Coca-cola India, has given the Atlanta-based parent, a reason to frown. The Indian subsidiary closed its first quarter ended March 31, '06 with a 10per cent decline in unit case volumes. This has been its seventh successive quarter reporting decline.
The company's release from Atlanta said it reflected “an impact of recent price increases and steps taken by the consolidated bottling operations to drive revenue growth and improve operating and working capital efficiency.” Coca-Cola, however, expects volume results to stabilise in India during the coming months of the year.
While the January-March quarter this year, shows a sharper decline over the previous one that logged a mid single-digit unit case volume decrease, it has been a relatively good beginning for the India division if compared with the whole of '04. Coca-Cola India had posted a volume decline of 22per cent and 14per cent in the third and second quarter last year, respectively.
“Some recovery post pesticides controversy that Coca-Cola saw in the last two quarters of '04 were an aberration and things haven't looked up for colas as negative associations with CSD persists,” said an analyst.
It's only now that the controversy has begun to fade from the popular memory, but the rising health consciousness specially in the urban markets could offset that, he added.
The company has all along maintained that price hikes have also had an impact on volumes. Interestingly, the company effected yet another price hike in late '05. “Price increases to cover rising raw material and distribution costs and the lingering effects of the false pesticide allegations drove the declines,” Coca-Cola had reasoned in its earlier statement while releasing the third quarter financials last year.
The statement also added: “The issues in India and the Philippines are being addressed; however, results from these markets are expected to remain weak for the remainder of '05 and into '06.” So the first quarter reverses don't come as a surprise.
The Indian subsidiary has had its share of woes on other fronts too which, analysts feel, could have had a bearing on the dip in CSD volumes in India. Attrition and greater emphasis on cost cutting leading to lower marketing spends, may have kept sales flat, they said.