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Pricing Strategies of Coca-Cola in India
- 1. Page1 Pritam Mukherjee MBA Marketing III 2019-2207-0001-0020 Marketing Assignment II IDENTIFYING PRICING AND DISTRIBUTION MIX OF VARIOUS PRODUCTS Submitted to Dr. Vinay Nandre
- 2. Page2 Acknowledgement I take this opportunity to express my profound gratitude and deep regards to my guide Dr. Vinay Nandre for his exemplary guidance, monitoring and constant encouragement throughout the course. The blessing, help and guidance given by his time to time shall carry us a long way in the journey of life on which I am about to embark. Lastly, I thank almighty, my parents, brother, sisters and friends for their constant encouragement without which this assignment would not be possible. I again would like to express my genuine compliments to my course instructor Dr. Vinay Nandre for giving us such a great lecture which helped me to make the survey successful and to get an opportunity of writing a report. Regards, Pritam Mukherjee Date: 11th , April 2020 Place: Pune ( Dr. Vinay Nandre )
- 3. Page3 Table of Contents Sector Information ....................................................................................................................................................4 Market size of food and beverages industry in India (2015-2020) .......................................................................4 The Food ................................................................................................................................................................4 The Beverages........................................................................................................................................................4 Company Information ...............................................................................................................................................5 Product Range ...........................................................................................................................................................6 Products Available Globally...................................................................................................................................6 Products Available in India ....................................................................................................................................7 Price and Variants......................................................................................................................................................8 Competitors Pricing.................................................................................................................................................11 Pricing Strategies.....................................................................................................................................................12 Psychological Pricing............................................................................................................................................12 Competitive Pricing..............................................................................................................................................12 Penetration Pricing..............................................................................................................................................12 Promotional Pricing .............................................................................................................................................12 Segmented Pricing...............................................................................................................................................13 Price Adoption.........................................................................................................................................................14 Distribution..............................................................................................................................................................14 Channel Levels.....................................................................................................................................................14 Marketing Practices.............................................................................................................................................14 Inventory Turnover Ratio ....................................................................................................................................14 Bibliography.............................................................................................................................................................15
- 4. Page4 Sector Information Market size of food and beverages industry in India (2015-2020) Financial development in a nation legitimately or in a roundabout way brings about a huge improvement in its food supply. The food and beverage industry in India comprised around 40 percent of its consumer packaged goods industry. The market size of the food and beverage industry the country over was assessed to be around 46 billion U.S. dollars in 2020. The food division is ready for additional development, with the plan to accomplish a greater commitment to the world food trade each year. The 6th biggest food and grocery item advertise on the planet is seeing exponential development, with online conveyance players like Swiggy, Zomato, FoodPanda among others setting up associations the nation over. The size of the online food delivery market in the nation was 300 million U.S. dollars in 2016. The Food Baked goods, convenience food, confectionaries and dairy make up the packaged food segment. Biscuits are arguably the soul food of citizens, where ‘chai pe charcha’ (conversations over cups of tea) is an essential evening routine. investments also increased significantly in the industry in 2016 and 2017. The packed organic food and beverages sector had a market size of over 500 million Indian rupees in 2016. The Beverages Tea is the most common beverage in the northern parts, while in the south, the affection towards a hot beverage is shared between tea and coffee equally. Fruit juices and soft drinks are the commonly consumed non-alcoholic beverages throughout the nation. Adherence to safety measures and quality food supply accompanied by strong global competition is likely to keep the industry’s plate full and stir it towards future expansion.
