Christina Ruggiero, CEO, Hindustan Coca-Cola Beverages (HCCB), promises to hone processes and offer ready supply of the beverages it makes.
By Jayashree Kini Mendes
Few firms are as defined by a single product as Coca-Cola. Even fewer firms are as widely known as the dark sweet beverage and its ‘contour’ bottle. In reality, Coke (as it is popularly known), the drink, has spread far beyond populated civilisation and into the domains of every newer geographies. Today, the behemoth continues its march looking for new territories to colonise with several more brands under its umbrella. It is also one of the few companies that has been through war and peace since starting operations in 1886.
In India, Hindustan Coca-Cola Beverages (HCCB), as it is called, is the fifth largest FMCG company that owns and operates 21 factories. Besides this, it sources from and supports 11 contract packing plants, has a network of 4,000 distributors and two million retail outlets. Any investment by HCCB is always positive news for a country rife with economic challenges.
HCCB needs the large number of plants as it manufactures and distributes Coca-Cola, Sprite, Maaza, Fanta, Thums Up, Limca, Smartwater, Minute Maid range of juices, Kinley and Bonaqua and Schweppes packaged water, Schweppes soda, mixers and Gingerale, Aquarius, Kinley soda, and Georgia tea and coffee. Such a wide array has pushed HCCB to newer ambitions. It has set itself a target to reach $2.5 billion in revenue by 2020. Achieving this called for processes and organisational changes, which is what CEO Christina Ruggiero has set out to do. She took office in June last year after HCCB’s earlier CEO, T Krishnakumar was elevated to the role of president India and South West Asia for Coca-Cola.
Heady MIX
An outsider may find it puzzling that personnel at a well-established and much-sought after brand could have much to do at their work place. Shouldn’t the system run itself? But Ruggiero has got her work cut out for her. Having spent time as chief procurement officer and handled production and distribution at the head office in Atlanta, Ruggiero is now manoeuvring the nuances of the Indian terrain. She says, “Our systems are in place. We are now sharpening our focus on being a total beverages company. The task is to make available to consumers, what they want to drink, versus asking them to drink, what we make available.”
Consumers are fastidious. HCCB knows that. To ensure that consumers have quick access to the beverages, the conglomerate refined the operating structure and simplified processes. It expanded operations to seven zones from the current five. The corporate resources were also reorganised to serve in the zones and factories. The refashioning strengthened sales and supply chain, thereby creating several hundred new jobs. HCCB alone employs 8,000 people, which does not include people working for the 4,000 distributors and 20 lakh retailers across 25 states.
The growth plan also aims at opening one million new outlets by 2020, taking it to three million.
The plans include following priorities of being consumer- and customer-centric, driving revenue growth, building a strong and agile system that has efficiency as its core, digitising the enterprise, and unlocking the power of associates (employees).
Little wonder why Ruggiero likens her job to an orchestra conductor. “We all play to the same tune but each has a different instrument. Also, we need to be able to play a different tune at different times, and each with equal finesse and style,” she adds.
Over the years, HCCB has opened new factories that are state-of-the-art and have lesser environmental footprint, while closing old factories, which were unviable and used old technology. These are initiatives taken of its own volition. For e.g. one of its newest factories at Bidadi (Karnataka) is highly automated and much more digitised and has one of the lowest water and energy usage ratios of all the bottling factories of The Coca-Cola Company, across the world.
RIGHT SOURCING
For 2018, HCCB is operating with the largest ever portfolio of products than in any other year. Ruggiero says, “The products we manufacture and distribute straddles an entire range—from value to premium, glass to tetrapak, and cans from 100ml to two-litre.”
The company is vigilant when it comes to sourcing raw materials and packaging, which constitute the major part of the products. Gaurav Khosla, senior VP, procurement, HCCB, says, “Our entire ecosystem hinges on sourcing the right ingredients at the right time and price. About 85-90% of our suppliers are Indian companies. Once our suppliers have undergone the rigorous process of being approved, they know the rules they have adhere to. Sometimes, inclement weather can play havoc with supply. That is where demand forecasting and procurement must be worked out to the last detail. In addition, we also procure CO2, PET, glass, refrigeration equipment (visicoolers, chest coolers, etc.) and much more, throughout the year.”
Specialised category managers keep a sharp eye out for global commodity trends that could unexpectedly impact raw material prices in India. HCCB plays a balance game between risk and opportunity creation. Khosla’s job is indeed demanding. Strategies call for sudden change and what held true six months ago may not be viable anymore. In such a scenario, he prefers to block certain raw materials for the next few months if need be. It is not surprising that long before Make in India emerged, HCCB stoutly stuck to local sourcing of produce that goes into its beverages.
Of course, demand forecasting is an important aspect of planning — peak season or not, low demand or high. “Supplying optimum quantities during peak season tests our mettle. Then there is the service. A dedicated team manages demand planning and acquires information from the operations team. We refer to historical trends. Of course, there are the trials of new products and its associated commercial activities for the month,” adds Khosla.
Price volatility is another major challenge. Sometimes, prices move between 50-600% either way. Having said that, HCCB continues to fulfil its obligations and takes pride that as a company it has evolved its systems to a point where it can be present in the consumer’s life, every time they reach out for a beverage. Ruggiero says, “It is about keeping their faith, each time. We are leveraging on e-commerce. For a traditional FMCG company like us, this means taking a fresh look at our supply chain and distribution systems and building the capability of an 8,000 people strong workforce to leverage digital mediums.” It is quite a task, she phews. No wonder the capability building teams conduct an average of two weeks training per month, through the year.
