Coke and Pepsi learn to complete in India
COKE AND PEPSI LEARN TO COMPETE IN INDIA
Brief Overview:
- The case of Coke and Pepsi in India is a lesson that all marketers can observe, analyze and learn from, since it involves so many marketing aspects that are essential for all marketers to take into consideration
- 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. ” While 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 beverage 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, 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.
Question 1: The political environment in India has proven to be critical to company performance for both PepsiCo and Coca-Cola India.
What specific aspects of the political environment have played key roles? Could these effects have been anticipated prior to market entry? If not, could developments in the political arena have been handle better by each company?
- Indian government viewed as unfriendly to foreign investors. Outside investment had been allowed only in high-tech sectors and was almost entirely prohibited in consumer goods sectors. The “Principle of indigenous available” If an item could be obtained anywhere else within the country, imports of similar items were forbidden.
This made Indian consumers had a little choice of products or brands and no guarantees of quality or reliability.
- Indian Laws, the government mandated that Pepsi’s products be promoted under the “Lehar Pepsi” name. For Coca-Cola, they attempted to enter into Indian market by joining with Parle and became “Coca-Cola India”
- Yes, it could anticipate the effect prior to market by using information from own company research, the business partner in that country, the expertise service, and own experience in near area. They could developments in political arena; Coke could agreed to start new bottling plants instead of buying out Parle, and thus wouldn’t agreed to sell 40% of their equity
Question 2: Timing of entry into the Indian market brought different results for PepsiCo and Coca-Cola India. What benefits or disadvantages accrued as a result of earlier or later market entry?
PepsiCo:
Pros: (1) entered the market before Coca-Cola and getting an early entry was able to help Pepsi go so far with Indian market while it was still developing; (2) the fact that company gained 26%market share by 1993
Cons: (1) The government mandated that Pepsi’s product be promoted under the name “Lehar Pepsi”, because foreign collaboration rules in force at the time prohibited the use of foreign brand names on products intended for sale inside India; (2) Indian Govt limited their soft drink sale no exceed 25% of total sales for the new entrant; (3) Pepsi Foods struggled to fight off local competitions.
Coca – Cola:
Pros: (1) have ability to align themselves with the market leader.
In fact, Parle offered to sell Coca – Cola its bottling plants in four key cities, and (2) Parle also offered to sell its leading brands. (3) Finally, Coca – Cola set up two new ventures with Frooti, Soda, and local product was called “Britco Foods”
Cons: (1) was denied entry until 1993 because Pepsi was already there; (2) It was very difficult for Coca – Cola take market share away from Pepsi and local firms, due to the beverage market was itself growing consistently form year to year; (3) Coca –Cola was not allowed to buy back 40% of equity when the company chose to leave Indian market in 1977
Question 7: What lessons can each company draw from its Indian experience as it contemplates entry into other Big Emerging Markets?
PepsiCo:
- Beneficial to keep with local taste
- Significant to follow market trends
- Sponsors and Celebrity appeals make more exceptional advertising
- It pays to keep up with emerging trends in the market
Coca – Cola:
- Pays specific attention to deals made with the government
- Establish a good business relationship with the government
- Investment in quality products
- Advertising is essential
- Beneficial to follow market trends
