Financial Daily from THE HINDU group of publications
Friday, Jul 23, 2004
Financial Daily from THE HINDU group of publications Friday, Jul 23, 2004 |
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Marketing
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Strategy Nestle `corrects' KitKat prices to industry benchmark levels Sindhu J. Bhattacharya
New Delhi , July 22 AFTER detergents, it could well be the turn of chocolates. Nestle has slashed prices of KitKat by up to Rs 2, bringing the brand on a par with the chocolate industry benchmark price points of Rs 5 and Rs 10. However, market leader Cadbury and Gujarat Cooperative Milk Marketing Federation (GCMMF, maker of the Amul brand) say there is no reason to slash prices further and the category will grow by creating new product segments and offering better value to the consumer. Both these players contend that there need to be a price correction, but perhaps upwards due to rising input costs! "The prices of KitKat have been rationalised in view of the fact that price points are important in the market," a Nestle spokesperson told Business Line while acknowledging the price slash. Thus, the Rs 12 and Rs 6 pack sizes are now priced at Rs 10 and Rs 5 respectively. The only other chocolate brand of Nestle - Perk - is already at Rs 5 and also Rs 2. The spokesperson said Perk was the largest selling SKU (stock keeping unit) in the category. While he did not elaborate further on reasons for a price cut, industry sources said KitKat is a wafer chocolate, overpriced compared to the regular one and a price correction was imminent. Meanwhile, asserting that GCMMF was not contemplating any change in prices for chocolates, General Manager-Marketing Mr R.S. Sodhi said "we have in fact begun to revive the brand over the last couple of months. We have repackaged the chocolates and launched four new products targeted at children and teenagers at the 5 and 10 rupee price points." He said there was no cause for slashing prices. Market leader Cadbury is again vehement while asserting that price cuts are not on its horizon. While admitting that the worm controversy last year more than halved the company's growth rate in 2003-04, a Cadbury spokesperson said "there have been no price correction in a long time. We believe in creating new product categories to spur growth." Over the last few months Cadbury has launched two new product segments: a 2-in-1 chocolate that is both brown and white and Cadbury Bytes in the snacking category. Analysts contend that even if prices of chocolates have been kept constant at Rs 5 and 10, the pack sizes have been consistently reduced. But this is contested by all three companies. The Nestle spokesperson said `4 fingers' Kitkat has always been 36 gram while `2 fingers' is 17.5 gram and the amount of chocolate has not changed even though prices have. Ditto for Cadbury and GCMMF. However, while the consumer gets 36 g of chocolate for Rs 10 in case of KitKat and 35 g of Amul, only 24 g is available in case of Cadbury Milk for the same price!
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