A single - digit fall in sales in the first quarter of calendar 2017 after years of steady growth, and sudden implementation of steep Goods and services Tax rate of 40 percent, up from 32-33 percent before, have been a double whammy for the Coca - cola company in India.
The company is now trying to implement several new strategies to boost its performance. Krishna Kumar, the newly appointed president says, "My formula is to provide consumers a wider choice that is not limited to only sparking beverages ( Cola drinks category) and let them finally decide".
At the core of his strategy is an aggressive push into juices, entry into new categories like ethnic beverages, expanding the water portfolio to add fortified salts and minerals as well as flavours, pushing ready - to - drink tea, coffee and flavored milk.
Krishna Kumar's game plan is apparently simple. The branded juice business in India is only Rs 5000 crore, one fourth the size of sparkling beverages but its margins are nearly double that of colas at 15- 16 percent . However, coke's two juices brands Minute Maid and Maaza account for only 20 percent of the Rs 13000 - 14000 crore that it makes from sparkling beverages alone. Also, though the growth potential is huge, this market is ruled by the unorganized juice market.
The relatively smaller contribution of Coke's juice brands is partly a function of limited reach- packaged juices are available only in retail stores at a higher price compared with the fresh fruit juices available from roadside vendors. Krishna Kumar plans to expand the availability of juices from one million retail outlets currently to 2.6 million in next three years. Juices will be available at every outlet that also stocks sparkling beverages. The company has already introduced a value pack of Rs 10 for 200 ml.
Coke is also test marketing a range of new products and categories that the company hopes will eventually generate reasonable volumes. Aquaris, a brand of fortified water has been launched nationwide and is positioned as an expensive niche product ( Rs 30 for 400 ml). The company has been experimenting with cold tea ( Fuze Tea) from 2015 but with limited success. The same is true for pilot projects in flavored milk, where this category in India. Addressing the demands of health conscious consumers the company is also experimenting with a combination of stevia ( a leave used as a calorie -free sugar alternative) instead of sugar in drinks.
However beverage industry experts are not very enthusiastic about Krishna Kumar's ambitious game plan. They point out the key challenge for Coke will be to convince to stock the product. Unlie sparkling drinks, juices are slow - moving items that retailers may be reluctant to stock because it will block up their capital. Also Coke will have to put in a huge marketing effort to convince customers who prefer fresh juices to shift to a packaged juice. As for sugar- free sparkling drinks, expert agrue that, unlike the US or Europe , the demand is small - about Rs 250 crore ( less than 2 percent of sparkling beverages) and needs to be sustained by aggressive marketing . After all, India is still not a mature beverage market. Only 20 percent of the country's population has tested a branded beverage.
At coke , all of this will have to be done even as the company has decided to absorb the additional hit on account for higher taxes, 2017 could well be the year of Coke's biggest test.
a. Critically evaluate Krishna Kumar's strategies related to Coke's focus on non - cola product categories. You may use any theory/ framework taught in your Advanced marketing management class to explain your point of view.
b. What marketing strategy Coke should adopt to - (a) Shift consumers from fresh juice to packaged juice and (b) to increase its market share in flavored milk.
Market mix and market Orientation strategy.
Kumar employed a marketing orientation strategy by taking into consideration the consumer's needs and desires. However, he used the market mix method of providing massive varieties of drinks to add on the sparkling beverage for his customers to make their final choice during market testing. however, Kumar's strategies will not only improve the company's production but also fulfill the target buyers' demands.
1. Marketing strategy for shifting consumers from fresh juice to packaged juice is a competitive positioning strategy - Kumar plans to fill the market gap by replacing fresh juice which is expensive scarcely available in the Indian market with a package of fresh juice at an affordable price and easy accessibility will attract most consumers to shift to Kumar's new product.
2. Marketing strategy for increasing it is market share in flavored milk is the target market strategy- the strategy is based on segment targeting to satisfy the demands of health-conscious consumers.