Group 3

Abhishek Bhowmik 15020841005

Anand Gupta 15020841007

Arjun Parekh 15020841070

Krithika Arvindan 15020841028

Miral Shah 15020841032

Rohan Bharaj 15020841046

Syed Mujtaba 15020841055

Cost based pricing

Market penetration pricing

Competition based pricing

PRICING STRATEGIES FOLLOWED BY COCA COLA

There are three different pricing strategies which a company can primarily follow:

Price Skimming: Charging premium prices initially to earn maximum revenue.

Market Price: Setting price as going market rate (by competitors)

Market Penetration: Charging lowest price to achieve highest possible sales.

To first determine its price, they used a cost-based

pricing system for its Original Coke. They first

designed the product, the original coke, determined

the costs for the product (product costs, capital

costs, and operational costs), set a price based on

the cost of Coke, and finally convinced the

consumers of the soda's value. From there, Coke

chose to use market-penetration pricing for it's price. Here, they set low initial prices in

order to attract a large number of buyers quickly, to gain a large market share. Currently,

Coca Cola products to meet the competition against major players like Pepsi, products

pricing is set around the same level of competition. So, their primary strategy is Market

Price because they believe price should not be too low or too high than the price competitor

is charging from. Their customers otherwise nobody will buy your product.

Coca-Cola uses the following alternate pricing strategies over the year for Coke:

1. Psychological Pricing

In 2009, Coca-Cola uses the psychological pricing strategy for their Original Coke. For

instance, the price of a 2-liter bottle of Original Coke was $2.49. They set the price to end in

9, because this makes customers think the price is less than $2.50, to appeal to the

customer.

2. Promotional Pricing

Coke also uses the promotional pricing strategy. Coca Cola has offered promotional prices

very frequently. In store that sell Coca-Cola, prices are often temporarily priced below the

list price to increase short-run sales. Especially on some occasion Coca Cola reduces its rates

like in Ramadan Coca Cola reduces its rate unto 5 Rupees on 1.5 liter bottle. It gives the

product a sense of urgency and customers purchase the product because of the lower price.

Coca cola company gives incentives to middle men or retailers in way a that they offer them

free sample and free empty bottles, by this these retailers and middle man push

their product in the market. And that’s why coca cola seen more in the market. And they

have a good sale in the market because according to the expert which product

seen more in the market that sells more. “Seen as sold “They do agreements with a shop

keepers and stores to exclusive sale in that stores. These stores are called as KEY accounts in

their local language. And coke also invest heavy budget on these stores and offers

them free samples and free bottles and sometime cash incentives.

3. Segmented Pricing

Coke uses the segmented pricing strategy. Based on different packages, Coca Cola is

available at different price. By their product in different sizes and at different costs, they get

to increase their revenue, because there is not much difference in the costs required to

produce the products. Following are the different packages available for different target

audience :

1. RGB - Returnable/ Refillable Glass bottles

2. PET – Plastic Bottles

3. CAN – Aluminium Cans (Tins)

4. Tetra – Tetra Packs

5. BIB - Beverages in bag

Following are the different pricing for different sizes:

1. COCA COLA

Packs 200 ml 300 ml 400 ml 600 ml 1.75 ml 2.25 ml

Price 10 16 20 34 55 80

2. DIET COKE

Packs 500 ml

Price 30

3. THUMS UP

Packs 200 ml 300 ml 400 ml 600 ml 1.25 ml 2.25 ml

Price 10 16 25 34 55 80

4. FANTA

Packs 200 ml 300 ml 400 ml 600 ml 1.25 ml 2.25 ml

Price 10 16 25 34 55 80

5. SPRITE

Packs 200 ml 300 ml 400 ml 600 ml 1.25 ml 2.25 ml

Price 10 16 25 34 55 80

6. MAAZA

Packs 200 ml 250 ml 600 ml 750 ml 1.2 ml

Price 10 15 37 38 55

4. Discriminatory Pricing

Coke also follow discriminatory pricing strategy, because they have different pricing when

sold through different channels. Following are the different channels where it is charged

differently.

Wholesalers/ distributers

Retail/ corner stores/ super markets

Restaurants/ cafes/ night clubs

Petrol stations

Automated teller machines (AMTs)

Coca Cola is sold through following ways:

1. Direct Selling: In this type of selling their products are supplied in shops and

departmental stores by using their own transports. In this type of selling company

have more profit margin.

2. Indirect Selling: In this type of distribution, they have their whole sellers and

agencies to cover all area to assure their customers for availability of Coca Cola

products.

5. International Pricing

Coke also uses the international pricing strategy. For instance, the price of a 2-liter bottle of

Coke in the United States is different from the price of the same product in China. This has

to do with the difference in economic conditions, competitive situations, and laws.

Thus, Coca Cola has been following various pricing strategies based on the requirement and

based on the introduction of new products targeting different audience.

COMPETITION ANALYSIS

Cola Wars between Coca Cola and Pepsi

Soft drink holds51% (majority of market share) of the total beverage market. Soft drink can

be further divided into carbonated drinks (Coca-Cola, Pepsi, Thumbs up, Diet coke, Diet

Pepsi etc.) And non-carbonated drinks (Orange, Cloudy lime, Clear lime and Mango). The

dominant players in soft drink market are Coca Cola and Pepsi, which own virtually all of the

North American market’s most widely distributed and best-known brands. They are

dominant in world markets as well. These companies’ products occupy large portions of any

supermarket’s shelf space, often covering more territory than real food categories like dairy

products, meat etc.

