July 25, 2008 3:00 am

Coke to shrink size of cans in Hong Kong

Coca-Cola is shrinking the size of its Coke and Fanta cans in Hong Kong as it battles soaring aluminium prices, a move analysts say foreshadows broader packaging changes from the world's leading soft-drink brands.

The soft-drinks group is reducing its can sizes to 330ml - the most common can size - from 355ml.

John Sicher, analyst at drinks newsletter Beverage Digest, said: "In a number of markets the big beverage companies are starting to look at different package sizes...both Coke and Pepsi are testing different package sizes in the US."

Mr Sicher said both companies were experimenting with "slightly smaller bottles" and that changes in packaging were likely to be "a major theme" for the soft- drinks industry over the next few years.

He said there were two reasons for the changes. First, rising commodity prices have increased the cost of soft-drinks' packaging as well as the drinks' ingredients.

Aluminium prices have risen by 65 per cent over the past three years to record levels as rising energy prices have pushed production costs sharply higher.

Energy accounts for about 45 per cent of the cost of producing finished aluminium.

Meanwhile, rising corn prices have raised the cost of high fructose corn syrup, which is used to sweeten most soft drinks.

Second, companies are becoming careful about working out the most effective price and packaging mix for their products.

The fizzy-drink market has fallen into serious decline over the past five years with all top brands losing sales as people switch to healthier drinks.

The US economic downturn is adding to companies' woes with PepsiCo this week reporting that sales were slowing at convenience stores as people become more careful about how they spend their money.

Neither Coke nor Pepsi were immediately available for comment.

Cutting the volume or weight of products is becoming an increasingly popular way companies are pushing through effective price rises and protecting profit margins, according to John Kemp, analyst at RBS Sempra.

Swiss food group Nestlé and Anglo-Dutch conglomerate Unilever have lost sales volumes after raising prices, according to analysts at Morgan Stanley.

www.ft.com/consumer

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