Marketing Strategy of Coca Cola in India
INDIA India has a GDP of over USD 1. 236 trillion (2009 estimate), the 12th largest in the world (4th largest in terms of GDP on purchasing power parity basis of USD 3. 57 trillion) and per capita income of just USD 1,100 (136th in the world). Even during recessionary period of the last two years, economy has been growing at over 7%, 2nd fastest in the world (after China), that means its average income will double within 10 years. Demographic Trends India’s population stood at 1. 157 billion (July 2010 estimate), growing at a rate of 1. 07% (2010 estimate) with 64. 3% of total population accounting for people between age bracket of 15-64 years and 30. 5% below 15 years of age. Sex ratio of total population remains at 1. 08 males to one female (2010 estimate). Following are the changes being observed in the structure of Indian population and its impact on the companies targeting the Indian consumers over the last decade: * Women are increasing becoming career-oriented and prefer to have children at a later stage in life.
Especially in urban areas, there has been a tendency to have maximum one or two children which resulted in parents spending more per child (leading to better quality of life and education) and has allowed women to stay at work longer (increasing household incomes and encouraging the purchase of labor or time saving products). * Alongside a declining number of children has been a decline in the average size of households. The growth of small size households has had numerous marketing implications, ranging from an increased demand for smaller units of housing and smaller size but better quality of clothing and groceries.
Social, Cultural and Lifestyle Developments In the last decade, India has seen more global influences than ever before. Technology has brought the diverse nation get closer, leading to evolution of communication patterns and reducing the bridges between urban and rural areas. This cultural shift has definite impacts on the Indian work scenario. Existing companies have redefined their strategies and companies have realized the importance of understanding the Indian playground in depth. Following are the key trends observed in socio-cultural environment f India, which give insights into new aspects of thought and communication that largely drive the nation today. * The role of women in society is changing as men and women increasingly share expectations in terms of employment and household responsibilities. For example, products like ready prepared meals will have more scope for growth which will relieve working women of their traditional role in preparing household meals. * Leisure is becoming a bigger part of many people’s lives, and companies have responded with a wide range of leisure related goods and services. Greater life expectancy is leading to an ageing of population and a shift to an increasingly elderly culture. Or at this time with 64% of the population being in the age of 15-40 years the Indian market is considered a youth market. Technology changing lives of Indian Consumers The pace of technological change is becoming increasingly rapid in the Indian consumers market, allowing new goods and services to be offered to consumers (for example, Internet banking and mobile telecoms).
New technology can allow existing products to be made more cheaply, thereby widening the market for such goods by enabling prices to be lowered. In this way, more efficient and low cost airlines have allowed new markets for domestic air travel to develop. Outlook: We have looked at socio-cultural implications of Indian Consumers during the last decade. Importantly, steps in the right directions need to be taken immediately to avail of the existing opportunity to boost economic growth and enhance the socio-cultural landscape of India.
CASE – 1 (MANUFACTURER) Changing Consumer Demand: Coca Cola’s strategy to exploit India’s Rural Markets during last decade Coca-Cola’s operations in India: Coca-Cola, world’s largest seller of soft drink concentrates since 1886, returned to India in 1993 after a 16 year hiatus, giving a new foot-print to the Indian soft drink market. Coca-Cola has made significant investments to build up its business in India, including new production facilities, waste water treatment plants, distribution systems, and marketing channels.
Coca-Cola India is among India’s top international investors, having invested more than USD 1. 1 billion in India since its entry in 1993. Decision to explore Indian Rural markets: During 2002, Coca-Cola came out with an idea to explore India’s Rural Markets, in an order to increase its sales volumes and gain overall market share in the country. This decision was not surprising, given the huge size of the untapped rural market in India and with flat sales in the urban areas, it was clear that Coca-Cola would have to shift its focus to the rural market.
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. Because of the erratic power supply most grocers in rural areas did not stock cold drinks. Also, people in rural areas had a preference for traditional cold beverages such as ‘Lassi’ (Yogurts) and lemon juice. Further, the price of the beverage was also a major factor for the rural consumer. Coca-Cola’s Rural Marketing Strategy: Coca-Cola’s rural marketing strategy was based on three A’s – Availability, Affordability and Acceptability.
