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Coke, Pepsi & the Indian Heartland

Posted on Thursday, Apr 14th 2005

December 2004. We were traveling in India. As we waited for our train at a small railway station in Bolpur, a small town near Calcutta, we watched a boy of 10 or 12 arrange his merchandise in preparation for boarding the train to Calcutta. He stacked up hundreds of packets of chips, cookies, and snacks from various multi-national brands in a basket.

I asked him how much he buys the merchandise for. He said, Rs. 9 (20 cents). And sells for Rs. 12. Looks like a 25% gross margin business. He sells about 200 of these packets on the train back and forth, makes a gross profit of Rs. 600 ($12) a day.

This kid is an unbelievably successful micro-entrepreneur, and does not belong in our 4 Billion consumers in question. However, he exemplifies one of those 4 Billion consumers who has managed to lift himself out of the hole.

More interestingly, he is a representative of the distribution channel of the major MNC brands like Pepsi, Coke, and many others. This boy of 12 is one of the thousands that are essential for the Coca Cola’s of the world to penetrate the heart of India, China, Africa, and Latin America.

So. Does Coca Cola have a program to offer financing (and training) to micro-entrepreneurs like our micro-hero?

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I had worked in rural south Gujarat in Coke sales for a brief while in 2000. Much of the distribution, of Coke and any other private enterprise, in such remote parts is controlled by large distributors (read rich landlords) who have a stranglehold on the channels. Coke does very little to encourage any entrepreneurial ventures at a micro-level. It was happy dealing with the existing structures.
Coke’s strategy at a local level is primarily determined by the Sales guys in that region and I do not see how things will change unless a more comprehensive “beyond sales” focus is brought in.

Girish Mallapragada Monday, April 9, 2007 at 4:15 PM PT

Girish,

Why don’t you point your friends at Coke to the articles? Who are the top decision makers?

Sramana

Sramana Mitra Monday, April 9, 2007 at 10:14 PM PT

Sramana,

My stint was during my summer internship that lasted three months a long time ago.

Your post prompted me to cite a possible reason as to why things don’t move the way they ought to be.

I do not believe in trusting MNC’s to consciously focus on sustainable development or micro-entrepreneurship. If there were any successful instances, in my opinion they are only a “not thought out” by -product of their profit-maximizing actions.

And as Mintzberg says, “Strategy is realized action”.

Girish Mallapragada Friday, April 20, 2007 at 7:29 AM PT