Financial Daily from THE HINDU group of publications
Wednesday, Mar 24, 2004
Industry & Economy
Marketing - Market Shares
Cola majors sweating it out in Kerala
Vipin V. Nair
Kochi , March 23
THE onset of a sweltering summer is the time when soft drink makers go overboard, but Coca-Cola and Pepsi, the big two, are unusually low-key in sultry Kerala.
A string of controversies involving bottling units and anti-American sentiments prevailing in the State mean Coke and Pepsi have had a massive drop in business in God's Own Country.
Industry sources say that Coke and Pepsi have lost their market share in Kerala by 30-40 per cent in the past one year. "There has been a big time hit in our share," admits an official of a cola giant.
The attack on Iraq by the US was the first incident that triggered boycotting of Pepsi and Coke in the State, which has a strong base of Leftist parties. The anti-cola campaign intensified with Coca-Cola's bottling plant in Palakkad getting embroiled in environmental problems.
The Coke plant was first accused of generating hazardous waste. Then it was alleged that the plant was drawing excess groundwater, leading to water shortage and nearby wells drying up. The Kerala Government has since asked the plant to stop functioning till the onset of monsoon, leading to its closure.
With the slump in business, Coke and Pepsi have by and large stopped doing any advertising in the State. "We are not doing any ads in Kerala now. No hoarding or any signage... ," the official told Business Line.
It is estimated that 7-8 million cases of soft drinks are sold a year in Kerala (one case contains 24 bottles). Earlier, Coke and Pepsi together would sell about 4-4.5 million cases, which has now fallen. Both the companies have invested over Rs 100 crore in the State so far.
The drop in the share of Coke and Pepsi has resulted in a gain for locally made colas, which now account for more than half of the Kerala market. "The overall market for soft drinks in the state has not been affected. The propaganda against MNC colas has benefited the local players," the official said.
Meanwhile, Coca-Cola has started sourcing from its plant in Bangalore to cater to the Kerala market till its bottling unit resumes operation. Industry sources say that empty bottles are being sent to Bangalore for refill, though it costs more - at least Re 1 per bottle in freight - for Coke.
"It is more expensive for Coke, but it has to retain whatever market share it has in the State," sources pointed out. Rumours have it that Coke is roping in Malayalam superstar, Mammootty, for its campaigns to regain its image in the State.
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