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Pepsi sees its cup runneth over

Pepsi sees its cup runneth over

Author | Source: The Economic Times | Tuesday, May 23,2006 7:53 AM

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Pepsi sees its cup runneth over

How many times have you gone to a big fat Punjabi wedding and been served a 'thanda' in a Pepsi cup? And you said, thanda matlab....We aren't taking a guess, but the numbers speak for themselves.

It's like having your cup and drinking his too. Small wonder then, that Pepsi should say cheers even when what you've actually been served may well be a Coke.

Merchandising couldn't have meant such a huge brand boost to Pepsi, especially when the company's marketing executive director Punita Lal says she never really thought of it that way. But this story's for real, and when we tell her so, Ms Lal says she has no problem. For the record, Pepsi sends some seven crore paper and plastic cups to its distributors for 'free', but actually on a 'no-profit-no loss basis'.

The distributors, in turn, pass them on to retailers who operate Pepsi vending machines. The cost of the cup is built into the price at which you buy a fountain Pepsi.

That's how the distributors track sales - the number of cups not returned at the end of a cycle determine the quantity of sales.

In reality, however, there should be many more Pepsi cups in the market than fountain Pepsi sales possibly justify. Just walk into your neighbourhood grocer and ask for disposable cups for a bash you have at night, and chances are you'll be paying for the Pepsi logo.

Ms Lal, at first, claimed ignorance, but then recognised that the cups indeed hold a huge brand advantage for Pepsi. This, despite every possibility of a neighbourhood entrepreneur creating a secondary channel for fakes. “I don't even sell the cups,” Ms Lal told ET, adding, “either they are diverted from the channel or manufactured by a secondary channel I am not familiar with.”

So that's as good as it gets. Ms Lal conceded that wittingly or unwittingly paper and plastic cup makers were doing a big service to the brand. “While it does not hurt me, it would actually delight us if Pepsi is served in a Pepsi cup. It's not a brand situation,” she said.

In the same breath, she also clarified that Pepsi does not sell cups to grocers and caterers. In fact, no extra cup is given to outlets other than what is meant for consumption from fountains. So, if retailers were to divert Pepsi cups from the trade, they would have to pay Pepsi, through distributors, for those many cups of Pepsi sold in the market. It doesn't make economic sense for them.

Industry estimates put the size of the paper and plastic cups market at less than 20 crore for soft drinks and about 10 crore for tea and coffee. Coca Cola officials refused to confirm the number of cups they put out, but 'unofficial' channels claim they put out about eight crore cups a year.

Ms Lal puts Pepsi's own figure lower at seven crore. So, going by the market's contention, there should be a crore more Coke cups in the market over that of Pepsi. Of the 20 crore cups in the market, clearly 5 crore are neither from Coke nor Pepsi. That's where Pepsi has the edge.

Do a quick check at your grocer's and chances are you'll end up buying blue Pepsi cups rather than Coke's red ones. However both insist that their involvement in the cups business is limited to the ones they procure and pass on to fountain machine operators who charge customers at 80 paise to a rupee per cup.

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