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Coke India forays into readymade tea, coffee

Coca-Cola's Indian unit announced a foray into the $1.12 billion readymade tea and coffee market on Tuesday but said the bulk of its revenues over the next seven years would still come from soft drinks.

The world's biggest soft drinks company, which holds the upper hand over rival PepsiCo Inc in the battle for India's $1.2 billion carbonated beverages market, said its new Georgia tea and coffee line would start selling in mid-November.

"This is one of our biggest diversifications in India," said Sanjiv Gupta, Coca-Cola India's deputy president, at a news conference.

Some 70 percent of India's commercial beverage market is comprised of tea and coffee, with an estimated value of $7.0 billion. Sixteen percent of tea and coffee is drunk outside the home and is the market that Coke hopes to grab, Gupta said.

It is the latest diversification for The Coca-Cola Company, which has branched out in the last few years into bottled water, powdered drink mixes and premium coffee and tea brands.

The US soft drinks giant has emerged as market leader in India since it was allowed to re-enter the country in 1993 after being booted out in 1977 by a left-leaning government, which demanded that it reveal its 'secret formula.'

Rival Pepsi made its debut in 1989 in India, which has a population of more than one billion people.

Coke built up its market share after its return by buying the soft drink brands of local beverage maker Parle.

"Over the next five years, I expect at least 60 to 70 percent of our turnover to still come from soft drinks," Gupta said.

"A large part of our volumes will come from water, tea and coffee... but they will take at least the next four to five years to seven years to really mature," he said.

Broke even

Gupta provided no details of the company's sales in India but said the business broke even last year.

Coca-Cola, whose advertisements blare from Indian television sets like those for Pepsi, has invested $805 million in India over the past decade to support its more than 15 beverage brands.

It has a nearly 61 percent share of the carbonated soft drinks segment, according to leading market research firm ORG, which says Pepsi has a 35 percent share.

Coke officials estimate India's carbonated drinks market is growing at 10 to 11 percent a year.

Earlier this year, Coca-Cola India tied up with fast-food chain McDonald's to introduce premium ready-to-serve hot coffee and tea under the 'Georgia Gold' brand through its own outlets in India.

Coca-Cola's new ready-to-drink tea line targeted at lower income consumers is priced attractively at four rupees a cup and coffee at five rupees. It will be dispensed through vending machines.

It will compete in the ready-to-drink segment with players such as Hindustan Lever, Nestle and the Tata group.

In September, Coca-Cola won a six-month extension of a government deadline for selling a 49 percent stake in its wholly owned subsidiary to local investors and partners. The company said more time was needed to complete the divestment.

The Indian government had asked the Atlanta-based soft drinks giant to comply with that condition within five years of resuming operations in the country.

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