FTS-DOC ITA

Moderator: Linda Abbruzzese

July 24, 2008

8:30 am CT

Coordinator: Thank you for holding. Parties will be on a listen-only mode until the question and answer session of today's conference. At that time you can press star 1 to ask a question. This call is being recorded. If you have any objections you may disconnect. I'd like to introduce your first speaker Ms. Linda Abbruzzese.

Linda Abbruzzese: Thank you and good morning for those of you joining on the East and West Coast and good afternoon, good evening for those who are joining us from other parts of the world.

Thank you for joining us for our Webinar on market opportunities in India. This is an extension, an extended version of the first market opportunity Indian Webinar we had earlier this year in I believe May.

I'm pleased to note that we had more than 115 people registered for this Webinar today. I am Linda Abbruzzese, International Trade Specialist for the Marketing Communications Office for the US Commercial Service at the Department Commerce.

This Webinar is being brought to you in cooperation by the US (Info) Commercial Service.

And I would like to welcome all participants in the export community who are joining us from all across the USA and India to learn about the market opportunities in India.

In a moment I’ll turn the presentation over to (Eileen Nandee) who is the Principal Commercial Officer of the foreign commercial service in (Shanai) India.

And I'd also like to introduce (Stan Stetnankasan), Vice President for the Marketing Strategy Insight of the Coca-Cola Company as they will be the main speakers of today's Webinar.

We will also be joined by specialists from the commercial service in India. We will also be joined by (Sandeep Mani), (Pricha Mayer), (Vida Nassan) and (Leonard Roberts). And they will also be assisting us with the answer part of the question - Q&A session.

I would like to give a special thanks to (Eileen) and also to (Greg Briscoe), who is the Commercial Officer at the US Export Assistance Center in Memphis, Tennessee, Marilyn Hinson of FedEx Solutions, George Tracy, Director for the Atlanta Export Assistance Center and (Ruxine) Coal Share Trade Committee for the Georgia Indo-American Chamber of Commerce for their collaboration in developing this Webinar on India.

Both speakers, (Eileen Nandee) and (Stan Stetnankasan) will be available at the end of the presentation to answer your questions. And their contact information will also be provided.

Now for those of you who just joined you can still log onto the Webinar by entering your URL Web site and pass code per instructions that were sent to you by email.

And we do have a few housekeeping details to make sure everyone gets the most benefit from this Webinar.

You'll be able to hear the presentation via your telephone and then view it simultaneously via your computer.

If you are not hooked up to both, please take a moment to do this. And if you're experiencing any technical difficulties, please press star zero anytime during the presentation and an operator will assist you.

Now because of the large number of participants online, now we have more than 49, it is not logistically feasible to take voice questions.

However, we do invite you to type in questions on your screen as they occur to you during the presentation.

There is a box on your screen where you can click and type in your questions any time during the presentation. We will compile the questions and present as many as time allows after the presentation.

Type questions which are not answered during the Webinar due to time constraints will receive personal answers via email after the Webinar.

In addition, all listeners will be provided with information for any individual follow-up counseling, (export) assistance or market research.

Now for those of you who just joined in and logged-in you can still joined in our Internet conference.

Now I'd like to introduce live online, (Eileen Nandee), Principal Commercial Officer of the US Commercial Service in India for the Foreign Commercial Service in (Shanai), India. (Eileen), thank you for joining us.

(Eileen Nandee): Hi Linda. Thank you. Good morning everyone and thank you all for participating in today's Webinar session. My name is (Eileen Nandee). I'm currently physically right now in Calcutta, India.

I've had some technical difficulties on - with my Internet access. So I'm on audio only so I actually (unintelligible) a little bit.

I should be joined later by our (Gerald Stutarski), our Deputy Senior Commercial Officer in (Zimbabwe).

I'm also very pleased to have a senior executive with Coca-Cola India. Coca-Cola would like to talk about the Indian market.

I first - jumping to the first slide just want to talk about, give a general overview of the Indian market.

Most of you have probably heard the success story of the - how Indian is just booming economically, commercially. And by that (unintelligible)relationship with India has never been better.

India is across the board (unintelligible) a shining, really seen as like the same generation of (unintelligible). In the past five or six years their growth rate has been 8% to 9%. And we don't see that decreasing at all.

And in the US we of course have our economic woes, but India is continuing pretty strong on that front.

However, it's a big country and it represents very diverse and challenging opportunities. But we firmly believe that the opportunities greatly outweigh the challenges.

(Unintelligible) which is great (unintelligible) that was run in 1990 when it was the (unintelligible). So (unintelligible) seeing dynamic growth across many, many sectors and that (unintelligible) telling regions why US companies (unintelligible).

These demographics, it's a huge country of course. The population is over a billion people. But what's really important is to remember that there's a huge (unintelligible) middle class.

The number of the middle class of course depends on the US. But we're talking about a very large group of 250 to 350 to even 450 million people.

So in terms of selling business services that represents a very strong market.

What's also important to note is that (unintelligible). And so hear the Indian (unintelligible) comprised, that represents the number of consumers presented in the time to come.

So moving onto the next slide, India, the momentum as I said shows no sign of stopping. And Goldman Sachs for example, says that by 2020 India is going to be one of the top three economies in the world. So that is really a force to be reckoned with. And that US companies really should not be ignoring the market.

