and Coke, soft drink behemoths and arch rivals, are totally
inundated by losses - though deceptive their savvy commercials and
marketing gimmicks can be. While Pepsi suffered a Rs 265-crore
loss as on 31 December 2000, Coke too accumulated losses of Rs 650
crore in the same period.
The figures look imposing
despite the fact that Pepsis figures do not include losses from
Tropicana, a pure-juice drink. Similarly, Cokes figures have
been arrived at after its Atlanta-based parent had written off
$400 million in the first quarter of calendar 2000. Worth noting
is the fact that losses have increased on a year-to-year basis.
Thus, in Pepsis case, its losses in the calendar year 2000
increased to Rs 67 crore in comparison to Rs 37 crore in calendar
Why are these two soft
drink majors incurring such huge losses despite being market
leaders? Blame it on competition, say analysts. So fierce is the
urge to retain their respective market shares that the two end up
spending heavily on advertisement and other sales promotion
activities, which include sponsorships and high-profile celebrity
According to industry
estimates, both the companies, put together, end up spending
nearly Rs 450 crore to Rs 500 crore annually on advertisements.
Then there are heavy-dealer discounts to contend with. For
example, Pepsi has cut down on its prices of its 2-litre bottles
of Pepsi, Miranda and 7-Up to Rs 43 from Rs 50. Similarly, it has
also cut the price of its 500-ml bottle to Rs 15 from Rs 18.
Will the companies cut
out on their advertisement budgets, dealer discounts and other
sale promotional activities? Apparently not, because as long as
there is competition in the market, these strategies will have to
be continued with.