Coca Cola Vs Pepsi in India: The Battle of Bottles Continues

Industry Background
Pepsi introduced aerated drinks in India in 1956 and withdrew in 1961 Coca Cola entered in 1961 and withdrew in 1977

Reduce its equity holding to 40%

Share the secret behind the concentrate

 Cola-Cola is a $19 billon US company based in Atlanta.

The Coca-Cola trademark is considered to be one of the five best known trademarks in the work also considered the most admired trademark according to a survey in 1988. It was developed as a formulation in 1886 by Dr. John Pemberton, a pharmacist in Atlanta. In 1919, Ernest Woodruff purchased the Coca-Cola company and by 1923 his son Robert Woodruff took the company to great heights.

Worldwide Coca-Cola has a market share of 70% in the Cola segment and about 40% of its market share comes from US alone. Worldwide 37% of Coca-Colas production was from independently owned bottlers; 57% from plants with non-controlling interests; and 13% from plants with controlling interests

Coca-Cola Brands in India

Profile Was formulated in 1893 in New Bern, North Carolina, by Caleb Bradham. Throughout 1950-60 Pepsi s competed on price and sold its concentrate to bottlers at a price 20% lower than Coca-Cola. By 1963 Pepsi under the leadership of Donald Kendell diversified into production of snacks (Frito-lay) and restaurants (Pizza-hut, Taco Bell, KFC). As a result of this diversification Pepsi-Cola was renamed PepsiCo.

 The reason for diversification was that the management was of the opinion that there were synergies possible across these businesses: chips were supposed to go well with soft drinks, and new fountain outlets could be opened in restaurants.

Pepsi has a number of powerful brands in its arsenal namely Slice, Diet Slice, Cherry Pepsi.

Pepsi Co. Brands in India

Parle Entered the Market

Parle led by Ramesh Chauhan captured 60% of the market. Parle soft drinks products Thumps up, Gold Spot, Limca, Citra, Maaza and Frooti

Competitors Pure Drinks Campa Cola and Campa Orange from regional vendors Dukes and Spencer

Post 1980 Era - Pepsi

Decade of slow Liberalization Good Stage for MNCs Pepsi re-entered the market with tie ups with Punjab Agro and Voltas (Became fully owned subsidiary of PepsiCo in 1991) Obligations Agro research set ups Technology transfer in food and beverage processing Investments in processing vegetables and grains Export obligations and facilities for local manufacturers of cola and fruit juice concentrates

Post 1980 Era Coca Cola

Coca Cola Re entered in 1993 after the liberalization. Captured 69% of market share after acquiring Parles soft drinks. Sore relationship between Coca Cola and Parle Coca cola promoted its own products Coca Cola was a new brand launch, not a relaunch Lost market share Parles market share captured by Pepsi and became the leader in Indian Market

Products
In India CSDs were largely distributed in returnable glass bottles. This trend was different as in most of the other countries CANS where used to served them. Low economies of scale in Can manufacturing caused high prices for canned soft drinks almost double. Introduction of Fountains 1998 Soft Drink Sales CSDS 61.3% NCSDs 19.5% NCSD Liquid and powder form10.4%

Market Share 1998

COCA COLA
Product
Coca Cola Limca Fanta Thums up TOTAL

Pepsi CO
Product Market Share(%)

Market Share(%)
18 10

Pepsi Cola

27

Mirinda 8 Teem 17 55 Approx TOTAL

10

1.5

40 Approx

PRODUCT PORTFOLIO
FLAVOR
COLA CLOUDED LIME CLEAR LIME ORANGE MANGO NSCD COCA-COLA COCA-COLA, THUMS UP* FANTA , LIMCA* CITRA FANTA ,GOLD SPOT* MAAZA* PEPSI CO PEPSI COLA SEVEN UP TEEM MIRINDA

SODA

KINLEY

EVERSAL

* DENOTES PRODUCT TAKEN FROM PARLE.

Products Category
SSoft Drinks

Aerated (CSDs)

Non Aerated (NCSDs)

Liquid Base

Diluted Fruit Pulp

Carbon dioxide

Preservatives

Bottled/Canned/ Tetrapacked

Indian Soft Drink Market

In 1996 Rs 32 Bn 60% CSDs and 20% NCSDs 15% consumption in PET bottles, highest was the consumption in returnable glass bottles. Bottling plants were highly capital incentive and highly automated having the typical filling rate of 600-1200 bottles per minute. Margins Bottler 10% Retailers 20% Markup due to excise and taxes 40%

Shares of Throat
LIQUID WATER TEA COFFEE MILK CSD NCSD SQUASH/POWDERS FRESH LIME JUICE ALCOHOL SHARE OF THROAT(%) 75 13.3 1.7 4.8 1.8 .7 .7 .9 .3

Indian Soft Drink Market

MONTH January INDEX 100

February
March April

150
170 200

May
June July

220
230 220

August
September October

200
170 160

November
December

150
150

Index : January=100

Supply Chain Structure

Concentrate Manufacturer Owned by Concentrate Manufacturer

Bottler

Franchisees

Retailers

End Users

Competition

Competitors in India
In India Coca-Cola held 54% of the market share while Pepsi Co. India had a market share of 40%. Since Coca-Cola had acquired Thumbs Up, Limca etc. from Parle its market share had shot up. Market share of soft drinks brands (as of Jan 1998)
Brand Coal Segment (60%) Orange Clouded Lime Clear Lime Coca-Cola Brands Coca-Cola: 17.9% Thumbs Up: 17.5% Fanta: 7.9% Gold Spot: 1.0% Limca: 9.4% Citra: 0.5% Pepsi Brands Pepsi: 27.3% Mirinda: 7.9% Teem: 1.5% 7 Up: 2.5%

Marketing style of Pepsi Co.

