Transcript of "Coke and Pepsi - Case Study in the Indian Business Environment "

1. BUSINESS PROJECT Yashaswini Agarwal 2013

2. CONTENTS 1 Acknowledgement and Preface 2 Introduction 3 CoCa-Cola and
Pepsi Co. 4 Entry and Exit of Coca Cola in India 5 Campa Cola and Thumps Up
come in existence 6 Entry of Pepsi 7 Re entry of Coca-Cola 8 Pepsi and Coke
Pesticide Controversy 9 Result 10 Leading brands in Indian Market 11
Bibliography
3. INTRODUCTION In the modern urban culture consumption of soft drinks
particularly among younger generation has become very popular. Soft drinks in
various flavors and tastes are widely patronized by urban population at various
occasions like dinner parties, marriages, social get together; birthday celebration
etc. Children of all ages are especially attracted by the mere mention of the word
soft drinks. The so-called competition for this product in the market is different
from other products. Mass media, particularly television, has contributed to a
large extent to the ever growing demand for soft drinks. The attractive jingles
and sports make the large audience remember the brand at all times. In todays
highly competitive market place, two players have dominated the industry; The
New York based Pepsi Company Inc. and the Atlanta based Coca- Cola.
Throughout the globe, these major players have been battling it out for a bigger
chunk of the ever growing soft drink market. This battle has been witnessed in
India too, between these two giants.
4. COCA COLA It was invented in May, 1886 by Dr. John .S. Pemberton in
Atlanta, Georgia, United States of America. Coca Cola offers a portfolio of world
class quality sparkling and still beverages, starting from Coca Cola to over 400
soft drinks, juices, teas, water and energy drinks. The most successful brands are
Coca Cola, Diet Coke, Sprite and Fanta. With operations over 200 countries it
has a workforce of 55,000 employees and serves over 1.7 billion servings each
day. PEPSI Pepsi was first developed by Caleb Bradham, a pharmacist and
industrialist from New Bern, North Carolina, in 1898. As the cola progressed in
popularity, he created the Pepsi-Cola Company in 1902 and registered a patent
for his recipe in 1903. The Pepsi-Cola Company was first incorporated in the state
of Delaware in 1919. Currently, PepsiCo is one the largest companies in the U.S.
It figures amongst the largest 15 companies worldwide according to the number
of employees hired. It has a U.S. Fortune rank of 50. Pepsi is bottled in nearly 190
countries. PepsiCo is a world leader in snacks, foods and beverages with
revenues of more than $43 billion. It consists of many companies amongst which
the prominent once are Pepsi-Cola, Frito-Lay and Pepsi Food International. The
group is presently into two of the most profitable and growing industries namely,
beverages and snack foods. It has scores of big brands available in nearly 150
countries across the globe.
5. ENTRY AND EXIT IN INDIA COCACOLA Coca Cola entered India in 1967. In
1977, the Janata government led by Moraji Desai came to power and launched
the Sixth Five-Year Plan, which aimed to boost the agricultural production and
rural industries. Seeking to promote economic self-reliance and indigenous

