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Copy of Coke & Pepsi Learn to Compete in India

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Rachel Fricke

on 5 March 2015

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Transcript of Copy of Coke & Pepsi Learn to Compete in India

Coke & Pepsi Learn to Compete in India
Impact of Culture
Challenges of Coke and Pepsi
Brand image
Working with the government
Low market demand for soft drinks
Expansion to rural areas
Recommendations for Coke and Pepsi
Increase transparency (brand image, respect of culture, change their relationship with farmers)
Working with the Indian government
Change consumer habits ("affordability planck")
Diversify product offering (packages water market)

Present Situation
SWOT Analysis
Competitor's Analysis
Conclusion
Preliminary Marketing Plan
The political environment in India has proven to be critical to company performance for both PepsiCo and Coca-Cola India. What specific aspects of the political environment have played key roles? Could these effects have been anticipated prior to market entry? If not, could developments in the political arena have been handled better by each company?
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?
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?
“Global localization” (glocalization) is a policy that both companies have implemented successfully. Give examples for each company from the case.
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?
Which of the two companies do you think has better long-term prospects for success in India?
What lessons can each company draw from its Indian experience as it contemplates entry into other Big Emerging Markets?
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.
Most recently Coca-Cola has decided to enter the growing Indian market for energy drinks, forecasted to grow to $370 billion in 2013 from less than half that in 2003. The competition in this market is fierce with established firms including Red Bull and Sobe. With its new brand Burn, Coke initially targeted alternative distribution channels such as pubs, bars, and gyms rather than large retail outlets such as supermarkets. Comment on this strategy.
Indian soft drinks industry specifics
Local expertise
Low demand (3 bottles per year)
Unfriendly behaviour of Indian government
Strict trade regulations
Principle of indigenous availability
Negative health impacts discovered

1991: First Gulf War – economic crisis

New Indian government - restructuring, liberalization

Local competitors: Parle Agro, Pure Drinks, Modern Foods, McDowells


Coca-Cola
1958: first entry
1977: withdrawal from the market
1990: attempt to reenter

Joint venture „Britco Foods“
Underestimated competitor
Took over Thums Up

PepsiCo
Non-carbonated drinks segment
1986: entered the market as Pepsi Foods Ltd.

Very strict trade regulations:
Processing local fruits and vegetable
Renaming the products

Main goal: fight off local competitors
Aggressive pricing strategy
Launch of new brands Slice and Teem

Cola segment:
Parle 60%
Pepsi Foods 26%
Pure Drinks 10%
Fastest growing beverage segment


PepsiCo
Aquafina brand
Diversification its portfolio
Non-cola products = 25% of overall business in India

Coca-Cola
Kinley bottled water
Market share of 28% in 2 years
Current leader in sales (Thums Up, Coke)

High seasons: mid-April to June, Navratri)
Indian festivals: Gujarati
Sport events
Celebrity endorsement
New size of bottle
Indian words
Gaana music

Yes, the political environment was something Coke and Pepsi could have anticipated prior to market entry
Indian government viewed as unfriendly to foreign investors
strict trade regulations, "principle of indigenous availability"
names of products
Politicians manipulated the pesticide allegations in their favor
Coke & Pepsi should have responded on the offensive
Indians interpret silence as guilt
Pepsi: 1986-joint venture w Voltas & Punjab Agro (Pepsi Foods Ltd.)
very stringent conditions
government demanded use of the name Lehar Pepsi
tough to fight local competition
Coke: had slight advantage in entering the market later in 1990
entered market with Britannia Industries India Ltd. (Britco Foods)
Parle sold bottling plants in key cities AND brands Thums Up, Limca, Citra, Gold Spot, Mazaa to Coke
Address confrontation directly

Provide evidence such as statistics gained from research guaranteeing their products are safe

Activist groups not effective enough to decrease sales-people already loyal to the brands
can create a negative reputation