- 5. Page5 Company Information The Coca-Cola Company, American corporation founded in 1892 and today engaged primarily in the manufacture and sale of syrup and concentrate for Coca- Cola, a sweetened carbonated beverage that is a cultural institution in the United States and a global symbol of American tastes. The company also produces and sells other soft drinks and citrus beverages. With more than 2,800 products available in more than 200 countries, Coca-Cola is the largest beverage manufacturer and distributor in the world and one of the largest corporations in the United States. Headquarters are in Atlanta, Georgia. The drink Coca-Cola was originated in 1886 by an Atlanta pharmacist, John S. Pemberton (1831–88), at his Pemberton Chemical Company. His bookkeeper, Frank Robinson, chose the name for the drink and penned it in the flowing script that became the Coca-Cola trademark. Pemberton originally touted his drink as a tonic for most common ailments, basing it on cocarine from the coca leaf and caffeine-rich extracts of the kola nut; the cocaine was removed from Coca- Cola’s formula in about 1903. Pemberton sold his syrup to local soda fountains, and, with advertising, the drink became phenomenally successful. By 1891 another Atlanta pharmacist, Asa Griggs Candler (1851–1929), had secured complete ownership of the business (for a total cash outlay of $2,300 and the exchange of some proprietary rights), and he incorporated the Coca-Cola Company the following year. The trademark “Coca-Cola” was registered in the U.S. Patent Office in 1893. Under Candler’s leadership, sales rose from about 9,000 gallons of syrup in 1890 to 370,877 gallons in 1900. Also during that decade, syrup-making plants were established in Dallas, Los Angeles, and Philadelphia, and the product came to be sold in every U.S. state and territory as well as in Canada. In 1899 the Coca-Cola Company signed its first agreement with an independent bottling company, which was allowed to buy the syrup and produce, bottle, and distribute the Coca-Cola drink. Such licensing agreements formed the basis of a unique distribution system that now characterizes most of the American soft-drink industry. Capitalized at $100,000 in 1892 upon incorporation, the Coca-Cola Company was sold in 1919 for $25 million to a group of investors led by Atlanta businessman Ernest Woodruff. His son, Robert Winship Woodruff, guided the company as president and chairman for more than three decades (1923–55). The post-World War II years saw diversification in the packaging of Coca-Cola and the development or acquisition of new products. The trademark “Coke,” first used in advertising in 1941, was registered in 1945. In 1946 the company purchased rights to Fanta, a soft drink previously developed in Germany. The contoured Coca-Cola bottle, first introduced in 1916, was registered in 1960. The company also introduced the lemon-lime drink Sprite in 1961 and its first diet cola, sugar-free Tab, in 1963. With its purchase of Minute Maid Corporation in 1960, the company entered the citrus juice market. It added the brand Fresca in 1966. In 2005 the company introduced Coca-Cola Zero, a zero-calorie soft drink with the taste of regular Coca-Cola. In 2007 the company acquired Energy Brands, Inc., along with its variously enhanced waters. That same year Coca- Cola announced that it would join the Business Leaders Initiative on Human Rights (BLIHR), a group of companies working together to develop and implement corporate responses to human rights issues that affect the business world.
- 6. Page6 Product Range Products Available Globally Coca-Cola Aerated Beverages Coca-Cola Diet Coke Thumbs Up Thumbs Up Charged Barbican Sprite Sprite Zero Kinley SOda RimZim Fanta Limca Schweppes Seagram's Enerygy Drinks Burn Buzz Mother Real Gold Rockstar Samurai Powerade Rani Float Scorpion Bottled Water Ades Kinley Bonaqua Cristal Dasani Ice Dew Kiwi blue Malvern Smart Water Fruit Based Beverages Bibo Cappy Maaza Gold Five Alive Mazza Amita Minute Maid Lift Oasis Vio Vitingo Kinley Fruitz Zico Tea & Coffee Products Enviga Refresh Tea Far Coast Saryusaisai Fuze Tea Georgia Gold Peak Tea Sports Drinks Aquarius PowerAde Vending Machines Georgia Canned Soup Bistrone Co- brand products Bacardi Mixers Nestea
