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CokeandPepsiLearntoCompeteinIndiaByDianaBerger,ArthurCatlin,IanCavanaugh,LarryCenotto,DaveChristiansen,andMattRossBackgroundofBeverageIndustryinIndia•Coca-Cola’spastinIndia–Presentfrom1958until1977•IndustryShakeupin1988•StateoftheIndustryin1993–45%ofmarketconsistedofsmallmanufacturers–$3.2millionmarketshare•LowDemandforCarbonatedDrinks–Averageof3servingsayear/personin1989–Averageof1404servingsayear/personinU.S.in2003PoliticalEnvironmentinIndiaPoliticalEnvironmentinIndia•KeyIssues–Indiaseenasunfriendlytoforeigninvestorsformanyyears–The“PrincipleofIndigenousAvailability”•PolicybanningimportsbeingsoldinIndia–TheLiberalizationofIndia’sGovernmentin1991•“NewIndustrialPolicy”•Traderules®ulationssimplified•Foreigninvestmentincreased–Pepsientersin1986–Coca-Colafollowsin1993PoliticalEnvironmentinIndia•IndianLaws–UnlawfultomarketundertheirWesternnameinIndia•Pepsibecame“LeharPepsi”•Coca-ColamergedwithParleandbecame“Coca-ColaIndia”–DifferentLawsforPepsiandCoke•Coca-Colaagreedtoselloff49%ofitsstockasaconditionofenteringandbuyingoutanIndiancompany•Pepsienteredearlier,andwasnotsubjecttothisPoliticalEnvironmentinIndia•Problems–IndiaforcedCoketosell49%ofitsequitytoIndianinvestorsin2002–Cokeaskedforasecondextensionthatwoulddelayituntil2007•Indiadeniedthis–PepsiwasheldtothissincetheyenteredIndiainadifferentyear.–CokeaskedtheForeignInvestmentPromotionBoardtoblockthevotesoftheIndianshareholderswhowouldcontrol49%ofCoke–ChangeinoversightoftheFIPB•PastlobbyingeffortsmadeuselessPoliticalEnvironmentinIndia•Couldtheseproblemshavebeenforecastedpriortomarketentry?–Probablynot•Inconsistent,andchanginggovernment•Howcouldthesedevelopmentsinthepoliticalarenahavebeenhandleddifferently?–CokecouldofagreedtostartnewbottlingplantsinsteadofbuyingoutParle,andthuswouldn’tofhadtoagreetosell49%oftheirequityTimingofMarketEntryTimingofMarketEntry•Pepsi(earlyentry-1986)–Advantages•EnteredthemarketBeforeCoca-Colaandwasabletogainafootholdinthemarketwhileitwasstilldeveloping•Gained26%marketshareby1993–Disadvantages•WereforcedtochangetheirnametoLeharPepsi•Govt.limitedtheirsoftdrinksalestolessthan25%oftotalsales•StruggledtofightofflocalcompetitionTimingofMarketEntry•Coca-Cola(lateentry-1993)–Advantages•Wereabletobuy4bottlingplantsfromindustryleaderParle•AlsoboughtParle’sleadingbrands:ThumsUp,Limca,Citra,GoldSpotandMazaa•Setup2newventureswithParletobottleandmarketproduct–Disadvantages•Deniedentryuntil1993becausePepsiwasalreadythere•HardertoestablishmarketsharewithPepsithere•Werenotallowedtobuyback49%ofequityResponsestoIndia’sEnormity•PepsiandCoca-ColarespondedinmanywaystotheenormityofIndiaintermsofitpopulationandgeographyResponsestoIndia’sEnormity•ProductPolicies–CateringtoIndiantastes•EnteringwithproductsclosetothosealreadyavailableinIndiasuchascolas,fruitdrinks,carbonatedwaters–WaitingtointroduceAmericantypedrinks•Coca-ColaintroducingSpriterecently–Introducingnewproducts•BottledwaterResponsestoIndia’sEnormity•PromotionalActivities–BothadvertiseandusepromotionalmaterialatNavrartri•PepsigivesawaypremiumriceandcandywithPepsi•Coca-Colaoffersfreepasses,Cokegiveawaysaswellasvacations–UseofdifferentcampaignsfordifferentareasofIndia•“IndiaA”campaignstrytoappealtoyoungurbanites•“IndiaB”campaignstrytoappealtoruralareasResponsestoIndia’sEnormity•PricingPolicies–PepsistartedoutwithanaggressivepricingpolicytotrytogetimmediatemarketsharefromIndiancompetitors–Coca-Colacutitspricesby15-25%in2003•AttempttoencourageconsumptiontotrytocompetewithPepsiandgainmarketshareResponsestoIndia’sEnormity•DistributionArrangements–ProductionplantsandbottlingcentersplacedinlargecitiesallaroundIndia–MoreaddedasdemandgrewandasnewproductswereaddedCokeandPepsi’s“GlocalizationStrategies”•Whatis“Glocalization”?–Global+Localization=Glocalization–Bytakingaproductglobal,afirmwillhavemoresuccessiftheyadaptitspecificallytothelocationandculturethattheyaretryingtomarketitin.–BothcompanieshavesuccessfullyimplementedglocalizationPepsi’sGlocalization•PepsiformsjointventurewhenfirstenteringIndiawithtwolocalpartners,VoltasandPunjabAgro,forming“PepsiFoodsLtd”.•In1990,PepsiFoodsLtd.changedthenameoftheirproductto“LeharPepsi”toconformwithforeigncollaborationrules.•Inkeepingwithlocaltastes,PepsilauncheditsLehar7UPintheclearlemoncategory.Pepsi’sGlocalization•AdvertisingisdoneduringtheculturalfestivalofNavrartri,atraditionalfestivalheldinthetownofGujaratwhichlastsforninedays.•Pepsi’smosteffectiveglocalizationstrategyhasbeensponsoringworldfamousIndianathletes,suchascricketandsoccerplayers.Coca-Cola’sGlocalization•FirstjoinedforceswiththelocalsnackfoodproducerBritanniaIndustriesIndiaLtd.intheearly90’s.•FormedajointventurewiththemarketleaderParlein1993•ForthefestivalofNavrartri,Coca-Colaissuedfreepassestothecelebrationineachofits“ThumsUp”bottles•AlsoranspecialpromotionswherepeoplecouldwinfreevacationstoGoa,aresortstateinwesternIndiaCoca-Cola’sGlocalization•Coca-Colaalsohiredseveralfamous“Bollywood”actorstoendorsetheirproducts.•Whocouldforget…VivekOberoiAishwaryaRaiCoca-ColaIndia’sMistakes•EntersMarketattheWrongTim