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Coke And Pepsi Learn To Compete In IndiaPrepared By-

Dhwani ShahMegha Jagtap Parth PurohitRohan MehtaParas Charan Mochan Bhola

Background of Beverage Industry in IndiaCoca-Colas past in IndiaPresent from 1958 until 1977

Industry Shakeup in 1988

State of the Industry in 199345% of market consisted of small manufacturers$3.2 million market share

Low Demand for Carbonated DrinksAverage of 3 servings a year/person in 1989Average of 1404 servings a year/person in U.S. in 2003

Coco-cola and Pepsi Co enter the Indian marketPepsi entered into the Indian beverage market in July 1986 as a joint venture with two local partners, Voltas and Punjab Agro, forming Pepsi Foods Ltd.

Coca-Cola followed suit in 1990 with a joint venture with Britannia Industries India before creating a 100% owned company in 1993 and then ultimately aligning with Parle, the leader in the industry.

As both companies would soon discover, competing in India requires special knowledge, skills, and local expertisewhat works here does not always work there. (Cateora & Graham, 2008, p. 604).

In this article, I will analyze the primary obstacle to Pepsi and Coca-Colas success, discuss their strategies to cope with the issue, and ultimately propose my own suggestions to improvement.

Fast Forward to the new MillenniumSeasonal Sales Promotions the 2000 NavratriCampaign-Thums Up Toofani Ramjhat, with 20000 free passes issued, one per Thumps up bottle.

On-site activities, buy one-get one free and lucky draw scheme like win the trip to Goa.

PepsiCo telecast Navratri utsav 2000 at Mumbai.

People enjoyed a mega offer of getting one kilo of basmati rice free with 300 ml bottle.Cont.The 2002 Summer TV Campaign-

keep it cool the new slogan came up for the new category of 7UP.

Focused on objective on growing the category and building brand salience.

Cont.Pepsis Sponsorship of cricket and football-

Launching of new ad campaign featuring the batting sensation, Mohammad Kaif.

Spot light has been on Sachin Tendulkar and Amitabh Bachchan.

PepsiCo had capitalize teams overall performance for world cup cricket held in South Africa.

Introduction of new product icy blue cola, was marketed nationwide as Pepsi blue.

Cont.Coca-colas lifestyle advertising-Used a strategy building a connect using the relevant local idioms.The campaign slogan was Thanda Matlab Coca-cola, which focused on the youth.Coca colas specific marketing objectives for 2003 were to grow the per capita consumption of soft drinks in rural markets, and to capture a larger share in the urban market from competition and increase the freq of consumption.

A New Product CategorySeveral producers have launched their own brands in a new category.Coke brand Kinley was introduced in 2000.Captured 28% market in 2002Currently, 40% share is with Bisleri of parle, 11% of Aquafina of Pepsi and other brands too.Coca Colas Attempt to Crack Indian MarketBy 2002, hold 56% market in national soft drink market.It recovered the losses upto 400 Cr. which was incurred in 1993 (total Accumulated loss over 2000 Cr.)49% of Holdings were ordered to sell to Indian Investors.More over FIPB was changed and again Co. begin to build new relations with bureaucrats.The Second Gulf WarDuring 2003, due to iraq war, an All-India Anti-Imperialist Forum to boycott purchase of American and British goods for unjust war .Led to decrease 50% in southern States through shop-to-shop campaign Learning Some Hard Lessons3 Years cost cutting programs bought dramatic results.Local purchasing policies bought 57% savings in Import duties.By reinvigorated with an infusion of 3.5 Million spent on A&D held Thumbs Up ranked 2nd Nation wide.Contamination Allegations And Water UsageIn a production of 3 Lac ltr of Soda drink a day uses 1.5 million ltr of water, enough to meet the requirement of 20,000 peopleContent of Pesticides residue was found in 2003, leading to close of plant, until corporation won a court ruling allowing them to reopen.Answer- 1India was a closed economy in the beginning.Policy banning imports.The Liberalization of Indias Government in 1991.New Industrial Policy.Strict policies regarding the entry of foreign brands.Trade rules & regulations simplified.Foreign investment increased.Pepsi enters in 1986.Coca-Cola follows in 1993.

ContdUnlawful to market under their Western name in IndiaPepsi became Lehar Pepsi.Coca-Cola merged with Parle and became Coca-Cola India.

