Successfully copied
With a strategy that combines disruptive and conventional, Coca-Cola India has turned Thums up and Sprite into billion-dollar brands, and is now aiming to get Maaza into the club, leaving competition behind in its wake
By: Krishna Gopalan
Please rotate your device

We don't support landscape mode yet. Please go back to portrait mode for the best experience

At a running time of two minutes and 54 seconds, Memu Aagamu is a rage on Coke Studio India’s YouTube channel. With over 75 million views, the song, nay music video, nay TV commercial…okay, all three put together, has lyrics in Hindi, Telugu and, believe it or not, in Korean. It stars Telugu films’ superstar Allu Arjun (think Pushpa), Bollywood singer Armaan Malik, and South Korean girl band TRI.BE.

Right. So, foot-tapping music, pleasing optics, cool fusion… all very well, but what’s the point? The point, folks, is Coke Studio; those familiar with the popular music television series would be wondering what happened. After all, Coke Studio is ordinarily meant to promote new singing talent—supported by star singers—from multiple influences ranging from classical Indian to rock and pop music. None of the protagonists in Memu Aagamu fits into this description. Armaan Malik is neither a new singer nor in the league of superstars. The Korean girls, extremely talented, are not in the Indian music scene. And Allu Arjun, for all his popularity, is an actor lip-syncing to Malik’s crooning, not a singer.

There is no question of doing a lassi or a chaas, since we cannot offer a differentiated product, nor do we have a cost advantage

Sanket Ray
Coca-Cola India & Southwest Asia

So, again, what’s the point? The larger point here is that this video exemplifies Coca-Cola India’s new, counter-intuitive approach towards marketing—be it in the media mix, launching new brands, approach to digital, or looking to make product offerings relevant through the year. How about a bottle of Sprite in winter? Fancy a Coca-Cola with your lunch? Or a Maaza after dinner? You get the drift.

Now, get this, too. This disruptive strategy is a new one, rolled out in mid-2022, so its impact is yet unknown. It is an appendage, newly attached to an already strong, conventional gravy train. Across concentrates and bottling, the Indian arm of the global beverage major is an over Rs 20,000-crore business (Coca-Cola India’s total income is Rs 3,192 crore in FY22, the balance is from bottlers; see chart ‘The Clink of Bottlers’). Growth from the conventional strategy—stable brands, lots of advertising, celebrity endorsements, and sponsoring high-profile sporting events—is far from challenged. The outcome of the conservative approach: Thums Up and Sprite are today $1-billion brands in terms of retail sales. And Maaza, with $500 million in the bag, and growing, is on the way. (Interestingly, mother brand Coke is at No. 4 in the in-house pecking order, behind Maaza, and is followed by Limca.)

So, why experiment? Fact is, the opportunity and potential the folks in India see outweigh the conservative approach. They feel there is still an India that has not had a taste of the company’s offerings. And the size of that market is enticing. Arnab Roy, Coca-Cola India & Southwest Asia’s Vice President and Head of Marketing, points to the opportunity: “Per capita consumption for our categories is still very low in India and that offers a huge growth opportunity.” In 2021, the per capita consumption of soft drinks in India was at 20 litres, according to data platform Statista; the figure was over 130 litres for the US.

The other reason for the experimental strategy is a practical one. Coca-Cola’s core brands are all ‘cold drinks’, which go cold (pun intended) in winter months. This also means that for at least four months every year, Coca-Cola’s distribution infrastructure is dismantled. And then rebuilt the following year. That is a painful and expensive exercise. Its bitter rival PepsiCo, at Rs 6,180 crore in revenues, has the advantage of having a substantial foods business, which it can rely on in winter months (in FY22, 88 per cent of its revenues came from food). Coca-Cola has no such buffer.

Ergo, the two-fold plan: let’s do the done thing; and let’s try some risky, too.

At the helm of this divergent strategy is Sanket Ray, 49, President of Coca-Cola India & Southwest Asia. With looks and manner that belie his position—he arrives for the photo shoot with Business Today dressed in blue jeans and sneakers, a black full-sleeve T-shirt, and an ordinary-looking, puffed, sleeveless jacket—Ray is the kind of CEO who says he doesn’t actually have a workstation in office, and plonks himself down wherever a seat is free. Bespectacled and with the mien of a scholar, he frequently reaches out for the soft board to drive home a point, giving one the feeling of being in a classroom.

