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COKE AND PEPSI LEARN TO COMPETE IN INDIA Prepared By- Dhwani Shah Megha Jagtap Parth Purohit Rohan Mehta Paras Charan Mochan Bhola

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Page 1: Coke and pepsi  presentation,

COKE AND PEPSI LEARN TO COMPETE IN INDIA

Prepared By-

Dhwani Shah Megha Jagtap Parth Purohit

Rohan Mehta Paras Charan Mochan Bhola

Page 2: Coke and pepsi  presentation,

Background of Beverage Industry in India

Coca-Cola’s past in India Present from 1958 until 1977

Industry Shakeup in 1988

State of the Industry in 1993 45% of market consisted of small manufacturers $3.2 million market share

Low Demand for Carbonated Drinks Average of 3 servings a year/person in 1989 Average of 1404 servings a year/person in U.S. in 2003

Page 3: Coke and pepsi  presentation,

Coco-cola and Pepsi Co enter the Indian market

Pepsi entered into the Indian beverage market in July 1986 as a joint venture with two local partners, Voltas and Punjab Agro, forming “Pepsi Foods Ltd.”

Coca-Cola followed suit in 1990 with a joint venture with Britannia Industries India before creating a 100% owned company in 1993 and then ultimately aligning with Parle, the leader in the industry.

As both companies would soon discover, “competing in India requires special knowledge, skills, and local expertise…what works here does not always work there.” (Cateora & Graham, 2008, p. 604).

In this article, I will analyze the primary obstacle to Pepsi and Coca-Cola’s success, discuss their strategies to cope with the issue, and ultimately propose my own suggestions to improvement.

Page 4: Coke and pepsi  presentation,

Fast Forward to the new Millennium

Seasonal Sales Promotions – the 2000 Navratri

Campaign- ‘Thums Up Toofani Ramjhat’, with 20000 free passes

issued, one per Thumps up bottle.

On-site activities, ‘buy one-get one free’ and lucky draw scheme like win the trip to Goa.

PepsiCo telecast ‘Navratri utsav 2000 at Mumbai’.

People enjoyed a mega offer of getting one kilo of basmati rice free with 300 ml bottle.

Page 5: Coke and pepsi  presentation,

Cont.

The 2002 Summer TV Campaign-

“keep it cool” the new slogan came up for the new category of 7UP.

Focused on objective on growing the category and building brand salience.

Page 6: Coke and pepsi  presentation,

Cont.

Pepsi’s Sponsorship of cricket and football-

Launching of new ad campaign featuring the batting sensation, Mohammad Kaif.

Spot light has been on Sachin Tendulkar and Amitabh Bachchan.

PepsiCo had capitalize team’s overall performance for world cup cricket held in South Africa.

Introduction of new product – ‘icy blue cola’, was marketed nationwide as Pepsi blue.

Page 7: Coke and pepsi  presentation,

Cont.

Coca-cola’s lifestyle advertising-

Used a strategy ‘building a connect using the relevant local

idioms’.

The campaign slogan was ‘ Thanda Matlab Coca-cola’, which

focused on the youth.

Coca cola’s specific marketing objectives for 2003 were to

grow the per capita consumption of soft drinks in rural

markets, and to capture a larger share in the urban market

from competition and increase the freq of consumption.

Page 8: Coke and pepsi  presentation,

A New Product Category

Several producers have launched their own brands in a

new category.

Coke brand Kinley was introduced in 2000.

Captured 28% market in 2002

Currently, 40% share is with Bisleri of parle, 11% of

Aquafina of Pepsi and other brands too.

Page 9: Coke and pepsi  presentation,

Coca Cola’s Attempt to “Crack” Indian Market

By 2002, hold 56% market in national soft drink market.

It recovered the losses upto 400 Cr. which was incurred

in 1993 (total Accumulated loss over 2000 Cr.)

49% of Holdings were ordered to sell to Indian Investors.

More over FIPB was changed and again Co. begin to

build new relations with bureaucrats.

Page 10: Coke and pepsi  presentation,

The Second Gulf War

During 2003, due to iraq war, an All-India Anti-

Imperialist Forum to boycott purchase of American and

British goods for “unjust war “.

Led to decrease 50% in southern States through ‘shop-to-

shop’ campaign

Page 11: Coke and pepsi  presentation,

Learning Some Hard Lessons

3 Years cost cutting programs bought dramatic results.

Local purchasing policies bought 57% savings in Import

duties.

By reinvigorated with an infusion of 3.5 Million spent on

A&D held Thumbs Up ranked 2nd Nation wide.

Page 12: Coke and pepsi  presentation,

Contamination Allegations And Water Usage

In a production of 3 Lac ltr of Soda drink a day uses 1.5

million ltr of water, enough to meet the requirement of

20,000 people

Content of Pesticides residue was found in 2003, leading

to close of plant, until corporation won a court ruling

allowing them to reopen.

Page 13: Coke and pepsi  presentation,

Answer- 1

India was a closed economy in the beginning. Policy banning imports. The Liberalization of India’s Government in 1991. New Industrial Policy. Strict policies regarding the entry of foreign brands. Trade rules & regulations simplified. Foreign investment increased. Pepsi enters in 1986. Coca-Cola follows in 1993.

