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Will colas be cheaper?

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Our Bureau

Mumbai, Feb. 28

Would the reduction of excise duties on aerated drinks from 24 per cent to 16 per cent mean cheaper Pepsi and Coke for the cola drinkers this summer?

Industry observers say that if prices were to be cut, the difference would be 20 paise per bottle, which would hardly make a difference to the consumer.

"Prices will not be reduced, but the reduction in excise duty would definitely help the cola majors in a big way to cut the huge losses they are currently incurring in the market," says a leading FMCG analyst.

He says that both Pepsi and Coke were not too comfortable with the Rs 5 pricing, as managing logistics had become a huge issue for them to handle. "Both these companies have already tried price-cutting and they believe that it doesn't really help."

Commenting on the excise duty cuts, a senior Pepsi spokesperson, says, "The reduction in excise duties is definitely a welcome move and will help to unleash resources necessary to make investments in distribution and chilling infrastructure which are major drivers of growth." The Pepsi spokesperson feels that a price cut at this juncture, would mean a maximum of 28 paise reduction per bottle, which the consumer will not be able to benefit.

"It would be much better if the industry responds to the need of investing in a sound distribution network across the geography, rather than cut prices."

Similarly, a Coca-Cola India spokesperson, in a press release, has said, "We are happy to note that he has taken cognisance the justifiable pending demand of the beverage industry for removal of Special Excise Duty (SED) on aerated waters, thus bringing it at par with other processed food items. The removal of SED will enable the industry to make further investments that will fuel growth in demand, resulting in higher employment, revenue to the Government and the overall positive impact in related sectors and the economy."

(This article was published in the Business Line print edition dated March 1, 2006)
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