Demonetisation Took the Fizz Out, Feels Coke
CEO-designate says note ban drained liquidity, but will eventually strengthen prospects locally
New Delhi: Coca-Cola is seeking to reverse a temporary slide induced by India’s currency swap, a one-off exercise its CEO-designate believes will eventually strengthen the prospects locally for the world’s biggest soft-drink maker.
British-born James Quincey, who will succeed Muhtar Kent at Coca-Cola’s Atlanta corner office in May, told investors during an earnings-analysis call on Friday that “demonetisation in India effectively drained liquidity”, but would ultimately help companies in the organised sector.
“We expected the short-term disruptions (of demonetisation) to kind of mitigate or to tail off as we come in 2017, though not from January 1. Clearly, we’re of the view that a formalisation of the economy helps the formal players. I think it’ll be good in the medium-term and the longterm,” said Quincey, who is serving as Coke’s chief operating officer and is often credited with steering the company toward drinks that contain less sugar.
India is Coca-Cola’s sixth-
JAMES QUINCEY CEO-designate, Coca-Cola largest market and is considered key to the company’s growth at a time it is contending with shifting tastes in its traditional markets, such as the US and Europe. In India, too, the demand for healthier drinks is increasing faster in urban centres, with consumers switching to fruit-based drinks. Uneven rural incomes and the currency swap appear to have depressed growth in rural India
We’re of the view that a formalisation of the economy helps the formal players. I think it’ll be good in the mediumterm and the long-term
as well, with volumes increasing in low single digits over the past four quarters. India’s carbonated drinks sales are estimated at about .₹ 14,000 crore.
Coca-Cola did not specify India sales numbers for the OctoberDecember ’16 quarter, but said global volume sales fell 1%, while net revenues declined 6%. It said full-year non-aerated beverage volumes increased 5% in the Asia-Pacific region.
Quincey said plans to boost growth include focusing on smaller-sized packages and no-calorie sparkling beverages. In the latest quarter, smallersized packages sold 10% more, while no-calorie colas saw accelerated growth in the second half of the year.
“On our journey towards profitability, it is imperative that we continue to drive efficiency in our business, which enables us to pass on the value to our consumers and sellers. As in the past, and like all good companies do, we will continue to assess resource allocation in furtherance of our goals of enhancing customer and seller experience while driving high quality growth,” the company representative wrote.
In February 2016, Snapdeal had put over 200 employees on a Performance Improvement Program and eventually let go of the additional staff.
Jasper Infotech employs about 10,000 people across all operations, including the ecommerce marketplace Snapdeal, payments platform FreeCharge and logistics and supply chain arm Vulcan Express, according to company representatives.
This estimate also includes over 5,000 contract workers in Vulcan. The CEO of a Delhi-based ecommerce firm said : “Snapdeal is under tremendous pressure to achieve targets similar to last year with 30% less resources,” adding that his company had se- en a surge of resumes from Snapdeal in the past six months. “The company now has an investor which has suddenly gone cold on India and is looking to right-size operations by reducing discounts, which in turn will reduce orders and requirement of staff,” said one of the sources cited above. The company’s employee-related expenses rose to .₹ 911 crore in FY 2016, up 148% from the previous fiscal. Employee expenses is the largest cost for Snapdeal after marketing and advertising. But unlike the latter, which is a variable cost, wages is a fixed cost. For the financial year 2015-16, the company’s total sales grew 56% to ₹ 1,457 crore, but losses more than doubled to .₹ 2,960 crore.
The decision to further reduce its workforce also comes on the back of the company’s decision to shut down Shopo, the Etsylike online consumer-to-consumer platform for small sellers that it relaunched in 2015, and in which chief executive Kunal Bahl had said the company would invest $100 million.
Jasper Infotech has been struggling to raise a fresh round of capital. Attempts to raise capital for FreeCharge independently have also not yielded any results. The company has seen a series of senior-level exits, including senior vice-president of partnerships and strategic initiatives Tony Navin, senior vice-president and head of the consumer-to-consumer platform Shopo Sandeep Komaravelly and Abhishek Kumar, head of corporate development over the past few weeks.
“These senior-level exits are on account of the executives looking out for better opportunities. The layoffs are primarily directed at mid-level employees and new hires about to complete a year,” said the first source.
The decision to further cut its workforce also comes on the back of company’s decision to shut down Shopo