Food & Beverages

Industry
Hindustan Coca-Cola
Beverages

Group 8 | Section E
Sakshi Baheti – PGP39236
Chirag Agarwal – PGP39239
Dhruv Somani – PGP39242
Divya Singh – PGP39243
Saumya Agrawal – PGP39268
Vatsal Mishra – PGP39279
Food & Beverages Sector Overview
F&B Segments Beverages Segments

Carbonated Soft Drinks Packaged Drinking Water Packaged Fruit Juice

Beverages Dairy Products Fruits & Vegetables

Agro-based Products Meat/ Poultry/ Seafood Bakery & Confectionary Energy drinks Club Soda Hot tea & cold coffee

Market Size projected to

Beverages Market - Key Statistics
Soft Drinks - Market Share
grow at a CAGR of 18.3%

Market Volume projected to grow at a

Coca-Cola
CAGR of 8.4%
6,93,630

PepsiCo Inc.
3,75,830

Industry witnessed growth of 16.9% in Bisleri

terms of value and 7.3% in terms of
volume in last 5 years Parle Agro Group

2023 2027 Others

About HCCB
Brief Background Key Information
Hindustan Coca-Cola Beverages (HCCB), a subsidiary of The Coca-
Cola Company, is a leading beverage producer in India, offering a President Year Founded Industry
diverse range of iconic brands like Coca-Cola and Thums Up. With Sanket Ray 1997 Beverages
a focus on sustainability and community development, HCCB
operates multiple manufacturing plants and engages in initiatives CEO Revenue (FY23) PAT (FY23)
such as water replenishment and women empowerment. Through
its extensive distribution network and strategic partnerships, HCCB Juan Pablo INR 12,700 cr. INR 809 cr.
remains committed to meeting the evolving preferences of Indian Rodriguez
consumers while driving growth and innovation in the industry.

Brand Portfolio
 Evolution of F&B Industry in India

GoI encourages growth of Liberalization increases FDI GoI imposes regulations Coca-Cola announces plans Coca-Cola is looking to
dairy industry by in beverage industry, on sale & consumption of to invest $5 billion in India divest bottling
promoting milk-based introducing a wide range of sugary drinks to address over the next few years to operations in all 16
beverages like lassi & international & domestic rising concerns about expand its presence in the manufacturing
flavored milk drinks brands obesity and diabetes country's beverage market facilities in India

1950s 1970s 1990s 2000s 2010s 2016 2018 2020s 2023

Coca-Cola & PepsiCo Growing health GST is implemented, COVID-19 leads trend
enter the Indian consciousness leads to impacting the beverage towards health &
market, introducing emergence of functional industry by standardizing wellness, increasing
carbonated soft drinks beverages such as herbal taxes across different demand for immunity-
like Coke, Pepsi, and teas, vitamin-enhanced states and simplifying the boosting beverages,
Limca water, and energy drinks tax structure for natural fruit juices, & low-
businesses sugar options
Future Opportunities in the Industry
Health &
Wellness Trend
Increasing awareness of health
& wellness is driving demand
for healthier beverages. Non-
alcoholic beverages with
benefits such as natural
ingredients, vitamins, minerals,
and antioxidants, are expected
to see substantial growth. This
includes products like herbal
teas, fruit-infused water,
coconut water, & probiotic
drinks
Consumer
Preferences
Consumer preferences are
evolving with a growing demand
for convenience, variety and
novelty in beverage choices.
Companies that offer
innovative flavors, unique
packaging and customizable
options to cater to diverse
tastes and preferences are
likely to gain a competitive edge
Govt. Initiatives &
Regulations
Government initiatives
promoting healthy alternatives
may influence consumer
choices & drive demand for the
alternatives. Taxation on sugary
drinks, mandatory labeling
requirements, and public
awareness campaigns about
the health risks associated with
excessive sugar consumption
could shape the future
landscape of the industry
Premiumization
and Specialty
Rising disposable incomes and
changing lifestyles are driving
demand for premium and
specialty beverages in India.
Consumers are willing to pay a
premium for high-quality,
artisanal, and exotic beverages
offering unique flavor
experiences. This includes craft
sodas, gourmet teas, specialty
coffees, and artisanal fruit
juices.
Porters Five Forces – Detailed Analysis
Degree of Rivalry Threat of New Entrants Threat of Substitutes

