1) Key issues

Despite its huge population, India had seen as unfriendly to foreign investors
for many years. In addition to the deterrents imposed by the government
through its strict trade policies, rules, and regulations, local demand for
carbonated drinks in India was very low compared with countries at a similar
stage of economic development. The Principle of Indigenous Availability
which is the policy banning imports being sold in India if an item could be
obtained anywhere else within the country. The liberalization of Indias
government in 1991, in which after the depression new government rolled
out new Industrial policy, trade rules & regulations simplified, and foreign
investment increased. To take the early bird advantage Pepsi entered in 1986
followed by Coca-Cola in 1993. In addition to the political conditions, there
are legal sanctions imposed on the foreign companies such as its unlawful to
market under their western name in India. Pepsi Became Lehar Pepsi and
Coca-Cola merged with Parle and became Coca-Cola India. Different laws
imposed 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 and Pepsi entered
earlier so was not subject to this condition.
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 and the Indian
government denied it. 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 that made past lobbying efforts useless.
These problems probably not had been forecasted prior to market entry.
These companies had entered the market knowing stringent government
policies but they did not forecast the inconsistent and changing government.
Coke could have agreed to start new bottling plants instead of buying out
Parle, and thus wouldnt have agreed to sell 49% of their equity.
2) Pepsi entered early in Indian market in 1986 which has its own advantages
and disadvantages.
Advantages:
Entered the market before Coca-Cola and was able to gain a foothold in
the market while it was still developing.
It gained 26% market share by 1993
Disadvantages:
o

Pepsi forced to change their name to Lehar Pepsi

o
o

Government limited their soft drink sales to less than 25% of total
sales
Struggled to fight off local competition

Coca-Cola entered late in Indian market in 1993 which has its own
advantages and disadvantages.
Advantages:

Coke were able to buy 4 bottling plants from industry leader Parle
They also bought Parles leading brands: Thums Up, Limca, Citra, Gold
Spot and Mazaa
Set up 2 new ventures with Parle to bottle and market product.

Disadvantages:

Denied early until 1993 because Pepsi was already there

Its harder to establish market share with Pepsi already had substantial
market
They were not allowed to buy back 49% of equity

3) Responses to Indias enormity:

Product Policies:
Catering to Indian tastes Entered with products close to those already
available in India such as Colas, fruit drinks and carbonated waters.
Waited to introduce American type drinks Coca-Cola introduced Sprite
recently.
Introduced new products Bottled water
Promotional Activities:
Both these companies advertised and used promotional material at Navratri
o
o

Pepsi given away premium quality rice and candy with a bottle
Coca-Cola offered free passes, Coke giveaways as we as vacations

Use of different campaigns for different areas of India

India A campaign tried to appeal to young urbanites

India B campaign tried to appeal to rural areas

Pricing Policies:

Pepsi started out with an aggressive pricing policy to try and get
immediate market share from Indian competitors
Coca-Cola cut its prices by 15-25% in 2003 in an attempt to encourage
consumption to try and compete with Pepsi and gain market share

Distribution arrangements:

Production plants and bottling centers placed in large cities all around
India
More production plants were added as demand grew and as new
products were added

4) Coke and Pepsis Glocalization (Global + local) Strategies:

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 to foreign collaboration rules.
In keeping with local tastes, Pepsi launched its Lehar 7UP in the clear
lemon category.
Advertising is done during the cultural festival of Navratri, a traditional
festival held in the town of Gujarat which lasts for nine days.
Pepsis most effective glocalization strategy has been sponsoring world
famous Indian athletes, such as Cricket and Soccer players.

Coca-Cola:

Coca-Cola first joined forces with the local snack food producer
Britannia Industries India Ltd. in the early 90s
Coke 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 Thums Up bottles
Coke also ran special promotions where people could win free
vacations to Goa, a resort state in western India
Coca-Cola also hired several famous Bollywood actors to
endorse their products.

5) Long-term prospects:

Pepsi:
More market share over Coke
Target to sell in wider regions
More successful advertising
Better marketing and advertising strategies
More widely accepted
Coca-Cola:
Trailing Pepsi with smaller market share
Difficulties in relationships with government
We think Pepsi has slightly better prospects.

6) Lessons from Indian experience

Better evaluation of political risks and relationships with government
are needed
Better timing of entry, companies need more accurate prediction of
consumption rates
Beneficial to keep up with emerging trends on the market
Key factors for success:
Availability (meeting local demand by increasing production locally)
Acceptability (building brand equality)
Affordability (pricing higher than local brands, but adapting to local
conditions)
The heart of any campaign is not just the product but also the position
it holds in peoples minds.
Pepsi:
Beneficial to keep with local tastes
Beneficial to pay attention to market trends
Celebrity appeal makes for exceptional advertising
Coca-Cola:

Pay specific attention to deals made with the government

Establish a good business relationship with the government
Investment in quality products
Advertising is crucial