Pepsi takes marketshare battle to Coca-Cola with a price cut
Pepsi Light products on a shelf at Nakumatt Lifestyle supermarket in Nairobi. File
What you need to know:
PepsiCo is selling its 350ml drinks at Sh23, translating to more volume for consumers at the same price as Coca-Cola’s Sh300ml bottles.
This sets up the two American firms for a fierce competition in a market that has been under Coca-Cola’s firm grip for more than two decades.
Global soft drinks giant PepsiCo has taken the battle for consumers to Coca-Cola’s doorstep with the offer of its 350ml bottled brands at the same price as its rival’s 300ml bottles.
The move, which comes as Pepsi prepares to open a new production plant in Kenya, sets up the two American soft drinks giants for a fierce competition in a market that has been under Coca-Cola’s firm grip for more than two decades.
PepsiCo, which is opening a Sh2.6 billion plant in Nairobi’s Ruaraka area on Monday, is selling six flavours of its 350ml drinks at Sh23, translating to more volume for consumers at the same price as Coca-Cola’s Sh300ml bottles.
PepsiCo is backing up that offer with a deep marketing budget to be spent mainly in advertising, building a nationwide network of distributors and installing branded soda coolers in key restaurants and bars.
PepsiCo’s Nairobi plant is producing Pepsi-Cola, 7-Up, Mirinda Fruity, Mirinda Orange and Evervess.
PepsiCo’s general manager for Kenya Butch Moldenhauer said the new prices are part of the firm’s plan to recruit consumers for its products even as he acknowledged the danger of sparking a price war.
“The pricing point is expected to encourage consumers to sample our products because we are offering them extra 50ml at a price that is equal to the competitor’s less volume bottles,” said Mr Moldenhauer.
“Starting a price war is not our intention but there is a danger of this happening because the competition has the right to make price changes,” he said.
Coca-Cola is gearing up for the rivalry with a Sh2.6 billion investment spread over three years to help boost the capacity of its seven Kenyan franchises and expand the reach of its juice products.
“Trends are always driven by market demand and our commitment continues to be having our products within an arm’s reach of all consumers,” says Rocky Findley, Coca-Cola country manager for Kenya.
Pepsi-Cola, 7UP and Mirinda are retailing in 350ml returnable glass bottles moulded at PepsiCo’s glass manufacturing plant within the Ruaraka complex.
PepsiCo’s price cut comes nine months after Coca-Cola made a similar move for its 300ml bottles in response to the rival’s return to Kenyan market.
Coca-Cola backed the price cut for the 300ml bottle with a two shilling increment in the price of the 500ml bottle to Sh37.
PepsiCo has announced that it will continue importing canned and plastic products as it has done since 2010 through Seven-Up Bottling Company Kenya (SBC Kenya).
PepsiCo returned to Kenya in late 2010 and has been relying on imports to service the local market.
To reduce the high cost of importation, PepsiCo decided to set up a local plant where it plans to produce at least six of its brands. Mr Moldenhauer said PepsiCo has invested heavily in advertising and distribution network, including the use thousands of branded coolers. “The installation of coolers has started in Nairobi but we intend to do the same in other major towns as the year progresses,” he said.
PepsiCo has also started hiring agents in Gilgil, Narok, Kithimani, Nairobi, Nakuru, Naivasha and Machakos to distribute its products across Kenya signalling the beginning of the marketshare battle in earnest.
The US multinational began hiring personnel including area sales managers, a human resource manager, public relations officers, and senior accountants in July last year.
Competition in the soft drinks market is expected to intensify in the coming months when SABMiller enters the battle with the establishment of a manufacturing plant.
The London-based company, which specialises in alcoholic beverages, took over family-owned Crown Foods, the bottlers of Keringet water brand through which it is expected to launch its entry into the soft drinks market.
“Even though Coca-Cola remains the leading player in soft drinks with a 41 per cent volume share and in carbonates with a 63 per cent share, it will be interesting to see what happens following the strong entry of PepsiCo Inc and SABMiller,” says a recent market report by Euromonitor International.
The changes are happening even as Kenya reported a drop in consumer demand in the first 10 months of 2012 forcing soda manufacturers to cut back on production.
Coca-Cola attributed the drop in demand the ongoing shift to fresh fruit juices and high inflation that reduced disposable incomes.
The latest Kenya National Bureau of Statistics (KNBS) report shows production of soft drinks dropped to 472,005 tonnes in the first 10 months of 2012 from 494,778 tonnes the previous year.
The drop in soda production bucks the recent industry trend that had seen production grow consistently since 2006 from 230,750 tonnes to 472,005 tonnes in 2011, helping to attract new players into the sector.
