Product Category of Industry:

CSD (carbonated soft drinks)

History of the Industry

The first ever carbonated soft drink company in Pakistan that was well recognized
was Coca-Cola that started its operations in Pakistan in the very early 1960’s. it was the
only CSD company in Pakistan by that time. Another international CSD company,
named as Pepsi Co came into action in Pakistan in 1971 when it established its first
production plant in Multan. In between that and afterwards a number of local companies
entered in this industry but they have not yet succeeded in occupying a big market share
in the industry. These companies include Shandy Cola, Amrat Cola, Pak Cola, Gourmet
Cola etc. A brief history of early companies of CSD Industry is given below:
Of Coca-Cola overall & in Pakistan:
The first company which started the production of carbonated soft drinks in
Pakistan was Coca-Cola Company in the year 1961.
In May, 1886, Coca Cola was invented by Doctor John Pemberton a pharmacist
from Atlanta, Georgia. John Pemberton concocted the Coca Cola formula in a three
legged brass kettle in his backyard. The name was a
suggestion given by John Pemberton's bookkeeper Frank
Robinson.
The soft drink was first sold to the public at the soda
fountain in Jacob's Pharmacy in Atlanta on May 8, 1886.
About nine servings of the soft drink were sold each day.
Sales for that first year added up to a total of about $50. The
funny thing was that it cost John Pemberton over $70 in
expanses, so the first year of sales were a loss.
Until 1905, the soft drink, marketed as a tonic, contained extracts of cocaine as
well as the caffeine-rich kola nut.

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 In 1887, another Atlanta pharmacist and businessman, Asa Candler bought the
formula for Coca Cola from inventor John Pemberton for $2,300. By the late 1890s,
Coca Cola was one of America's most popular fountain drinks, largely due to Candler's
aggressive marketing of the product. With Asa Candler, now at the helm, the Coca Cola
Company increased syrup sales by over 4000% between 1890 and 1900.
Coke concentrate, or Coke syrup, was and is sold separately at pharmacies in
small quantities, as an over-the-counter remedy for nausea or mildly upset stomach.
On February 7, 2005, the Coca-Cola Company
announced that in the second quarter of 2005 they
planned to launch a Diet Coke product sweetened
with the artificial sweetener sucralose ("Splenda"), the same sweetener currently used in
Pepsi One.
On July 5, 2005, it was revealed that Coca-Cola would resume operations in Iraq
for the first time since the Arab League boycotted the company in 1968.
In April 2007, in Canada, the name "Coca-Cola Classic" was changed back to
"Coca-Cola.”
In November 2009, due to a dispute over wholesale prices of Coca-Cola products,
Costco stopped restocking its shelves with Coke and Diet Coke

Of Pepsi overall & in Pakistan:

Pepsi is the brand of PepsiCo. Pepsi was first introduced in Pakistan 38 years ago
and established a plant at Multan in 1971 by Riaz Bottlers Company, who are responsible
for introducing "Pepsi Company” of U.S.A. Since that period they are in the production
and promotion of Pepsi Cola. Now through their advance approach in marketing of their
product, they are able to control the complete market of Lahore and is surrounding areas
far surpassing the monopoly of Coca-Cola in those areas. The future of Pepsi in Pakistan
is extremely bright because Pepsi excellence in quality, image and distribution than its
competitors.
The story of Pepsi International starts from North
Carevalino store that store was owned by Caleb
Bradham. He prepared a drink called drink of brad. In

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1903 Caleb Bradham registered it as Pepsi Cola, made his own company and soon
starting its sales. In 1909 more than 24 American states gave
license to Pepsi for sale. Pepsi Cola was first introduced in 6.5
ounce bottle. Pepsi was first registered in 1932.
In 1932 Pepsi Cola was introduced a big bottle of 12
ounce. In 1950 the Pepsi Cola formula was slightly changed
and the sweetness and calories in Pepsi Cola were decreased.
In 1957 the bottle was changed to new attractive bottle and the
Product line was also increased by introduction two more
products that are Teem and Marinda. Today Pepsi Cola is
available to more than 100 million of consumers which also
include Soviet Union and China.
The market in Pakistan is surely dominated by Pepsi. It
has proved itself to be the No.1 soft drink in Pakistan. Now a
days Pepsi is recognized as Pakistanis National drink. In 1971,
first plant of Pepsi was constructed in Multan, and from their
after Pepsi is going higher and higher.
Pepsi's greatest rival is Coca Cola. Coca Cola has an
international recognized brand. Cokes basic strength is its brand name. But Pepsi with its
aggressive marketing planning and quick diversification in creating and promoting new
ideas and product packaging, is successfully maintaining is No.1 position in Pakistan. In
coming future Pepsi is also planning to enter into the field of fruit drinks. For this, it has
test marketed its mango juice in Karachi for the first time.

