Coca-Cola pushes further into India
The beverage giant is bullish on the country, seeing an untapped rural market and growing middle class as key growth drivers.
The company sees huge opportunities to grow, with some 700 million people in India living in rural areas. Coca-Cola projects almost a billion people will enter the middle class in the next decade there, and almost 800 million will move to the cities. The beverage giant is bullish on India as it sees the scarcely penetrated rural market and quickly growing middle class as the key drivers for growth.
Coca-Cola competes with companies like Pepsico (PEP) and Dr. Pepper Snapple Group (DPS).
Our price estimate for Coca-Cola is $75, implying roughly 10% upside to the current market price.
Coca-Cola has invested more than $1 billion on its Indian operations, and has consistently reported double-digit growth there for quite some time. In order to reach prospective rural customers, it is working on solving its supply-chain issues. It is also planning innovative ways to penetrate the interiors, keeping into consideration local tastes and its global brands.
We also wrote recently about its sales strategy in Transactions over volume in India, Coke's growth mantra.
We highlighted that focusing on transactions is a well-thought out strategy, especially for emerging nations like India, which have an ever growing middle class and a demographic profile that has a higher proportion of youngsters.
We believe this strategy would be successful, briefly discussed below:
- Coca-Cola is working on offering more affordable packs to build more transactions. This would help the beverage giant to penetrate middle class segment and younger generation in these markets.
- More affordable packs also ensure a strong presence in homes, which aligns with Coca-Cola's plans to penetrate rural India. There is a pent up demand for affordable and diverse offerings in these economies.
We believe developing strategies to penetrate rural India would prove a strategic fit for Coca-Cola in the long term.
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The company is scrambling to protect its equities arm, which could face declining volume and revenue as competitors close the gap.
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