After years of focusing on disposable plastic bottles, Beverage maker Coca-Cola India Pvt. Ltd is promoting returnable glass bottles once again. The change helps the company reach out to more users and reduce packaging costs.
Years ago, beverage companies started phasing out the ubiquitous returnable glass bottles, replacing them with travel and storage-friendly PET bottles that now dominate the industry.
“In 2021, we could predict that inflation is going to be one of the major challenges in the coming year, and glass bottles are the least impacted packaging in inflation. It also gives us an affordable play in large parts of India, “Sanket Ray, president for India and South-West Asia, Coca-Cola, said.
The bottles rolled out last year at a Rs. 10 price point (200 ml) in select states and are available across the company’s top-selling brands such as Coca-Cola, Thums Up, and Sprite. In some markets, glass bottles now make up 30% of beverage sales. Overall, they account for a little less than 10% of the company’s business.
Coca-Cola’s move comes at a time when inflation is eating into household budgets, raising the prices of everything from soaps to fuel. As a result, shoppers are reaching out for more affordable packs or moving to cheaper brands.
The maker of Sprite and Coca-Cola carbonated beverages said it has lowered the price points of such glass bottles from Rs. 12–14 to Rs. 10 in seven states in India to drive its affordability agenda.
We have started expanding the distribution, putting more glass into it, and also putting marketing behind it, “Ray said. The company is seeing “really strong momentum” in sales of such bottles, largely led by demand emerging from small towns and rural areas.
In the three months ended March 31, 2022, the company sold 500 million extra bottles in India. The company said in an earnings statement that nearly 70% of these incremental transactions were driven by small packages such as returnable glass bottles and affordable, single-serve PET packages. Its India business grew by “mid-teens” in the first quarter of the current year on the back of an early summer and improvement in out-of-home consumption.
Packaged consumer goods firms are also witnessing unprecedented input cost inflation, with prices of everything from packaging materials to edible oils on the upswing.
“For us, logistics costs are a significant part of our costs. Also, any increase in fuel price has an impact on (plastic) resin costs, “he said.
Because of the low cost of packaging materials, glass bottles are least affected by inflation, according to Ray.”It’s a one-time cost and the bottles are rotated,” said Ray.
Ray said inflation is a “big issue” for every consumer company. “Our expectation was that inflation would be between 3% and 5%—this has increased to some extent now.” Inflation is going to be part of our strategy; if we want to expand in India, we have to focus on affordability as a solution. For that, we have to invest in glass bottles, “he added.
The company also took pricing actions in the last quarter of 2021. “We have been playing around with our packs, which are revenue growth management, specifically pack and pricing. For example, when we changed some pricing on large PET packs, we also strongly reinforced our focus at the Rs. 10 price point through our glass bottles. We relaunched it strongly across a few markets, to see that we do not lose out to consumers because of the impact of inflation, “he said.
Coca-Cola isn’t the only market where Coca-Cola is trying glass bottles to counter inflation—a recent report by Reuters said Coca-Cola is expanding the distribution of its cheaper returnable glass bottles in several emerging markets.
Meanwhile, Coca-Cola is also planning to sell its products in more stores as traditional trade makes a smart recovery. The company added 250,000 outlets to its distribution network of four million stores in the March quarter. It will add a similar set of numbers over the next two quarters.