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    Will Coke's 200ml pack price cut cannibalise Thums Up?


    Independent marketers are not convinced about the strategy as they feel that in the urge to close in on arch-rival Pepsi, Coke runs the risk of cannibalising Thums Up.

    ET Bureau
    Summer is still a few weeks away, but cola brands have already started feeling the heat. While most brands are closely guarding their marketing secrets for the season, Coca-Cola surprised pundits when it dropped the price for the 200 ml returnable glass bottle (RGB) by 2 to 8.

    That may not seem unusual — after all in the past the Coke company has cut price. However , most of those reductions were across all brands in the portfolio, from flagship Thums Up and Sprite to Limca and Fanta. This time, however, the exercise applies only to Coca-Cola .

    Independent marketers are not convinced about the strategy as they feel that in the urge to close in on arch-rival Pepsi, Coke runs the risk of cannibalising Thums Up, its top cola brand and the country’s largest selling carbonated drink.

    So why is one of the world’s most valuable brands discounting itself in India? The official response from Coca-Cola is that the “special promotional price” will “fuel growth of the cola category. As the 200 ml pack is the entry point into the category, it will recruit new consumers into the cola segment since it is a very attractive price point,” says a company spokesperson.

    The promotional offer is being rolled out in phases across select markets; 70% of markets will have the 8 price. Those familiar with the promotion say that this is a pilot project for three months, with an option to extend it.

    Clearly, Coke has trained its sights on Pepsi — which has yet to react to the price cut — and hopes to inch closer to it. Still, market observers wonder whether the drop in price is aimed at Pepsi or at Coke’s own brand, Thums Up, which is the leader in the cola category as well as in carbonated drinks.

    Latest market share figures are unavailable — both cola majors will not part with them — but those familiar with recent numbers point out that Thums Up has a share of roughly 42% of the 4,000 crore pure cola market. Pepsi follows with 36%, and Coca follows with a share of just under a fifth (a few regional brands account for the rest).

    An official at a beverage marketer says that Thums Up also leads the approximately Rs 10,000 crore carbonated soft drinks market with a 15% share. If marketers do not approve of Coke’s move, it’s with good reason. “Unless this is a global diktat, this strategy is flawed from Thums Up’s point of view,” reckons Nobby Gupta, founder & CEO, Nobby Brand Architects .

    “In countries wherever Coke is present it always has to be the market leader and all other brands have to follow; if that is the aim for India as well then this strategy falls in place,” he adds. But he also goes on to say that this strategy will have a negative impact on the combined share of both Coke and Thums Up.

    Gupta’s logic is simple: Lowering the price of Coke will not put pressure on just Pepsi, it will also cannibalise the market share of Thums Up. “And if Pepsi drops price too, which is likely, there is a chance of it eating into both Coke and Thums Up,” adds Gupta.

    Then there are those who feel that dropping prices for short-term gain is dangerous. “Because when you go back to old prices consumers may well say: ‘Thank you very much for the discount, now I will go back to Thums Up,” says Anand Halve, co-founder of Chlorophyll Brand & Communications Consultancy. “Momentary bribing does not ensure long-term consumer loyalty,” he adds.

    For a generation of Indians, Thums Up, with its relatively stronger taste, is synonymous with cola. “The preference for a strong cola continued even as new cola brands entered and are now expanding the category. Over all these years, Thums Up’s communication has remained consistent,” says Devendra Chawla, president, food & FMCG, Future Group, who is a former Coke associate.

    To be sure Thums Up has assumed almost cult brand status over the past two decades with commercials like ‘Taste The Thunder’ and ‘Toofani Thanda’ that had an international look and feel to them. Ashok Kurien, advertising guru and former chairman Publicis India, who was involved in the launch of Thums Up says: “Thums Up managed to crack the soul of Indian consumers through advertising and reached out at a deeper level. It was about struggles in life, the anxiety and determination to survive and succeed. This was probably the strongest concept in Indian advertising that connected to the young Indian male. And it still connects today.”

    When Coca-Cola acquired Thums Up, Kurien advised the Atlanta-headquartered company to only pit Coke against Pepsi and not touch Thums Up — as it already had an 85% market share. “But Coke introduced both Coca-Cola and Thums Up in 300 ml bottle and people lapped up Thums Up, with Pepsi taking the second spot.”

    The battle between Coke and Pepsi continues, although Coke officials deny the attempt to spark off a cola war; they just want to step up per capita consumption by Indians, they say. “Indians consume only 12 200 ml bottles of beverages per year compared to 675 bottles by Mexicans — the highest consumers of Coca-Cola globally,” points out a Coke official.
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    9 Comments on this Story

    Kaushik3193 days ago
    I doubt if Coke is diluting the indian product for making a profit sense. Still seriously 10/- is a sticky price point. If Pepsi can make it 9/-, all coke family will be in trouble.

    Go with it Indra Nooyi.. "Pepsi nine, India fine!"
    Nobody3193 days ago
    "Indians consume only 12 200 ml bottles of beverages per year compared to 675 bottles by Mexicans - the highest consumers of Coca-Cola globally".

    No wonder then that the average mexican is several times more obese than the average indian!
    LassiDrinker3194 days ago
    Thums Up has always been a double edged sword for Coca-Cola. It has been giving big competition to its own brand Coke. I guess coca-cola ir running behind a peacock in bush rather taking care of a white pegion in hand... and at the end of the day all colas ARE BAD for your health... no matter which one is it and especially with alcohol it is even worse... :(
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