- 7. Page7 Products Available in India Coca-Cola Aerated Beverage Coca-Cola Diet Coke Thumbs Up Thumbs up Charged Thumbs Up Charged No Sugar Sprite Sprite Zero Fanta Limca Schweppes Tonic waterGinger Ale Kinley SodaRimZim Barbican Energy Drink Burn Aquarius glucocharge Rani FloatPowerade Bottled Water KinleySmart Water Vending Machines Georgia Vending Soliutions Tea & Coffee products GeorgiaFuze Tea Fruit Based Beverages Maaza Mazza Gold Minute Maid Vitingo ZicoVio Kinley Fruitz Co- brand products Bacardi MixerNestea
- 8. Page8 Price and Variants Aerated Beverages Name Variants Quantity Price (₹) List Price Kirana Retail Online Coca-Cola Pet Bottles 2.25 ltrs 95 95 95 94 2 ltrs 90 90 85 82 1.75 ltrs 85 85 80 75 1.5 ltrs 75 75 75 75 1.25 ltrs 65 65 65 59 750ml 45 45 45 45 600ml 40 40 40 40 400ml 25 25 25 25 300ml 20 20 20 20 250ml 15 15 15 15 Glass Bottles 330ml 20 20 20 20 300ml 15 15 NA NA 200ml 12 12 NA NA Cans 330ml 40 40 40 40 300ml 35 35 35 33 180ml 25 25 25 25 Diet Coke Pet Bottles 500ml 35 35 35 35 Cans 330ml 40 40 38 38 300ml 35 35 35 35 Thumbs Up Pet Bottles 2.25 ltrs 95 95 95 95 2 ltrs 90 90 85 81 1.75 ltrs 80 85 80 75 1.25 ltrs 65 65 65 65 750ml 45 45 42 45 600ml 40 40 40 40 500ml 35 35 35 35 475ml 30 30 30 30 400ml 25 25 25 25 300ml 20 20 20 20 250ml 15 15 15 15 Glass Bottles 330ml 40 40 NA NA 300ml 15 15 NA NA 200ml 12 12 NA NA Cans 330ml 40 40 40 40 300ml 35 35 35 35 200ml 30 30 30 30 180ml 25 25 25 25 Thumbs Up Charged Pet Bottles 500ml 35 35 35 35 400ml 25 25 25 25 300ml 20 20 20 20 250ml 15 15 15 15 Glass Bottles 200ml 12 12 NA NA
- 9. Page9 Cans 330ml 40 40 40 40 300ml 35 35 35 35 200ml 30 30 30 30 180ml 25 25 25 25 Thumbs Up Charged No Sugar Pet Bottles 500ml 35 35 35 35 400ml 25 25 25 25 300ml 20 20 20 20 250ml 15 15 15 15 Cans 330ml 40 40 40 40 300ml 35 35 35 35 200ml 30 30 30 30 180ml 25 25 25 25 Sprite Pet Bottles 2.25 ltrs 95 95 95 94 2 ltrs 90 90 85 82 1.75 ltrs 85 85 80 75 1.5 ltrs 75 75 75 75 1.25 ltrs 65 65 65 59 750ml 45 45 45 45 600ml 40 40 40 40 400ml 25 25 25 25 300ml 20 20 20 20 250ml 15 15 15 15 Glass Bottles 330ml 20 20 20 20 300ml 15 15 NA NA 200ml 12 12 NA NA Cans 330ml 40 40 40 40 300ml 35 35 35 33 180ml 25 25 25 25 Sprite Zero Cans 330ml 40 40 40 40 300ml 35 35 35 33 Fanta Pet Bottles 2.25 ltrs 95 95 95 94 2 ltrs 90 90 85 82 1.75 ltrs 85 85 80 75 1.5 ltrs 75 75 75 75 1.25 ltrs 65 65 65 59 750ml 45 45 45 45 600ml 40 40 40 40 400ml 25 25 25 25 300ml 20 20 20 20 250ml 15 15 15 15 Glass Bottles 330ml 20 20 20 20 300ml 15 15 NA NA 200ml 12 12 NA NA Cans 330ml 40 40 40 40 300ml 35 35 35 33 180ml 25 25 25 25 Limca Pet Bottles 2.25 ltrs 95 95 95 94 2 ltrs 90 90 85 82 1.75 ltrs 85 85 80 75
- 10. Page10 1.5 ltrs 75 75 75 75 1.25 ltrs 65 65 65 59 750ml 45 45 45 45 600ml 40 40 40 40 400ml 25 25 25 25 300ml 20 20 20 20 250ml 15 15 15 15 Glass Bottles 330ml 20 20 20 20 300ml 15 15 NA NA 200ml 12 12 NA NA Cans 330ml 40 40 40 40 300ml 35 35 35 33 180ml 25 25 25 25 Schewepps Cans 300ml 35 35 35 35 Schewepps Tonic Water Slim Can 300ml 50 NA 50 50 NRGB 250ml 45 NA 45 45 Schewepps Ginger Ale Cans 300ml 50 NA 50 50 RimZim Jeera Pet Bottles 2.5 ltrs Not Found 2.25ltrs Not Found 1.75 ltrs Not Found 1.25 ltrs 65 65 65 65 750ml 45 45 43 45 600ml 35 35 35 35 400ml 25 25 25 25 300ml 20 20 20 20 250ml 15 15 15 14.9 250ml (ASSP)** 15 15 15 15 Kinley Soda Pet Bottles 2 ltrs Not Found 1.5 ltrs Not Found 1.25 ltrs 28 28 28 28 750ml 20 20 20 20 500ml 17 17 17 17 350ml Not Found Tetra Pack 1 ltrs Not Found Barbican NRGB* 330ml 99 NA 95 99 Cans 330ml 70 NA 70 69 250ml Not Found *NRGB (Non- Returnable Glass Bottles) **ASSP (Affordable Small Sparkling Package)
- 11. Page11 Competitors Pricing The closest and well known competitor of Coca-Cola is PepsiCo., so, I have compared Coca-Cola with PepsiCo., as it has a wide range of products and there has always been a cold war between the companies, the products are very similar to each other and mostly they launch their new products when the other launches one, the advertisement method used is also kind of same “ThumbsUp” and “Mountain Dew” both showcase to do something daring and so on. The comparison of price for some of the similar kind of products are mentioned below: Company Brand Category Similarity Quantity MRP (₹) Coca Cola Kinley Mineral Water Type of Product 1 