Major Players of the Industry

Different Companies have the following shares in this industry:

Players In Lahore In Pakistan

Coca-Cola 45% 33%
Pepsi 38% 54%
Others* 17% 13%
*Others include: Shandy Cola, Amrat Cola, Pak Cola, Gourmet Cola etc.

CSD Industry, Pakistan 3

 Hence, the major players of the Carbonated Drinks Industry are Pepsi & Coca-
Cola.
Mission Statements of Major Players
Of Pepsi
“We work to increase the value of our shareholder’s
investment. We do this through sales growth, cost control
and wise investment of resources. We believe that our
commercial success depends upon offering quality and value
to our consumers and customers, providing products that
are safe, wholesome, economically efficient and
environmentally sound. We also strive to provide a fair
return to our investors while adhering to the highest
standards of integrity.”
Of Coca-Cola
Our roadmap starts with our mission, which is enduring.
It declares our purpose as a company and serves as the standard against which we
weigh our actions and decisions.
To refresh the world
To inspire moments of optimism and happiness
To create value & make a difference

Locations in Pakistan:

The production units as well as warehouses of Pepsi and Coca-Cola are located at
the following locations in Pakistan:
Of Coca-Cola:
6 production related locations of Coca-Cola are at:
 Lahore
 Karachi

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  Faisalabad
 Multan
 Rahimyar Khan
 Gujranwala
There are 20 warehouses of Coca-Cola Pakistan. Each production plant has 2-3
warehouses. Production Plant of Lahore has two warehouses.

Of Pepsi:
9 production related locations of Pepsi are at:
♦ Lahore
♦ Gujrat
♦ Qasur
♦ Multan
♦ Islamabad
♦ Sheikhupura
♦ Karachi
♦ Bahawalpur
♦ Faisalabad
Each have 2-3 warehouses. One in Lahore is Riaz Bottler near Gulberg (being supervised
by Humayun Akhter).

Production capacity

Related to the production in Pakistan, the Data we gathered of Coca-Cola

Pakistan is as follows:

Of Coca-Cola:
Country: Pakistan
Population: 176.4 million
Production Capacity: 112 million unit cases anually

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GDP Per Capita (2008 E): 1,030 $
Per Capita Consumption of Sparkling Beverages: 10.8 liters

Of Pepsi:
We visited the plant of Pepsi located in Lahore, it covers an area of 60,000 square
meters, with four production lines.
Production capacity 15 million TEUs (Twenty-foot equivalent unit, a measure
used for capacity in container transportation),
It means almost 95 million cases are produced annually by one production Plant
of Pepsi Pakistan.
Of Shandy Cola:
Approximately 55 million unit cases annually
Of Amrat Cola:
Approximately 40 million unit cases annually
Of Gourmet Cola
Approximately 50 million unit cases annually

Last 5 Years Import & Export

Exports:
There is somehow import in this industry but no export at all. Pepsi and other
local companies are not involved in any type of export but Coca-Cola remained involved
in the Export of Drinks till end of 2004. They used to export the drinks to one of
Pakistan’s neighbor country Afghanistan. It was lessen with the start of the war in

CSD Industry, Pakistan 6

Afghanistan and was ended at the end of 2004 when the conditions and relations became
too much severe among Pakistan & Afghanistan.

Imports:
Imports of the industry involves Technology that is imported once after many of
years and also the Raw Material are imported such as:
• CO2 from Central America & Europe in huge Cylinders
• Tons of Syrup is imported from Central America, in huge drums
• Plastic (in form of Razor or Razon) is imported from China

Another important thing is that the Tins are not made in Pakistan because the cost of
producing Tins is too much high. That’s why, these Tins are imported by both companies
from Gulf Region Countries like from Dubai, Bahrain, Saudi Arabia etc. Millions of Tins
are imported every month from these countries.

The exact figures of import & export of Pepsi and Coca-Cola were not available
but that of whole non-alcoholic drinks in Pakistan were available. The following four
pages show the overall imports as well as exports of the whole non-alcoholic drinks
industry including the carbonated drinks industry of Pakistan:

CSD Industry, Pakistan 7

CSD Industry, Pakistan 8
CSD Industry, Pakistan 9
CSD Industry, Pakistan 10
CSD Industry, Pakistan 11
 Sources of Raw Material

Raw material of this industry include: CO2, Water, Sugar, Syrup, Plastic,
Glass, Tins etc.
These companies take different raw materials from different sources. Some of the
sources along with the material that is taken from there are given below;
• CO2 from Central America & Europe in huge Cylinders
• Water is local, but is purified thoroughly by passing through
a number of processes
• Syrup from Central America
• Sugar is purchased locally from Shakkar Gunj, Pakistan
• Plastic (in form of Razor or Razon) is either bought from
Karachi or is imported from China
The purchase point as well as quantity of the material is dependent upon the decisions
made by the management of the companies.

