Forex Essay

979 WordsDec 17, 20124 Pages
Pepsi India chief on cola pricing While stating he would probably have to follow rival Coke, once again, if it went in for Rs 4 pricing, Pepsi's India [ Images ] head Rajiv Bakshi says FMCG firms have to focus on premium pricing to be able to grow at 20-25 per cent a year. He tells Business Standard, the market's never been so right before. Excerpts: You've been saying the old price-penetration model isn't going to give you the kind of growth you need. So, was the old paradigm wrong? It wasn't wrong, but it delivered, and can deliver, only single-digit growth, or at most growth in the low teens. Today, with an 8 per cent GDP growth, you've got huge growth in the number of families in the upper income segment, I think the number of car-owning households (10 million households and 50 million people in them) is the best way to look at this. These people can now afford to buy more expensive drinks. Gatorade, Diet Pepsi, Tropicana, Cafe Chino. . . they're all targetted at this group. If I want a 20-25 per cent topline growth, I can no longer use the old one-size-fits-all pricing strategy. In the 1990s, most FMCG companies focused on value pricing. There was no room to do more. But in this decade, say, in 2001-02, FMCG companies should have developed premium categories. Two to three years ago, we started seeing a boom in the car market -- the B segment started selling more than the Maruti 800 [ Images ], Mercedes [ Images ] became a Rs 1,000-crore (Rs 10 billion) brand selling cars at around Rs 40 lakh (Rs 4 million) apiece. All this points to a dramatic hike in the purchasing power of the creamy layer... I think FMCG firms need to develop a business model of premium pricing in what I'd call the mass-luxury segment. The reason why this couldn't be done earlier is that you didn't have mass in this market. Today, you have the mass. Today, the growth in the upper

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