As a part of the transition, Hindustan Coca-Cola
Beverages (HCCB) divested three of its existing plants in the region — one each in Ghaziabad, Varanasi, and Jammu. The refranchising exercise, which resulted in the company exiting bottling operations in northern India, left the cola major with 15 plants in the country.
Following its global model, Coke owns and operates bottling plants through HCCB — a subsidiary of its global bottling arm Bottling Investment Group — in India. Coca-Cola
India owns the rights for its secret formulations and is in charge of promotional activities.
“The impact of these refranchising activities has been included as a structural change in our analysis of net operating revenues on a consolidated basis, as well as for Asia Pacific, North America, Latin America and Bottling Investments operating segments,” the firm added.
This move follows PepsiCo’s divestment of bottling assets to its key franchise partners, such as Varun Beverages, in the past five years. Unlike Coke, PepsiCo does not bottle any of its beverages in India now.
While both have refrained from relating any of these moves to their respective profitability, experts said the exit from bottling operations were related directly to improving bottom lines. Being a low margin business, bottling and marketing of beverages usually puts strain on a firm’s margins.
The company also informed its investors through its filings that during the December quarter, the India unit drove its operating income.
“Operating income growth in the quarter was driven by strong underlying operating leverage, primarily in the company’s bottling operations in India,” it said.