DAYALBAGH EDUCATIONAL INSTITUTE AGRA

SUMMER TRAINING REPORT ON PARTNER RELATIONSHIP MANAGEMENT OF PEPSICO INDIAS FOBO VARUN BEVERAGES LTD. & ACCEPTANCE OF SLIM DIET CANS IN THE TRANS-YAMUNA AND AGRA MARKETS.

SUBMITTED BY C. TILAK PRAKASH ROLL NUMBER: 077508

ACKNOWLEDGEMENT
There is always a sense of gratitude one expresses to others for the helpful and needy service they render during all phases of life. I have completed this training with the help of different personalities. I wish to express my gratitude towards all of them. It gives me immense pleasure to express my deep regards and sincere sense of gratitude to Mr. Manmohan R Paul Vice-president (marketing)for his guidance throughout the training. Thank you sir for your able and worthy guidance. I would also like to thank Mr. Rana, Mr. Prashant Sharma and Mr. Hitesh for their support which helped me throughout my training. I would also like to thank my teacher Prof. K Shanti Saroop for steering my confidence and capability for giving me insight into training by giving me exposure to the arena of competitive and real world. Lastly I would like to thank my parents and friends for their constant support during the duration of my training. Thank You One and All

C. TILAK PRAKASH ROLL NO. 077508 BBM 5TH SEMESTER

TABLE OF CONTENTS
ABSTRACT12 Research Methodology........................................................................................15 Report and Analysis of Data Collection .26 CSD Industry Overview.27 CSD Industry analysis31 Market Analysis and Industry Challenges......37 Industry process Improvement Opportunities46 PepsiCo International61 History..61 PepsiCo The parent Company.64 Overview PepsiCo International..66 How PepsiCo overcame Competition.68 SCAs70 PepsiCo India..74 Introduction..74 Overview Of PepsiCo India...76 PepsiCo with RKJ Group..78 Strategic Divisions.80 Marketing Overview of PepsiCo India81 Marketing environment.81 Value Delivery83 3

Value Chain85 4 Ps.88 Strategic Marketing.100 Factors Influencing Marketing Strategy100 Key Success Factors...112 SCAs.113 Communicating with Customer.115 Advertising116

Porters Five Forces.135 SWOT Analysis138 Porters Grand Strategies143 BCG Matrix145 Recommendation.147 Conclusion.153 Bibliography.............158 Appendices160

ABSTRACT Title: PARTNER RELATIONSHIP MANAGEMENT OF PEPSICO INDIAS FOBO VARUN BEVERAGES LTD.
This study titled as above aims at exploring the strategies followed by PepsiCo India to manage its various partners both internal as well as external since it started its operations in India. This study will also explore what changes PepsiCo India is bringing in order to increase its visibility and market presence to tackle the ever increasing hold of Coca Cola on the Indian beverage market. This study aims to explore the overall functioning and position of PepsiCo India in the marketplace. It also aims to know customer perception regarding PepsiCo India. To know about these facts this report will primarily focus on the partner relationship management of PepsiCo Indias main carrying and forwarding agency Varun beverages limited. To know the overall functioning of PepsiCo India is important in order to get an understanding of the topic. It is also important because is will explore the sales and distribution system of Pepsi India which is considered to be one of the strongest not only in the country but also worldwide. This project also covers a detailed observation and study of the VISI-PURITY campaign and the various retail initiatives specially related to

the Slim Diet Cans and their acceptance in the Trans-Yamuna and Agra markets both of which are upmarket towns The various observations and studies were done through route rides, direct marketing, market visits and from the sales team of PepsiCo India. The aim of the overall training was to have a complete and thorough understanding of the process of the various stages of product movement from the bottling stage to the final consumer and the various agencies which influence and help move these products. Also the study entails the various push and pull strategies actually used by us suffuse the trans Yamuna Market with slim diet cans and also studies the acceptance of the newly introduced Slim Diet Can range. Although this study will explore the overall functioning of PepsiCo India, but in order to be precise it will primarily concentrate on the beverage segment of PepsiCo India.

LITERATURE REVIEW
PepsiCo is one of the oldest, largest and most successful beverage and snack food companies in the world. PepsiCo was founded by Caleb Bradham in 1902 in USA. Today PepsiCo and its affiliates operate in more than 140 countries in the world and generate revenues in excess of $ 40 Billion. In its pursuit of never ending growth and expansion, PepsiCo entered India in 1989 in a joint venture with Punjab Government. However, PepsiCo India very soon started its beverage operations in collaboration with the R K Jaipuria group. Soon after entering the beverage segment PepsiCo Established its dominance in the market owing to its expertise in sales, marketing, operations and local collaboration. PepsiCo maintained its market dominance for many more years to come. However, this advantage slipped and PepsiCo had to concede the market leadership to Coca Cola India. Several actors were responsible for this development. But, the most important are; Ad campaigns targeting regional markets. Discontinuation of Slums in the distribution network by PepsiCo. This move by PepsiCo adversely affected its position of a market leader because while PepsiCo discontinued the use of Slums in its distribution network, Coke continued it and within one year, it was able to snatch considerable market share from PepsiCo. Acquisition of well-established and favored brands like Thums Up and Limca by Coca Cola India. These two brands still constitute a bulk of sales for Coca Cola India.

To explore the reasons behind these developments this study will analyze the marketing initiatives and policies of PepsiCo India in detail with particular focus on its partner relationship management. The above-mentioned objectives can be achieved by carrying a proper and planned research involving different types and methods. The data collected fo laid the foundations for the study and gave a platform for the analysis and findings which lead to the fulfillment of the objectives. The data collected for research is primary and secondary. Primary data is collected by observation, interviews and questionnaires. While secondary data is collected from the internet through different case studies and reports on the CSD industry. Observation method was carried in East-Delhi to know the market position and market share of PepsiCo products. Interviews of people from the sales department were conducted to know the sales and distribution network and marketing policies of PepsiCo India, while questionnaire method was used to know about the customer perception of the slim diet can portfolio. Secondary data is used to know about the CSD industry and the Company i.e. PepsiCo. The data collection and analysis paves way for the recommendation ad conclusion of the study that reveals some important findings regarding the strategy and corporate structure and strategy of PepsiCo India.

CSD INDUSTRY OVERVIEW

The soda drink and bottled water industry includes more than 3,000 companies that manufacture and distribute beverages. Only in the USA combined annual revenue is more than $70 billion. Coca-Cola and PepsiCo hold more than 50 percent of the market, following strong consolidation in the past decade. Only a few other companies have annual revenue above $500 million. Most are local or regional manufacturing and bottling operations with annual revenue under $100 million.

Competitive Landscape:
Demand for non-alcoholic beverages is driven by consumer tastes and demographics. The profitability of individual companies depends on effective marketing. Large manufacturers have economies of scale in production and distribution, with average annual revenue per production worker close to $1 million. Small companies can compete by producing new products, catering to local tastes, or selling at lower prices.

Products, Operations & Technology:

Nonalcoholic beverages include sodas (carbonated soft drinks, or CSD), bottled waters, juices, and a large variety of mixtures. Sodas account for about 60 percent of the market. The manufacture and distribution of most national soda brands, including Coke and Pepsi, is a two-tiered process. The primary manufacturer produces a flavored syrup called concentrate that is sold to local bottlers who manufacture and distribute the finished product. In a typical bottling operation, the flavored syrup, corn syrup (sugar), and filtered water are mixed in appropriate proportions, carbon dioxide gas is injected, and the finished soda product is poured into bottles or cans, which are capped, labeled, and packaged. 9

The two-tiered structure is most efficient for national companies with large volume, because the manufacturing process is simple and because water, the main ingredient of sodas, is expensive to ship and is available locally. Smaller companies combine the syrup production and bottling operations in one plant. For soft drink bottlers, the major raw materials, aside from the flavored syrup, are corn syrup and containers -- glass bottles, aluminum cans, or plastic bottles made from polyethylene terephthalate (PET). Bottlers frequently operate sizable distribution systems, including warehouses and fleets of specialized delivery trucks. Production and distribution volume is usually measured in cases of 192 ounces, although actual cases of 12-ounce cans now contain 288 ounces. Coca-Cola produces more than 4 billion cases of soft drinks per year; PepsiCo, over 3 billion. In addition to producing canned and bottled soft drinks, large manufacturers sell sweetened syrups to restaurants and other retailers that produce the finished product at the point of sale by mixing the syrup with carbonated water to produce fountain products. About 35 percent of Coca-Cola's US product is in the form of fountain sales and 60 percent in bottled sales. The manufacturing process for most non-soda beverages is usually more complicated than the mix-carbonate-and-bottle soda process and therefore isn't usually handled by local bottlers. In most cases, non-soda products are bottled by the manufacturer and distributed through the same types of channels--wholesalers, distributors, brokers--used by food manufacturers, although bottlers may also participate. Bottled waters, a rapidly growing category of beverage, are either bottled at specific springs or made locally from filtered tap water. Manufacturers and bottlers typically operate under contracts, called Bottler Agreements, that specify the territory within which the bottler has an exclusive right to make, sell, and distribute the manufacturer's brand in bottles or cans. Fountain products are often sold separately through wholesalers, under Distributor Agreements. Bottle and fountain territories may overlap and bottlers may also be fountain distributors. Coca-Cola sells products through about 80 local bottlers and 500 fountain wholesalers.

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Bottler Agreements usually require that container and packaging materials be bought from suppliers that are approved by the manufacturer, and that the bottlers not handle competing products. Agreements also specify the price that the bottler must pay for concentrate. The manufacturer has no control over the prices the bottler charges customers, and usually isn't obligated to spend money for marketing or promotions in the bottler's territory. Often, however, the manufacturer will provide marketing and promotion support. In one year, for example, Coca-Cola provided about $600 million in marketing support to Coca-Cola Enterprises, its largest bottler. Many Coke and Pepsi bottlers hold perpetual contracts that can be terminated only for breach of contract. The industry depends on technology for developing new products in the labs and packaging product at the plants. Most bottling plants are highly automated with a combination of mechanical automation and computerized robotics.

Sales & Marketing:

Beverage manufacturers, bottlers, and wholesalers sell products through a variety of channels, such as food and convenience stores, restaurants, vending machines, mass merchandisers, and institutions, including schools and colleges. Soda bottlers typically own local vending machines. The marketing approach to each of these channels is quite different and often includes promotional spending. Large manufacturers may also sell directly to national accounts and usually advertise on national or regional TV and in print. Manufacturers typically produce a line of brands and often test and introduce new products into the market through their existing distribution channels.

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Target Segment Youth:

The child/youth market is of crucial importance to drinks manufacturers as under-19s constitute 20-30% of the population in western countries, making them a substantial and lucrative consumer base. With many life-long consumption habits formed during youth, gaining high penetration in the children's and teenagers' market is of key importance to manufacturers with long-term ambitions and growth targets. Targeting Soft Drinks to Youths enables companies to: Assess the size of the soft drinks opportunity by age group Understand children's values and motivations and their impact on the soft drinks market Develop incumbent market position through enhanced targeting and promotion Assess trends in new product development in the children's market over the course of the past 2 years Combine business to business executive opinion and local field research

Analysis and Industry Challenges:

In order to survive in this environment, companies must consider the market trends that will likely shape the industry over the next few years. This will help soft drink companies to understand the challenges they will encounter and to turn them into opportunities for process improvement, enhanced flexibility and, ultimately, greater profitability. Market trends for the soft drink industry can be summarized by six fundamental themes: Changing consumer beverage preferences, featuring a shift toward health-oriented wellness drinks Growing friction between bottlers and manufacturers in the distribution system

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Continually increasing retailer strength Fierce competition Complex distribution system composed of multiple sales channels Beverage safety concerns and more-stringent regulations Consumers turn to wellness and healthy drinks

In much of the developed world, a significant portion of the population is overweight or obese. This includes two-thirds of Americans and an increasing number of Europeans. Consequently, many people have started to actively manage their weight and change their lifestyles, a shift that is reflected in their choices in the beverage aisles: Demand has increased for beverages that are perceived to be healthy Energy drink consumption has also climbed, due to the increasingly active lifestyles of teenagers This trend towards healthier drinks has created a number of new categories, and changed the consumption trends of the beverage industry as a whole. While previously dominated by carbonated soft drinks, the industry is now more evenly balanced between carbonates, and product categories with a healthier image, such as bottled water, energy drinks and juice:

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While carbonates are still the largest soft drink segment, bottled water is catching up fast, with an average of 58 liters consumed annually per capita. Among individual countries, Italy ranks number one in bottled water consumption, with the average Italian drinking 177 liters per year. Overall, bottled water represents the fastest growing soft drink segment, expanding at 9 percent annually. This growth is being partially driven by increasing awareness of the health benefits of proper hydration. The industry has responded to consumers desire for healthier beverages by creating new categories, such as energy drinks, and by diversifying within existing ones. For example, the leading carbonated soft drink companies have recently introduced products with 50% less sugar that fall mid-way between regular and diet classifications. Similarly, a South African juice company has recently released a fruit-based drink that contains a full complement of vitamins and nutrients.

