The Soft Drink Industry includes businesses that mainly produce non-alcoholic, carbonated beverages, mineral waters, and concentrates and syrups for carbonated beverage production. However, the manufacturing of fruit juices and non-carbonated fruit drinks is categorized within the canned and preserved fruit and vegetable industry.
Our main focus is on the activities and products we offer:
- Aerated waters;
- Carbonated beverages;
- Mineral and spring waters;
- Soft drink concentrates and syrup;
- Soft drink preparation carbonating.
The soft drink industry can be analyzed using Porter’s Five Forces framework as these commonly consumed beverages are made up of carbonated water, sugar, and flavoring. They are non-alcoholic and fizzy in nature, typically packaged in bottles or cans.
- A fierce competition exists among very few players: – Duopoly industry – Intense rivalry between Coke and Pepsi
- The threat of substitutes is reduced by the expansion of products portfolio: – Many alternative beverages e. g. juice, tea
- Suppliers have less bargaining power: – Many substitutes for sugar and packaging e. g. sugar – corn syrup, sweeteners packaging – glass, plastic, metal cans
- Different levels of bargaining power exist among the groups of buyers: – Vending Machine – no buyer bargaining power – Fast Food chain – more bargaining power
- Strong barriers to new entrants: – Amount of capital investment require – Exclusive territories in distribution channel – The access to retail channel
Coca-Cola, the renowned corporation that has been supplying the world with the most popular soft drink concentrates since 1886, returned to India in 1993 after a 16-year break to support the Indian soft drink market. In that same year, the Company acquired both the leading soft-drink brand and bottling network in India. Coca-Cola brands have become iconic globally and in India, there are a total of 50 bottling operations – 25 owned by the Company and an additional 25 owned by franchisees. Moreover, a network of 21 contract packers manufactures various products for Coca-Cola.
Coca-Cola utilizes 10-tonne trucks, known as three-wheelers with open bays, to make their brands available in remote parts of India. This particular design enables them to easily maneuver through the narrow alleyways commonly found in Indian cities. Coca-Cola is a globally available carbonated soft drink that can be bought from stores, restaurants, and vending machines.
According to The Coca-Cola Company, their beverage is distributed in more than 200 countries. Coke, also referred to as cola/pop, is manufactured by the company in Atlanta, Georgia before being supplied to authorized Coca-Cola bottlers across the globe.
Exclusive contracts are held by the bottlers with the company, who utilize concentrate, filtered water, and sweeteners to create finished Coca-Cola products in cans and bottles. These bottlers then distribute and sell Coca-Cola to retail stores and vending machines. Coca-Cola Enterprises is a key bottler, holding the title for largest in North America and Western Europe.
Coca-Cola India’s operations are structured into 5 regions, with a separate corporate entity called Coca-Cola India. The marketing function is divided into two roles: Coca-Cola India’s corporate marketing and region marketing. Corporate marketing focuses on developing the brand’s personality and ensuring a noticeable presence through above-the-line marketing. On the other hand, region marketing is responsible for implementing on-the-ground activities and driving consumer engagement through below-the-line spending. Each region has its own dedicated marketing resources to carry out local activation and execute brand plans, making each unit self-sufficient. The overall marketing philosophy and objectives remain consistent across all operations.
The marketing philosophy of Coca-Cola is to be the most preferred brand in all the beverage categories they operate in. Their marketing objective is to achieve this by implementing an integrated approach to become the top-of-mind brand in all categories. They achieve this through innovative advertising on various platforms and effective promotions for their brands. Additionally, they launch new packaging and flavors to further stimulate consumer interest. Specifically in India, Coca-Cola focuses on advertising as a key strategy and their objective is to use reminder type advertising that aligns with the product life cycle.
The reason for this is that Coke is currently at the maturity level, so companies typically use reminder type advertising to increase their penetration. Coca-Cola sets its advertising budget based on competitors, particularly Pepsi. When Coca-Cola sees that Pepsi has increased its advertising budget, the management plans to do the same in order to compete. Before creating an advertising message, Coca-Cola takes into consideration the importance of capturing customer attention.
