Pay more for the fizz: Cola majors set to hike prices after 6-year gap

If your daily diet includes a glass of sparkling cola, then you should get ready to shell out more. After keeping prices in check for years, the American cola giants are set to make their fizzy drinks portfolio costlier. 

Coca-Cola and PepsiCo --- the two beverage majors that control over 80 per cent of the country’s organised cola market --- are likely to raise prices by 6-14 per cent ahead of the summer season. While minor changes to prices of specific shelf keeping units (SKUs) have been effected earlier, it is for the first time since 2014 that prices will be revised across portfolios.

People in the know said the price of the 600-ml PET (polyethylene terephthalate) bottle of Coca-Cola, ThumsUp, Sprite, Pepsi, and 7UP would be raised by 8.6 per cent in Delhi. The revised price of the SKU is set at Rs 38 for the National Capital Territory --- up from Rs 35. For certain brands like Mountain Dew, the hike could be steeper --- by 14.3 per cent --- to Rs 40.

The price of a 2-litre PET bottle has been set at Rs 90 for popular brands --- 5.9 per cent higher than the current Rs 85. For 1.25 litres, it is Rs 65, an 8.3 per cent increase.

However, the prices of their glass bottle SKUs --- both 200ml and 300ml --- remains unchanged at Rs 12 and Rs 15, respectively. Glass bottles are targeted towards price-conscious consumers, who are yet to shift to larger packs. The upcoming hike will, however, cover a larger part of their portfolio as PETs and cans now constitute over 60 per cent of the industry’s volume uptake.

“We continue to observe market dynamics and consumer preferences. Depending on the insights, we take decisions on our pricing strategy,” a PepsiCo India spokesperson said.  Despite the increase in the effective tax rate after July 2017 --- when goods and services tax came into effect --- the two Cola giants refrained from hiking prices across their portfolio. 

Specific changes in price for certain SKUs helped them mitigate some part of the additional cost. However, their attempt to absorb the higher taxation impacted their bottom line. For example, Coke’s bottling arm Hindustan Coca-Cola Beverages posted a net loss of Rs 118 crore in FY18.

Since the last price hike six years ago, prices of key raw material such as sugar have risen in double digits. 

In addition, its performance over the past several quarters may have given Coca-Cola the confidence to raise prices. At least since late-2018, the India unit registered steady volume growth.