Beverage companies and bottlers are conflicting:

In the soft drink markets of Europe and the US, beverage companies use bottlers to package and distribute products. This structure often causes conflicts of interest between manufacturers and bottlers. Nevertheless, the supply chain must consistently deliver value to the market in order for the segment to prosper. Despite any dissonance, the concept of one face to the customer must be maintained. Many factors are contributing to the friction between bottlers and beverage companies: Beverage companies often profit from increased concentrate sales at the expense of bottlers margins Beverage companies have historically had higher returns and lower capital requirements Bottlers have historically had lower returns and higher capital requirements for building and maintaining production and distribution networks

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Bottlers continue to consolidate in an attempt to offset margin pressure through cost reduction. Specifically, size helps them to: Spread fixed costs over greater volume Make larger investments in automated production lines Contain the costs of acquiring new customers Increase customer loyalty Declining prices have further reduced bottlers margins

Soft drink manufacturers continue to develop new products and packaging, which increases operational complexity and, therefore, expenses for bottlers. More new soft drinks have been introduced in the last two years by the top beverage companies than were introduced in the entire decade of the 1990s. Examples include: Coke with Lemon, Vanilla Coke, Dr. Pepper Red Fusion, Pepsi Blue, DnL, Fanta Berry, SoBe Mr.Green, Sierra Mist, and Mountain Dew Code Red. While manufacturers view these new products as a way to build a portfolio of options to hedge against product successes or failures, bottlers see them as a burden since they often require additional capital expenditures.

Retailers power continuously increases:

With Big Bazaar , Vishal and other discount stores leading the charge, Indias dominant retailers are demanding better service and shorter order-to-delivery cycles from soft drink companies. This is dramatically reshaping the industry, forcing soft drink companies to become more efficient, while taking pricing power out of their hands. The dual need for improved supply chain agility and cost efficiency is challenging suppliers to reevaluate the ways in which they plan and manage their supply chains, as they constantly search for approaches that will help them achieve the rock-bottom prices and operational excellence now expected in the industry. Furthermore, the growth of private-label products is encouraging manufacturers to take a number of steps to compete more effectively. Increasingly, they are turning to innovation

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and new product introduction as a means to achieve real differentiation as well as growth. Branded manufacturers are also looking to get closer to the consumer, with many of the larger ones piloting direct-to-consumer marketing approaches. They are also trying to better understand the in-store consumer experience by monitoring the execution of instore activities. Nevertheless, many suppliers are losing brand equity. In recent years, a couple of factors have been fueling the growing competition between manufacturers and retailers: Retailers are using their power to set higher standards for marketing and operational excellence, including escalating demands for improved service quality and shorter orderto-delivery cycles from manufacturers and distributors. Because of their direct relationships with consumers, retailers have a deeper knowledge of consumer behavior. Competition is becoming more and more difficult:

In the beverage manufacturing industry, competition is growing due to the following factors:
Constant demand for new niche products related to consumer preferences for healthier and more diversified offerings Industry consolidation, which has significantly raised the bar for the scale needed to compete The growth of private-label products. These competitive pressures have led to: SKU proliferation - number of SKUs in a typical beverage company has doubled from 1991 to 2001 A plethora of new product failures: Only 20% are effective Only 10% generate significant revenue

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Most fail within the first two years Further consolidation and rationalization to capture cost savings by improving operations and eliminating redundancy: Industry leaders are acquiring small, high growth companies Mid-market players are vertically integrating Declining soft drink prices: Profitability can only be improved through greater efficiency in the supply chain or through more-effective trade promotions, which usually require considerable expenditures.

Sales channels are very complex The macro environment in which soft drink manufacturers operate has several unique characteristics: Market to consumers/sell to retailers through wholesalers Must have the ability to communicate directly with retailers Multiple distribution channels Seasonal demands

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CHANNELS OF BEVERAGE INDUSTRY

The beverage industry is a multi-channel industry. Therefore, soft drink companies have several types of customers with diverse characteristics:

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Modern Trade/Large Chain Retailers

Greater power in negotiating purchases of concentrations and merges Direct access to the consumer and a tendency to protect this relationship from manufacturer intrusion Request contributions and discounts from brand companies

Small Individual Retailers

Huge number of small point sales Sometimes buy products directly through cash and carry or modern trade

Indirect Channel (wholesalers)

Medium-sized organizations as a consequence of aggregation through consortia and merging Playing a fundamental role in beverage distribution Possess critical information regarding individual points of sale in terms of volume, assortment, presence of competitors beverages, etc. Due to the complexity of the marketplace, the entire logistical chain must be able to sustain brands, products and services coherently within the various channels, taking into account differing points of sale and diverse customer needs. Additionally, each beverage manufacturer must provide customers with an extensive set of packaging options, including: Tracking product in various package sizes Special labeling requirements for customers International/domestic packaging Tracing / recall capabilities. Statutory regulation is increasing.

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Governments around the world are concerned about food safety and quality. Periodically, safety failures make big news in the global press. Amid this growing concern, regulators are cracking down on sanitation and a variety of other food-safety requirements. Each soft drink company must take these industry challenges into consideration, as well as its own strengths and market position, when looking for ways to drive innovation, accelerate growth and increase margins.

Industry Process Improvement Opportunities

Improve customer relationships with Direct Store Delivery: Branded beverage manufacturers are attempting to get closer to the consumer, with many larger manufacturers piloting direct-to-consumer marketing approaches. These include active monitoring of in-store activity and, in some markets, a significant move back to direct store delivery (DSD). Direct Store Delivery is a business process used in the beverage industry to sell and distribute goods directly to the customers point-of-sale. With DSD, the soft drink company gets in direct contact with retailers, restaurants and pubs and other outlets where consumers can obtain the product. Manufacturers can use DSD to: Make beverage goods available to stores and customers quickly Optimize process settlement in sales and distribution through complete coverage of the supply chain Improve customer retention and build customer relationships through personal service Realize additional sales opportunities Obtain first-hand information about the market Better position brands against competitors

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 Ensure product quality up to the point of sale Best in class DSD companies couple the process of direct delivery with a cultural change in how they view their employees and how their delivery personnel operate: They are not just drivers but they have sales skills, communication skills and a global view of the companys offerings, commercial priorities, and initiatives. Direct Store Delivery is characterized by variable orders and deliveries. Consequently, the process should involve more than just bringing goods to the point of sale. It should eventually encompass taking additional orders, picking up empties, collecting money, and more. Best in class DSD operations typically include many value added activities, such as:

Merchandising activities - Enables the company to leverage frequent delivery visits

to the point of sale. These activities include tracking merchandising of other entities (suppliers, wholesalers, etc.); reporting on in-store merchandising activities; carrying out competitive intelligence (competitive products, product mixes, prices, displays, etc.); and monitoring store/account execution. May also include some preventive maintenance.

Additional sales opportunities - Allows a company to sell goods off the truck
without any preceding order. The mix of products on the truck is dependent on what is most likely to be sold on a certain trip. Support provided by handheld devices enables drivers to skip back-end paperwork and to close the process through printed invoices.

Enhance relationship with indirect partners - Indirect sales are the process of
selling to an end customer through a third party and tracking that sale as such. Due to the complexity of the beverage supply chain, conflicts of interest frequently arise between beverage manufacturers and beverage distributors:

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Soft drink manufacturers profit from increased sales at the expense of distributors margins Soft drink distributors profit from positive local pricing environments, which, if exploited, reduce volume sales Soft drink distributors continue to consolidate in an attempt to offset margin pressure through cost reduction

Despite these conflicting interests, it is crucial that beverage manufacturers and beverage distributors maintain one face to the customer. These companies jointly market and sell the product in the marketplace, and close co-operation yields benefits for both parties. The indirect relationship is a partnership that must be nurtured by both the supplier and the distributor. The stakes are high for everyone. For the manufacturer, a poor relationship with a distributor may cause it to give a competitor greater share of mind in the local marketplace. For the distributor, a negative relationship with a supplier means constant threats of contract termination and reduced marketing dollars spent in the local market. A strong manufacturer/distributor relationship is also important because consumers are becoming more difficult to capture and classify. It is not only about sales; it is also about information. But how can strategic information flow freely between partners? Although 22

sharing is implied in the word partnership, the reality is that companies are still uncomfortable about exchanging strategic information. Nevertheless, it is critical for companies to share information regarding sales volume and market intelligence on both the microscopic and macroscopic levels. The importance of the distributors role in the indirect channel for beverage distribution suggests that it would be beneficial to establish a common understanding between distributors and manufacturers regarding: Coding (products, channels, customers) Technology Data interpretation Marketing and sales actions.

In some cases, distributors are small- to medium-sized companies that only dedicate a few people full-time to operational activities. As a result of this structure, they are rarely open to implementing a truly collaborative environment. Recently, however, mergers between distributing companies, and acquisitions of distributing companies by manufacturers, have significantly modified many operating and ownership structures. Consequently, a few well-structured and managed distributors have emerged that possess a better understanding of the value of collaboration. These distributors have been at the forefront of facilitating partnership initiatives. Increase sales force effectiveness through incentives management In the beverage industry, the critical path to a companys success is the effectiveness of its sales force. No matter how efficiently the company runs its manufacturing processes, or how well it markets its products, a beverage company cannot succeed without an effective sales force that ensures product placement on the store shelves. A beverage manufacturers sales force typically comprises 17%-25% of the companys cost basis. Beverage distributors have an even higher percentage of their tot al costs 23

allocated to their sales forces. Yet, how can beverage companies get the most out of their investments and ensure that their sales forces are operating optimally? Properly managed commission programs allow beverage companies to effectively motivate their sales forces to increase or maintain volume by brand or package. A commission could be a rebate, discount, or other payment to a third party or in-house employee. In order to actively manage sales behavior, it should be paid when the internal or external sales representative meets a pre-established benchmark for a tracked metric. The commission could take the form of either a cash payment or an item. While commissions are usually paid based on sales volume, best-in-class companies take a more holistic view of commission metrics. Some other important measures include: Account revenue growth Profit results Number of new accounts Customer service metrics Account retention.

Manage safety requirements through tracking and traceability As recent history has shown, the ability to track inventory accurately and to perform a timely and cost-effective product recall is critical in the beverage industry. Inventory items need to be tracked, monitored, and controlled in different ways and at very detailed levels. In each individual plant or warehouse, each resource requires a different level of control/analysis. Food safety legislation, such as EU Directive 178, impacts the whole process flow. Traceability is a goal that must be achieved over the entire value chain, requiring a batch control system that is able to track and document all related characteristics.

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At the batch level, it is now possible to assign different product attributes when searching for the product including: Manufacturing Expiration Dates Shelf Life Dates

Classifying production lots into batches allows companies to identify specific inventory and automatically record its history, including the history of the raw materials (and their associated batch numbers) used in its production. In other words, it allows full recall of the materials that have been involved in the overall manufacturing process. These improvements reduce the companys exposure to litigation and regulatory fines. In addition, track and trace improvements help companies to maintain high quality standards, which is often a selling point that differentiates one brand from another and that can command a price premium with the consumer. Recording and tracking that quality is critical. In the final analysis, soft drink companies must strive for the highest quality standards they can achieve ones that are superior to those of their competitors.