Different Laws for Pepsi and CokeCoca-Cola agreed to sell off 49% of its stock as a condition of entering and buying out an Indian company.Pepsi entered earlier, and was not subject to this.

ContdIndia forced Coke to sell 49% of its equity to Indian investors in 2002.

Coke asked for a second extension that would delay it until 2007 which was denied.

Pepsi was held to this since they entered India in a different year.

Coke asked the Foreign Investment Promotion Board to block the votes of the Indian shareholders who would control 49% of Coke.

Change in oversight of the FIPB:Past lobbying efforts made useless.

ContdCould these problems have been forecasted prior to market entry?Probably notInconsistent, and changing government.

How could these developments in the political arena have been handled differently? Coke could of agreed to start new bottling plants instead of buying out Parle, and thus wouldnt of had to agree to sell 49% of their equity.Answer-2Coca-Colas Pros & Cons of Timing of Entry in the Indian MarketBenefitsParle offered its bottling plants in 4 major cities.Made its return to India with Britannia Industries India Ltd.

DisadvantagesRigid Rules and Regulations.Buying of bottling plants leads to 49% disinvestment.Local demand of carbonated drinks is as very low.Harder to establish themselves.

Pepsis Pros & Cons of Timing of Entry in the Indian MarketBenefitsOwn set up green filled bottling plants.Advantage of coming before Coca Cola.Government policies favored the company.Joint venture with Volta's and Punjab Agro.Gained 26% share by 1993.

DisadvantagesPepsi approached Parle but it was rejected.Launched 7up and there is stiff competition in the market for lemon drinks.

Answer-3Responses to Indias Enormity

Pepsi and coca-cola responded in many ways to the enormity of India in terms of it population and geography.

Conti ..Cont..Product Policies:Catering to Indian tastesEntering with products close to those already available in India such as colas, fruit drinks, carbonated waters

Waiting to introduce American type drinksCoca-Cola introducing Sprite recently

Introducing new productsBottled water

Conti ..

Cont..

Promotional Activities:Both advertise and use promotional material at Navratri.Pepsi gives away premium rice and candy with PepsiCoca-Cola offers free passes, Coke giveaways as well as vacationsUse of different campaigns for different areas of India India A campaigns try to appeal to young urbanites India B campaigns try to appeal to rural areas

ContPricing Policies:

Pepsi started out with an aggressive pricing policy to try to get immediate market share from Indian competitors

Coca-Cola cut its prices by 15-25% in 2003Attempt to encourage consumption to try to compete with Pepsi and gain market shareContd ..

Distribution Arrangements:Production plants and bottling centers placed in large cities all around India

More added as demand grew and as new products were added

Answer-4Coke and Pepsis Glocalization StrategiesWhat is Glocalization?Global + Localization = Glocalization

By taking a product global, a firm will have more success if they adapt it specifically to the location and culture that they are trying to market it in.

Both companies have successfully implemented glocalization

Pepsis GlocalizationPepsi forms joint venture when first entering India with two local partners, Voltas and Punjab Agro, forming Pepsi Foods Ltd.

In 1990, Pepsi Foods Ltd. changed the name of their product to Lehar Pepsi to conform with foreign collaboration rules.

In keeping with local tastes, Pepsi launched its Lehar 7UP in the clear lemon category.

Pepsis GlocalizationAdvertising is done during the cultural festival of Navrtri , a traditional festival held in the town of Gujarat which lasts for nine days.

Pepsis most effective glocalization strategy has been sponsoring world famous Indian athletes, such as cricket and soccer players.

27Coca-Colas GlocalizationFirst joined forces with the local snack food producer Britannia Industries India Ltd. in the early 90s.

Formed a joint venture with the market leader Parle in 1993.

For the festival of Navratri, Coca-Cola issued free passes to the celebration in each of its Thumps Up bottles.

Also ran special promotions where people could win free vacations to Goa, a resort state in western India.

Coca-Colas GlocalizationCoca-Cola also hired several famous Bollywood actors to endorse their products.Who could forget

Answer-5Yes, we agree that Coca-Cola India made mistakes in planning and managing its return to India.

They wrongly forecasted Indian political environment due to which they had to dilute their stakes later (49% disinvestment).

They rejected the plan to put up green fields bottling plants as they took over Parles existing bottling plants.

Coca cola tried to get extensions twice.

Answer -6Pepsi and Coke can confront the issue of water use in the manufacturing of their products by the use of canal irrigation & rainwater harvesting.

Then they can also put water recycl