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. 1) Availability When Coca-Cola entered the rural market, it focused on strengthening its distribution network there. It realized that the centralized distribution system used by the company in the urban areas would not be suitable for rural areas. In the centralized distribution system, the product was transported directly from the bottling plants to retailers. 2) Affordability
Coca-Cola conducted a survey of Indian Rural Markets (in an order to frame its marketing strategy) and came out with a conclusion that 300 ml bottles (primarily being sold in urban areas) were not popular with rural and semi-urban residents where two persons often shared a 300 ml bottle. It was also found that the price of Rs 10 (15 cents) per bottle was considered too high by rural consumers. For these reasons, Coca-Cola decided to make some changes in the size of its bottles and pricing to win over consumers in the rural market and 200 ml bottles, called ‘Chota Coke’ (small coke) priced at Rs 5 (7 cents).
Coca-Cola announced that it would push the 200 ml bottles more in rural areas, as the rural market was very price-sensitive and was sure that it would increase the rate of consumption in rural India (as evident from the fact that rural sales accounted for over 50% of Coca-Cola’s total sales in 2003). 2) Acceptability The initiatives of Coca-Cola’s in distribution and pricing were supported by extensive marketing in the mass media as well as through outdoor advertising. The company put up hoardings in villages and painted the name Coca Cola on the compounds of the residences in the villages.
Company had also set up temporary retail outlets and participated in fairs and traditional local gathering (primarily on festivals) which are major sources of business activity and entertainment in rural India. The Upshot Coca-Cola’s marketing initiatives were proved to be very successful, and as a result, its rural penetration increased from 9% in 2001 to 35% in 2003 and 54% in 2009 as Coca-Cola continued to add more villages to its distribution network in rural markets. CASE – 2 (SERVICE PROVIDER) Changing consumer demand: Bharatmatrimony. com to tap India’s growing online matrimonial services market An Overview of the Company: Institution of marriage holds a significant moment in the life of an Indian” Mr. Janakiraman, CEO – Bharatmatrimony. com BharatMatrimony. com has grown into a leading name in online matrimonial market within last decade in India. Company has successfully innovated the concept of match making on the Internet, connecting millions of marriage aspirants across India and World. Company has been making profits right from the beginning (net profits of USD 3. 6 million in 2009) and is currently growing at the rate of 300 % per annum. Key Milestones: BharatMatrimony. om has over 10 million members worldwide and been recognized by the Limca Book of Records for having the highest number of documented marriages. The site has also been awarded “The Best Matrimony Portal” by PC World, a leading technology magazine. Change in demand for matrimonial/match-making services from traditional means (marriage bureaus/brokers, newspaper advertisements and family/friend networks) to online services: India’s online match making market is worth about USD 20 million presently, a small fraction of around USD 500 million spent on traditional matrimonial services.
It is estimated that there are around 450 million people in India currently below the age of 21 and with over 300 million people estimated to get married in the next 30 years in India, matrimonial services is a fast growing market in India and online match-making concept is still remains untapped and expected to grow at an annual rate of 50% to 70% in the coming 5-7 years. Growing penetration of internet especially among young Indians: India has one of the youngest population pool and the fifth largest Internet Population in the world with present figure crossing 40 million online users, which is estimated to grow further in a big way.
Matrimonial websites are increasingly turning into a better option for the younger generation in their search for the perfect life partner. India has low level of Internet penetration compared to other countries, many of whom have seen, as a result, the growth of a large number successful Internet businesses over the past decade. Bharatmatrimony’s innovative idea of promoting the match-making through internet: The company has got the first mover advantage since they were the ones who started this online matrimony segment in India.
On the socio-cultural front, the dominant tradition is that of arranged marriages, where the parents or family elders find a suitable match for the young adults. Though matrimonial portals are a fairly recent phenomenon, the trend has picked up. Match the demographics and the tradition of arranged marriages and there is clearly a huge market for match-making – whatever the medium. With its reach, convenience, speed and relative privacy, the Internet provides a superior alternative to any other medium.