Contd…

Page 14: Coke and pepsi  presentation,

Unlawful to market under their Western name in Indiao Pepsi became “Lehar Pepsi”.o Coca-Cola merged with Parle and became “Coca-Cola

India”.

Different Laws for Pepsi and Cokeo Coca-Cola agreed to sell off 49% of its stock as a

condition of entering and buying out an Indian company.

o Pepsi entered earlier, and was not subject to this.

Contd…

Page 15: Coke and pepsi  presentation,

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 which was denied.

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:o Past lobbying efforts made useless.

Contd…

Page 16: Coke and pepsi  presentation,

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.

Page 17: Coke and pepsi  presentation,

Answer-2

Page 18: Coke and pepsi  presentation,

Coca-Cola’s Pros & Cons of Timing of Entry in the Indian Market

Benefits Parle offered its bottling plants in 4 major cities. Made its return to India with Britannia Industries

India Ltd.

Disadvantages Rigid Rules and Regulations. Buying of bottling plants leads to 49% disinvestment. Local demand of carbonated drinks is as very low. Harder to establish themselves.

Page 19: Coke and pepsi  presentation,

Pepsi’s Pros & Cons of Timing of Entry in the Indian Market

Benefits Own set up green filled bottling plants. Advantage of coming before Coca Cola. Government policies favored the company. Joint venture with Volta's and Punjab Agro. Gained 26% share by 1993.

Disadvantages Pepsi approached Parle but it was rejected. Launched 7up and there is stiff competition in the

market for lemon drinks.

Page 20: Coke and pepsi  presentation,

Answer-3Responses to India’s Enormity

Pepsi and coca-cola responded in many ways to the enormity of India in

terms of it population and geography.

Conti ..

Page 21: Coke and pepsi  presentation,

Cont..

• 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

Conti ..

Page 22: Coke and pepsi  presentation,

Cont..

• Promotional Activities:– Both advertise and use

promotional material at Navratri.• 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

Page 23: Coke and pepsi  presentation,

Cont…

•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 2003Attempt to encourage consumption to try to

compete with Pepsi and gain market share

Page 24: Coke and pepsi  presentation,

Contd ..

•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

Page 25: Coke and pepsi  presentation,

Answer-4Coke and Pepsi’s “Glocalization Strategies”

What is “Glocalization”? Global + Localization = Glocalization

By taking a product global, a firm will have more success if they adapt it specifically to the location and culture that they are trying to market it in.

Both companies have successfully implemented glocalization

Page 26: Coke and pepsi  presentation,

Pepsi’s Glocalization

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.

Page 27: Coke and pepsi  presentation,

Pepsi’s Glocalization

Advertising is done during the cultural festival of Navrtri , a traditional festival held in the town of Gujarat which lasts for nine days.

•Pepsi’s most effective glocalization strategy has been sponsoring world famous Indian athletes, such as cricket and soccer players.

Page 28: Coke and pepsi  presentation,

Coca-Cola’s Glocalization

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 Navratri, Coca-Cola issued free passes to the celebration in each of its “Thumps Up” bottles.

Also ran special promotions where people could win free vacations to Goa, a resort state in western India.

Page 29: Coke and pepsi  presentation,

Coca-Cola’s Glocalization

Coca-Cola also hired several famous “Bollywood” actors to endorse their products.

Who could forget…

Page 30: Coke and pepsi  presentation,

Answer-5

Yes, we agree that Coca-Cola India made mistakes in planning and managing its return to India.

They wrongly forecasted Indian political environment due to which they had to dilute their stakes later (49% disinvestment).

They rejected the plan to put up green fields bottling plants as they took over Parle’s existing bottling plants.

Coca cola tried to get extensions twice.

Page 31: Coke and pepsi  presentation,

Answer -6

Pepsi and Coke can confront the issue of water use in

the manufacturing of their products by the use of

canal irrigation & rainwater harvesting.

Then they can also put water recycling plant to treat

the discharged water from their factories and then

they can provide that water to farmers for their

agricultural use. This way the ground water problem

can also be solved and managed.

Page 32: Coke and pepsi  presentation,

Cont..

Coke can further defuse boycotts or demonstrations against their products in California by doing Ad-campaigns in which they can ask the experts from the ministry of health to convey the message to the public that their products are safe and healthy.

They can also hire celebrities to do the Ads for their products because the public follows them.

Coke should address the group directly because their company was not wrong and they should justify themselves.

Page 33: Coke and pepsi  presentation,

• Pepsi– Better marketing and advertising strategies– Widely accepted– More preferable– More market share– Less Political conflicts

• Coke– Government conflicts– Trailing Pepsi in market share

Pepsi will fare better in the long run

Answer-7

Page 34: Coke and pepsi  presentation,

Answer-8Pepsi’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

Page 35: Coke and pepsi  presentation,

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

Page 36: Coke and pepsi  presentation,
Page 37: Coke and pepsi  presentation,