Impact of Price Wars on Sales Performance of Carbonated Drinks Companies in Kenya: A Case of Highlands Drinks Limited.

Abstract

Purpose: This study focused on examining the impact of price wars on sales performance of carbonated drinks companies in Kenya with reference to Highlands Drinks Limited. Methodology: The study adopted a descriptive research design that gathered both quantitative and qualitative data. The target population comprised of 300 managers from different carbonated drinks companies that sell their products in Nyeri town. After employing stratified random sampling, the sample size was 90 respondents which was 30% of the target population. The study employed a questionnaire to obtain primary data whose reliability was tested through Cronbach’s alpha in which 0.789 value was obtained which was acceptable. The questionnaire return rate was 94.44%. Quantitative data was analyzed using the Statistical Package for Social Sciences (SPSS) version 20 and presented as figures and tables for clarity. Qualitative data was used to supplement interpretation of quantitative data. Findings: The findings showed that the days of wild growth and huge profits for Kenya’s carbonated soft drink manufacturers could be over as price war continue to intensify due to competition pressures. It was evident that refraining from price cuts would cause sale volumes of the former duopoly (Coca-Cola and a Pepsi) to plunge even further than had been experienced, given the low per capita consumption of carbonated soft drinks in Kenya. Also, the study found out that even though price cuts are an advantage of consumers, it is a disadvantage to manufacturers as it affects their profitability, which also in turn reduces taxes to government. Conclusion: The main competing strategy employed by majority of carbonated drinks manufacturer was pricing. Pricing is one of the important decisions that need to be made by a firm and which affects its revenue and profitability. Recommendations: The study recommends the carbonated drinks manufacturers in Kenya to adopt non price competition strategies that can be employed by business owners and sales reps to avoid a price war. These strategies include price matching, evaluating competitors, product re-branding, increasing stockists, and creative advertising.