Coke & Pepsi Learn to Compete in India

Presented By: Waqas Saleem

The Indian Soft Drinks Industry

In 1993,
45% of Soft Drinks Industry consisted of small mfrs. Combined business worth = $3.2 million

Leading Producers:
Parle Agro Pure Drinks Modern Foods McDowells

All offered Carbonated Orange & Lemon-lime beverage drinks

Cont..
Coca-Cola was presented in the Indian Market from 1958 until withdrawal in 1977 following a dispute with govt. over its trade secrets. Coca-Cola chose to leave india rather than:
Cut its equity to 40%. Hand over its secret formula for syrup.

 Following Coca-Colas departure, Parle became the market leader. Established franchises:
Dubai, Kuwait, Saudia Arabia, Oman. Sri lanka

Set-up production:
In Nepal & Bangladesh

Served Distant Markets in Tanzania, Britain, Netherlands, USA.

 Parle invested heavily on its Image Advertisement Flagship Brand = Thums up. Thums up associated with Job well done and Personal Success. Target Market = 15 to 24 Years

 Soft Drink Market of India composed of 6 product segments:

Cola, Cloudy Lemon Clear Lemon Orange Soda Mango

Prior to foreign producers, competition was between Parles Thums up and Pure Dinks Campa Cola.

 In 1988, Govt. warned that BVO, an essential ingredient in locally produced soft drinks, was carcinogenic. Producers
Either have to use costly imported substitute estergum Or Establish R&D in order to find out substitute.

Many Failed and quickly withdrew from Industry.

 One segment was composed of Non-carbonated fruit drinks. Growing industry as Indian Consumer perceive these drinks as Natural, Healthy and tasty. Leading Brand
Parles Frooti (a mango flavored drink) Exported to franchises in US, Britain, Portugal, Spain & Mauritius.

Opening up the Indian Market in 1991

In June 1991, India experienced severe economic crisis by the rise of imported oil prices following the gulf war.
Foreign Exchange reserves fell Imports were tightly controlled Industrial production fell while inflation was rising.

 In June 1991, New Govt. took office led by prime minister , Narasimha Rao and Finance minister, Dr. Manmohan Singh. They launched the restructuring program. By 1994,
Inflation was halved. Exchange reserves were greatly increased. Exports were growing Foreign investors were looking at India.

 For many years, Indian govt. is considered to be unfriendly for the foreign investors. After 1991, introduction of new industrial policy intended to dismantle the complicated rules & regulations, foreign investment increased dramatically.

 Foreign investors started to invest in:

Processed foods Software Engineering plastics Electronic equipment Power generation Petroleum generation

Equity stakes increased from 40% to 51%.

Coca-Cola & Pepsico Enter the Indian Market.

In 1989, average Indian was buying 3 bottles a year as compared to
11 bottles Bangladesh 13 bottles Pakistan

PepsiCo
In July 1986, they lodged a joint venture. They selected 2 Local Partners
Voltas Punjab Agro.

Application was approved under the name Pepsi Foods Ltd. by govt. of Rajiv Gandhi in September 1988.

 As expected, very stringent conditions were imposed.

Sales of soft drink concentrate couldnt exceed 25% of the total sales of new venture.

Robert Beeby, CEO Of Pepsi Cola Intl, said at that time:

Were willing to go so far with India because we wanted to make sure we get an early entry while the market is developing

 In May 1990, the govt. mandated that Pepsi Foods products be promoted under the name Lehar Pepsi. Foreign Collaborations rules in force at the time prohibited use of foreign brand names on products intended for sale inside india. Other Exapmles are:
Maruti Suzuki Carrier Aircon L&T Honeywell Wilinsons Wiltech Modi-Champion

 In Keeping with Local tastes, Pepsi Food launched Lehar 7UP along with Lehar Pepsi. Marketing & Distribution were focused in the North & west around major cities of Delhi and Mumbai. Introduced 1-liter bottles which had severe impact on the local producer, Pure Drinks. Market Leader preempted any further pricing moves by Pepsi Foods by introducing 250-ml bottle that sold for same price as its 200 ml. Bottle.