From Beverage Digest 6/13/97

Average US supermarket prices plunge for all top-10 CSD brands (BD 2/7/97) plus private label (PL) cola for 12 weeks ending 5/4/97 vs same period last year. Top executives of PepsiCo and CCE each say the other system was the cause. CCE says it will "attempt" to raise prices after July 4th holiday. Pepsi vs Coke. Prices of Pepsi brands in BD's top-10 declined at slightly greater rate than prices of Coke's brands. Coke Classic was down -3.5%; Pepsi down -3.6%. Diet Coke down -3.8%; Diet Pepsi down -3.9%. Sprite down -2.1%; Mt Dew down -4.9%. CF Diet Coke down -3%; CF Diet Pepsi -3.7%.

Pepsi's view. At PepsiCo's 6/4/97 meeting with Wall Street analysts, PepsiCo CEO Roger Enrico, according to analysts, says Pepsi won't "allow its market position to be threatened by Coke's aggressive pricing." Enrico declares: "If Coke goes to zero, we go to zero. Our nuclear bomb is as big as theirs." Pepsi CEO Craig Weatherup reportedly calls Coke system's CSD pricing "irrational."

CCE's view. On 6/5/97, CCE executives send memo to field executives re pricing. BD obtains copy. Vice chairman/CEO Summerfield Johnston and president/COO Henry Schimberg note at previous day's analyst meeting, "Pepsi indicated that the Coca-Cola system was decreasing prices to an `irrational level.'" Johnston/Schimberg: "We want to succeed based on superior marketing ... rather than the short-term approach of buying share through price discounting." 'Not the Coke system.' Add: "Those of you in Coke heartland cites where we already have a 50 (CSD) share ... have seen the worst of the price discounting first-hand and we all know its source is not the Coca-Cola system. In these areas ... we have absolutely no motivation to decrease prices except in response to a competitive initiative."

'Increase prices.' CCE executives: "While we have already responded to the competitive pricing initiatives in place for the July 4th holiday (to) protect our share, subsequent to the holiday, we will again attempt to increase prices ... If the competition views this as an opportunity to gain share through predatory pricing, we will, as we have in the past, respond immediately." Conclude: "We support (Coke's) share goals and believe they must ulimately be achieved through superior marketing and execution. However, we will not ride to any goal on the backs of either our share owners or our customers."

Reactions/views. Top non-Coke/Pepsi franchise company executive: "The pricing out there has gotten outrageous. Maybe this will calm things down." Paine Webber's Manny Goldman: "The discounting has gotten out of hand." Adds: "The last time soft drink prices were raised in the summer was during Julius Caesar's second term ... There will be plenty of time for prices to increase this summer. CCE and COBO set the tone for the industry. CCE took a step, COBO will follow, as will others."

Data. Chart shows prices and changes per 288-oz case -- encompassing multiple supermarket soft drink packages -- for top-10 brands plus PL cola vs corresponding period in 1996. More. Issue supplement, The Green Sheet, tracks 2L and 12-pack prices in 15 US markets over same 12-week period.

Brands. 1) Pepsi's Mt Dew posts the largest price drop; down -29¢ or -4.9%. But brand maintains 2nd highest per-case price. Bottlers say Mt Dew's steep price drop probably relates to Coke's introduction of Surge (BD 12/14/96). 2) on percentage basis, all prices except Sprite's down -3% or more. Sprite down -2.1%. 3) all top-10 brands except Sprite shed 17+¢ from average prices. Sprite and PL cola down -12¢. Packages: 12-packs. Full US 12-pack prices drop for every top-10 brand. 12-pack declines range from -5% to -9%. 2-liter. For full US, all 2L prices down. Price decreases range from -1% to -4%.

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