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Coca-Cola in India: Innovative Distribution Strategies

with ‘RED’Approach

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Purchased for use on the Sales & Distribution Management, at Reliance Foundation Institution of Education and Research - Jio Institute.
“Now Coke’s RED execution – done in big cities through direct distribution by the company – is
followed by the sales teams of both its company-owned and franchise-owned bottlers. Essentially,
this plan covers its visi-coolers, the availability of beverages and activation.”1

– T. Krishnakumar, CEO, Hindustan Coca-Cola Beverages Pvt. Ltd.

“No consumer goods company today can afford to forget that the rural market is a very big part of the

Taught by Mudit Mathur, from 23-Jul-2024 to 30-Nov-2024. Order ref F511975.

Indian consumer market. You can’t build a presence for a brand in India unless you have a strategy for
reaching the villages.”2

– Jagmohan Singh Raju, Professor of Marketing, The Wharton School

Educational material supplied by The Case Centre

The Coca-Cola Company (TCCC) had started building its global network since 1920s and in the
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process entered into the Indian market in the early 1950s. However, disputes with the Indian
government forced TCCC to leave India in 1977. Economic reforms during the 1990s paved way for
Coca-Cola to re-enter the Indian market after 16 years in 1993. Since then Coca-Cola India (CCI)
had made huge investments and expanded its operations in India matching its global system – the
Coca-Cola System.
Over the years, CCI had built its strong distribution system consisting of company-owned, franchised
and contract manufactures and distributors. With its focus on effective execution, in 2006, CCI
introduced ‘Right Execution Daily’ (RED), a distribution plan which boosted the sales of its products
in urban markets through efficient brand displays and visibility programmes. India, being a predominately
rural economy and all major MNCs targeting the potential rural markets with their products, CCI
was no exception. It made its presence felt in the rural markets of India with its unique marketing
and distribution strategies. It further plans to implement RED in these markets. However, the question

1
Kamath Vinay, “How Coke’s growth got a RED boost”, http://www.thehindubusinessline.com/2010/02/12/stories/
2010021251780100.htm, February 12 th 2010
2
“Marketing to Rural India: Making the Ends Meet”, http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4172,
March 8th 2007

This case study was written by Fareeda and Syed Abdul Samad under the guidance of Dr. Nagendra V. Chowdary, IBSCDC. It is intended
to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.
The case was compiled from published sources.

© 2010, IBSCDC.
No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever
without the permission of the copyright owner.

case centre Distributed by The Case Centre All rights reserved e [email protected] t +44 (0)1234 750903 or +1 781 236 4510 w www.thecasecentre.org
 510-062-1
Coca-Cola in India: Innovative Distribution Strategies...

to be answered is – what are the challenges that the company might face in reaching out to the
customers in Indian rural markets and how far can RED be extended to rural India?

Coca-Cola’s Effective Distribution System

Coca-Cola, the world famous and best tasting cola product originated as soda fountain beverage

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in 1886, in Atlanta, US.3 TCCC is the largest beverage company in the world with its operations

Purchased for use on the Sales & Distribution Management, at Reliance Foundation Institution of Education and Research - Jio Institute.
spread in more than 200 countries.4 It leads the beverage markets in the world benefiting from its
broad reach and scale. It markets nearly 500 global brands such as Coca-Cola, Sprite, Fanta, Maaza,
etc., and more than 3,000 beverage products including sparkling cola drinks, juices, sports drinks and
energy drinks.5 With the largest product portfolio, Coca-
Cola allows the people across the globe to enjoy its Exhibit I
beverages for about 1.6 billion times a day. 6 The The Coca-Cola System

Taught by Mudit Mathur, from 23-Jul-2024 to 30-Nov-2024. Order ref F511975.

