The Hindu Business Line : Thanda matlab

THIS summer, soaring temperatures are being matched with an equally intense reduction of prices, as far as the Rs 5,500-crore soft drinks industry goes.

Take Pepsi Foods, which has dropped prices of its 300 ml returnable glass bottles (RGB) to Rs 6 just two days ago. While the price reduction has been implemented only in one market - Delhi - it is expected to be introduced in other markets subsequently.

This, when Summer 2003 had been predicted as the season of the 200 ml, Rs 5 price point, being the key driver to push volumes.

When contacted by Business Line, a Pepsi spokesperson said, "in a high-consumption market such as Delhi going into the summer, aggressive price points devolving from the 300-ml segment will work much better. Our price strategy for this market, therefore, works off this thinking. As a consequence to this, 200-ml bottles are also priced at Rs 5. The new price points are - 300 ml at Rs 6, and 200 ml at Rs 5."

While there is no word from Coca-Cola on this, industry analysts expect the company to follow suit. "The two brands cannot operate pricing strategies independent of each other. The market is just too competitive," an industry analyst said.

Coca-Cola says it has an overall market share in excess of 60 per cent for its soft drinks brands, a claim Pepsi Foods contests. However, as the analyst said, "The soft drinks industry is heavily dependent on returnable glass bottles, and Coke has taken the lead here. Pepsi's latest price reduction strategy, therefore, is critical to drive volumes."

Earlier this year, Coca-Cola had taken the price war head on by introducing 600-ml PET bottles priced at Rs 12 each, beginning with Maharashtra, one of Pepsi's key markets.

Pepsi - which was selling 500-ml PET bottles priced at Rs 15 each - was caught on the backfoot and was forced to react, beginning with reducing prices of its 500 ml bottles to match that of Coke.

Meanwhile, action may just shift to the 200-ml segment. According to industry sources, Coke is offering Sunfill sachets priced at Rs 2 each, free with 200-ml and 300-ml bottles, in some regional markets. In effect, therefore, while Coke's price points for 200-ml and 300-ml bottles remain at Rs 5 and Rs 7 respectively, the consumer is being offered more for less.

In the home-consumption segment too, Coca-Cola took the lead earlier this year, by slashing prices of its 1.5-litre and 2-litre PET bottles.

Pepsi too reduced prices of its 1.5-litre and 2-litre PET bottles, to Rs 35 and Rs 40 respectively, against the earlier price of Rs 43 and Rs 50.

For now, it seems to be Advantage Consumer.

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