Coles and Woolworths WILL buy product and sell it at a loss. This is called loss leading, and is used to bring foot traffic into their stores. They lose on this item, but they win when the individuals purchase other products, mainly complementary items to the item they are losing on as an impulse buy, sometimes at an I flated price. That's been going on for years.
Where Asahi differs to the old Schweppes is that they run to a 30 year business plan. If this plan permits a loss year on year in a category for 10 years to bring the opposition to it knees, they will do it. They know this strategy will work because their competitor is at the mercy of the share market and its short view. People want a return every year. If you told the market you were going to lose money for ten years, everyone would abandon ship and check on things in 2025.
A big company like Asahi will offset this loss, which at ten years is short term to them via their global profit making beer assets.
Coke is working hard to reinvent itself, but it's a difficult process. They really do need Indonesia to work. They've dropped their margin there to win back volume, but it remains to be seen whether they can then creep the price back up and keep customers. We will see.
CCL Price at posting:
$10.34 Sentiment: Hold Disclosure: Held
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