Tata Consumer Products Ltd (TCPL) had to lower the price of Tata Gluco Plus due to aggressive pricing from rival Campa Cola. The company’s revenue from its ready-to-drink business fell by 11% in the September quarter because of “competitive pricing action,” said Managing Director and CEO Sunil D’Souza during the investors’ call.
Campa Cola’s INR 10 Bottle forces competitors to lower prices
Notably, Reliance Retail‘s Campa Cola has shaken up the beverage market with its INR 10 PET bottle pack, pushing competitors to lower their prices to keep market share and growth. According to Business Standard, D’Souza said: “A new player coming in with a different price point disrupted the industry. While on paper it is INR 10 versus INR 10 … it didn’t surface quickly enough … while the INR 10 was the same to the consumer, the trade price was dramatically different.” However, he noted that other major companies like Coke and PepsiCo “adapted their pricing on the trade very, very quickly. We did not.”
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D’Souza added that although the product is excellent, it must be priced competitively. “There is a level up to which you can charge a premium, not beyond that,” he said. He also mentioned that this is a penetration strategy by Campa, which was acquired by Reliance Retail.
Tata Consumer reports INR 1.50 to INR 2 loss per bottle
“We were roughly about, I would say about 30% premium to competitors and about 20% premium to the multinationals in terms of price to retail. Now, just as a perspective, we know at that price to retail, that is not sustainable. And the loss is roughly INR 1.50 to INR 2 per bottle,” D’Souza explained.
Further, TCPL is committed to staying in the ready-to-drink market and will not relinquish its market share.
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“We have gone in there, we made the corrective actions, we’ve taken down the price. And that’s why I emphasise the impact, was on Tata Gluco plus only, not as much on Tata Copper Plus, because there is not all this action out there,” he stated.
Therefore, TCPL has adjusted its pricing. “We have corrected some other stuff happening through this thing because of the stress…when a business is stressed, there are ten other things which pile up. We took that in our stride in September and it’s cleaned up. And we do expect, by end of this quarter we should be back to our 25-30% growth levels.” While Campa’s availability is still limited in some markets, it is offering more affordable prices compared to Coca-Cola and PepsiCo. The latter brands sell 250ml bottles for Rs 20 each, while Campa sells 200ml for Rs 10.
