New Delhi: After six quarters of back-toback single-digit volume growth, top soft drinks makers Coca-Cola and PepsiCo have returned to double-digit volume growth in the July-September quarter, riding mainly on continued warm weather conditions in several parts of India.
Industry officials, however, remain cautious in their outlook for the next couple of quarters, with the impact of the 5% excise duty increase on new bottles announced in the Union budget kicking in from mid-September.
“The third quarter was supported primarily by an extended summer and lesser rains. But we are not yet seeing it as a longterm revival of the industry. The excise duty impact on new stock has kicked in, and besides, the fourth quarter is lean season,”a top bottling partner of one of the cola firms said.
Summer months have a huge direct influence on industry sales, contributing more than half of annual volumes. “Among key markets, India delivered volume and value share gains with double-digit volume growth,”Coca-Cola chairman and CEO Muhtar Kent said in an earnings call late last week. “Although weather was a benefit in India, it negatively impacted the company’s performance in China and Japan as both countries experienced an unseasonably cool summer,”he added.
While Coca-Cola declined to comment on the exact volume growth for India in the third quarter, officials directly aware of the numbers say the maker of Thums Up and Sprite fizzy drinks has posted volume growth in the range of 13%-15% in the quarter.
PepsiCo, which makes Pepsi cola, Tropicana juices and Kurkure salty snacks, has also posted volume growth of about 15%, a top official in direct knowledge of the development said. PepsiCo chairman and CEO Indra Nooyi said in a third quarter earnings call that India along with Egypt posted double-digit growth. “In developed markets, consumer category demand continues to be sluggish.
In other key emerging markets, China, India and Brazil, even though the political environments are relatively stable, GDP and consumer spending growth remains mixed,” she had said.
Both firms have been investing ahead of the curve on higher infrastructure and low prices, as their headquarters believe India is a key growth bastion in a global environment which continues to see sluggish sales across developed markets. Similar to most con-sumer goods firms, the two beverage makers saw growth slowing down to single digits over the past five-six quarters, due to overall slowdown in discretionary spends as well as erratic weather conditions.
Both Coca-Cola and PepsiCo have hiked prices of large packs by 5%-7% to offset the additional excise duty hike of 5% on aerated sugary drinks. While prices of glass bottles and entrylevel packs of 200 ml and 300 ml have not been changed as the companies believe higher prices could have a huge negative impact on sales, prices of fresh stocks of big 1.5 and 2 litre bottles have gone up starting last month.
“The actual impact of higher price could reflect in the next two quarters,”said a beverage industry veteran, requesting not to be named. Coca-Cola’s Kent had, in last week’s earnings call, said, “While we have begun to see early signs of progress, we recognize that we need to increase the scope and pace of change as we continue to face a challenging macroeconomic environment.”Globally, Coca-Cola reported earnings below street expectations for the third quarter, with flat revenues and global volumes growing 1%.
Source : Economic Times