'In the next three years Coca-Cola will invest another $380 million in Pakistan'

In 2005 Rizwan Ullah Khan was appointed as Coca-Cola's Country Manager for Pakistan and Afghanistan. Over the years, he has been a strong advocate of System Alignment between the Company and Bottling system, which has resulted in Pakistan becoming one of the Company's high priority markets, with the business doubling in 4 years.
Mr. Khan was one of the founding members of the American Business Forum, an association of leading US organisations in Pakistan, which he currently also heads. He has also served on the Board of Directors of Pakistan Human Development Forum (National Commission for Human Development) and is a governing body member of Rising Sun Education and Welfare Society. Following is a brief excerpt from a recent conversation he had with BR Research in Lahore
BR Research: Coca-Cola has slowly but steadily been investing in the Pakistani market for the last couple of years. What is it that makes Pakistan such an enticing market for companies the likes of Coke?
Rizwanullah Khan: Well for starters, a few years down the line, you're looking at a population of around 230 million, 65 percent of which comprises of youths below the age of 29 years. And you're essentially looking at a middle class of 60 to 70 million people, people with refined tastes and sensibilities. So for all the political uncertainty and the myriad hurdles that businesses -especially multinationals- face here, the end results are just that much more rewarding.
So from the point of view of an investor such as Coke, the Pakistani market is amongst the most promising in the world. Our commitment with the country is cemented by the fact that we have spent nearly $350 million in significant upgradations and value addition to our own distribution footprint within the span of the last 7 years. And what's more is, the money brought in has not merely been a re-investment of cash-flows being generated locally, but instead is genuine green-field FDI being flown in to expand our business from the ground up.
BRR: Coke has been about taking branding to a whole new level. In the context of Pakistan however, a surge in popularity only came by in the late 000's. Tell us about Coke's revival and its rise to prominence amongst the so called Pakistani 'Generation X'?
RUK: It all started in 2005. In my mind, that's the time where I draw the line between the metaphorical 'Before' and 'After'. Since 2001, in my previous capacity within the organisation, we had been working to bring our parent company's senior executives to Pakistan and show them the kind of raw opportunities that a market of this scope presented. So when we were able to do that, a plan for heavy investment followed suit and it did take us a while but here we are today.
These giant leaps of growth that you see today are a result of those investments which in turn prompted revenue growth. In the last 7 years we have grown 3.5 times of what were in 2006 and have achieved steady double digit volumetric growth during this period.
Now obviously a lot of this has come as a direct result of focus on brand building. Then we also had to work on capacity expansion and we have ended up expanding almost every Coke plant in the country. Additionally we also expanded our distribution footwork and our supply chain with a complete focus on tackling our competitors in a head-on fashion.
But one aspect of this growth has been creating the brand 'Coca-Cola' in the Pakistani market. We have indeed made inroads into Pakistani consumer's psyche but I truly believe that we did so by first earning our social license from the people of this country. This is a belief we at Coke have always held onto. We believe that success and revenue growth will always follow suit but first you have to earn your social license by cementing your place in the hearts of the consumers and really, that is what we have been trying to do all along.
BRR: Tell us how Coke Studio the phenomenon came about?
RUK: In our business, you never really get a day off. You need to constantly be able to keep your consumers engaged and create a perennial pull and a demand. So we started out with research and looked into how we could tap into different consumer segments and we found that there were two things that universally brought people together in these parts of the world: Music and Cricket.
So by 2008 we were able to put together the concept of Coke Studio, which is essentially all about presenting a creative genius that broke boundaries and fused together the like and the opposite, the old and the new. And from day one, the response has been positive in ways that we simply could not have foreseen.
Coke Studio is in fact the one feat that we at Coca-Cola Pakistan are particularly proud of. It is now a case study in consumer engagement in and of itself and something that started literally as a home-grown organic idea is now being rolled out globally, in places as far as South Africa and Latin America. So we did set precedence, and it gives me immense pride every time I talk about it.
BRR: Would you go so far as to say that Coke Studio played a big role in helping Coca-Cola grab elusive market share?
RUK: Well Coke Studio definitely did help us connect with our target audience in a much faster way. It gave us a jump-start in reaching out to the young adult market, something that might have taken one or two years if we had gone about the process organically. So it did give us a foothold there.
But then we also came up with massive genius of a marketing campaign in tandem with Coke Studio so you can't really say that it has been a one trick pony. We were the first ones to activate a number of marketing opportunities and everyone else has been inspired to follow suit. In cricket for instance, we have taken marketing beyond the customary branding through logos and product placement and made a breakthrough by reaching out to fans like no other brand had ever done.
So, all of that has been greatly conducive to Coke's growth in this market. And today we are the biggest single brand name in Pakistan. And I'm basing this on two parameters; namely brand equity and market share. Right now our brand equity is much higher than our mainstay competitors and volumewise we are not far behind.
BRR: If you take the per capita consumption of carbonated beverages at around 70 bottles per person, how does Pakistan stand amongst regional peers? How do we compare with other developing countries in terms of our consumption patterns?
RUK: We have much better per capita consumption than India, but compared to the rest of the world, even if you take a country like Egypt -which has per capita consumption of around 100 bottles- we are lagging a bit behind. So amongst emerging countries, Pakistan has a lot of room left to grow.
But we also need to look at these numbers in perspective. In 2005 for instance, we were at a per capita consumption of around 18 bottles, so the overall industry has also grown by 3.5 times. So as an industry, the growth has been phenomenal.
BRR: There is a general perception amongst people that Coke is more of an urban brand whereas Pepsi has a lot of pull from the rural strata. Is that perception right?
RUK: I really wouldn't go as far as to say something like that. While it is indeed a game of perception, the fact that Coke might have greater pull in urban areas can simply be explained by the fact that that's where our marketing has been concentrated. But we are changing that and moving very rapidly into rural markets.
The thing is, expansion is costly, and we really started getting into it by 2005, so it's going to take us another couple of years to expand fully, but we're getting there. And I think that going forward a couple of things will be aligning for Coke. First of all our production standards are world class and the handling and distribution network is unmatched in Pakistan. Then of course we have the marketing edge and the brand equity we have painstakingly built over the course of the last 7 years. So all in all, things are looking great.
BRR: Where is Coke poised to go next?
RUK: We've had a phenomenal run in the last 7 years and now we are poised to go right ahead and in another 3 to 4 years we will be in a position to be the market leaders in Pakistan.
When I took over at 2005, we had only a couple of thousand employees, and today we have over 6,000 employees. Today we inspire billions of Rupee's worth of economic activity and our operations directly affect millions of retailers, and other elements in the supply chain. We purchase raw material worth billions of Rupees every year and are one of the most respected multi-national operations in the country.
Going forward, we are looking to open new plants in Karachi, Multan and Islamabad and will be investing around $380 million in these endeavours in the next 3 years. So by 2020, we intend to make Pakistan a $1 billion investment destination for Coca Cola International.