Harris International, the manufacturers of Rihamu cola, has finally navigated the turbulent waters albeit with major bruises.
In December 2013, coca-cola reduced the prices for most of its products by almost 50%, in response to Riham that had set their prices slightly below coca cola’s. The cheapest coca -cola went for Ugx. 800. Riham, Pepsi and other players had to follow suit by reducing further the cost for their drinks. These actions set off price wars and competitive rivalries.
What the players missed was that selling at a low price doesn’t provide sufficient revenue to meet the costs of production. To successfully compete on price, one needs deliberate cost focus strategy with clear streamlined processes. Coca and Pepsi could not sustain very low prices for their sodas for a long period, and had to adjust them upwards. That is how Rihamu cola has been able to gain gasp for a breath. How long this will remain, we do not know yet.
Industry watchers agree that Rihamu cola has so far been able to disorganize the soda market and one day, they will command some reasonable share.
The current state of Uganda’s soda market has been described as having reached the level of ‘‘hypercompetition.’’ Hyper competition threatens efforts to sustain market share and trend is unpredictable. According to Prof. Richard D’Aveni, you are in hypercompetitive market if you find yourself challenged by innovative but aggressive competitors, not giving up despite your moves.
What ails Rihamu?
To remain relevant, Rihamu’s strategy was to diversify and attach the competition from all angels. They invested in producing several products beyond Cola drinks. One of the key products they launched was Lavita, a product that tastes like Coke’s Novida. Such a product that is said to taste like the competition surprised their nemesis, as such would entail multiple reactions by lowering prices would be very difficult to sustain – as the major manufacturing fixed costs must be paid anyway.
Other products like Rihamu WhatsUp and Rihamu Cola are said to look and taste similar to Coka Cola and Pepsi products. Their latest product on the market, Oner Juice resembles Afia, the Kenyan product that took the market by storm.
In the recent developments, while Coke and Pepsi moved to increase prices of their soda products, Rihamu chose to stay put. This tactical move is said to have already negatively impacted the incumbents.
The change in prices means soda consumers will have to part with more money in order to drink a bottle of a soda. In the changes, the 300ml glass bottle now costs Ugx. 1,000 up from Ugx. 800. Add the costs of depositing to a bottle, the cost is Ugx. 1,400. The 330ml PET bottle now costs Ugx.1200 up from Ugx. 1000. While the 2litre PET bottle now costs Ugx. 4200 up from Ugx. 3800.
For Rihamu, 320ml bottle now goes for Ugx.1, 000. Even if they increased prices from Ugx. 1,000 to Ugx 1,200, they also increased the bottle size from 350ml to 400ml.
The price rises come at time when soda sales of both Coke and Pepsi have been sluggish in the recent past. The increase in prices, industry watchers say, is likely to drive away some consumers to alternatives or to Rihamu soda which is relatively cheap. It should be noted that large share of Soda is consumed by the low-end segment in the youth bracket that are said to be price sensitive.
Rihamu is said to be riding on mistakes by Coke and Pepsi. The introduction of PET bottles by former is said to have weakened and almost wiped out Rihamu. However, as Rihamu was on verge of collapse Coke’s Kamini Soda become scarce. That is time when Rihamu resurfaced. And it seems to have come back in a big way.
Watch this space.