Conduct Fishbone tool for root cause analysis to the case study of Coca-Cola India Frozen Dessert Plan Heats Up Competition.

In November 2017, when winter was about to begin in India, Coca-Cola India Private Limited (Coca- Cola India) laid out a plan for the next summerthe introduction of a whipped frozen fruit dessert. Minute Maid Perfect Fruit, which Coca-Cola India planned to launch in India's top 10 cities in 2018, was to be an extension of the company's Minute Maid brand. Coca-Cola India also intended to expand Maaza, its fruit drink brand, with two new variants. These extensions were to be part of the company's strategy to launch a line of Beverage Plus products. Although globally, Coca-Cola India's parent company first began testing Perfect Fruit in Australia, the frozen dessert market in India would be the first to witness its full-scale launch.

T. Krishnakumar, president of Coca-Cola India and South-West Asia, announced that the company was focusing on executing its fruit-circular economy strategy, even as it launched Beverage Plus product innovations. According to Krishnakumar, the company's intention was to launch Minute Maid Perfect Fruit by processing Indian fruits, such as mango and litchee, in keeping with Coca-Cola India's commitment to Indianize its fruit-based beverage business. The company planned to launch the products at high foot traffic retail outlets and popular locations for young people. Krishnakumar believed that over the next three to four years, the high-level fruit-based indulgence products were certain to add 10-12 per cent in value to the Minute Maid franchise.² If Coca-Cola India chose to make a foray into the frozen desserts segment, what strategic capabilities could it leverage? What possible obstacles to success could arise in the new product categories? What branding strategies could the company use to promote its products in this segment? Which market segments should the company target? What were the pros and cons of entering this segment? Most importantly, was it the right time to enter this market segment?

THE COCA-COLA COMPANY

Headquartered in Atlanta, Georgia, The Coca-Cola Company was a giant in the beverage sector and one of the most recognized soft drink brands in the world. With a portfolio of 500 brands, a footprint in over 200 countries, and over 700,000 employees worldwide, it was the world's largest beverage company. As many as 21 of its brands were valued at over US$1 billion each.³ The Coca-Cola product, invented in 1886 by the chemist and druggist John Pemberton, was the company's best-known product. In its "World's Most Valuable Brands 2017" list, Forbes placed the Coca-Cola brand fifth, after Apple Inc., Google LLC, Microsoft

Corporation and Facebook, Inc. (Facebook), with a value of US$56.4 billion. Coca-Cola was the only beverage brand in the list of top 20, far ahead of its next competitor, Pepsi.⁴ Internationally, The Coca-Cola Company owned several leading brands, including Coca-Cola, Coca-Cola Life, Dasani, AdeS, Fanta, Sprite, Minute Maid, Gold Peak, Honest, Fresca, Zico, Ciel, Powerade, Simply Orange, Glaceau, and Odwalla.⁵

COCA-COLA INDIA

The Coca-Cola Company first entered India in 1950 and exited after almost three decades in 1977, only to re- enter in 1993. In India, the company's three-pronged system comprised Coca-Cola India Private Limited, Hindustan Coca-Cola Beverage Private Limited, and various franchise bottling partners. The company's many marketed brands included Georgia tea and coffee; Fuze iced tea, tonic water, and ginger ale; Thums-Up; Kinley; Minute-Maid; Fanta; Maaza; Sprite; Limca beverages; and its popular flagship brand, Coca-Cola.⁶

The Coca-Cola Company committed to invest up to $7 billion in India by 2020. Although Coca-Cola India lost some market share in the Indian soft drinks sector from 2012 (37.6 per cent) to 2016 (32.9 per cent), it maintained relatively steady leadership.⁷ Working on reformulations for its products to lower sugar content and emphasize smaller sizes, it entered the value-priced dairy segment in 2017 with its brand Vio and planned to enter the frozen dessert market with a modified version of Minute Maid.⁸ The company had a strong distribution network, with 2.6 million outlets in the country supported by 700,000 distributors and 57 manufacturing plants. To maintain high product quality and safety standards, the company adopted the Coca-Cola Operating Requirements (abbreviated as KORE) for its qualitytesting at everystage of production. Coca-Cola India also ensured a strong rural market and focused on affordability by introducing multiple product units and accessibility. It also ensured a strong connection with its market by creating promotion material focused on experience.⁹

