The Hindu Business Line : Soft drink cos woo home segment with price cuts

With the objective of driving volumes especially in the in-home segment that was hit most by the pesticides controversy, both Coca-Cola India and Pepsi Foods have once again undertaken a drastic reduction in consumer prices of their soft drink brands.

Said Mr Shashi K. Kalathil, Executive Director, Marketing, Pepsi Foods, "Post the pesticide controversy, while sales in metros are now bouncing back as far as on-premise consumption goes, the in-home segment has been that much slower in recovery."

Therefore, while both the soft drink companies were selling their 1.5-litre PET bottles at Rs 38 the same time last year, this season prices of 1.5-litre PET bottles have dropped to Rs 30. While Coca-Cola took the lead in dropping the price, Pepsi followed suit for obvious reasons.

Similarly, prices of 2-litre PET bottles have dropped to Rs 35 now, compared with Rs 43 the same period last year.

A Coca-Cola official termed the price reduction strategy as "seasonal."

Obviously, the price reduction exercise both companies had resorted to earlier this year was not enough. In March, for example, Pepsi and Coca-Cola had reduced prices of their 1.5-litre PET bottles to Rs 35 in place of Rs 43 the same time in the previous year, while the prices of 2-litre PET bottles were brought down from Rs 50 the previous year to Rs 40 at the onset of the peak season this year.

While the objective is obviously to drive volumes and bring back the consumer confidence, industry analysts are sceptical about the move. "This is off-season in any case, and reducing prices may not bring in the volumes the soft drink companies have projected. But the companies are faced with little choice. The pesticide controversy, after all, has not faded in the consumer's memory."

In the returnable glass bottles (RGB) segment, meanwhile, the 200-ml at Rs 5 price point strategy continues. In fact, Coca-Cola has revived its Rs 5-centric advertising.

According to Mr Kalathil, while the industry had been growing at a healthy 25-30 per cent during the first half of the year driven by the hot summer, the Rs 5 price point and scale of marketing activity, post the pesticide controversy, the industry growth fell by over 10 per cent.

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Soft drink cos woo home segment with price cuts

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