Production Process

The production processes of the products are as follows:

Coca-Cola
Production Process of Liquid:
The complete production process by which the liquid of the bottle is prepared is
as follows:

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Production Process of Regular Bottle:
Thick Concentrate
(Imported)
Cleaning of Empty Bottles (Automated for almost 30 minutes) → Refill→ Rapping

Sugar
Production Process of Pet Bottle
There is no involvement of Human hand in this production until the product
Water
reaches the retail stores or some sales outlet. The production System is Completely
Automated.

Syrup
1 Razon of Plastic

Water + CO2
Test Tube

Bottles

Filling

Rapping

6 Case Packing

Ware House

How it Reaches Customers (Supply Chain)

Production
⇓ (through lifters)
DPG (Warehouse)

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 ⇓
Customer Channels (Retail, Restaurants, Café’s)
⇓
End Consumers

Delivery Mechanism include vehicles like trucks, vans etc. 120 Vehicles of Coca-
Cola are operating only in Lahore for the completion of Delivery Mechanism

Pepsi
Pepsi has almost same process of Production as that of Coca-cola. There is a lot
of differences in the technological level of both companies that is discussed later in this
document.
The technology used for the making of the product is imported from United
States
of America and at times from different parts of Europe. All the equipment used in the
production of Pepsi and other products involves very little element for error. It not only
saves time but also increases the production rate of the product. Every year due to the
latest equipment, the production capacity of the company is increasing.
The bottles to be filled with Pepsi are manufactured at Baluchistan Glass Limited
(BGL), and shifted to Pepsi plants in wrapped and sealed form for protection. On its
arrival at the plant, the bottles then go through the process of washing and are rinsed
thoroughly with filtered water before proceeding to the next stage on the conveyer belt.
Then the bottles are inspected with the help of special screen to monitor any
damage on the bottles. There are special tanks that contain the Pepsi material. This
material is in concentrated form and comes from Dubai. This concentrated material is
then dissolved with filtered water and carbon dioxide to produce PEPSI.
The distribution process of Pepsi is as follows:

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 Main City distributor

3-4Warehouses

3-4 Terrorities

80 Vehicle to cover
Lahore

There are 4 assembly lines in the production process. Each produces 13,000
karate’s of bottles. Each karate includes 24 bottles.

Technological Level

All the companies of this industry are using the latest and up to date technology
specially Coca-Cola Pakistan which is using completely automated technology & has set
the bench mark in Asia in the field of such Technology.

Pepsi:
The Company is using completely imported technology and it’s details are as
follows:
Filtration Plant imported from Germany
Injection Modeling Technology of Canada
Glow Modeling Technology of Germany
Water Treatment Plant from Germany
It is just a bit below than the bench mark of the industry in the field of technology as
some of it’s functions are not entirely automated but is instead partially automated.

Coca-Cola:

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 This Company is using almost same technology as that of Pepsi but is ahead in
terms of advancement. Its because the machinery is completely automated in this
company. There is no involvement of Human hand in this production until the product
reaches the retail stores or some sales outlet. The production System is Completely
Automated. Bench has been set by it’s own self in the field of technology in the industry.

Problems faced by the Industry

Every industry in Pakistan as well as in the World has some problems to face.
Some of the problems are collective while some are individual. The problems faced by
the Carbonated Drinks Industry in Pakistan are as follows:
⇒ Tied up Economic situation of the country (Economic Crises)
⇒ Overall Recession not only in industry but also in whole world
⇒ Less buying power of the customers affecting the sales
⇒ Product being included in the Luxury Product
⇒ Price war & too much Competition in the industry (good as well as bad in some
sense)
⇒ Wastage of Bottles (not possible to completely recycle)
⇒ Changing Trends & Consumption Patterns
⇒ Increased Costs of raw products up to 30%, but same prices, so decreased level of
profit
⇒ Energy Crises in the Country
⇒ Sugar Crises in the Country

Pricing Strategies:

Price is the amount of money the customers are willing to pay to obtain that
particular product.
Providing quality products at the lowest possible price had always been one of the
main concerns of Pepsi. One of the ways by which the company has been able to assist

CSD Industry, Pakistan 16

 this effort is by increasing the use of inexpensive and recyclable plastic bottles.
In Pakistan, the Pakistan Beverages Manufacturers Association (PBMA) fixes the
prices of commodities in view of the taxes laid down by the government, the excise duty,
sales tax, and the cost of the production material, the overhead cost, and the profits.
Companies in this Industry have the following pricing objectives:
 Profitability for the bottlers and the company.

