler investing?

A: Absolutely. The bottlers have to invest and there has to be a seamless alignment. We have to be one system. We are two sides of the same coin. When the company can’t provide the leadership and the strategic input, the strategic guidance and lay out a roadmap and a vision, you have trouble where the bottlers are really not sure of where to invest, what to invest, what the roadmap is. I think that was one of the issues that we were facing.

Q: So it wasn't a larger macro issue. It was more internal.

A: I think the economy was doing well. The Indian economy has been doing well since the 90’s. GDP has been growing. So there were a lot more internal issues to our system that were a problem. What we did right at that point in time was we basically started talking to our bottling partners. I brought the bottles in and really had a dialogue with them. A heart to heart conversation as to what do we need to do and jointly we created our vision.

We brought in our management team; I brought in managers from Coca Cola system worldwide. There were a lot of people we had exported out. So we brought them back - managers from Russia, from China, from the US and these were people who grew up in the Indian system in the early and mid 90s, had gone out for assignments and I brought them back. We really looked at ourselves in the mirror and said what’s going wrong, what do we need to do to fix it.

Q: What you do on the product side, did you have to do any tweaks in the product side?

A: Not really. One of the things we had to do was align our pricing to what the market could bear and what would be economically viable for our bottling partners because a lot of the products we were selling were just not viable. If you remember the Rs 5 coke, 200ml at Rs 5 was just not viable and the system was losing a lot of money because of that.

Q: You took Rs 8, that's a big jump, it's a 60% jump so weren’t you afraid of losing volume? Did you lose volumes?

A: There are times when you have to make a tough call and you got to make a call that’s right for the long term sustainability of the business. So when we did that and we aligned into what we call our OBPPC which is occasion, brand, pack, price and channel strategy that provides us with the right packaging, the right product, the right brand for the right occasion. So for example a 200ml, we said the price should be Rs 8 at that point in time and it would be in X number of channels for these particular occasions, the product would be sold for, for X number of brands.

A product like a Diet Coke, for example, we would not put into a returnable glass bottle because Diet Coke consumers are very different evolved consumer. So we did come up with specific strategies for each of our packaging. Also expansion plans, we clearly identified a segmented approach as to how do you segment the market metro, urban, semi-urban, rural? How do you then go and execute? What should be your route to market? What are the products you need to innovate? We have a great opportunity in India with a range of products that are global brands such as Coco Cola, Fanta and Sprite as well as local brands Thums-up, Limca and Maaza.

Q: Your sales in the last quarter grew 20%. This is something that we have seen across consumer goods across the country. We have had FMCG companies, listed ones reporting growth in excess of 20% so are you recession proof or are you recession resilient because it has been a slow year for rest of the country?

A: I think the beauty is that a chairman always says that we are in the best business because there are so much of opportunities for us and in the beverage business specially and also FMCG for that matter. India, coming back to the demographic dividend, it’s a nation over a billion people; there are only two in the world.

There is going to be urbanization that’s going to happen over the next 10-15 years, there is going to be more people going to the consumer class so there is going to be a lot of inherent consumption that is going to be built and with the GDP growth. I know it is slowing down to about 6-6.5% but even 6.5%, if we can maintain 7-8% at a bare minimum and then come back to a 9-10% after that will give you a lot of people getting into the middle class, that consumption I won’t call it recession proof. But clearly, it would boost consumption, and with that consumption will come expansion of FMCG products and opportunity to grow.

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