Post on 02-Apr-2018
7/27/2019 Coca Cola vs Pepsi_finall
1/36
Coca Cola Vs Pepsi in India: The
Battle of Bottles Continues
7/27/2019 Coca Cola vs Pepsi_finall
2/36
Industry Background
Pepsi introduced aerated drinks in India in 1956 and withdrew in
1961
Coca Cola entered in 1961 and withdrew in 1977
Reduce its equity holding to 40%
Share the secret behind the concentrate
7/27/2019 Coca Cola vs Pepsi_finall
3/36
7/27/2019 Coca Cola vs Pepsi_finall
4/36
Cola-Cola is a $19 billon US company based in Atlanta.
The Coca-Cola trademark is considered to be one of the five best
known trademarks in the work also considered the most admired
trademark according to a survey in 1988.
It was developed as a formulation in 1886 by Dr. John Pemberton, a
pharmacist in Atlanta.
In 1919, Ernest Woodruff purchased the Coca-Cola company and by
1923 his son Robert Woodruff took the company to great heights.
7/27/2019 Coca Cola vs Pepsi_finall
5/36
Worldwide Coca-Cola has a market share of 70% in the Cola segment
and about 40% of its market share comes from US alone.
Worldwide 37% of Coca-Colas production was from independently
owned bottlers; 57% from plants with non-controlling interests; and 13%
from plants with controlling interests
7/27/2019 Coca Cola vs Pepsi_finall
6/36
Coca-Cola Brands in India
7/27/2019 Coca Cola vs Pepsi_finall
7/36
7/27/2019 Coca Cola vs Pepsi_finall
8/36
Profile
Was formulated in 1893 in New Bern, North Carolina, by Caleb
Bradham.
Throughout 1950-60 Pepsi s competed on price and sold its
concentrate to bottlers at a price 20% lower than Coca-Cola.
By 1963 Pepsi under the leadership of Donald Kendell diversified
into production of snacks (Frito-lay) and restaurants (Pizza-hut, Taco
Bell, KFC).
As a result of this diversification Pepsi-Cola was renamed PepsiCo.
7/27/2019 Coca Cola vs Pepsi_finall
9/36
The reason for diversification was that the management was of the
opinion that there were synergies possible across these businesses:
chips were supposed to go well with soft drinks, and new fountain
outlets could be opened in restaurants.
Pepsi has a number of powerful brands in its arsenal namely Slice,
Diet Slice, Cherry Pepsi.
7/27/2019 Coca Cola vs Pepsi_finall
10/36
Pepsi Co. Brands in India
7/27/2019 Coca Cola vs Pepsi_finall
11/36
Parle Entered the Market
Parle led by Ramesh Chauhan captured 60% of the market.
Parle soft drinks products Thumps up, Gold Spot, Limca, Citra,
Maaza and Frooti
Competitors
Pure Drinks Campa Cola and Campa Orange from regional
vendors
Dukes and Spencer
7/27/2019 Coca Cola vs Pepsi_finall
12/36
Post 1980 Era - Pepsi
Decade of slow Liberalization
Good Stage for MNCs
Pepsi re-entered the market with tie ups with Punjab Agro andVoltas (Became fully owned subsidiary of PepsiCo in 1991)
Obligations
Agro research set ups
Technology transfer in food and beverage processing
Investments in processing vegetables and grains
Export obligations and facilities for local manufacturers of colaand fruit juice concentrates
7/27/2019 Coca Cola vs Pepsi_finall
13/36
Post 1980 Era Coca Cola
Coca Cola Re entered in 1993 after the liberalization.
Captured 69% of market share after acquiring Parles soft drinks.
Sore relationship between Coca Cola and Parle
Coca cola promoted its own products
Coca Cola was a new brand launch, not a relaunch
Lost market share
Parles market share captured by Pepsi and became the leader in
Indian Market
7/27/2019 Coca Cola vs Pepsi_finall
14/36
Products
In India CSDs were largely distributed in returnable glass bottles.This trend was different as in most of the other countries CANSwhere used to served them.
Low economies of scale in Can manufacturing caused high prices for
canned soft drinks almost double.
Introduction of Fountains
1998 Soft Drink Sales
CSDS 61.3%
NCSDs 19.5%
NCSD Liquid and powder form10.4%
7/27/2019 Coca Cola vs Pepsi_finall
15/36
Market Share 1998
Product Market Share(%)
Coca Cola 18
Limca 10
Fanta 8
Thums up 17
TOTAL 55 Approx
Product Market Share(%)
Pepsi Cola 27
Mirinda 10
Teem 1.5
TOTAL 40 Approx
COCA COLA Pepsi CO
7/27/2019 Coca Cola vs Pepsi_finall
16/36
PRODUCT PORTFOLIO
FLAVOR COCA-COLA PEPSI CO
COLA COCA-COLA, THUMS UP* PEPSI COLA
CLOUDED LIME FANTA , LIMCA* SEVEN UP
CLEAR LIME CITRA TEEM
ORANGE FANTA ,GOLD SPOT* MIRINDA
MANGO NSCD MAAZA*
SODA KINLEY EVERSAL
* DENOTES PRODUCT TAKEN FROM PARLE.
