Coke proposes Chinese model to its Indian Franchisees

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The new model involves pooling investments and setting up common manufacturing capacities, and would mainly be for non-carbonated drinks. Coca-Cola’s bottling arm, Hindustan Coca-Cola Beverages (HCCB), is not expected to invest in the shared-bottling model and will continue to operate independently.

“The company is discussing how the model can be implemented in India, but it will be a long-term initiative and is not likely to happen immediately,” a company official, requesting not to be named, said. “It would help in optimising delivery systems, realigning supply chain infrastructure to better meet consumer needs and create economies of scale.”

Under the proposal, independent bottlers would split their investments and share the returns equally among themselves. As bottling investments take about five-six years to bring returns, the move would help the bottlers in freeing large amount of money.

A Coca-Cola India spokesman said: “The Coca-Cola Company has various successful models of distribution and manufacturing of their products in different markets across the world. Some models have joint investment of bottlers as well as the company. In India, we do not have a shared- investment model.”

The Atlanta-based beverage maker’s top brass discussed benefits of shared resources and pooling investments with its franchisee bottlers last month in Shanghai, China. While Coke has 23 company-owned plants, 22 are operated by franchisees and 11 are contract packing units. The company’s overall investments in India stand at over $1 billion.

The model in India is expected to be mainly for non-carbonated drinks as maximum growth is expected to come from this segment. Coke’s non-carbonated portfolio includes Minute Maid and Maaza juice drinks, Kinley packaged water, and a dairy-based drink under the Maaza umbrella.

The beverage giant has already announced a ‘vision 20:20’ for its employees – which details multiple goals it hopes to achieve by the year 2020. As part of the ‘vision’, the company says it wants to ‘strengthen its franchise system to optimise marketing and distribution, effective and efficient manufacturing, supply chain and logistics operations. We believe that the franchise model is the best way to win in the marketplace. At the same time, the franchise model cannot remain static.’

About five years back, Coca-Cola India hived off its bottling into a separate division under HCCB to separate management responsibilities between the marketing and bottling side of the business to focus more on these two areas. While HCCB oversees all bottling operations, Coca-Cola India is in charge of marketing and strategy development.

Rival PepsiCo, meanwhile, last week announced a bottler integration exercise for its Gatorade sports drink – under which the beverage will be distributed through a direct store delivery system starting next year in the US and Canada.

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