company has been able to create a global reach with
local focus through its ‘Coca-Cola System’ strength,
consisting of the company, bottling partners and Our Our Our
customers (Exhibit I). Coca-Cola manufactures the Company Bottlers Customers
concentrates, beverage bases and syrups and sells them
Educational material supplied by The Case Centre

to the bottling partners. It owns the brands and focuses

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on marketing the brands to reach the consumers. It Source: “The Coca-Cola System”, http://www.thecoca-colacompany.com/
works with around 300 bottling partners ranging from ourcompany/the_cocacola_system.html
international, regional to family-owned operations,
responsible for producing, packaging, distributing and merchandising its products worldwide forming
the world’s largest beverage distribution system.7 Its customers are retail stores, restaurants, drug
stores, etc., who in turn sell its products to end consumers.
The bottling partners are the essential entity of Coca-Cola System who produce and distribute
the company’s products. The company also has a small size bottling operations of its own; however,
most of the operations are done by its bottling partners. In 2008, about 78% of Coca-Cola’s worldwide
unit case volume (volume of cases ) was produced and distributed by bottling partners not owned by
company (i.e., Coca-Cola had no ownership interest or a non-controlling equity interest in bottlers).8
These bottlers, formed in partnership with the company, work closely with its customers to carry out
localised marketing plans.
In its 123 years of operations, TCCC has been serving consumers around the globe applying a
simple formula: provide a moment of refreshment for a very small amount of money – a billion

3
“History of Bottling”, http://www.thecoca-colacompany.com/ourcompany/historybottling.html
4
“2008 Annual Review”, http://www.thecoca-colacompany.com/investors/pdfs/2008_annual_review/2008_annual_review.pdf,
page 11
5
Ibid., page 42
6
“Growth, Leadership and Sustainability”, http://www.thecoca-colacompany.com/ourcompany/index.html#tab1
7
“The Coca-Cola System”, http://www.thecoca-colacompany.com/citizenship/the_coca-cola_system.html
8
Ibid.

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times a day.9 The company’s presence across geographies,

Exhibit II
lifestyles and age groups provides tremendous opportunities
Coca-Cola Beverages’ Per Capita
to expand. The market cycles in different markets help the
Consumption Increase over a Decade
company to balance its business. For instance, a challenging
market in North America in 2008 was offset with its strong 1998 2009
results from the markets of Latin America and Eastern

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India 3 7
Europe. In the same year, more than half of the company’s

Purchased for use on the Sales & Distribution Management, at Reliance Foundation Institution of Education and Research - Jio Institute.
unit case volume has been accounted for by the emerging Indonesia 8 13
markets due to their increasing per capita consumption of Nigeria 29 27
the company’s products (Exhibit II).
China 8 28

Coca-Cola India: Distribution System Kenya 31 36

Coca-Cola entered India in early 1950s giving the Indian Egypt 31 49

Taught by Mudit Mathur, from 23-Jul-2024 to 30-Nov-2024. Order ref F511975.

consumers a taste of its sparkling cola drink for the first time. Russia 21 69
Benefiting from being an early entrant, it was the leading soft
drink brand in the country until 1977. In 1977, Coca-Cola left Morocco 65 81
India due to the increasing pressure from the Indian Thailand 60 81
Educational material supplied by The Case Centre