7/27/2019 Coca Cola vs Pepsi_finall
17/36
Products Category
SSoft Drinks
Aerated
(CSDs)
Non
Aerated
(NCSDs)
Liquid Base Diluted Fruit Pulp
Carbon dioxide Preservatives
Bottled/Canned/
Tetrapacked
7/27/2019 Coca Cola vs Pepsi_finall
18/36
Indian Soft Drink Market In 1996 Rs 32 Bn 60% CSDs and 20% NCSDs
15% consumption in PET bottles, highest was the consumption in
returnable glass bottles.
Bottling plants were highly capital incentive and highly automated
having the typical filling rate of 600-1200 bottles per minute.
Margins
Bottler 10%
Retailers 20%
Markup due to excise and taxes 40%
7/27/2019 Coca Cola vs Pepsi_finall
19/36
Shares of ThroatLIQUID SHARE OF THROAT(%)
WATER 75
TEA 13.3
COFFEE 1.7
MILK 4.8
CSD 1.8
NCSD .7
SQUASH/POWDERS .7
FRESH LIME JUICE .9
ALCOHOL .3
7/27/2019 Coca Cola vs Pepsi_finall
20/36
Indian Soft Drink MarketMONTH INDEX
January 100
February 150
March 170
April 200
May 220
June 230
July 220
August 200
September 170
October 160
November 150
December 150
Index : January=100
7/27/2019 Coca Cola vs Pepsi_finall
21/36
Supply Chain Structure
Concentrate
Manufacturer
Retailers
Bottler
End Users
Owned by
ConcentrateManufacturer
Franchisees
7/27/2019 Coca Cola vs Pepsi_finall
22/36
Competition
7/27/2019 Coca Cola vs Pepsi_finall
23/36
Competitors in India
In India Coca-Cola held 54% of the market share while Pepsi Co.India had a market share of 40%.
Since Coca-Cola had acquired Thumbs Up, Limca etc. from Parle its
market share had shot up.
Market share of soft drinks brands (as of Jan 1998)
Brand Coca-Cola Brands Pepsi Brands
Coal Segment (60%) Coca-Cola: 17.9%
Thumbs Up: 17.5%
Pepsi: 27.3%
Orange Fanta: 7.9%
Gold Spot: 1.0%
Mirinda: 7.9%
Clouded Lime Limca: 9.4% Teem: 1.5%
Clear Lime Citra: 0.5% 7 Up: 2.5%
7/27/2019 Coca Cola vs Pepsi_finall
24/36
Marketing style of Pepsi Co. Pepsi from the beginning chose to adapt to Indian needs and preferences
by associating itself with local festivals, events, and traditions.
Its strategy was to introduce campaigns made in India and specific to
Indian settings, people, and idioms.
For example it adapted the famous US campaign line Youve got the Rightone baby, Uh-Huh to Yehi hai right choice baby, Aha.
In Chennai it offered a bottle of Pepsi free with idlis, in Kolkata, it linked it
with local cricket, and in Delhi with the festival of Holi.
It adopted an aggressive marketing strategy and positioned itself as a
thing for the youth.
It was also agile in getting a number of events sponsored or in which it had
major presence.
7/27/2019 Coca Cola vs Pepsi_finall
25/36
Cont
It also associated itself with celebrities in its ad campaigns.
7/27/2019 Coca Cola vs Pepsi_finall
26/36
Marketing style of Coca-Cola Initially Coca-Cola campaigned its low key and less aggressive global
ads in India.
From mid 1997, they also started on similar platform as Pepsi andlaunched India specific ads.
They ran a very successful campaign with the theme Eat, Sleep,Drink only Coca-Cola which increased its brand recall from 19.4%in August 1997 to 30.4 % in March 1998.
Realizing the need of having celebrities endorsing its products,
Coca-Cola signed cine stars Amir Khan, Karishma Kapoor and amongcricketers they signed Sourav Ganguly, Anil Kumble etc.