industries, the government wanted multi-national corporations to go into

partnership with Indian corporations. At that time Coca-Cola was India's leading
soft drink when the new government ordered the company to dilute at least 60%
of its stake in its Indian unit as required by the Foreign Exchange Regulation Act
(FERA) of 1973 and also turn over its secret formula for Coca-Cola. The policy
proved controversial, diminishing foreign investment and led to the exit of highprofile corporations such as Coca-Cola and IBM from India.
6. CAMPA COLA AND THUMPS UP COMES IN EXISTENCE After Coca Cola left the
Indian market due to problems with Indian Government, the Indian Government
decided to start a local brand to meet the demand for soft drinks in the country.
Pure drinks group was started by Padma Sri late Sardar Mohan Singh in 1942,
and in 1950 they started bottling Coca- Cola across India. In 1978, when Coca
Cola left India, they started bottling their own brand Campa Cola. Thums Up
was introduced in 1977 to offset the expulsion of The Coca-Cola Company from
India. The Parle brothers, Ramesh Chauhan and Prakash Chauhan, along with
Bhanu Vakil, launched Thums Up as their flagship drink, adding to their portfolio
of older brands Limca (lime flavour) and Gold Spot (orange flavour). Thums Up
enjoyed a near monopoly with a much stronger market share, often
overshadowing domestic rivals like Campa Cola, Double Seven, Dukes and
United Breweries Group's McDowell's Crush. According to statistics Parles Thums
Up market share kept increasing since 1983 (43%) to 1990 (70%), while its chief
rivals share had been declining.
7. ENTRY OF PEPSI Pepsico saw the opportunity to enter the Indian market after
Coca- Cola departed. In their first attempt in 1985, Pepsico tried to join hands
with one of Indias leading business house, the R P Goenka group, to begin
operations in the country. They put forward a deal to promote the development
and export of Indian agro- based products, and in turn get permission from
central government to import cola concentrate and to sell a Pepsico brand. This
request was rejected on the grounds that the import of concentrate could not be
agreed to and the use of foreign names were not allowed. In their second
attempt in 1988, Pepsico put forward a very impressive offer. They promised to
create employment opportunities for about 50,000, make 75% of the total
investments in food and agro processing, bring advanced technology and 50% of
total produce to be exported. PepsiCo gained entry to India in 1988 by creating a
joint venture with the Punjab government-owned Punjab Agro Industrial
Corporation (PAIC) and Voltas India Limited. This joint venture marketed and sold
Lehar Pepsi until 1991, when the use of foreign brands was allowed; PepsiCo
bought out its partners and ended the joint venture in 1994.
8. RE ENRTY OF COCA COLA The Coca-Cola Company re-entered India through its
wholly owned subsidiary, Coca-Cola India Private Limited and re-launched CocaCola in 1993 after the opening up of the Indian economy to foreign investments
in 1991. However, Coke's reentry was based upon several commitments and
stipulations which the company agreed to implement in due course. One such
major commitment was that Hindustan Coca-Cola Holdings would divest 49 per
cent of its shareholding in favor of resident shareholders by June, 2002. As the

company had returned to India after a gap of 16 years, many local brands had
emerged till then. It acquired ownership in the Parle Group which gave the
company instant ownership to the popular brands likes Thumps Up, Goldspot,
Limca and Mazza. The deal not only gave manufacturing, bottling, and
distribution assets to Coke but also a strong consumer preference. Jayadev Raja
was made the first Chief Executing Officer of Coca Cola India. Access to 53 of
Parles plants and a well set bottling network, gave Coca Cola Company an
excellent base for rapid introduction of the companys international brands.
9. PEPSI AND COKE-PESTICIDE CONTROVERSY-2003 - 2006 The 2 international
brands Pepsi and Coca Cola faced a new challenge when the local governments
placed a ban on their products following a report by an environmental group
claiming the sodas contained high levels of pesticide. On August 5, 2003, The
Centre for Science and the Environment (CSE) issued a news release which
stated that The soft drinks brands sold contain a deadly cocktail of pesticides
residue. The CSE, a New Delhi based research and advocacy group that aims for
sustainable growth, based its accusations on tests conducted by the Pollution
Monitoring Laboratory in April, 2003. During the tests, pesticide residue was 24
times above limits set by the Bureau of Indian Standards in 57 samples tested. In
one bottle of Coca-Cola bought in Calcutta, the level of the carcinogenic
pesticide Lindane exceeded the bureaus standards by 140 times. The pesticides
Lindane, DDT, Malathion and chlorpyrifos are responsible for cancer, damage to
the nervous system and reproductive system, birth defects, and severe
disruption of immune system. Coca Cola India president and CEO Sanjiv Gupta
argued against the allegations of CSE and questioned their testing method. This
dispute had stoked a fresh media maelstrom and had fanned protests across
several regions.
10. The state of Gujarat and Madhya Pradesh, had banned the sale of the soft
drinks in schools and government offices. Similar bans were announced by state
governments in the northern states of Rajasthan and Punjab a week before
Lawmakers from the opposition Bharatiya Janata Party called for a nationwide
ban. Protesters in Mumbai and Kolkata defaced Pepsi and Coke ads and burned
placards depicting soda bottles. Public had gone furious and protest for Coke and
Pepsi to leave India had begun. Soon, sales dropped by 30 40%. Both Coke and
Pepsi published newspaper advertisements to spread message that pesticide
levels in their products are below permissible levels and less than those detected
in other foods, such as tea, fruits and dairy products.
11. RESULT Repeated tests were conducted and on August 21, 2003, the then
Minister of Health and Family Welfare, Sushma Swaraj announced that the
samples did not contain unsafe levels of pesticides. The Joint Parliamentary
Committee (JPC) investigating pesticide contamination in soft drinks and
beverages tabled its final report in Parliament in 2004, corroborating the findings
of the Centre for Science & Environment (CSE) that leading Coca-Cola and Pepsi
brands contained hazardous pesticides. The efforts of the Government of India
have led to the establishment of stricter norms that are on par with the best in
the world. 2 years later, Coca Cola hiked prices in India by 10-15 percent. The