Pepsi and Coke need to demonstrate initiative that they're taking steps toward being more environmentally and socially conscious
Pepsi: partnered with TV channel to broadcast festival in Gujarat
"Keep it Cool" regionally adapted campaign
used Bollywood actors to endorse products
used famous cricket and soccer players in ads
sponsored music video to appeal to 15-25 year olds in northern/western parts of India
Coke: Thums Up "think local, act local" plan-buy one get one free, win a trip to Goa
build connection with youth market: India A-18-24 year old metropolitan youth
used music and dance to appeal to market
Bombay Dreams/Chennai Dreams (southern India)
build stronger bond with youth, deeper connection with brand
"cool means coca-cola"-target youth in rural areas to develop brand preference-successful
Red Lounge retail outlets, myenjoyzone.com
announced mini with well known Hindi dancer
Coca-Cola
SWOT Analysis
Product: Bottled water in jugs and smaller bottles for individual consumption

Strengths:
Local Knowledge, Local Brands, Local Production. Popularity among Urban Youth. Brand Connection to Celebrities. Red Lounge. Flexible Pricing. Industry Leader.
Weaknesses:
Low Market Share in Bottled Water. Low Level of Cultural Knowledge. Insensitivity to Local Environmental/Community Needs.
Opportunities:
Increasing Indian Economy. Rural Youth Market. Cultural Festival of Navratri
Threats:
Lack of Consumer Emotional Attachment to the Brand. Many Competitors. Political-Legal Environment. Healthy Lifestyle Movement. Lack of Growth in Carbonated Beverage Sector.
Pepsi-Co
Promotion:
Personal selling
Poster advertisements

Placement: Distribution through Coke and Pepsi employees to rural areas
Use intermediaries between towns: brand representatives
Price:
Strengths:
Long-Term Brand Consumer Relationship. Flexible Pricing. Connection to National Athletes. Top Position Among Bottled Water Brands.
Weaknesses:
Low market Share. Lack of Cultural Knowledge.
Opportunities:
Increasing Indian Economy. Rapid Growth of Bottled Water Industry. Health Lifestyle Movement. Passion for Sports in India. Cultural Festival of Navratri and Garba Competitions.
Decrease the prices
Discount with the second jug

Threats:
Competitors Ability to Copy Pricing. Political-Legal Environment. Many Competitors. Lack of Growth in the Carbonated Beverage Sector.
Smart business move for both companies
Indian market for carbonated beverages not growing, decline in popularity
Bottled water market valued at 1,000 Crores (10,000,000 Rupees)
New luxury segment, health-conscious people
Pepsi: Aquafina (top three brands in country)
Coke: Kinley (28% market share)
Fast-growing markets have potential for success for Coke
Use of different distribution channels is a good strategic decision
Burn could be overshadowed by known brands in grocery stores
Selling Burn in a new environment could create early brand recognition/preference
Coke has better potential for success
Thums Up and Coke are top two brands in India
Leadership in the industry
Timing and close watch of political environment are key
Strategies
Target markets, regional marketing
Celebrities/Sports icons favored
Handle any controversies that could arise regarding their products head on
Produced by Pure Drinks (India)
Manufactured by Parle
(India)
-leading soft drink company before Coke and Pepsi

Competitors Analysis
Set backs
Coke: appealed to masses during Gujarati festival, "think local, act local" Thums Up
build connection with youth market India A: 18-24 year old metropolitan youth using music and dance
"cool means coca-cola" for rural markets
affordability plank (5 rupees) to encourage regular consumption
mini
Pepsi: sponsored Gujarat festival, partnered with TV channel
certain regions had offer to receive one kilo of rice with refill of 300-ml case
introduced 200-ml bottle to boost sales volume
sponsored music video to appeal to ages 15-25 in northern/western parts of India
In 1977 Coca- Cola withdrew from India due to a dispute with the government regarding trade secrets.
This allowed Parle to re-establish control of the market

when Pepsi first entered the indian marketplace they found themselves overwhemed by Parle's extensive product line. As a result they were forced to change
Competitors Analysis
recovery
As of Coca-Cola's prowess as a company they were able to jump back into the industry following their withdrawal and a fortuitous legal predicament regarding a chemical called BVO allowing CocaCola to acquire much of the company that once led the industry
Pepsi had a more hands-on approach to combating their difficulties as they adding two more sub-brands to keep up with the vast product lines of companies like Parle.
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