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Kendall, president and chief executive officer of Pepsi-Cola and Herman W.Lay, chairman and chief executive officer of Frito-Lay, through the merger o f t h e t w o c o m p a n i e s . C a l e b B r a d h a m , a N e w B e r n , N . C . p h a r m a c i s t , created pepsi-Cola in the late 1890s. No single foreign investment project has been the center of much attention and controversy in the late 1980s and early 1990s as the Pepsi Co project in India. The project, Pepsi Foods Limited, was cleared bythe Indian government in September 1988 as a joint venture of Pepsi Co,Punjab government-owned Punjab Agro Industrial Corporation (PAIC) andV o l t a s In d i a Li m i t e d . B e f o r e t h i s p r o j e c t w a s c l e a r e d , P e p s i C o m a d e a n attempt to enter into India as early as in May 1985, when it teamed up withAgro Product Export Ltd., a company owned by R. P. Goenka group, andsought permission from the central government to import cola concentrate and to sell a PepsiCo brand soft drink in the Indian market, in return for thee x p o r t o f j u i c e c o n c e n t r a t e f r o m P u n j a b . U n d e r t h i s p r o p o s a l , t h e m a i n objectives put forward by PepsiCo were 'to promote the development and export of Indian made and agro-based products and to foster the introduction and development of PepsiCo products in India'. This proposal which was submitted to the Secretary at Ministry of Industrial Development received rejections on the grounds that the import of concentrate could not be agreed to and the use of foreign brand names as domestic tariff area (DTA) was not allowed Pepsi is no longer a joint venture company with its Indian partners. Taking full advantage of liberalized policies, it has takenfull control of Pepsi Foods. In 1994, Pepsi made an offer to both Voltas andPAIC to buy their equity at 'attractive' terms. Voltas sold all its shares toPepsi while PAIC, being a public enterprise, was forced to pull out and nowit holds less than 1 percent of the total equity in Pepsi Foods Ltd. Instead of t a k i n g s t r i c t a c t i o n a g a i n s t P e p s i f o r n o t f o l l o w i n g i t s c o m m i t m e n t s , t h e Indian government has given more concessions to it in the post-liberalization p e r i o d . F o r i n s t a n c e , i t h a s a l l o w e d P e p s i t o i n c r e a s e i t s t u r n o v e r o f beverages c o m p o n e n t t o b e yo n d 2 5 p e r c e n t , a n d P e p s i i s a l s o n o l o n g e r restricted by its commitment to export 50 percent of its turnover.Recently the government also allowed PepsiCo to set upa new company in India called PepsiCo India Holdings Pvt.Ltd, a whollyowned subsidiary of PepsiCo International. Surprisingly, the new companyis also engaged in beverage manufacturing, bottling and exports activities asPepsi Foods Ltd. All the new investments by the PepsiCo International have been channelised through this new venture. It now handles 28 bottling plantswith a sales turnover of Rs 500 crores, which is higher than Pepsi Food’sturnover of Rs.375 crore in 1996. (The Financial Express, April 21, 1997).Although the financial performance of both these companies in India has not been creditable so far, with total accumulated losses close to Rs.350 crore( e x c e p t s m a l l s u r p l u s i n 1 9 9 6 ) , ye t i t h a s b e e n s u c c e s s f u l i n a c h i e v i n g significant market share and brand royalty in India. PRODUCT: A business needs to consider the products that it p r o d u c e s a n d t h e s t a g e o f t h e p r o d u c t l i f e c y c l e t h a t a p r o d u c t i s a t . Marketing strategies will vary according to the type of product and its stagein the life cycle.In case of Pepsi, in the rural markets, the 300ml bottleand now days the new small or commonly known as the ―chota pepsi‖ isvery much popular. The Pepsi Co. is even thinking of introducing their newPepsi-Aha, but presently they are concentrating more on the normal pepsi asthe rural
market is a niche market. Pepsi is even successful in introduci ngthe big 1-1.5 liter PET bottles in the rural markets. These big bottles are very popular during big festivals and marriages. Price: Most businesses use a "cost plus" method for setting the prices of their products. This involves determining unit production costs andthen adding in a profit margin. However, many other factors are involved.Consider "perceived price" (what you think consumers will be prepared to pay), demand elasticity (is it elastic or inelastic?), competitors' pricing (canyou afford to undercut their prices?), pricing objectives (what do you want toachieve Ð increased market share? increased profits? market leadership? etc.) Example 2 Perfume How much does it cost to make? Can businesses afford a "price war"? Why