INDIA: Coca-Cola Co's US$5bn investment may strain distribution - analyst
The Coca-Cola Co has upped investment plans in India
Plans by the Coca-Cola Co to expand in India could put pressure on its supply chain and distribution in the country, according to an analyst.
The soft drinks giant announced it was upping investment in India by US$3bn to $5bn over the next eight years yesterday (26 June). But this new injection could strain logistics despite India's improving infrastructure, Torsten Stocker, partner at consulting firm Monitor Group, told just-drinks today (27 June).
“Much of Coca Cola's investment might be focused on product innovation and aggressively building brands,” Stocker said. “The growth ambition would definitely put a strain on the supply chain and distribution.”
Stocker said Coca-Cola may want to focus on revamping its supply chain in India in the wake of accusations of contaminating groundwater, with sustainability at the core of its strategy.
“This would imply significant investment by Coca-Cola and its bottling partners, and may require Coca-Cola to partner with a much higher number of supply chain partners, social partners - such as NGOs - and developing them."
Stocker said Coca-Cola is “betting big” in India because of the country's enticing growth figures.
He said the RTD non-alcoholic beverage market is expected to post double-digit growth in the near future, thanks to favourable demographics and improving transport links.
The growth potential has increased competitiveness in the country, with PepsiCo and domestic company Rasna expanding their presence to high-value beverages such as fortified drinks, Stocker said.
Growth is most likely to come from non-carbonated beverages such as fortified and “healthy lifestyle” drinks, he added.
Companies are keen to tap into India's 1.2bn population that shows room for major growth. In his speech announcing the extra investment yesterday, Coca-Cola CEO Muhtar Kent said Indians on average drink only 12 eight-ounce bottles of brand Coca-Cola a year.
In 2020 it is predicted the age of the average Indian will be 29, compared to 37 for Chinese.
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