Reliance Consumer Products’ pricing strategy could lead to price war in beverage industry

India’s beverages industry is likely to face price war for the first time. The reason for this is the aggressive pricing strategy of Reliance Consumer Products. The company has launched its brand Campa Cola and new energy drinks at Rs. 10. It will likely lead to an intense competition with other companies like Coca-Cola, Dabur, and ITC.

Reliance pricing strategy

The company has launched its brand Campa Cola at Rs. 10. Apart from this, it has also launched its sports drink Spinner and also energy and rehydrating beverage product known as RasKiK Gluco Energy at Rs. 10.  

This aggressive pricing strategy of the company has severely impacted products under the category of out-of-home consumption higher than products under category of in-home consumption. In the financial year 2024-25, the company recorded revenue of Rs. 1,000 crore from its Campa brand. In a few states, the Campa brand has a market share of higher than 10 percent in the sparkling beverage segment.

Plans of firms operating in beverages industry

As the summer season is coming near, companies like ITC and Dabur operating in manufacturing of fruit-based beverages are planning to serve attractive discounts and deals to the consumers. Beverages are generally out-of-home consumption products. Pricing strategy is important in these products as out-of-home consumption products contribute to about 40 percent of the beverage business.

Dabur has plans to reduce the prices of its Real juice nectar products to about Rs. 100 per litre, which was earlier Rs. 130. The chief executive officer of Dabur, Mohit Malhotra stated that the sales growth of Real juice is adversely impacted due to prices of Coke and Pepsi being Rs. 50 per litre. He further stated that Dabur will launch a new better affordable range of product portfolio in the consumer market. It will also provide some slightly higher margins to its distribution networks. Its aim is to attract more consumers and also to incentivize its distributors. It has joined hands with McKinsey & Company, who earlier worked with PepsiCo and Coca-Cola  to prepare a strong beverage strategy. 

The price of Coca-Cola bottlers contracted to Rs. 15 for 250-ml, which was earlier Rs. 20. According to the company, it is a promotional offer to the consumers and not a price cutting strategy of the company. It is a historical trend of the company to reduce its price before the upcoming festivals like Holi. 

The owner of B Natural Brand, ITC is also preparing for aggressive consumer offers and pricing strategy. 

In the past, Coca-Cola and PepsiCo had several price wars but it was only between them and no involvement of other brands and players. This is for the first time that many beverage companies along with juice makers are aggressively competing in the market for the same consumer base at large pricing points. 

The chairman of PepsiCo, Ramon Laguarta stated that pricing strategy is a crucial part for the development of beverage segments, particularly in emerging and developing nations. The company is already following this in the USA and it plans to do so in India as well in the upcoming terms. 

Tata consumer Products has decided to increase profit margins for retailers on its Tata Gluco+, glucose drink. It will act as an incentive to retailers who promote and sell Tata Gluco+ as it will earn them more profit. The main aim of the company is to expand the product sales and consumer attraction towards Tata Gluco+. The improvement in the total profitability of the brand and company will be worked on later. 

Impact in long-run

The ongoing aggressive price strategy of the beverage companies will be profitable in the short-run and this summer season but it will be adverse in the long-run. It will certainly affect the profitability of the companies. In the past, Pepsi and Coca-Cola declared a pricing of Rs. 5 which was quite profitable in the short-run but the companies had to pay the price with its profitability levels.

Perception of consumer demand

The summer season is an important term for the beverage players as 60 to 65 percent of their yearly sales is earned in the period of March to June. 

Dabur stated that the purchasing behaviour for out-of-home consumption products is based more on impulse. The consumers tend to buy the beverage which they find cold and it could be refreshment drinks or fruit juice or anything. In recent times, many new brands have entered the beverage industry which includes energy drinks and colas segments. It led to widening the availability of a variety of products for the consumers.

Expansion in Production Capacity

Reliance is rapidly expanding its production capacity in the market. Varun Beverages, the biggest bottler of PepsiCo has also expanded its production capacity to around 20 to 25 percent YoY for the upcoming summer season. The company states that there is a large scope for affordable products offered by regional brands in the country who have a market share of 20 percent. The company is optimistic about the ongoing competition and believes that all brands have enough space to grow. It also believes that this will lead to expansion in the market. The main focus of the company is to expand 10 to 12 percent of more retail outlets each year. 

The product categories like tender coconut water, 100 percent juices, and bottled water are not yet affected by the price war. The reason for this is these products are considered as healthy options and are sold at higher prices.