Entry of PepsiCo into

Indian Market
Reason to Enter New Market
• As the major market for PepsiCo, the US, seemed
to be reaching saturation levels, the option to
expand on a global scale seemed to have
become inevitable for the company.
• India was a profitable destination since its vast
population offered a huge, untapped customer
base.
• During the late 1980s, the per capita
consumption of soft drinks in India was only
three bottles per annum
 First Entry
• In May 1985, PepsiCo had joined hands with one of India's
leading business houses, the R P Goenka (RPG) group, to
begin operations in the country. The company, along with
the RPG group company Agro Product Export Ltd.,
planned to import the cola concentrate and sell soft
drinks under the Pepsi label.
• To make its proposal attractive to the Indian government,
PepsiCo said that the import of cola concentrate would
essentially be in return for exporting juice concentrate
from operations to be established in the north Indian
state of Punjab. 
• The government rejected this proposal primarily on two
grounds.
– Import of the cola concentrate .
– The use of a foreign brand name (Pepsi)
• The association with the RPG group too ended at this
juncture
 Problem Faced
• In 1988, the New York office of the President of the multi-
billion cola company PepsiCo received a letter from India.
• The letter was written by George Fernandes, ”I learned that
you are coming here. I am the one that threw Coca-Cola
out, and we are soon going to come back into the
government. If you come into the country, you have to
remember that the same fate awaits you as Coca-Cola.“
• PepsiCo's arch-rival cola company, Coca-Cola, had indeed
been forced to close operations and leave India in 1977
after the Janata Dal came to power.

•
 Second Entry
• The company knew that the political and social
problems that plagued Punjab were an extremely
sensitive issue for India.
• PepsiCo's decision to link its entry with the
development and welfare of the state.
• The new proposal gave enough emphasis on effects of
PepsiCo’s entry on agriculture and employment in
Punjab.
• The company promised to create many employment
opportunities in the state.
• It further claimed that many terrorists would be lured
to come back to the society to work.
• It added a lot of positives to the company’s proposal.
•
 Conti..
• The govt. was quite impressed with Pepsi’s promises.
• Finally, Pepsi Foods Ltd. venture was finally cleared in
Sep ’88.
• “Pepsi” – a JV b/w PepsiCo (36.89%), PAIC (36.11%),
and Voltas (24%) India Ltd.
• The co. launched its soft drinks business in 1989.
• Pepsi set up a fruit and vegetable processing plant at
Zahura village in Punjab’s Hoshiarpur district.
• It began to import materials for tomato cultivation.
• The co. entered into contract farming with the rich
farmers for growing tomatoes.
•
 Pepsi enjoys
• In 1990, Govt. of India liberalized the economy on the ground of
severe foreign exchange crisis.
• The process included:
 ...removal of numerous restrictions on foreign trade, and
 ...increased role of private equity in Indian markets
• Pepsi benefited from the economic changes in many ways:
 ...it was free from the commitments that it made at the time of its entry
 ...the co. can now invest more than 25% in its soft drinks business
 ...it was also no longer required to export 50% of its production
 ...PAIC’s share was brought down to 1% and Voltas’s to nil
 ...the co. established a wholly-owned subsidiary, PepsiCo Holdings India
Pvt. Ltd.
 ...Pepsi changed its cola’s name from “Lehar Pepsi” to “Pepsi”
 ...it sold off its tomato paste plant to HLL in 1995

After all, Pepsi wasn’t that bad...
 Pepsi’s entry – Indian benefits...
• Pepsi’s tomato farming project shot up India’s tomato
production from 4.24 mn tonnes (‘91-92) to 5.44 mn tonnes
(‘95-96).
• Punjab’s overall tomato productivity went up from 28k tonnes
to 250k tonnes and per hectare from 16 tonnes to 50 tonnes.
• The co. offered its contract farmers, free of cost, some advanced
equipments such as transplanters and seedling machines.
• It also set up the agricultural research centers in Jallowal and
Channo (Punjab) and Nelamangala (Karnataka).
• It extended its contract farming initiatives to groundnuts in
2000.
 Pepsi’s entry – Indian benefits...
• The project initiated in Punjab and then introduced in Gujarat.
• By using imported technology from China, the per hectare yield
improved from 1 tonne to 3.5 – 4.5 tonnes.
• Pepsi invested an additional amount of Rs. 3.75 bn spread over 3
years (2000-02) in Karnataka over & above the existing
investment of Rs. 1.4 bn.
• Since its entry into India, the co. had already invested Rs. 18 bn
by the year 2000.
Pepsi – doing business on its own terms...
• In 2000, Pepsi’s exports added up to Rs. 3 bn.
• It included processed foods, basmati rice, guar gum and even soft
drink concentrate.
• Even by 2000, it could procure only 3k tonnes of potatoes p.a. as
against its requirements of 25k.
• In 2002, the co. entered into various contract farming deals.
• It joined hands with Punjab Agri Export Corporation to process
citrus fruits for its Tropicana project in August 2002.
• By 2003, Pepsi’s soft drinks, snacks, fruit juices and mineral water
business had established themselves firmly in India.
 Some words to quote...


 “For millions of Indians, Pepsi had become a part

of their lives in many different ways”