Factors Intensity Rating Factors Intensity Rating Factors Intensity Rating

Competitors High 4 Capital High 5 Availability High 5
Growth High 4 Brand High 5 Switching
Low 2
Capacity High 4 Distribution High 4 costs

Differentiation Low 2 Access Inputs Low 2 Price-value Low 2

Perishability Low 2 Technology Low 1 Innovation High 4

Total Moderate 3.2 Total M-H 3.75 Total Moderate 3.25

Buyers’ Power Suppliers’ Power Overall

Factors Intensity Rating Factors Intensity Rating Factors Intensity Rating

Concentration Low 2 Concentration Moderate 3 Rivalry Moderate 3.2

Information High 4 Labor High 4 Entrants M-H 3.75

Backward Integration Low 2 Substitutes Moderate 3.25

Low 2
Integration Buyers’ Power L-M 2.75
Financial
Pricing Moderate 3 High 4
Sources Suppliers’ Moderate 3.25
Total L-M 2.75 Total Moderate 3.25 Total Moderate 3.25
Industry Overview – Porters Five Forces

Force Intensity Comments

The market is concentrated with the top four leading players, The Coca-Cola Company, Pepsi Co, Inc., Parle
Degree of
Moderate Agro Group and Kali Mark battling alongside fast-growing challenger brands and regional players. The strong
rivalry
growth of the market might help to decrease the intensity of rivalry

Threat of Differentiating products to some extent is possible by stressing health benefits & taste. Although it would be
Moderate -
new difficult for a new entrant to compete with strong & established players, it may be possible to achieve small-
High
entrants scale success based on innovative production method or nutritional benefits

Substitutes primarily include 100% juices, fruit-based drinks, and RTD iced tea/coffee. Leading players tend
Threat of
Moderate to have diverse product ranges, which reduces the threat posed by substitutes. For example, Nestle is a
substitutes
major player in the coffee market as well as being a leading manufacturer of carbonated soft drinks

Consumers are price-conscious but also value convenience & ethical sourcing, creating complex purchase
Buyers’ Low -
decisions. The growing popularity of private label brands & online grocery shopping signifies increased
power Moderate
buyers’ power, pushing companies to differentiate through quality, branding & sustainability

Large F&B companies have greater bargaining power with suppliers of commodities like wheat or sugar,
Suppliers’
Moderate while smaller brands might face higher supplier margins. Geopolitical issues & climate change are disrupting
power
supply chains & increasing input costs, adding volatility to supplier dynamics & impacting profitability
HCCB - Critical Success Factors Assessment
HCCB Rating on F&B Critical Success Factors
Product Innovation (Speed, Time to Market) 18 products launched in 2018 (including variants)

Distribution Network 3500+distributors, 4.5M retailers

Brand Recognition & Loyalty 3M loyal customers, 58% market share

Product Range (Variety, Local taste adaptation) 37 products across 8 categories

Strict adherence to ISO Quality certifications, ASEBI equipment

Product Quality (Taste, Safety, Consistency)
for precise bottle inspections, COBRIX analyser for consistency
Carbon neutrality, PET recycling initiative, advanced waste
Sustainability Practices & CSR Activities
management

Regulatory Compliance FSSAI compliant

Large scale production provide cost leadership resulting in

Cost Efficiency (Economies of Scale)
product availability at affordable rates

Exclusive Rights & Trademarks “Pouring rights” agreement with L&T Metro Rail (Hyderabad) Ltd

Hit campaigns: Jo Chaho ho jaye, Coca-Cola enjoy!, Thanda

Marketing & Promotion (Online & Offline)
Matlab Coca Cola, Taste The Feeling, Open happiness

Legend
Low Rating High Rating
HCCB - Competitive Advantage Analysis

Resources Valuable Rare Inimitable Organized Competitive Advantage

Intellectual Property Sustained

(Product Formulation) Competitive Advantage

Competitive parity with

Brand Recognition
brands like Pepsico

Distribution Network Competitive advantage

Temporary
HR Practices
Competitive Advantage

Innovation and
Competitive Advantage
Product Development

Exclusive Sustained
Manufacturing Rights Competitive Advantage

Sustainability Initiatives Competitive Advantage

 HCCB - Value-Net Analysis
Customers Complementors
Individuals across age groups; B2B- HORECA*, Snack & Food Manufacturers, Dining & Entertainment
Cinemas, Supermarkets venues, Event Organizers (Sports, Concerts)