The opportunity [for Maaza] is huge, but dealing with supply chain issues is a reality. [In 2021], the mango crop failed and the situation was tough

Arnab Roy
VP & Head of Marketing
Coca-Cola India & Southwest Asia

Behind the professorial façade, though, lies a sharp brain that expertly leverages an engineering and MBA background, and a deep understanding of distribution through stints in cement companies ACC and Lafarge and then Coca-Cola (first in bottler Hindustan Coca-Cola Beverages or HCCB, and later in Coke’s offices in Vietnam and China) over a career spanning 25 years. And notwithstanding the new, disruptive marketing approach, Ray likes to keep things simple. Sample this: “We do not make technological products. We make beverages to refresh our consumers.”

We know that. But such clarity is refreshing from a CEO in an industry that practically drowns itself in marketing layers, frequently losing its core message in the din it itself creates to amplify the same message.

As we sit for the interview in a modest meeting room at the Coca-Cola India headquarters in Gurugram, mention of the word ‘strategy’ brings a twinkle to Ray’s eyes. Taking charge of the company in January 2021, bang in between the first two waves of the Covid-19 pandemic, was a difficult yet learning experience. “As an organisation, it was clear to us that a post-Covid-19 world would see a serious supply chain disruption and, hence, more inflation. It therefore became necessary for us to strengthen our core base,” he explains.

That core base is pretty strong already. With 80 million drinkers each week across its brands and penetration levels of 25-26 per cent, Coca-Cola is in a vantage position. Industry insiders, quoting numbers from Nielsen, say the carbonated soft drinks (CSD) market stands at Rs 50,000 crore, in which the company’s share is 60 per cent. Rival PepsiCo India (CSD brands include Pepsi, Mountain Dew and Sting) has just over 30 per cent share. In the cola segment, Thums Up and Coke are ahead of Pepsi. Likewise, Sprite, a lemon drink from Coca-Cola, leads the market ahead of PepsiCo’s Mountain Dew. In energy drinks, though, PepsiCo’s Sting has built a sizeable lead over its rival’s new offering Charged (more on that later). In the non-carbonated space, Coke’s Minute Maid and PepsiCo’s Tropicana and Slice slug it out against Dabur’s Real, Parle Agro’s Frooti, and ITC’s B Natural, among others. Bottom line: In India’s carbonated drinks market, Coca-Cola is the clear market leader, with almost double the market share of nearest rival PepsiCo.

To build on this, Ray, who loves playing with figures, says the top team decided to do something simple: “Can we double our consumer base in the next three to five years, is what we asked ourselves. That road map was laid out in early 2021.” At that time, the company also had milk-based drinks such as Vio and water-soluble powders such as Aquarius Glucocharge and Minute Maid Vitingo in its portfolio. But a changing environment meant pivoting to a “core strategy”, with the objective being to do a few things but do them really well. Such a strategy would have, for instance, no place for dairy or, for that matter, water-soluble powders. In addition, Ray’s ABCDE model—short for availability, building relevance, Coke, digital and enablers—entailed a plan to increase the number of occasions when Coca-Cola’s beverages are consumed, offer more variants, and put a huge focus on digital and sustainability. Over the past year, the company has launched three variants—Fanta Apple Delite, Maaza Aam Panna, Limca Sportz—as well as Charged.

You have to deal with high volumes and low margins [in the packaged water business]. Since water is a commodity, building a brand is not easy

Ramesh Chauhan
Bisleri International

“It is certainly a better strategy to extend established brands into categories that can benefit from the presence of the mother brand,” says K.S. Narayanan, a food and beverage industry veteran. To him, getting into a category like dairy in India is not prudent for Coca-Cola. “Establishing a back-end supply chain from milk collection centres to chilling, processing and value addition is a challenge. It takes significant time and effort to build scale,” he says.

The strategy appears to have paid off. For the April-June quarter of 2022, Coca-Cola India saw its best performance in terms of volume, delivering one billion incremental transactions, largely thanks to a surge in numbers of Thums Up and Sprite.

Focussing on the core for three years will be followed by a close look at what can be done in adjacencies. There’s no new launch planned for the first half of 2023. “We will need to time it well,” reasons Ray. The company, he says, is clear on what not to do. “There is no question of doing a lassi or a chaas, since we cannot offer a differentiated product, nor do we have a cost advantage,” he explains. Ray also wants to take the company’s retail presence from 2.2 million outlets to 4 million. “Just increasing the number of outlets is a huge job. At the end of it, we are a hub company and the entire network has to get together,” he says, adding wryly that his strategy is simple and boring.

