India

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Marketing

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Nov 24, 2024

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Introduction Despite the huge population and perceived potential market, India is not considered by multinational beverage companies as an important market for their products. Barriers imposed by Indian government such as austere trade policies, government regulation, demand for local carbonated drinks, and environmental and safety checks make India to be less attractive to beverage companies compared to countries at similar economic development with India. Coca Cola re-entered the Indian market in 1990, four years after its competitor, Pepsi Foods Ltd, had ventured into the same market (Rudenko & Simpson, n.d). However, the companies would face contamination allegations and safe water use. The political environment in India was not conducive for success of the two companies. However, through marketing strategies, Coca Cola and Pepsi companies have learned to addresses this suspect political environment as detailed herein. Political Environment in India Although political environment is not favourable for the multinational beverage companies in India, the country has potential for market if the positioning strategy is addressed. This section, identifies two market segments that a beverage company intends to exploit. The first segment is the middle-income. In 2020, an estimated 28.5% of the Indian population were classified as middle-income earners (Jain & Goli, 2022). Consequently, with Indian population estimated at 1.38 billion in 2020, then over 380 million Indians are in middle class. The second target market is the hospitality sector. In 2021, Indian hospitality sector was at occupancy rate of 34.4% (Jain & Goli, 2022). By selecting the two market segments, the marketer believes in meeting the tastes and preferences of the market share. Thus, this section highlights the marketing strategy that will be used to gain competitive advantage over this market segment.

Specific Aspects of the Political Environment Various aspects of the Indian political environment have had a significant impact on beverage sector in India. Protection of the local companies by the Indian government is a key political aspect that determines the success of foreign companies in the Indian market. For instance, when Coca Cola re-entered the market in 1990, it found it difficult to take away market share from the local beverage market that was rapidly growing year after year. Government gave incentives to local producers while imposing policies that deterred foreign beverage companies. Second, the business environment in India is characterized by unsubstantiated claims of contamination of beverages. For instance, just when the Coca Cola and Pepsi had settled in India, there were claims by local manufacturers that American beverages contained a significant levels of pesticide residue (Vedwan, 2007). Although the tests conducted on Coca Cola and Pepsi products found that they were safe for consumption, there were protests in India over Coca Cola and Pepsi products, leading to partial bans of the products by some Indian states. The Indian media is also portrayed as biased against foreign beverage companies. For instance, the article alludes that newspaper printed Coca Cola can images with headlines like toxic cocktail while news channel broadcasted images of protestors with a caption pouring Coke down the throats of donkeys (Rudenko & Simpson, n.d). Pricing Both companies seem to have a common pricing strategy. For instance, both PepsiCo and Coca Cola have produced promotional activities that are aligned with sports, festivals, and helping the needy in India. By so doing, the companies have allowed clients to take advantage of contests and special sales that encourage purpose and customer loyalty. The pricing policies adopted by the companies is also flexible. For example, Coca Cola has reduced its prices by 15

to 25% to make their products affordable and reach more clients. The Coke brand, has also introduced a new unique size to grab the attention of the consumers and gain more market share. To counter these moves, PepsiCo has also lowered its prices. Timing of Entry Pepsi was founded in 1898, 12 years after Coca Cola was founded (Moses & Vest, 2010). Due to the strict laws of venturing into the India market, Pepsi could only form a joint venture with an Indian company. This was in line with the Indian anti-foreign policy laws. Therefore, Pepsi traded in the India market under the name Lehar Pepsi. Formed in 1886, Coca Cola is regarded as the largest manufacturer and distributor of soft drinks. Unlike Pepsi, Coca Cola was already in the Indian market by 1958-1977, before implementation of the anti-foreign policy. However, Coca Cola left the Indian market following pressure from the Indian government over the patent formula. After exit, Coca Cola traded in India under the name Britco Foods, following a joint venture with the Britannia Industries India Ltd (Rudenko & Simpson, n.d). Coca Cola would re- enter in the Indian market in 1990, as noted above. From this brief, the timing of entry by both companies have resulted to them experiencing different reactions. For instance, to gain entry into the highly regulated Indian market, PepsiCo had to struggle to convince the Indian government. PepsiCo promised the Indian government that it will engage in corporate social responsibility mechanisms aimed at uplifting economy of the rural Indians affected by terror activities in the Northern Indian state of Punjab by getting involved in agricultural activities. Moreover, PepsiCo made a host of other promises that were attractive to local authorities, though expensive to implement. On the other hand, the joint venture with Britannia, helped Coca Cola win the Indian market.

