Entry Of Pepsi In India


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A study of Pepsi\'s successful entry in India inspite of adverse conditions.

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Entry Of Pepsi In India

  1. 1. A study, by- Renuka Narang ITM
  2. 2. - George Fernandes, General Secretary , Janata Dal Year 1988 “ I learned that you are coming here. I am the one that threw Coca-Cola out, and we are soon going to come back into the government. If you come into the country, you have to remember that the same fate awaits for you as Coca-Cola”
  3. 3. <ul><li>The thirst for global presence made Pepsi to venture in India with already inroads in 150 countries before India. </li></ul><ul><li>The huge consumer base of 850 million in India can never be ignored, in spite of all the odds </li></ul><ul><li>Due to the fate of Coke in India the market entry had to be prepared carefully. </li></ul>
  4. 4. <ul><li>Political environment </li></ul><ul><ul><ul><li>Intent of development of local players only </li></ul></ul></ul><ul><ul><ul><li>Opposition to promotion of carbonated drinks </li></ul></ul></ul><ul><ul><ul><li>Fear of invasion of foreign brand </li></ul></ul></ul><ul><li>Legal environment </li></ul><ul><ul><ul><li>Severe restrictions in equity through FERA </li></ul></ul></ul><ul><ul><ul><li>Dispute in relation to ownership of Pepsi brand name( foreign name not allowed) </li></ul></ul></ul><ul><li>Economic environment </li></ul><ul><ul><ul><li>Closed and Forex starved economy </li></ul></ul></ul><ul><ul><ul><li>Cold drink industry in nascent stage </li></ul></ul></ul><ul><li>Socio cultural environment </li></ul><ul><ul><ul><li>Fear of invasion of MNC culture </li></ul></ul></ul><ul><ul><ul><li>Fear of impact on Health/diet </li></ul></ul></ul>
  5. 5. <ul><li>PepsiCo teamed up with Agro Product Export Ltd., a company owned by R. P. Goenka. </li></ul><ul><li>Objectives put forward to sought permission from the central government </li></ul><ul><ul><ul><li>to promote the development and export of Indian made and agro-based product </li></ul></ul></ul><ul><ul><ul><li>to import cola concentrate and to sell a PepsiCo brand soft drink in the Indian market </li></ul></ul></ul><ul><li>But the Proposal rejected on the grounds that the import of concentrate could not be agreed to and the use of foreign brand names was not allowed </li></ul>
  6. 6. <ul><li>Proposal: </li></ul><ul><ul><li>'Green Revolution' in Punjab which would end stagnation in Punjab's rural sector and would help in promoting small and middle farmers. </li></ul></ul><ul><li>Argument: </li></ul><ul><ul><li>This project will create ample employment opportunities for the unemployed youth who has taken the path of terrorism and thereby will help in restoration of peace in Punjab </li></ul></ul><ul><li>Outcome: </li></ul><ul><ul><li>Argument very well received in the political circles in Delhi and Punjab which finally led to PepsiCo's* entry into India in the form of a joint venture with PAIC* and Voltas* as its partners </li></ul></ul>
  7. 7. <ul><li>Punjab boasted a healthy agricultural sector with good crop record in past. </li></ul><ul><li>Punjab being progressive state with larger landside with farmers </li></ul><ul><li>Easy water availability </li></ul><ul><li>High unemployment rate </li></ul>
  8. 8. <ul><li>The project will create employment for 50000 people nationally, including 25000 jobs in Punjab alone; </li></ul><ul><li>74 percent of the total investment will be in food and agro- processing. Manufacturing of soft drinks will be limited to only 25 percent; </li></ul><ul><li>PepsiCo will bring advanced technology in food processing and provide thrust by marketing Indian products abroad; </li></ul><ul><li>State of the art technology would be provided in the fields of food processing and soft drink manufacturing at no foreign exchange outflow; </li></ul><ul><li>50 percent of the total value of production will be exported; </li></ul>
  9. 9. <ul><li>An agro-research centre will be established by PepsiCo in consultation with ICAR and PAU; </li></ul><ul><li>No foreign brand name will be used for domestic sales; </li></ul><ul><li>The export-import ratio will be 5:1 over 10 years, which means that for every dollar spends in foreign exchange on this project, the company will ensure an export earning of 5 dollars for 10 years; </li></ul><ul><li>25 percent of the total fruits and vegetable crops in Punjab will be processed in the project; </li></ul><ul><li>A substantial increase in government revenue due to consumer market expansion and tax collection. </li></ul>
  10. 10. <ul><li>Commitments: Nothing official about it </li></ul><ul><li>Evidence showed that right from the beginning, Pepsi had no intention of diversification in Punjab but the real motive was to sell soft drinks. </li></ul><ul><li>It was a tactics played by PepsiCo to get entry in the domestic market of India </li></ul><ul><li>Thus, Pepsi with its strong market instinct and research become the powerful player of Indian beverages and soft drink industry with implying their funda of GLOCALISATION. </li></ul><ul><li> GLOBAL + LOCALISATION = GLOCALISATION </li></ul>
  11. 11. <ul><li>Fruit and vegetable plant set up in Punjab </li></ul><ul><ul><ul><li>Focus: Processing tomatoes to make tomato paste </li></ul></ul></ul><ul><li>Soft drink business launched. </li></ul><ul><li>Promised 24000 jobs, actual 909 in first four years </li></ul><ul><li>Research Center still waiting </li></ul><ul><li>Export target of 50% met by exporting a variety of Indian products like 'Basmati' rice, Darjeeling tea, glass bottles and even leather products </li></ul><ul><li>Pepsi no longer a joint venture company with its Indian partners. </li></ul><ul><li>Zahura Village formers still awaiting their compensation of 25 lacs </li></ul>
  12. 12. <ul><li>Product </li></ul><ul><li>Price </li></ul><ul><li>Place </li></ul><ul><li>Promotion </li></ul><ul><li>Politics </li></ul><ul><li>Public Image </li></ul>