government to reveal its product formula and reduce its equity

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Total World 65 85
stake under Foreign Exchange Regulation Act (FERA) (which
governed the foreign companies’ operations in India). Post- Source: “2008 Annual Review”, http://www.thecoca-
liberlisation, in 1993, Coca-Cola re-entered India with a strategy colacompany.com/investors/pdfs/2008_annual_review/
to regain its earlier position by overtaking Pepsi and local 2008_annual_review.pdf, page 29
marketers, who rose in its absence.
In the same year, to quickly capture the market, CCI acquired Thums Up, the most trusted and
leading local brand launched in 1977 by Parle Agro Pvt. Ltd.10 Coca-Cola cemented its presence in
India with the ownership of Thums Up and its bottling network. Besides, Thums Up, it acquired other
popular local brands such as Limca, Maaza, Citra and Gold Spot which not only increased its
manufacturing, bottling, and distribution assets but also gained strong consumer preferences. Since
then Coca-Cola with the combination of its local and global brands (like Coca-Cola, Sprite, Fanta, etc.)
started tapping the Indian markets with global as well as Indian tastes/flavours. The low per capita
consumption of its products also provided more potential for growth in India than in any other country.
During 1993–2003, CCI invested more than $1 billion – to build new production facilities, waste
water treatment plants, distribution systems and marketing channels –becoming one of the major
investors in the country. With its extensive operations, CCI achieved break even in 2002, with a
volume growth of 39% – while the average industry growth was only 23%.11 Encouraged by this
positive performance, the company, in 2003, invested another $100 million to hone its operations.12

9
“The Chronicle of Coca-Cola”, http://www.thecoca-colacompany.com/heritage/chronicle_global_business.html
10
“Our Brands”, http://www.coca-colaindia.com/brands/brands_thumsup.aspx
11
“Coca-Cola India”, http://mba.tuck.dartmouth.edu/pdf/2004-1-0085.pdf, page 4
12
“Coca-Cola in India”, http://www.coca-colaindia.com/aboutus/aboutus_ccindia.aspx

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CCI’s Urban Market Distribution System

The growth in the sales volume of CCI was attributed to its unique pricing and distribution strategy.
For instance, to ensure price affordability, the 300 ml Returnable Glass Bottle (RGB) priced INR 10,
in 2003, CCI launched the 200 ml RGB package at INR 5. With this ‘small Coke’ strategy, the gap
between the soft drink and other local options (such as tea, buttermilk and lemon juice priced between

Usage permitted only within these parameters. This PDF may not be reproduced, stored in a retrieval system, or uploaded to any LLM (e.g. ChatGPT).
INR 3–INR 5) was reduced, boosting its sales across the country – mainly in small towns and rural
areas. The small Coke was a big hit accounting for nearly 50% of the total soft drink sales of the

Purchased for use on the Sales & Distribution Management, at Reliance Foundation Institution of Education and Research - Jio Institute.
company by 2005.13
Though its INR 5 pack was a success, CCI was struggling with declining sales volumes since
2003, due to the big controversy over the use of pesticides in its products. CCI was also running
into more complex problems, affecting its image with allegations ranging from indulging in unethical
business practices to polluting the environment, tax evasion and even running inappropriate

Taught by Mudit Mathur, from 23-Jul-2024 to 30-Nov-2024. Order ref F511975.

commercials depicting ‘eve-teasing’.14 Sanjay Gupta, the then CEO, CCI, reported, “The pesticide
problem was a blow to Coke’s goodwill in the country, so much so that the smart pricing strategy
of selling a bottle for INR 5 began wavering. Subsequently, volumes fell drastically, turning revenues,
costs and margins awry. Soon, rising prices of key inputs such as sugar and vegetable oil dealt
another blow. The company was forced to pull back from the ‘cheap cola’ strategy and hike
Educational material supplied by The Case Centre

prices by 20% (to INR 6).”15

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In 2006, CCI implemented a significant turnaround strategy and registered a 14% volume growth
in 2007. The company increased the prices of its brands by 14%.16 As per Neville Isdell, chairman of
the board, TCCC, “…Coca-Cola India is already implementing a significant turnaround strategy,
which includes reworking its marketing and distribution strategy and aggressive advertising as well
as expanding the product mix to become a ‘complete non-alcohol beverage’ company. This will help
[stabilize] volumes in India during the coming months of the year.”17 CCI also increased its advertising
spends from INR 80 crore in 2006 to INR 120 crore and launched a corporate campaign showcasing
all its beverage brands under a common tagline ‘Little Drops of Life’.18
In 2007, the CCI implemented the five-point growth plan with an investment of $250 million for the
next 3 years. Atul Singh, president and CEO, CCI, said, “In the past four consecutive quarters, we have
reported good growth, with the last quarter clocking 12% in India. To enhance it further, our new
initiative will follow a five-point strategy involving people, planet, portfolio, partners and performance.”19
Speaking of the investments made by the company, he further added that, “...brand-building, sales,