ICE CREAM AND FROZEN DESSERT MARKET

According to the Food Safety and Standards Authority of India, ice cream was categorized as a dairy-based dessert or confection, whereas frozen desserts were categorized as frozen confections made with edible oils. Indian consumers generally did not differentiate and considered whatever looked like ice cream to be ice cream.¹⁰

The combined ice cream and frozen desserts (ICFD) market comprised mainly ice cream and frozen yoghurt (see Exhibit 1). Ice cream was an extremely popular cold dessert, customized to suit local tastes and made available in multiple forms, shapes, and packages. The ICFD market grew by 20 per cent in 2016 to reach the

$1.59 billion mark. The segment was forecasted to grow at a compounded annual growth rate (CAGR) of 11 per cent until 2021, which would likely increase the segment's value to $2.65 billion.¹¹ India's extreme hot climate worked in favour of this market. A study by the Delhi-based Centre for Science and Environment found that 2016 was warmer by 1.26 degrees Celsius, compared to previous years, and the 2007-2016 decade was the warmest ever,¹² helping the ICFD segment achieve high volume sales from 2014 to 2016 (see Exhibit 2).

ICE CREAM MARKET IN INDIA

Globally, India was the fastest-growing market for ice cream consumption, followed by Vietnam and Indonesia. Impulse ice cream led the segment, followed by the take-home ice cream segment (see Exhibit 2). A report by the market research agency Mintel suggested that volume sales were likely to reach 381.8 million litres in 2017 and 657.2 million litres in 2021. The category saw a CAGR increase of 10-15 per cent thanks to an increase in disposable income and discretionary spending.¹³ According to a Euromonitor International report, "modernization brought improved cold storage facilities and greater availability of low-cost compact

freezers and chillers, which helped increase the penetration rate of ice cream in rural areas. This created further opportunities for growth in the category."¹⁴ The major companies in this segment were Gujarat Co-operative Milk Federation Limited (GCMMF), Hindustan Unilever Limited, Vadilal Industries Limited (Vadilal), and Mother Dairy Fruit and Vegetable Private Limited (Mother Dairy) (see Exhibit 3).

Major Competitors in the Indian Ice Cream Market

GCMMF

With products marketed under the brand name Amul, GCMMF was the market leader in the ICFD segment in 2017.¹⁵ Covering approximately 18,700 villages in Gujarat, GCMMF produced an average of 17.7 million litres of milk every day, ranking among the top 13 dairy companies in the world, according to the International Farm Comparison Network. Amul had a diverse brand portfolio that comprised direct milk products (e.g., milk, milk powder, and curd), processed products (e.g., cheese, ghee, and fresh cream), beverages, cattle feed, sweets, and chocolates. The company had sales of $4.23 billion for the financial year 2016-17, achieving a growth of 18 per cent over the previous year. The group turnover crossed the $543.8 million mark in 2016- 17 and planned to achieve a sales turnover of $7.82 billion by the end of 2020-21.¹⁶

Hindustan Unilever Limited

Unilever was the world's leading ice cream manufacturer, operating under the Heartbrand name. The Indian division, Hindustan Unilever Limited, sold ice cream under the brand name Kwality Wall's, which was established in India in 1993. The brand had a wide product range, comprising frozen treats such as Cornetto and Feast (targeted at teens and adults), Paddle Pop (targeted at kids), and Creamy Delights and Fruttare (aimed at fruit-loving people). The brand positioned itself as a celebration for every achievement in life and aimed to reach a profit before tax of $365.20 million by March 2017.¹⁷

Vadilal

Established in 1907, Vadilal had approximately 50,000 dealers across the nation, 250 Vadilal ice cream parlours, and various other franchise outlets across the country. It had been growing at a rate of approximately 30 per cent during the 2007-2017 decade and aimed to reach the 4.5 billion¹⁸ mark in 2017-

18. According to the company's website, Vadilal was voted the most trusted ice cream brand in India by The Brand Trust Report in 2013. The company had various famous brands under its umbrella, including Gourmet, Flingo, and Badabite.¹⁹

