Classic ‘Reliance strategy’ helps Campa Cola carve a 10% market share

Bengaluru: The Seventies’ rock-star, Campa Cola, has made a return, with Reliance, its new owner, playing the market with its signature disruptive pricing. If analysts had scoffed at its scope for growth in a saturated market with MNC players such as Coca Cola and Pepsi deeply entrenched, they could not completely write-off Reliance’s ability to break into it.

Fact is, price war was inevitable, they agree. “You cannot identify new spaces to sell your beverages where Pepsi and Coke are not selling as they (such spaces) don't exist.

The only way you can take their space is by incentivising dealers, by making sure there is a price advantage,” highlighted consulting firm Technopak Advisor's Ankur Bisen.  It may be recalled that Reliance used the same move to capture the telecom market with its Jio pricing.

Needless to say, Campa Cola’s re-entry has its far more mature competitors scurrying for cover. “Disruptive pricing, backed by higher retailer margins, is rapidly gaining shelf space and consumer mindshare, especially in value-driven rural segments. This is forcing other fast moving consumer goods (FMCG) brands to react with price cuts, pack-size boosts, and margin adjustments,” said Avinash Chandani, Partner, Deloitte India.

Reliance acquired Campa Cola in August 2022 and reintroduced the brand in 2023. It kept its strategy simple, as it has done with most of its consumer offerings - low pricing to win the market, rather than focus on margins from the word go. Result - in the year or two, it has been around, Campa Cola already boasts a 10 per cent market share. 

Sustainability is not the goal in the near term, say market observers DH spoke to. Priced at Rs 10 a bottle, the product is working at a thin margin after accounting for taxes, packaging, logistics, and retail margins—making it heavily reliant on volume, for sustenance. Once the volumes pick up in the next 12-18 months, the low cost offering will be justifiable, the experts added.

On the other hand, this strategy has pushed the cola industry to work on reducing its costs and be able to match the low pricing. While incumbents are focusing on returnable glass bottles (RGBs) to reduce costs, newer entrants are using the low-cost polyethylene terephthalate (PET) bottles. However, at a broader level, with distribution consolidating through e-commerce and quick-commerce, legacy players will face margin pressure, adding to the challenges of the industry.

But pricing cannot be the sole winner for Campa Cola. Reliance will also have to look at increasing its supply chain against the incumbents, given the growing demand due to a hotter-than-usual summer and rising out-of-home consumption for small packs. Even though Campa is fast tracking its bottling infrastructure, its supply chain lacks the reach of the incumbents in the near term.

Sectoral experts said that industry leading brands have reached over 40 lakh outlets with 10–15 per cent annual growth in distribution, ensuring deep penetration into rural & urban markets.

Hence, even with a strong pricing appeal and infrastructure investments, supply chain depth built over years by others cannot be replicated overnight. “Reliance will have to expand its back-end supply chain because the demand is only going to soar given that it has already hit Rs 1,000 crore in the cola market,” said brand strategist Harish Bijoor.  

The soft drinks battle has taken a new shape, shifting from branding to affordability and access, putting pressure on profit margins and long-standing distribution loyalties. “The decision has now come to the price-sensitive buyer, where brand loyalty takes a backseat to affordability and availability,” added Chandani. 

This has triggered a broader portfolio rethink across the industry, with companies focusing more on small pack innovations. Even the likes of Amul have begun to provide low cost offerings (example: Rs 10 lassi) to garner a larger market share. 

In addition to strategies driven by price, beverage players in general are also tapping into the health and performance trend as consumers are becoming more conscious of what they are consuming, with brands launching low-sugar variants and functional drinks to capture evolving consumer preferences. This is also a category Reliance will have to tap into, if it wants to expand its market share, analysts added.