13
Bhandari Bhupesh and Vivek T. R., “Our distribution is as good as HLL’s: Coke CEO”, http://www.business-standard.com/india/
news/our-distribution-is-as-good-as-hll%5Cs-coke-ceo/152067/, May 21 st 2004
14
Basu Indrajit, “Coke still floundering in India”, http://www.atimes.com/atimes/South_Asia/HF23Df03.html, June 23 rd 2006
15
Ibid.
16
Mehra Priyanka, “Coca-Cola India sales increase 18%, point to turnaround”, http://www.livemint.com/2008/02/14232858/
CocaCola-India-sales-increase.html, February 14 th 2008
17
“Coke still floundering in India”, op.cit.
18
“Coca-Cola India sales increase 18%, point to turnaround”, op.cit.
19
“Coca-Cola looks to India for global services”, http://www.hindu.com/2007/08/18/stories/2007081856761600.htm, August
18 th 2007

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equipment, infrastructure like coolers and bottling lines, trucks and other distribution related materials
would be the primary focus and priority investment areas.”20
The operations of CCI consists of 50 bottling plants spread across different states, responsible
for the manufacture, sale and distribution of its products across the country. The company owns 25
of them which are grouped under its bottling arm Hindustan Coca-Cola Beverages Pvt. Ltd. (HCCBPL)

Usage permitted only within these parameters. This PDF may not be reproduced, stored in a retrieval system, or uploaded to any LLM (e.g. ChatGPT).
and the remaining 25 are franchisee-owned. Besides the bottling operations, the company also has a
network of 21 contract manufacturers who manufacture and pack its products. The CCI uses a

Purchased for use on the Sales & Distribution Management, at Reliance Foundation Institution of Education and Research - Jio Institute.
range of vehicles from 10-tonne trucks, open-bay three wheelers to trademark tricycles and push
carts to reach the retailers in every nook and corner of the country.
CCI uses the centralised distribution system to distribute its products in metros and urban
cities. The company distributes its products directly from bottling plants or contract packers to the
customers (retail stores, restaurants, etc.) who retail them to end consumers. It uses large trucks

Taught by Mudit Mathur, from 23-Jul-2024 to 30-Nov-2024. Order ref F511975.

to transport the products to the customers, who usually order in bulk. The cost of distribution is
borne by both the company and its
bottling partners investing in Exhibit III
vehicles travelling long distance to Distribution Chain and Routes
reach its potential customers. The
Educational material supplied by The Case Centre

Production Plant Warehouse Depot Warehouse

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distribution channels are set up in

such a way that they can cater to Distribution Warehouse Retail Stock Retail Shelf Consumer
customers anytime, anywhere.
They have a wide network of Distribution Routes
well-managed sales teams with the Route Type Customer Type Quantity Lead Time
responsibility of distributing Clubs, restaurants,
Bulk quantities in
products to diverse parts of the Key Accounts hotels and corporate Monthly
single transaction
cities. CCI divides its customers houses
into different routes and different Future Departmental stores and Stock are stacked to 15 days or
types (such as clubs, hotels, Consumption supermarkets avoid shortages weekly
supermarkets, etc.) and assigns a Small size bars and Medium size
Immediate
sales team to a particular route. The restaurants, educational quantities with high Daily
Consumption
routes of distribution and the institutions consumption rate
product delivery are based on Neighbour outlets of the
Not
consumption quantity and lead time General above customers types As required
considered
of ordering by the potential in any particular route
customers (Exhibit III).
Compiled by the authors from http://www.scribd.com/doc/18631036/Summer-Project-in-
Along with its strength of REDRight-Execution-Daily-outlet-of-COCACOLAPatna-AMIT-KRISHNA
extensive distribution network in
metropolitan and large town population, CCI communicates through aspirational messages such as
Life ho to aisi (Life as it should be). The company’s performance is also attributed to its effective
execution of its distribution plans.