And that (unintelligible) relationship (unintelligible) mentioned is across the board. This week or in the past couple of weeks the (unintelligible) nuclear deal of course got attention both in the United States and India. But that's just one spot of (unintelligible) of how our ties are developing.

(Unintelligible) forefront of (unintelligible) because the fact to trading commerce.

Jumping to the next slide here you see how the Indo-US or US-Indo trade balance has greatly increased. Of course India enjoys a surplus of our trade relationship. But we made some nice inroads last year in - between 2006, 2007.

In that case we sold a couple of airplanes (unintelligible) the trade relationship. But you see the overall trend. And again we don't see this slowing down anymore (unintelligible).

Linda Abbruzzese: Hello? We're experiencing some technical difficulties in hearing (Eileen)‘s presentation. We'll be starting in a couple minutes.

Coordinator: This is the operator. We're having some technical difficulties. The speaker will be rejoining shortly. Please stand by.

(Eileen Nandee): Hello?

Linda Abbruzzese: Hello (Eileen)?

(Eileen Nandee): Hi yes?

Linda Abbruzzese: We can hear you a lot better. Can you start back on the slide about Indian (Vest)? And I think that's when it started.

(Eileen Nandee): Okay, I apologize for that. This is one of the many challenges that we all face with doing international business.

Okay, so jumping back to investments. Again, on this slide you see a very healthy increase and steady growth rate of US investment in India. But what's particularly noteworthy is you also see strong growth in Indian investment in the United States.

On number of key Indian companies have been acquiring global competitors around the world. And this really also shows that Indian companies are becoming a force to be reckoned with and points to the vitality of the Indian economy right now.

The next slide I have is a map of India. And just to talk briefly about the commercial service, here on the map you don't really get a sense of the diversity of India. But you can see how large the country is.

We have offices in 70 cities throughout the country. And basically we serve to help US companies create strategic solutions and to help you find entry points to sell your business services.

We - if we're working with a company that has a niche product for specialized applications we will often recommend that they - their company like find one distributor each for the entire country.

However, if it has more general applications and/or a lot of competition, we recommend that you find distributors in each of the region's North, South, East and West to help with market penetration.

The North, South East and West are very distinct regions. When you go from different parts of India you feel like - you truly feel like you're in a different country. And that provides challenges but also provides with very interesting opportunity to do business.

I hope this is better. I hope you can hear me better this time.

Man: Yes.

(Eileen Nandee): Continuing on, the next graph talks about CS India Services. This just goes hand in hand with the data that you saw before with booming commercial relationship and the trade ties that are deepening. You see that the demand for our services is growing.

And as I mentioned before, India is a very dynamic market that US companies really cannot afford to ignore much longer.

Jumping to the next slide, the best prospects, it's - I just at the onset want to mention that this list is very extensive but not exhaustive meaning that if one of your products and services is not on the list its by no means does not mean that you don't have a strong potential here. Probably the contrary.

But where we see the strongest demand and highest growth areas are the sectors listed here. This is one page of two. Everything from airport equipment, education services. That basically means that means back from India to the United States.

Medical equipment, jumping to the next slide, mining, oil, telecommunications, water. We do a lot in franchising, a lot in retail, a lot in many, many other sectors.

But this just gives you a flavor of the very diverse opportunities that are here and some of the key areas that we see.

Now we work with a lot of small companies who have as I mentioned before, niche products that fit into any of these categories. And that's fine.

Part of what we do to help you do business here is that we vet your product or service. So we'll tell you up front if we think that the local competition is too strong, if the price points don't match because Indian companies are very, very price sensitive or whatever the case might be to help you make the decision if India is the right market for you at the right time.

Moving to the next slide, just want to talk about some success stories that we’ve had with our trade missions.

Back in 2006 we organized the largest trade mission ever in the history of the US government. That was led by the Under Secretary Frank Lavin. And we had over 250 companies participate.

A small company from California came to Mumbai and Calcutta which is where I'm based right now and they sell hand drills for dentists.

And we set them up with a bunch of meetings with potential distributors and agents. And as a result of all those meetings that they had they found a distributor based in New Delhi. And since then they sold over $86,000 of equipment and have strong goals and every intention to sell more.

So they attribute that success directly to the meetings that we arranged for them in the various cities.

Now on to the next page on a different trade mission and which was industry focused on automotive parts that was held in the fall of 2007, (Swift-Shaw) which is based in Michigan made immediate sales for $16,000 to Indian clients in Bangalore and (Tunai).

I should mention this case of making immediate sales of course is rare. It's not unusual. But we do recommend that you have a high level of patience when dealing in India. Because not only do you have technical difficulties as we’re experiencing tonight but things sometimes take a lot longer. But immediate sales can happen.

However, what's more noteworthy is they saw a huge increase in the sale of - in immediate months after the trade mission which again they attribute back to that - the trade mission. And of course they're going to be a VP customer.

So I just want to go quickly through a very exciting opportunity that we have coming up. We are working with FedEx on a large trade mission to India in November. It’s November 9th through 16th which we’ll go through Delhi, Hyderabad and Mumbai. And this will hit three of the four regions -- the north, South and West regions of India. And those in many ways are the most booming and dynamic parts of the country.

Moving to the next slide, basically as I mentioned before, a key service that we provide to all companies is to do the upfront vetting.

So we say pretty quickly yes there's a market for you or no and these other reasons why. And of course that's usually valuable information for you either to make a justification to take a trip or to save your time and money and perhaps come to India at another time.