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Optimize the extended supply chain In a business environment characterized by strong competition, changing consumer preferences, a complex distribution channel, and conflicting relationships between soft drink manufacturers and distributors, the beverage supply chain is under significant pressure. Moreover, the worlds dominant grocery retailers (with Wal-Mart paving the way) continue to demand increasingly better service quality and shorter order to delivery cycles from manufacturers. This confluence of factors is forcing manufacturers to become more efficient, while taking pricing power out of their hands. The need for both improved supply chain agility and cost-efficiency is challenging suppliers to re-assess how they plan and manage their supply chains. The logistic chain must be able to sustain brands, products and services cohesively, while taking into account different channels, customers, points of sale and customer needs. Accordingly, companies should consider taking the following steps to improve their supply chains:

Ensure product availability on-shelf On-shelf availability is becoming a

critical issue for both manufacturers and retailers. A system that avoids out-ofstocks improves consumer value, builds brand and store loyalty, increases sales and most importantly boosts category profitability. The traditional practice of filling out-of-stocks with other products is no longer sufficient particularly from the manufacturers point of view. If consumers cannot find the brand they want, their loyalty to that brand suffers. A 2002 GMA study found that out-of-stocks jeopardize $6 billion in retail sales every year. Less conservative estimates put this figure as high as $20 billion.

Flexible ordering; flexible delivering Most retailers are demanding

increased flexibility in order lead-times and delivery methods, putting additional pressures on the supply chains of manufacturers and distributors. To withstand these pressures, companies need to streamline product movement through programs such as store-specific shipments. They must also meet the strategies of progressive retailers, which require flow-through distribution and cross-docking.

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Accurately forecast demand Properly forecasted demand drives two of

the primary metrics used to measure the efficiency of a beverage companys supply chain: customer service and inventory. Accurate forecasts are essential to achieving improved customer service and lower inventory levels. Even with recent success in developing and maintaining efficient supply chain processes, forecasting inaccuracy remains a significant industry problem. According to the 2003 GMA Logistics Study, more than one-third of all forecasts are inaccurate at the national level. This figure jumps to almost one out of every two at the regional (distribution-center) level. Meanwhile, at the store level, differences in store formats and sizes hamper the forecasting process, and few have the tools to accurately manage the sheer volume of data generated by forecasting. Furthermore, many manufacturers do not have the technology to properly support their planning and forecasting efforts. Many manufacturers are still forecasting sales in months, although their plants run on weekly plans. That means they have to squeeze weekly totals out of monthly boxes.

Implement a fully integrated empties management process

Empties management is the process of managing returnable containers, including kegs, CO2 tanks, bottles and crates(an essential part of direct store delivery). A successful empties management system gives the manufacturer a detailed picture of the entire empties lifecycle, including the location and status of a companys assets. This process:

Lowers costs by controlling high-value empties assets Increases control by managing empties at customer locations Decreases manufacturing issues by tracking empties. Reduce time-to-market for new products
An efficient new product development system is essential in the beverage industry. New products need to be brought to market quickly in order to capitalize on changing consumer preferences and competitive threats. However, new products must be developed tactically, and the products potential must be understood and analyzed before

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it hits the market. Currently, success rates for new products are astonishingly low dropping from 75% to 25% in the last decade according to AMR and most fail within the first two years after introduction. The companies that are best able to execute the whole product development cycle will clearly have an advantage. This requires reducing time-to-market as well as making effective use of scarce internal resources and improving collaboration with partners. In addition, great attention must be paid to aligning the related marketing initiatives (e.g. advertising, sales promotions, etc.) with the new product introductions. Innovation is one of the primary growth drivers for beverage companies, and it can involve changes to the product itself or to the products packaging: Product innovation Focuses on providing new tastes and flavors to demanding consumers. Packaging innovation - Emphasizes developing differentiated packaging according to the consumption situation. Often, beverage manufacturers use packaging innovation to increase product shelf life. To ensure new product success, beverage companies must oversee the integration, consolidation and reuse of knowledge from all involved parties (including beverage manufacturers and bottlers), from R & D through production, and down to sales, marketing, and financials. By emphasizing greater collaboration and implementing Web-based workflow, beverage companies can reduce lead-time from concept to shelf by 25 - 40% and, at the same time, better integrate safety controls into the development process.

Increase customer retention through effective trade promotions:

In an environment characterized by strong retailers and discriminating consumers, beverage companies must utilize processes and tools to protect their market shares. To do this, they must make a favorable impact at the point of sale through promotional activity.

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Trade promotions have become a necessary and expensive cost of doing business. With a sizable percentage of volume being driven through a smaller base of retailers, the competition for shelf space has never been higher. If a beverage company fails to execute a trade promotion at Wal-Mart, a competitor will. Furthermore, as trade promotions have proliferated over the past few years, they have also become more targeted. In response, beverage companies must create promotions for specific demographics, channels, and retailers, which make the sales process more costly and complex. Trade promotions vary widely in terms of method, approach, and structure. Many local promotions are run ad-hoc with marginal capital investments by field sales associates, while others require significant investment and involve pre-scheduling in co-operation with national chains. Two of the most commonly used trade promotions in the beverage industry are coupons and rebates. Coupon and rebate management are critical to enhancing relationships between the beverage manufacturer and wholesalers, customers and, in the case of coupons, consumers.

Coupon programs, which are in essence trade promotions addressed to the final
consumer, are mainly executed via discounts at large retailers. The coupon, a certificate with a stated value, can be applied immediately or reserved for the next purchase. A properly executed coupon program enables beverage companies to pass savings directly to the end consumer. On the other hand, rebate programs are trade promotions addressed to the retailer. Therefore, contractual terms and conditions between the manufacturer and the retailer must be monitored and executed. Rebates are often part of special trade promotions, and management of the rebates typically follows one of the following flows:

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Figure - Rebate management in direct sales

Figure- Rebate management in Indirect Sales

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Improve margins by optimizing the telesales channel

For a large number of companies in the beverage industry, telephone sales is the primary method of order taking and customer interaction. An effective telesales process can increase revenues and complement other sales processes, such as DSD and field assets management. This is accomplished by integrating the phone sales function with the companys other operations. When correctly executed, inbound and outbound telesales functionality enables companies to manage effectively and efficiently all contacts related to sales and customer services. In addition, it helps build client relationships, sell new business, and expand and retain the current customer base. Well-implemented telesales functionality also enables business processes to be integrated and standardized. This effectively closes the loop, creating a consistent experience for customers within a multi-channel environment. Some of the key benefits that a company can gain through telesales include:

Revenue Enhancement
Improved sales effectiveness by consolidating the customer relationship Better up-selling Improved cross-selling Increased customer retention Expanded customer base Enhanced competitiveness via services that match or surpass those of competitors

Margin Improvement
Reduced costs for order processing Accelerated sales process 31

Lower sales costs in comparison to field sales Increased flexibility and speed to market Differentiated service levels according to customer relevance and need.

Implementing closed-loop processes between the telesales operations and other departments can provide agents with a comprehensive view of all customer interactions across the enterprise in real time. In order to optimize the telesales channel, agents must have tools to manage the entire sales process, from generating leads, planning calls, and prioritizing sales opportunities and activities, to managing contacts and placing orders quickly. Business performance improvement priorities the path to value Against the backdrop of these market challenges, how can soft drink companies drive profitable growth and create value for their owners or shareholders? In practical terms, there are four areas on which companies in the soft drink business need to focus: Revenue protection and enhancement for example, as driven by product and packaging innovation, differentiated quality, improved product availability, and better management of customer relationships Cost reduction/margin improvement for example, through improved operational efficiency, lower labor costs, reduced waste and the capture of operational synergies from acquisitions Improved asset utilization for example, through reduced inventory levels of soft drinks held in cold storage and faster turnaround of re-usable transit packaging in the supply chain Regulatory/assurance for example, through demonstrating quality by participating in retailer assurance schemes and assisting trade customers in achieving full compliance with new traceability legislatiON

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PEPSICO INTERNATIONAL HISTORY OF PEPSICO

1893--Caleb Bradham, a young pharmacist from New Bern, North Carolina, begins
experimenting with many different soft drink concoctions; patrons and friends sample them at his drugstore soda fountain.

1898--One of Caleb's formulations, known as "Brad's Drink," a combination of

carbonated water, sugar, vanilla, rare oils and cola nuts, is renamed "Pepsi-Cola" on August 28, 1898. Pepsi-Cola receives its frist logo.

1902-- Bradham applies for a trademark with the U.S. Patent Office, Washington D.C.,
and forms the first Pepsi-Cola Company.

1905--Pepsi-Cola's first bottling franchises are established in Charlotte and Durham,

North Carolina. Pepsi receives its new logo, its first change since 1898.

1934--A landmark year for Pepsi-Cola. The drink is a hit and to attract even more sales,
the company begins selling its 12-ounce drink for five cents (the same cost as six ounces of competitive colas). Caleb Bradham, the founder of Pepsi-Cola and "Brad's Drink," dies at 66 (May 27th, 1867-February 19th, 1934).

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1941--The New York Stock Exchange trades Pepsi's stock for the first time.
In support of the war effort, Pepsi's bottle crown colors change to red, white, and blue.

1960--Young adults become the target consumers and Pepsi's advertising keeps pace
with "Now it's Pepsi, for those who think young."

1963-- Pepsi-Cola continues to lead the soft drink industry in packaging innovations,
when the 12-ounce bottle gives way to the 16-ounce size. Twelve-ounce Pepsi cans are first introduced to the military to transport soft drinks all over the world.

1965--Expansion outside the soft drink industry begins. Frito-Lay of Dallas, Texas, and
Pepsi-Cola merge, forming PepsiCo, Inc. Military 12-ounce cans are such a success that full-scale commercial distribution begins.

1970--Pepsi introduces the industry's first two-liter bottles. Pepsi is also the first
company to respond to consumer preference with light-weigh, recyclable, plastic bottles.

1984--Pepsi advertising takes a dramatic turn as Pepsi becomes "the choice of a New
Generation."

1985--After responding to years of decline, Coke loses to Pepsi in preference tests by

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reformulating. However, the new formula is met with widespread consumer rejection, forcing the re-introduction of the original formulation as "Coca-Cola Classic." The cola war takes "one giant sip for mankind," when a Pepsi "space can" is successfully tested aboard the space shuttle.

1991-- Pepsi introduces the first beverage bottles containing recycled polyethylene
terephthalate (or PET) into the marketplace. The development marks the first time recycled plastic is used in direct contact with food in packaging.

1992-- Pepsi-Cola and Lipton Tea Partnership is formed. Pepsi will destribute single
serve Lipton Original and Lipton Brisk products.

1994-- Pepsi Foods International and Pepsi-Cola International merge, creating the
PepsiCo Foods and Beverages Company.

1997-- PepsiCo. announces that it will spin off its restaurant division to form Tricon
Global Restaurants, Inc. Including Pizza Hut, Taco Bell, & KFC, it will be the largest restaurant company in the world in units and second-largest in sales.

1998-- Pepsi celebrates its 100th anniversary.

