Coke and Pepsi - Learn to Compete in India
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This document discusses Coke and Pepsi's strategies for competing in the Indian market. It provides background on India's political environment and laws regarding foreign investment. Pepsi entered India in 1986 while Coke entered in 1993. Both companies localized their products and promotions to suit Indian tastes. The document analyzes some mistakes made by Coke, such as entering at a time that required selling 49% equity to Indians and later trying unsuccessfully to avoid this. Overall, Pepsi is assessed as having better marketing and a larger market share positioning it for longer term success in India over Coke.
Coke and Pepsi - Learn to Compete in India
- 1. Coke and Pepsi Learn to Compete in India presented by: Parth singh-B25 Rohit anand-B34 Renu luthra-B31 Sahil wadhwa- B Pankaj luthra Ishank awasthi
- 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. Coke and Pepsi’s Glocalization (Global + local) Strategies
- 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.
- 15. 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
- 16. Coca-Cola also hired several famous “Bollywood” actors to endorse their products.
- 17. 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
- 18. 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
- 19. 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
- 20. 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
- 21. Coca-Cola’s Lesson’s Learned Pay specific attention to deals made with the government Establish a good business relationship with the government Investment in quality products Advertising is crucial