Basically on a trade mission the -we do the prearranged matchmaking for US companies with local partners. So you tell us who do you want to meet with, what kind of agents (clients), customers, et cetera.. And we go out and find those people. And, you know, prearrange matchmaking.

What we do - we gauge their level of interest and we get them all your information beforehand. So and we send you information on the company that we’re meeting with. So you can hopefully skipped through all the formalities and really get down to the heart of the business and have a very substantive meeting.

In addition we have networking events of course and city site visits to different elements to see the dynamics, the economy at network and (send out) briefings to get a firm handle on what's going on in the country.

Next slide, the first stop of course was Delhi which is the capital city. This is where all the government -the Federal government agencies are located. And most major industries and sectors are also here.

So we find that when US companies come they almost always go to Delhi.

Hyderabad is a much smaller city but this is really where you see India shining. There's a - it's booming and you see shiny buildings all over the city. And Hyderabad has a very wide range of sectors that are coming up. And I have them listed here -- pharmaceutical, steel, biotech, power. And so we're seeing a lot of demand for US companies going to Hyderabad.

Then the mission will wrap up in Mumbai which is of course the financial capital and (at) most of the (Mumbai) industries. And a lot of the distributors and traders in India are based in Mumbai.

So the final slide has more detail. If you're interested in any questions or if you need information on the Indian market please do contact me. My name is the second from the bottom. And we'd be happy to help you in any way to explore whether India is the market for you right now.

So with that I will turn it over to our next speaker from Coca-Cola, Mr. (Stan). And he will talk from the US company perspective on doing business in India. Then we'll take questions. Thank you.

(Stan Stetnankasan): Thank you (Eileen). Thanks for the wonderful presentation. The objective of my presentation is to give you an idea of what does it take the Coca-Cola Company to succeed in India?

What I also propose to do is to give you an overview of a journey from a marketing perspective and how marketing alone is not adequate and how you need to organize a business around a good solid understanding of consumers in India.

Understanding the Indian psyche is critical. And only then you will be able to leverage the reality for developing profitable business results. And that's going to be the focus of my presentation.

Moving onto the next slide, now here are the four broad buckets that I (will be) covering in the presentation over the next 30 minutes or so.

What are the opportunities and challenges some of which (Eileen) covered. But next I wanted to give you on idea of, you know, how we look at Indian consumers and then move on to talking about, you know, the soft drink industry in India, what are the characteristic features and how do we leverage that to create a really successful business in India.

And lastly give you an overview of Coca-Cola in India, what did we do from a marketing perspective to really create a pretty strong brand after we're reentered the business back in 1993 after a 16 year hiatus.

So India opportunities and challenges.

As (Eileen) mentioned it's an incredibly vibrant economy. It is certainly one of the most strategic countries for us as the Coca-Cola Company from various perspectives.

One, there are 1.2 billion people. There are 619 million economically active consumers. That's actually a bigger than the population of the United States. It's a very large consumer market. There are 514 million users of milk in the country and 84 million users of tea in the country.

If you look at some of the other businesses like credit cards this is growing at roughly 30% per annum. The world's largest toilet soap brand is a brand from the stables of Unilever, Lifebuoy - 130,000 tons. The numbers are mind boggling.

And India two-wheeler manufacture is the world's second largest manufacturer of two wheelers.

So if you look at the numbers from any angle it is really a very, very attractive proposition. It is a market that we can’t (ill afford) to ignore.

It's not only a numbers game from volume perspective. It is also quite a profitable market.

If you look at the next slide, some of the large multinationals like Unilever, Colgate, Palmolive and Nestle have had pretty good return on their capital employed.

Politically given that it is a very vibrant and alive democracy and there is a rapid liberalization that is going on, the opportunities are only going to increase with every passing year.

Just to give you a perspective still about 15, 20 years ago telephone systems in India was quite primitive. There were very few people who had access to a land line.

But in the last five years alone the whole industry has transformed pretty significantly. One of the statistics that we've heard recently is that there are more calls made from cell phones then land lines in India. That kind of gives you an idea of the kind of transformation that is going on in India.

Talking about the Indian population, everybody talks about large numbers. Yes there are large numbers, 1.2 billion of us in India. The urban population alone is 280 million. Just to put it in perspective, that's about the size of the United States.

The rural population is 240 million. What most companies are interested are in the economically active population. So in the urban India, 126 million of them are economically active. And in the rural India, 164 million of them are economically active.

Reaching them is always a big challenge in India. There are 3770 towns. And when I say towns, these are not small places. You know, most of them would have a population of more than 200,000, 300,000.

Layer on top of that 650,000 villages. Some of them are slightly difficult to access. So that kind of gives you an idea of the complexity of India and the enormity of size that India is.

There are 5 million outlets in India which sell traditional fast moving consumer goods like toilet soaps, toothpaste and so on.

So if you really have to install a cooler for distributing soft drinks in India you probably need a capital outlay close to $10 billion. And that's an enormous amount of money to make sure that we have cold availability for our products in each and every one of those five million outlets. And that's not a small task by any stretch of imagination.

Then, the retail in India unlike some of the developed countries is actually quite fragmented. I've given you some photographs of typical retail outlets, typical mom and pop grocery outlets in India. They’re very small usually run by an individual, and their family partakes in the running of the shop. And this kind of outlet at about 5 million of them.

(Fourteen) percent of the outlets in urban India have daily turnover of less than $20.00. That sounds like a small amount from an international perspective but that is the kind of amount with which a typical retailer cannot only make money and put food on the table but he’s also making a little bit of profit at the end of the day.

