A real paanch-up

offering.

Consider the transaction. Invariably, consumers never got the 200-ml returnable bottle for the prescribed Rs 5; the retailer would always charge Re 1 extra, notwithstanding any arguments from the consumer.

That also meant, at times, that the balance Rs 4 was shelled out in the form of candies (if the shopkeeper had run out of coins).

Meanwhile, the Rs 5 communication had been conveyed so strongly and has made such an impact that the consumer felt cheated every time he paid Rs 6.

So, the offerings in the price band of Rs 5 (actually Rs 6) to less than Rs 10 confused the value equation, resulting in the consumer perceiving little value in the paanch pack.

The paanch pack, in fact, cannibalised the other offerings of Coca-Cola. The equation between the quoted price, actual price, perceived value and quantity did not help this offer to stand all by itself.

The ever-rising raw material cost should have been taken in to account by those in charge at the company, before they committed to such an unaffordable "affordability strategy".

The volumes of the low margin offer grew at the cost of the high margin offerings, which is unsustainable for any organisation.

Besides, the consumption pattern of soft drinks differs widely from that of other fast-moving consumer goods.

Unlike the success stories of other small packs "" shampoo, soap, oil and so on "" where leftovers can be stored, carbonated soft drinks cannot be kept for later consumption.

That's essentially for three reasons: first, the drink will lose its fizz if it is kept after opening. Second, the glass bottle is returnable. And third "" perhaps most importantly "" it is human nature to finish the drink.

Consumption habits of soft drinks are a double-edged sword. The consumer is likely to feel that if he buys a pack of 300 ml or more, he is buying enough for two to share. The perceived value of the larger drink is, therefore, higher.

But, at the same time, the target segment for the Rs 5 offering is the youth (more rural than urban). Young people are more likely to share beverages among themselves. This consumption behaviour leads to higher consumption of the 300 ml offering than the paanch pack.

Lower margins for the retailer further support the argument that he is likely to

push the larger pack more than the smaller one. Any affordability strategy will put pressure on margins in the short-term, but it is critical to build the market.

During the launch of the 200 ml strategy it was assumed that in the long run it would take over the 300 ml segment. Now, however, it is likely to be in a situation that is the converse.

Such an "affordability strategy" is now becoming unaffordable to the strategy maker himself. Are we really expanding the market, increasing volumes, and increasing consumption by segmenting the market?

The paanch offer could be penetrative in the early phases. But it could never have been a sustainable long-run strategy.