Coca-cola expands reach and cuts costs with glass bottles

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NEW DELHI : Beverage Maker Coca-Cola India Pvt. Ltd is once again promoting returnable glass bottles, after years of focusing on disposable plastic bottles. The change helps the company reach more users and reduce packaging costs, a company executive said.

Over the years, beverage companies have gradually moved away from the ubiquitous returnable glass bottles, replacing them with easy-to-carry and store PET bottles, which now dominate the industry.

“In 2021, we could predict that inflation will be one of the major challenges in the coming year and the glass bottle is the packaging least impacted by inflation. It also gives us an affordable game in many large parts of India,” Sanket Ray, president for India and Southwest Asia, Coca-Cola, said in an interview.

The bottles were deployed last year in a 10 prizes (200ml) in select states are available in the company’s best-selling brands such as Coca-Cola, Thums Up and Sprite. In some markets, glass bottles now account for 30% of beverage sales. In total, they represent just under 10% of the company’s activity.

Coca-Cola’s move comes at a time when inflation is eating away at household budgets, driving up the prices of everything from soaps to fuel. As a result, shoppers are looking for more affordable packs or turning to cheaper brands.

Soft drink maker Sprite and Coca-Cola said it has lowered the prices of these glass bottles from 12-14 at 10 in seven states in India to carry out its accessibility program.

“We started expanding distribution, introducing more glass and putting marketing into it,” Ray said. The company is seeing “very strong momentum” in sales of these bottles, largely driven by demand from small towns and rural areas.

In the three months ended March 31, 2022, the company sold an additional 500 million bottles in India. Nearly 70% of those incremental transactions were driven by small packaging such as returnable glass bottles and affordable single-serve PET packaging, the company said in a statement. Its business in India increased in the mid-teens in the first quarter of the current year thanks to an early summer and an improvement in out-of-home consumption.

Consumer packaged goods companies are also witnessing unprecedented inflation in input costs, with prices for everything from packaging materials to edible oils rising.

“For us, logistics costs are a significant part of our costs. Also, any increase in the price of fuel has an impact on the cost of the resin (plastic),” he said.

Glass bottles, Ray said, are the least affected by inflation due to the negligible cost of packaging materials. “It’s a one-time cost and the bottles are rotated,” Ray said.

Ray said inflation is a “big deal” for every consumer business.

“We expected inflation to be between 3% and 5%, which has increased to some extent now. Inflation is going to be part of the strategy; if we want to grow in India, we have to focus on affordability as a solution. For that, we need to invest in glass bottles,” he added.

The company also took pricing action in the last quarter of 2021.

“We’ve been playing around with our packs, which is revenue growth management, especially packs and prizes. For example, when we took prices on large PET packaging, we also strongly increased our focus on the 10 price levels thanks to our glass bottles. We’ve revived it strongly in a few markets, to see that we’re not losing consumers to the impact of inflation,” he said.

India isn’t the only market where Coca-Cola is trying glass bottles to stave off inflation – a recent Reuters report said Coca-Cola is expanding distribution of its cheaper returnable glass bottles in several markets emerging.

Meanwhile, Coca-Cola also plans to sell its products in more stores as traditional commerce makes a smart recovery.

The company added 250,000 outlets to its distribution network of four million stores during the March quarter. It will add a similar set of numbers over the next two quarters.

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