Coca-Cola widens its reach, cuts costs with glass bottles
- Nearly 70% of incremental transactions during March quarter were driven by small packages
Beverage maker Coca-Cola India Pvt. Ltd is promoting returnable glass bottles once again, after years of focusing on disposable plastic bottles. The change helps the company reach out to more users, and reduce packaging costs, a top company executive said.
Over the years, beverage companies phased out the ubiquitous returnable glass bottles, replacing them with travel and storage-friendly PET bottles which now dominate the industry.
“In 2021, we could predict that inflation is going to be one of the major challenges in the coming year and glass bottle is the least impacted packaging in inflation. It also gives us an affordability play in large parts of India,” Sanket Ray, president for India and South-West Asia, Coca-Cola, said in an interview.
The bottles rolled out last year at a ₹10 price point (200 ml) in select states are available across the company’s top-selling brands such as Coca-Cola, Thums Up, and Sprite. In some markets, glass bottles now make up 30% of beverage sales. Overall, they account for a little less than 10% of the company’s business.
Coca-Cola’s move comes at a time when inflation is eating into household budgets, raising the prices of everything from soaps to fuel. As a result, shoppers are reaching out for more affordable packs or moving to cheaper brands.
The maker of Sprite and Coca-Cola carbonated beverages said it has lowered price points of such glass bottles from ₹12-14 to ₹10 in seven states in India to drive its affordability agenda.
“We have started expanding the distribution, inputting more glass, and also putting marketing behind it,” Ray said. The company is seeing “really strong momentum” in sales of such bottles, largely led by demand emerging from small towns and rural areas.
In the three months ended 31 March 2022, the company sold 500 million extra bottles in India. Nearly 70% of these incremental transactions were driven by small packages such as returnable glass bottles and affordable, single-serve PET packages, the company said in an earnings statement. Its India business grew in “mid-teens” in the first quarter of the current year on the back of an early summer and improvement in out-of-home consumption.
Packaged consumer goods firms are also witnessing unprecedented input cost inflation with prices of everything from packaging materials to edible oils on an upswing.
“For us, logistics cost is a significant part of our cost. Also, any increase in fuel price has an impact on (plastic) resin cost,” he said.
Glass bottles, said Ray, are least impacted by inflation because of negligible packaging material cost. “It’s a one-time cost and bottles are rotated,” said Ray.
Ray said inflation is a “big issue” for every consumer company.
“Our expectation was that inflation will be between 3% and 5%—this has increased to some extent now. Inflation is going to be part of strategy; if we want to expand in India we have to focus on affordability as a solution. For that, we have to invest in glass bottles,“ he added.
The company also took pricing actions in the last quarter of 2021.
“We have been playing around with our packs, which is revenue growth management, specifically pack and pricing. For example, when we took some pricing on large PET packs we also strongly reinforced our focus at the ₹10 price points through our glass bottles. We relaunched it strongly across a few markets, to see that we do not lose out consumer because of the impact of inflation,” he said.
India isn’t the only market where Coca-Cola is trying glass bottles to counter inflation—a recent report by Reuters said Coca-Cola is expanding the distribution of its cheaper returnable glass bottles in several emerging markets.
Meanwhile, Coca-Cola is also planning to sell its products in more stores as traditional trade makes a smart recovery.
The company added 250,000 outlets to its distribution network of four million stores in the March quarter. It will add a similar set of numbers over the next two quarters.
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First Published:3 May 2022, 01:29 AM IST
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