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PEPSICO THE PARENT COMPANY

PepsiCo, Inc. is one of the world's largest food and beverage companies. The company's principal businesses include:

Frito-Lay snacks Pepsi-Cola beverages Gatorade sports drinks Tropicana juices Quaker Foods

PepsiCo, Inc. was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay. Tropicana was acquired in 1998. In 2001, PepsiCo merged with the Quaker Oats Company, creating the worlds fifth-largest food and beverage company, with 15 brands each generating more than $1 billion in annual retail sales. PepsiCos success is the result of superior products, high standards of performance, distinctive competitive strategies and the high level of integrity of our people. Pepsi-Cola North America, headquartered in Purchase, N.Y., is the refreshment beverage unit of PepsiCo Beverages and Foods North America, a division of PepsiCo, Inc. PepsiCo Beverages and Foods North America also comprises PepsiCo's Tropicana, Gatorade and Quaker Foods businesses in the United States and Canada. Pepsi-Cola North America's carbonated soft drinks, including: Pepsi, Diet Pepsi, Pepsi Twist, Mountain Dew, Mountain Dew Code Red, Sierra Mist, and Mug Root Beer account for nearly one-third of total soft drink sales in the United States. Pepsi-Cola North America's non-carbonated beverage portfolio includes Aquafina, which is the number one brand of bottled water in the United States, Dole single-serve juices and SoBe, which offers a wide range of drinks with herbal ingredients. The company also makes and markets North America's best-selling, ready-to-drink iced teas and coffees via joint ventures with Lipton and Starbucks, respectively. 36

OVERVIEW PEPSICO
The PepsiCo challenge (to keep up with archrival The Coca-Cola Company) never ends for the world's #2 carbonated soft-drink maker. The company's soft drinks include Pepsi, Mountain Dew, and Slice. It owns Frito-Lay, the world's #1 maker of snacks such as corn chips (Doritos, Fritos) and potato chips (Lay's, Ruffles). Cola is not the company's only beverage: PepsiCo sells Tropicana orange juice brands, Gatorade sports drink, and Aquafina water. PepsiCo also sells Dole juices (licensed) and Lipton ready-to-drink tea (licensed from Unilever). Its Quaker Foods division offers breakfast cereals (Life), pasta (Pasta Roni), rice (Rice-A-Roni), and side dishes (Near East). Wal-Mart is PepsiCo's largest customer, accounts for 9% of sales. PepsiCo may be vying for more Pepsi-drinking people but its hefty snacks and juice sales help to quench the company's thirst for bottom-line growth. Frito-Lay's salty snacks rule the US market; the snack division accounts for about one-third of company sales. The company announced a major restructuring in 2007, splitting its two business units (Pepsi-Cola North America and PepsiCo International) into three: one for US food, a second for US drinks, and a third for food and drinks abroad. CEO Indra Nooyi said that due to the company's healthy growth in recent years, PepsiCo is approaching a size that can be better managed as three units rather than two. The split looks like this: PepsiCo Americas Foods includes Frito-Lay North America, Quaker, and the Latin American food and snack businesses; PepsiCo Americas Beverages includes North American beverage sales, including Gatorade and Tropicana; and PepsiCo International includes business in the UK, the rest of Europe, Asia, the Middle East, and Africa. With a saturated soft-drink market, the company continues to try new iterations: In 2007 the company introduced its first vitamin-enhanced water, called Aquafina Alive. It signed a licensing agreement with Ben & Jerry's in 2006 for the sale of Ben & Jerry's milkshakes

37

in the US, as well as a deal with Starbucks for the distribution of the coffee purveyor's Ethos water brand. Hot on the heels of Coke's introduction of Blak, in 2006 Pepsi launched a coffee-flavored cola, named, Pepsi Max Cino, in the UK. Venturing further into the non-cola category, PepsiCo acquired sparkling juice companies IZZE and Naked Juice in 2006. It also began selling Fuelosophy, a smoothie drink, at organic grocery store chain Whole Foods, and struck a deal to develop products with juice maker Ocean Spray Cranberries. Bowing to the public's growing concern about childhood obesity, in 2006 Pepsi, along with Coca-Cola, Cadbury Schweppes, and the American Beverage Association agreed to sell only water, unsweetened juice, and low-fat milk to public elementary and middle schools in the US. As for high schools, the agreement calls for no sugary sodas to be sold and one-half of the offered drinks to be water, diet sodas, lemonade, or iced tea. The agreement was facilitated by former president Bill Clinton. CEO Steve Reinemund stepped down as CEO in 2006 in order to spend more time with his family. His replacement was Indra Nooyi, the company's president and CFO. Indianborn Nooyi, the 11th female CEO of a FORTUNE 500 company, has been instrumental in strategic decisions at the company, such as the acquisition of Tropicana and merger with Quaker Oats. Shortly after her appointment, Nooyi restructured the top level of power at the company. She appointed John Compton, previously head of the Quaker-Tropicana-Gatorade unit, to the newly created position of CEO for PepsiCo North America, reporting directly to her.

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HOW PEPSICO OVERCAME COMPETITION

How PepsiCo outgunned Coke:
Losing the cola wars was the best thing that ever happened to Pepsi while Coke was celebrating, PEPSI took over a much larger market. Pepsi beat Coke in December for the first time in their 108-year rivalry, surpassing its nemesis in market capitalization. The great irony of Pepsi's rise is this: It has never sold more soda than Coke, even today. "Pepsi's been on fire," notes Robert van Brugge, beverage analyst with Sanford 55Bernstein. Over the past five years its stock has risen more than a third, while Coke's has sunk 30 percent. Even ten years ago, it was easy to write off PepsiCo (Research) as the loser in the cola wars against Coke (Research): the proof was everywhere. The company's profits trailed those of its rival in Atlanta by 47 percent. Its value in the stock market was less than half of Coca-Cola's. Coke's CEO at the time, Roberto Goizueta, was so sure of his company's dominance that he practically dismissed Pepsi, telling FORTUNE, "As they've become less relevant, I don't need to look at them very much anymore." PepsiCo turned its cola Waterloo into an opportunity to retrench, regroup, and ultimately outflank its old foe. Losing the cola wars, it turns out, was the best thing that ever happened to Pepsi. It prompted Pepsi's leaders to look outside the confines of their battle with Coke. A decade ago, Coke offered investors a compelling story: a recession-resistant product inexpensive enough that consumers would buy it in good times and bad, but valued enough that they would willingly pay an extra nickel or so above what no-name brands charged.

39

What Coke investors didn't envision was that an emerging preference for other soft beverages --water, sports drinks -- would fracture demand. Nor did they see that the business strengths that once applied to cola would take hold across a broadened soft drink and snack-food market -- a market that Pepsi, and not Coke, dominated. "They were the first to recognize that the consumer was moving to noncarbonated products, and they innovated aggressively," observes Gary Hemphill of Beverage Marketing. PepsiCo embraced bottled water and sports drinks much earlier than its rival. Pepsi's Aquafina is the No. 1 water brand, with Coke's Dasani trailing; in sports drinks, Pepsi's Gatorade owns 80 percent of the market while Coke's Powerade has 15 percent. Throughout the past five years under CEO Steve Reinemund, the company has deftly moved with every shift in consumer tastes. "He's thinking about what the products should look like in the future," says Victor Dzau, a director of PepsiCo.

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Sustainable competitive advantage

Three major sustainable competitive advantages give PepsiCo a competitive edge as it operates in the global marketplace: Big muscular brands; Proven ability to innovate and create differentiated products; and Powerful go to market systems. Cost and Quality. Timing and know how. Strongholds. Deep pockets.

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Strategic Competitive Advantage

Exploitation Profits from a sustained competitive advantage Launch Counterattack

Traditional View

Time Firm has already moved to advantage 2 Profits from a series of actions Exploitation Counterattack

Hypercompetition
Time

Launch

Coke: 1886; Pepsi: 1893. 1933: Pepsi struggling to stave off bankruptcy. Dropped price of its 10c, 12 oz. bottle to 5c, making it a better value. Ad jingle twice as much for a nickel better known in the US than the Star Spangled Banner.

Price / Ounce

Coke Pepsi Coke Price / Ounce

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Pepsi

Perceived Quality

Perceived Quality

Pepsi keeps price advantage through 60s and 70s, when Pepsi charged its bottlers 20% less for its concentrate. With rising ingredient costs, Pepsi could no longer offer twice as much for the same price. So, it raised price to Cokes level giving it a war chest to fuel an aggressive ad campaign. Battle shifted from Price to Quality, with Pepsi targeting the youth. What followed was the Pepsi Challenge & Real Thing Coke ads

Price / Ounce

Pepsi

Youth & Middle Class Segments Perceived Quality

Price / Ounce

Coke

First move: Pepsi Challenge 2nd move: Cokes Ad war Perceived Quality

Perceived quality caught up. Deeper pocketed and lower cost Coke initiated a price war in selective markets where Pepsi was weak in the 70s. Pepsi responded with its discounts and by the end of the 80s, 50% of food store sales were on discount Other companies moved into the lower left quadrant of the market. But the two major players forced price down to ultimate value. To break price spiral, Coke launched New Coke to keep Coke loyals and induce switching among Pepsi buyers. But this move from Coke was rejected by the market.

43

Attempts to move to next arena via niches in caffeine and sugar substitutes were adopted.

Price / Ounce

Price / Ounce

Generics RC Cola

Coke & Pepsi Price Spiral

NewCoke Classic Coke & Pepsi Actual NewCoke Intended Perceived Quality

Perceived Quality

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PEPSICO INDIA
Introduction:
PepsiCo entered India in 1989 and in the span of a little more than a decade it became the country's largest selling soft drinks company. The Company has invested heavily in India making it one of the largest multinational investors. The group has built an expansive beverage, snack food and exports business and to support the operations are the group's 43 bottling plants in India, of which 15 are company owned and 28 are franchisee owned.

PepsiCo stays committed to providing its consumers with top quality beverages. Its diverse portfolio of brands include the flagship cola brand - Pepsi; Diet Pepsi; 7Up; Mirinda; Mountain Dew; Slice fruit drink; Tropicana brand 100% fruit juices in various flavours; Aquafina packaged drinking water; Gatorade plus local brands Lehar Evervess Soda, Dukes Lemonade and Mangola.

PepsiCo is also a dominant player in the snack food segment in India. PepsiCo's snack food company Frito-Lay is the leader in the branded potato chip market. It manufactures Lay's Potato Chips; Cheetos extruded snacks, Uncle Chips; traditional namkeen snacks under the Kurkure and Lehar brands; and Quaker Oats.

PepsiCo is one of the largest MNC exporters in India and its export business consist of three categories - agri business, commodities and Pepsi system sales. PepsiCo has made significant investments with the Punjab Agriculture University to develop a comprehensive agro-technology program that has helped thousands of farmers across India improve the yield of their farms and the quality of their agricultural products. PepsiCo has leveraged its knowledge in contract farming to develop seaweed cultivation

45

in Tamil Nadu and has partnered with the Government of Punjab to help farmers of the state through the utilization of developed technology for citrus farming.

As part of its sustainable development initiatives, PepsiCo India has been a committed leader in the promotion of rain water harvesting, water conservation recycling and the reduction of effluent discharge. PepsiCo has also established zero waste centers and PET recycling supply chains and assisted victims of natural disasters. PepsiCo stays dedicated in its endeavor to develop community outreach programs by supporting rural water supply schemes, administering medical camps in villages, providing computers to rural schools and creating opportunities for women in rural areas through vocational training as an alternate means of livelihood.

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OVERVIEW OF PEPSICO INDIA:

PepsiCo Mission "To be the world's premier consumer products company focused on convenience foods and beverages. We seek to produce healthy financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity." PepsiCo in India PepsiCo entered India in 1989 and has grown to become one of the countrys leading food and beverage companies. One of the largest multinational investors in the country, PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India.

PepsiCo India and its partners have invested more than U.S.$700 million since the company was established in the country. PepsiCo provides direct employment to 4,000 people and indirect employment to 60,000 people including suppliers and distributors. PepsiCo nourishes consumers with a range of products from treats to healthy eats, that deliver joy as well as nutrition and always, good taste. PepsiCo Indias expansive portfolio includes iconic refreshment beverages Pepsi, 7 UP, Mirinda and Mountain Dew, in addition to low calorie options such as Diet Pepsi, hydrating and nutritional beverages such as Aquafina drinking water, isotonic sports drinks - Gatorade, Tropicana100% fruit juices, and juice based drinks Tropicana Nectars, Tropicana Twister and Slice. Local brands Lehar Evervess Soda, Dukes Lemonade and Mangola add to the diverse range of brands.

PepsiCos foods company, Frito-Lay, is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG. It manufactures Lays Potato Chips,

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Cheetos extruded snacks, Uncle Chipps and traditional snacks under the Kurkure and Lehar brands. The companys high fibre breakfast cereal, Quaker Oats, and low fat and roasted snack options enhance the healthful choices available to consumers. Frito Lays core products, Lays, Kurkure, Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets. The group has built an expansive beverage and foods business. To support its operations, PepsiCo has 43 bottling plants in India, of which 15 are company owned and 28 are franchisee owned. In addition to this, PepsiCos Frito Lay foods division has 3 state-ofthe-art plants. PepsiCos business is based on its sustainability vision of making tomorrow better than today. PepsiCos commitment to living by this vision every day is visible in its contribution to the country, consumers and farmers. Performance With Purpose Performance with Purpose articulates PepsiCo India's belief that its businesses are intrinsically connected to the communities and world that surrounds it. Performance with Purpose means delivering superior financial performance at the same time as we improve the world. To deliver on this commitment, PepsiCo India will build on the incredibly strong foundation of achievement and scale up its initiatives while focusing on the following 4 critical areas that have a business link and where we believe that we can have the most impact.