Industry and always remain in the war to get the majority of market share with each other.

These companies always be pioneer in using various innovative technology and method to

become the market leader. These companies present the world new innovative ways of

doing the marketing and how take advantage of various opportunities and how to use your

strength in a better way. In India currently colas (carbonated soft drinks) products comprises

61% and non-cola segment constitutes 36% of the total soft drink market whereas 2% is

covered under other various drinks like apple juice, cold coffee, cold tea etc.

Historical Timeline (Cola Wars)

• High-fructose corn syrup replaces sugar

• Diet Coke introduced, boosts profits

• New Coke fails, Coca Cola Classic returns

• Coca Cola Enterprises established

• Maintains lead in cola market share

COLA War Years 1974-1999

• The “Pepsi Challenge” • Pepsi Lite (1 Calorie)

introduced • Enters fast-food business • Outpaces Coke in food

store sales • High-fructose corn syrup

replaces sugar • Pepsi Bottling Company

goes public

• In response to federal nutrition guidelines and public concern with diet and obesity offers alternative low calorie beverages

• Wins Subway account, retains exclusive deals with Burger King and McDonalds

• Holds big lead over Pepsi in cola market

2000-2010

• In response to federal nutrition guidelines and public concern with diet and obesity offers alternative low calorie beverages

• Supplies all Taco Bell, KFCs and most Pizza Huts

• Snack food lines very profitable

Product Portfolio

Pricing Strategy used by Pepsi Vs. Coca Cola

Pepsi: It has consistently wielded its pricing strategy as an invitation to sample, aiming to

turn trial into addiction. It launched the 500-ml bottle in 1994 at Rs.8 versus ThumsUp's

Rs.9. Its 1.5-liter bottle followed Coke into the market place at Rs.30 – Rs.5 less than Coke's.

Pepsi raised the price once consumption stabilized, counting on the habit to compensate for

the lack of a price-benefit. It could continue with lower price positioning due to the fact that

in the soft drink industry the retailers rarely pass on the company the price advantages

gained by them from the consumers by selling competing brands at the same price and

pocketing the discounts.

Coke: Initially Coke mimicked Pepsi by introducing 300 ml cans at an invitation price of Rs.15

before raising it to Rs.18. When it realized that the brand did not hold enough attraction to

fork out a premium from the consumers, it introduced a lower-priced, similar-sized version

to gain consumers.

It can be inferred from the above article that Coca-Cola and Pepsi are perfect substitutes

and hence the pricing strategy of one directly impacts the demand for the other product.

Hence, the indifference curve of Coca-Cola and Pepsi would be a straight line with equal

slopes across all points on the line.

FUTURE PRICING STRATEGIES

While cocal cola has not been doing well for the past decade, the entire blame cannot be

borne by the strategies of the company. The primary reason for its stagnation is the changes

in the tastes of the general populace.

Indifference Curve of Pepsi and Coca cola

There appears to be a move towards a more organic drink and natural products category

leading to the decline of the entire coke category for the next 20 years. The annual sales of

coke have constantly been on the decline as described in the data compiled by the Wall

Street Journal.

To add on top of this is the loss of brand value over the years. In BrandZ’s annual brand

rankings publication, Coke has constantly been losing its top spot.

So is this the end of coca cola as we know it? Well by following the below mentioned

strategies, we hope not.

Safety Net:

Pricing in its bare form will not change the fate of coca-cola. Coke is the leader in the cola

sector undoubtedly. But since 75% of its revenues is from this category, the changing

drinking habits of the audience has hit coke the most. Hence it needs to build a safety net.

The first thing that coke needs to do is ensure that it branches out into alternate categories

such as energy drinks and health drink.

Milking Profits:

It has already launched a premium milk brand called Fairlife in the US. Fairlife costs twice as

much as the other brands but is said to have more protein, minerals and less sugar. While

this might be a paradox to the image associated with coke, if this brand launches itself as a

reliable and trustworthy then coke can move away from the unhealthy category. This will

require the maximum effort from coke as the transition will mean shattering the image in

the minds of consumer that took years of efforts to be built. Hence while maintaining the

same pricing strategy for coca cola, it needs to establish the premium status in the milk

category with appropriate marketing.

Also the launch of VIO in Bangalore, India in February 2016 further established its expansion

into the milk category. VIO is a ready to consume, flavoured milk is priced at Rs. 25 for 200

ml packs. Dairy is a category, which is firmly rooted in Indian tradition and enjoyed greatly

by consumers since time immemorial and hence it will reap benefits by launching it in India.

Energizing consumer needs:

It has also bought a 16.7% stake in the Monster energy drink taking its first steps in the

energy drink market. The energy drink market is characterized by a soft drink that provides

high level of sugar to overcome tiredness during or after a physical activity. This will be next

obvious market to launch into as the Indian energy and sport drinks market showed a

growth rate of CAGR of more than 19.50% from 2012 – 2015. While its own energy drink

brands of Full throttle and Burn do exist, they have not been able to build a reputation from

scratch and this is where the familiarity of Monster energy will come into play.

International Expansion:

Innocent, which is the European smoothie company has doubled its turnover from 2008 to

£209m in 2012 and is the top smoothie brand in Europe in terms of market share, according

to Nielsen. And logically Coke has bought almost 100% share of this company to capture the

European continent. By ensuring there is leader based pricing of this product, it will be able

to continue the support the brand has been receiving so far.