Assignment for case study

By Duaa saleem

Q3.

Sol.

The Indian market is enormous in terms of population and geography. How have the two companies
responded to the sheer scale of operation in India in terms of product policies, promotional activities,
pricing policies, and distribution arrangements? Ans Product policies >> – Entering with products close
to those already available in India such as colas, fruit drinks, carbonated waters, Coca-Cola introducing
Sprite recently, and Introducing new products is bottled water. Promotional activities >> – Both
advertise and use promotional material at Navrartri are Pepsi gives away premium rice and candy with
Pepsi and Coca-Cola offers free passes, Coke giveaways as well as vacations. Pricing policies >> – Pepsi
started out with an aggressive pricing policy to try to get immediate market share from Indian
competitors, Coca-Cola cut its prices by 15-25% in 2003. Distribution arrangements >> – Production
plants and bottling centers placed in large cities all around India, More added as demand grew and as
new products were added.

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 Sliceand 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 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.

Political environment

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.

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.

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 “competitive advantages … and then
build long-term businesses around those strengths. 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.Now Pepsi has a position in India as a foreign investor
that is mutually beneficial to both India and to PepsiCo Worldwide.

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 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.)

Issues faced

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.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. 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. 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.

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 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.