While India is economically quite vibrant and quite active from a human development perspective it is not anywhere near some of the other countries in Asia like Indonesia, Philippines, China.

So if you look at the human development index that the United Nations publishes our index in India is 115. The life expectancy’s pretty good and it is growing and is literacy. Half the adults in India is literate, but it is growing very, very rapidly.

The other thing that characterizes India is that while the usage of essentials is pretty high, some of the nonessentials, i.e., chocolates, ketchups, ice cream are quite low.

I gave some numbers a little while ago in terms of the number of people using toilet soap and tea. They run into half a billion or so. But when you talk about nonessentials you're talking about 35 million, 25 million, 81 million -- those kind of numbers. So there is a huge headroom. That's the way we look at our business in Coca-Cola Companies.

The (customs) and habits in India are quite modest. You can still get urban transportation at 10 cents a ride in India. And that's a hand drawn rickshaw. It is still done in some of the smaller towns in India.

While it does look a little bit unorganized, India probably has got one of the most efficient (dial a line) service. It is so efficient that it has got Six Sigma certification and it is also something that is studied by leading business schools in India on how do they actually manage logistics of such proportions.

And most of the people who do the distribution of (lunch packets) in (Bombay) are people who are not even literate. They can't even read and write. But they make sure that it is delivered 100% of the time day in and day out.

It's also got a very cheap laundry service. And there's of visual of a typical laundry service in Mumbai.

So (into the) market there also is pretty intense diversity. And some of the skill with which some of the operators have -- some of them are local operators -- it is almost mind boggling.

So as (Eileen) mentioned, the consumers in India are quite value conscious. They’re also extremely price sensitive.

So if you look at, you know, the charts, bulk of the products sold in India are either in the popular or mass market arena. The premium products are a relatively small proportion of the total business. But having said that that is where incredible growth is happening over the last few years.

I need to switch to another deck and all do that. Give me a minute. Yes, there you go.

So sticking to the same theme of price sensitivity, every time a manufacturer figured out how to offer a better price to consumers the category has experienced pretty significant boom.

Sort of an example of how Nestle actually managed to really exponentially grow their (instant model) category. And they did that actually way back in the early 90' when they actually dropped the price from 7 rupees to 5 rupees. And the whole business almost tripled in two years timeframe. That is how sensitive the Indian consumers are to price.

Even a category like shampoo which traditionally was classified as a nonessential, once large companies like Proctor & Gamble and Unilever figured out how to offer packaging that actually meets the Indian consumers' needs a lot better combined with the (reduction) of (outside beauty), the whole category experienced a pretty significant boom.

So is marketing in India an easy task? Probably no. It is a country of immense complexities. There are 29 states and six union territories. Literally if you move from one state to another it is almost like moving from one country to another.

There are 16 official languages. And some of the languages are as different as German is from Japanese.

There are 1650 dialects. And there are more than 150 communities represented, communities not in the sense that we know it in the US. But these are religious, or ethnic communities that are there (again).

The population, 82% of them are Hindus, close to 12% are Muslim, 2% Christians and 2% (unintelligible).

Now having said that you'll find almost all the religions represented in India. So that kind of gives you an idea of the diversity that India has.

People from different parts of India have almost very, very different mindset and attitude to life.

If you look at people from the state of (Maharashtra) which is - of which Mumbai is the capital, people are very practical, very professional and no frills. And given that the financial market is there in Mumbai, there is a fair amount of drive towards making money for people in this part of the world.

Then moving - oh sorry. This is actually a build chart. Unfortunately in the WebEx it doesn't build.

But if you move up to the next group of consumers who are in the state of (Grugial) which is probably one of the most industrial vibrant states, people are very value conscious. They might have a lot of money but they’ll not buy anything that they think does not offer value.

Moving to north, you'll find a lot more (concrete) convention happening in the northern part of India.

In the southern part of India the emphasis is more on education and taking up a job which provides them with intellectual stimulation and professional security.

The urban rural contrast in India is incredibly stark. And on one hand you have in the rural India people still using (carts) for mode of transportation. And on the other hand you'll find some of the most advanced cars being used in rural India.

Just 4% of the population lives in the top (six cities) of India. However, they account for over 27% of India's purchasing power. That kind of gives you an idea of concentration of wealth in India.

Seventy percent live in rural areas and 1/3 of them actually live below poverty line. If that is the case, one question that people need to ask themselves before they market in India is how do we actually appeal to the people in rural India in a meaningful and relevant way?

Having talked about diversity in India, there are a couple of things that actually unify India. One thing that unifies India is a game of cricket. While we all think it is a game, in my feeling is actually a religion. Despite the fact that there is so much of diversity, when it comes to cricket, the whole country rallies around that game.

And this game really got a tremendous impetus when we won the World Cup in 1983. In fact, (17%) of sponsorship for World Cricket actually comes out of corporations in India.

Approximately $50 million to $75 million are spent on the game of cricket in India. And this is a number that was as of 2006. And in 2007 that number will almost increase by tenfold.

And when a big cricket game happens in India, the whole country comes to a grinding halt particularly if there's a match between India and Pakistan you’ll hardly find people on the streets. So that's one big unifying factor.

And the second big unifying factor in India is movies. India has the largest film industry in the world. There are over 700 movies produced and there are 30,000 movie theaters in India.