Competitors Suppliers
Direct- PepsiCo, Dabur, ITC, Parle Agro; Raw Material- sugar, flavorings; Equipment - Bottling
Indirect- Energy Drinks, Dairy based beverages & Packaging; Service- Logistics & Distribution

Players Added Value Rules Tactics Scope

Collaboration with FSSAI Regulations for food Opportunities to link with
Complementors “Coca- safety, Environmental Shape perceptions via markets like health
Cola India & Reliance Increase added value via laws, labor laws, & trade drinks, energy drinks
CSR initiatives, Marketing
Retail launch PET unique marketing agreements affect HCCB campaigns & Public
recycling initiative” campaigns tailored for the “Coca cola India
“Coca-Cola India Relations efforts
Indian market, & expands into alcohol
“HCCB refranchises 3 sustainability practices launches 100% rPET “Music in a bottle: Coke segment by launching
bottling operations” bottles in 250ml and Studio Bharat is adding
Complementors also add Lemon Dou “
750ml sizes” fizz to Coca-Cola”
B2B contracts value through brand
“Burger King to sign offerings & marketing “Installed reverse “Launched glucose and
Coca-Cola as its vending machines at “#MagicWaaliDiwali wish electrolyte-based
strategies
beverage partner in stadiums touchpoint to cards using AI” product called Limca
India” dispose PET bottles” Sportz”

*HORECA – Hotels, Restaurants and Cafes

HCCB - Triangle of Corporate Strategy
Assets, Skills and Capabilities Competitive
Segments and Industries
• Capabilities: Innovative & sustainable Advantage
• Segment: non-alcoholic beverages
manufacturing, vast distribution
• Main offerings: carbonated soft
network, market research & customer
drinks, juices, water & energy
relationship management
drinks
• Skilled workforce managing complex
• Forayed into alcoholic beverage
supply chains, marketing campaigns,
market by launching Lemon-Dou
product innovation & development
Vision
HCCB's vision aligns with Coca-
Cola Co's global vision to "refresh
the world and make a difference,"
which guides their strategic
decisions and initiatives.
Vision: becoming “Total Beverage
Company”

Coordination Control
Organization

Structure, Systems and Processes

• Product line based divisional organization structure
• Culture of collaboration & innovation
HCCB - Value Chain Analysis
Vast manufacturing footprint, multiple bottling plants equipped with state-of-the-art
Infrastructure
infrastructure
Support Activity

HR Management Special emphasis on training, month-long festival of learning initiated in September 2020

Technology
Implementation of IoT for real-time equipment monitoring & AI for predictive maintenance
Development

Strategic procurement to secure high-quality ingredients, negotiating long-term contracts

Procurement
with suppliers of key commodities like sugar and fruit pulps

Inbound Outbound Marketing &

Primary Activity Operations
Logistics
Maintaining quality High speed bottling
of raw materials lines to fill 1000
High-capacity bottling bottles per hour
lines at Pathankot
PepsiCo's dispensing
equipment at Gurgaon
Integrated advanced water ensures exact carbonation
treatment technologies to and syrup levels as per
ensure sustainability PepsiCo's global standards
Logistics Sales
Services
Vast distribution Mass marketing Extensive after-sales
network supplies to campaigns, such as services & consumer
remote regions “Share a Coke” engagement programs
Effective leveraging of Launching of Pepsi Black,
logistics to launch a no-sugar variant, with a
“Mountain Dew Ice” in digital-first marketing
remote regions of the strategy, leveraging social
country media influence
Comparison of Competitive Strategy with VBL
COST DIFFERENTIATION COST DIFFERENTIATION

Source of competitive
Cost Leadership Differentiation Cost Leadership Differentiation
Large volumes lead to low
BROAD

BROAD
SCOPE

SCOPE
Diverse products (Coca-Cola, unit costs Products differentiated via
Economies of scale &

advantage
Minute Maid, Kinley) Mass production in plants like India centric campaigns like
Extensive distribution
Products differentiated via that at Pathankhot IPL’s title sponsor
network
branding & positioning
Cost Focus Differentiation Focus
Cost Focus Differentiation Focus
NARROW

NARROW
No focus on niche market Encompassing focus on
SCOPE

SCOPE
Not adopted by HCCB Diverse portfolio, not focused
from cost perspective complete portfolio
Operates in a broad market, on a narrow market
No such focused strategies
not a niche market Differentiation across broad
market

