³COCA COLA IN RURAL INDIA´

A Project Report submitted in partial fulfillment of the requirements For the award of the degree Of POST GRADUATE DIPLOMA IN MANAGEMENT Approved by AICTE 2009-11 (Equivalent to MBA)

Submitted To: Dr.Sanjay Jain Faculty IMS (GZB)

Submitted By: Praveen Kumar Giri BM-09149

INSTITUTE OF MANAGEMENT STUDIES GHAZIABAD

1

including CocaCola. Coke¶s acquisition of local popular Indian brands including Thumbs Up.CASE STUDY ± COCA COLA IN RURAL INDIA Coca-Cola was the leading soft drink brand in India until 1977 when it left rather than reveals its formula to the government and reduce its equity stake as required under the Foreign Exchange Regulation Act (FERA). 2 . Coca-Cola returned to India in 1993.000 local employees at its twenty-seven wholly owned bottling operations supplemented by seventeen franchisee-owned bottling operations and a network of twenty-nine contract-packers to manufacture a range of products for the company. Shock energy drink and the powdered concentrate Sunfill hit the market. After a 16-year absence. Sprite and Fanta. which governed the operations of foreign companies in India. Limca. plus the Schweppes product range. Leading Indian brands joined the Company's international family of brands. Coca-Cola India produced its beverages with 7. bottling. diet Coke. and distribution assets but also strong consumer preference. Coca-Cola India achieved 39% volume growth in 2002 while the industry grew 23% nationally and the Company reached breakeven profitability in the region for the first time. the company launched the Kinley water brand and in 2001. In 2000. cementing its presence with a deal that gave Coca-Cola ownership of the nation's top soft-drink brands and bottling network. Maaza and Gold Spot provided not only physical manufacturing.

Coke and Pepsi dominated the market and together had a consolidated market share above 95%.Coca-Cola recognized that to compete with traditional refreshments including lemon water. Soft drink sales in India grew 76% between 1998 and 2002. 73 in Thailand. by 2003 91% of sales were made to the lower.000 million and were expected to grow at least 10% per year through 2012. It also tapped local forms of entertainment like 3 . from 5. fruit juices. It doubled the spend on Doordarshan. and lassi. In spite of this growth. While soft drinks were once considered products only for the affluent. butter milk or lemon water. the rural market represented a significant opportunity for penetration and a critical battleground for market dominance. annual per capita consumption was only 6 bottles versus 17 in Pakistan.000 in 2007. With its large population and low consumption. Coke Rural Initiatives Coca-Cola India doubled the number of outlets in rural areas from 80. middle and upper middle classes.000 in 2001 to 160. thereby bridging the gap between soft drinks and other local options like tea. which increased market penetration from 13 per cent to 25 per cent.670 million bottles to over 10. tea. In 2001. increased price compliance from 30 per cent to 50 per cent in rural markets and reduced overall costs by 40 per cent. 173 in the Philippines and 800 in the United States. competitive pricing was essential. It brought down the average price of its products from Rs 10 to Rs 5. green coconut water.

increasing market penetration from 13 to 35%. Rs.000 in 2009. Per capita consumption in rural areas has doubled in the last two years.µThanda matlab Coca. Coke invested in distribution infrastructure to effectively serve a disbursed population and doubled the number of retail outlets in rural areas from 80. The idea was to position Coca-Cola as a generic brand for cold drinks. This pricing strategy closed the gap between Coke and basic refreshments like lemonade and tea. Coca-Cola launched the Accessibility Campaign.annual haats and fairs and made huge investments in infrastructure for distribution and marketing. 4 . smaller than the traditional 300ml bottle found in urban markets. The campaign was launched to supports CCI¶s rural initiatives. The rural market for Coca-Cola grew at 37 per cent over the last year. The advertisement with tagline.Cola¶ was targeted at rural semi urban consumers. ³Thanda´ Goes Rural In early 2002. making soft drinks truly accessible for the first time. against a 24 per cent growth in urban areas. However. the poor rural infrastructure and consumption habits that are very different from those of urban people were two major obstacles to cracking the rural market for CCI. CCI launched a new advertisement campaign featuring leading Bollywood star Aamir Khan. The decision was not surprising. CCI began focusing on the rural market in the early 2000s in order to increase volumes. and concurrently cutting the price in half. introducing a new 200ml bottle. Result: the rural market accounts for 80 per cent of new Coke drinkers and 30 per cent of its volumes. 5. Because of the erratic power supply most grocers in rural areas did not stock cold drinks. given the huge size of the untapped rural india.000 in 2001 to 240. In an effort to make the price point of Coke within reach of this high-potential market.