 Providing consumers the value for their money.

Pepsi & Coca-Cola have adopted Market Penetration Pricing Strategy at that
time when they were introduced. But now they always keep on changing their pricing
strategy according to the circumstances.
Prices are set by a body of International Beverage Association. Competition in
the Industry also determines the product prices. Competition based pricing approach has
been used in Karachi, when Coke lowered their price, so Pepsi also lowered the price.
They also set their prices, based on demand and supply situation of the market, and
according to consumer values. Some times Companies changes their product prices
according to the season.
Summer is supposed to be a good season for beverage industry in Pakistan. So, in
winter they reduce their prices to maintain their sales and profit. But normally they
reduce the prices of their pet bottles or 1 litter glass bottle.
The sample list of prices is:

BOTTLE SIZES Coca Cola Price PEPSI PRICE

RGB (Regular) Rs. 12 Rs. 12
1 Liter Returnable Bottle Rs. 35 Rs. 35
Can (300 ml) Rs. 30 Rs. 35
1.5 Liter Bottle (Pet) Rs. 60 Rs. 60
2.25 Liter Bottle (Pet) Rs. 70 Rs. 70
Non Returnable (Disposable
Rs, 25 Not by Pepsi
Glass, 250 ml)
Non Returnable (Disposable
Rs. 25 Rs. 25
{Plastic, 250 ml)

CSD Industry, Pakistan 17

 To intermediaries like retail stores, cafe’s, restaurant etc, the rate is somehow
different to different dealers depending upon the quantity of demand by them. Different
discounts are also given to high level outlets that are decided by the management. Like
sometimes 1 can free with 1 karate etc.
Coca-Cola is linked with International Bottler (Turkish)
Pepsi is linked with Riaz Bottler (Local)

CSD Industry, Pakistan 18

 Government Policies & Incentives

Each industry has to face some of the policies as well as incentives imposed by
the Government. The government policy, at times, makes a lot of difference as the
government may increase the freight charges, the prices of glass, or the prices of steel.
Thus the overall price of the product also gets affected. Those for this specific industry
are as follows:
 No specific Government Incentive as such except taxes
 Imposed Government Regulatory Bodies like:
o Tax against Profit
o Tax against Sales (Approximately 16%)
o Labor tax
 Companies are advised for Long-term and strong relationships with Customers
 Strong Vendor-Supplier Relationship is also advised

Future Prospects after W.T.O

Except two large brands of Pepsi & Coca-Cola, all other companies in this
industry are local and have no link with other countries for import & export so there will
not at all be affect on their futures after W.T.O.
While after the contract of Pakistan with W.T.O, Pepsi and Coca-Cola will also
not be affected. According to the “Key Accounts Managers” as well as “Key Marketing
Managers” of both the companies, these companies are the international companies and
are already operating at a huge level all over the world. People are too much keen in
using these drinks in their daily life not only in Pakistan but all over the world. They
have already set their standards according to W.T.O standards and are already operating
in an accurate way. Hence, there will be no change in the future prospects of the
companies after W.T.O & they are planning to keep operating in the same way as they
are doing now.

CSD Industry, Pakistan 19

References:

We met the following during the visit to Plants of Coca-Cola and Pepsi:

Mr. Kashif Rafiq Key Accounts Manager, Coca-Cola 0300-8435531

Mr. Salman Key Accounts Executive, Coca-Cola 0301-8467879
Mr. Zuhaib Noor Red Auditor, Coca Cola 0300-8004978
Mr. Rizwanullah Khan Area Development Representative, Pepsi 0314-4441206
Mr. Abdul Ahad Maintenance Engineer, Pepsi ----

The plants we visited are as follows:

Coca-Cola:
104-A Industrial Estate, Kot Lakhpat, Lahore, Pakistan
042-5111044
Pepsi:
SF-25 & 26,Centre Point, Main Boulevard,Gulberg-III, Lahore, Pakistan
042- 5754932

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Bibliography:

http://www.cci.com.tr/en/content/detail.asp?cid=8&navId=1&navId2=8
http://www.scribd.com/doc/8659275/Pepsi
http://www.alibaba.com/showroom/Carbonated_Beverage.html
http://www.pepsico.com/Company
http://www.thecoca-colacompany.com/
http://images.google.com.pk/images?
hl=en&source=hp&q=pepsi+production&btnG=Search+Images&gbv=2&aq=f&oq=
http://www.coca-cola.com/index.jsp
Pc-Tas (for import & Export of Industry)

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