The Hindu Business Line : PepsiCo may hike prices more to meet input costs

INFLATIONARY pressures are at it again. Just two months after soft drink prices were increased, PepsiCo India initiated a second round of price hikes last week. And what's more, soft drinks could become costlier in the near future as raw material and other input costs are rising.

Even as PepsiCo initiated a price hike of a rupee in the 300-ml and Rs 3 in the 500-ml pack last week, the company is considering whether to further increase prices of the larger PET sizes to meet the steep hike in input costs.

"Over the last few weeks, prices of the plastic used in making PET bottles have appreciated sharply. Our costs for these pack sizes have almost doubled. We are considering whether to pass on this steep increase to the consumer," the PepsiCo India Chairman, Mr Rajeev Bakshi, told Business Line here.

He said the cost per empty PET bottle has increased by Rs 3 but a final decision on whether this will result in higher MRPs has not yet been taken.

On whether the first round of price hikes in August had impacted the company's volume growth, Mr Bakshi said although volume growth had suffered over the last two months, the decline was less than expected.

"After the first round of price increases, volume growth has slipped by only five percentage points to 15 per cent. However, there has been unexpected value growth of 25 per cent over this period."

Between January and August this year, the company achieved value as well as volume growth of close to 20 per cent, he said.

Mr Bakshi said that price increases have been taken well by the consumer, but the real test would come in March next year when the peak season for soft drinks begins.

PepsiCo has decided to start a phased launch of Lipton Ice Tea in Chennai and Bangalore by the year-end.

"The brand already had some equity in these markets since it has been present there for some time. A phased launch beginning with these markets will help us devise marketing and sales strategies for the product nationally," said Mr Bakshi.