Cornelius Lucas International Marketing April 23, 2012 Case study-Coke and Pepsi learn to compete in India Coke had been present in the Indian market until they left in 1977 because of a dispute over the trade secrets. They chose to leave instead of cutting their equity stake to 40% and handing over their secret syrup recipe. When Pepsi entered the market, sales of soft drink concentrate to local bottlers could not exceed 25 percent of total sales for the new venture. The government also mandated that Pepsi Food’s products be promoted under the name “Lehar Pepsi” (“lehar” meaning “wave”).
I think that these two examples of government regulations could have not been avoided. India’s soda market is already tough enough to enter so these regulations probably came with no surprise. I think both companies anticipated intense regulations like this before market entry and they planed accordingly. I don’t think the 1990s was a great time to enter the India market. India experienced severe economic crisis when the oil prices started to rise because of the first Gulf war. Foreign exchange reserves fell as Indians cut back on repatriation of their savings.
Although, things started to grow dramatically once the new government took over in 1994, the Indian government was viewed as unfriendly to foreign investors. The demand for carbonated drinks was very low for a country of India’s size. Both companies had to work really hard with promotion to get their products up and running. I think Coca Cola’s promotion plans were excellent. Their approach was directed towards a younger crowd. They used commercials that included music and dancing. This increased sales by 50 percent. Coca Cola also reduced its prices by 15 to 25 percent to encourage consumption.
The price reductions and the new product launch were announced in successful television ads for both Pepsi and Coke. Coca Cola’s approach was more centered towards local idioms while Pepsi was more focused on the popular sports culture in India. A summer campaign featuring 7UP was launched by Pepsi with plans of growing the category and building brand awareness. The date was chosen to coincide with the India– Zimbabwe One-Day cricket series. Pepsi also made their bottles smaller to increase consumption and frequency of purchases since the other soda brands were much bulkier.
Coca Cola used local Indian superstars in their commercials to build a connection with the urban youth. The first ad execution, called “Bombay Dreams,” featured A. R. Rahman, a famous music director. This approach was successful with the target audience of young people, increasing sales by 50 percent. When India won an outstanding victory in the India–England NatWest One-Day cricket series finals, Pepsi launched a new ad campaign featuring the popular athlete, Mohammad Kaif. Pepsi lineup of other cricket celebrities includes Saurav Ganguly, Rahul Dravid, Harbhajan Singh, Zaheer Khan, V.
V. S. Laxman, and Ajit Agarkar. All of these players were part of the Indian team for the World Cup Cricket Series. I think Coke and Pepsi should attack the issue head on. I feel as though Coke and Pepsi couldn’t control the amount of pesticides in their sodas because they used water that came from India. They should promote the fact that the amount of pesticides in the water supply was no where near harmful. Coke and Pepsi should address activist groups as a whole instead of wasting time addressing them individually.
Both companies should answer all questions completely and shouldn’t leave any details out. I think Pepsi has a better chance for long term success in India. Their marketing plan is geared towards success more than Coke’s. They have also ran into fewer problems and regulations unlike their counterpart. The number one lesson I think both companies can learn from is the contamination allegations and water usage situation. They should have tested the water before they began to produce their product. They should be more careful when picking out a water supply thats going to be the main focus of your operation.
They could have also handled the media a lot better after the incident blew up. They should have come to the conclusion that its better to attack your problems head on instead of waiting and hoping for them to die down. I thought it was smart move. The market for carbonated drinks in India wasn’t that strong from the beginning for both of the companies. They are going to either adapt to the changing market or get lost behind. It’s much easier to cut your loses with the carbonated drink promotions and adapt to much healthier choices like water and Gatorade.
It wouldn’t make any sense to continue a promotion that’s going to be overwhelmed with new healthier product market. I Think this could be a very lucrative expansion for Coke but it will be a struggle to make way in the fierce India market. It’s going to be hard to compete with Red Bull and Sobe since this is what they focus solely on. Coke has too many different products to focus solely on the energy drink expansion. I also think that the product will not take off fast enough since the large retail outlets are already overwhelmed with established energy drinks. 98934893