reason given was price increases to cover rising raw material and distribution
costs and the lingering effects of the pesticide allegations which drove decline in
sales.
12. LEADING BRAND IN INDIAN SOFT DRINKS MARKET GOLD SPOT: This orange
colored carbonated soft drink was introduced in the early 1950s, and acquired by
the Coca-Cola company in 1993. Its tangy taste has been popular with Indian
teenagers. LIMCA: This thirst-quenching beverage features a fresh and light
lemon-lime taste. The Limca brand was introduced in 1971 and acquired by the
Coca-Cola company in 1993. MAAZA: Maaza, launched in 1984 and acquired by
the coca-cola company in 1993, is a non carbonated mango soft drink with a rich,
juice & natural mango taste. THUMPS UP: In 1993, the Coca-Cola company
acquired this brand, which was originally introduced in 1977. Its strong and fizzy
taste makes it unique carbonated Indian cola. As of February 2012, Thums Up is
the leader in the cola segment in India, commanding approximately 42% market
share and an overall 15% market share in the Indian aerated waters market.
APPY FIZZ It is a product by Parle Agro, introduced in India in 2005. Appy Fizz
consists of carbonated apple juice, and is used as the basis for cocktails and is a
popular drink. After the success of Appy which was clean apple juice, Parle
launched its sequel product as Grappo Fizz, which is a carbonated grape juice.
RASNA - Rasna is a soft drink concentrate brand owned by Pioma Industries
which is based in Ahmedabad, India. It was launched in mid-seventies but started
gaining popularity in the eighties when the market was dominated by carbonated
soft drinks like Thums up, Gold Spot and Limca. As of 2009, Rasna had a 93%
market share in the soft drink concentrate market in India.
13. According to 2012 reports, Sprite has a market share of 14 per cent while
Thums Up has a 15 per cent share. Following the two Coca Cola brands, Sprite
and Thums Up, is Pepsi, which has a 11.2 per cent market share. Sprite is also
the largest selling sparkling (carbonated) soft drink brand in China as well,
according to news reports. Brand Coke itself follows Pepsi with a 7.5 per cent
share. Several other brands such as Fanta and Mirinda with a similar share of the
market as Coke jostle for the fourth place in terms of share. Sprite, launched its
new summer campaign with a tagline of chalo apni chaal in summer 2012. It
continued with its campaign which targets the Indian youth.
14. CONCLUSION There are still a lot of issues that Coke and Pepsi need to
resolve when it comes to their image abroad and in India. They both still
represent the west, but they need to become better adapted to the different
environments they decide to become part of. They need to not just be able to
market their product efficiently; they need to show some responsibility when
things start to go sour for them. The Indian people continue to steadily buy and
consume soft drinks. However, Indians in general are consuming a wider variety
of beverages and Coke and Pepsi should be willing to expand the options. They
already have some fruit sodas, and some bottled water markets, but potential for
introducing fruit cocktails and other beverages do exist in the market. Coke and
Pepsi still continue to align themselves with brands, celebrities, sports, and
lifestyles that the Indians find appealing. Both the companies need to

continuously check on their products to make sure they are safe, and continue to
be environmentally and morally sound with their plants, operations, distribution,
and products in general.