Pepsi struggled to enter the highly regulated Indian market in the late 1980s. To gain approval, Pepsi promised to invest in rural development in Punjab and create many jobs. It also pledged to export half of its production and establish an agro-research center. After establishing operations, Pepsi did not fulfill many of its commitments. However, economic liberalization in the 1990s benefited Pepsi as it expanded its beverage business in India on its own terms through contract farming and acquisitions. While criticisms remain over unfulfilled promises, Pepsi has established a strong presence in India's growing consumer market.

1. CASE - PEPSI’S ENTRY
INTO INDIA
PRESENTED TO – PRESENTED BY-
DR. MURLIDHAR PANGA SIR MUSKAN RAHEJA
YASHI PACHAURI

2. ABSTRACT
 The case discusses the strategies adopted by the soft drinks and snack foods major PepsiCo to
enter India in the late 1980s.
 To enter the highly regulated Indian economy, the company had to struggle hard to 'sell' itself to
the Indian government.
 PepsiCo promised to work towards uplifting the rural economy of the terrorism affected north
Indian state of Punjab by getting involved in agricultural activities.
 In addition, it made a host of other promises that made its proposal very attractive to the
regulatory authorities.
 The case also discusses the criticisms levelled against the company, in particular, criticism of its
failure to honour many of its commitments after it started operations in the country and after the
liberalization of the Indian economy.
 Finally, the case takes a look at the contract farming initiatives undertaken by Pepsi since the
1990s and seeks to critically analyze the strategies used by the company to enter India.

3. PEPSI: Pull towards lucrative Indian market
 The thirst for global presence made Pepsi to venture in India with already inroads
in 150 countries before India.
 The huge consumer base of 850 million in India can never be ignored, in spite of
all the odds.
 Due to the fate of Coke in India the market entry had to be prepared carefully.

4. ISSUES TO CONSIDER
Political environment
 Intent of development of local players only
 Opposition to promotion of carbonated drinks
 Fear of invasion of foreign brand
 Desire to get best deal out of foreign collaboration.
 Desire to earn foreign exchange.
Legal environment
 Severe restrictions in equity through FERA
 Dispute in relation to ownership of Pepsi brand name( foreign name not allowed)

5. Economic environment
 Closed economy
 Cold drink industry in nascent stage
 FOREX starved economy
 Lack of adequate market for fruits cultivators
Socio-cultural environment
 Fear of invasion of MNC culture
 Fear of impact on diet

6. Pre-Establishment - (First attempt)
 PepsiCo teamed up with Agro Product Export Ltd., a company owned by R. P. Goenka in
May 1985.
 Objectives put forward to sought permission from the central government:
1. to promote the development and export of Indian made and agro-based product
2. to import cola concentrate and to sell a PepsiCo brand soft drink in the Indian market
 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

7. The ‘Punjab card’- (second attempt)
The second attempt focuses on diversification of Punjab agriculture and employment generation
rather than soft drinks –May 1986
 Proposal:
'Green Revolution' in Punjab which would end stagnation in Punjab's rural sector and would
help in promoting small and middle farmers.
 Argument:
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.
 Outcome:
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.

8. Bundle of promises leading to Establishment
of PEPSI in India
Impressive terms and conditions that helped get clearance from Indian government to get an
entry in India –September 1988
 The project will create employment for 50000 people nationally, including 25000 jobs in
Punjab alone;
 74 percent of the total investment will be in food and agro- processing. Manufacturing of soft
drinks will be limited to only 25 percent;
 PepsiCo will bring advanced technology in food processing and provide thrust by marketing
Indian products abroad;
 State of the art technology would be provided in the fields of food processing and soft drink
manufacturing at no foreign exchange outflow;
 50 percent of the total value of production will be exported;

9.  An agro-research centre will be established by PepsiCo in consultation with ICAR
and PAU;
 No foreign brand name will be used for domestic sales;
 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;
 25 percent of the total fruits and vegetable crops in Punjab will be processed in
the project;
 A substantial increase in government revenue due to consumer market expansion
and tax collection.

10. POST-ESTABLISHMENT
 Commitments: Nothing official about it
 Evidence showed that right from the beginning, Pepsi had no intention of diversification
in Punjab, but the real motive was to sell soft drinks.
 It was a tactics played by PepsiCo to get entry in the domestic market of India
 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.
 GLOBAL + LOCALISATION = GLOCALISATION

11. Pepsi’s Promises: Keep some, break more
 Fruit and vegetable plant set up at Zahura village in Punjab
Focus: Processing tomatoes to make tomato paste
 Promised 24000 jobs, actual 909 in first four years
 Export target of 50% met by exporting a variety of Indian products like 'Basmati' rice,
Darjeeling tea, glass bottles and even leather products
 Pepsi no longer a joint venture company with its Indian partners.
 On payments by cheque, found out that 80% of the farmers did not even have a bank
account.
 Research centers still waiting.
 Industry Committed company included the small vendors who sold soft drinks as indirect
employees. It could not be regarded as the employees of Pepsi
 Information revealed that more than 50% employees working in its bottling business and
not for food processing activities.

12. Pepsi :6 P’s
A wonder marketing strategy
 Product
 Price
 Place
 Promotion
 Politics
 Public Image

13. India Liberalizes - A Boon For Pepsi
 In the early 1990s, the Government of India was facing a foreign exchange crisis.
 The Process included: removal of numerous restriction on foreign trade and increased the
role of Private Equity in Indian market
 The Company took full Advantage of New Economic Policy.
 Bought off its partners in Joint Venture. A Wholly- Owned subsidiary.
 PepsiCo Holdings India Pvt. Ltd. (PHI) – Devoted Soft Drinks Business. Changed Cola
Name from Lehar Pepsi to Pepsi.
 Decision to sell off its Tomato Paste Plant to the Indian FMCG major, Hindustan Lever
Ltd. (HLL).
 1995 – Beverages business grew by as much as 50% ;1996 – PHI – Pepsis turnover by Rs.
1.25 Billion, 1.5% Fruit & Vegetable Exports & 67% Plastic Exports;1997 – The Agro
Research Center promised by the Company was nowhere in sight.

14. Doing Business on its own terms…
 In 2000 Pepsi’s export added up to Rs. 3bn.
 It included processed foods, basmati rice, guar gums and even soft drink concentrate.
 Even by 2000 it could procure only 3,000 tonnes of potatoes p.a. as against its requirement of
25,000 tonnes.
 In 2002, company entered various contract farming deals.
 It joined hands with Punjab Agri Export Corporation to process citrus fruits for its Tropicana
project in August 2002.
 The company also initiated, first of its kind, organized and commercial seaweed farming in
Tamil nadu.
 By 2003, Pepsi’s soft drinks, snacks, fruit juices and mineral water business had established
themselves firmly in India.

15. THANK-YOU