Sunday, October 15, 2006

Small servings

A while back softdrink companies in India launched 200 ml bottles of softdrinks priced at Rs. 5. That the 5 rupees is a psychological price - it is a single coin of the largest denomination is a different point for some other time. The "standard" bottle sizes in India are 300 ml, 250 ml. Once upon a time these bottles were priced around 10 rupees - now they are costlier.

The new bottles brought the softdrink within the reach of the coffee, tea and nimbu pani (the real competitors to soft drinks) customers from a price perspective. But now, with inflation (or perhaps margins), the prices of these small bottles is inching up. Recently, I was charged 8 for a small (200 ml) bottle of Sprite. If this is the MRP, then that defeats the objective of having a small serving for this price - the competition with tea, coffee is lost. If it is not the MRP and the shopkeeper charges a higher price, then the softdrink companies objective is lost once again.

Very often, the idea of selling stuff in small sachets/servings is to enable people to sample or buy for immediate use or making stuff affordable (this is a funny argument, because the price of 100 grams of a premium product may equal 500 grams of the regular product that they would have used). But inflation or increased margins could defeat the purpose. And I suspect that this is the case with small softdrink servings. The margins of companies may go down, since customers on an average might chose to go with smaller servings than with regular servings.

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