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PEPSICO INDIA WITH RKJ GROUP:

Vision
Being the best in everything we touch and handle. Mission Continuously excel to achieve and maintain leadership position in the chosen businesses; and delight all stakeholders by making economic value additions in all corporate functions. It can be said with absolute certainty that the RKJ Group has carved out a special niche for itself. Our services touch different aspects of commercial and civilian domains like those of Bottling, Food Chain and Education. Headed by Mr. R. K. Jaipuria, the group as on today can lay claim to expertise and leadership in the fields of education, food and beverages.

The business of the company was started in 1991 with a tie-up with Pepsi Foods Limited to manufacture and market Pepsi brand of beverages in geographically pre-defined territories in which brand and technical support was provided by the Principals viz., Pepsi Foods Limited. The manufacturing facilities were restricted at Agra Plant only. Varun Beverages Ltd. is the flagship company of the group.The group also became the first franchisee for Yum Restaurants International [formerly PepsiCo Restaurants (India) Private Limited] in India. It has exclusive franchise rights for Northern & Eastern India. It has total 46 Pizza Hut Restaurants & 1 KFC Restaurant under its company.

The group added another feather to its cap when the prestigious PepsiCo International Bottler of the Year award was presented to Mr. R. K. Jaipuria for the year 1998 at a glittering award ceremony at PepsiCos centennial year celebrations at Hawaii, USA. The award was presented by Mr. Donald M. Kendall, founder of PepsiCo Inc. in the presence

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of Mr. George Bush, the 41st President of USA, Mr. Roger A. Enrico, Chairman of the Board & C.E.O., PepsiCo Inc. and Mr. Craig Weatherup, President of Pepsi Cola Company.

Strategic Divisions:
PepsiCo India consists of different divisions that include Beverage division, Snack food division and the Restaurant division (Yum Restaurants India Pvt. Ltd.). These divisions work as separate SBUs and have their separate management. PepsiCo India divided its beverage division into different operating divisions. The heads of these divisions report directly to the CEO. The heads of these divisions are in charge of their respective areas and are accountable for the proper functioning of all the regions. The FOBOs also report to the regional heads apart from the COBOs.

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MARKETING OVERVIEW OF PEPSICO INDIA

Marketing Environment:
Marketing environment is the overall environment in which a Company operates. This consists of the Task Environment and the Broad Environment.

Task Environment
Task Environment includes the immediate players involved in producing, distributing and promoting the offering. The main players are the company, suppliers, distributors, dealers and the target customers. Suppliers include the material and service suppliers such as marketing research agencies, advertising agencies, banking and insurance companies, transportation companies, and telecommunications companies. The dealers and distributors include agents, brokers, manufacturer representatives and others who facilitate finding and selling to customers. The suppliers for PepsiCo India include the bottle suppliers for the soft drinks. These include the Pet bottles and the Glass bottles. One of the most vital products required in the operation is Refrigerator. PepsiCo does not manufacture the refrigerators, instead they are supplied by different vendors who get time bound contracts from the company. The distributors and dealers are part of the sales and distribution network. This will be explained later under the section of Place, in the 4 Ps segment. The target customer for PepsiCo is primarily the youth. But, because of increasing competition from Coke PepsiCo has expanded its target customer base which now includes people who are prospects for beverages beyond the CSD category. PepsiCo has started targeting this segment by offering products in the Non- CSD category, these include fruit based non-carbonated drinks, juice based drinks, energy drinks, sports drinks, snack food (from the snack food division i.e. Frito Lay).

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Broad Environment:
This contains forces that can have a major impact on the players in the task environment. This includes six components: demographic environment, economic environment, physical environment, technological environment, political legal environment, and socio cultural environment. Companies need to pay close attention to the trends and developments in these environments and make timely adjustments to their marketing strategies in order survive and succeed in the market. This will be explained in detail in the strategic marketing segment.

Value Delivery Process:

The value delivery process consists of the value creation and delivery sequence. This is done in three phases. The first phase, choosing the value, represents the homework done by the marketing department before the product exists. Marketing is required to segment the market, select the appropriate the target market, and develop the offerings value proposition. This is known as Segmentation, Targeting and Positioning and is the essence of strategic marketing. Once the business unit has chosen the value, the second phase is providing the value. Marketers need to determine specific product features, prices and distribution. The task in the third phase is communicating the value by utilizing the sales force, sales promotion, advertising, and other communication tools to announce and promote the product. Each of these value phases has different cost implications.

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Choose the Value (Strategic Marketing) Customer Segmentation Market Selection / Focus Value Positioning

Provide the Value (Tactical Marketing) Distributi on / Servicing Sourcing / Making Pricing Service Develop ment Product Develop ment

Communicate the Value (Tactical Marketing) Sales Force Sales Promotion Advertising

Fig. 2 Value Creation and Delivery Sequence

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Generic Value Chain:

Firm Infrastructure Suppo rt Activit ies Human Resource Management Technology Development Procurement Outbound Logistics Marketing and Sales
Margin

Inbound Logistics

Operations

Service

Primary Activities

The generic value chain is a tool to identify ways to create value for the customer. This model proposes that every firm is a synthesis of activities performed to design, produce market, deliver and support its product. In order to be more precise only the primary activities in the value chain of PepsiCo India are analyzed.

Primary Activities: Inbound Logistics This involves bringing and procuring raw materials for the
business. For the carbonated drinks industry only two raw materials are required, they are water and the concentrated salt that is used to produce the final product. For this purpose water is extracted from the ground and the concentrated salt is provided by PepsiCo India to all the plants in the country.

Operations Operations primarily includes all the bottling plants. Currently there are
32 bottling planting in India that operate for PepsiCo. Of the 32 plants, 15 are owned by PepsiCo and the rest 17 are (FOBO), owned by R K Jaipuria Group.

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Outbound Logistics The Outbound logistics of Pepsi can be divided into three
stages. First the finished product from the bottling plants is sent to the depot or the territorial office, from where it is sent to the C & F centers and the Distributor Points according to their demand. From the C & F centers and Distributor Points the product is sent out for sale in the market to the retailers.

Marketing and Sales The sales and distribution network of Pepsi is very strong
and comprises of different layers and a dedicated sales force. This is one of the important factors for the success of Pepsi. To keep the company abreast with competition and to provide support to its channel partners and to increase the sales, PepsiCo puts lot of effort in its marketing activities. This includes maintaining excellent relations with its channel partners, making huge investments in Advertising, signing of Megastars as its brand ambassadors, sponsoring various events, launching promotional for any launch or re launch of a product.

Service In this industry after sales service is generally not required. The only
exception being leak or burst bottles. In that case, the shopkeeper gets replacement for plastic bottles from the salesmen instantly, while the replacement for glass bottles is provided between 25th and 30th of every month. They are required to collect all the damaged glass bottles and give to the respective salesperson who gives them the replacement within the next few days after getting it approved from the CE or ADC.

Marketing Mix / 4 Ps:

Marketing Mix has been defined as the set of marketing tools that a firm uses to pursue its marketing objectives. These tools are classified into four broad groups, namely, Product, Price, Place and Promotion. Marketing mix decisions should be made to influence trade channels as well as final consumers. A firm can alter any of the four Ps accordingly, including changes in the product and distribution channel as well. 55

The four Ps represent the sellers view of the marketing tools available for influencing buyers. Whereas, from a buyers point of view, each marketing tool is designed to deliver a customer specific benefits according to his or her requirements.

Marketing Mix

Target Market

Place Channels Coverage Marketing Variables: The Four P Components of the Marketing Mix Assortments Locations Inventory Transport 56

Product

Product

Prod. Variety Prod. Variety Quality Quality Design Design Features Features Brand Name Brand Name Packaging Sizes Packaging Services Sizes Warranties Services Returns Warranties Returns

Price List Price Discounts Allowances Payment period Credit Payments

Promotion Sales Promotion Advertising Sales Force Pubic Relations Direct Marketing

Fig. 3 Four Ps

Product:Pepsi offers different variety of products ranging from carbonated to Non

Carbonated Soft Drinks. These include Pepsi Cola Mirinda ( Lemon and Orange ) 7 Up Dew Slice Tropicana Aquafina (Mineral Water)

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These Products come in different size 200 ml, 300 ml, 600 ml, 1200 ml, 2 lt. there are nearly 42 SKUs which are monitored and regulated on daily basis.

Product Quality:
This is one of the most important aspects that any Co. needs to address. Specially in the case of Pepsi this is even more important because of the controversies and claims regarding the CSE report on Pesticides in Pepsi. Therefore pepsi has to maintain stringent quality norms and standards and norms. Pepsi does that by following one quality standard worldwide and according to the official website of pepsi, the Co. maintains that : At every level of Pepsi-Cola Company, we take great care to ensure that the highest standards are met in everything we do. In our products, packaging, marketing and advertising, we strive for excellence because our consumers expect and deserve nothing less. We promise to work toward continuous improvement in all areas of our organization. At every step of our manufacturing and bottling process, strict quality controls are followed to ensure that Pepsi-Cola products meet the same high standards of quality that consumers have come to expect and value from us. We also follow strict quality control procedures during the manufacturing and filling of our packages. Each bottle and can undergoes a thorough inspection and testing process. Containers are then rinsed and quickly filled through a high-speed, state-of-the-art process that helps prevent any foreign material from entering the product. Additional quality control measures help to ensure the integrity of Pepsi-Cola products throughout the distribution process, from warehouse to store shelf.

Brand Name:

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This is the most important thing any Co. in this Business needs to do if it wants to remain and succeed in the Business. Pepsi has successfully done that for so many years. Pepsi has targeted the youth and has invested heavily in advertising and building a brand image (by launching several campaigns and roping in mega stars such as Shahrukh, Sachin, ganguly, Dravid etc.) that attracts to the youth and this is one of the main reason for the success of Pepsi.

Packaging and Size : The products are available in packaging and sizes. This is done
to facilitate the use according to the requirements of the Customer. Different packaging also affects the usage pattern of the product in various markets. e. g. sale of 2 lt. bottles is high in areas in which middle and high income group customers stay. But the sale of 200 and 300 ml bottles is high in areas where people in the lower income group bracket stay. The sale of 600 ml bottles is high in areas where students etc. stay. Different packaging is also provided for different products like Tetra Packs, Pet Bottles and Glass Bottles (in 200 and 300 ml).

Services, Warranties, Returns : There are no warranties and services (post sales)
provided for these products but there is provision of returns in case there is any problem with the product, e.g. leak or burst bottle, half filled bottle etc. The pet or plastic bottles are returned the same day and a replacement is provided for the same but in the case of glass bottles the retailer has to collect all the burst bottles and return it to the salesman around 25th of every month to get a replacement.

Price:
List Price: The Price of each product is fixed and there is no discrepancy. Salesmen are not authorized to make any change, alteration or give discounts unless authorized by the Company.

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Discounts: Discounts are provided to Wholesalers and Slums but there is no discount for retailers. The discounts are negotiated directly with the Company and the C&F or the Distributor point is not involved in the price negotiation. Allowances: Allowances are given to salesmen on achieving their daily targets. This target is given to every Salesman everyday before he goes on his designated route. The Depot In charge (Sr. C E / C E) gives the target to every salesman in consultation with the TDM. Payment period and Credit terms: No credit is provided. The payment procedure is not flexible as the retailers are required to make on the spot payments. At times, they defer the payment and in that case, the Salesman either shows a shortage or pays the rest of the amount by himself. The wholesalers are also required to make in advance but at times they also defer the payment and make the payment at a later date.

Promotion:
Sales Promotion: This is the most frequently used form of promotion which is used to increase the sale of the selected product. These promotions are used from time to time depending upon the sale of the products. If the sale of any particular product declines or shows a declining trend then a suitable Sales Promotion Campaign is launched to increase the sale of that product. Advertising: Advertising is done by PepsiCo. COBO (Company owned Bottling Operations) and FOBO (Franchisee owned Bottling Operations) have no say in the advertising campaigns and their planning. The advertising account of Pepsi is handled by JWT (J Walter Thomson) in association with the Corporate office of PepsiCo India.

