Beverage giant Coca-Cola has sold one of its soft drink bottling arms in North Gujarat to its local franchisee bottler, Kandhari Global Beverages Group. While the company has confirmed the development, it hasn't revealed the value of the transaction.
According to The Economic Times, which first reported the development, Coca-Cola has sold the plant for Rs 2,000 crore. They claim that the move is part of the soft drink maker's traditional policy of an asset-light business model, under which the company uses local partners to expand into new markets while reducing capital investment and regulatory compliance burdens.
The Coca-Cola Company, which operates through Hindustan Coca-Cola Beverages (HCCB), has been increasingly refranchising its bottling operations globally and in India, where it dominates the market along with rival PepsiCo. However, reports suggest that both Coca-Cola and PepsiCo have been under pressure since Mukesh Ambani's Reliance reintroduced the Indian soft drink brand Campa with cheaper prices, leveraging its wide distribution network in 2022.
Coca-Cola's Asset-Light Model
Coca-Cola, through HCCB, has been divesting its bottling operations in India. In December 2024, the company announced that it will be selling a 40% stake in HCCB's parent firm, Hindustan Coca-Cola Holdings (HCCH), to the Jubilant Bhartia Group, the franchise operator that runs Domino’s Pizza and other food chains.
The company bottles brands like Coca-Cola, Thums Up, Sprite, Minute Maid, Maaza, SmartWater, Kinley, Limca, and Fanta in two ways. First, it runs bottling plants (across India, 15 after the sale of Gujarat plant), and second, Coca-Cola has about 10 local bottling partners with 54 plants. These partners include Moon Beverages, Kandhari Global, and SLMG Beverages.
In January, the company announced that it would be divesting its bottling operations in at least three regions, including Bihar, Rajasthan, North-East India, and select parts of West Bengal, as per a report by The Hindu BusinessLine.
With the latest deal, as per The ET, Coca-Cola’s share of the bottling business will be reduced to 40% through HCCB.
Rationale Behind the Sale
In January, Coca-Cola Company CFO John Murphy had said that they wanted to "focus on things that we are good at, which is building brands and being a good franchise partner to our bottlers."
"We will divest in other regions in India, and we will do it in a thoughtful and very deliberate manner,” he said while on a trip to India, as reported by BusinessLine.
In its latest earnings report released in February, the Coca-Cola Company recorded net gains of $303 million in 2024 due to refranchising its bottling operations in parts of India.
CFO Murphy told analysts that the Indian market has a tremendous amount of runway ahead while noting that "the environment there is pretty vibrant, with a tremendous competitive set."
As per the reports citing Tofler data, Hindustan Coca-Cola Beverages (HCCB) reported a three-fold increase in net profit to Rs 2,808.31 crore in FY24, driven by a 10.10% rise in revenue to Rs 14,021.54 crore. In contrast, Coca-Cola India Pvt Ltd, which manages brand operations, saw its net profit decline by 41.82% to Rs 420.29 crore, despite a 4.24% increase in revenue to Rs 4,713.38 crore.
Last year, ET reported that HCCB was in the early stages of planning an initial public offering (IPO), citing company executives.
