De­mon­eti­sa­tion Took the Fizz Out, Feels Coke

CEO-des­ig­nate says note ban drained liq­uid­ity, but will even­tu­ally strengthen prospects lo­cally

The Economic Times - - Front Page - Ratna.Bhushan @times­group.com

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

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