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The advantage of PepsiCo over Coca Cola is the mover advantage since being the first big foreign beverage helped it overcome difficulties that it might have experienced had Coca Cola been in the market. Moreover, the mover advantage helped PepsiCo win the untapped Indian market with excess of one billion population. On the contrary, the advantage of Coca Cola timing entry over PepsiCo is that entering after PepsiCo allowed Coca Cola to learn from the mistakes that PepsiCo could have made during the entry. Another advantage of late entry by Coca Cola is that it coincided with the time that India was open to foreign investments. However, late entry is disadvantaged in that the company may fall into the temptation of using positioning strategies adopted by the rival multinational companies. Long-Term Success Although both had good marketing strategies before entering India, I believe, Coca Cola failed to recognize the influence of the government and was criticized negatively as an excuse for doing so. In my opinion, Pepsi will outperform Coca-Cola in the long run because Pepsi has better marketing and advertising. It also gained wider consumer acceptance because it appeared earlier in that market, which could have resulted in Pepsi gaining more market share than Coca- Cola. Coca-Cola entered the market several years after Pepsi entered the market. While Coca- Cola's application was rejected, Pepsi was approved, giving them a market advantage. It seems logical that Pepsi would take advantage of this launch, but they face competition and a market that doesn't usually consume carbonated products (Singaram, Ramasubramani, MEHTA, & Arora, 2019). When Coca-Cola entered the market, one of its competitors was willing to join Coca-Cola while Pepsi struggled. Conclusion

It is important to consider the presence of the government in the country. For instance, consider the following questions; is it corrupt, is it hostile to foreign companies or American companies in particular? Both Pepsi and Coca-Cola face this challenge as they compete for market share for their products in India. Due to the environmental issues that both companies face, it is helpful to examine the local environmental impact of the products as well as the company's impact on the environment. These questions go hand in hand. There will be impacts and it is important to be aware of them and have a plan to counter the expected negative effects. In general, I think their move to enter the bottled water market is very strategic and profitable for both companies. With so many proven health issues in the United States and all other cultures today, they have to stay competitive. People drink more water, especially from bottles. A very logical step for the company to enter the bottled water business. Therefore, both PepsiCo and Coca Cola, if available in the Indian market, need to keep this fact alive. Based on the above analysis, I believe that PepsiCo was advantaged by its Indian market entry timing compared to Coca Cola.

References Jain, N., & Goli, S. (2022). Demographic change and private savings in India. Journal of Social and Economic Development , 1-29. Moses, C. T., & Vest, D. (2010). Coca-Cola and PepsiCo in South Africa: a landmark case in corporate social responsibility, ethical dilemmas, and the challenges of international business. Journal of African Business , 11 (2), 235-251. Rudenko, Y., & Simpson, M., (n.d). Case 1-3 Coke and Pepsi Learn to Compete in India. Singaram, R., Ramasubramani, A., MEHTA, A., & Arora, P. (2019). Coca Cola: A study on the marketing strategies for millenniums focusing on India. International Journal of Advanced Research and Development , 4 (1), 62-68. Vedwan, N. (2007). Pesticides in Coca‐Cola and Pepsi: Consumerism, brand image, and public interest in a globalizing India. Cultural Anthropology , 22 (4), 659-684.

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