EXISTING PRODUCT NEW PRODUCT EXISTING PRODUCT NEW PRODUCT

Market Penetration Product Development Market Penetration
Product Development

EXISTING
Growth Strategy
EXISTING

MARKET
MARKET

Prices at par with Recent foray into Strategy similar to HCCB

competitors & focus on alcoholic beverages Pricing at par with competitors No plans in the near
brand promotion for market Launch of “Lemon-Dou” Similar promotional activities future
penetration

Market Development Diversification Market Development Diversification

MARKET

MARKET

Can focus on rural markets No plans in the Acquisition of South Africa No plans in the near
NEW

NEW

which haven’t been tapped near future based The Beverage Company future
fully yet Bid to expand geographical
footprint
Operational and Financial Metrics
HCCB VBL
Particulars HCCB VBL Particulars
FY20 FY21 FY20 FY21
8 product categories 9 beverage categories Revenue 9,750 6,923 6,360 8,642
including carbonated including CSDs, NCBs,
Gross Profit 4,821 3,443 3,596 4,607
soft drinks (CSDs), energy drinks, packaged
Products offered packaged drinking water, drinking water, club soda, Gross Profit % 49.44% 49.74% 56.54% 53.31%
packaged fruit juice, sports drinks, dairy based
EBITDA 1,118 604 1,203 1680
energy drinks, club soda, beverages;
hot tea & cold coffee packaged snacks EBITDA margin % 11.47% 8.72% 18.92% 19.44%
Number of brands PAT 975 71 330 711
37 18
under portfolio
PAT margin % 10.00% 1.02% 5.19% 8.22%
45 lakh+ retailers and 38 lakh+ retailers and
Distribution network Ratios and WC
3500+ distributors 2400+ distributors
# of manufacturing Cash Conversion Cycle (in days) 46.1 25.3 67.1 66.7
16 34
facilities
ROE 19.13% 1.29% 9.60% 18.26%
International Nepal, Sri Lanka, Morocco,
- ROCE 18.15% 1.56% 9.17% 12.26%
Presence Zambia and Zimbabwe
Source: Business Standard, Industry Reports, Annual Reports Source: Bloomberg, Business Standard Amounts in INR crores

• Revenue Growth – HCCB reported revenue of ~INR 12,700 cr in • Cash Conversion Cycle – HCCB has better cash conversion cycle
FY23, demonstrating growth of 8.33% p.a. (5 year CAGR), as as compared to VBL due to better payment terms with suppliers.
compared to ~INR 15,600 cr for VBL which has shown a growth of
22.5% p.a. It could be attributed to the fact that HCCB has • EBITDA Margin – VBL enjoys a higher EBITDA margin as compared
divested its bottling plants in 3 regions to its existing franchises. to HCCB owing to lower sales and marketing costs.
Proposed Strategic Opportunity for HCCB
Whitespace for HCCB
Rising consumer demand for healthier drink options
that offer taste & flavor profiles resonating with local
preferences. HCCB can tap into this whitespace in
Non-Alcoholic-Ready-to-Drink (NATRD) segment by
offering beverages in traditional Indian flavors like
Kokum, Rose Sherbet, Masala Cola, Indian
Gooseberry etc. that are not yet fully explored.
As per EY, market size for non-alcoholic ready to drink
beverages will be INR 1427 Bn in 2030, growing at a
CAGR of 7.2%
Why & How to capture this space?
Strategic Alignment
By tapping into this segment, Coca Cola can extend the scope of its
current beverage portfolio potentially creating a category or sub-brand.
This is in-line with its strategy of divesting bottling operations like its
competitor PepsiCo & focusing on brands, innovation, marketing,
strategy and online presence
“HCCB revives plans to sell Coca-Cola's bottling business”
(January 2023)
Recommended Mode of Entry: Organic
• Competency: HCCB has required knowledge & infrastructure to
innovate as per taste & preference of Indian consumers
• Economies of Scope: HCCB’s established production, distribution &
marketing capabilities can be used for new category
• Brand Synergy: HCCB’s existing brand recognition can be leveraged to
gain consumer trust in new product extensions
• Quality Assurance & Control: Provides HCCB with complete control
over product development process, ensuring quality standards & trade
secrecy protocols are maintained as per global Coca-Cola guidelines
Thank You