Users need to simply log on to a matrimonial portal and upload their profiles, sharing as much or as little information as they choose. They can then search for partners according to their individual preferences. Non-resident Indians (NRIs) are zeroing in on their dream partners through the various tools that can be accessed via internet and proving to be a big draw for NRIs, living in the US, UK, Middle East, Australia ; New Zealand. Bharatmatrimony. com is the first portal in India to offer
Voice-based matrimony services, which allow users to record, listen and reply to any profile using their mobile phones. The Web site has also taken the lead in offering Real-Time online Horoscope Matching and presently offers this service in nine regional languages. The Road Ahead: Despite the presence of many online matrimonial portals, there is a vast majority of people following the traditional means of finding a soul-mate and the reason behind this is present social norms and low internet penetration rate in India.
The online portals are mostly used by people living in metro cities but with expected rapid increase of internet users in urban and semi-urban areas, online matrimonial services are expected to grow at 50% annually in the near future. (Please Turn Over to Next Page) PART – B (Answers to Questions 1) Environmental Scanning Strategy Followed by United Spirits Limited Information regarding environmental scanning conducted by any company remains a high degree of proprietary records and hence, I will not be able to discuss the environmental scanning process conducted by my employer.
However, I was able to collect some data/information regarding United Spirits Limited and same is being discussed here. Brief Overview of Company: United Spirits Limited (UB Group) is India’s largest manufacturer of alcoholic beverages (beer brand is known as ‘Kingfisher’) and second largest in the world with sales of USD 1. 12 billion for FY ending 31/03/2010. THE ENVIRONMENT SCANNING PROCESS Environmental scanning is the foundation for strategic thinking and planning. True scanning breaks out of the internal focus and limiting paradigms that keep us from seeing and understanding the driving forces in the environment.
Environmental scanning is not fortune telling. We can’t predict the future, but we can prepare! United Spirits has analyzed the following factors while researching the external environment for beer markets in India: SOCIAL ; DEMOGRAPHIC FACTORS: India’s population is 1. 236 billion (2009 estimate), second largest after China. India’s young emerging middle class (64% of country’s population is between ages of 15-64 years) offers tremendous upside growth potential in urban areas.
The economy is growing rapidly and personal disposable income is rising, especially among young Indians working in the services sector like IT/software, banking/financial services, telecoms and consulting. ECONOMIC FACTORS: India is one of the world’s fastest growing consumer markets. A rapidly growing population, an emerging middle class with rising per? capita incomes and blossoming urban centers make India a powerful emerging market. Moreover, Favorable agricultural climate ; network: India’s climate is favorable for the harvesting of hops and barley, the primary natural ingredients in beer.
There exists potential to establish supply relationships with local commodity producers. Steady growth in India’s beer market: India has an active domestic brewing industry with many local firms and rising foreign investment. Although per? capita beer consumption is relatively low presently but younger generations (characterized by westernized culture) have the potential to be high? volume consumers. According to a report on beer market in India, from ‘MindBranch’ (a research firm based in US), beer sales in India are forecast to grow at a compound annual growth rate of 17. 2% until 2012.
COMPETITIVE FACTORS: Although market saturation is only a marginal concern, it is worth noting that a rush of foreign investment, combined with a healthy domestic brewing industry, makes India a highly competitive emerging market. POLITICAL AND LEGAL FACTORS: A tangled web of tax and regulations across Indian states (India has 28 states and 7 union territories) remains a major barrier to beer market growth in the country. Different regulations on pricing and distribution, as well as fluctuating excise duties, foster inefficiencies and makes harder for brewers to attract consumers.
Transporting beer is expensive and each state levies taxes on alcohol at its own determined rates. It is a state? by? state market rather than a national market and taxes are levied at higher rates on all alcoholic products crossing the state borders. This makes it essential for brewers to have production facilities in different states (rather than centralized production facilities and gaining economies of scale). OUTLOOK: Despite its challenges, India’s young emerging middle class and favorable agricultural climate make this an attractive expansion opportunity.
Many international players acknowledge India as a largely untapped market with strong growth potential. Answer to Question: 2 (Part B) United Spirit’s Environmental Scanning Strategy: Evaluating its Success (I could collect very limited information available to measure the success of United Spirit’s Environmental Scanning Strategy, being proprietary information for the company) Successful environmental scanning alerts the organization to critical trends and events before the changes have developed a discernible pattern and before competitors recognize them.
