International Business

Moiz Saldiwala
3BBA C
1411655
Company:

PepsiCo

Industry:

Beverages, Chips

Founded:

North Carolina, USA (1898)

Founder:

Donald Kendall, Herman Lay

Headquarters: Purchase, New York, USA

Areas served: Worldwide
How did PepsiCo enter India?
PepsiCo formed a conglomerate with Punjab Agro Industries and Voltas (a subsidiary of
TATA group) to enter India. Hence, we can say that PepsiCo acquired the merger strategy to
enter India.
Convincing India that it needs western junk has not been easy.
It took half a decade of negotiating, 20 debates in parliament and a monumental public
relations campaign for PepsiCo to enter India. PepsiCos entry in India was made possible by
the companys willingness to take 36.9% share in conglomerate called Pepsi Foods Private
Limited.
PepsiCo agreed to set up fruits and vegetables processing plants, agriculture research stations,
franchised bottling operations and snack food factories using local potatoes and other
ingredients. First plants were built in Northern Punjab.

Why did PepsiCo want to enter India?

1. In the 1980s, the USA market seemed to be reaching its saturation level.
2. India was always a market that every MNC wanted to enter; the main reason being
vast population.
3. Low per capita consumption of soft drinks in India 3 bottles per annum when
compared to 63 for Egypt, 38 for Thailand and 13 for Pakistan.
4. Expand Sales - Increase the market for their production by tapping potential new
countries.
5. Minimize Risks - Globalization and International trade also helps in minimizing
risks.
6. To leverage on technology - to increase production efficiencies.
7. To counter foreign investments by competitors.
8. Minimize Costs and optimal resource utilization - By shifting operations in areas
with cheaper labour and resources.
Difficulties PepsiCo faced while entering India
PepsiCo joined hands with RP Goenka (RPG) Group to begin operations in Punjab. Agro
Product Export Limited planned to import the cola concentrate and sell soft drinks under the
Pepsi label. PepsiCos proposal to the Indian government was rejected for two reasons:
1. Did not accept the clause regarding the import.
2. Use of foreign brand name Pepsi was not allowed.
At this juncture, the RPG group also ended.
Other reasons were:
1. India being a closed economy till 1991, there was high level of intervention by the
government in the corporate sector.
2. Low awareness, demand and consumption for soft drinks. The per capita consumption
was only 3 per annum.
3. Foreign brand name could not be used.
4. Cola concentrate the major ingredient to make Pepsi soft drink could not be
imported.

Current scenario of PepsiCo in India

India over the past quarter of a century has provided a roller-coaster ride to one of the world's
most enduring beverage brands. It began with a fizzy national debate over a small bottle of

sweetened water, followed by a legendary cola war with rival Coca-Cola, and PepsiCo's
eventual transformation into India's largest food and Beverage Company.
PepsiCo and its bottlers have invested more than Rs 12,000 crore to bottle and sell its drinks
across two million shops countrywide, in many places cold. Indians now have a per capita
consumption of 22 bottles of soft drinks each year, up from three in 1989. PepsiCo is trying
to dislodge Coca-Cola in drinks, though the gap is still large, but is streets ahead of the
competition in snacks.
Last year, PepsiCo's worldwide chairperson Indra Nooyi announced the company and its
partners would invest a staggering Rs 33,000 crore ($5.5 billion) in India till 2020, which is
likely to see manufacturing capacity double. She, of course, is squaring off against CocaCola, which will invest $5 billion over the same period. By then, India could be Coke's fifth
largest market. It would be an overstatement to call the past couple of decades the Pepsi era.
But the two cola giants have played a starring role on the corporate scene since India opened
its economy in 1991.
Source:
http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy1/Pepsi%20Entry%20into%20India%20A
%20Lesson%20in%20Globalization.htm
http://www.business-standard.com/article/companies/how-india-became-pepsi-s-right-choice114032701308_1.html