Analysts think it makes a lot of sense for Coca-Cola to stick to its core business. According to Apoorva Nema, Practice Head (beverages team) at data analytics and consulting firm GlobalData, growth drivers’ categories typically generate lower margins than the legacy CSD business. “While price points in high-protein milk, for example, are higher than that of soft drinks, the bottom line is relatively less attractive.” 

Let’s take a deeper look at the contra approach. Logically, a soft drinks major would spend a lot of money in the second quarter of the calendar year to coincide with summer. However, the folks at Coca-Cola instead decided to spend more in Q3 (July to September), on the runway to the festive season. Why so? Marketing head Roy says the management decided to ask themselves a simple question: are we being sharp with our brands?

The answer was a quantitative analysis. For example, Sprite typically sees 100 new consumers coming in during peak summer, 80 of whom exit by the end of the season. “Then, we have to build this process all over again. That led to us increasing investments in Q3 and building more occasions to consume each of our brands,” he says. For example, a Maaza campaign has the drink consumed as part of a conversation post dinner. “The insight came from mango being a dessert in India,” explains Ray. For Coke, it used Durga Puja in West Bengal. Here, Coke Studio Bangla belted out its music with a host of local food at a ticketed event.

“The communication for each of the brands comes down to idea first,” says Sukesh Nayak, Chief Creative Officer at Ogilvy, the agency that handles Coca-Cola’s advertising business. To him, the objective has been to create an end-to-end engagement with the consumers; an ad during a world cup match doesn’t do anything incremental. “The stump cam for Thums Up is now a content game as compared to a typical campaign of drinking it in the stadium,” he says. Stump cam refers to a campaign where consumers can access cricket content by scanning a QR code on Thums Up bottles. “Something like a stump cam allows me to own the content, which throws up opportunities with respect to community and influencers,” says Roy. Referencing the Memu Aagamu project, his view is that disruptive content will now become an ecosystem for engagement. “Of course, we will need to create multiple properties much beyond the television commercial,” chips in Nayak.

The stump cam for Thums Up is now a content game as compared to a typical campaign of drinking it in the stadium

Sukesh Nayak
Chief Creative Officer

The brand with possibly the most potential in the Coca-Cola stable is Maaza; very little can come in the way of it hitting the $1-billion mark. In the organised juices market, which is upwards of Rs 15,000 crore in size as per industry estimates, Maaza is the clear leader. It is sold at different price points (a higher proportion of pulp makes a variant more expensive) and the most affordable version at Rs 10 is up against Parle Agro’s Frooti. On the anvil is the relaunch of Maaza Gold, a more premium offering.

But Maaza faces certain challenges beyond its control. “The opportunity is huge, but dealing with supply chain issues is a reality. [In 2021], the mango crop failed and the situation was tough,” says Roy. By any estimate, over half the crop is wasted each year. For the record, Coca-Cola India is the largest buyer of mangoes in India. Narayanan points out that not only is mango the national fruit, but India is also its largest producer. “Mango is the topmost flavour by a distance. Therefore, just building on the fruit’s capabilities from a supply chain perspective and continuously innovating can put Coca-Cola in a very strong position compared to its peers,” he says.

The other challenge area for the company is energy drinks. In October 2017, PepsiCo India had launched Sting, an energy drink from its international portfolio. At Rs 50, a 250-ml can of Sting was less than half the price of market leader Red Bull’s can, which came at Rs 110. The PET version was even more attractive— Rs 25 for 250 ml and Rs 50 for 500 ml.

The success of Sting has been stunning, giving revenues of over Rs 550 crore in 2021 (calendar year) to its bottler and manufacturer Varun Beverages, according to a Motilal Oswal report. In terms of volumes, Sting sold 23 million cases (one case has 24 units) in 2021, which was a surge of around 5.4x from the previous year. In the first half of 2022, it spiked another 2.9x YoY to hit 30 million cases. Across India, the brand sells at over 3 million outlets, of which 0.4 million are exclusively for Sting. There has not been success of this magnitude in the CSD market for a long time.

