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Tuesday, May 13, 2003

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What `price' cola drinks... !

Ratna Bhushan


CONFUSED about what soft drink to buy to quench your thirst? Now you will also be unsure of what price to pay.

The price war that had broken out earlier this year between the two cola companies has taken an interesting turn during the current peak sales period.

Just about one month after PepsiCo dropped prices of its 300-ml returnable glass bottles in some high-consumption markets such as Delhi to Rs 6 from the earlier Rs 8, the soft drink major has now settled for a price tag of Rs 7. Interestingly, PepsiCo's Rs 6 price tag had been well-publicised through point-of-sale publicity and hoardings.

Price of Coca-Cola's 300-ml glass bottles, too, is now at Rs 7 in some high-consumption markets. While in some regions Coke was selling its 300-ml bottles at Rs 6.50, in others, the company was selling these at Rs 8.

This season has seen unprecedented action on the price front. For example, prices of Pepsi's 300-ml bottles witnessed almost a 40 per cent reduction - from Rs 10 at the beginning of the year, to Rs 6 last month.

When contacted by Business Line, PepsiCo's spokesperson said, "Only the price of Pepsi 300-ml bottles has been taken up to Rs 7 in Delhi. The price of the flavour brands in the same pack size remains at Rs 6. Our market surveys revealed that despite our aggressive price communication, retailers were still selling the product at a higher rate in many parts of Delhi. This did not meet our objective of passing on the benefit to the consumers. Some retailers were also found to have been moving their stocks from Delhi to neighbouring higher-priced markets, and the consumer was still not getting the benefit." While Coke has remained focused on the 200-ml segment to drive volumes, Pepsi has identified the 300-ml returnable glass bottles segment as its mainstay this season.

Interestingly, both companies adopt a region-specific variable price strategy for their 200-ml and 300-ml glass bottles. Prices of 200-ml glass bottles, for example, vary from Rs 5 to Rs 3, down from Rs 7 at the beginning of the year.

Analysts tracking the sector say dropping end-consumer prices of returnable glass bottles would result in both companies incurring huge losses. For now, however, driving volumes seems to be the deciding factor on which both companies are basing their pricing strategies.

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