ltrs 20 PepsiCo Aquafina 20 Coca Cola ThumbsUp Carbonated Soft- Drink Appeal (Daring) 600ml 40 PepsiCo Mountain Dew 40 Coca Cola Sprite Lemon Lime Soda Flavor 750ml 45 PepsiCo 7Up 40 Coca Cola Diet Coke Sugar Free Drinks Type of Product 250ml Can NA PepsiCo Diet Pepsi 25 Coca Cola Fanta Orange Flavored Drinks Flavor 2.25 ltrs 95 PepsiCo Mirinda 85 Coca Cola Maaza Mango Juice Flavor 600ml 35 PepsiCo Slice 35 Coca Cola Powerade Sports Drink Hydration Drinks 500ml 50 PepsiCo Gatorade 50 From the chart above we can see that most of the items are priced same except some, such as PepsiCo. Charges a bit lower than Coca-Cola for their lemon lime soda drinks as well as their orange flavored drinks, another noticeable thing was that Diet Coke is not available on a 250ml variant but Diet Pepsi was, I have highlighted the cells with green color for the brand who was having an advantage on price as they were providing a same type of product at a lower price. We can say that Coca- Cola is using a Market Price or Competitive Pricing method. Coca-Cola added new product in their product line Barbican which was a non- alcoholic beer whereas Heineken and Budweiser who are well known players in the alcoholic beverage segment launched their non- alcoholic beers, and their price were: Company Brand Category Similarity Quantity MRP (₹) Coca-Cola Barbican Beer Non- Alcoholic Beer 330ml Can 70 Heineken N.V. Heineken 0.0 75 Anheuser Busch Budweiser 0.0 80 The above chart clearly shows the price advantage of Coca- Cola over the other two players but we can say that for penetrating in the market as it as new segment for Coca-Cola, the company is using a lower price to grab the market share as the other two brands are very well known in this segment, we can say that Coca-Cola is using a Penetration Pricing Strategy for Barbican.
- 12. Page12 Pricing Strategies As Coca-Cola have a wide range of products it uses different pricing strategies and they change their strategies with the ongoing market and their competitors price also impacts on their prices, the following pricing strategies are being followed by Coca-Cola: Psychological Pricing Coca-Cola has used this pricing method for Barbican’s 330ml NRGB containers by keeping the price as Rs. 99 which will be perceived as less than Rs. 100 products by the customer and they will get attracted. Generally, this type of pricing is implemented by keeping the prices slightly lower than the whole number, for e.g. 1.25 ltrs of a pet bottle of Sprite is priced at Rs.59 in the online market, it will attract the customer to buy from the online market rather than a Kirana Store or Retail Outlet. Competitive Pricing Competitive pricing strategy is a practice of setting prices similar or slightly lower than the competitor if we see the comparison chart in Page 11 we can see most of the products who are of similar category are priced same this is done because if they charge more than their competitor then the customers will shift from them as the category of the product is similar. Penetration Pricing In 2003, Coca-Cola introduced a 100ml Tetra pack of Maaza at just Rs.6 which was the lowest price for a Coca- Cola product in a non-returnable pack (Source: Business Standard, Apr 2013), this type of pricing was used to penetrate and grab the market share, though this was introduced initially in rural parts of UP to capture the market in those areas and was extended in other areas later. Moreover, the glass bottles of Coke are available at a very affordable rate so that customers do not switch because of the price. Promotional Pricing During IPl or World Cup, Coca-Cola offer their drinks at a lower rate than the regular price, or other promotional activities such as Paytm cashbacks, international trips etc., are being offered, this is done to enhance the sale of the product as many people go to watch matches and while they go in the stadiums they might grab some snacks if the prices are low then they will get attracted a purchase the product. Other promotional activities such as lucky draws by sending codes to a number and so on, are also done. Nowadays, Paytm cashback is being used by many of the companies as promotion, by giving them assured cashbacks and some lucky customers may get more than the assured price.
