Though both companies follow a policy of regional pricing, the MRP in Delhi has been fixed at Rs 10, up about 11 per cent from Rs 9 earlier. While Pepsi effected the increase last month, Coke did the same earlier this month. Traditionally, both of them do not increase prices together and one usually follows the other in effecting changes in the pricing.
The increase in prices comes at a time when both players have been struggling to maintain the pressure on their bottomlines because of high excise and sales tax structures. The soft drink majors have been increasing prices of their products in regular intervals. While the current increase comes after the one in March 1999, the one before that was during October 1997.
According to industry watchers, the increase is largely a result of lack of relief on the excise front, with duties at 40 per cent being the worlds highest. Also, freight and input costs have increased substantially, they said and added that to remain competitive they had to increase prices.
Prices of soft drinks have almost doubled over the last five years. Being a price-sensitive product, these increases have not been taken very well by consumers and growth has slowed down from 25 per cent during 1998 to 5 per cent during 1999 and about 11 per cent during year 2000.
A study by NCAER had revealed that a significant 65 per cent of consumption of soft drinks is by the middle class and an additional 25 per cent by the lower income group.
The Rs 5,500-crore soft drink sector employs a staggering 1.25 lakh people and is one of the single largest contributors of foreign direct investment estimated at $1 billion. Together, the two companies are said to have accumulated losses in excess of Rs 500 crore because of high duty structures.