Otherwise, the firm may be forced into a reactive mode instead of being proactive. United Spirits Limited has been very successful in implementing its Environmental Scanning Strategy for beer markets in India as evident from the following facts: 1) United Spirits reported a significant 79% growth in total sales in the last three financial years, from USD 625 million in FY2006-07 to USD 1. 12 billion in FY2009-10. 2) Company is already largest spirits manufacturing company in India and became second largest manufacturer in the world in 2010. ) Company’s portfolio of spirits brands is valued at over USD 5 billion 4) Company is a Market Leader with over 59% market share of India Spirits Business 5) Company has sold over 100 million cases (3. 6 billion bottles) in the year 2009-10 6) Portfolio comprises of a wide range of Brands including 20 Millionaire Liquor Brands Suggestions for further improvement in the environmental scanning strategy adopted by United Spirits: Focus on small cities and semi-urban areas of India:
Environmental scanning should now be focused on smaller towns and cities, as economic growth has continued to spill over from the major cities into smaller ones, the alcoholic drinks industry has been buoyed by strong growth in the consumption of economy beer drinks in smaller cities in less developed states, such as Orissa, Bihar and Madhya Pradesh. Product Portfolio to incline towards niche brands With continued expansion in the consumer base for niche, international and premium products, manufacturers and importers stepped up their activity in niche categories ranging from champagne to dark beer.
The spate of international brand launches continued in 2009, with the entry of several brands, including Korbel Champagne (Brown-Forman Corp), and Teacher’s Origin blended Scotch whisky, by Beam Global Spirits ; Wine. Niche concepts gained traction recently, for example, the opening of Beer Garden – a microbrewery from Rockman Group in 2008 and ‘Howzzat’ – a cricket themed microbrewery opened in 2009. To explore high-end supermarkets for distribution of premium products Rise of chained outlets in the on-trade is also expected to provide opportunities for manufacturers to connect with consumers through promotions and tie-ups.
Volume sales of alcoholic drinks through supermarkets witnessed a strong rise in 2008 and 2009. This provided a point of contact for manufacturers to target consumers with premium products, such as imported lager and wine. Outlook: United Spirits is expected to gain momentum as demand for branded alcoholic drinks is expected to continue to rise in near future with a double digit growth rate. A sound environmental scanning strategy can definitely provide a first mover advantage to United Spirits and gain market share.
References List: 1) CIA World Fact-book (India page) 2) “India at a Glance”. Know India Portal. National Informatics Centre(NIC). 3) India Country Profile from BBC (www. bbc. co. uk) 4) Moody’s credit rating and analysis report on India 5) “Interface between urban and rural development in India”. In Dutt, Ashok K. ; Thakur, Baleshwar. City, Society, and Planning: Planning Essays in honour of Prof. A. K. Dutt. Concept Publishing 6) http://en. wikipedia. org/wiki/India 7) http://www.
Coca-Colaindia. com 8) http://www. cokefacts. org/facts/facts_in_keyfacts. shtml 9) http://en. wikipedia. org/wiki/Coca-Cola 10) Various news and articles available on online archives of Indian newspapers (Times of India, Economic Times, Business Standard and Financial Express) 11) Report on India’s online matrimonial search from M/S Juxt-Consult Online Research ; Advisory Company (an online research consultancy firm based in India) 12) http://www. bharatmatrimony. com 3) Modern Indian Culture and Society – an article by Knut Jacobsen (http://media. routledgeweb. com/pdf/9780415452199/9780415452199. pdf) 14) Information on online matrimonial services from Alexa, a web information company (www. alexa. com) 15) India Ministry of Information and Broadcasting (2009). India: a reference annual. New Delhi: Govt. of India 16) ComScore report on social networking sites in India (http://www. gauravonomics. com/blog/comscore-report-on-socialnetworking- sites-in-india) 7) India Wedding Planner (www. indiaweddingplanner. com) 18) “Beer market in India”, a report from MindBranch, a research firm based in US (www. mindbranch. com) 19) CIA World Fact-book (India page) 20) ‘About us’ and financial information pages of www. unitedspirits. in 21) Brewery Magazine http://www. breweryage. com/industry/ 22) Beer in India. http:// http://en. wikipedia. org/wiki/Beer_in_India 23) http://www. beerinstitute. org/statistics. asp? sid=2 24)