Faculty : Dr.

Archi Mathur

Group Members : Sunidhi Mehta Jyotirman Choudhury Priyadarsh Charan Rakesh Sharma

THE INTERNATIONAL SCENARIO:

Rivalry between Coke and Pepsi and each was out to beat the

other.
Coke outsells Pepsi.

In 1987 Coke & Pepsi have 40.3% & 30.2 % of the U.S market
respectively.

Had an image of soft drink manufacturer and marketer.

Apart from Pepsi cola co. and Pepsi cola International, it had six other divisions which had given it a commanding presence in Food Business. Soft drinks contributed 32 % & the restaurants 27 % to the total operating profits in 1987 . Pepsi was merged with Frito-Lay to constitute Pepsi co. International in 1965. In 1987 Pepsi co. was ranked 29th in the Fortune 500 whereas Coca Cola was at 54th. Today, Frito-Lay division markets over 100 varieties of Snack Food. Pepsi Co. acquired Kentucky Fried Chicken chain in 1986, with this Pepsi became the owner of the worlds largest restaurant chain which also includes Pizza hut and Tacco Bell with a total of nearly 16500 outlets in 1987. Pepsi had so far made inroads in 151 countries 150 before India.

THE INDIAN SCENARIO:

Limca was the largest selling brand, cola was the largest selling flavor accounting for 40 % of the market share Lemon drinks followed cola with 31 % and orange drinks had only 19 %. Lemon drinks were more popular in Metros. In 1977 a change at a centre led to the exit of the Coca cola. The first national cola drink to pop up was Double Seven. Pure drinks, Delhi switched over to Campa Cola after cokes exit and by the end of seventies, it was only Campa cola in the Indian cola market. In 1980 another cola drink, Thumps Up was launched by Parle but was objected by Pure Drinks to its being called a cola drink. Thrill by Mc Dowell's in mid eighties and by the late eighties there was Double cola which entered the market with the USP of an American Cola. The Indian soft drinks industry was estimated to be worth Rs 900 crores. In 1978 Parle led the Indian soft drinks market, in 1983 its market share was 43 percent, 44 percent in 1987 and in 1990 it reached to 70 percent whereas its chief rivals Pure drinks share had been declining in 1978 it was 28 percent , in 1983, 22 percent and in 1987 it was 21 percent. An additional dimension to the Indian soft drinks was fruit drinks. In 1988 it was valued at Rs 40 crores and was growing at a rate of 20 percent which was faster then the growth of the aerated soft drinks.

ENTRY OF PEPSI IN INDIA PHASE I:

In 1985 a proposal with R.P. Goenka group was rejected by the then govt. The proposal involved:
Export of fruit juice concentrates from Punjab in return for the import of cola concentrates. The deal offered was 3:1 export import ratio.

ENTRY OF PEPSI IN INDIA PHASE II:

Rs 22 crore Pepsi co project was the second bid. The second proposal encompassed the following activities:
Agro Research centre (costing Rs 1.55 crores). A potato and grain based processing unit (costing Rs 8 crores). A fruit and vegetable processing unit (costing Rs &.5 crores). Exports. The Pepsi co would have an equity holding of 39 percent, PAIC, 20 percent and Voltas , 24 percent. The balance was to be placed privately from loans. Imports would be 37 crores and exports a minimum of Rs 194 crores over a 10 year period. Benefits and advantages of proposal includes better market for rice, wheat and fruits in Punjab

Acceptance of the Pepsi Offer in India in 1990:

Offer was accepted after much negotiations Export import ratio was finally fixed at 5:1 Cold drinks sale was fixed at 22.5% of total sales Lot of political lobbying was involved.

Issue 1 : What were the elements of Indian market environment that Pepsi co. had to tackle?
Elements of Micro Environment
Competitors Partners/ Collaborations Suppliers Customers

A) Competitors
1-Market Leader- Parle
DirectLimca ,Thums Up, Golds Spot-44% in 1988. Indirect Fruit Juice, Frooti. 2- Challenger Pure Drinks-Campa cola

Contd
3- Followers Mc Dowells Thrill Double Cola

Other Characteristics Medium Competition 2% of Advertisement Inexperienced and Apprehensive of Fighting International Player . Low Installation Cost and Equipment Value Relatively Inferior

B-Partners/ Collaborations
PAIC and Voltas were vocal in their support.
Agriculture Oriented PAIC had know-how about farmers state of agriculture . Established Brand Name of Tata.

C-Suppliers
Mostly farmers with high expectation whose:
Income from wheat was falling . Fruit Cultivation was increasing , but had a major problem to dispose them.

