Case Summary

Coke and Pepsi had a tough time getting into the beverage market in India. However, the venture seemed to be well worth it, since in 1993 about 4 percent o! the so!t drinks industr" consisted o! small manu!acturers and the business was worth 3.# million dollars. Coke had previousl" been in India, but in 19$$, it was !orced to leave because o! a dispute with the Indian government. In 19%%, the so!t drink industr" in India su!!ered because a government warning was issued that &'(, a necessar" ingredient in the drinks, was a proven carcinogenic. )an" companies could not a!!ord importing substitutes o! this ingredient and withdrew !rom the industr". *his reduced amount o! competition, and the !act that India e+perienced an economic crisis in 1991, allowed Coke and Pepsi to enter the Indian market. *he new government turned India into a &ig ,merging )arket b" 1994, which meant !oreign investors were welcomed once again in India. However, once the" are in India, the" are !aced with some problems !rom competitors and with demand. PepsiCo entered India in 19%- as .Pepsi /oods 0td.1 in a 2oint venture with local partners. In order to be able to sell their products, the" had to !ollow man" new rules, including changing the name o! the Pepsi cola because it is a !oreign product. &ut PepsiCo was willing to appease the government to sta" in the market. PepsiCo, upon entering India, also made new brands to better compete throughout the so!t drink market, including 3lice and *eem soda. Pepsi was !orced onl" to compete with local brands until Coca Cola re4entered the market in 1995. It 2oined with 6odre2, an Indian compan", and was turned down, so Coke 2oined !orces with snack !ood compan" &ritannia Industries India, 0td. and the two became .&ritco /oods.1 In 7ul" 1993, Parle, the leading so!t drink manu!acturer decided to sell its leading brands 8Coke and Pepsi9s ma2or competitors: and its main bottling plants in !our ke" cities to Coke. &oth Coke and Pepsi chose to advertise and run promotions during important events and times in India. /or instance, the" both advertise heavil" in summer, when the most so!t drinks are consumed, and the" also advertise heavil" during the Indian !estival o! ;avrati. *he" both also run big television campaigns during cricket and !ootball games, and the" also emplo" big &oll"wood celebrities to endorse their products. Pepsi 1 |C o k e a n d P e p s i i n I n d i a

does especiall" well b" sponsoring the cricket, and Coke does well marketing a li!est"le towards India9s "outh. &oth companies, however, were accused b" an environmental organi<ation o! having pesticide residue in their products. *he companies ran tests that proved their products were sa!e but it was too late= people were banning and protesting their products. &ecause neither compan" came !orward to reassure the people, their silence was interpreted b" customers as guilt. *his hurt their image even more, including in the >.3. *he contaminated groundwater incident onl" e+panded !urther !or Coke, and people began accusing the compan" o! using sparse groundwater in its products and taking the water supplies awa" !rom the locals and !rom !arming uses. *he" also accused Coke o! making the water to+ic, thus threatening health and the environment. Coke decided to sta" in an attempt to help !ind a solution to the increasing problem o! groundwater ?uantit" and ?ualit". 8Cateora, p -5#4-5-.:

The Political Environment of India

Coca Cola had previousl" been in India, but when the government in India changed hands in 19$$, the" were !orced to leave along with other !oreign companies such as I&). Coke would not give India its secret Cola recipe, and because the new government limited !oreign ownership to 45 percent. *hese laws were eliminated in 1991 a!ter the Indian government changed hands again, and India began to welcome !oreign !irms and investments to help the econom" boom. 8)a2umdar, p 9#.: Pepsi came to India and !ollowed ever" rule the Indians gave them. *his included !orcing Pepsi to distribute and process various !ruits and vegetables, and changing the names o! Pepsi9s di!!erent brands. ,ven the classic .Pepsi Cola1 was !orced to be changed to .0ehar Pepsi1 and .0ehar $>P1 to !it in with India9s re?uests. *heir scheme worked, however, because as Coke was tr"ing to get back into the market in 1995, Pepsi was approved while Coke was not, which gave Pepsi the leverage to pro!it in India. 8Cateora, p -53.: Pepsi9s willingness to do e+actl" as India wanted has proven to be ver" bene!icial !or the compan". Pepsi is now also involved in counter trade in India, which has helped them to develop their business in India even !urther than Coke. *he" look at a countr"9s # |C o k e a n d P e p s i i n I n d i a

.competitive advantages@ and then build long4term businesses around those strengths.1 8/luck, p 19.: In India, this means Pepsi is .in the business o! creating hard currenc" to get our partners in so!t4currenc" countries to bu" our products, to repatriate our earnings and to get access to !oreign markers.1 8/luck, p 19.: ;ow Pepsi has a position in India as a !oreign investor that is mutuall" bene!icial to both India and to PepsiCo Aorldwide.

