Reversing a trend of recent years, Coca-Cola is moving away from PET bottles and re-introducing glass packaging as a way to lower prices and keep customers buying in its Latin American markets.
In la…
Reversing a trend of recent years, Coca-Cola is moving away from PET bottles and re-introducing glass packaging as a way to lower prices and keep customers buying in its Latin American markets. In late August 2003, Coca-Cola launched an advertising campaign in Venezuela that proclaims “What is Good Always Returns.” A one-liter glass bottle costs shoppers one-third less than a comparable PET bottle. Similar efforts are under way in Argentina and Brazil, which is Coca-Cola“s third-biggest market by volume after Mexico and the U.S. For Coca-Cola, the return to its glass bottle offers hope for the company to boost volume growth in Latin America. Once widely used by Coca-Cola around the world, with one notable exception returnable glass bottles are sold only in some developing countries, where the company and its bottlers want to offer an affordable alternative to low-income consumers. That exception is Germany, where a law introduced in 2003 makes non-returnable bottles for certain types of beverages more expensive. When consumers buy Coca-Cola in a glass bottle, they leave a deposit for the container. When they return the empty bottle to the store for a full one, they pay only for the beverage. If they do not want to buy another Coca-Cola, they can get their deposit back. Although the Coca-Cola bottlers pay more to ship and clean the bottles, they save on raw materials, because the glass is reused. The fact that glass is almost always locally sourced, and is therefore immune to currency fluctuations, also means a lower cost. The price of PET is quoted in dollars because it is usually imported. In Latin America, “glass is now a very compelling alternative,” says Bob Ford, an analyst at Merrill Lynch & Co. who specializes in the region. Environmentalists welcome the use of glass bottles although retailers are less enthusiastic due to the extra weight and space required compared to PET bottles. “You need a major shock in the economy for retailers to want to allocate space to store glass,” says Mr. Ford. In Venezuela, where the economy is badly hit by a political crisis and most families cannot even cover the cost of basic food items, Coca-Cola salespeople are going door to door in 12 cities to promote returnable glass bottles. Coca-Cola is waiving the deposit fee for the first-time purchase of a family-size beverage in a glass bottle. Within two years, the company hopes that returnable glass bottles will account for 60% of the Venezuelan market, by volume. Coca-Cola first began reviving glass bottles in Argentina in 2001. At the start of the country“s serious economic difficulties, Coca-Cola launched family-size returnable glass bottles that made the beverage 25% cheaper than if bought in a plastic PET bottle. The company wanted to lower the price of its soft drinks “at a time when Argentines were questioning the affordability of everything in their lives,” says Rodolfo Salas, business manager of Coca-Cola in Argentina. Today, refillable bottles account for one-third of Coca-Cola“s Argentine sales, by volume, compared with less than 10% three years ago. The emphasis on refillable packages helped sales of Coca-Cola“s flagship cola grow 27% in the April-to-June quarter in 2003, compared with the same quarter in 2002. Coca-Cola hopes sales will return this year to the level that it achieved before the economic crisis started in late 2001. PepsiCo Inc. has followed the lead of its rival in promoting returnable bottles. In Brazil, Latin America“s biggest country, volume sales for all Coca-Cola brands went down 6% in the first half of 2003, compared with the first half of 2002. Amid the flat performance, in June 2003 the Brazilian Coca-Cola unit launched family-size returnable glass bottles in Rio de Janeiro and nearby towns. Depending on results in Rio, the campaign could go national. In several other cities, Coca-Cola is assessing consumers“ acceptance of single-serve, 6-fluid-ounce Coca-Cola in a glass bottle. “Tight budgets have restricted Coca-Cola consumption to weekends and special occasions” for lower-income households, says Claudia Colaferro, marketing director for Coca-Cola in Brazil. “We are passing the savings from returnable glass onto the consumer.”