is Coca Cola so successful?As far as the pricing goes, the 300 ml Pepsi bottle is priced at Rs. 10. But the company soon realized that this pricing worked inthe urban markets but not in the rural markets as in the rural markets, Pepsii s n o t a n e c e s s i t y b u t a l u x u r y. T h e y f o u n d o u t t h a t p e o p l e i n t h e r u r a l markets bought cold drinks only if there was some occasion. A price point of Rs 10 for a 300 ml bottle has proved a major deterrent: it has kept away newconsumers in the urban and semi-urban pockets, and it has blanked out thefar larger rural markets where annual per capita consumption is less than a bottle. So the Rs. 10 bottle was not that successful. But their sales increasedafter introducing the ―chota Pepsi‖. This 200ml Pepsi was reasonably priced between Rs.5- Rs.7. This was a major weapon for the expansion of the ruralmarket. Pepsi expects the smallsize offering to account for 30 per cent of volumes this year compared with 18 per cent last year.But there are other areas of concern — principally thatthe 200 ml offering should not cannibalize 300 ml sales. In that case, therewill be no market growth. That is why pricing could be crucial. Pepsi, for instance, has reckoned that giving consumers 33 per cent (100 ml) less colaat 50 per cent of the price (Rs 5) is not a sustainable option and can, at best, be used as an introductory offer. The conclusion is based on hard facts. Last year, the beverage giants test-marketed 200 ml bottles at a price of Rs 5. Insteadof growth, Pepsi discovered that 300 ml drinkers merely shifted to the200 ml variant, the market remained stagnant and everyone lost money.The conclusion was clear: cutting prices does not necessarily expand themarket. Place This generally refers to the physical locations of productsales as well as the methods of distribution. However, it is also considered to be the "place" or "position" in the market of the product; refer to information below. Businesses need to make many decisions related to "place": access, parking, competition, physical location etc.It’s the most important P in the cola wars — Place. Andnothing evokes more passion in Pepsi and Coke than distribution. Major innovation is underway on the distribution front at Pepsi, pre-selling beingthe biggest of all. It’s been successfully test marketed in Bangalore, Barodaand Coimbatore — and may soon roll out nationally.In case of the distribution network, t h e r e i s n o involvement of wholesalers in the distribution of products. It is more like anagent network. The companies have divided the country into various regionsand established a franchisee in each region. The franchisees have their own bottling plants and
manage all the day-to-day operations. However, of late,the soft drinks companies have started setting up company owned bottlingunits have been acquiring some of its franchise bottles.In the current system, the strike rate in the Delhi marketi s a b o u t 4 0 p e r c e n t , w h i c h c a n b e i m p r o v e d t o 8 0 p e r c e n t i n t h e p e a k season, claims a franchise director. The result for Pepsi could be significant s a v i n gs . ― C o l a s s e r v i c e j u s t 7 . 5 - 8 l a k h a c c o u n t s c o m p a r e d t o t h e o t h e r F M C G p l a ye r s w h o s e r v i c e t h r e e t i m e s t h e n u m b e r . In n o v a t i o n i n o u r distribution system will take us closer to the 21 lakh figure,‖ says Vats, afranchise director.Pepsi believes in direct distribution whereas Coked o e s n ’ t . It m a i n l y c o n c e n t r a t e s o n d e a l e r s a n d m o s t i m p o r t a n t l y c u t t i n g costs. ―There are plenty of innovations possible in distribution that can cutcosts‖, says a Pepsi official.For Pepsi, the rural market is a chosen thrust this year. Ithas targeted to reach 20 to 28 per cent of the rural population in the firstye a r o f t h i s o p e r a t i o n . In t h e f i r s t s t a g e , t h e c o r p o r a t i o n i s planning am a s s i v e r o l l o u t i n v i l l a g e s w i t h p o p u l a t i o n s o f 5 0 0 0 . T o d o t h i s effectively, Pepsi is focusing on establishing a cold chain.The company has developed special freezers that allowits products to stay chilled despite power cuts of three to four hours. It willalso use traditional iceboxes to sell its product in rural India. For the ruralmarkets, Pepsi is looking at the wholesale route since the logistics of directdistribution are too huge to handle in the interiors. Promotion This refers to the promotion of the product to the targetm a r k e t . T h i s i s a c h i e v e d t h r o u g h a c o m b i n a t i o n o f : a d v e r t i s i n g: u s e o f e l e c t r o n i c a n d p r i n t m e d i a . The "reach" (how many people will see theadvert), frequency (how many t i m e s w i l l I a d v e r t i s e t h