D-Customer
Fresh Indian Market , who were new to the taste of Foreign Cola Brand

Macro environment
Political environment
Legal Environment Economic Environment Socio-Cultural Environment Technological Environment

1-Political Environment
Development of Economy. Intent of Development of Local Players Only. Opposition to promotion of carbonated drinks. Fear of invasion of foreign brand. Opposition to reliance on foreign technology . Desire to get best deal out of foreign collaboration. Desire to increase exports . Desire to earn foreign exchange.

2-Legal environment
Severe restrictions in equity through FERA
Dispute in relation to ownership of Pepsi brand name.

3-Economic environment
Closed economy
Cold drink industry in nascent stage FOREX starved economy Lack of adequate market for fruits cultivators

4-Technological environment
Inferior technology for production of soft drinks .
Requirement of knowledge in agriculture industries . Requirement of technology for fruits processing .

5-Socio-cultural environment
Fear of invasion of MNC culture
Fear of impact on diet

Issue-2-How were these elements managed ?

MICRO ENVIRONMENT. Competitors Partners / Collaborations Suppliers Customers MACRO ENVIRONMENT. Political Legal Economic Technological Scio-cultural

A-Competitors
Tackled the market leader head on. Protected the public image, by putting up precise answers to questions :
Director, Business Division . Careful instruction to its partners: PAIC and Voltas

Emphasized on the point that in spite of being a foreigners, will create more benefits than local player. Did not harp on the foreign nature ; came up with the Indianized version of the brand in form of Lehar Pepsi Ensured that discrediting /disruption tactics, were properly pinned against the perpetuators. Ensured top of the line equipment and plants were installed

B-Partners /Collaboration
Made optimum use of its partners displacing opposition garnering support Used PAIC for countering argument from competitors ensuring support from suppliers Used Voltas, it being a company of Tatas to establish credibility to quell any criticisms Both were used for swaying public opinion ,in their favour. Loyalty and interest ensured through equity stake PAIC40% , voltas-24%

C-Suppliers
Fueled their expectation by spreading awareness of benefits
through PAIC Provided the alternative for sale of agro products Provided an option for opening of bottleneck and marketing of fruits.

D-Customers
Promised a unique brand experience of foreign cola drink.

A-Political
Phase-I Offer made with R.P.Goenka in 1985 He included 3:1 export import ratio only on fruit juice concentrate. It was rejected

Phase-II
Offer made with PAIC and voltas Offer made in areas mentioned in the facts . Agro research centre Agro based food processing mostly Fruit based food processing Exports .

Assured development of products others than cold drinks limiting it to

25 % of sales . EXIM ratio highly in favor of India

Repatriation only after adequate FOREX.

Assurance on meeting export regulations Assured employment -500-direct and 30000-indirect

Dilution of foreign brand to Lehar

Phase-III

To further emphasis the offer made in phase II Equity stakes were revised PAIC 40% Voltas -24% ,Pepsi-35% EXIM ratio fixed at 5% Indulged in political lobbying Ensured the active participation of Punjab government.

B-Legal
Compliance with legal requirements Fighting out the cases inside as well as outside.

C-Economic
Ensured penetration in economy through attractive offer
FOREX EXIM ratio Better deal than other countries.

Attacked the developing cold drinks industry

Superior technology Better finance

In area of agriculture
Providing a market for agro products Provision of better prospects for food products .

D-Technological
Assured availability of high end technology Established collaborations for development of agriculture

E-Socio-Cultural
Ensured Indianization through Indian version of Pepsi

Issue-3-what is your learning about managing the environment?

IDENTIFICATION APPRAISAL ANALYSIS REACTION

Flexibility in changing offers . Operating on strength Brand name Soft drink Ensuring self benefit in benefit of others . Going beyond requirement making it look like an initiative.

Issue-4-How do you see the emerging environment in the Indian soft drinks market ?
Production Market Competition Promotion Others

Production
Better & more efficient means of production Introduction of variety of flavours More choices available to the buyers in terms of prodcuts, brands & flovors

Market
Growth in market size Spread of market of Pepsi Probable entry of Pepsi in fruit drinks

Competition
Increase in the degree of competition Probable exit of Pure Drinks Consolidation of small players Incoming of more foreign players especially Coke

Promotion
Exposure to new forms of strategies & techniques Increase in the budgetary allocation to advertisement & sales promotion More aggressive form of promotion to be observed in the market

Others
Less political hostility towards entering of foreign players Relaxation of legal requirements Better employment generation

THANK YOU