Parent's keeping watch on Coke

Parent's keeping watch on Coke

Author | Source: The Economic Times | Thursday, Jul 20,2006 5:29 AM

Parent's keeping watch on Coke

The Indian arm of Coca-Cola is increasingly coming under the parent's scanner owing to mounting losses. Company sources say, there's been hands-on involvement of the expats in Indian subsidiary unheard of earlier.

While declining volumes, the latest dampener being a 12 % decline in volume sales for April-June quarter, eighth straight quarter of falling sales, and ongoing restructuring of bottling operations could be the main reason for parent's active involvement, unabated migration of top level executives in India has also played a role in the changed circumstances.

In some cases, top level vacancies within the company have been filled by the cola giants' team of expats or Indians from within the system across the globe. Sources say, the brief to most of the expats who are coming is to take India operations to the next stage of evolution.

“Most of these people are coming after stints in the market which were in the same situation that India finds itself in. They would be used to apply their best practices to India,” said a company executive. Take for instance John Ustas, Coke's bottling operations CEO in India.

He has worked in several Latin American markets and turned them around. Similarly Ben Legg, regional director-north who was brought in earlier this year to help Indian operations and Rich Miller, India's VP-sales in bottling.

Muhtar Kent, president, Coca-Cola International, who visited India a month back, was sore because of falling volume sales, say insiders. His contention: Indian operations has got every possible support from Atlanta, so it's time to deliver.

Sources add, Mr Kent left with a stiff target of 10% volume growth, in the current quarter. That means, the local subsidiary will have to aim for an overall growth of high double digits in the remaining six months of '06 to achieve Kent's target and make good the volume loss for the first half of the year.

The only other Coca-Cola market that beat India in poor performance was Philippines where the unit case volume decreased high teens in the quarter. The company's annual financial statement released from Atlanta reads pretty much the same as the one in last quarter.

The company has attributed the decline to “the impact of recent price increases and steps taken by the consolidated bottling operations to drive revenue growth and improve operating and working capital efficiencies.” The cola giant, however, expects volume results in India to begin to stabilise during the balance of the year.

Coca-Cola India spokesperson states that the company is in the process of creating a carbonated-soft-drinks culture by expanding its distribution and penetrate deeper in the markets where it operates. “While we intend to expand our portfolio, we are pushing our retail connect beyond a million outlets we sell through.”

The Indian subsidiary had closed it first quarter, January-March '06 with a 10% decline in unit case volumes making the quarter under review its eighth successive decline.

While there's a feeling in The Coca-Cola Company that globally, sales of juices and packaged water are important in its achieving long-term growth targets, there's been no activity on that front in India so far, though it is about to change.

Indian executives inform in private that India launch of Minute Maid, Coke's largest selling juice brand, is more or less firmed up for the next month, or latest by October. Analysts say, it could be late with Pepsi and Dabur controlling 80% of the market and assorted competition raring its head.

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