Coca-Cola mulls price cut in market battle with Pepsi

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A Coca-Cola plant in Kisumu: The company is mulling price cut in market battle with Pepsi. FILE 

By NEVILLE OTUKI
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Coca-Cola is preparing to cut soda prices to grow and defend its market share that has come under attack from a rejuvenated PepsiCo. 

The beverage giant said it would reduce the cost of its flagship 300ml soft drink less than a year after the company lowered the price to Sh23 from Sh25.

The move is seen as a reaction to PepsiCo, which opened a bottling plant in Nairobi in February and offered a larger product of 350ml bottle that is retailing at the same price as Coca-Cola’s 300ml.

“We haven’t decided yet on the shape the downward review will take but it will definitely involve the 300ml bottle,” Coca-Cola East Africa general manager Peter Njonjo told the Business Daily on the sidelines of Thursday’s event to mark 65 years since the firm began operations in Kenya.

The company had earlier raised the price of a 500ml bottle by Sh2 to Sh37 in what was largely seen as attempt to compensate for the cut on its 300ml bottle.

Besides pricing, Coca-Cola is upping its investments with a Sh2.6 billion war chest that will be spread over three years to boost capacity of its seven local franchises and expand the juice business.

PepsiCo’s Sh2.4 billion plant in Ruaraka has raised the ante and is a challenge to Coca-Cola’s near monopoly in the Kenyan market.

(Read: PepsiCo cuts its prices in battle with Coca-Cola)

PepsiCo made its re-entry into the market in late 2010 and has been relying on imports by its agent Seven-Up Bottling Company Kenya to serve the local outlets with brands like Pepsi Light, Mirinda, Mountain Dew, 7UP and Evervess. It quit the Kenyan market in the 1990s.

Importation being a costly affair as opposed to local production, PepsiCo decided to set up base in Nairobi to produce its soft drink brands.
The move ushered in a vicious battle for control of the market as PepsiCo seeks to cut the dominance of Coca- Cola in Kenya.

The increased activity in the beverages market comes at a moment when soft drinks production dropped in 2012 for the first time in four years, according to data from Kenya National Bureau of Statistics.

The data shows production of soft drinks dropped from 371.3 million litres in 2011 to 359.5 litres last year. This was the first decline since 2008 when a weak economy and the post-election violence hurt sales of soft drinks.
ALOK KUMAR
PGDM II SEM