Transcript of "Coke and Pepsi - Learn to Compete in India"
Coke and PepsiLearn to Compete in Indiapresented by:Parth singh-B25Rohit anand-B34Renu luthra-B31Sahil wadhwa- BPankaj luthraIshank awasthi
Political Environment in IndiaKey Issues ◦ India seen as unfriendly to foreign investors for many years ◦ The “Principle of Indigenous Availability” Policy banning imports being sold in India ◦ The Liberalization of India’s Government in 1991 “New Industrial Policy” Trade rules & regulations simplified Foreign investment increased ◦ Pepsi enters in 1986 ◦ Coca-Cola follows in 1993
Indian Laws ◦ Unlawful to market under their Western name in India Pepsi became “Lehar Pepsi” Coca-Cola merged with Parle and became “Coca- Cola India” ◦ Different Laws for Pepsi and Coke Coca-Cola agreed to sell off 49% of its stock as a condition of entering and buying out an Indian company Pepsi entered earlier, and was not subject to this
Problems ◦ India forced Coke to sell 49% of its equity to Indian investors in 2002 ◦ Coke asked for a second extension that would delay it until 2007 India denied this ◦ Pepsi was held to this since they entered India in a different year. ◦ Coke asked the Foreign Investment Promotion Board to block the votes of the Indian shareholders who would control 49% of Coke ◦ Change in oversight of the FIPB Past lobbying efforts made useless
Could these problems have been forecasted prior to market entry? ◦ Probably not Inconsistent, and changing governmentHow could these developments in the political arena have been handled differently? ◦ Coke could of agreed to start new bottling plants instead of buying out Parle, and thus wouldn’t of had to agree to sell 49% of their equity
Timing of Market Entry Pepsi (early entry-1986) ◦ Advantages Entered the market Before Coca-Cola and was able to gain a foothold in the market while it was still developing Gained 26% market share by 1993 ◦ Disadvantages Were forced to change their name to Lehar Pepsi Govt. limited their soft drink sales to less than 25% of total sales Struggled to fight off local competition
Coca-Cola (late entry-1993) ◦ Advantages Were able to buy 4 bottling plants from industry leader Parle Also bought Parle’s leading brands: Thums Up, Limca, Citra, Gold Spot and Mazaa Set up 2 new ventures with Parle to bottle and market product ◦ Disadvantages Denied entry until 1993 because Pepsi was already there Harder to establish market share with Pepsi there Were not allowed to buy back 49% of equity
Responses to India’s EnormityProduct Policies ◦ Catering to Indian tastes Entering with products close to those already available in India such as colas, fruit drinks, carbonated waters ◦ Waiting to introduce American type drinks Coca-Cola introducing Sprite recently ◦ Introducing new products Bottled water
Promotional Activities ◦ Both advertise and use promotional material at Navrartri Pepsi gives away premium rice and candy with Pepsi Coca-Cola offers free passes, Coke giveaways as well as vacations ◦ Use of different campaigns for different areas of India “India A” campaigns try to appeal to young urbanites “India B” campaigns try to appeal to rural areas
Pricing Policies ◦ Pepsi started out with an aggressive pricing policy to try to get immediate market share from Indian competitors ◦ Coca-Cola cut its prices by 15-25% in 2003 Attempt to encourage consumption to try to compete with Pepsi and gain market share
Distribution Arrangements ◦ Production plants and bottling centers placed in large cities all around India ◦ More added as demand grew and as new products were added
Coke and Pepsi’s Glocalization(Global + local) Strategies
PepsiPepsi forms joint venture when first entering India with two local partners, Voltas and Punjab Agro, forming “Pepsi Foods Ltd”.In 1990, Pepsi Foods Ltd. changed the name of their product to “Lehar Pepsi” to conform with foreign collaboration rules.In keeping with local tastes, Pepsi launched its Lehar 7UP in the clear lemon category.
Coca-ColaFirst joined forces with the local snack food producer Britannia Industries India Ltd. in the early 90’s.Formed a joint venture with the market leader Parle in 1993For the festival of Navrartri, Coca-Cola issued free passes to the celebration in each of its “Thums Up” bottlesAlso ran special promotions where people could win free vacations to Goa, a resort state in western India
Coca-Cola also hired several famous “Bollywood” actors to endorse their products.
Coca-Cola India’s MistakesEnters Market at the Wrong Time ◦ By entering at this time, Coca-Cola India agreed to abide by 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 yearsCoca-Cola tried to get extensions…twice ◦ India granted the first extension, denied the secondCoca-Cola India tried to deny the upcoming Indian shareholders voting rights ◦ Foreign Investment Promotion Board (FIPB) Denies This
1st Mistake ◦ Coca-Cola should have been more careful of when they entered the market and what they were promising when they entered.2nd Mistake ◦ Coca-Cola should not have tried to weasel their way out of promises that they made.These mistakes hurt Coca-Cola’s image and reputation as an International Company
Coke or Pepsi in the Long Run?Pepsi ◦ Better marketing and advertising strategies ◦ More widely accepted ◦ More market shareCoke ◦ Government conflicts ◦ Trailing Pepsi in market sharePepsi will fare better in the long run
Pepsi’s Lessons LearnedBeneficial to keep with local tastesBeneficial to pay attention to market trendsCelebrity appeal makes for exceptional advertisingIt pays to keep up with emerging trends in the market
Coca-Cola’s Lesson’sLearnedPay specific attention to deals made with the governmentEstablish a good business relationship with the governmentInvestment in quality productsAdvertising is crucial