Coke and Pepsi Learn to Compete in India

Case I: Coke and Pepsi Learn to Compete in India

Since the early 1990's Coca-Cola Corporation and PepsiCo have been combating on what is known as the "Beverage Battlefield" in India. Today India is one of the most sought after countries for foreign investments because of their continually growing market opportunities. However during Coca-Cola and Pepsi's attempts to broaden their global consumer bases both companies encountered several obstructions on their pursuits of conquering the Indian soft drink market.

From a historical standpoint, Coca-Cola and Pepsi were facing obstructions even before entering the market in the late 1980's. Coca-Cola's past venture in India had ended on bad terms with the Indian government when they refused to offer up their trade secrets. During the absence of foreign investment in the soft drink industry in India a local company, Parle, became the market leader. Parle invested a great deal into their leading brand, Thums Up, and played a dominant role in the soft drink industry until the liberalization of the Indian economy in 1991. After this time many of the political and legal obstacles facing Coca-Cola and Pepsi were lessened.

Other political challenges hindered the success of Coca-Cola and Pepsi in India as well. In 2003, when the United States and Britain invaded Iraq, the All-India Anti-Imperialist Forum called a boycott on goods from America and India. Indian's protested American companies for the war and specifically targeted Coca-Cola and Pepsi products. While the war was beyond control for these two companies, management perhaps could've done more to not only attempt to predict the backlash from Indian consumers due to the war, but also could've created advertisement campaigns to address the situation.

While political and legal factors produced problems for Coca-Cola and Pepsi, I feel that both companies did do a lot of things right. It's easy for a company to go into another country with an ethnocentric view that whatever works in their home country will work internationally and then fail. However both Coca-Cola and Pepsi did a lot of things to prevent that situation from happening. Both companies heavily participated in the cultural festival of Navratri in western India to promote their products and create brand awareness in a culturally traditional setting. The companies also produced television and print advertisements that linked important Indian themes to their products by "building a connect using the relevant local idioms" (Cateora, Graham 606). Coca-Cola and Pepsi both utilized popular Indian sporting events, athletes, and celebrities to endorse their products. Both companies could've made the mistake of using American celebrities or already made American commercials to advertise their products in India, but instead made the right move by making advertisements to specifically target their foreign market.

Coca-Cola and Pepsi also made the right moves by adapting to cultural barriers in India. One such barrier was the affordability of products for Indians. Because India is a country where people are known to live on very little a day, the idea of getting people to spend what little they have on a soft drink could be quite a stretch. However Coca-Cola India went with an aggressive pricing policy and reduced the price of their soft drinks in 2003 from 15% to 25% nationwide (Cateora, Graham 607). To compete competitively in the market, Pepsi reduced their prices as well. This move allowed both companies to offer products that were affordable to the target market in India but also encouraged more Indians to consume Pepsi and Coca-Cola products.

Both companies also created smaller sized bottles to allow for lower prices for Indian consumers. Coca-Cola and Pepsi created bottles ranging in size from 200 ml to 500 ml to adapt to cultural needs and increase their sales. By offering smaller sized bottles many consumers also increased the frequency in which they were purchasing the soft drinks.

Another way that both companies effectively dealt with culture was to create a new product category in their market, bottled water. Coca-Cola's brand of bottled water, Kinley, has grown to a leading market share of 37% since its launch in 2001 (Kripalani, Clifford). This dealt with cultural issues and the need for clean water in the country and also allowed the companies to break into a highly valued market.

Although Coca-Cola and Pepsi did a lot of things right during their venture into India despite some major obstructions, I feel that there are certain things they could've done better. What I believe to be the biggest obstruction for these companies, primarily for