09-11-2012, 06:06 PM
Coca-Cola India
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History of Coke
The Early Days
Coca-Cola was created in 1886 by John Pemberton, a pharmacist in Atlanta, Georgia, who
sold the syrup mixed with fountain water as a potion for mental and physical disorders. The
formula changed hands three more times before Asa D. Candler added carbonation and by
2003, Coca-Cola was the world’s largest manufacturer, marketer, and distributor of
nonalcoholic beverage concentrates and syrups, with more than 400 widely recognized
beverage brands in its portfolio.
With the bubbles making the difference, Coca-Cola was registered as a trademark in 1887
and by 1895, was being sold in every state and territory in the United States. In 1899, it
franchised its bottling operations in the U.S., growing quickly to reach 370 franchisees by
1910.10 Headquartered in Atlanta with divisions and local operations in over 200 countries
worldwide, Coca-Cola generated more than 70% of its income outside the United States by
2003 (See Exhibit 3).
International expansion
Coke’s first international bottling plants opened in 1906 in Canada, Cuba, and Panama.11 By
the end of the 1920’s Coca-Cola was bottled in twenty-seven countries throughout the world
and available in fifty-one more. In spite of this reach, volume was low, quality inconsistent,
and effective advertising a challenge with language, culture, and government regulation all
serving as barriers. Former CEO Robert Woodruff’s insistence that Coca-Cola wouldn’t
“suffer the stigma of being an intrusive American product,” and instead would use local
bottles, caps, machinery, trucks, and personnel contributed to Coke’s challenges as well with
a lack of standard processes and training degrading quality.12
Coca-Cola continued working for over 80 years on Woodruff’s goal: to make Coke available
wherever and whenever consumers wanted it, “in arm’s reach of desire.”13 The Second
World War proved to be the stimulus Coca-Cola needed to build effective capabilities
around the world and achieve dominant global market share. Woodruff’s patriotic
commitment “that every man in uniform gets a bottle of Coca-Cola for five cents, wherever
he is and at whatever cost to our company”14 was more than just great public relations. As a
result of Coke’s status as a military supplier, Coca-Cola was exempt from sugar rationing
and also received government subsidies to build bottling plants around the world to serve
WWII troops.15
Turn of the Century Growth Imperative
The 1990’s brought a slowdown in sales growth for the Carbonated Soft Drink (CSD)
industry in the United States, achieving only 0.2% growth by 2000 (just under 10 billion
cases) in contrast to the 5-7% annual growth experienced during the 1980’s. While per capita
consumption throughout the world was a fraction of the United States’, major beverage
companies clearly had to look elsewhere for the growth their shareholders demanded. The
Coca-Cola India no. 1-0085
looming opportunity for twenty-first century was in the world’s developing markets with
their rapidly growing middle class populations.
The World’s Most Powerful Brand
Interbrand’s Global Brand Scorecard for 2003 ranked Coca-Cola the #1 Brand in the World
and estimated its brand value at $70.45 billion (See Exhibit 4). 16 The ranking’s methodology
determined a brand’s valuation on the basis of how much it was likely to earn in the future,
distilling the percentage of revenues that could be credited to the brand, and assessing the
brand’s strength to determine the risk of future earnings forecasts. Considerations included
market leadership, stability, and global reach, incorporating its ability to cross both
geographical and cultural borders.17
From the beginning, Coke understood the importance of branding and the creation of a
distinct personality.18 Its catchy, well-liked slogans19 (“It’s the real thing” (1942, 1969),
“Things go better with Coke” (1963), “Coke is it” (1982), “Can’t beat the Feeling” (1987),
and a 1992 return to “Can’t beat the real thing”) 20 linked that personality to the core values
of each generation and established Coke as the authentic, relevant, and trusted refreshment
of choice across the decades and around the globe.
Indian History
India is home to one of the most ancient cultures in the world dating back over 5000 years.
At the beginning of the twenty-first century, twenty-six different languages were spoken
across India, 30% of the population knew English, and greater than 40% were illiterate. At
this time, the nation was in the midst of great transition and the dichotomy between the old
India and the new was stark. Remnants of the caste system existed alongside the world’s top
engineering schools and growing metropolises as the historically agricultural economy
shifted into the services sector. In the process, India had created the world’s largest middle
class, second only to China.
A British colony since 1769 when the East India Company gained control of all European
trade in the nation, India gained its independence in 1947 under Mahatma Ghandi and his
principles of non-violence and self-reliance. In the decades that followed, self-reliance was
taken to the extreme as many Indians believed that economic independence was necessary to
be truly independent. As a result, the economy was increasingly regulated and many sectors
were restricted to the public sector. This movement reached its peak in 1977 when the Janta
party government came to power and Coca-Cola was thrown out of the country. In 1991, the
first generation of economic reforms was introduced and liberalization began.
The Indian Beverage Market27
India’s one billion people, growing middle class, and low per capita consumption of soft
drinks made it a highly contested prize in the global CSD market in the early twenty-first
century. Ten percent of the country’s population lived in urban areas or large cities and
drank ten bottles of soda per year while the vast remainder lived in rural areas, villages, and
small towns where annual per capita consumption was less than four bottles. Coke and
Pepsi dominated the market and together had a consolidated market share above 95%. While
soft drinks were once considered products only for the affluent, by 2003 91% of sales were
made to the lower, middle and upper middle classes. Soft drink sales in India grew 76%
between 1998 and 2002, from 5,670 million bottles to over 10,000 million (See Exhibit 6)
and were expected to grow at least 10% per year through 2012.28 In spite of this growth,
annual per capita consumption was only 6 bottles versus 17 in Pakistan, 73 in Thailand, 173
in the Philippines and 800 in the United States29.
With its large population and low consumption, the rural market represented a significant
opportunity for penetration and a critical battleground for market dominance. In 2001,
Coca-Cola recognized that to compete with traditional refreshments including lemon water,
green coconut water, fruit juices, tea, and lassi, competitive pricing was essential. In
response, Coke launched a smaller bottle priced at almost 50% of the traditional package.