- 13. Page13 Segmented Pricing Coca- Cola segments the market based on different packages they offer as the production cost of the drinks is same the company makes it available at different packaging to target customers of each segment, there are product available at Rs. 12 glass bottle and also Product available at Rs. 95 Pet Bottles, the following are the packaging types of coke; RGB – Returnable Glass Bottles NRGB – Non- Returnable Glass bottles Aluminium Cans Pet Bottles Tetra Packs ASSP – Affordable Small Sparkling Packages
- 14. Page14 Price Adoption Coca- Cola generally sets prices by ongoing market price or competitors pricing method because if they charge more than what their competitor is charging then they will lose market share as customers will shift from them and move to their competitors. The company’s main objective is to target most of the population where it is serving for that it has to keep its prices very low and set the price with a low profit margin. So the prices are being set by keeping the target population in mind and it should neither be too low nor too high. Distribution Channel Levels Coca- Cola uses the following distribution channel: Marketing Practices Franchise – Coca-Cola uses franchise model by selling their franchise to bottlers and they themselves produce the syrup. They also do refranchising where it is intended to reduce costs associated with maintaining delivery trucks and warehouses while retaining control over the bottling process. Direct Marketing – Coca-Cola also have their own distribution network through which they themselves supply their products to retailer and shops. E-Commerce- Nowadays as the ecommerce is increasing coca cola sells through this network too by using big basket, grofers, etc. Inventory Turnover Ratio Inventory Turnover Ratio Year Quarter Total revenue (million $) (A) Inventory (million $) (B) Inventory Turnover Ratio (A/B) 2019 4 9742 3739 2.605509495 A good inventory turnover ratio believed to be 4 to 6 here it is 2.60 approx. so we can say that the inventory turnover ratio is not good. Syrup Producer Bottler Distributor Retailer Customers
- 15. Page15 Bibliography Statista. “India - Food and Beverages Market Size 2020.” Accessed April 10, 2020. https://www.statista.com/statistics/742909/india-food-and-beverages-market-size/. Encyclopedia Britannica. “The Coca-Cola Company | History, Products, & Facts.” Accessed April 10, 2020. https://www.britannica.com/topic/The-Coca-Cola-Company. Marketing91. “Marketing Mix of Coca Cola - 4 P’s of Coca Cola - Coca Cola 4 Ps Explained,” February 21, 2015. https://www.marketing91.com/marketing-mix-coca-cola/. “PRICING STRATEGY OF COCA COLA - The Final Projects.” Accessed April 10, 2020. https://sites.google.com/site/thefinalprojects/home/project-on-beverage-industry/coca-cola/pricing- strategy-of-coca-cola. “(25) Coca Cola Pricing Strategy | LinkedIn.” Accessed April 10, 2020. https://www.linkedin.com/pulse/coca-cola-pricing-strategy-shashank-jindal/. The Financial Express. “Coca-Cola Raises Prices for All Cola Brands in India,” August 7, 2014. https://www.financialexpress.com/archive/coca-cola-raises-prices-for-all-cola-brands-in- india/1277168/. Flipkart.com. “Coca-Cola Plastic Bottle Price in India - Buy Coca-Cola Plastic Bottle Online at Flipkart.Com.” Accessed April 11, 2020. https://www.flipkart.com/coca-cola-plastic- bottle/p/itmfda2sxpsqf9g8. “Coke Launches 100 Ml Maaza Packs at Rs 6 | Business Standard News.” Accessed April 11, 2020. https://www.business-standard.com/article/companies/coke-launches-100-ml-maaza-packs-at-rs-6- 113041700020_1.html. Daszkowski, Full Bio Follow Linkedin Follow Twitter Don Daszkowski wrote for The Balance Small Business He is an experienced entrepreneur who has trained individuals to become Certified Franchise Consultants Read The Balance’s editorial policies Don. “Coca-Cola and Franchising.” The Balance Small Business. Accessed April 11, 2020. https://www.thebalancesmb.com/coca-cola-company-franchise- 1350173.