Pepsi and Coca Cola in India - a Case Study

Topics: Coca-Cola, Pepsi, Carbonation Pages: 6 (1805 words) Published: September 16, 2010
The political environment in India proved to be very problematic for both PepsiCo and Coca-Cola when they entered the market. The government has long enforced a protectionist stance on its economy in order to safeguard the interests of its people. Even with the New Industrial Policy in 1991 (Pathak 2007), that loosened the grip on foreign businesses entering the country, PepsiCo and Coca-Cola still had to jump through many hurdles before they could operate.

For example, PepsiCo was limited to selling at most 25% of total sales of their soft drink concentrate to local bottlers (Cateora 2007). They were also not allowed to use foreign brand names on their products, which meant that PepsiCo had to rename their products Lehar Pepsi and Lehar 7UP. These limitations served to dampen PepsiCo’s advance into the market, as well as tamper with the ‘product’ element of their marketing mix by getting rid of the brand’s established name.

Coca-cola on the other hand, was forced by the government to relinquish 49% of the company’s shares in order to purchase the local bottling plants (Cateora 2007). What made it worst was that at the time the company was pleading with the government to waive the ruling; there was a change in the bureaucratic in the government that left all past lobbying efforts in vein. This lack of solid institutions not only makes it hard for companies to manage the enviroment, but also gives way to corruption.

Unfortunately, even if the two companies had extensively researched the situation and performed comprehensive environment analysis, they would have not foreseen many of the problems. This is due to the unstable and unpredictable nature of the political and legal environment resulting from a lack of a solid foundation of law.

While PepsiCo entered India in 1988, Coca-Cola only managed to properly re-enter the Indian market in 1993, a whole 5 years after its rival. Both companies’ ventures faced some strict conditions from the government. However, Coca-Cola’s initial entry decision to buy out local company Parle would eventually result in some heavy repercussions for the company.

Those 5 years really made a difference to PepsiCo. It allowed the company a firm grasp in the market. According to the case study, by 1993, the company had already managed to hold 26% of market shares and this was even before Coca-Cola entered the market. Carbonated drinks require low involvement and are often convenience purchases. These kind of purchases are often based on whatever is on the consumers evoked set at the time; something which takes a lot of effort to change (Mathur 2006). Entering early gave Pepsi the upper edge in this respect.

During the time, India’s regulations regarding international business and trade were also constantly changing (Pathak 2007). At the time of PepsiCo’s entry, the government’s policy on international trade were more open and rules for operating with local businesses were more forgiving. Unfortunately for Coca-Cola, by the time it entered the county, the Indian government had changed it policies again to reinforce its stance in protecting local businesses. While the government allowed Coca-Cola to buy out Parle to use their bottling factory to manufacture their products, it gave the company five years before it had to release 49% of its shares to the locals.

India’s population is over 1.1 billion over a very large geographical spread. The cultures within India are also dissimilar from one part to another as well as varying levels of income depending on the region. While there are some uniform interests, marketers should not assume that one marketing mix within a region will work in another region.

The southern region of India is more rural and households there have less income compared to other regions. In order to serve these markets better, both Pepsi and Coca-Cola sold their drinks in extra small 200ml bottles in these regions to promote an increase in frequency of purchase. These...

Bibliography: Business Global 2006, 'India: Behind The Scare Over Pesticides In Pepsi And Coke ', Bloomberg Newsweek, 4 September 2006.
Cateora, PR,JLG 2007, International Marketing, McGraw Hill, New York.
Emmett, J 2009, 'Cricket sponsorship drives Pepsi sales surge ', SportsPro, 15 July 2009.
Mathur, V 2006, Evoked set: myth or reality? - brand name products, New Century Publications, New Delhi.
Mohaiemen, N 2004, 'Thanda Matlab Coca Cola ', IMC India, 20 January 2004.
Pathak, B 2007, Industrial Policy of India : Changing Facets, Deep and Deep.
Petrof, JV & Daghfous, N 1996, 'Evoked set: myth or reality? - brand name products ', Business Horizons, May-June 1996.
Prasso, S 2008, 'Lessons for the Indian market ', Enterpreneur, April-May 2008.
Shatrujeet, N 2001, 'Amitabh Bachchan debuts for Pepsi ', afaqs!, 5 May 2001.
The Financial Express 2003, 'Corporates Revel In Community Festivals ', The Financial Express, 23 September 2003.
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Coca Cola Case Study Essay
  • Coca Cola and Pepsi Cola Case Study Essay
  • Comparative Study of Pepsi and Coca-Cola (India) Essay
  • Coca Cola Case Study Essay
  • Coca Cola Case Study Essay
  • Essay on Coca-Cola Case Study
  • Coca Cola Case Study Essay
  • Coca Cola Case Study Research Paper

Become a StudyMode Member

Sign Up - It's Free