Coke and Pepsi Campaigns in India

Pepsi and Coke, due to research, !ound that the summer season and the cultural !estival o! ;avrati are the two times a "ear that Indians consume the most so!t drinks. *he summer months last onl" about $5 to $ da"s, !rom Bpril to 7une, and the !estival o! ;avrati is celebrated mostl" b" people living in 6u2arat and )umbai, and is celebrated !or about # da"s. B representative o! Coke describes its marketing campaign as one that thinks local and act local= the" have implemented campaigns such as bu" one, get one !ree, !ree passes to a dance during the !estival o! ;avrati, and drawings to win trips to places such as 6oa. Pepsi couldn9t a!!ord to not participate in ;avrati as well, and has sponsored big, popular dance competitions called .garba1 dances. Pepsi9s representatives !eel con!ident about teaming up with Cee Blpha, a popular *' channel amongst the 6u2arati, to broadcast the ;avrati !estival. Blso, Pepsi o!!ers some customers the abilit" to get re!ills o! Pepsi and to get !ree &asmati rice, which is considered premium ?ualit" rice. &oth companies take advantage o! *' campaigning, and get more involved in regional and local !estivals and sporting events around India. Pepsi is especiall" good with aligning itsel! with sports, such as cricket. &oth companies have also !ound it important to get &oll"wood celebrit" endorsers o! their product to help align themselves with Indians and lose some o! their western !eel. Pepsi has run ver" success!ul campaigns with cricket, especiall" the one4da" series. In their campaigns, the" !eature )ohammad Dai!, one o! the most popular cricket batters in India, and some o! his team4mates. *his has helped Pepsi create campaigns and new products using these sports heroes to market their new products. Pepsi has also aligned itsel! in the same success!ul wa", but with Indian !ootball pla"ers 8our soccer.: Coke has taken a di!!erent approach. *he" have targeted speci!ic "outh li!est"le 3 |C o k e a n d P e p s i i n I n d i a

and habits and aligned themselves with their customers. (ne group the" targeted in particular was 1% to #4 "ear olds in urban areas. *he" marketed to them using popular Indian music director B. E. Eahman and &oll"wood stars in short !ilms. *he" also made lounges called .Eed 0ounges1 which are places where "ouths can en2o" an" o! Coke9s products and have a hang out spot where the" also can pla" video games, watch *', and sur! the Internet. *hese campaigns have proven to help Pepsi and Coke make sales, along with sporting di!!erent priced and si<ed products !or this diverse market. 8Cateora, p -534 -54.:

Coke and Pepsi Face Issues with Pesticides

In Bugust #553, an environmental group in India claimed that both Coke and Pepsi had high levels o! pesticide residue in their products. ;ew Felhi9s Center !or 3cience and the ,nvironment tested samples o! both products and reported, .each sample has enough poison to cause@ cancer, damage to the nervous and reproductive s"stems@ and disruption o! the immune s"stem.1 8Pesticide Pepsi and Cancer Coke, p : &oth companies denied these allegations, and did plent" o! research to determine their products had a negligible amount o! pesticides, considerabl" less than other products being made in India. ,ither wa", the" !ound that their products were sa!e. *his bad press started to negativel" a!!ect their 1.# billion dollar market in India especiall" when the Indians started to stage protests against the companies that resulted in partial bans across the nation. 0ocal politicians began to immediatel" attack their brands, making the people doubt the brands even more. ,ventuall", both companies9 products were banned !rom being sold in government o!!ices, schools and hospitals. Coke and Pepsi attempted to ease the people9s minds b" sta"ing ?uiet until all their research had been properl" administered and interpreted. However, in Indian culture, sta"ing ?uiet is the worst thing a compan" can do in a crisis, since sta"ing ?uiet is a sign o! guilt. Coke eventuall" stepped !orward to tr" and attack b" getting their e+ecutives to ?uestion the credentials o! the companies that accused them. It still wasn9t enough and the Indian people continued to protest the brand even more a!ter Coke tried desperatel" to redeem their image. 8Cateora, p -5 : Pepsi began a public relations o!!ensive that claimed, .Pepsi is one o! the sa!est 4 |C o k e a n d P e p s i i n I n d i a

beverages "ou can drink toda".1 *heir strateg" seemed to work better than Coke9s desperate attempt to dispute the claims. Pepsi actuall" stepped !orward and said that there were pesticides in Pepsi but it was the same amount that could be !ound in an" other product produced in India. Coke was the compan" that got the most heat through this situation. Bn activist group in Cali!ornia got other >.3. colleges to accuse the corporate giant o! overusing groundwater, having too man" pesticides in their products, and giving !armers !ertili<ers with to+ins in them. Bll the accusations revolved around one Coke plant located in Plachimada, India. Coke had to renew their permission to be there and the" didn9t !or a while, and the local government began to make claims along the same lines as the Cali!ornian activist group. *he Coke plant in Plachimada reopened in #55-, which led to Coke products being banned on several >.3. campuses in protest. Coke negotiated with the universities and agreed to !und a research assessment b" an organi<ation o! the universities picking and the ban on the campuses o! Coke products were li!ted. 8Cateora, p -5-.: *he report said that there were no pesticides in the Coke, but that the compan" was guilt" o! using up all the groundwater in the area. B Felhi4based environmental group asked Coke to shut down its plants, but Coke wouldn9t. Instead, it claimed it could do good things b" sta"ing around and !igure out the water problem instead o! running awa" !rom it.

Conclusion
*here are still a lot o! issues that Coke and Pepsi need to resolve when it comes to their image abroad and in India. *he" both still represent the west, but the" need to become better adapted to the di!!erent environments the" decide to become part o!. *he" need to not 2ust be able to market their product e!!icientl"= the" need to show some responsibilit" when things start to go sour !or them. *he Indian people continue to steadil" bu" and consume so!t drinks, but the market isn9t growing at all. However, Indians in general are consuming a wider variet" o! beverages and Coke and Pepsi should be willing to e+pand the options the" have available. *he" alread" have some !ruit sodas, and some bottled water markets, but |C o k e a n d P e p s i i n I n d i a

ma"be i! the" were to make !ruit cocktails and other beverages that aren9t in India alread". Coke and Pepsi still have a good chance o! being success!ul in India, but the" are onl" going to achieve their goals b" continuing to align themselves with brands, celebrities, sports, and li!est"les that the Indians !ind appealing. *he" both need to continuousl" check on their products to make sure the" are sa!e, or at least appealing to the Indians, and continue to be environmentall" and morall" sound with their plants, operations, distribution, and products in general. *he" will probabl" be able to sta" in India !or some time, but the" reall" need to become more accustomed to the culture and tr" to shake o!! some o! their western imperialist !eel.

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