It also positioned its other brands like Thumps Up with a machoimage, Fanta as fun drink, and Limca for anyone taking a breather
7/27/2019 Coca Cola vs Pepsi_finall
27/36
7/27/2019 Coca Cola vs Pepsi_finall
28/36
Key Differences
Category Pepsi Co. Coca-Cola
Advertisement
They worked primarily with ad
agency and they went fornational and regional promotion
They worked with 4 to 5 ad
agencies and most of there adsand they went for national
promotion
Distribution and
Logistics
It operated smaller trucks which
covered shorter routes and they
used half depth crates
It operated large trucks on
longer routes and used full depth
crates.Bottling Plants It owned and operated a
number of bottling plants thus
providing a control over bottling
operations
They initially had very little
bottling plants and later followed
the footsteps of Pepsi
Quality Pepsis quality standard were
not as stringent and world class
compared to Coca-Cola
They quality checks were very
stringent and world class
Management Very thin head office and much
of the initiatives were left to the
people at regional level
Coca-Cola had most of its
decisions taken at head office in
New Delhi, even Atlanta office
kept it on a tight leash
7/27/2019 Coca Cola vs Pepsi_finall
29/36
QUES AND ANS
7/27/2019 Coca Cola vs Pepsi_finall
30/36
Threat of New Entrants
7/27/2019 Coca Cola vs Pepsi_finall
31/36
Threat of New
Entrants
Degree of Threat Rating Action Required
CapitalRequirement High capitalrequirement for
initial setting up of
bottling plants and
distributions.
High New entrantslooked far fetched
dreams. The
existing rivalry
between the two
giants has already
sore the marginDistribution System Need to be robust
to meet ever
increasing demand
as the market is on
rise
High Try to get more
franchise under the
belt and try to
improve the
logistics.
Economies of Scale Coca Cola stands
way ahead ,the
benefit of bulk sale
and distribution
cannot be fetched
by other
High Concentrate more
on bulk sale,
production and
distribution. Can
use its network to
get full benefits
Threat of New Entrants
7/27/2019 Coca Cola vs Pepsi_finall
32/36
Threat of New
Entrants
Degree of Threat Rating Action Required
Government Polices High restrictions onentry ,high amount
of quality check up
of products.
High Because of hugerestriction posed by
the government it
helps Coca Cola to
sustain as market
leader as the entry
threat becomeminimum
Overall Strong Entry
Barriers, High
Capital Investment,
Government
Obligations make it
difficult for new
entrant to enter
High Practically only few
companies have
tried to enter in this
segment. Threat
from the new
entrant other than
the new innovative
product is minusule
7/27/2019 Coca Cola vs Pepsi_finall
33/36
Threat of
Substitutes
Degree of Threat Rating Action Required
Relative
Performanceof Substitutes
Almost all Cola drinks are sold
at the same price, othersubstitutes sold at much
cheaper rate but end benefit
is differentiable
High It needs to continue to introduce
value for money combination tomake its brand cheaper yet
powerful.
Switching Cost No Switching cost practically.
Buyers can any time switch to
different product category.
High Brand Promotion is important.
Distribution plays an important role
in making its product available everytime at all places
Buyer
Propensity to
Consume
Consumption of Cola drinks is
influenced by the climate.
People might opt for other
substitutes like tea,coffee,etc.
High Take advantage of the summer heat
in India. Capture the tea and coffee
drinker who might like to prefer cold
drink to quench themselves in thescorching summer.
Overall Pepsi is one of the main
substitute threats of Coca
Cola. Other substitutes like
tea,coffee,etc influence the
buyers but its hardly Coca
Medium India is a tea drinking society but
coca cola has been to able to
influence to a great extent. Rural
population is the key to increase
and spread its influence.
7/27/2019 Coca Cola vs Pepsi_finall
34/36
Q2. Identify the Strategic questions facing Coca
Cola?
Expanding market share in non carbonated drinks category.
Expanding in bottled and packaged mineral water segment.
Severe water shortages in India.
Environmental issues, labor rights issue, food and quality measure.
Decision making, managing logistics and distribution of products.
7/27/2019 Coca Cola vs Pepsi_finall
35/36
Q4.Set of recommendation for coca Cola by taking into
account the offensive and defensive strategies of Pepsi
Coca-cola India needs to establish more number of fountains and it
has to built a good number of high image clients as compared to
Pepsi (having 1st mover advantage) .
Acquire more bottling plants under his own leadership.
Decentralize the decision making process and give freedom at
regional level to take initiatives.
It should focus on vertical expansion as within the product in
pepsico. Only 37% product are beverage CocaCola should focus on
beverages business and related businesses, e.g. bottling, sugar
plantation, or even tin can and glass recycling business.
7/27/2019 Coca Cola vs Pepsi_finall
36/36
If Coca-Cola focuses only on the carbonated soft drink sector
competitively, it will weaken or make Coca-Cola lose the
market leader in beverage industry. Coca-Cola can focus more
on bottled water, noncarbonated drinks, and especially
energy drinks.