20
“Coca-Cola looks to India for global services”, op.cit.

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Implementing the ‘RED’

Since 2006, CCI has been growing consistently posting double digit growth as a result of its
effective distribution plans. In pursuit of excellence, CCI implemented ‘Right Execution Daily’ (RED)
strategy in 2006. RED helped CCI to post 10%–15% incremental sales annually.21 The Coca-Cola
Hellenic, fourth-largest bottler of TCCI, highlights the traits of RED in its Annual Report 2008 as,

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“This programme monitors, at the individual outlet level, how well we implement and maintain our
merchandising standards. Furthermore, it helps us identify opportunities

Purchased for use on the Sales & Distribution Management, at Reliance Foundation Institution of Education and Research - Jio Institute.
to make immediate improvements that support growth for our customers Exhibit IV
and us. RED is just one part of our efforts to enhance revenue growth CCI’s Visi-Cooler
opportunities by optimising the combination of brand, package and price
for each consumption occasion.”22
CCI implements its RED strategy mainly in metros and urban areas

Taught by Mudit Mathur, from 23-Jul-2024 to 30-Nov-2024. Order ref F511975.

through direct distribution. The sales teams of CCI (including both the
company-owned and franchised) visit the retail outlets (customers)
separately and help the company in RED execution which involves the
right placement of visi coolers23 (Exhibit IV), checking the availability
of products in the stores and activates24 company’s brands through
Educational material supplied by The Case Centre
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offers and price messages. Explaining the strategy, T. Krishnakumar,

CEO, HCCBPL, says, “RED is nothing but the power of routine. Many
companies falter at the stage of execution and a Coke old-timer recalls
that the earlier focus was on just making the brands available at the
retailer outlet through a conventional distributor-led model with no control
of how the brand was displayed nor on what else the retailer dumps in
a Coke visi-cooler.”25
The company’s sales team works with the owners of the outlets to
ensure the visibility, availability and activation of the brands. They ensure
that retailers maintain hierarchy in displaying brands – for instance,
Coke on top, followed by other sparkling beverages such as Thums
Source: Kamath Vinay, “How Coke’s growth got a RED
Up, next the juices such as Nimbu Fresh and Maaza and then Kinley
boost”, http://www.thehindubusinessline.com/2010/02/
water at the bottom of the visi-cooler.26 In this regard, a member of 12/stories/2010021251780100.htm, February 12th 2010
the Coke sales force in the context of modern trade, whether it is a
small kirana, a bakery or a restaurant explained, “it is important that the brand be visible and
appealing to a potential customer. The Coke force works with retailers to ensure the cooler is in

21
“How Coke’s growth got a RED boost”, op.cit.
22
“Teamwork for Success”, http://www.coca-colahellenic.com/Download.aspx?ResourceId=36674, 2008
23
Huge transparent fridge which displays the CCI products.
24
Activation is the marketing activity increasing the visibility of the brands through store displays, contests, offers and price
message displays.
25
“How Coke’s growth got a RED boost”, op.cit.
26
Kamath Vinay, “RED programme: Coke says nothing left to chance”, http://www.thehindubusinessline.com/2010/02/12/
stories/2010021251870200.htm, February 12 th 2010

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prime position, especially in outlets that exclusively stock only Coca-Cola brands.”27 Besides, the
approach also ensures placing the signages or hoardings of the brands communicating the offers
(such as combo shots) and price messages at the entrance of the store increasing the sales.
CCI ranks its customer outlets as diamond, gold, silver or
bronze in its distribution region based on the volume of
Exhibit V
Coca-Cola India Customer Type Based on

