Thursday, September 13, 2018

Why does a cup of coffee cost you more at the airport?

Ever wondered why bottled water costs much more at the airport or in-flight than what you normally pay at the local store? Can companies charge differently for products sold through different trade and retail channels? How is it that the maximum retail price (MRP) varies?

Earlier this year, the Supreme Court said hotels and restaurants could sell bottled water and other packaged products above the MRP as they also render a service and cannot be governed by the Legal Metrology Act.

Besides, MRPs at locations including airports can vary because of the real estate costs. Riyaaz Amlani, CEO & MD, Impressario Entertainment & Hospitality, says airports are one of the most expensive retail locations. “At airports, concessionaires have to pay 5-6 times higher rentals compared to any other retail location, making it capital-intensive.”

Experts also point out that multiple changes to the GST structure in the last year-and-a-half have made MRP and labelling a tricky issue for packaged food companies.

Recently, the Airports Authority of India (AAI) asked concessionaires at the airports it manages to ensure that products are sold at MRP, and that provisions were also being made to offer affordable snacks and beverages.
According to Dhanraj Bhagat, Partner, Grant Thornton India LLP, “MRP on the product can vary depending on quantity, quality, packaging and other product differentiation [features] that may be there. However, for identical pre-packaged products, dual MRP is not permitted. The channel of sale — the shop or the mall — is not the basis [for the price] is to ensure that consumer is not disadvantaged that the amendment has been made.”
12/09/18 Meenakshi Verma Ambwani/Business Line