CASE STUDYCoke and Pepsi Learn to Compete in India

Group #6

Abigail Yoong (exch.)

Alexey Abramov (MM-1)

Ivan Ulitin (MM-3)

Julia Borshkova (MM-1)

Julia Gorokhova (MM-1)

Zoya Shakhova (Mark)

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Outline

• Political environment

• Timing of entry

• Growth of market

• Global localisation

• Coca-Cola’s mistakes

• Who has prospects?

• Lessons we learned

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India’s political environment

Principle of "indigenous availability“difficult trade policies, rules and regulationsprohibited usage of foreign brand name in India (!)sales of soft drinks concentrate to local bottlers could

not exceed 25% sales of the venturerequired to process & distribute local fruits and

vegetablesmarket was very small in size (!)

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India’s political environment• Could these effects have been anticipated prior to market entry?Probably not because investment rules in India were

unclear and altering during the 1990s and implementation of government rules was inconsistent

• Could developments in the political arena have been handled better by each company?In order to avoid some restrictions of Indian government

Coca-Cola could run new bottling plants instead of buying out Parle, and thus wouldn’t have to sell 49% of its equity

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Early and late entry (1)

Pepsi (1986 – early entry)• Advantages

Entered before Coca-Cola, got 26% market share by 2003Easier to differentiate from local products

• DisadvantagesStricter regulations – changed their name to Lehar PepsiLimitation of soft drink sales to 25% of total sales by Gov.Tough competition with local brandsNo experience, no previous examples of (un)success

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Early and late entry (2)

Coca-Cola (1993 – late entry)• Advantages

Bought 4 bottling plants from industry leader ParleAcquired Parle’s leading brands: Thumbs Up,

Limca, Citra, etc.2 new ventures with Parle to bottle and market

production

• DisadvantagesHarder to establish market share with Pepsi

presenceNo allowance for equity buy back

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Promotional activities (1)• Pepsi

Price – aggressive

Place – around Delhi and Mumbai

Promotion – sponsorship at Navratri, TV campaign using

sports and celebrities, sales promotion

Product – different bottle size (200ml), fountain sales, 3

tastes of Mirinda, Pepsi Blue, sparkling water

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Promotional activities (2)• Coca-Cola

Price – affordable, huge reductions up to 15-25% in 2003

Place – different target regions - India A and B

Promotion – events, lifestyle focus, sales promotion

Product – acquired 5 brands from Parle, water, mini-sized

bottles

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‘Glocalisation’ of Pepsi

• Pepsi forms joint venture with two local partners

• Pepsi Foods Ltd. became “Lehar Pepsi”

• Lehar 7UP was launched in order to correspond local

tastes

• Company‘s advertising was held during the cultural

festival of Navrartri

• Sponsorship of world famous Indian athletes, such as

cricket and soccer players

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‘Glocalisation’ of Coca-Cola

• Formed a joint venture with the local leader

• Coca-Cola issued free passes to the celebration in each of its

“Thums Up” bottles for the cultural festival of Navrartri

• Company held on-site activities where people could win a free trip to

Goa

• Strategy of ‘building a connect using the relevant local idioms’

• Company hired several famous “Bollywood” actors to endorse their

products

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Coca-Cola India made mistakes• Enters Market at the Wrong Time

• By entering at this time, Coca-Cola India agreed to abide all the Foreign Investment Laws of that year.

• Coca-Cola India tries to expand investment• Government allowed acquisition only if Coca-Cola agreed to sell

49% of equity within 2 years

• Coca-Cola tried to get extensions twice• India granted the first extension, denied the second

• Coca-Cola should have been more careful with promises• Internationalism was not popular among people

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Long-term prospects

Pepsi

• More market share

(23.5% vs. 16.5%)

• Sold in wider region

• More successful

advertising

Coca-Cola

• Trailing Pepsi with

smaller market share

• Difficulties in

relationships with

government

PEPSI HAS SLIGHTLY BETTER PROSPECTS

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Lessons from Indian experience• Better evaluation of political risks and relationships with government

are needed

• Better timing of entry. Companies need more accurate prediction of consumption rates

• Beneficial to keep up with emerging trends on the market

• Key factors of success: availability (meeting local demand by increasing production locally); acceptability (building brand equity); affordability  (pricing higher than local brands, but adapting to local conditions).

• The heart of any campaign is not just the product but also the position it holds in people's minds.

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Thank you for attention!