Cola firms not so hot

Cola firms not so hot

Author | Source: The Economic Times | Thursday, Apr 27,2006 8:01 AM

Cola firms not so hot

Hefty advertising budgets and film-star brand ambassadors notwithstanding, cola majors PepsiCo and Coca-Cola are recording flat sales with low single-digit volume and value growth for the second consecutive year.

Trade sources have attributed this to last year's price hike and a consumer shift towards non-carbonated beverages like fresh fruit juices, milk, packaged juice and flavoured drinks.

With the growth of their flagship brand Pepsi stagnating, the company is upping spends on promotions in order to revamp their other brands and are shifting focus to their other categories. For example, earlier this year PepsiCo India had John Abraham relaunching 'Diet Pepsi', which was first introduced in the Indian market seven years ago.

The consumer base for the diet category is fairly low but the company is attempting to rope in more consumers by bringing the price down to Rs 12 from the earlier Rs 20 and through marketing in the Tier II cities.

More recently, the company had revamped its 600ml '7 Up' bottle with Malika Sherawat as brand ambassador for the campaign, for which the company spent about Rs 2.5 crore.

“India's per capita consumption of cola still remains at 10 servings per year (that is, each person has a cola about 10 times per year), while Pakistan's and Sri Lanka's is 25 and 30, respectively,” said Vipul Prakash, vice president-marketing, PepsiCo.

“For the summer, we will focus on home consumption, a category which has been growing since the past two-three years, for which we have started our Pepsi TV campaign. The ad spends on the campaign are in the range of Rs 8-10 crore and we are hoping to record a 20% value growth and a volume growth in the low teens this summer,” he added.

Coca-Cola, according to industry analysts, has a 65% market share for 'Coke' and 'Thums Up' combined and have recorded single-digit volume growth and double digit value growth in '05-06. “Sales for both Pepsi and Coke have been 50% less this year because of the price hike.

This year we are buying 30-40 crates a month compared to last year's 80-90 crates (each crate has 6 pieces of the 1.5 litre bottles),” said a distributor in south Mumbai. Other categories like juices are being pushed by traders and importers as the margins for these are about 10-15% compared with the 5-8% margins they get when dealing with colas.

Last year, the consumption rose to 250m crates and has stagnated ever since. Also, the per capita cola consumption was a little less than 10 last year and has reached 10 this year. In the unorganised segment, retailers are selling at Rs 2 higher than the MRP of Rs 40 for a 1.5 litre bottle.

According to industry sources, going ahead, Pepsi will increase focus on both Tropicana and Gatorade in the months to come, while Coca-Cola will enter the fruit juice segment with its Minute Maid to compete with Tropicana.

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