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Premium member Presentation Transcript Coke And Pepsi Learn To Compete In India: Coke And Pepsi Learn To Compete In India Prepared By- Dhwani Shah Megha Jagtap Parth Purohit Rohan Mehta Paras Charan Mochan BholaBackground of Beverage Industry in India: Background of Beverage Industry in India Coca-Cola’s past in India Present from 1958 until 1977 Industry Shakeup in 1988 State of the Industry in 1993 45% of market consisted of small manufacturers $3.2 million market share Low Demand for Carbonated Drinks Average of 3 servings a year/person in 1989 Average of 1404 servings a year/person in U.S. in 2003Coco-cola and Pepsi Co enter the Indian market: Coco-cola and Pepsi Co enter the Indian market Pepsi 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 expertise…what 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-Cola’s success, discuss their strategies to cope with the issue, and ultimately propose my own suggestions to improvement.Fast Forward to the new Millennium: Fast Forward to the new Millennium Seasonal Sales Promotions – the 2000 Navratri Campaign- ‘ 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.: 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.: Cont. Pepsi’s 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 team’s overall performance for world cup cricket held in South Africa. Introduction of new product – ‘icy blue cola’, was marketed nationwide as Pepsi blue.Cont.: Cont. Coca-cola’s 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 cola’s 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 Category: A New Product Category Several producers have launched their own brands in a new category. Coke brand Kinley was introduced in 2000. Captured 28% market in 2002 Currently, 40% share is with Bisleri of parle, 11% of Aquafina of Pepsi and other brands too.Coca Cola’s Attempt to “Crack” Indian Market: Coca Cola’s Attempt to “Crack” Indian Market By 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 War: The Second Gulf War During 2003, due to iraq war, an All-India Anti-Imperialist Forum to boycott purchase of A merican and B ritish goods for “unjust war “. Led to decrease 50% in southern States through ‘shop-to-shop’ campaignLearning Some Hard Lessons: Learning Some Hard Lessons 3 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 2 nd Nation wide.Contamination Allegations And Water Usage: Contamination Allegations And Water Usage In 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 people Content of Pesticides residue was found in 2003, leading to close of plant, until corporation won a court ruling allowing them to reopen.Answer- 1: Answer- 1 India was a closed economy in the beginning. Policy banning imports. The Liberalization of India’s 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. Contd …Slide 14: Unlawful to market under their Western name in India Pepsi became “Lehar Pepsi”. Coca-Cola merged with Parle and became “Coca-Cola India”. Different Laws for Pepsi and Coke Coca-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. Contd …Slide 15: India 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. Contd …Slide 16: Could these problems have been forecasted prior to market entry? Probably not Inconsistent, 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 wouldn’t of had to agree to sell 49% of their equity.Answer-2: Answer-2Coca-Cola’s Pros & Cons of Timing of Entry in the Indian Market: Coca-Cola’s P ros & Cons of Timing of Entry in the Indian Market Benefits Parle offered its bottling plants in 4 major cities. Made its return to India with Britannia Industries India Ltd. Disadvantages Rigid Rules and Regulations. Buying of bottling plants leads to 49% disinvestment. Local demand of carbonated drinks is as very low. Harder to establish themselves.Pepsi’s Pros & Cons of Timing of Entry in the Indian Market: Pepsi’s Pros & Cons of Timing of Entry in the Indian Market Benefits Own 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. Disadvantages Pepsi approached Parle but it was rejected. Launched 7up and there is stiff competition in the market for lemon drinks. Answer-3 Responses to India’s Enormity : Answer-3 Responses to India’s Enormity Pepsi and coca-cola responded in many ways to the enormity of India in terms of it population and geography. Conti ..Cont..: Cont.. Product Policies: Catering to Indian tastes Entering with products close to those already available in India such as colas, fruit drinks, carbonated waters Waiting to introduce American type drinks Coca-Cola introducing Sprite recently Introducing new products Bottled water Conti .. Cont.. : Cont.. Promotional Activities: Both advertise and use promotional material at Navratri . Pepsi gives away premium rice and candy with Pepsi Coca-Cola offers free passes, Coke giveaways as well as vacations Use 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 Cont…: Cont… Pricing 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 2003 Attempt to encourage consumption to try to compete with Pepsi and gain market shareContd ..: Contd .. Distribution Arrangements: Production plants and bottling centers placed in large cities all around India More added as demand grew and as new products were addedAnswer-4 Coke and Pepsi’s “Glocalization Strategies”: Answer-4 Coke and Pepsi’s “ Glocalization Strategies” What 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 glocalizationPepsi’s Glocalization: Pepsi’s Glocalization Pepsi 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.Pepsi’s Glocalization: Pepsi’s Glocalization Advertising is done during the cultural festival of Navrtri , a traditional festival held in the town of Gujarat which lasts for nine days. Pepsi’s most effective glocalization strategy has been sponsoring world famous Indian athletes, such as cricket and soccer players.Coca-Cola’s Glocalization: Coca-Cola’s Glocalization First joined forces with the local snack food producer Britannia Industries India Ltd. in the early 90’s. 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-Cola’s Glocalization: Coca-Cola’s Glocalization Coca-Cola also hired several famous “Bollywood” actors to endorse their products. Who could forget…Answer-5: Answer-5 Yes, 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 Parle’s existing bottling plants. Coca cola tried to get extensions twice.Answer -6: Answer -6 Pepsi 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 recycling plant to treat the discharged water from their factories and then they can provide that water to farmers for their agricultural use. This way the ground water problem can also be solved and managed.Cont..: Cont.. Coke can further defuse boycotts or demonstrations against their products in California by doing Ad-campaigns in which they can ask the experts from the ministry of health to convey the message to the public that their products are safe and healthy. They can also hire celebrities to do the Ads for their products because the public follows them. Coke should address the group directly because their company was not wrong and they should justify themselves.Answer-7: Pepsi Better marketing and advertising strategies Widely accepted More preferable More market share Less Political conflicts Coke Government conflicts Trailing Pepsi in market share Pepsi will fare better in the long run Answer-7 Answer-8 Pepsi’s Lessons Learned: Answer-8 Pepsi’s Lessons Learned Beneficial to keep with local tastes Beneficial to pay attention to market trends Celebrity appeal makes for exceptional advertising It pays to keep up with emerging trends in the marketCoca-Cola’s Lesson’s Learned: Coca-Cola’s Lesson’s Learned Pay specific attention to deals made with the government Establish a good business relationship with the government Investment in quality products Advertising is crucial You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.