On an average, 13 million Indian's watch movies every day in a movie theater. These numbers are actually quite mind-boggling. So cricket and movies are things that actually unify India.

To give you an idea of how the Indian psyche has evolved over the last few years, late 80s the whole economy was characterized by a little bit of stagnation, a little bit of hopelessness. And that actually gets reflected in the Indian movies.

We and Coca-Cola Company strongly believe that the Indian movie producers and directors probably understand the pulse of the Indian consumers and more importantly they actually shape the way the Indian consumers think much more than we can believe.

So if you look at some of the movies that used to be produced in the 80s, it was all about angry young men trying to struggle, trying to defy the system and create a place for themselves.

Than in the early 90s when the economic revitalization started, although in a small way, people suddenly realized that oh, there is hope for us. And then came the you know, Suzuki car. And that became a pretty big status symbol in India. And more and more people started realizing that those things are within their reach.

This whole thing got tremendous amount of impetus when in the late 90s some of the Indian women started winning Miss Universe and Miss World Contest. And that suddenly put India in a world map at least from an Indian perspective. And they've finally started saying okay, I can win in the world scene too.

And that got reinforced further when the IT industry in India started taking off. That is when people started saying that okay, there is a huge hope for us. We can do it and we will.

So people like (Niran Mupee) of - the Chairman of Enforces are somebody who started Hotmail and sold it to Microsoft in the late 90s. People look at those big success stories and say these are the aspirational role models that we need to emulate. And there's this unbridled sense of optimism that started kicking up in India in a big way.

However, well all this is happening some of the core Indian values did not really change dramatically. We do see trends in terms of those little (paring) a little bit. But restraint is one core Indian value.

It is a (unintelligible) suppression of desire that have been conditioned by historical poverty. So there is a generation of consumers who have been brought up in an environment where they'd didn't have things in plenty. So even though they have money in their wallet they always have a tendency to save a sizable proportion of it.

That is the reason why the savings rate in India is probably among the highest in the world.

And then there is this culture underpinning that drives the way Indian consumers think about their life. And that stratifies the (unintelligible) value.

This has got not necessarily much to do with the (Cap) system, but is the whole concept of quantification of risk change by society.

So if you are - if you want to demonstrate a risk change behavior, it is okay. In fact, it is actually quite acceptable in society. So there are two core values which kind of underpin the way Indian consumers think about their life and how they actually go out and buy products and services.

So in that kind of an environment consumers have been given a (cost). People in the past used to want less for less. And now they're demanding a lot more for a little more.

So whether it's the size of cars, whether it's the kind of consumer promotions that are run, people are demanding a lot more for a little more.

Indulgence has to be aligned to tradition. So if you look at McDonald's, and like in the US, McDonald's in India is almost bordering on fine dining. And they have figured out what it means to really tap into Indian palette. They have Indianized some of their product offerings. Consequently the business for McDonald's in India is actually experiencing a very healthy growth.

And even Nestle when they launched (noodles), (noodles) is not part of traditional Indian cuisine. But if you go to a typical urban household there is a very good probability that you will find a few packs of (noodles) in the pantry of an Indian kitchen in urban India.

Plus on top of that take companies like Unilever and Procter & Gamble. They have figured out packaging options which are pretty much tailored for Indian markets where the outlay on a per occasion basis is very much affordable. And in the process they've been able to create a culture for convention of their products which did not exist before.

So you can actually buy a sachet of shampoo for one rupee which is quite insignificant even for an Indian consumer. That gets people going in terms of using shampoo to wash hair. And once they get used to it, upgrading them to a small bottle and then subsequently to a big bottle becomes less of a marketing challenge.

So the sparkling drinks in India. The category is about 400 million unit cases. And what we mean by unit cases, a case is what, 24 8 ounce servings.

The per capita of soft drink consumption in India is seven. To put it in perspective in China it is close to 25. And in Mexico it is close to 800. So that kind of gives you an idea of what are the upside potential for us in India.

The penetration is low from a retail a perspective. I told you about 5 million outlets in the retail universe. Only 14% of them sell soft drinks. The reason only 14% of them sell soft drinks is because unless it is sold cold it is not the kind of experience that we would want consumers to have.

And making it available cold as I mentioned earlier costs a lot of money. So it is a process that takes us a little bit of time. And we do it one city at a time, one state at a time.

The business is highly seasonal. Fifty percent of our volume gets sold in a four month window which is very typical in India but is not so typical in a lot of other markets.

The category unlike other developing countries is actually skewed towards (unintelligible) consumption as in go to a shop, buy a bottle, drink it they're and give it back to the outlet. Or go to a restaurant and order a soft drink.

Whereas in some of the other developing countries the home consumption is actually the most dominant consumption.

The business is primarily returnable glass bottles where people pay a deposit to take a bottle home. And when they return the whole bottle they get the deposit back. And that's about 20% of our volumes.

The rural market is extremely underdeveloped. And it is not tapped at this point of time to the extent to which we would like to tap it.

Seventy percent of the population lives in rural India up. So we have to get there but it is the question of how to get there in the most efficient manner.

The opportunity. This is a slide that talks about the current reality as well as the opportunity that lies ahead of us.

So sparkling soft drinks like Coke are seen as special occasion products. They're not seen as everyday consumption products in India as yet. It is getting there but still a long way away from that.

Really haven't taught people in India what it means to drink an ice cold coke. And there's a huge upside potential. We're doing that. And as we do it we see some strong growth in volumes.

