New Delhi: Entry of big companies such as Reliance Retail and Tata Consumer Products in the beverages segment is positive and will only help the category to expand, Coca-Cola President (India and Southwest Asia) Sanket Ray said on Tuesday.
The entry of the two home-grown majors is a “great opportunity” albeit with enhanced competition and Coca-Cola India would invest to develop the market further and bring innovations to evolve the category and ultimately benefit the consumers, he said here in an interaction.
Ray, however, said the entry of Reliance Retail and Tata Consumer Products can result in “some disruptions at the local level” leading to consolidation, but pricing will not be a game changer.
“This category penetration is one of the lowest in FMCG. Coke and Pepsi do not have enough budget to get into that,” he said when asked how the market dynamics would be with the entry of new players.
Reliance Retail had acquired the home-grown brand Campa Cola signalling its intention to enter the soft drinks market in India. TCPL, Tata group’s FMCG arm, is expanding its presence in the beverage market.
“If TCPL and Reliance come, they would put more money into the market. This category would expand from commercial to non-commercial level,” he added.
According to him, Coca-Cola and Pepsi together control over 65 per cent of the market and the rest 35 per cent is still controlled by other beverage makers.
“There is space for more players,” he said, adding, already new players like TCPL are doing well.
This would help bring in some consolidation at the local level, which he sees as “positive” as the larger players would bring more money in advertising and help the category to evolve finally.
Citing the examples of the spices segment, in which several FMCG companies such as Dabur, Emami, and ITC have entered, now the market has started moving towards branded from non-branded.
“For me, that’s a great opportunity,” he said, adding he respects TCPL and Reliance, which are top-rated companies and “space is there” for more players.
On the pricing pressure due to competition, he said, “Only pricing will not be a game changer. They will operate at different levels they would bring a lot of innovations and disruptions. It is good for the overall industry.”
When asked whether Coca-Cola may face stiff competition from Campa Cola in the modern trade format, as Reliance is the largest retailer in the country, Ray said it may get the initial first level of placement at their stores.
However, he said, stocks at the stores have to be rotated and “if the stock does not move then Reliance Retail also has to deliver the stockholder’s value as well”.
When asked about the rural demand, Ray said, now it is growing along with the urban market. Moreover, rural sales would also get help from good monsoons and increased government spending towards those areas.
However, he also added that lower price points are doing well and high price points are not doing well and hence there is pressure on larger packs.
Over Open Network for Digital Commerce (ONDC), Ray said: “We see a potential in that”. Coca-Cola is registering itself as a supplier on ONDC, which is an initiative of the government to promote an open platform for all aspects of the exchange of goods and services through electronic networks.
Presently around 2.4 per cent of sales come from e-commerce and it is expected to grow.
