INDIA – Hindustan Coca-Cola Beverages (HCCB), the bottling arm of Coca-Cola, has revived plans of selling its business as a robust post-pandemic recovery boosts valuation again, executives directly aware of the development said.
They added that operations could be either split among independent Indian bottlers or could go to a single Indian or an overseas company.
Coca-Cola, which sells Coke, Thums Up and Sprite soft drinks, and Minute Maid juice, dominates the ₹50,000-crore packaged drinks market in India.
The transaction involving the asset sale of 16 bottling plants operated by HCCB will be complex and could take over 12 months, one of the officials mentioned above said.
“Coca-Cola had begun the divestment process in end-2019, by selling off its bottling units in the north, which accounted for 10% of its bottling operations. But plans to sell the remaining business were halted as Covid struck. Now, the process is being revived,” the official added.
“Potential buyers would include industrial houses, including some of Coca-Cola’s independent global bottling associates. Coca-Cola’s existing Indian franchisee bottling partners may not have the bandwidth to buy out the national bottling operations,” another official mentioned above said.
Mukesh Ambani-led Reliance Industries, with which Coca-Cola had earlier held talks for the sell-off, is no longer on the list of potentials since it is pursuing its own FMCG strategy, the official quoted above added.
In August last year, Reliance acquired Campa Cola from New Delhi-based Pure Drinks, and this month, Reliance Consumer Products, the FMCG arm of Reliance Retail, is in talks to acquire a 50% stake in Gujarat-based Sosyo Hajoori Beverages Company which sells beverages under the Sosyo franchise.
The move to divest bottling operations across the country comes at a time when Coca-Cola has initiated a global strategy to sell asset-heavy operations and reduce fixed costs.
In line with the strategy, HCCB says it will focus on core brands, innovation, marketing, strategy, and online presence as well as supplying concentrate to its bottlers.
HCCB bottles over 50% of Coca-Cola’s overall volumes in India through 16 plants. The remaining bottling is handled by independent bottlers who together run over two dozen franchisee plants for the company.
In the recent company’s financial reporting, Hindustan Coca-Cola Beverages posted a net profit of ₹375.4 crore in FY 22, clocking a strong growth of over ₹71.6 crore in FY 21.
As per the regulatory filing sourced from the business intelligence platform, Tofler, the company garnered a total income (standalone) of ₹9,147.74 crore in FY 22, up 30.6 percent over FY 21.
The company said it has been substantially investing to ramp up manufacturing capacity for 2023 and beyond, including an investment of Rs 660 crore in a new digitally enabled plant in West Bengal.
The factory is built on a 6.9-acre land parcel, hosting four manufacturing lines, which will produce sparkling drinks and juice products and is 32 meters tall. This is the company’s second plant in the state.
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