The Hindu Business Line : Soft drink majors gear up to beat the heat

THE coming summer season could be `do or die' for the soft drink industry. Hence, it is leaving no stone unturned while gearing up for the peak season from March to October.

Despite increasing prices in the second half of last year, Coca-Cola India as well as PepsiCo took a significant hit on their bottomlines in 2004 due to their low-price strategy, rising input costs and a hangover of the pesticide controversy. Both the companies are desperately hoping for a better sales performance this time round. Yet itmay be dependent to a large extent on the weather gods, who are now dictating an unprecedented warm spell in South India and an unusually long winter in the North.

On the sales front, the PepsiCo India Chairman, Mr Rajeev Bakshi, told Business Line that his company's sales grew "by 15-20 per cent in 2004" after two rounds of price hikes in the second half, but the company has decided not to raise prices of the 200 ml and 300 ml pack sizes from the present Rs 6 and Rs 8, respectively, this season.

"We feel Rs 6 and Rs 8 are the right price points and we are not looking at any further price hikes at least till June 2005. Prices in the larger, PET packs have already been increased to Rs 38 (1.5 litres) and Rs 43 (2 litres)," he said, while declining to give sales growth projections for the current year.

Coca-Cola India is looking at adding capacities this year, having anticipated increased demand. A company spokesperson confirmed that a franchisee bottler is readying a new bottling plant in Madhya Pradesh and that there could be further capacity addition "in case, the business needs it."

Currently, the company has 27 company-owned bottling plants , 17 franchisee-owned bottling plants and more than two dozen contract packers. While the spokesperson declined to comment further on the matter, company sources said there had been some capacity addition last year as well.

But if what the Coca-Cola Company's Chairman and CEO, Mr E. Neville Isdell, said last week after announcing the company's global results for 2004 is anything to go by, sales of Coca-Cola India could have been badly hit last year.

"In India, unit case volume in the fourth quarter (ended December 31, 2004) was primarily impacted by a price increase on the key affordability package, driven by rising raw material costs," he had said. While countries such as China, Australia, Indonesia and Thailand posted double-digit growth, this was "moderated by a weak performance in the Philippines and India."

And if postures are any indication, the upcoming summer could make both Coke and PepsiCo sweat!

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