Coca Cola Rural Marketing Strategy

COCA COLAs rural marketing strategy was based on three As Availability, Affordability and Acceptability. The first A Availability emphasized on the availability of the product to the customer; the second A Affordability focused on product pricing, and the third A- Acceptability focused on convincing the customer to buy the product. COCA COLA began focusing on the rural market in the early 2000s in order to increase volumes. This decision was not surprising, given the huge size of the untapped rural market in India. However, the poor rural infrastructure and consumption habits that are very different from those of urban people were two major obstacles to cracking the rural market for COCA COLA. Because of the erratic power supply most grocers in rural areas did not stock cold drinks. Also, people in rural areas had a preference for traditional cold beverages such as lassi and lemon juice. Further, the price of the beverage was also a major factor for the rural consumer. Availability Once COCA COLA entered the rural market, it focused on strengthening its distribution network there. It realized that the centralized distribution system used by the company in the urban areas would not be suitable for rural areas. In the centralized distribution system, the product was transported directly from the bottling plants to retailers. However, COCA COLA realized that this distribution system would not work in rural markets, as taking stock directly from bottling plants to retail stores would be very costly due to the long distances to be covered. The company instead opted for a hub and spoke distribution system. Under the hub and spoke distribution system, stock was transported from the bottling plants to hubs and then from hubs, the stock was transported to spokes which were situated in small towns. These spokes fed the retailers catering to the demand in rural areas. COCA COLA not only changed its distribution model, it also changed the type of vehicles used for transportation. The company used large trucks for transporting stock from bottling plants to hubs and medium commercial vehicles transported the stock from the hubs to spokes. For transporting stock from spokes to village retailers the company utilized all range of automobiles from trucks, auto rickshaws, cycle rickshaws and hand carts to even camel carts in Rajasthan and mules in the hilly areas, to cart the products from the nearest hub. By March 2003, the company had added 25 production lines and doubled its glass and PET bottle capacity. Further it also distributed around 2,00,000 refrigerators to its rural retailers. It also purchased 5,000 new trucks and auto rickshaws for boosting its rural distribution. Through its rural distribution initiatives, COCA COLA was able to increase its presence in rural areas from a coverage of 81,383 villages in 2001 to 1,58,342 villages in August 2003. Apart from strengthening its distribution network, COCA COLA also focused on pricing in rural market. Affordability A survey conducted by COCA COLA in 2001 revealed that 300 ml bottles were not popular with rural and semi-urban residents where two persons often shared a 300 ml bottle. It was also found that the price of USD 0.30 cents per bottle was considered too high by rural consumers. For these reasons,

COCA COLA decided to make some changes in the size of its bottles and pricing to win over consumers in the rural market. In 2002, COCA COLA launched 200 ml bottles priced at USD 0.20 cents. COCA COLA announced that it would push the 200 ml bottles more in rural areas, as the rural market was very price-sensitive. It was widely felt that the 200 ml bottles priced at USD 0.20 cents would increase the rate of consumption in rural India. Reports put the annual per capita consumption of bottled beverages in rural areas at one bottle as compared to 6 bottles in urban areas. The 200 ml bottles priced at USD 0.20 cents would also make COCA COLA competitive against local brands in the unorganized sector. It was reported that in the states of Rajasthan and Gujarat the local cola brands such as Choice and Tikli cost only half the price offered by COCA COLA, which gave them the advantage in garnering the major market share before COCA COLA came out with small Coke. COCA COLA also targeted the rural consumer aggressively in its marketing campaigns, which were aimed at increasing awareness of its brands in rural areas Acceptability The initiatives of COCA COLA in distribution and pricing were supported by extensive marketing in the mass media as well as through outdoor advertising. The company put up hoardings in villages and painted the name Coca Cola on the compounds of the residences in the villages. Further, COCA COLA also participated in the weekly mandies by setting up temporary retail outlets, and also took part in the annual haats and fairs major sources of business activity and entertainment in rural India. COCA COLA also launched television commercials (TVCs) targeted at rural consumers. In order to reach more rural consumers, COCA COLA increased its ad-spend on Doordarshan. The company ensured that all its rural marketing initiatives were well-supported by TVCs. When COCA COLA launched Small Coke in 2002 priced at USD 0.20 cents, it bought out a commercial featuring Bollywood actor Aamir Khan to communicate the message of the price cut and the launch of 200 ml bottles to the rural consumers. The commercial was shot in a rural setting In the summer of 2003, COCA COLA came up with a new commercial featuring Aamir Khan, to further strengthen the Coca-Cola brand image among rural consumers. The commercial aimed at making coke a generic name for Thanda. Is a very North India-centric phenomenon. Go to any restaurant in the north, and attendants would promptly ask, thanda ya garam? Thanda usually means lassi or nimbu pani, garam is essentially tea. Because the character, in itself, represented a culture, we wanted to equate Coke with Thanda, since Thanda too is part of the popular dialect of the north. Thus making Thanda generic for Coca-Cola. With the long-playing possibilities of the Thanda idea becoming evident, Thanda became the central idea. Once we decided to work on that idea, the creative mind just opened up. Between March and September 2003, COCA COLA launched three commercials with the Thanda means Coca-Colatag line. All the three commercials aimed to make rural and semi-urban consumers connect with Coca-

cola. The first ad featured Aamir Khan as a tapori (street smart); in the ad he makes the association between Coca-Cola and the word Thanda. The second commercial in the series featured Aamir Khan as a Hyderabadi shop-keeper; here again he equates the word Thanda with Coca-Cola. The third commercial featured Aamir Khan as a Punjabi farmer who offers Coca Cola to ladies asking for Thanda. The three commercials showed progression in associating Coke with Thanda in a rural/semi-urban context. In the first commercial the connection of Coke with Thanda was made, in the second one there was a subtle difference, with the shopkeeper asking customers to ask for Thanda instead of Coke, and the third commercial showed that when one asked for Thanda, one would get Coke. Analysts said that all the three commercials succeeded in make rural consumers connect to Coke and increased awareness of the brand among them. Along with TVCs, COCA COLA also launched print advertisements in several regional newspapers

Future Prospects
COCA COLA claimed all its marketing initiatives were very successful, and as a result, its rural penetration increased from 9% in 2001 to 25% in 2003. COCA COLA also said that volumes from rural markets had increased to 35% in 2003. The company said that it would focus on adding more villages to its distribution network. For the year 2003, COCA COLA had a target of reaching 0.1 million more villages. Analysts pointed out that stiff competition from archrival PepsiCo would make it increasingly difficult for COCA COLA to garner more market share. PepsiCo too had started focusing on the rural market, due to the flat volumes in urban areas. Like COCA COLA, PepsiCo too launched 200 ml bottles priced at USD 0.20 cents. Going one step ahead, PepsiCo slashed the price of its 300 ml bottles to USD 0.30 cents to boost volumes in urban areas. In early 2003, COCA COLA announced that it was dropping plans to venture into other beverage businesses. Company sources said that increasing volumes of cola drinks had made the company rethink its plans of launching juice and milk-based beverages. In 2002, COCA COLA had announced plans to launch beverages such as nimbu paani (lemon juice), fruit juice, cold coffee, and iced tea in collaboration with Nestle India. Though COCA COLA was upbeat on account of its early success in its drive to capture the rural market, the question was whether the company would be able to take this success further. A major media setback occurred in August 2003, when the Delhi-based Center for Science and Environment announced that it had found high pesticide content in soft drinks manufactured and sold by both cola majors

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