Coke buys back Kinley bottling rights from franchisee bottlers

NEW DELHI: Hindustan Coca-Cola Beverages, the bottling subsidiary of Coca-Cola India, has acquired the bottling and distribution rights for its Kinley packaged water brand from franchisee bottlers in three states, ending a long-drawn dispute.

���In order to gain synergy with the rest of the portfolio, Hindustan Coca-Cola Beverages (HCCBPL) has integrated the operations of some exclusive Kinley water franchise bottling partners in select territories in Tamil Nadu, Karnataka and Maharashtra with itself,��� a Coca-Cola India spokesperson told ET.

The compensation the world���s largest beverages maker paid to individual franchisee bottlers could not be confirmed. With this acquisition, which is for both retail and bulk water, Coca-Cola can have a direct and centralised distribution system for Kinley, which tops the retail packaged water market with a 10.3% share, and align its bottling operations more efficiently.

The mass-distributed Kinley leads the Rs 2,200-crore retail packaged water market with a 10.3% share, according to market research firm AC Nielsen. The market is growing at a rate of about 17% per year. The integration of bottling operations also means that there is no overlapping between Hindustan Coca-Cola Beverages and Coke���s franchisee bottlers in these markets.

The bottlers had earlier resisted the buyout by Coca-Cola, saying Kinley was a long-term profitable business. They had also opposed the firm���s plan to launch BonAqua, its global packaged water brand, in the same territories.
The Coca-Cola spokesperson said the integration has been done over the last 24 months. ���HCCBPL now services packaged drinking water requirements of consumers in these markets through brand Kinley,��� he added.

Several leading franchisee bottlers of Coca-Cola had signed an agreement called the Coca-Cola International Bottlers Agreement (CIBA) to get the franchisee rights for Kinley. Under the agreement, bottlers had to set up manufacturing capacities and take care of infrastructure development of coolers and signages. Coca-Cola did only advertising. The contracts, ranging between five and eight years, had been renewed from time to time.

Kinley began turning in profits about two years ago, with the company splitting distribution channels for water and aerated drinks and renewing focus on multiple packs and marketing. Meanwhile, Coca-Cola has decided not to extend BonAqua beyond Delhi for the time being. People close to the development said Coca-Cola had originally intended to retail BonAqua mainly through modern trade.

Packaged water is highly fragmented and categorised by low margins estimated to be a third of carbonated drinks. Smaller players, which indulge in heavy price discounting, together make up for 70% of the overall category. The remaining 30% of the market is dominated by three players, such as Kinley, Ramesh Chauhan���s Bisleri and PepsiCo���s Aquafina.