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 45 percent of the
soft drinks industry consisted of small manufacturers and the business was worth 3.2
million dollars. Coke had previously been in India, but in 1977, it was forced to leave
because of a dispute with the Indian government.
In 1988, the soft drink industry in India suffered because a government warning
was issued that BVO, a necessary ingredient in the drinks, was a proven carcinogenic.
Many companies could not afford importing substitutes of this ingredient and withdrew
from the industry. This reduced amount of competition, and the fact that India
experienced an economic crisis in 1991, allowed Coke and Pepsi to enter the Indian
market. The new government turned India into a Big Emerging Market by 1994, which
meant foreign investors were welcomed once again in India. However, once they are in
India, they are faced with some problems from competitors and with demand.
PepsiCo entered India in 1986 as “Pepsi Foods Ltd.” in a joint venture with local
partners. In order to be able to sell their products, they had to follow many new rules,
including changing the name of the Pepsi cola because it is a foreign product. But
PepsiCo was willing to appease the government to stay in the market. PepsiCo, upon
entering India, also made new brands to better compete throughout the soft drink market,
including Slice and Teem soda.
Pepsi was forced only to compete with local brands until Coca Cola re-entered the
market in 1990. It joined with Godrej, an Indian company, and was turned down, so Coke
joined forces with snack food company Britannia Industries India, Ltd. and the two
became “Britco Foods.” In July 1993, Parle, the leading soft drink manufacturer decided
to sell its leading brands (Coke and Pepsi’s major competitors) and its main bottling
plants in four key cities to Coke.
Both Coke and Pepsi chose to advertise and run promotions during important
events and times in India. For instance, they both advertise heavily in summer, when the
most soft drinks are consumed, and they also advertise heavily during the Indian festival
of Navrati. They both also run big television campaigns during cricket and football
games, and they also employ big Bollywood celebrities to endorse their products. Pepsi

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does especially well by sponsoring the cricket, and Coke does well marketing a lifestyle
towards India’s youth.
Both companies, however, were accused by an environmental organization of
having pesticide residue in their products. The companies ran tests that proved their
products were safe but it was too late; people were banning and protesting their products.
Because neither company came forward to reassure the people, their silence was
interpreted by customers as guilt. This hurt their image even more, including in the U.S.
The contaminated groundwater incident only expanded further for Coke, and people
began accusing the company of using sparse groundwater in its products and taking the
water supplies away from the locals and from farming uses. They also accused Coke of
making the water toxic, thus threatening health and the environment. Coke decided to
stay in an attempt to help find a solution to the increasing problem of groundwater
quantity and quality. (Cateora, p 602-606.)

The Political Environment of India

Coca Cola had previously been in India, but when the government in India
changed hands in 1977, they were forced to leave along with other foreign companies
such as IBM. Coke would not give India its secret Cola recipe, and because the new
government limited foreign ownership to 40 percent. These laws were eliminated in 1991
after the Indian government changed hands again, and India began to welcome foreign
firms and investments to help the economy boom. (Majumdar, p 92.)
Pepsi came to India and followed every rule the Indians gave them. This included
forcing Pepsi to distribute and process various fruits and vegetables, and changing the
names of Pepsi’s different brands. Even the classic “Pepsi Cola” was forced to be
changed to “Lehar Pepsi” and “Lehar 7UP” to fit in with India’s requests. Their scheme
worked, however, because as Coke was trying to get back into the market in 1990, Pepsi
was approved while Coke was not, which gave Pepsi the leverage to profit in India.
(Cateora, p 603.)
Pepsi’s willingness to do exactly as India wanted has proven to be very beneficial
for the company. Pepsi is now also involved in counter trade in India, which has helped
them to develop their business in India even further than Coke. They look at a country’s

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“competitive advantages… and then build long-term businesses around those strengths.”
(Fluck, p 19.) In India, this means Pepsi is “in the business of creating hard currency to
get our partners in soft-currency countries to buy our products, to repatriate our earnings
and to get access to foreign markers.” (Fluck, p 19.) Now Pepsi has a position in India as
a foreign investor that is mutually beneficial to both India and to PepsiCo Worldwide.

Coke and Pepsi Campaigns in India

Pepsi and Coke, due to research, found that the summer season and the cultural
festival of Navrati are the two times a year that Indians consume the most soft drinks.
The summer months last only about 70 to 75 days, from April to June, and the festival of
Navrati is celebrated mostly by people living in Gujarat and Mumbai, and is celebrated
for about 25 days. A representative of Coke describes its marketing campaign as one that
thinks local and act local; they have implemented campaigns such as buy one, get one
free, free passes to a dance during the festival of Navrati, and drawings to win trips to
places such as Goa. Pepsi couldn’t afford to not participate in Navrati as well, and has
sponsored big, popular dance competitions called “garba” dances. Pepsi’s representatives
feel confident about teaming up with Zee Alpha, a popular TV channel amongst the
Gujarati, to broadcast the Navrati festival. Also, Pepsi offers some customers the ability
to get refills of Pepsi and to get free Basmati rice, which is considered premium quality
rice.
Both companies take advantage of TV campaigning, and get more involved in
regional and local festivals and sporting events around India. Pepsi is especially good
with aligning itself with sports, such as cricket. Both companies have also found it
important to get Bollywood celebrity endorsers of their product to help align themselves
with Indians and lose some of their western feel.
Pepsi has run very successful campaigns with cricket, especially the one-day
series. In their campaigns, they feature Mohammad Kaif, one of the most popular cricket
batters in India, and some of his team-mates. This has helped Pepsi create campaigns and
new products using these sports heroes to market their new products. Pepsi has also
aligned itself in the same successful way, but with Indian football players (our soccer.)