A MOVING STORY
Though MNCs account for a few thousand jobs, they own or orchestrate a supply chain that accounts for over a large percentage of trade. No point in getting your manufacturing right if you cannot get your distribution right. Though HCCB has a national manufacturing capacity, certain capacities are national, some cater to a specific geography, and some are for local. For example, its returnable glass bottle capacities typically do not travel large distances. “Our other packages, which are not returnable in nature, travel longer distances, which is where we have a national or geographical level manufacturing footprint, says Dinesh Jadhav, executive director, supply chain, HCCB.
Any FMCG company worth its salt strongly relies on continuous replenishment system for inventory management. Norms about maintaining minimal inventory ratios are adhered to stringently. Replenishment of a particular SKU is different for for every location, based on demand. Supplying to one million outlets sounds Herculean. Yes, complexities do arise. Jadhav has to ensure that warehousing and logistics segues with manufacturing and planning. “Cross functional detailed planning helps since we are investing in planning as a process, and certain methodologies required to handle increased complexity,” he adds.
One of Jadhav’s key role is drawing up a strong blueprint in increasing reach from warehouse to store. The increase in product portfolio and SKUs only makes it that much more complex. HCCB well knows that every outlet may not need all the SKUs it has. So sketching out a segmented strategy for fulfilling demand, measuring service levels, are all in day’s job for the team. Right execution daily (RED) is critical and the entire system is created around it working well for the supply chain and taking the company to the next level.
BEHIND THE SCENES
Between demand and supply, HCCB has its manufacturing units that run like clockwork. It’s easy to see why. All its plants work three shifts and employees ensure that they meet all orders. The Wada plant on the outskirts of Mumbai is a fine example of conscientious manufacturing. The plant sources surface water from about 16km away and has installed its own pipeline to draw water to the plant. The water is purified through filtration, chemical coagulation and reverse osmosis to be made ready for the next process. Similarly, other ingredients such as sugar also undergo a purity test and the vats are cleaned regularly to eliminate all sediments. The plant follows batch production and changes to the batch are made based on orders logged into the ERP.
Batch of beverages are sent to the laboratory for random checks to check for imbalances, if any. HCCB has preferred to import advanced machinery for the manufacturing process. The system is so advanced that even minutely defective glass bottles are rejected by the system, and accepted ones go through a 6-7 step cleaning process before going in for filling. HCCB uses preforms to make full-blown PET bottles, which again undergo cleaning through a filtered airor and then with chlorinated water. High-resolution cameras installed at regular intervals scan for defects and deviations and interrupt operations if need be.
Another operation HCCB follows is unanticipated audits conducted by third-party professionals like ISO-certified agencies or The Coca-Cola quality team.
In all this information technology (IT) is at the heart of what HCCB wants to accomplish by 2020. In most cases, IT is often invisible, however, HCCB prefers that it lead from the front. Prasanna Borah, chief information officer, says the digital factory at Sanand will introduce the concepts of predictive maintenance and upkeep versus the prevalent prescriptive concept. “We hope to get this factory underway in H12018. When it goes live, it will also do away with the need to maintain separate records and performance delivery specs. The machines will record and store the performance metrices to an automated database, thereby helping us analyse big data. Such concepts are prevalent in consumer marketing but not so much for machines.”
Another example is the continuous roll out of Service Management software like SuccessFactors and KRONOS. SuccessFactors has streamlined the process of performance management, target setting, incentives, bonuses, etc., while KRONOS has rationalised the process of marking attendances, calculating wages and overtime, etc.
Ruggiero says, “For me, digital is not a strategy; it is a way of doing business. We use our IT capability to segment and distribute our products in the right channels and right outlets; at the same time, we are leveraging digital to ensure a cost-efficient, uninterrupted supply of high quality, great tasting products. There is a massive level of complexity here that we are trying to solve by leveraging IT and building people capability.”
Harsh Kumar Bhutani, CFO, seeks ways for sustainable growth. “One of our biggest focus is to strengthen our front end, i.e. focus on execution. The other focus is segmented execution and this can only happen on the back of IT, a strong supply chain, data analytics and razor sharp execution. The third is capital management. We would like to allocate resources not only for 2018, but also for 2019 and 2020 aspirational growth targets.”
HOW GREEN IS MY WORLD
As one of India’s top manufacturing companies, preserving and protecting the environment is a responsibility that HCCB takes seriously. It is inspired by the government’s vision of achieving 40% cumulative electric power capacity from non-fossil fuel-based energy resources by 2030. It procures and uses solar power and clean energy like CNG/PNG to meet energy requirements. About five HCCB factories (two in Karnataka and three in Andhra Pradesh and Telangana) already use solar and clean fuel for their energy requirements.
Contrary to popular belief, the Coca-Cola system is a miniscule consumer of water representing only 0.023% of the 40 billion m3 of water consumed by industries in India. Preserving water is at the heart of its sustainability strategy. By implementing best-in-class technology, recycling and reusing water, implementing local projects that revitalise watersheds, it has created a water replenishment potential of 148% compared to the total water used in the manufacturing processes. Even the bottling plants recycle water to the best extent possible.
Such a massive programme across processes makes it hard to not realise why its beverages brands are the most recognised everywhere.