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beverages sold by the outlets (Exhibit V). For instance, CCI
ranks Thalapakkatu Biryani outlet in Chennai as diamond for
Volume Sales

Purchased for use on the Sales & Distribution Management, at Reliance Foundation Institution of Education and Research - Jio Institute.
its sales of 800–1,000 cases of Coca-Cola products in a year.28 Customer Type (Rank) Sales Volume (annual)
The visi cooler which accommodates about 30 cases is
increasing the visibility of the company’s brands and driving Diamond More than 800 cases
sales. Mohideen Noble, owner of the outlet says, “The huge Gold 500–799 cases
fridge is driving sales as customers with parched throats can
Silver 200–499 cases
see and pick a brand of their choice.”29

Taught by Mudit Mathur, from 23-Jul-2024 to 30-Nov-2024. Order ref F511975.

Bronze Less than 200 cases
Though RED is the common programme among FMCGs,
the difference is the intensity of execution kept up by CCI. Note: One case occupies 24 bottles of 8 ounces each
Out of the 12 lakh outlets through which CCI products are
Compiled by the authors from “Summer Project in RED(Right
distributed, only 3 lakh follow RED approach. One of the
Educational material supplied by The Case Centre

Execution Daily) outlet of COCA-COLA, Patna – AMIT

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customers of CCI explains, “The top-of-mind brand will be

KRISHNA”, http://www.scribd.com/doc/18631036/Summer-
asked for. If it is not available or it is not chilled/cold, the P r o j e c t - i n - R E D R i g h t - E x e c u t i o n - D a i l y - o u t l e t - o f -
consumer easily moves onto other options. That’s why this COCACOLAPatna-AMIT-KRISHNA, page 40
activity is so crucial for soft drinks.” 30 Though RED is
boosting the sales, it is increasing the costs such as sales force recruitment, visiting cost, training
cost, etc. However, T. Krishnakumar believes that, “In the long run it’s a cost that pays for itself.
We had to increase the sales force initially but with added revenues, they pay for themselves. It
becomes a virtuous cycle.”31 With successful implementation in the cities, now CCI is also planning
to implement RED in rural markets and investing in the infrastructure along with distribution,
logistics and transportation.

Potentials of Indian Rural Markets: Coca-Cola’s Challenges

Coca-Cola, identifying the potential underlying the least tapped, highly populated rural markets,
started serving them. MNCs are attracted towards rural markets, as they account for the country’s
74% of population, 41% of its middle class, 58% of its disposable income and a large consumer
class.32 The increasing purchasing power of the rural consumers is leading to the market growth at
a rate of 3%–4% annually, adding about 1 million new consumers every year, increasing consumption.33

27
“How Coke’s growth got a RED boost”, op.cit.
28
Ibid.
29
Ibid.
30
“RED programme: Coke says nothing left to chance”, op.cit.
31
Ibid.
32
“Corporates turn to rural India for growth”, http://www.rediff.com/money/2003/aug/21rural.htm, August 21 st 2003
33
Jain Nimnish, “Rural market has immense potential”, http://toostep.com/trends/rural-market-has-immense-potential

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As per Pankaj Gupta, practice head, Consumer and Retail, Tata Strategic Management Group,
“Several factors have led to an increase in rural purchasing power. The increase in procurement
prices has contributed to a rise in rural demand. A series of good harvests boosted rural employment
in agricultural and allied activities, government schemes, loan waivers increase in rural purchasing
power is reflected in rural growth across a number of categories.”34

Usage permitted only within these parameters. This PDF may not be reproduced, stored in a retrieval system, or uploaded to any LLM (e.g. ChatGPT).
The increase in purchase power of rural consumers reflected growth across different categories.
For instance, FMCGs grew at 23%, durables at 15%, telecom at 31%, etc.35 The rural consumers

Purchased for use on the Sales & Distribution Management, at Reliance Foundation Institution of Education and Research - Jio Institute.
are increasing their spending across different categories with their consumption patterns similar to
the urban consumers. According to MART, a New Delhi-based research organisation, rural India
buys 46% of the soft drinks sold, 49% of motorcycles, 59% of cigarettes and 11% of lipstick.36 This
increasing spend on utilitarian and luxury products encouraged the MNCs to penetrate largely into
the high potential rural markets.

