Coca Cola Project

Coca-Cola in Rural India
Coke in India
Coca-Cola was the leading soft drink brand in India until 1977 when it left rather than reveal its
formula to the government and reduce its equity stake as required under the Foreign Exchange
Regulation Act (FERA) which governed the operations of foreign companies in India .
Coke Rural Initiatives

Coca-Cola India doubled the number of outlets in rural areas from 80,000 in 2001 to 160,000 in
2003, which increased market penetration from 13 per cent to 25 per cent.
It brought down the average price of its products from Rs 10 to Rs 5, thereby bridging the gap
between soft drinks and other local options like tea, butter milk or lemon water.
It doubled the spend on Doordarshan, increased price compliance from 30 per cent to 50 per
cent in rural markets and reduced overall costs by 40 per cent.
It also tapped local forms of entertainment like annual haats and fairs and made huge
investments in infrastructure for distribution and marketing.
Result: the rural market accounts for 80 per cent of new Coke drinkers and 30 per cent of its
volumes.
The rural market for Coca-Cola grew at 37 per cent over the last year, against a 24 per cent
growth in urban areas. Per capita consumption in rural areas has doubled in the last two years.
Thanda’ Goes Rural

In early 2002, CCI launched a new advertisement campaign featuring leading Bollywood star
Aamir Khan. The advertisement with tagline- ‘Thanda matlab Coca- Cola’ was targeted at rural
semi urban consumers.
The idea was to position Coca-Cola as a generic brand for cold drinks. The campaign was
launched to supports CCI’s rural initiatives.
CCI began focusing on the rural market in the early 2000s in order to increase volumes. The
decision was not surprising, given the huge size of the untapped rural india.
In an effort to make the price point of Coke within reach of this high-potential market, Coca-
Cola launched the Accessibility Campaign, introducing a new 200ml bottle, smaller than
thetraditional 300ml bottle found in urban markets, and concurrently cutting the price in half,
to 7.
This pricing strategy closed the gap between Coke and basic refreshments like lemonade and
tea, making soft drinks truly accessible for the first time.
Coke invested in distribution infrastructure to effectively serve a disbursed population and

doubled the number of retail outlets in rural areas from 80,000 in 2001 to 160,000 in 2003,
increasing market penetration from 13 to 25%.
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.
Availability
Once CCI 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.
However, CCI realized that this distribution system would not work in rural markets, as taking
stock directly from bottling plants to retail stores would be very costly due to the long distances
to be covered.
For transporting stock from spokes to village retailers the company utilized auto rickshaws and
cycles.
Commenting on the transportation of stock in rural markets, a company spokesperson said,

“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.
The company instead opted for a hub and spoke distribution system, Under the hub and spoke
distribution system, stock was transported from the bottling plants to hubs and then from hubs,
the stock was transported to spokes which were situated in small towns.
CCI not only changed its distribution model, it also changed the type of vehicles used for
transportation. The company used large trucks for transporting stock from bottling plants to
hubs and medium commercial vehicles transported the stock from the hubs to spokes.
Advertising Strategy
Coke realised that the communication media used in cities and urban areas would not work in
villages because of low penetration of conventional media.
Coke has estimated that TV access is 78.5 per cent in urban India but only 41per cent in rural
India Similarly, Cable & Satellite access in urban India is 51 per cent in urban India but only 14
per cent I rural India.
Coke considered alternative options, and decided to concentrate on 47,000 haats (weekly
markets) & 25,000 melas (fairs) held annually in various parts of the country.
Pepsi Vs Coke
The main competitor and rivalry of Coke is Pepsi, but if we the rural market, there are some
major regional players like Campa- Cola and others.
When Coke launched ‘Thanda matlab Coca-Cola’, suddenly Pepsi came up with ‘Thanda-
Chelaga Kya’.
PepsiCo too had started focusing on the rural market, due to the flat volumes in urban areas.
Like CCI, PepsiCo too launched 200 ml bottles priced at Rs. 5. Going one step ahead, PepsiCo
slashed the price of its 300 ml bottles to Rs 6/- to boost volumes in urban areas.
Future Prospects
CCI claimed all its marketing initiatives were very successful, and as a result, its rural
penetration increased from 29% in 2006 to 55% in 2010.
CCI also said that volumes from rural markets had increased to 55% in 20012.
The company said that it would focus on adding more villages to its distribution network.
For the year 2010, CCI had a target of reaching 0.10 million more villages. Analysts pointed out
that stiff competition from archrival PepsiCo would make it increasingly difficult for CCI to
garner more market share.
In early 2003, CCI announced that it was dropping plans to venture into other beverage
businesses.
Future Prospects
Company sources said that increasing volumes of cola drinks had made the company rethink its
plans of launching juice and milk-based beverages.
In 2006, CCI had announced plans to launch beverages such as nimbu paani (lemon juice), fruit
juice, cold coffee, and iced tea in collaboration with Nestle India.
Though CCI was upbeat on account of its early success in its drive to capture the rural market,
the question was whether the company would be able to take this success further.

Coca Cola Project

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Coca Cola Project

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Coca-Cola in Rural India

Coke Rural Initiatives

Thanda’ Goes Rural

Coke invested in distribution infrastructure to effectively serve a disbursed population and

Commenting on the transportation of stock in rural markets, a company spokesperson said,

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