The price value equation in India is quite tenuous. Consequently when there's a special occasion at the movie theater or you have a birthday at home or you have a small get together at home or you’re having a party at home, soft drinks play a pretty significant role.

But if you're having a meal at home or you're having a beverage when watching TV, it is not soft drinks. It is usually water. And that is why we believe there's a huge opportunity going forward.

I talked about the price relationship for products in India. That is true for our category also. Every time we increase the price because of various reasons whether it is because of excise duty or whether it is because of cost of goods going up, every time we increase the price that demand stalls. It stalls for a certain period of time and after that it starts taking off.

And then when you're forced to raise the price again it goes up again.

Now the volume stalls again. So we have experienced this over the last 13 years. And that actually got us thinking about what do we need to do to really break this tenuous price relationship that consumers have?

So we started to look looking at our business in India. What is so unique about our business in India? What do we need to do different within the Coca-Cola company in India? And therefore, how can we actually transform the way our business functions and more importantly generate transformation of growth?

To give you an idea of what we have done I need to talk about the history of the Coca-Cola company in India. In 1977 we exited India, came back to India in 1993. We acquired a local brand, (Sundrop). And along with that came a reasonable amount of infrastructure.

Most of the infrastructure there was infrastructure that we left behind when we exited in the year 1977. We also started acquiring a lot of bottling partners in India because we thought that if you have to really execute well in India we might as well have complete ownership of the whole value chain.

And after we've acquired all those bottling partners to the extent of almost roughly 17% of the total volume, we started restructuring and consolidating those bottlers so that we become more efficient, we become lean, mean and hungry.

Then in 2001 the focus was all about optimizing capacity to make sure that we have the right plan in the right place where the demand is there.

In 2002 we actually started testing some high growth business models. And the whole thing was driven by the affordability platform because we realized that taking a Western business model and applying it in India is probably not something that is going to work.

We need to have a model that is tailored for the Indian consumers that is underpinned by a good solid understanding of the Indian consumer psyche.

After we tested this model in a few markets in India in 2002 (unintelligible) about prospective of the model and we started rolling it out nationally in (2000). Since then our business has been experiencing pretty significant growth.

So those are some of the shifting paradigms that we went through in various blocks of time. Ninety-three to ‘96 ten people wanted me to drink a good ice cold Coke. Our operation was quite fragmented. There were 44 disparate entries. There were lack of sufficient procedures. It's a large but interactive brand portfolio. We had a pretty sizable portfolio but most of them are really not activated.

In the late 90s we said okay, we need to create a cohesive system and put in some rudimentary systems and processes in place to really get a good understanding of what goes on where.

We started activating a full portfolio. Two-thousand one onwards we structured our business in a very unique and differentiated way. We created five regions. We had an extremely well oiled system where we could actually transfer empty glasses from one bottling system to another bottling system depending on need. And we were able to restructure our whole distribution system.

Our distribution system largely relies on direct distribution to the stores unlike some of the other FMCD companies and CBD companies who relied quite heavily on wholesalers.

And we also started making entry into some of the other emerging categories like water and powders. And we also wanted to establish leadership in juice given that Indian consumers are a lot more focused on health and wellness.

So what are the outcomes? The transformation presented in a low volume growth in the mid 90s to pretty strong double digit growth in the mid 2000s.

As a system we were making loss, we turned corner in the middle of 2000, started making modest profits. We were actually losing share and consumer preference.

We have regained share and consumer preference to the extent that we have leadership position in India right now.

From a single brand we actually moved to a full beverage portfolio. And we not only focused on demand creation but we also have systems - infrastructure in place to pull through those demands.

But here is a good idea of the - into which our operation is diversified within India. We have 44 locations for soft drink manufacture. We have 15 locations where we manufacture water. And there are 800,000 outlets where our brands are available now. And that's actually (21 possible) the total 5 million CBD universe in India.

There are 500,000 branded coolers in India. And we have 3000 direct employees and 6000 contracted laborers working for the Coca-Cola company.

And if you take a total multiplier effect at last count was that there are probably close to a million jobs that have been created by the Coca-Cola system in India.

And those are the five regions and the relative contribution of volume. The Northern part of India where the soft drink convention culture is a lot more established accounts for a pretty significant proportion of our total business.

Sorry. I need to go to the first slide in this deck.

Now how did we actually go about transforming the business in India? We believe we actually employed something that was pretty unique and differentiated. And that differentiation came from our superior marketing capability.

If you look at India there is no dearth of information. You can source whatever information you want. Being a democratic country, being a liberal company, doing market research, collecting consumer opinion has never been a problem.

So we looked at our inventory of information that we have. You name it we had it. And literally, you know, the joke in India business at one point of time used to be that we will buy information from any trespasser who comes to our office. So we had lots and lots of information.

We came to a realization that information is not the one that is going to really make us stronger in the marketplace. What we need is a good knowledge of the marketplace.

So we (unintelligible) all the information and came out with a bunch of core knowledge that we thought could transform the business.

When you ask consumers people will come back and say yes I would love to consume Coke. But when you ask them do you consume Coke they'd don't consume it as often as we would like them too. And that's what we call a virtual convention. There is an intent but the intent is not translating into behavior.

Secondly, when we really observe consumers and how they behave in a store the extent to which they specified brand was much lower than what we would've thought.

In a country like US people will go to a shop and say give me a Coke. Or when they are in an aircraft they will say can I have a Coke. The brand was always specified.