Taught by Mudit Mathur, from 23-Jul-2024 to 30-Nov-2024. Order ref F511975.

CCI increased its efforts to serve the rural markets, concerned by its stagnant growth in the
urban markets since 2001. It increased the number of outlets in rural areas from 80,000 in 2001 to
160,000 in 2003 increasing its penetration from 13% to 25%.37 The efforts resulted in CCI’s growth
in rural market to be at 37% whereas just 23% in urban markets. However, CCI claims to have
reached only one-fourth of the rural market, providing huge potential for the company to develop
Educational material supplied by The Case Centre

effective rural marketing strategy.38 It changed its marketing, advertising and distribution strategies
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accordingly to suit the rural customers and adopted the 4As strategy– Affordability, Availability,
Acceptability and Awareness.
To make its products affordable to the rural consumers, CCI introduced INR 5 Coke packs throughout
its rural outlets. This increased the consumption of the soft drink in the rural areas occupying 30% of
CCI’s volumes and tapped in 80% of the company’s new users from rural areas.39 To support this
strategy, a series of advertisements were run on television featuringAamir Khan depicting people from
different backgrounds with tagline ‘Thanda Matlab Coca-Cola’ (cold means Coca-Cola).
CCI even modified its distribution chain ensuring availability of its products in rural areas. There
are about 627,000 villages in India spread across 3.2 million sq. km., which means the distributors
have to travel about 200 km. to reach just five shops with drop sizes of less than a case.40 To
overcome the above challenge, CCI shifted its distribution to the three tier ‘hub and spoke’ model
from its centralised distribution model as travelling long distances would affect the company’s costs.
The company appointed large distributors (hub) who supply the full loads from the company plants
to large towns or cities often weekly. These distributors again appointed small distributors (spokes)

34
“Why Companies See Bright Prospects in Rural India”, http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4386,
June 18th 2009
35
Ibid.
36
“Marketing to Rural India: Making the Ends Meet”, op.cit.
37
“Corporates turn to rural India for growth”, op.cit.
38
“Marketing to Rural India: Making the Ends Meet”, op.cit.
39
Ibid.
40
“Corporates turn to rural India for growth”, op.cit.

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Coca-Cola in India: Innovative Distribution Strategies...

carrying loads once in a week from large distributors in towns to adjoining areas. The small distributors
then hire rickshaws, cycles or bullock carts to carry the products to the village retailers on daily basis.
Coke spokesperson commented, “We use all possible means of transport that range from trucks, auto
rickshaws, cycle rickshaws and hand carts to even camel carts in Rajasthan and mules in the hilly
areas, to cart our products from the nearest hub.”41 The company invested in glass bottles and large
vehicles in accordance with the new distribution model. Company official comments, “We also modified

Usage permitted only within these parameters. This PDF may not be reproduced, stored in a retrieval system, or uploaded to any LLM (e.g. ChatGPT).
the use of our returnable glass bottles to meet the demands of the hub-and-spoke model.”42 CCI re-

Purchased for use on the Sales & Distribution Management, at Reliance Foundation Institution of Education and Research - Jio Institute.
engineered its bottles, lowering its weight by 10% with a yield in shipping and transportation expenses.43
In this decentralised mode of distribution, the small distributors bear the cost of distribution which
earlier was the company’s responsibility. This is an advantage to the company as it accrues long-
term benefits of penetration without any costs. As an industry analyst opines, “Thanks to larger
loads, savings in distribution expenses and a lower price point, the whole [Coke] proposition is very
attractive.”44 The new model even addresses the problem of working capital of the retailers in the

