Coke gets fizzy over Sri Lanka

Fizzy drink giant Coca-Cola is trying to corner Sri Lanka's market by offering natural drinks over carbonated soft drinks.

12 Mar 2007

Coca-Cola, one of the world's biggest soft drink makers, is investing $4 million to set up a fruit juice plant in Sri Lanka as part of its expansion in this South Asian island of 19.5 million people.

The move is part of the carbonated soft drink giant's plans to gain a toehold in the growing 'wellness' market, where health conscious Sri Lankans are seeking out natural foods. "Fruit juice is a growing beverage category here, driven by people's desires to lead healthy lifestyles," said Basil Gadzio, national manager for Coca-Cola Beverages Sri Lanka.

He estimated Sri Lanka's total soft drinks market to be worth around $80 million, with 100 million litres being consumed annually.

The fruit juice industry, which was worth $12 million, accounted for about a fourth of the country's total soft drink sales each year, he said. The plant, which begins production within the next six months, will initially offer mango and mixed fruit juice.

"Sri Lankans have a very sweet pallet," said the 37-year-old South African at the company's plant here in Biyagama, 25 kilometres outside the capital, Colombo. "In the future we are looking into the possibility of introducing iced tea and water to this health drink segment," he said.

The multinational giant has been doing business in Sri Lanka for 46 years and currently accounts for just over 40% of the island's soft drink market. The bulk of its sales come from Coke, followed by Sprite and Fanta. Nearly 70% of the company's sales generate from small retail outlets who sell soft drinks in glass bottles. "But modern retailing is just starting to emerge and we estimate around $5 million worth of trade goes through supermarkets. This segment alone is showing about 30% annual growth, which is a good opportunity for us," Gadzio said.

The company, which earned $30 million last year from sales islandwide, still manages to sell its products in the embattled eastern regions of the island. "The eastern region accounts for a small five percent of our sales now. We have agents in the north, but we can't get supplies through after the A-9 was closed," he said, referring to the main highway that links the north and south of the country.

The government closed the A-9 highway last August, amid heavy fighting between security forces and Tiger rebels. Goods to the embattled north are now sent through ships by the government, with supplies limited to essentials like food and medicines.

Carbonated soft drinks don't figure as "essential food items", although Gadzio said some of the foreign aid workers there may yearn for a Coke.

Gadzio said Coca-Cola's remained bullish about Sri Lanka, despite a strike that crippled its operations a decade ago.

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