Experts believe that a prolonged price war may lead to consolidation in the soft drinks market.
With the return of Campa Cola and the price war it initiated, the Indian soft drinks sector is currently experiencing a notable disruption. With the incumbent market leaders, Coca-Cola and PepsiCo joining the price war, it is an all-or-nothing war for a share of the consumer’s wallet in the soft drinks sector, said a report by GlobalData.
The Campa Cola brand has been a common sight across India when Coca-Cola and PepsiCo did not operate in the country due to regulations and it was revived once again in 2022 when Reliance Retail announced the acquisition of the brand.
In 2022, just weeks after Reliance Industries made an entry into the FMCG space, it had announced the acquisition of Campa Cola brand for Rs 22 crore. Later in 2023, Reliance’s FMCG unit announced the relaunch of Campa Cola, along with two other flavours. Backed by the deep pockets of its parent, Reliance Industries, the company embarked on an aggressive pricing model to capture market share, stated GlobalData.
Parthasaradhi Reddy Bokkala, Lead Consumer Analyst at GlobalData, stated that with the price of a 200ml cola bottle at Rs 10 ($0.12) and a 500ml bottle at Rs 20 ($0.24), Campa Cola had undercut the prices of PepsiCo, Coca-Cola, and other competitors by 50%, as 200ml bottles typically cost Rs 20 ($0.24). In response, Coca-Cola and PepsiCo introduced promotional pricing for their larger bottles. This resulted in a lull in the price war, as Campa Cola’s distribution reach remained limited.
“Thanks to the gradual increase in Campa Cola’s distribution reach, the situation changed in recent quarters as the aggressive prices and expanded distribution disrupted the operations of Coca-Cola and PepsiCo. The two companies have been forced to withdraw from the status quo and increase promotions on their products. For instance, Coca-Cola recently launched a 350ml bottle (150ml free) of its flagship Coca-Cola brand at Rs 20 ($0.24),”
Francis Gabriel Godad, Consumer Business Development Manager, GlobalData India, said.
Further, the predatory pricing has also affected the volumes of non-cola categories and brands. For instance, PepsiCo’s Tropicana and ITC’s B Natural brands suffered volume losses due to the expanding price differential between nectars and colas.
The price war in the Indian soft drinks sector is a multifaceted issue driven by aggressive pricing strategies, shifting consumer preferences, economic pressures, and a growing focus on health.
“As companies continue to adapt to these dynamics, the competition is likely to intensify, with potential long-term implications for brand loyalty and market positioning. With all the major players having deep pockets, the market is in for a long-drawn price war, which can lead to a consolidation in the market, as smaller players may not be able to sustain in a long-drawn price war,”
Parthasaradhi Reddy Bokkala concluded.
Source: Financial Express