Taught by Mudit Mathur, from 23-Jul-2024 to 30-Nov-2024. Order ref F511975.

villages with its small drop sizes and frequent deliveries.
To further increase its product’s availability and acceptance among rural consumers, CCI provided
low-cost ice boxes to retailers in rural areas. Providing chilled beverages posed as a challenge for
the company due to lack of refrigerators and proper electricity supply in rural areas. To provide
Educational material supplied by The Case Centre
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chilled products to its consumers in the rural areas, CCI introduced ice boxes instead of refrigerators
as there are frequent power cuts. It provided both tin boxes costing around INR 1,000 for new
outlets and thermocol boxes costing less than INR 300 for seasonal outlets. This helped the company
to increase its consumer base in the rural areas.
The company’s innovative distribution and pricing initiatives are supported by its extensive marketing
efforts, creating awareness in the rural areas. It used a combination of TV, radio and cinema to
reach the rural households, positioning its beverage as a generic cold drink. The company even used
the unconventional media promotions through rural trade fairs and festivals, village road shows,
haats (fairs), etc. It even stuck posters on cinema vans, village market places, wells and public areas
increasing its brand visibility (Exhibit VI).
Despite its strong efforts to penetrate in rural India, CCI claims to have reached only 25% of
the potential market, providing a huge scope for the company’s growth.45 The expected increase
in income of the rural consumers at CAGR of 12% from $220 billion in 2004–2005 to $425 billion
in 2010–2011 will boost the growth of CCI.46 John Sicher, editor, Beverage Digest believes, “As

41
“Colas’ countryside crusade”, http://www.thehindubusinessline.com/catalyst/2003/07/03/stories/2003070300160300.htm,
July 3rd 2003
42
Jacob G Anil, “Picking Rural Pockets”, http://www.business-standard.com/india/news/picking-rural-pockets/160503/, April
22 nd 2003
43
“How Coca-Cola Became ‘The Real Thing’ in India”, http://knowledge.emory.edu/article.cfm?articleid=822, November 3 rd
2004
44
“Colas’ countryside crusade”, op.cit.
45
“Marketing to Rural India: Making the Ends Meet”, op.cit.
46
“Why Companies See Bright Prospects in Rural India”, op.cit.

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Coca-Cola in India: Innovative Distribution Strategies...

consumers get wealthier, Coke becomes more and more affordable and the growth becomes
more achievable.”47

Exhibit VI
CCI’s Product Promotions in Rural Markets

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Video Vans

Purchased for use on the Sales & Distribution Management, at Reliance Foundation Institution of Education and Research - Jio Institute.
Painting Public Places –
Public Wells

Taught by Mudit Mathur, from 23-Jul-2024 to 30-Nov-2024. Order ref F511975.

Educational material supplied by The Case Centre
Copyright encoded A76HM-JUJ9K-PJMN9I

Painting an Outlet Increasing Visibility

Compiled by the authors

To capture this growing market, CCI is taking initiatives such as parivartan (change) programme,
developing products customised as per local tastes and stepping up distribution. As part of the
parivartan programme, launched by Coca-Cola University, the company gives training to the small
town retailers on displaying and stocking products well. The company offering its small size affordable
products in rural areas is also planning to distribute the 200 ml bottles, which are becoming popular
among rural consumers. Given the changing scenario of retail in India, especially in rural India, CCI
is investing in infrastructure and distribution. The company is planning to get more coolers installed in
the stores of the retailers to increase the availability and visibility of its brands. Once the infrastructure
required like roads, electricity, etc., is done, the company can implement RED effectively. However,
with problems of transportation, frequent power cuts and small drop size requirements spread across
the length and breadth of rural India, the viability and effectiveness of RED, still raises apprehensions.

47
Fredrix Emily, “Coca-Cola eyes emerging middle class for growth”, http://www.livemint.com/2009/11/17224607/CocaCola-
eyes-emerging-middle.html?d=1, November 17 th 2009

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