³ India B´ included small towns and rural areas.Affordability focused on product pricing. Affordability and Acceptability. 100. The first µA¶ ± Availability emphasized on the availability of the product to the customer. The second µA¶ .´ (life as it should be) was the successful and relevant tagline found in CocaCola¶s advertising to this audience. ³ Life ho to aisi .´ the designation Coca-Cola gave to the market segment including metropolitan areas and large towns. Coca cola India marketing strategy CCI¶s rural marketing strategy was based on three A¶s ± Availability.Brand Localization Strategy: The Two India¶s India A: ³Life ho to aisi´ ³ India A. 5 The third µA¶- . Acceptability focused on convincing the customer to buy the product. This segment sought social bonding as a need and responded to inspirational messages. Coke was perceived as a luxury that few could effort. This segment¶s primary need was out-of-home thirst-quenching and the soft drink category was undifferentiated in the minds of rural consumers. 10 and an average day¶s wages around Rs. Additionally. India B: ³Thanda Matlab Coca-Cola´ Coca-Cola India believed that the first brand to offer communication targeted to the smaller towns would own the rural market and went after that objective with a comprehensive strategy. with an average Coke costing Rs. comprising the other 96% of the nation¶s population. celebrating the benefits of their increasing social and economic freedoms. represented 4% of the country¶s population.

under the hub and spoke distribution system. CCI not only changed its distribution model. It was also found that the price of Rs10/. auto rickshaws. the product was transported directly from the bottling plants to retailers. the stock was transported to spokes. 6 . In the centralized distribution system.per bottle was considered too high by rural consumers. It realized that the centralized distribution system used by the company in the urban areas would not be suitable for rural areas. as taking stock directly from bottling plants to retail stores would be very costly due to the long distances to be covered. The company used large trucks for transporting stock from bottling plants to hubs and medium commercial vehicles transported the stock from the hubs to spokes. CCI realized that this distribution system would not work in rural markets. ³We use all possible means of transport that range from trucks. cycle rickshaws and hand carts to even camel carts in Rajasthan and mules in the hilly areas. Affordability A survey conducted by CCI in 2001 revealed that 300 ml bottles were not popular with rural and semi-urban residents where two persons often shared a 300 ml bottle. it also changed the type of vehicles used for transportation. a company spokesperson said. The company instead opted for a hub and spoke distribution system. For transporting stock from spokes to village retailers the company utilized auto rickshaws and cycles. to cart our products from the nearest hub. However. Commenting on the transportation of stock in rural markets.Availability Once CCI entered the rural market. it focused on strengthening its distribution network there. stock was transported from the bottling plants to hubs and then from hubs. which were situated in small towns.

major sources of business activity and entertainment in rural India. To ensure full loads. Further. CCI launched 200 ml bottles (Chota Coke) priced at Rs 5. and also took part in the annual haats and fairs . In 2002. and they were supplied from the company's depot in large towns and cities. large distributors (Hubs) were appointed. Reports put the annual per capita consumption of bottled beverages in rural areas at one bottle as compared to 6 bottles in urban areas. 7 . 5 would increase the rate of consumption in rural India. The company put up hoardings in villages and painted the name Coca Cola on the compounds of the residences in the villages. CCI also participated in the weekly dandies by setting up temporary retail outlets. Acceptability The initiatives of CCI in distribution and pricing were supported by extensive marketing in the mass media as well as through outdoor advertising. CCI announced that it would push the 200 ml bottles more in rural areas. It was widely felt that the 200 ml bottles priced at Rs.For these reasons. Distribution Strategy To reach out to rural India. Coke started out by drawing up a hit list of high potential villages from various districts. as the rural market was very price-sensitive. CCI decided to make some changes in the size of its bottles and pricing to win over consumers in the rural market.

