Coke and Pepsi - Learn to Compete in India


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Coke and Pepsi - Learn to Compete in India

  1. 1. Coke and PepsiLearn to Compete in Indiapresented by:Parth singh-B25Rohit anand-B34Renu luthra-B31Sahil wadhwa- BPankaj luthraIshank awasthi
  2. 2. Political Environment in IndiaKey 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
  3. 3. 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
  4. 4. 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
  5. 5. Could these problems have been forecasted prior to market entry? ◦ Probably not  Inconsistent, and changing governmentHow 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
  6. 6. 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
  7. 7. 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
  8. 8. Responses to India’s EnormityProduct 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
  9. 9. 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
  10. 10. 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
  11. 11. 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
  12. 12. Coke and Pepsi’s Glocalization(Global + local) Strategies
  13. 13. PepsiPepsi 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.
  14. 14. Coca-ColaFirst 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 1993For the festival of Navrartri, Coca-Cola issued free passes to the celebration in each of its “Thums Up” bottlesAlso ran special promotions where people could win free vacations to Goa, a resort state in western India
  15. 15. Coca-Cola also hired several famous “Bollywood” actors to endorse their products.
  16. 16. Coca-Cola India’s MistakesEnters 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 yearsCoca-Cola tried to get extensions…twice ◦ India granted the first extension, denied the secondCoca-Cola India tried to deny the upcoming Indian shareholders voting rights ◦ Foreign Investment Promotion Board (FIPB) Denies This
  17. 17. 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
  18. 18. Coke or Pepsi in the Long Run?Pepsi ◦ Better marketing and advertising strategies ◦ More widely accepted ◦ More market shareCoke ◦ Government conflicts ◦ Trailing Pepsi in market sharePepsi will fare better in the long run
  19. 19. Pepsi’s Lessons LearnedBeneficial to keep with local tastesBeneficial to pay attention to market trendsCelebrity appeal makes for exceptional advertisingIt pays to keep up with emerging trends in the market
  20. 20. Coca-Cola’s Lesson’sLearnedPay specific attention to deals made with the governmentEstablish a good business relationship with the governmentInvestment in quality productsAdvertising is crucial