In 1987 Coke & Pepsi have 40.3% & 30.2 % of the U.S market respectively.
Apart from Pepsi cola co. and Pepsi cola International, it had six other divisions.
Pepsi was merged with Frito-Lay to constitute Pepsi co. International in 1965. Pepsi became the owner of the world’s largest restaurant chain which also includes Pizza hut and Tacco Bell with a total of nearly 16500 outlets in 1987. Pepsi had so far made inroads in 151 countries – 150 before India.
THE INDIAN SCENARIO: Limca was the largest selling brand, cola was the largest selling flavor .
In 1977 a change in government at a centre led to the exit of the Coca cola.
The first national cola drink to pop up was Double Seven.
In 1980 another cola drink, Thumps Up was launched by Parle .
Thrill by Mc Dowell's in mid eighties and by the late eighties there was Double cola .
The Indian soft drink industry was estimated to be 900 crores.
An additional dimension to the Indian soft drinks was fruit drinks
Pepsi in India
In 1985 a proposal with R.P. Goenka group was rejected by the then govt.
The proposal involved:
Export of fruit juice concentrates from Punjab in return for the import of cola concentrates.
The deal offered was 3:1 export import ratio.
Therefore second bid was widened to take in a food processing division.
Acceptance of the Pepsi Offer in India in 1990:
Export import ratio was finally fixed at 5:1
Cold drinks sale was fixed at 22.5% of total sales
Issue 1 : What were the elements of Indian market environment that Pepsi co. had to tackle? Elements of Micro Environment
2-Legal environment Severe restrictions in equity . To show the results without the soft drink component. Closed economy 3-Economic environment Cold drink industry was in nascent stage Foreign Exchange problem. Lack of adequate market for fruits cultivators
Issue-2-How were these elements managed ? MICRO ENVIRONMENT. Competitors Partners / Collaborations Suppliers Customers MACRO ENVIRONMENT. Political Legal Economic Technological Social
Food processing was included in second proposal
Assurance on meeting export regulations
Employment -500-direct and 30000-additional were assured
In the revised deal
Equity stakes were revised
PAIC 40% Voltas -24% ,Pepsi-35%
EXIM ratio fixed at 5%
Indulged in political lobbying
Ensured the active participation of Punjab government.
Assured availability of high end technology
Established collaborations for development of agriculture
Ensured Indianization through Indian version of Pepsi
Compliance with legal requirements Fighting out the cases inside as well as outside.
Issue-3-what is your learning about “managing the environment”? IDENTIFICATION APPRAISAL ANALYSIS
Flexibility –in changing offers . Operating on strength Brand name Soft drink. Going beyond requirement making it look like an initiative.
Issue-4-How do you see the emerging environment in the Indian soft drinks market ? Production Market Competition Promotion
Production Better & more efficient means of production Introduction of variety of flavours More choices available to the buyers in terms of prodcuts, brands & flovors
Market Growth in market size Spread of market of Pepsi Probable entry of Pepsi in fruit drinks
Competition Increase in the degree of competition Probable exit of Pure Drinks Consolidation of small players Incoming of more foreign players especially Coke
Promotion Exposure to new forms of strategies & techniques Increase in the budgetary allocation to advertisement & sales promotion More aggressive form of promotion to be observed in the market