Beverage major Coca-Cola’s move to sell 40 per cent stake in its Indian bottling arm to Jubilant Bhartia Group is expected to help the company execute its asset-light strategy in India. Bhartia Group is set to pick up 40 per cent equity in in Hindustan Coca-Cola Holdings Pvt Ltd (HCCH), the parent of the beverage major’s bottling arm, Hindustan Coca-Cola Beverages (HCCB).

Experts believe the strategic move will help the beverage major to unlock value while enabling Bhartia Group to foray into a high growth segment. Analysts also pointed out that the move will help Coca-Cola ringfence its Indian operations amidst heightened competition in the carbonated soft drinks segment.

The beverage major is also expected to explore options for a public listing of HCCB in the coming months.

Ankur Bisen, Senior Partner & Head-Consumer, Food & Retail, Technopak said, “Coca-Cola has been following the asset light strategy globally, so this move is on accepted lines. Also, with aerated beverages under intense scrutiny world over, Coca-Cola also wants to divert investments into newer opportunities and therefore is focusing on unlocking value wherever they can. For the Bhartia Group, which is the largest food services player in India, QSR business with Domino’s has reached a certain scale and will now be giving more of an incremental growth. So at that stage, a company usually looks to get into newer segments for an accelerated growth path.”

Expand topline

“For the Bhartia Group, this move is in line with putting growth on the agenda and seizing opportunities that have synergies and can give them disruptive growth. So this is an opportunity to help expand their topline and satiate shareholders expectations,” he added. 

This move comes amidst growing competition in the aerated beverage market especially with the entry of Reliance Consumer Products with Campa Cola, in a sector that has largely been a duopoly of Coca-Cola and PepsiCo so far.

“We expect competition to Varun Beverages (PepsiCo bottler) to potentially go up due to this development as Jubilant group has shown strong execution capabilities through Jubilant FoodWorks. In any case, with entry of RIL through Campa Cola competition in this sector will go up. Also this industry has high margins which gives ability for a player to turn aggressive in order to take market share,” said Abneesh Roy, Executive Director, Nuvama Institutional Equities.

Bisen noted that partnering with the Jubilant Bhartia Group will help Coca-Cola to “ringfence its Indian operations” amidst increasing competition in the carbonated soft drinks sector. Experts believe that Jubilant Bhartia Group could also explore possible synergies with its QSR business strengthening Coca-Cola’s distribution further.

Stating that the divestment was on expected lines, Angel investor and business strategist Lloyd Mathias pointed out that local bottlers and partners have the ability to run efficient operations with lower-cost structures. “This can give beverage players the ability to focus sharply on affordability amidst intense competition,” he added.