But in India people just go and say give me something cold.

When we had this learning which I shared with you a little while ago that pricing plays a major role in causing an inflection point of demand. There is a high diversity of culture united only by movies and cricket. It's something that I shared a little while ago. And that cold availability was low.

And lastly the price compliance in India was quite low. So we can put whatever price we want on our bottles but the shopkeeper could always charge a rupee or two more and we could do nothing about it.

So armed with this knowledge traditionally we would have jumped into action. And the action we would've taken is to reduce the price. News firms start to communicate price drop. And if you do that, you know, we start - the consumers would know that the price has been reduced and there is credibility around that because 12,000 cricketers are communicating it.

That's the action we would have normally taken. But instead we sat around the table and said this is not going to work because that is going to be reducing the category to a commodity for a period of time. And that would actually kill the business profitability in due course.

So we said okay, what we need is to really get to the core insight that can actually help us to touch on the business. And the insight was - the next side didn’t come on the screen. I'm sorry about that.

The core insight was we have to teach people that something cold is equal to Coca-Cola.

So we don't want people to go and ask for something cold. We want those people to say give me a Coke and not something cold.

And we ran a full ad campaign around that. And that was probably one of the best ad campaigns that we have run in the recent past in India.

And we used an (unintelligible), a film celebrity who had incredible credibility with consumers in India. And of course, you know, the way he communicated the message was humorous and connected with consumers in a big way. That was one part of the equation.

The other part of the equation was to make sure that the (unintelligible) complied with the price. Because we hit upon a magical price point of 5 rupees at that point of time. And we did that not through one dimensional price drop but through a multidimensional activity that actually resulted in us looking at a supply chain, us looking at our bottles, the cost of goods. And we're reengineered an entire business and we made the product available at 5 rupees. And at that price we were making a little bit of money too.

And if we had not done this holistic business reengineering we could've dropped the price and we'd have lost our shirt in the process. So that was one big ah ha a moment for us at the Coca-Cola Company.

It's not just about marketing but it's about how to do a 360 degree marketing program and more important way how do you do a total system reengineering?

Now here is the (third). You know, I would have loved to played some ads, but in the interest of time, the price communication was that we used - we localized the price communication in different states to really appeal to that consumers in a meaningful way in that particular territory.

We used celebrities and we strongly reinforced the imagery around brand Coke. And we did that consistently, backed it up with some solid system reengineering.

And the systems reengineering effort involved (light reading) of bottles and driving operational efficiencies through freight reduction and so on.

And we also started looking at alternative forms of distribution. In this slide you can see how a farmer in India during the off season when his tractor is not utilized for farming uses that for distributing soft drinks in the neighboring villages.

And we were able to create a design for a trolley that can be attached to the tractor and it can distribute a product and he can actually make a little bit of money during off season when he's actually not doing farming.

And this kind of innovation actually helped us to really increase the width and depth of coverage of our products in the marketplace. And we were able to actually take distribution level from 11% and 12% of the total retail universe to 21% of the total retail universe.

So what were the results? The results were spectacular. For confidentiality reasons I cannot give the exact volume numbers. But what I've given you is an index.

In 1994 if you set the index at 100, in 2002 the index jumped to 382. And in 2003 the index jumped to 465. And since then our business hasn't really looked back. And we have grown from string to string in India. And combined with that our overall profitability has increased.

So what are the big learnings? We would classify our big learnings has six key successes. Conviction. That to us is one of the most important things. Having short term blips is a reality in an Indian business environment. But you've got to take a long term point of view. (How can) reaching in the market and invest in a sustainable fashion?

Connecting with consumers is the next key. Got to connect with the Indian consumers doing it one way, the way we do it globally might or might not be the most appropriate thing.

To the Indian consumer a global brand is very relevant but you've got to make it relevant and meaningful from their cultural context.

Compliance. How do we make sure that our entire system and the retailers comply to a set of process, policies and guidelines? Focusing on that can actually make a huge difference to success or otherwise of the business in India.

Customer service. The retailer in India might sound like a disorganized challenge. But providing customer service is critical for building long term relationship with those people.

The divergence of customer service in India might be very different from the kind of customer service that customers in other markets - and what I mean by customers, other retailers.

You've got to be obsessed about cost because let us not forget about the fact that Indian consumers are value conscious. You cannot obsessed about cost, passing on the cost to the Indian consumer on a temporary basis might work but on a sustained basis is actually suicidal.

Clear duty and innovation is also very, very critical. The challenges that the country represents requires lateral thinking almost on a daily basis. And you've got to think about the business very differently every time you sit down to do your business plan.

Those six keys of success in our opinion are critical for long term viability in India. Thank you.

Linda Abbruzzese: Thank you (Stan) for an excellent presentation. And also here is (Stan)‘s contact information if you would like to ask him a question or get in contact with him. There is his information.

I'd like to now go to the question and answer session. And we will be taking some questions from the written queue.

Also, for those of you who have questions about getting a copy of the PowerPoint presentation slides we will have these available to distribute to everybody. We also will have a transcript. And we did have this archived as well so that you can see this in a tape format.

Okay, I’ll start with the first question here from like (Chris Farmer) who says are the manufacturers the only companies securing significant marketshare?

(Stan Stetnankasan): What is that?

Linda Abbruzzese: The question is from (Chris Farmer) and this is directed also to our panel as well.

