Coca-Cola wants to get into circular economy. Along with its bottling partners and fruit suppliers in India they will be investing $1.7 billion in the Indian agriculture ecosystem in the coming five years. The company will source locally produced fruits in order to produce their non-carbonated drinks, which contribute to 40% of its revenue in Asia.
Coca-Cola wants to contribute to sustainable agriculture in India, using a variety of Indian-grown fruits as ingredients in its juice as well as aerated drinks. The company also wants to focus on increasing and diversifying its own portfolio and has done so by producing 11 variants of the Minute Maid in 10 years.
How does the circular economy impact the farmers?
According to a statement released by the company, around two lakh farmers would experience gains from this 5-year plan. Coca-Cola is not only working on developing technologies such as high-density plantation and micro-irrigation systems but also has introduced Project Unnati. Through the projects, farmers will benefit from improved farm land and productivity potential of fruits like mangoes and oranges which are popular ingredients for fruit juices. Also, over 20,000 farmers will be given subsidised seeds, drip irrigation equipment, and training to manage the high-tech equipment in the plants. This mechanisation and specialisation would definitely increase the farmers’ efficiency and fruit yields.
Furthermore, Coca-Cola’s plan will increase employment and improve the livelihood of the farmers, especially since a significant proportion of rural India’s is into farming. Thus, this plan will spur economic growth in the country. A large share of the revenue will be put back into the local economy due to local sourcing, thereby increasing the GDP and benefiting the community in bigger terms. The technology and production methods that Coca-Cola will bring in to facilitate sustainable agriculture will reduce the harm done to the environment. It will also lay emphasis on conservation of soil, water, energy and biological resources.
Despite all these benefits, FDI can lead to the foreign company using its power to manipulate the government to bend the rules and regulation standards. In the case of production problems (such as famine), the farmers will be indebted if they receive any advances. Also, since farmers are no longer in control of their own work, they lose their bargaining power. Thus, contrary to the proposal, Indian farmers might not benefit as much as expected. In the past, India has received FDI mostly in the retail sector and hence, the consequences of the investment in the agricultural sector are unclear. Also, the country may suffer by becoming too dependent on the foreign company to improve its infrastructure and other facilities.
What does Coca-Cola stand to gain?
The carbonated drinks market hasn’t been performing well, as consumer patterns suggest that people want to live healthier lives. Thus, they are switching over to healthier drinks like fruit juices. To keep up with these trends, Coca-Cola aims to procure and use different varieties of fruit pulp to develop this line of beverages. The company will be able to provide a variety of juices and soft drinks with its fruit content, slightly altering its brand image and attracting more consumers.
Furthermore, since the consumers will know that the fruits are locally sourced, they will be more likely to buy the beverage giant’s drinks. Additionally, Coca-Cola will be more responsive to the market as the local suppliers will be able to deliver the materials quickly, and will provide products with consistent quality. Completely localising the supply chain will reduce the costs and hence the company can use it for other phases of the plan, such as infrastructure.
Coca-Cola has already begun the first phase of its production by sourcing 1800 tonnes of fruit from Jalna, Maharashtra. Moreover, the company will not only continue being one of the biggest buyers of India’s agricultural productions but will also continue exporting these raw materials to other countries.