April 23, 2012
Case study-Coke and Pepsi learn to compete in India
Coke had been present in the Indian market until they left in 1977 because of a dispute over the trade secrets. They chose to leave instead of cutting their equity stake to 40% and handing over their secret syrup recipe. When Pepsi entered the market, sales of soft drink concentrate to local bottlers could not exceed 25 percent of total sales for the new venture. The government also mandated that Pepsi Food’s products be promoted under the name “Lehar Pepsi” (“lehar” meaning “wave”). I think that these two examples of government regulations could have not been avoided. India’s soda market is already tough enough to enter so these regulations probably came with no surprise. I think both companies anticipated intense regulations like this before market entry and they planed accordingly. I don't think the 1990s was a great time to enter the India market. India experienced severe economic crisis when the oil prices started to rise because of the first Gulf war. Foreign exchange reserves fell as Indians cut back on repatriation of their savings. Although, things started to grow dramatically once the new government took over in 1994, the Indian government was viewed as unfriendly to foreign investors. The demand for carbonated drinks was very low for a country of India’s size. Both companies had to work really hard with promotion to get their products up and running. I think Coca Cola’s promotion plans were excellent. Their approach was directed towards a younger crowd. They used commercials that included music and dancing. This increased sales by 50 percent. Coca Cola also reduced its prices by 15 to 25 percent to encourage consumption. The price reductions and the new product launch were announced in successful television ads for both Pepsi and Coke. Coca Cola’s approach was more centered towards local idioms while Pepsi was more focused on the popular...