It says are the manufacturers the only companies securing significant marketshare in India?

(Stan Stetnankasan): I am a little bit lost with that question.

Linda Abbruzzese: Okay.

Man: I think it (unintelligible) is really making a statement or is he asking the question?

Linda Abbruzzese: No, (Chris) is asking a question. He says are manufactures the only companies securing significant marketshare in India?

I'm thinking it's...

Man: (Unintelligible) manufacturing companies who are - when you look at what - again, you have to look at what type of manufacturing are you looking at. Because they are something that, you know, if you take in the machine tool sector, those manufacturing companies are here.

They have some good demand supply gaps like if there's $700 million in a market there. The manufacturers are only taking to about $360 million. There is a gap of another $300 million to $400 million. And that is coming out from outside India.

Linda Abbruzzese: Okay great. And also (Chris) if you'd like two rewrite that question for us we'd be more than happy to answer it if there's something that we'd didn't answer for your original question.

The next question I have here is from (Daryl Greenland). He asks what is India's Web usage in accessing products?

(Stan Stetnankasan): Using your Web in India for accessing products?

Linda Abbruzzese: I’ll repeat it again. It says what is India's Web usage in accessing products?

(Stan Stetnankasan): In accessing products. The access to Internet in India is growing quite rapidly. But it is still not at critical levels to do really big time e-commerce kind of business in India.

It is usually localized in the big urban pockets. And even in big urban pockets the access to broadband is somewhat restricted.

All the things are growing incredibly rapidly. So, you know, the story might be very different, you know, three years from now. But as of now you really don't have the kind of critical mass.

Like for example in the US upwards of 80% of the people have access to Web. And more than half of that is through broadband. Now are those the kind of numbers that we have in India? No.

So e-commerce is at an infancy stage right now in India is my guess. You know, we're not into e-commerce in India in a big way.

Man: No, you're right (Stan) because when you look at the number of Internet connections that are here at this point in time it's about 4 million Internet connections.

Of course it's growing by 100% every year, but that would take, you know, 2 to 3 years down the line you would have maybe about 8 to 10 million or a little bit more than that Internet connection.

But that again is a limited to mostly urban sectors and certain pockets in those urban sectors. You're right (Stan).

(Stan Stetnankasan): Yes.

Linda Abbruzzese: Okay great, thank you.

Next question I have here is from (R. Pat). It says depending on customer segments, are there products with different sizes or price so that customers have an incentive to move up the value chain status et cetera?

(Stan Stetnankasan): Yes, I'll answer that question. We look at the Indian business in three broad buckets. And it's a pretty obvious kind of bucket. There are the so called haves in India. I mean they have a lot of money. They’re less price sensitive.

You know, if you go to certain pockets of big cities in India, you know who I'm talking about.

These are people to whom you don't offer packages that are relatively cheap. You offer them absolute state-of-the-art packages for those people, the kind of packages that you would get in any developed country.

But what you also know is that vast majority of the populations are in the middle and lower income group. And these are people who are moving up the social ladder and they’re moving up in large numbers.

So if you really do not create culture around your product consumption you're not going to have a sustainable business going forward. So you cannot afford to ignore those middle and lower class consumers.

So the upper class consumers are the ones who, you know, will help you to keep your business rival from a profitability standpoint. But the middle and lower class are the ones who are going to make your business sustainable in the long run.

So you really have to focus on sustainability. You've got to create packages that are tailored for the middle and lower income group consumers. And that is something that almost every CDB company in India does beautifully. Whether it is Unilever, whether it is Proctor & Gamble, whether it is Nestle or whether it is Coca-Cola.

We all do that. Because unless we do that we all know that when these lower income group consumers become middle income group consumers, they will have graduated to the next level of income without having gotten new to the category.

And we also know that once they get used to that category and when they move up to the next level they will automatically trade up to the higher value-added pack or a more premium pack. And that is when the revenue and profit actually starts kicking in for consumer product companies.

Linda Abbruzzese: Okay thank you very much. I’ll go through our last question here from (Janine Foray). Any recommendations about printing, publishing in India for that market and the South Asia region hub?

Anyone in our panel, (Stan) or...

(Stan Stetnankasan): No, I have no understanding of the industry.

Linda Abbruzzese: Okay is there...

Man: Is that for printing and packaging?

Linda Abbruzzese: Printing and publishing in India. Are there any recommendations about the printing and publishing in India for that market and the South Asia region hub?

Man: Actually most of the printing and publishing companies were set up unintelligible in India. But, you know, it has (unintelligible). You have unintelligible. And they have a very big printing press at the publishing house here.

And (unintelligible) to this all of Southeast Asia of course but (unintelligible) and in Asia.

But again, you're looking at India, Bangladesh and Sri Lanka. (Unintelligible) on the region of this - around this area. It's not that (we were) out of India.

Linda Abbruzzese: Okay great. Well thank you very much. That was a last question we had from our audience.

I would like to let everyone know that remember for those of you whose questions we were not able to answer that you might think of later on, please contact one of - the contact information of the CN.

Everyone, I'm afraid that's all the time that we have. And I would just like to let everyone know that please check out the Website www.fedex.com/think India and www.buyusa.gov/india for more information on India as well as www.exports.gov/cs for more information on exploring other Webinar events.

Thank you everybody for joining us and please check your email boxes for more information on upcoming Webinars.

Thank you and goodbye.

Coordinator: That concludes today's conference. You may disconnect at this time.

END