Under Venkatesh Kini, Coke saw an era of change

Venkatesh Kini, Outgoing president, Coca-Cola India
Since Coca-Cola re-entered India in 1992, its most prominent image has been of a dominant entity in the carbonated drinks market, also known for brands like Thums Up, Sprite and Limca. 

During the past 25 years, it had several obstacles, from the pesticide crisis to groundwater issues, in the business environment. These have only got tougher since 2014, when now outgoing president, Venkatesh Kini, took charge. 

Increasing taxes, slowing in consumer spending and changing lifestyles have reflected in its sales. Coca-Cola India’s revenue growth remained flat between 2014-15 and 2015-16 and its profit plunged 6.4 per cent, as volume sales declined during key months. While Kini’s predecessor, Atul Singh, was able to deliver 32 consecutive quarters of growth in his tenure, Kini’s stint was punctured with periods of negative growth even during the peak summer months. 

His tenure was much shorter than his predecessor, who headed the operations for nearly eight years. And, was affected by macro-economic factors such as general slowing in the consumer market and growing competition from local players, which offered similar products at lower prices. 

Several cases of unrest and protest in and around its manufacturing units in Rajasthan, Gujarat, Uttar Pradesh and Kerala, among others, led to suspension of production.

Despite headwinds on multiple fronts, Kini’s regime was marked by transformational changes that were initiated. From a predominantly fizzy drinks maker, Coca-Cola took on the task of expanding its portfolio outside its core business, a task arch-rival PepsiCo began years ago. 

While Coca-Cola continues to generate nearly 65 per cent of its revenue from sale of carbonated drinks, PepsiCo gets well over 50 per cent sales from its non-cola products. 

PepsiCo’s food and snacks business is nearly equal to its beverages business, which helps it hedge against the risk of slowing sales in the fizzy drinks category, unlike Coke. And, PepsiCo’s stated focus on providing healthier options to its consumers is only going to increase. 

Making healthier food and beverages and daily nutrition products will be its key focus areas, Indra Nooyi, global chairman and chief executive, told investors last week. “Snacks with low levels of sodium and saturated fats and beverages with less than 70 calories will increase in the portfolio,” she said. 

Under Kini’s leadership and guidance from Atlanta (global headquarters), Coca-Cola has attempted to widen its offerings by introducing sugar-free Coke (Coke Zero), a milk-based drinks brand (Vio), packaged coconut water (Zico) and set a target of making its mango pulp-based non-fizzy drink, Maaza, a Rs 6,600 crore ($1billion) brand in the country by 2023. 

It is also preparing to launch the country’s first juice-based carbonated drink this year, Kini told this newspaper last month. To address falling sales (by volume), it also came up with smaller pack sizes across its portfolio in early 2016, both in aluminium cans and PET bottles.

Despite dwindling volume sales between April 2015 and March 2017, Coca-Cola India’s revenue and profits improved. Its net profit margins remained above 27 per cent during FY15 and FY16, higher than the previous two years. 

During FY16, PepsiCo’s net loss widened to Rs 538 crore from Rs 177 crore a year before and revenue fell by 18 per cent to Rs 6,626 crore. Coke’s bottom line, however, remained positive. With a new management in place, globally as well as in India, Coca-Cola is to now concentrate on further expanding its consumer reach, by accelerating the transformation begun under Kini.

To meet changing consumption habits, its global chief executive, James Quincey, is banking on the non-core businesses like juices and other non-fizzy drinks. It would be important for Kini’s successor, T Krishnakumar, to execute the task in hand effectively, as the threat of imposition of a ‘sugar tax’ looms.