Pepsi from the beginning chose to adapt to Indian needs and preferences by associating itself with local festivals, events, and traditions. Its strategy was to introduce campaigns made in India and specific to Indian settings, people, and idioms. For example it adapted the famous US campaign line Youve got the Right one baby, Uh-Huh to Yehi hai right choice baby, Aha. In Chennai it offered a bottle of Pepsi free with idlis, in Kolkata, it linked it with local cricket, and in Delhi with the festival of Holi. It adopted an aggressive marketing strategy and positioned itself as a thing for the youth. It was also agile in getting a number of events sponsored or in which it had major presence.

Cont
It also associated itself with celebrities in its ad campaigns.

Marketing style of Coca-Cola

Initially Coca-Cola campaigned its low key and less aggressive global ads in India.

From mid 1997, they also started on similar platform as Pepsi and launched India specific ads.
They ran a very successful campaign with the theme Eat, Sleep, Drink only Coca-Cola which increased its brand recall from 19.4% in August 1997 to 30.4 % in March 1998. Realizing the need of having celebrities endorsing its products, Coca-Cola signed cine stars Amir Khan, Karishma Kapoor and among cricketers they signed Sourav Ganguly, Anil Kumble etc. It also positioned its other brands like Thumps Up with a macho image, Fanta as fun drink, and Limca for anyone taking a breather

Key Differences
Category Advertisement Pepsi Co. Coca-Cola They worked primarily with ad They worked with 4 to 5 ad agency and they went for agencies and most of there ads national and regional promotion and they went for national promotion It operated smaller trucks which It operated large trucks on covered shorter routes and they longer routes and used full depth used half depth crates crates.

Distribution and Logistics

Bottling Plants

It owned and operated a They initially had very little number of bottling plants thus bottling plants and later followed providing a control over bottling the footsteps of Pepsi operations
Pepsis quality standard were not as stringent and world class compared to Coca-Cola They quality checks were very stringent and world class

Quality

Management

Very thin head office and much Coca-Cola had most of its of the initiatives were left to the decisions taken at head office in people at regional level New Delhi, even Atlanta office kept it on a tight leash

 QUES AND ANS

Threat of New Entrants

Threat of New Entrants Capital Requirement Degree of Threat High capital requirement for initial setting up of bottling plants and distributions. Rating High Action Required New entrants looked far fetched dreams. The existing rivalry between the two giants has already sore the margin

Distribution System

Need to be robust to meet ever increasing demand as the market is on rise Coca Cola stands way ahead ,the benefit of bulk sale and distribution cannot be fetched by other

High

Try to get more franchise under the belt and try to improve the logistics. Concentrate more on bulk sale, production and distribution. Can use its network to get full benefits

Economies of Scale

High

Threat of New Entrants

Degree of Threat

Rating High

Action Required Because of huge restriction posed by the government it helps Coca Cola to sustain as market leader as the entry threat become minimum Practically only few companies have tried to enter in this segment. Threat from the new entrant other than the new innovative product is minusule

Government Polices High restrictions on entry ,high amount of quality check up of products.

Overall

Strong Entry Barriers, High Capital Investment, Government Obligations make it difficult for new entrant to enter

High

Threat of Substitutes
Relative Performance of Substitutes

Degree of Threat

Rating

Action Required
It needs to continue to introduce value for money combination to make its brand cheaper yet powerful.

Almost all Cola drinks are sold High at the same price, other substitutes sold at much cheaper rate but end benefit is differentiable

Switching Cost

No Switching cost practically. High Buyers can any time switch to different product category.
Consumption of Cola drinks is High influenced by the climate. People might opt for other substitutes like tea,coffee,etc. Pepsi is one of the main substitute threats of Coca Cola. Other substitutes like tea,coffee,etc influence the buyers but its hardly Coca

Brand Promotion is important. Distribution plays an important role in making its product available every time at all places
Take advantage of the summer heat in India. Capture the tea and coffee drinker who might like to prefer cold drink to quench themselves in the scorching summer.

Buyer Propensity to Consume

Overall

Medium India is a tea drinking society but coca cola has been to able to influence to a great extent. Rural population is the key to increase and spread its influence.

Q2. Identify the Strategic questions facing Coca Cola?

Expanding market share in non carbonated drinks category. Expanding in bottled and packaged mineral water segment. Severe water shortages in India. Environmental issues, labor rights issue, food and quality measure.

Decision making, managing logistics and distribution of products.

Q4.Set of recommendation for coca Cola by taking into account the offensive and defensive strategies of Pepsi
Coca-cola India needs to establish more number of fountains and it has to built a good number of high image clients as compared to Pepsi (having 1st mover advantage) . Acquire more bottling plants under his own leadership. Decentralize the decision making process and give freedom at regional level to take initiatives.

It should focus on vertical expansion as within the product in pepsico. Only 37% product are beverage CocaCola should focus on beverages business and related businesses, e.g. bottling, sugar plantation, or even tin can and glass recycling business.

 If Coca-Cola focuses only on the carbonated soft drink sector competitively, it will weaken or make Coca-Cola lose the market leader in beverage industry. Coca-Cola can focus more on bottled water, noncarbonated drinks, and especially energy drinks.