e p r o d u c t ? ) a n d impact of the advertising must also be evaluated.Personal selling: what happens in the "shop", contact between sales people and consumers or customers. Sales promotion: use of gimmicks and incentives e.g.competitions.Sponsorship and promotional licensing: includingspecific products sold under license that promotes the business (e.g. football jumpers).Publicity or public relations: "adversarial" in local papersor special promotional materials.Due to the cola wars promotion, and advertising hasalways been an integral part for both the cola cos: Pepsi and Coke. But for the first time perhaps in the history of cola wars, the strategies of the two giant cos are diverging in India. Whether it’s business or product strategiesor the critical distribution game plan, the archrivals are taking roads that donot meet. Mr. Bakshi of Pepsi Co. is bringing a change in their distributionand marketing strategies. Now days where Coke is concentrating more ont h e 2 0 0 m l b o t t l e , M r . B a k s h i o f P e p s i s a ys ― T h e 2 0 0 m l b o t t l e g e t s z e r o demand in the rural market.‖ He is concentrating on th e 1.0 liter bottles of Pepsi. The Pepsi Co. had used an excellent marketing strategy here. Duringthe Lagaan mania they were distributing free tickets in the rural marketsalong with their 1.5 liter PET bottles. Pepsi made this 1.5-liter PET bottlevery famous for their special festive occasions and marriage.Well the popularity of the product has also increased duet o their advertisements or basically famous cricket and b o l l y w o o d personalities endorsing this product. For instance the Sachin ―Aala re Aala‖advertisement where even he is wearing a mask along with those rural kids.Or you can even take the new Sachin and Amitabh Bachchan advertisementwhere both of them say ― Yeh Dil Maange More!!!!!!!‖ Sachin has donemany advertisements for Pepsi in the span of 10 years.Pepsi’s rural market advertisement- Pepsi has unveiled amajor campaign in Andhra Pradesh, roping in top Telugu film star, PawanKalyan, even as the star's
elder brother, Chiranjeevi, is into pushing Coca -Cola's Thums Up. Pawan Kalyan, however, ruled out any rivalry between him and his brother. Though he will sing Yeh Dil Maange more, his brother will say Yeh Dil Maange no more. ―We have our lives and we have our ownchoices,‖ he said on the possible in-house cola feud.Pepsi also kicked off a rural campaign, spread over twomonths. Decorated Pepsi vans will roll out into market of the State. Everyconsumer drinking a Pepsi from these vans will get to play a game and win prizes. These include Pawan Kalyan memorabilia, T -shirts, autographed posters and calendars.Explaining the reason for choosing Pawan Kalyan toendorse Pepsi, Mr. Rohit Ohri, Director HTA, Pepsi's ad agency, said Pepsia n d P a w a n K a l ya n w e r e go i n g t o b e a n ideal combination. ―Both are so y o u t h f u l , e n e r g e t i c a n d f u n l o v i n g , ‖ h e s a i d . M r . V i j a y S h a n k e r Subramaniam, ViceP r e s i d e n t ( M a r k e t i n g ) , P e p s i F o o d s Lt d , s a i d t h e company was starting an ―aggressive campaign‖ in Andhra Pradesh. Apartfrom the van operations, which were flagged off by Pawan Kalyan, other campaigns have been lined up throughout the year.Later, Pawan Kalyan presented a cheque for Rs 5 lakh toM r . M e h m o o d A l i , a m e c h a n i c w i t h t h e A n d h r a P r a d e s h S t a t e R o a d Transport Corporation for winning Pepsi's Mera number ayega campaign. Lastly, we all know that though Coke ranks 1 st with57 % of the market share (which includes Thums –up too), Pepsi ranks2 nd w i t h 4 3 % o f t h e m a r k e t s h a r e . T h e P e p s i C o . h a s f o u gh t a b i t t e r s t r u g g l e u p w a r d s s t a r t i n g f r o m a z e r o m a r k e t s h a r e . W h e n P e p s i entered the market in 1989, they faced the daunting task of pacifyingIndian swadeshi activists alone. Their trucks were smashed and officesr a n s a c k e d s o a s t o d i s s u a d e t h e m f r o m e n t e r i n g t h e In d i a n m a r k e t . Whereas when Coke entered (or re-entered) the Indian market in 1993,t h e s i t u a t i o n h a d b e e n s m o o t h e d o u t b y P e p s i a l r e a d y , a n d t h e atmosphere was extremely conducive to foreign multinationals comingto India. Therefore, though Coke ranks 1 st , it got this position only afterintroducing the Parle products who already had a 70% market share atthat point of time. Presently Pepsi Co. is also concentrating on its otherp r o d u c t s l i k e s l i c e , m i r i n d a a n d a q u a f i n a . T h e i r n e x t a i m i s t o popularize their other products like sodas, then the new Pepsi Aha- theapple drink and beat coke to become the new market leader.
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