The Hindu Business Line : Coke, Pepsi hike prices by a rupee in select markets

SOFT drinks have become costlier by a rupee after both, Coca-Cola and Pepsi, effected the hike across select markets earlier this month. Both companies said on Wednesday that prices have been increased to generate value growth since the five-rupee price point was becoming unviable.

Coca-Cola India President and CEO, Mr Sanjiv Gupta said the company has increased prices also to counter the significant increase in input costs over the last couple of months. The price hike follows two years after the company unleashed its "affordability strategy" in India with the 200 ml pack size priced at Rs 5 and 300 ml at Rs 6 to drive volume growth.

However, while sales volumes have grown over this period, the commensurate value growth has not happened, he said on the sidelines of the two-day CII Marketing Summit here.

"We have hiked prices by a rupee in both pack sizes, but this has been done in selective markets. Large-serve PET bottles are costlier by 10-12 per cent. This has been done to generate some value growth. While we continue to make money on the five rupee pricing even today, the quantum needs to go up," he said. When contacted, PepsiCo Chairman, Mr Rajeev Bakshi also confirmed the price hike effective August 1 across Tamil Nadu, Karnataka, Kerala and Andhra Pradesh in the south, in Delhi, Haryana, Punjab and Mumbai markets.

Mr Gupta said while the new pricing has largely been introduced across select markets including big cities like Delhi and Mumbai, the five-rupee pricing for Coco-Cola products would continue in some parts of rural India.

He said the soft drink industry consumer base has doubled over the last two years to touch 250 million and this has been made possible due to the lower price point strategy. Mr Gupta also invoked the steep increase in input costs to justify the price hike.

"The two per cent cess Government imposed in this Budget, about 30 per cent increase in sugar prices, rising prices of pre-formed resin used to make PET bottles and in other forms of packaging have all impacted margins," he added.

Asked whether the company's growth has slowed down, Mr Gupta said, "The first half of this year has seen double digit growth but it has been lower than last year. First half in 2003 saw 30-40 per cent growth levels, which are clearly unsustainable."