Coke's New Strategy in India: Market Focus - Targeting Rural India

Coke’s new strategy in India
With slowdown in developed markets, companies like PepsiCo and Coca-Cola are looking at
emerging in rural marketing. The Coca-Cola Company (Coke), the world’s largest nonalcoholic
beverage company, is not one to be left behind. Coke has a new strategy and has renewed its
focus on semi-urban and rural markets in India.
Market Focus – Targeting rural India

The soft drink consumption market in India is mainly concentrated in urban cities. Coca-Cola
has renewed its focus on the rural market in India and believes there is huge opportunity with
vast growth potential in these markets. Coke is targeting small towns (tier II and III towns like
Agra, Bilaspur and Lucknow) and rural markets in India.
The ‘Parivartan’ program – Training small town retailers

The company calls this the “Parivartan” program (meaning “Change” in English). Shop owners
(traditional retailers) are given training on displaying and stocking products well. The goal of the
innovative training program is to provide traditional Indian retailers with the skills, tools and
techniques required to succeed in a constantly changing retail scenario. Presentations (including
audio/visual technology) in local Hindi language help small retailers (with stores less than 200
square feet in average size) to better understand the concepts involved. Each retailer also
receives a Coca-Cola “Certified Retailer” certificate at the conclusion of the program.
Coke's new strategy involves training retailers in a program launched by the Coca-Cola
University. In 2007, the company launched Coca-Cola University — a virtual, global university
for all learning and capability-building activities.
The program, which debuted on Dec. 18 in Agra, equipped "mom-and-pop" shop owners with
the skills, tools and techniques required to succeed in India's evolving retail landscape. All
invited retailers attended the session, which allowed them to learn in a formal setting using
leading-edge audio/visual technology and engaging presentations conducted in the local Hindi
language.The content is structured around the four pillars of retail—customer, shop, stock and
finance.
The programme has covered 20,000 retailers in North India so far. Based on their feedback they
are developing ‘Advanced Parivartan’ that will cover issues like shop layout and location,
display, basics of finance, knowledge of credit card transactions, people management skills,
among others.
There are around 12 million retailers in the country, out of which kirana stores account for over
90% of the Rs 7,40,000-cr retail business in India. But a company official maintained that these
retailers would not be pushed to stock Coca-Cola products through this programme. Some of
these retailers don't even stock soft drinks.
The idea came out in a meeting at the World Economic Forum in Davos around two years ago
when Coke’s global chief met the commerce minister of India and suggested running the
programme in India. Also, as a token of goodwill gesture, an accidental death insurance of Rs 1
lakh is being provided free of cost to all the attending retailers as a protection against any
eventualities.
In bigger cities the company has conducted Parivartan programme in classrooms or by hiring
hotels. The classroom Parivartan programme has been organised across cities in UP and Punjab
-Agra, Ludhiana, Chandigarh, Amritsar, Gorakhpur, Lucknow, Bareilly, Haldwani, Bilaspur,
Kolkata, Faizabad, and Rajamundry.
The ‘Coca-Cola University on Wheels’ has also covered small towns such as Hoshiarpur,
Mukeria, Nakodar, Phagwara, Nawanshahar, Malerkotla, Barnala, Khanna, Moga, Jalandhar,
among others. Going forward in the future, Coca-Cola’s plan is to scale up this initiative by
taking it across India.
Adapting to local culture and taste

Coke has set up an R&D faculty in India to develop beverages that suit local taste and increase
focus on localizing its portfolio of beverages. Earlier Coca-Cola India had been outsourcing all
R&D functions from its facility in Shanghai. Some examples of local flavors include Maaza aam
panna by Coca-Cola and Pepsi has locally-produced flavors under its Tropicana juice brand
(with nimbu pani (lemon water) in the pipeline).
Moving from a price strategy to stepping up distribution

In the past (in 2002-03), Coke had already targeted rural consumers by bringing down the entry
price (Rs 5 a bottle) for its product. Now, it has stepped up distribution of its 200-ml (priced at
Rs 7 and Rs 8 ) returnable-glass-bottles.
Will this Programme sustain??
Rural India is also characterised by growing affluence with agricultural output increasing to
nearly 215 million tonnes in 2004 compared to176 million tonnes in 1991. This thirteen year
period has steadily increased the size of India's consuming class. It’s a market of more than 1
billion people.
I feel that this programme will definitely sustain with the developing market in rural areas. . As
today's farmer could be tomorrow's city resident. So it’s better if the market is captured quickly.
This programme is based on the 3 A’s of rural marketing i.e. The first ‘A’ – Availability emphasized
on the availability of the product to the customer; the second ‘A’ – Affordability focused on product
pricing, and the third ‘A’- Acceptability focused on convincing the customer to buy the product and
some other reasons as follows:
 Affordability : Indian consumers are "emotional". Only 50% of what is consumed is what goes
in the mouth and in the stomach; the other 50% goes in the mind and heart. Rural people are
price sensitive. With price affordability and quality- Therefore from Rs.5 in the past (2003-
2004) to now Rs 7 and Rs 8 bottles
 Size and design changes : change to a distribution of its 200-ml returnable glass bottles
 Improving product acceptance : Coca-Cola provided low-cost iceboxes as regular
power outages meant families could not depend on refrigerators. For an example,
electricity-deficient areas, such as some of the hinterland in Uttar Pradesh, it now provides shops
with coolers that operate with brine solution so its products can stay chilled up to 12 hours
without electricity. In other places, it has trade agreements with local ice makers.
 Advertising: The advertisement with the tag line - 'Thanda Matlab Coca-Cola' was targeted at
rural and semi-urban consumers. According to company sources, the idea was to position Coca-
Cola as a generic brand for cold drinks. It also doubled the spend on Doordarshan for its
advertisement.
 Awareness creating promotions: The company has put up hoardings in villages and painted the
name Coca Cola on the compounds of the residences in the villages.
It also participated in the weekly mandies by setting up temporary retail outlets, and also took
part in the annual haats and fairs - major sources of business activity and entertainment in rural
India. Over 47,000 haats (weekly markets) & 25,000 melas (fairs) held annually in various
parts of the country.
 Distribution: They ensured full loads, large distributors (Hubs) were appointed, and they
were supplied from the company's depot in large towns and cities. Full load supplies were
offered twice weekly against payment by demand draft. On their part, the hubs appointed
smaller distributors (Spokes) in adjoining areas. The smaller distributors undertook fixed
journey plans on a weekly basis and supplied against cash. The distributors also hired
rickshaws (cycle operated vans) that travelled to villages daily.

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Coke's New Strategy in India: Market Focus - Targeting Rural India

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Coke’s new strategy in India

Market Focus – Targeting rural India

The ‘Parivartan’ program – Training small town retailers

Adapting to local culture and taste

Moving from a price strategy to stepping up distribution

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