Mother Dairy

Originally established by the National Dairy Development Board as an initiative under Operation Flood to make India milk sufficient, Mother Dairy had a diverse portfolio including milk, milk products, cottage cheese, ice cream, and frozen vegetables by 2018. Mother Dairy had two other brands: Safal and Dhara. Safal was a leading fruit and vegetable retail business with a strong presence in the northern part of the country. Dhara, on the other hand, covered the edible oil segment. The company aimed to exceed 100 billion in sales by the end of financial year 2019. It also expanded its ice cream portfolio with the launch of several new ice cream variants, including the sweet dessert Nolen Gur, the regional sweet yoghurt Misti Doi, and the mango-flavoured dessert Aam Doi in East India.²⁰

FROZEN YOGHURT MARKET IN INDIA

Although the ice cream market in India was facing increasing dairy costs, prices were being managed by the giant corporations to avoid major increases to the end consumer. This issue provided an opportunity for frozen yoghurt producers, who also relied on dairy, to extol the benefits and advantages of yoghurt and expand market share in India. In fact, the frozen yoghurt category was expected to double in size and reach up to $1 billion by 2021, to capture up to 12 per cent of the Indian ICFD market, with a CAGR of 15-16 per cent. The entry of multinational corporations such as Red Mango, Pinkberry, Yogurberry, and others was likely to widen the market and further push growth for the category.²¹

Major Competitors in the Indian Yoghurt Market

Cocoberry

Cocoberry entered the Indian frozen yoghurt retail market in 2009 and grew to 32 outlets in seven cities across India. With strawberry and blackberry as its most popular flavours, the company used its first-mover advantage in the frozen yoghurt segment to become the market leader. Cocoberry positioned itself as a healthier alternative to ice cream, with just over 1 calorie per gram, gluten-free products, and herbal drinks with fruits chunks.²²

Kiwi Frozen Yoghurt

This Canadian yoghurt chain was launched in India by Brand Calculus in 2010 and featured the product Kiwi Kiss Yoghurt. Primarily focussed on South India, Kiwi Frozen Yoghurt had one retail store in Chennai and two in Bengaluru. The company also positioned itself as a healthier alternative, targeting fitness- oriented people with healthy eating habits.²³

Red Mango

Red Mango was a frozen yoghurt chain with a presence in over 20 countries and 168 cities. The company entered the Indian market in 2012 with flavours such as Kiwi and Madagascar Vanilla. Red Mango claimed that its products were made with extensive care and that the all-natural, low-fat, gluten-free ingredients were carefully chosen for their mineral content (e.g., calcium) and nutritional value.²⁴

GCMMF

In 2012, the GCMMF ice cream company Amul launched Flaavyo, the company's first nutrition-based product. It was launched in two popular flavours: mango and strawberry. By 2017, the new product was available only in the states of Gujrat and Maharashtra.²⁵

EVOLVING INDIAN CUSTOMERS

With 1,500 dialects and a multitude of faiths, India was a culturally diverse country. This diversity in religion, language, culture, tradition, social customs, dress, and food preferences influenced Indian consumer choices.²⁶ In 2016, a Goldman Sachs report found that India had a youth population of several hundred million tech- savvy people with improved education levels, ready to drive rapid growth and create a consumer market

deeply tied to mobility and connectivity. A large section of this demographic consisted of 130 million young urban people earning an average income of $3,200 in 2017. According to the report, the expansion of this urban mass, both in terms of size and income, was expected to be the key driver of India's consumption over the next five to 10 years. Customer focus had shifted towards quality, price, delivery, and service, as Indian markets became more sophisticated and were offered more variety. India's 1.2 billion people were becoming richer, younger, and more energetic, thereby accelerating the growth rate. Young Indians were modern, yet curiously steeped in tradition, and often skeptical of Western global marketers.²⁷

Besides the youth, India's middle class was also expanding, with increasing expendable income. Middle-class customers preferred value-for-money products but were loyal and flexible enough to adapt to the fast-changing market. Even though the size of India's middle class was limited, consumption patterns reflected aspirations that surpassed income levels.²⁸ The consumption pattern of the upper-class consumer, on the other hand, focused on luxury goods rather than utilities. This segment was brand conscious and chose higher-priced goods with a brand value that portrayed its image in society, rather than being swayed by convenience, health, or wellness. With more of these customers gravitating toward more expensive premium brands, the share of premium brands was increasing.²⁹

