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Coca-Cola’s inflation plan reflects post-Covid reality

In India and Southwest Asia, Coca-Cola, the beverage corporation, is deploying a handful of different techniques to address the concerns thrown up by rising inflation – a phenomenon it expects to remain with us for a few more financial quarters yet.

Why it matters

While cost increases for companies are typically addressed through price rises, Coca Cola’s India and SW Asia operation is looking to claw back some of those margin-diminishing cost increases. 

But its commitment to a value offer reflects the importance that brands think not just about short-term protection but also about medium- to long-term perception. Additionally, the firm is finding success in a resurgent out-of-home consumption market.

A strong brand and popularity among consumers have shown how firms like Coca-Cola are well-placed to weather difficult economic times. In its most recent earnings call, the company also noted the importance of its increased marketing investments to ensure a strong sales quarter at the beginning of 2022.

Balancing volume and dollar sales

Price increases are, of course, on the cards, explains Coca-Cola India and Southwest Asia president Sanket Ray, speaking to the Economic Times. In his interview, he revealed a handful of insights about how the firm will address the tough economic situation in the region.

First, inflation is here for at least the rest of the year. “We expect it to stay for a few more quarters,” says Ray.

Pricing will adapt to pack:

• Price increases will be focused on certain large packs. These are likely to be in the region of previous 3-3.5% increases.
• “For affordable packs, though, we are holding onto prices,” Ray tells the paper.
• Out-of-home consumption has grown 20% year-over-year, with a handful of new small formats critical to this consumption occasion.
• Elsewhere, relatively low market penetration and a strong pipeline of innovations hold multiple opportunities for the company.

Operational adaptations have been crucial, with earlier investments in manufacturing capability helping to ease the pressure of rising logistics costs on margins.

Sourced from Economic Times, Financial Times, Marketing Week