The core competence of Coca-Cola is its distribution system and how it serves its largest customers such as McDonald’s

Jagdish Sheth
Charles H. Kellstadt Professor of Business
Emory University

The worry for Coca-Cola has been Sting taking away Thums Up drinkers in its largest markets—Andhra Pradesh, Telangana and Uttar Pradesh. While Coke did put in Thums Up Charged in the past, the cola and energy combination did not quite work. This July, Thums Up Charged was relaunched as just Charged (with only a logo of Thums Up), and Coke officials say it is today the market leader in the same three states. “We have had some success, but Sting is a national brand and Charged sells in only four-five states,” points out Roy. “Our bottlers need to be convinced; once that happens, we will be present in more parts of India.”

Thums Up, as well as mother brand Coke, might also face some headwinds from the re-entry of Campa Cola, which was recently acquired by Reliance Industries. Pointing out that Campa Cola was at its peak when Coca-Cola and Pepsi were not present in India, Narayanan feels the brand, which has nostalgic value, might get a boost from its new owners: “It will get distribution in all their online and offline stores. This is a big positive.” But he adds that those who remember the brand are older and not the biggest consuming class for aerated drinks, and so it is likely to have limited appeal.

Another challenge for Coca-Cola is in packaged water, where Kinley slugs it out against, literally, thousands of players. “The business has a long tail and is price-sensitive,” explains Roy. Still, the company will need to have a presence since water gives it entry into retail outlets. “It is a minus point in summer if your brand is not visible.” Here it is up against market leader Bisleri, which has a 32 per cent share of the organised market, according to industry officials quoting Nielsen numbers, with Kinley and PepsiCo’s Aquafina trailing it. Bisleri had an operating revenue of Rs 1,133 crore in Covid-hit FY21 (it was at Rs 1,465 crore in FY20)—with at least 90 per cent of that coming from water—and a net profit of Rs 95 crore.

Half-jokingly, Bisleri International’s Chairman Ramesh Chauhan says success in the packaged water business is a combination of emotion and dedication. “You have to deal with high volumes and low margins. Since water is a commodity, building a brand is not easy,” he explains. Bisleri derives a big chunk of its revenue from the bulk segment—the large plastic cans visible in offices. 

Establishing a back-end supply chain from milk collection centres to chilling, processing and value addition is a challenge. It takes significant time and effort to build scale

K.S. Narayanan
Food and Beverage Industry Veteran

The india story has proved handy in neighbouring markets. For instance, high inflation in Sri Lanka saw the company launch its products in glass bottles. “We look at low-cost solutions in some of these places and glass has done well in Nepal and Bangladesh, too. Many of these markets have the traditional distribution systems and it helps since we saw that phase in India,” says Reetima Rakyan, Vice President of Coca-Cola Southwest Asia.

At the same time, globally as well as in India, carbonated beverages have not had it easy because of increased health awareness (especially related to sugar). A transition, which was necessary to ensure the large consumer base remains unaffected, has been set in motion.

Jagdish Sheth, Charles H. Kellstadt Professor of Business at Emory University’s Goizueta Business School, believes Coca-Cola (globally) has been successful in diversifying into more growth-oriented beverages such as BodyArmor, Costa Coffee and Honest Tea. He points out that Coca-Cola adopted the conscious strategy of defining its business as a beverages business and not just carbonated beverages. “Fortunately, it has a large free cash flow as well as more than $11 billion of cash on its balance sheet. Rather than returning the cash to its investors either through an increase in dividend or a share buyback, it has decided to invest in higher growth businesses but in the same category of business, namely beverages.”

The India strategy also mirrors another component of the strategy in more developed markets. “The core competence of Coca-Cola is its distribution system and how it serves its largest customers such as McDonald’s and the hospitality industry. This was really proven during the pandemic,” says Sheth, adding that the company will innovate more on its logistics and supply chain with the use of cloud computing, wireless technology, Blockchain, and AI. “All this gives the company more economies of scope in addition to the scale and speed of supplying more than 200 brands.”

Ray compares the India story of his company to where it was in China 20 years ago before things took off. “That kind of growth in India is inevitable and this is a once-in-a-decade opportunity for us,” he says. If that is true, where is Coca-Cola India then placed? “Oh, we still believe we are in day one,” he says with a grin.

The corollary to that could well be “we won’t stop”. Which, incidentally, is what Memu Aagamu means in Telugu. It’s all connected, see?


Story:Krishna Gopalan
Producer: Arnav Das Sharma
Creative Producers: Raj Verma, Nilanjan Das
Videos: Mohsin Shaikh
UI Developer: Pankaj Negi