WAY FORWARD

With the frozen desserts market set to expand exponentially over the next decade, Coca-Cola India would be well poised to reap the benefits of this growth, should it decide to enter this segment. Improvements in cold chain infrastructure, more refrigeration facilities, rising disposable incomes, and the changing lifestyle of Indian consumers presented opportunities that the company could capitalize on with frozen dessert offerings. With an expanding and thriving youth population that was looking for healthier food options, and with an increasing number of Indian consumers choosing nutrients over taste, Coca-Cola India's expansion into the frozen-fruit desserts segment was likely to complement this trend towards healthy living.

Some industry experts were predicting that the next decade belonged to fruit processing.³⁰ Coca-Cola India's president, Krishnakumar, also believed that this move could help his company remain relevant at a time when carbonated beverages were being blamed for rising obesity rates and other sugar-related health problems. As Coca-Cola India prepared to launch new frozen desserts, the company needed to decide how to leverage its brand equity to find success in a new market. It needed to assess the segments it wanted to target, the possible obstacles it could face, the pros and cons of entering the frozen desserts market, and the branding strategies it could use to present its new product as a healthier option. Most importantly, Coca-Cola India needed to decide if the time was right to make its foray into the suddenly competitive frozen desserts market.

EXHIBIT 1: ICE CREAM AND FROZEN DESSERTS MARKET

Frozen Yoghurt

Impulse Ice Cream

-Single Portion Dairy Ice Cream

-Single Portion Water Ice Cream

Unpackaged Ice Cream

Take-Home Ice Cream

-Take-Home Dairy Ice Cream

oBulk Dairy Ice Cream

oIce Cream Desserts

oMulti-Pack Dairy Ice Cream

-Take-Home Water Ice Cream

oBulk Water Ice Cream

oMulti-Pack Water Ice Cream

Source: Prepared by the author with information from Ice Cream and Frozen Desserts in India, Euromonitor International, database, August 2017, accessed May 3, 2018, www.euromonitor.com/ice-cream-and-frozen-desserts-in-india/report.

EXHIBIT 2: ICE CREAM AND FROZEN YOGHURT VOLUME SALES CONTRIBUTION, 2014-2016 (IN THOUSAND TONNES)

Product

2014

2015

2016

Impulse Ice Cream

173.02

194.16

223.27

Single Portion Dairy Ice Cream

136.52

154.47

179.14

Single Portion Water Ice Cream

36.50

39.69

44.12

Take-Home Ice Cream

115.80

124.90

137.61

Take-Home Dairy Ice Cream

115.80

124.90

137.61

Bulk Dairy Ice Cream

115.18

124.24

136.90

Ice Cream Desserts

0.62

0.66

0.71

Ice Cream and Frozen Desserts

288.82

319.07

360.88

Source: Prepared by the author with information from Ice Cream and Frozen Desserts in India, Euromonitor International, database, August 2017, accessed May 3, 2018, www.euromonitor.com/ice-cream-and-frozen-desserts-in-india/report.

EXHIBIT 3: ICE CREAM AND FROZEN YOGHURT MARKET SHARE, 2012-2016 (AS A PERCENTAGE)

Company

2012

2013

2014

2015

2016

Gujarat Co-operative Milk Marketing Federation Limited

17.70

17.50

17.90

17.70

17.40

Hindustan Unilever Limited

11.50

11.40

9.90

9.80

9.70

Mother Dairy Fruit and Vegetable Private Limited

8.10

7.90

8.00

7.90

7.80

Hatsun Agro Products Limited

3.80

4.20

4.50

4.40

4.60

Vadilal Industries Limited

6.20

6.20

5.90

5.50

5.30

Devyani Food Industries Private Ltd

4.00

4.00

4.20

4.00

3.90

Punjab State Cooperative Milk Producers Federation Limited

0.70

0.70

0.70

0.70

0.70

Havmor Foods Private Limited

3.20

3.29

3.40

3.42

3.48

Others

44.80

44.80

45.40

46.50

47.10