A cup of Coke—or Sprite, or Thums Up—sold at Rs5 ($0.07) in rural Gujarat of western India is the “cheapest, most accessible Coke you can probably buy in the world,” James Quincey, the company’s president and chief operating officer, told investors earlier this month.
These inexpensive units of the drink are proof of the world’s largest beverage maker’s focus on India’s rural market, which is home to 67% of the country’s population. In India—Coke’s sixth-largest market globally “a lot of the focus is on affordability,” Quincey said, speaking during a Deutsche Bank global consumer conference call.
And the innovation underway in India—where per capita consumption of the beverage is among the world’s lowest—could possibly help the company penetrate other developing markets.
“There is a whole set of markets around the world where the trend of income inequality continues to play out and where the necessity becomes to move from the middle to more premium offerings and more affordable offerings,” Quincey added.
Consumer companies such as Coca-Cola have to rely on lower price points for India’s rural market because the average daily household incomes here can be as low as Rs166 ($2.96).
That’s why in 2014, Coca-Cola began experimenting with the “splash bar“—a sort of kiosk where the vendor dispenses small, 80-150ml cups of Sprite, Thums Up, or Fanta, starting at Rs5. It began in rural Gujarat with 31 bars, and eventually multiplied to 30,000 splash bars, selling over 1.5 million cups daily, a company spokesperson told The Economic Times earlier this month.
But Coca-Cola has tried to work with such low prices earlier. In the early 2000s, it launched a 200 ml bottle dubbed Chhota Coke at Rs5. In 2006, it exited the price point due to higher transportation and packaging costs. A 200ml bottle now costs Rs12 ($0.18).
Coca-Cola is also trying other things to stoke demand in the hinterland, including investing in technology. It is testing a new polyethylene terephthalate or PET packaging that increases the drink’s shelf life. “So, this is a way of really being able to extend the reach way further into the rural areas,” Quincey explained.
The company’s move comes at a time when urban consumers in India are going easy on fizzy drinks, opting for healthier options such as juices and fruit drinks. The beverage maker, therefore, has been diversifying its portfolio accordingly.
But it still needs customers for its mainstay—Coca-Cola.