Pepsi dumps Paanch strategy; hikes prices

Pepsi dumps Paanch strategy; hikes prices

Author | exchange4media News Service | Saturday, Aug 07,2004 8:19 AM

Pepsi dumps Paanch strategy; hikes prices

It’s official. Carbonated soft drink major PepsiCo has taken the plunge, finally: it has revised its pricing strategy upwards in the country.

The new pricing--being rolled out in select states--marks the end of the much talked about Rs 5 or ‘affordabilty strategy’ flanked by the soft drink major for the last two years.

While PepsiCo India confirmed that it had taken a price increase of 20 per cent across its brand portfolio, Coca-Cola India could not be reached. But, industry sources say that this is Coke’s agenda too.

According to Pepsi, the company has revised prices of all its SKUs including PET bottles in the states of Tamil Nadu, Karnataka, Delhi, Punjab, Haryana, Mumbai and Uttar Pradesh.

So, while a 200-ml Pepsi returnable glass bottle (RGB) will cost Rs 6 instead of erstwhile Rs 5, the price of a 300-ml RGB will vary betweeen Rs 7 and Rs 10. A 1.5 litre and 2 litre PET will now cost Rs 35 and Rs 40 instead of Rs 30 and Rs 35 respectively.

According to PepsiCo India chairman Rajeev Bakshi, the aim of the affordability strategy was to increase penetration and widen the consumer base of carbonated soft drinks in the country. However, while the strategy helped increase the base to 240 million, at the same time, it squeezed the margins and put pressure on profitability, as well. "We sacrificed profitability for an increase in consumer base. It was an investment strategy on which returns were limited," Mr Bakshi said.

According to him, the new price points should continue for about one year or so.

"We will have to stabilise pricing at a combination fo Rs 6 and Rs 8 for about a year or so," he added. The price hike, he hoped would contribute to a value turnover increase of 15 per cent for Pepsi.

FE had earlier reported that Coke bottlers recently had in their interaction with the visiting Coca Cola chairman E Neville Isdell discussed the ‘affordability’ strategy and its impact on their bottomline. The Rs 5 price strategy, they had said had hit their profitability and that some of them were not in a position to take losses anymore. Coke spokesperson was unavailable for comment.

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