Coke and Pepsi learn to compete in India

Aspects of the political environment in India have played key roles that are through its austere trade policies, rules, and regulations. As we seen from case, in the past, the Indian government was viewed as unfriendly to foreign investors. Outside investment had been allowed only in high-tech sectors and was almost entirely prohibited in consumer goods sectors. The “principle of indigenous availability” is using material only in country for protecting Indian people. They will change following liberalization of the Indian economy and the dismantling of complicated trade rules and regulations.

Yes, it could anticipate the effect prior to market by using information from own company research, the business partner in that country, the expertise service, and own experience in near area.

2. Timing of entry into the Indian market brought different results for PepsiCo and Coca- Cola India. What benefits or disadvantages accrued as a result of earlier or later market entry?

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 and then in 1993 aligning with Parle, the leader in the industry.

     

The primary barrier to Pepsi’s entry into the Indian market was its political / legal environment as a result of its history; also, the government mandates that Pepsi products be promoted under the name “Lehar Pepsi” within the Indian market.   Despite the CEO of Pepsi said: “We’re willing to go so far with India because we want to be sure we get an early entry while the market is developing.”

In May 1990, Coca-Cola reenters Indian by means of a proposed joint venture with local bottling. The primary barrier to Coca-Cola’s entry into the Indian market was its political / legal environment. The government turned down this application. However, Coca-Cola made its return to India by joining forces with Britannia Industries India Ltd., The new venture was called “Britco Foods”.

At that time, Coca-Cola would not take market share away from local companies because the beverage market was itself growing consistency from year to year. This is disadvantage of Coca-Cola.

3. The Indian market is enormous in terms of population and geography. How have the two companies responded to the sheer scale of operations in India in terms of product policies, promotional activities, pricing policies, and distribution arrangements? 

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.

Responses to India’s Enormity

Product Policies

Catering to Indian tastes Entering with products close to those already available in India such as colas, fruit drinks, carbonated waters and waiting to introduce American type drinks Coca-Cola introducing Sprite recently, Introducing new products, and Bottled water.

Responses to India’s Enormity

Promotional Activities

Both advertise and use promotional material at Navrartri

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

Responses to India’s Enormity

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 share

Responses to India’s Enormity

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

4. “Global localization” (glocalization) is a policy that both companies have implemented successfully. Give examples for each company from the case. 

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

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

Advertising is done during the cultural festival of Navrartri , 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

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 Navrartri, Coca-Cola issued free passes to the celebration in each of its “Thums 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 also hired several famous “Bollywood” actors to endorse their products.

Who could forget…

Vivek Oberoi Aishwarya Rai

5. How can Pepsi and Coke confront the issues of water use in the manufacture of their products? How can they defuse further boycotts or demonstrations against their products? How effective are activist groups like the one that launched the campaign in California? Should Coke address the group directly or just let the furor subside? 

Coca-Cola eventually decide to go on the attack, though indirectly, giving detailed briefing by executive, who questioned the scientific credentials of their products’ accusers.

PepsiCo began a public relations offensive, placing large advertisement in daily newspapers saying, “Pepsi is one of the safest beverage you can drink today.

From campaign in California can be effective in solving the problem and marking trust in water problem. Coke should the group directly for easy working.

6. Which of the two companies do you think has better long-term prospects for success in India? 

Pepsi

Better marketing and advertising strategies

More widely accepted

More market share

Coke

Government conflicts

Trailing Pepsi in market share

Pepsi will fare better in the long run

7. What lessons can each company draw from its Indian experience as it contemplates entry into other Big Emerging Markets? 

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 market

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

8. Comment on the decision of both Pepsi and Coke to enter the bottled water market instead of continuing to focus on their core products carbonated beverages and cola- based drinks in particular.

This is a good strategic because carbonated beverages and cola were not growing in last decade. So changing market is opportunity.