NEW DELHI: The restructuring at Coca-Cola India appears far from over. After hiving off the bottling operations earlier this year, the Atlanta-based soft drink giant has now decided to infuse fresh equity.
Its request to infuse up to Rs 550 crore in Hindustan Coca Cola Holdings (HCCH) was approved by the Foreign Investment Promotion Board on Thursday.
A company spokesperson said that the additional investments would enable the bottling subsidiary of HCCH, Hindustan Coca Cola Beverages, to increase its urban and rural penetration and diversify its range of beverages.
Besides providing the much-needed cash for expansion, the fresh tranche of investment is expected to be used for buying out the high net worth Indians, who currently hold a 49% stake HCCB.
The investment comes at a time when Coke is faced with a double-digit decline in sales volumes in the Indian market. A spokesperson had admitted that Coke lost 14%, 12% and 22% sales volume during the first three quarters of 2005, respectively.
The culprit? Pesticide allegations levelled against the firm in 2003, followed by the implementation of the much-hyped “affordability” strategy that eroded margins.
“The affordability strategy was the biggest loss-making strategy for the bottling operations of Coke. It was built on the premise that lower prices (Rs 5 for a 200 ml pack size) would drive up volumes substantially, but from the second quarter of 2002 till mid-2004, sales volume took a severe beating,” the company spokesperson said.