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Sales Force: There is a dedicated sales force at every C&F and Distributor point. Every Salesman is assigned a specific route that he has to cover every day. The Salesman has to take care of all the Shops on the designated route and address and inform (to the Sr. CE / CE) about any issue any retailer has on the route. The Salesmen are also assigned the task of providing all the information to the retailers regarding the daily schemes and the details of all the promotion schemes launched from time to time. These include informing the retailer about the promotional scheme, registration for the scheme, terms and conditions of the scheme etc. The Salesman is also assigned the task of registering maximum possible outlets on his assigned route.

Public Relations:
This is one important aspects related to the success of PepsiCo in India. Pepsi believes in maintaining good and healthy relations with all its Channel partners and every other person in the value chain. This has helped Pepsi in maintaining an extremely competitive position in the market in spite of the continuous onslaught from Coca Cola.

Place:
Channels: Channels are independent organizations involved in the process of making a product or service available for use or consumption. There are different intermediaries in channels that facilitate the availability of goods to the consumer. Coverage: Two things come under market coverage. These are Market Reach and Market Penetration. Market Reach can be termed as accessibility and Market Penetration can be termed as Frequency.

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FIG. 4 SALES AND DISTRIBUTION NETWORK OF PEPSICO INDIA.

COMPANY

COBO

FOBO

WAREHOUSE

C&F

DISTRIBUTOR

SALESMEN

SALESMEN

WHOLESALER

SLUMS

RETAILER

RETAILER

CUSTOMER

CUSTOMER

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Initially the focus of the Company remains on reaching all the markets and then the Company shifts its focus on increasing the frequency of sales in the respective markets so that the sales and profitability of the Company can be increased. Company (PepsiCo): PepsiCo India provides the salt to all the bottling plants in the Country that carry out the bottling operations.

COBO: These are Company owned bottling operations operating directly under the
Company. Out of 32 bottling plants, PepsiCo owns 15.

FOBO: These are Franchise owned bottling operations. R K Jaipuria group does all the
franchisee-bottling operations for PepsiCo India; currently R K J Group has 17 bottling plants for Pepsi.

Warehouses: These are Company or franchisee owned warehouses spread over various
locations that cover the respective territories and come under the purview of their respective Area or Territory Offices. Stocks are sent from the bottling plants to these warehouses, from where they are sent to the C & F centers and Distributor Points.

C & F Centers: These are the biggest centers in the distribution network and receive
proper assistance from the Company (either COBO or FOBO). The C & F center is owned by a private player and not by the Company. The vehicles (Delivery Vans) are owned by the Company, and the Salesmen at the C & F points are on the Company Payroll.

Distributors: These are small, compared to C & F centers. Everything at the

Distributor point owned and managed by the distributor, even the salespersons are on the Distributors payroll.

Wholesalers: These are smaller than C & F centers and Distributor points and get the
stock directly from the Company or Franchisee. They get their stock directly from the Company and thus get special rates and extra discounts from the Company.

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Slums: They are generally smaller than the Wholesalers are. However, they get special
discounts from the C & F centers and Distributor points. All the different players in the distribution channel namely C & F centers, Distributor points, Wholesalers and Slums have different designated markets and are not supposed to operate in the market designated to any other player.

Retailer: Retailers are the most important chain in the distribution channel of Pepsi as
they are the only point of contact with the customers. Retailers get their stock from all the other channel members in the distribution channel.

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STRATEGIC MARKETING OF PEPSICO INDIA

Demographic/ Economic Environment Technological/ Physical Environment

Marketing Intermediarie s

Marketing Information System 4 Ps

Target Customers

Marketin g Planning System Public

Suppliers

Marketin g Control System

Marketing Organization & Implementatio n System

Competitor s

Political/ Legal Environment

Social/ Cultural Environment

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Demographic / Economic Environment:

Demographic environment comprises of people of different ages and class. This helps the Company in identifying specific target market for specific products. Similarly, economic environment helps the Company in deciding how much to spend and accordingly price the products. Pepsi distributes its products considering this in mind. Cans are distributed in areas that have more youth population and two lt. bottles are distributed in areas that have more no. of families. 200 ml bottles are primarily distributed in areas with lower income group people.

Technical / Physical Environment:

Technical and physical environment refers to the technical capabilities and the infrastructural capabilities and requirements of the Company. Pepsi has access to the best technology for its products and it uses the same technology worldwide for its products. This was instrumental in helping Pepsi handle the pesticide controversy.

Political / legal Environment:

This is one of the most important factors that a company needs to consider while starting, establishing and expanding operations in any country. Legal Environment is important because a company needs to confirm to the laws of the land and carry out its operations accordingly. While political environment is important as it can play an important in forming opinions regarding the company. This is the reason why Pepsi operates in India in collaboration, initially it started its operations in India with Punjab Government and then it started its operations in the carbonated and non-carbonated beverage segment n collaboration with RKJ group.

Social / Cultural Environment:

This plays an important role in determining the acceptability of the product according to he socio cultural norms of the market and the effect the company has on each of these. Companies need to be very careful about this issue as people are very sensitive about their culture and may not tolerate any infringement. This determines the ingredients (of

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the products) and the type advertisement and promotions used by the Company. Because of these factors, Pepsi primarily uses Bollywood stars and Cricket stars in India as they are the biggest celebrities and role models and are widely accepted.

Market Intermediaries:
Market Intermediaries facilitate the availability of products to the customers. Primarily there are three strategies for distribution through market intermediaries. They are Exclusive distribution, Selective Distribution and Intensive Distribution. Exclusive Distribution means severely limiting the number of intermediaries. It is used when the producer wants to maintain control over the service level and outputs offered by the resellers. It often involves exclusive leading arrangements. Selective Distribution involves the use of few selective intermediaries who are willing to carry a particular product. It is used by established companies and by new companies seeking distributors. Intensive Distribution consists of the manufacturer placing the goods or services in as many outlets as possible. Pepsi primarily uses intensive distribution for its products. This is done to increase the market reach and market penetration of its products and to counter competition from its largest and biggest rival Coke. The sales and Distribution network of Pepsi is already discussed in detail. Suppliers: There are no suppliers for the carbonated beverage industry including PepsiCo. The salt used by all the bottling plants to make the beverages is supplied to them by PepsiCo irrespective of whether they are COBO or FOBO. The concentrated salt is the only ingredient apart from water that is required to manufacture the beverages.

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Competitors:
For Pepsi the biggest competition comes from Coke. Even outside India Coke is Pepsi biggest competitor. Because of the fierce competition from Coke, Pepsi has to be very aggressive in promoting itself through advertisements and other methods like sales promotions. This is evident in the immense expenditure Pepsi incurs on its advertisements and endorsements of its brand ambassadors.

Marketing Information System:

Definition Marketing Information System consists of people, equipment and procedure to sort, analyze, evaluate and distribute needed timely and accurate information to marketing decision makers. MIS is needed to counter issues like too much information, too little information, too late information and inaccurate information. The type of information required by Pepsi is regarding new products launched by its competitors primarily Coke, promotional schemes and daily schemes of Coke and new brand endorsements etc. Information regarding new product launches is required by PepsiCo so that they can accordingly plan their strategy, while information regarding promotional schemes and daily are required by all the regional and territorial offices so that they can accordingly introduce and test the schemes.

Marketing planning System:

This is required to make a marketing plan that is a central instrument for directing and coordinating marketing effort. The marketing plan primarily operates at two levels. Strategic Marketing plan This lays out the target market and the value proposition to be offered. Tactical marketing Plan Specifies marketing tactics, including product features, promotion, merchandising, pricing, sales channel and service. Decisions regarding strategic marketing plan are taken at the corporate level. While most of the decisions regarding tactical marketing plan are taken at the regional and territorial 68

level. These decisions are required for the formulation of marketing planning system for specific markets. These systems include methods of promotion, like sales promotion. Sales promotion primarily includes displays and incentives to retailers in the form of gifts, merchandise and discounts on purchase of products.

Marketing Control System:

It is a system comprising of different procedures and various levels of management to bring efficiency and to keep a check on different marketing functions within the organization. There are primarily four types of marketing control systems. These are, Annual Plan Control, Profitability Control, Efficiency Control and Strategic Control. Annual plan control These are top and middle management tasks that try to examine whether the planned results are being achieved. This is also done at regional offices apart from the corporate office. These regional offices comprise off the COBO and FOBO offices. These tasks primarily comprise off Sales analysis, Market share analysis, Sales to expense analysis, Sales to expense ratio, Financial analysis etc. In PepsiCo India, this is beyond annual plan. It is done on monthly basis, apart from annually and bi annually. The sales analysis is done to know the sales and sales trend of different brands individually and with respect to their competitors. Sales analysis is the primary tool to identify the type and scope of promotions launched by the Company. Profitability Control This is done to examine whether the company is making or losing money while carrying out its business. Profitability is measured in terms of product category, territory, segment, channels, order size etc. For PepsiCo India, the most profitable product / brand among all the products is Pepsi Cola. Every territory is required to monitor and increase its profitability. The territorial offices are required to report to the head office and send a detailed report for analysis and planning.

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Efficiency Control Used to evaluate and improve the spending efficiency and impact of marketing expenditures. Efficiency of sales force, advertising, sales promotion and distribution is measured. Sales force efficiency is primarily measured by scheduled calls, completed calls and strike rate. Scheduled calls are the total no. of outlets on a particular route. Completed calls are, total no. of outlets visited, and strike rate is the no. of outlets on which sales is successful. Salesmen are also judged on their monthly and weekly data and asked to improve their performance if it is not up to the mark. To motivate the sales force they are given daily targets and if they achieve their targets then they receive incentives accordingly. The incentives are announced in advance, the daily incentives are cash based and if any promotional incentives or monthly incentives are there, they are generally in the form of gifts or merchandise. Advertising efficiency is measured at the corporate level. Although it is generally believed that its very difficult to get a precise idea of the advertising efficiency, still some of the factors are taken into consideration to measure advertising efficiency. These can be summed up as, advertising cost per thousand target buyers reached by the media vehicle, percentage of audience who noted, saw, associated or read the Ad. Consumer opinions on the Ads content and effectiveness. Before and after measures of attitude towards the product. Advertising efficiency can also be improved by better product positioning, pre testing the Ads, looking for better media buys, and doing post testing. We will analyze the Advertising campaigns of PepsiCo India in greater detail later. Another important factor to be taken into consideration while analyzing the efficiency is the distribution efficiency. This is a very important aspect of the operations of PepsiCo India because this industry primarily relies on the push strategy and if the sales and distribution network is not strong then the company will not be able to achieve the desired the sales of its products and will also find it extremely difficult to cope with the competition from the largest soft drinks manufacturer in the world. The sales and distribution network of PepsiCo is very strong and has a very specific structure. PepsiCo makes sure that this structure is not altered and works within the specified framework and to its full potential. The effectiveness of the distribution network is judged based on market reach and market penetration. For this purpose, supervisors (sales executives)

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accompany the salesmen regularly and make sure that they cover all the shops on the route and also report and any issues found in the market. Strategic Control This is used to examine whether the Company is pursuing its best opportunities with respect to markets, products and channels. To do a proper assessment for strategic control different instruments including marketing audit, marketing effectiveness, marketing excellence review and the ethical and social responsibility review. Marketing audit is a comprehensive, systematic, independent and periodic examination of a companys or business units marketing environment, objectives, strategies and activities with a view to determine problem areas and recommending a plan of action to improve the companys marketing performance.

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SALES AND MARKETING HIERARCHY OF PEPSICO INDIA.

MUM

UM

UM

TDM

MDM

ADC

MDC

CE

ME

SALESPERSONS

MARKETING ASSISTANTS

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MUM Marketing Unit Manager:

In charge of specific zones (e.g. north, south, east, west) and report to the corporate office.

UM - Unit Manager:
In charge of day to day operations and supervision of all the functions within the organizations including operations, logistics, sales and distribution, marketing. The Unit Manager reports to the MUM.

