Coca-Cola India plans to acquire manufacturing and distribution rights for Kinley packaged water from its bottlers in key local markets. The idea is to expand Kinley beyond water to high-margin wellness drinks and control its distribution so that it reaches a wider consumer base.
The rationale behind Coca-Cola’s move, say sources, is to “project Kinley as a healthy beverage and re-work its entire positioning mix.’’ The effort is drawn from The Coca-Cola Company’s global strategy to move towards healthy beverages as carbonated soft drink sales decline in the US.
The Indian arm feels it can strengthen Kinley only if it comes under its direct control in key markets. Coke has evinced interest in buying back Kinley’s franchisee rights in Hyderabad, Hospet, UP, Delhi, Kolkata and Pune, among other markets. But most bottlers are resisting the buy-out, since Kinley is now a profitable business and bottlers want to reap the benefits of having invested heavily in expanding distribution in the past.
Several leading bottlers of Coca-Cola India had signed the Coca-Cola International Bottlers Agreement (CIBA) which gave them franchisee rights for Kinley packaged water. This meant that while bottlers invested in developing the market, setting up and increasing capacities, and putting up coolers and signages, Coke took care of advertising the brand.
The agreements were signed with different bottlers at different points in time and the contracts ranged from five to eight years. While in the past, Coca-Cola has renewed agreements with some bottlers on a case-to-case basis, it’s for the first time that the soft drink company wants to buy out the rights.
Launched in 2000 in 500-ml and 1-litre packs, Kinley has since mounted considerable losses. Coke had also launched Kinley in 200-ml cups priced at Rs 3 to promote single-serve consumption, but the idea did not work. In the first two years of its launch, Coca-Cola concentrated on volumes to penetrate the market and at one point even claimed to sell more than market leader Bisleri which the latter called “a jokeâ€Â.
But, in the last few years, Kinley has led a rather obscure life. The pesticide controversy led the company to focus on and resurrect cola sales. But more importantly what led to course correction was the arrival of the new global chief Neville Isdell. From a volume-led strategy, he changed the focus to profitability. Coke stopped discount schemes and dumping of goods and even de-emphasised Kinley for sometime, leading industry analysts to speculate whether the company was withdrawing the brand.