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 Coke has taken a different approach. They have targeted specific youth lifestyle
and habits and aligned themselves with their customers. One group they targeted in
particular was 18 to 24 year olds in urban areas. They marketed to them using popular
Indian music director A. R. Rahman and Bollywood stars in short films. They also made
lounges called “Red Lounges” which are places where youths can enjoy any of Coke’s
products and have a hang out spot where they also can play video games, watch TV, and
surf the Internet. These campaigns have proven to help Pepsi and Coke make sales, along
with sporting different priced and sized products for this diverse market. (Cateora, p 603-
604.)

Coke and Pepsi Face Issues with Pesticides

In August 2003, an environmental group in India claimed that both Coke and
Pepsi had high levels of pesticide residue in their products. New Delhi’s Center for
Science and the Environment tested samples of both products and reported, “each sample
has enough poison to cause… cancer, damage to the nervous and reproductive systems…
and disruption of the immune system.” (Pesticide Pepsi and Cancer Coke, p 5)
Both companies denied these allegations, and did plenty of research to determine
their products had a negligible amount of pesticides, considerably less than other
products being made in India. Either way, they found that their products were safe.
This bad press started to negatively affect their 1.2 billion dollar market in India
especially when the Indians started to stage protests against the companies that resulted in
partial bans across the nation. Local politicians began to immediately attack their brands,
making the people doubt the brands even more. Eventually, both companies’ products
were banned from being sold in government offices, schools and hospitals.
Coke and Pepsi attempted to ease the people’s minds by staying quiet until all
their research had been properly administered and interpreted. However, in Indian
culture, staying quiet is the worst thing a company can do in a crisis, since staying quiet
is a sign of guilt. Coke eventually stepped forward to try and attack by getting their
executives to question the credentials of the companies that accused them. It still wasn’t
enough and the Indian people continued to protest the brand even more after Coke tried
desperately to redeem their image. (Cateora, p 605)

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 Pepsi began a public relations offensive that claimed, “Pepsi is one of the safest
beverages you can drink today.” Their strategy seemed to work better than Coke’s
desperate attempt to dispute the claims. Pepsi actually stepped forward and said that there
were pesticides in Pepsi but it was the same amount that could be found in any other
product produced in India.
Coke was the company that got the most heat through this situation. An activist
group in California got other U.S. colleges to accuse the corporate giant of overusing
groundwater, having too many pesticides in their products, and giving farmers fertilizers
with toxins in them. All the accusations revolved around one Coke plant located in
Plachimada, India. Coke had to renew their permission to be there and they didn’t for a
while, and the local government began to make claims along the same lines as the
Californian activist group. The Coke plant in Plachimada reopened in 2006, which led to
Coke products being banned on several U.S. campuses in protest. Coke negotiated with
the universities and agreed to fund a research assessment by an organization of the
universities picking and the ban on the campuses of Coke products were lifted. (Cateora,
p 606.)
The report said that there were no pesticides in the Coke, but that the company
was guilty of using up all the groundwater in the area. A Delhi-based environmental
group asked Coke to shut down its plants, but Coke wouldn’t. Instead, it claimed it could
do good things by staying around and figure out the water problem instead of running
away from it.

Conclusion
There are still a lot of issues that Coke and Pepsi need to resolve when it comes to
their image abroad and in India. They both still represent the west, but they need to
become better adapted to the different environments they decide to become part of. They
need to not just be able to market their product efficiently; they need to show some
responsibility when things start to go sour for them.
The Indian people continue to steadily buy and consume soft drinks, but the
market isn’t growing at all. However, Indians in general are consuming a wider variety of
beverages and Coke and Pepsi should be willing to expand the options they have

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available. They already have some fruit sodas, and some bottled water markets, but
maybe if they were to make fruit cocktails and other beverages that aren’t in India
already.
Coke and Pepsi still have a good chance of being successful in India, but they are
only going to achieve their goals by continuing to align themselves with brands,
celebrities, sports, and lifestyles that the Indians find appealing. They both need to
continuously check on their products to make sure they are safe, or at least appealing to
the Indians, and continue to be environmentally and morally sound with their plants,
operations, distribution, and products in general.
They will probably be able to stay in India for some time, but they really need to
become more accustomed to the culture and try to shake off some of their western
imperialist feel.

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