TDM - Territory Development Manager:

TDM is the in charge of the sales and distribution network of a particular territory within a zone. Responsible for the daily, monthly and annual sales within the territory decides the daily schemes for products and incentives for salespersons. He is also responsible for cost effectiveness, profit generation and profit maximization within the territory.

MDM - Marketing Development Manager:

MDM is responsible for all the marketing activities and their effectiveness within a territory. Decides the format and time frame of the marketing and promotional activities and the incentives given to the retailers.

ADC - Area Development Coordinator:

Reports to the TDM, and is in charge of a C & F center and the distributor point in the area. He is directly responsible for any issues in the area and is supposed to ensure the smooth functioning of the entire sales and distribution network in the area. ADC is responsible for timely disposal of any issue faced by the retailers. He decides and approves the boards, displays and hoardings in the area.

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MDC - Marketing Development Coordinator:

Reports to MDM, and is in charge of carrying out all the marketing activities in the area. He is responsible for the execution and success of marketing and promotional activities. Coordinates with the outside agencies for displays, boards, checks conducted in the market. He is also responsible to keep a check on the expenditure of the marketing activities in the market.

CE - Customer Executive:
Reports to the ADC and is in charge of the salespersons. He is required to visit the market and accompany every salesperson as frequently as possible. He is the first person to get information about the market / area and is the first contact if the salespersons or retailers face issue. Responsible for assigning and achieving daily sales target given to the salespersons.

ME - Marketing Executive:
Reports to the MDC and is responsible for the daily functioning of the marketing activities in the including awareness of promotions in the market and the response in the market

Salesperson:
They are the most important asset for the company as they are the ones who sell the products, are responsible for acquiring new customers, and retain the old ones. Their work also includes informing the retailers about the promotions and any new scheme launched. They are also required to push for the sale of any new product launched in the market and make sure that the retailers are following the company guidelines regarding the launch and the maintenance of Vizicoolers. They report to the CE.

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Marketing Assistant:
Reports to the ME and is responsible for the distribution and usage of the displays and boards in the area. Also has to check whether retailers are following the guidelines of the company regarding promotional displays, other displays and displays in the Vigicoolers. They report to the ME. Pepsi is one of the most well known brands in the world today available in over 160 countries. The company has an extremely positive outlook for India. "Outside North America two of our largest and fastest growing businesses are in India and China, which include more than a third of the worlds population." (PepsiCos annual report, 1999) This reflects that India holds a central position in Pepsis corporate strategy. India is a key market for Pepsico, and at the same time the company has added value to Indian agriculture and industry. PepsiCo entered India in 1989 and is concentrating in three focus areas Soft drink concentrate, snack foods and vegetable and food processing. Faced with the existing policy framework at the time, the company entered the Indian market through a joint venture with Voltas and Punjab Agro Industries. With the introduction of the liberalisation policies since 1991, Pepsi took complete control of its operations. The government has approved more than US$ 400 million worth of investments of which over US$ 330 million have already flown in. One of PepsiCos key strategies was to develop a completely local management team. Pepsi has 15 company owned factories while their Indian bottling partners own 28. The company has set up 8 greenfield sites in backward regions of different states. PepsiCo intends to expand its operations and is planning an investment of approximately US$ 500 million in the next three years.

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Sustainable Competitive Advantage:

Competitive advantage is a companys ability to perform in one or more ways that its competitors cannot or will not match. When a company is able to maintain that advantage a long period of time that gives it an edge over its competitors then, this advantage is termed as sustainable competitive advantage. Any competitive advantage must be seen by customers as a customer advantage. Then only that competitive advantage can be transformed into a sustainable competitive advantage. Three major competitive advantages give PepsiCo India a competitive edge in the market place. They are:

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Big Muscular Brands built through better market positioning and heavy investment in advertising and promotions; Proven ability to innovate and create differentiated products through superior operating base; Powerful go to market system built with the help of superior relationship base and an impeccable sales and distribution network.

Making it all work are the extraordinarily talented and dedicated people who are an integral part of PepsiCo India.

Communicating with the Customer:

Marketing Communication is the means by which firms attempt to inform, pursued and remind consumers directly and indirectly about the products and brands they sell. Marketing Communication is the central instrument of making brand equity. Marketing Communication consists of six major modes of communications called the marketing communication mix. Advertising. Sales promotion. Events and Experiences. Public Relations and Publicity. Direct Marketing. Personal Selling.

Although PepsiCo uses all the modes in some form or the other, but this study will examine various aspects of communication with the internal customers.

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FIVE FORCES EFFECTING THE ENVIROMENT

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Bargaining Power of Suppliers 1. Supplier Concentration 2. Importance of Volume to Supplier 3. Differenciation of Inputs 4. Impact of Inputs on Cost of Differentiation 5. Switching Cost of Firms in the Industry 6. Presence of Substitute Inputs 7. Threat of Forward Integration 8.Cost Relative to Total Purchase in Industry

Threat of New Entrants 1. Cost Advantage. 2. Proprietary Products 3. Access to Inputs. 4. Government Policy. 5. Economies of Scale. 6. Capital Requirement 7. Brand Identity. 8. Switching Cost. 9. Distrbution Access. 10.Retaliation.

Existing Rivalry Among Firms

Bargaining Power of Buyers 1. Bargaining Leverage. 2. Buyer Volume. 3. Buyer Information. 4. Brand Identity. 5. Price Sensitivity. 6. Treat of Backward Integration. 7. Product differentiation. 8. Buyer Concentration Vs Industry. 9. Substitutes Available. 10. Buyers Incentive.

Threat of Substitutes 1. Switching Costs. 2. Buyer inclination to Substitute. 3. Price performance trade off of Substitutes.

Degree of Rivalry 1. Exit Barriers 2. Industry concentration 3. Fixed costs / Value added. 4. Industry Growth. 5. Overcapacity. 6. Product difference. 7. Switching Costs. 8. Brand Identity. 9. Diversity of Rivals. 10. Corporate Stakes.

Threat of new entrants:

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Pepsis product differentiation caused by their marketing strategy has limited the threat of new entrants. Also the heavy start up costs of manufacturing and packaging plants would be a deterrent. But, the biggest deterrent is brand image and reputation; a new company would be very hard pressed to take market share away from established players like Pepsi, Coke etc. More importantly, the access to distribution channels is currently one of the biggest barriers to entry, and this barrier remains because both Coke and Pepsi maintain very strong relation with their channel partners.

Bargaining power of buyers:

The level of bargaining power differs among groups of buyers. The bottlers, retailers and distributors have significantly greater bargaining power than the end consumer does. Large retailer such as Reliance, Big Bazaar, Subhiksha are able to extract profits from the Company through incentives such as volume-based purchases, promotions and displays. This is particularly true for pet bottles. But, this can also be harmful for the retailers and they losing customers if they refuse to stock a particular brand. The bargaining power of the consumer is low. They are a fragmented group and no one individuals purchase accounts for a significant portion of manufacturers profit. Although the presence of substitutes does serve to increase buyer power for consumers, but a high degree of brand loyalty mitigates this loyalty. In short, we can say that the end consumer has medium bargaining power.

Bargaining power of suppliers:

There are very few suppliers for the entire soft drink industry. The end product is comprised of few ingredients, which are largely commodities. In addition, it is safe to assume that Pepsi accounts for a large percentage of the suppliers total revenues. Thus, it is important for the suppliers to contain whatever bargaining power they have. The overall bargaining power of the suppliers is considered low.

Threat of Substitutes:
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There are many substitutes to sweetened carbonated beverages. Specially in India there are several substitutes that pose a threat to PepsiCo. They are bottled water, juices, energy drinks, tea, coffee, energy drinks and CSD from its main competitor Coca Cola India. The challenge lies in increasing brand loyalty within these substitute markets, because the substitute products are, for the most part, contained with each manufacturers product portfolio. In India the local beverages like tea and nimbu paani pose a threat to some extent to the established players. Therefore the threat of substitutes is very high specially because of negligible switching costs.

Existing Rivalry among firms:

There is intense rivalry between Coke and Pepsi. This rivalry leads to a downward pressure on prices and significant investment in advertising in an attempt to build and maintain brand loyalty. In a maturing market such as domestic carbonated drinks, the only way to gain market share is to steal from ones rival. Thus, Coke and Pepsi fight heatedly over prices, suppliers, spokespeople, retail space and ore importantly, the taste buds of consumers.

To do a complete analysis of the overall environment is not possible due to the huge sample size of the population therefore before presenting my findings I would like to remind the reader the limitations or constraints under which the survey was done. This survey may not be fruitful for the entire population of internal partners of PepsiCo butit will surely be useful for the particular regions mainly Trans-Yamuna and EastDelhi.

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FINDINGS
RESEARCH METHODOLOGY
Every research methodology includes a research design which may be defined as the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research process with economy in procedure. The sampling method that I am being using is the stratified sampling method, the reason behind using this method even though the time consumption when taken into consideration is more is to divide the whole set of population I am considering for my work into different group according to type of information gathered from each set and by that a perfect co-relation could also be done. My data collection processes would consist of series of procedures which would be further divided into primary and secondary data collection. The secondary data are those studies made by others for their own purposes. The secondary data for my research would be collected from the companies own data, archives and their annual financial reports. Also the findings of prior research studies on outsourcing of accounting processes would give an ample amount of historical data or decision making patterns. Also I would use internet to get some more information about the industry and use journals for getting guidance from the past researches in this topic.

DATA COLLECTION METHOD

The data collection mode used to get the desired information from primary sources & Unstructured Direct Interviews &the instruments used in the Questionnaire. In this research data was collected through two different modes, namely direct interviews. Primary data collection Secondary data collection

Primary data collection: Primary data was collected through Questionnaire Surveys and

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Secondary Data Collection: Secondary data was collected from old reports and magazines and data provided by Varun Beverages itself.

Limitations
The limitations faced during the training and while undergoing my research was lack of availability of first hand data. As the data included is secondary in nature, authentication of the data is major concern. The next difficulty was the facts and figures had change due to change in financial year, thus it could affect the recommendation and conclusion part. Also there were huge constraints when it came to time as a one month period only allowed me a bit of primary research plus the population size being humongous my sample pf 50 retailers does not necessarily represent the entire population rather it can be taken as a representative group of the regions in which the survey was taken.

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SURVEY RESULTS
Q1) WHAT DO YOUT THINK OF PEPSIS PERFORMANCE AS A BRAND? Q2) HOW ARE THE SALES FIGURES IN THE PRESENT PEAK SEASON AS COMPARED TO COKE? Q3)WHAT KIND OF CUSTOMER BASE DO YOU TO CATER TO? Q4)WHAT IS THE DEMAND OF DIET CARBONATED DRINKS IN THE MARKET? Q5)HOW IS DIET PEPSI PERFORMING IN THE MARKET? Q6) WHEN DIET PEPSI WAS IMTRODUCED FOR THE FIRST TIME, HOW WAS THE RESPONSE? Q7) DO U THINK THE PRESENT DISPLAY SCHEMES AND VARIOUS PROMOTIONAL MEASURES LIKE STANDYS BANNERS ETC. AIDING TO INCREASING VISIBILTY OF THE PRODUCT? Q8)HOW ARE THE SALES OF DIET PEPSI IN COMPARISON TO DIET COKE? Q9)HOW MUCH DO U THINK A RETAILER SETS TO GAIN BY INTRODUCING DIET PEPSI TO HIS CUSTOMERS? Q10)WHAT ARE YOUR SUGGESTION TO IMPROVE THE STANDING OF DIET PEPSI IN THIS PARTICULAR MARKEt?

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SWOT ANALYSIS
In order to get clear understanding of the position of Diet Pepsi in the various markets we did a SWOT analysis from the data obtained from the survey and the various retailer interviews

STRENGTHS:
PACKAGING AND PRICING Pepsi has the advantage of having provided the same kind of health based carbonated drink the Slim Diet Pepsi Can which in comparison to the Diet coke is a much more attractive offering because it is slim sleek equally healthy and way cheaper. DISTRIBUTION As already mentioned Pepsi India has one strongest and most efficient sales and distribution networks not only in India but also throughout the globe. Also in the particular market where the survey was done the sales people have developed a network which is powerful enough to make or break sales for Pepsi in any given quarter P R One of the most important factors of success of PepsiCo in India is the relationship the company and its constituents have with the channel partners. The Company officials and even the employees of FOBO have very good rapport and relations with the Channel partners. Also the recently introduced retailer benefit schemes such as the gold card membership and other free gifts and offerings not only motivate the retailers but also helped us create visibility for the Slim Diet Can range in a profound. The experience of working with people who welcome us with a smile rather than a frown will always be remembered.