Coke has estimated that TV access is 78.Full load supplies were offered twice weekly against payment by demand draft. The commercial was shot in a rural setting. it bought out a commercial featuring Bollywood actor Aamir Khan to communicate the message of the price cut and the launch of 200 ml bottles to the rural consumers. Advertising Strategy Coke realized that the communication media used in cities and urban areas would not work in villages because of low penetration of conventional media. 8 . The smaller distributors undertook fixed journey plans on a weekly basis and supplied against cash. In the summer of 2003. the hubs appointed smaller distributors (Spokes) in adjoining areas. and decided to concentrate on 47. In order to reach more rural consumers. CCI came up with a new commercial featuring Aamir Khan. The company ensured that all its rural marketing initiatives were well-supported by TVCs. CCI also launched television commercials (TVCs) targeted at rural consumers. On their part. CCI increased its ad-spend on Doordarshan. The distributors also hired rickshaws (cycle operated vans) that travelled to villages daily. When CCI launched Chota Coke in 2002 priced at Rs. to further strengthen the Coca-Cola brand image among rural consumers.000 melas (fairs) held annually in various parts of the country. Cable & Satellite access in urban India is 51 per cent in urban India but only 14 percent in rural India. Coke considered alternative options.000 haats (weekly markets) & 25.5 per cent in urban India but only 41per cent in rural India Similarly. 5.

µgaram¶ is essentially tea. All the three commercials aimed to make rural and semi-urban consumers connect with Coca-cola. the creative mind just opened up.´ 9 . Once we decided to work on that idea. the creator of the commercial. they wanted to equate Coke with µThanda¶. Because the character. Thus making µThanda¶ generic for Coca-Cola. With the long-playing possibilities of the µThanda¶ idea becoming evident. µthanda ya garam?¶ Between March and September 2003. national creative director ± McCann Erickson. since µThanda¶ too is part of the popular dialect of the north. CCI launched three commercials with the µThanda Matlab Coca-Cola¶ tag line.¶ Of the reason for picking up the word µThanda¶. Prasoon Joshi. The first ad featured Aamir Khan as a µtapori¶ (street smart). represented a culture. in itself.The third commercial featured Aamir Khan as a µPunjabi farmer¶ who offers Coca Cola to ladies asking for Thanda. in the ad he makes the association between Coca-Cola and the word µThanda ¶ The second commercial in the series featured Aamir Khan as a µHyderabadi shop-keeper¶. and attendants would promptly ask. here again he equates the word µThanda¶ with Coca-Cola. µThanda¶ became the central idea.µ Thanda¶ usually means lassi or nimbupani. said.The commercial aimed at making coke a generic name for µThanda. ³Thanda is a very North India-centric phenomenon. Go to any restaurant in the north.

This market accounted for 80% of India¶s new Coke drinkers. 5 product. Pepsi Vs Coke The main competitor and rivalry of Coke is Pepsi. Driven by the launch of the new Rs.Rural Success Comprising 74% of the country's population. and was expected to account for 50% of the company¶s sales in 2003. 10 . but in rural market. there are some major regional players like Campa. per capita consumption doubled between 20012003. and 58% of its disposable income. the rural market was an attractive target and it delivered results. 41% of its middle class.Cola and others. 30% of 2002 volume. Coke experienced 37% growth in 2003 in this segment versus the 24% growth seen in urban areas.

Going one step ahead.to boost volumes in urban areas. its rural penetration increased from 9% in 2001 to 25% in 2009. the question was whether the company would be able to take this success further. In 2002. and iced tea in collaboration with Nestle India. 11 . suddenly Pepsi came up with µThandaChelagaKya¶. fruit juice. 5. and as a result. CCI had a target of reaching 0. The company said that it would focus on adding more villages to its distribution network. Analysts pointed out that stiff competition from archrival PepsiCo would make it increasingly difficult for CCI to garner more market share. In early 2009. cold coffee. Like CCI. CCI had announced plans to launch beverages such as nimbupaani (lemon juice). Company sources said that increasing volumes of cola drinks had made the company rethink its plans of launching juice and milk-based beverages.When Coke launched µThanda matlab Coca-Cola¶. For the year 2008. due to the flat volumes in urban areas. PepsiCo too launched 200 ml bottles priced at Rs. Though CCI was upbeat on account of its early success in its drive to capture the rural market. PepsiCo slashed the price of its 300 ml bottles to Rs 6/.2 million more villages. CCI announced that it was dropping plans to venture into other beverage businesses. Future Prospects CCI claimed all its marketing initiatives were very successful. CCI also said that volumes from rural markets had increased to 35% in 2011. PepsiCo too had started focusing on the rural market.

12 .