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NON-CARBONATED This is one those strengths of Pepsi that often goes unnoticed but plays a very important role in success of Pepsi in India and even around the globe. The non-carbonated segment is dominated by Pepsi, Tropicana is the market leader in fruit juices. In the mineral water segment, Aquafina clearly outsells Kinley without ay fuss. Bottling Pepsi has the advantage of being in partnership with the largest bottler in India, the R K Jaipuria Group. RKJ Group controls almost 65% of the bottling operations of PepsiCo in India. At times this is also seen as a weakness of Pepsi in India attributing to the fact that the Jaipuria group is so strong that in certain circumstances it can even defy the parent Company. Pepsi Pepsi Cola is the biggest strength of Pepsi as it is the market leader in the Cola segment and clearly outsells both the products the Coca Cola Company namely Coke and Thums Up. Pepsi controls almost 60% market share in the Cola segment.

WEAKNESS:
SECOND MOVER DISADVANTAGE - Diet Pepsi Cola does have the first mover advantage which Diet Coke has and this may prove to be a major shortcoming also in the Agra Market no Extensive efforts have been made to popularize it. Brand On a comparative scale Diet Coke proves to have a better brand image in customers mind than. This compels to incur extra expenditure in Advertising, Promotions and Sponsorship. MCDONALDS This is one of the most important reason why Diet Coke outsells Pepsi worldwide and specially in the United States. Similarly, in India Diet Pepsi may suffers in sales because of institutional sales. Now Pepsi is trying very to bridge this gap in the near future.

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EXPENDITURE Right from the very beginning Pepsi has hired the biggest and the most expensive stars in the country as its brand ambassadors and has spend heavily on advertising which has affected its balance sheet. Vizicoolers At presently this is one the biggest problems faced by Pepsi. Pepsi is not able to get refrigerators in India so they have to import it other namely Sri Lanka, Mauritius etc. Because of this, retailers are facing lot of problems in vigicoolers. They are not able to get new refrigerators, replacements for old ones, even the repair work takes lot of time because at times even the spares are not available on time.

OPPORTUNITIES:
Lowest Per Capita Consumption Even after almost decades of presence in the market, there are growth opportunities for Diet Pepsi in India as here the per capita consumption of carbonated beverages is one of the lowest in the world. Health Based: apart from its Juice Based drinks portfolio Pepsi can Use the Slim Diet can to the maximum by promoting it as a health drink at Cheaper prices.

THREATS:
NGOs NGOs like CSE can seriously hamper the sales and prospects of companies operating in this industry. This happened during the pesticide controversy involving both coke and Pepsi. HEALTH Growing health awareness among people and some of ill effects of carbonated beverages have pursued many people to switch over to non-carbonated beverages that can seriously hamper the long-term prospects of the entire Industry and not Pepsi.

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ENVIRONMENT Environmental concerns are often raised because of the massive amount of water extracted by the bottling plants resulting in the drop in groundwater level which affects the local population adversely.

In India PepsiCo adopted the strategy of growth through intensification. In the intensification strategy, it used market penetration by developing one of the strongest sales and distribution network in the world and utilizing it to the fullest. Pepsi did market development by making the aware of the best products available at their disposal, by using the best technology to produce the products, by properly communicating with the customer, and making the customer realize that he is important. Pepsi also explored new markets by venturing new segments like fruit based beverages, sports drinks, snack food division. Pepsi expanded and established itself in the market place by constantly developing new products to the customers, like Tropicana, Gatorade, and Pepsi Blue. In this way, Pepsi was also able to effectively counter the threats posed by substitutes and new entrant

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RECOMMENDATION
This is one of the most important and most difficult part of the study. I arrived at certain recommendations for PepsiCo India(Trans-Yamuna and Agra markets) after the analysis of the data. Some of the important recommendations are as follows There should be and correct feedback from the retailers on the performance of salesmen. This will help improve their efficiency and accountability. Moreover, this will also help in reducing the confusing that the retailers have at times because the salesmen does not explain the schemes properly. As already mentioned Vizicoolers are a major reason of dissatisfaction among retailers. The periodical maintenance check of Vizicoolers is done at three months. This should be done at an interval of 45 days or 60 days instead of the current practice of 90 days A complete survey of the every territory should be done for standys, banners logo racks etc. and then a proper budget and plan should be made for their availability at the required places, instead of doing it in bits and pieces as the current practice is this will help with promotion at every retailer level There should be incentives for salesmen for every display they enroll because they are assigned this task and if they get incentives for the same then it will greatly increase the efficiency of the promotional activities. Pepsi should also introduce a version of Diet Pepsi Cola as a sports drink range this is a completely new and untapped market which will help in providing the impetus for Diet Pepsi

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Pepsi should start more aggressive marketing of its Diet Pepsi range of products as they have very good growth and future prospects while there is not much growth in the carbonated beverages sector.

In order to respond effectively to changing market trends and challenges, soft drink companies must support their improvement efforts with industry-specific solutions. These solutions should have the following characteristics and provide the following capabilities:

Basic processes
Pre-configured processes with clearly defined implementation scope A streamlined implementation strategy is necessary to minimize disruptions to the business while maximizing enterprise-wide adoption. When a world-class solution tailored to the specific needs of the soft drink industry is coupled with a rapid implementation approach, it can deliver immediate business value, generating a high overall return on investment and a low total cost of ownership. Manage financials including cost management An effective solution must provide an integrated finance system capable of handling cost management, meeting internal and external reporting requirements, providing real-time data access, and drilling-down to greater levels of detail. Manage procurement process Necessary capabilities for efficient procurement include supporting vendor price comparisons and flexible pricing processes for the actual value of the raw ingredients. It should also support quotation handling, contract management, and batch handling. Meet customer expectations for managing Their Orders An effective solution should be able to effectively manage the entire process for handling customers orders, encompassing variable pricing, delivery, invoicing and payment. It should support

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beverage companies in shortening order cycle times, making on-time and in-full deliveries, and providing optimal payment methods for customers. Optimize planning and manufacturing to suit specific business requirements Solutions in this arena should support a multi-step manufacturing process. This includes the ability to perform automatic batch determination based on expiration date during production-order processing. Provide efficiencies in integrated inventory management Integrated inventory management capabilities are crucial. The system should be able to automatically update all stock figures after material movements have been posted. These figures should be accessible in real-time for decision support. Manage product safety As food safety requirements become more advanced across the beverage industry, track and trace capabilities are a prerequisite. An effective solution should have the functionality to find a defective batch that has already been delivered to a customer. Beverage-specific processes Plan deliveries Effective solutions feature powerful tools that businesses can use to efficiently load, dispatch, and track any number of deliveries. An emphasis should be placed on eliminating redundant trips and matching the appropriate vehicles and drivers to customers for each delivery. By extending route management into the order management system, companies could reap potential cost savings of 25% to 50%. Monitor route business Beverage companies must be able to account for every item delivered, and take quick action to resolve item discrepancies. Best-in-class solutions provide powerful check-in and check-out functions that record all deliveries and returned goods.

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They should also provide tools to monitor quickly and accurately the entire transportation operation, or that of a transportation supplier, from loading and delivery to accounting and settlement of returned goods. The system as a whole should ensure complete loads, on-time deliveries, solid inventory control, and seamless invoicing. Keep track of empties Best-of-breed beverage industry solutions paint a detailed picture of the entire empties situation, showing the location and status of crates, kegs, or pallets, and helping optimize return logistics. It should also permit quick access of each customers empties account as well as print delivery notes or invoices recording the empties involved in a delivery. Manage rebates and bonus agreements Rebate and bonus agreements are critical to enhancing relationships among beverage manufacturers, wholesalers and customers. Yet, the task of managing rebate programs is becoming increasingly difficult as current rebate arrangements often involve numerous parties, including many that are not directly involved in the initial transactions. Effective beverage solutions provide companies with the tools needed to manage easily and accurately large, complex partner constellations with any number of bonus or rebate arrangements. They should also provide coupon management. These functions apply both to direct and indirect customers. Manage commissions In the beverage industry, complex commission structures are needed to motivate the sales force and to encourage them to push certain brands and to develop specific markets. Best-in-class solutions allow companies to complete commission based transactions, make payments both to internal and external sales forces, and track the payment of these commissions over time.

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CONCLUSION
After analyzing all the aspects of the data available and giving some important recommendations a suitable conclusion which should be derived for this study. However, before starting the conclusion part, the objective of the research must be kept in mind so that we can arrive at a befitting conclusion for the research problem. The primary objective of this research was to develop a complete understanding of the overall functioning of PepsiCo India including the sales and distribution network and marketing (Partner Relationship Management to be precise). The data collected provided a sound base for understanding the overall organizational set up of PepsiCo in India. By analyzing the data and the literature review, following conclusion was inferred: The Sales and Distribution Network of Pepsi is very strong and almost flawless. PepsiCo India had the first mover advantage when it entered the market and it capitalized on that advantage to grab the market. Franchisee based operations combined with the Companys operations add strength to the overall presence of the Company in the market. Franchisee takes care of its operations and PepsiCo does not interfere in its operations. The Franchisees are required to report to the Company at specific time intervals. The Advertising Campaigns are conceived, implemented by the PepsiCo and Franchisee has no say in that.

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Promotional activities within every territory are under the territory office and the officials of that office are responsible for the effectiveness and successful implementation of these campaigns.

Because of fierce competition PepsiCo has spend heavily on Ads in order to increase the brand recall and successfully face the competition.

Pepsi has good brand image and recall in the customers mind but the most surprising thing is that when compared with Coke, Pepsi lags behind in terms of brand image.

Although the overall functioning of Pepsi is very efficient, there are certain areas that can be improved.

PepsiCo is finding it difficult to counter the competition from Coke in carbonated Beverages Segment but it has distinct advantage and upper in almost all the other segments like snack food, non carbonated beverages, sorts drink, restaurants etc.

Diet Pepsi even though newly introduced hasnt yet caught up with Diet Coke the way it should.

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BIBLIOGRAPHY

PHILIP KOTLER, 12TH EDITION.

PEPSICO INTERNATIONAL OFFICIAL WEBSITE, PEPSICO INDIA WEBSITE. PEPSICO INTERNATIONAL INTERNAL REPORT.

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APPENDICES
Q1) WHAT DO YOUT THINK OF PEPSIS PERFORMANCE AS A BRAND?
o VERY GOOD o GOOD o AVERAGE o POOR o VERY POOR

Q2) HOW ARE THE SALES FIGURES IN THE PRESENT PEAK SEASON AS COMPARED TO COKE?
o PEPSI IS IN FRONT o THEY ARE AT PAR o COKE IS AHEAD

Q3)WHAT KIND OF CUSTOMER BASE DO YOU TO CATER TO? 1. INCOME GROUP o Q4)WHAT IS THE DEMAND OF DIET CARBONATED DRINKS IN THE MARKET? Q5)HOW IS DIET PEPSI PERFORMING IN THE MARKET? Q6) WHEN DIET PEPSI WAS IMTRODUCED FOR THE FIRST TIME, HOW WAS THE RESPONSE? Q7) DO U THINK THE PRESENT DISPLAY SCHEMES AND VARIOUS PROMOTIONAL MEASURES LIKE STANDYS BANNERS ETC. AIDING TO INCREASING VISIBILTY OF THE PRODUCT?

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Q8)HOW ARE THE SALES OF DIET PEPSI IN COMPARISON TO DIET COKE? Q9)HOW MUCH DO U THINK A RETAILER SETS TO GAIN BY INTRODUCING DIET PEPSI TO HIS CUSTOMERS? Q10)WHAT ARE YOUR SUGGESTION TO IMPROVE THE STANDING OF DIET PEPSI IN THIS PARTICULAR MARKET?

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