The concept known as the “Clutter Buster” suggests that only advertisements with a unique or specialized appeal will have a lasting impact on customers. An example of this is Coca-Cola’s current slogan, “Thanda Matlab Coca-Cola,” which has attracted significant attention from consumers. The Coca-Cola Company primarily promotes its products through electronic media channels like television, radio, and the internet. They also target prominent newspapers in India for their advertising efforts. In conclusion, Coke employs both electronic and print media platforms for their advertising campaigns.
Coca Cola is increasing its presence in India by supplying multinational organizations such as McDonalds, Subway, Dunkin Donuts, and others. Additionally, the company is focusing on the local market where these establishments exclusively serve Coca Cola as their preferred beverage choice. Market Development involves searching for new markets for current products and currently, there are several Coca Cola flavors that are not yet available in India.
Coca Cola has the opportunity to tap into the Indian market by introducing new flavors. The beverage industry in India is in need of a change as consumers have remained loyal to the same flavors for an extended period. Although there are potential risks such as losing customers or facing higher demand, Coca-Cola Company can confidently bring these new flavors to India.
Both Coca-Cola and PepsiCo Inc., two well-known global beverage brands, aim to implement diversification strategies that come with growth opportunities and associated risks. For instance, Coca-Cola could boost its brand value by venturing into the snacks market. On the other hand, PepsiCo Inc., headquartered in Purchase, NY, is a Fortune 500 company engaged in manufacturing and promoting various products such as carbonated and non-carbonated drinks, salty and sweet snacks, along with other food items.
PepsiCo, the owner of Pepsi-Cola brands, also possesses numerous other brands including Quaker Oats, Gatorade, Frito-Lay, SoBe, Naked, Tropicana, Copella, Mountain Dew, Mirinda and 7-Up (excluding the USA). Since 2006, Indra Krishnamurthy Nooyi has been serving as the Chief Executive Officer at PepsiCo. Under her leadership, the company has focused on promoting healthier snacks and working towards achieving a net-zero environmental impact as part of Nooyi’s “Performance With Purpose” philosophy. The distribution and bottling of beverages are primarily managed by associated companies such as The Pepsi Bottling Group and Pepsi Americas. PepsiCo entered the Indian market in 1989 and has since become one of India’s leading food and beverage companies.
PepsiCo, a multinational investor, has entered the Indian market to cater to the ever-changing needs of consumers. Since its establishment, PepsiCo India and its partners have invested over $1 billion, generating employment for 150,000 individuals including suppliers and distributors.
PepsiCo offers a variety of products that range from enjoyable treats to nutritious meals. They strive to provide both joy and nutrition along with a great taste. PepsiCo India’s wide-ranging portfolio includes popular refreshment beverages like Pepsi, 7 UP, Mirinda, and Mountain Dew. They also offer low-calorie options such as Diet Pepsi, hydrating and nutritional drinks like Aquafina drinking water, Gatorade isotonic sports drinks, Tropicana 100% fruit juices, and juice-based beverages such as Tropicana Nectars, Tropicana Twister, and Slice. Additionally, they have local brands like Lehar Evervess Soda, Dukes Lemonade, and Mangola to offer even more variety. PepsiCo’s foods company, Frito-Lay, leads the market for branded salty snacks and ensures that all their products are trans-fat and MSG-free.
The company produces a variety of snack brands, including Lay’s Potato Chips, Cheetos extruded snacks, Uncle Chipps, Kurkure, and Lehar. In addition, they offer Quaker Oats, a high fibre breakfast cereal, and a range of low fat and roasted snack options to provide healthier choices for consumers.
Frito Lay uses Rice Bran Oil to cook its core products such as Lay’s, Kurkure, Uncle Chipps, and Cheetos, reducing saturated fats. All of their products have voluntary nutritional labeling on their packages. PepsiCo, the parent company of Frito Lay, has developed a vast beverage and food business. To support its operations, PepsiCo has 43 bottling plants in India – 15 owned by the company and 28 owned by franchisees. Additionally, PepsiCo’s Frito Lay foods division operates three advanced plants. PepsiCo’s business is driven by its vision of creating a better future through sustainability. Every day, PepsiCo demonstrates its commitment to this vision through its contributions to the country, consumers, and farmers.
The non-alcoholic soft drink beverages market can be divided into fruit drinks and soft drinks, with further subdivisions of carbonated and non-carbonated options. Carbonated soft drinks comprise cola, lemon, and orange flavors, while mango drinks belong to the non-carbonated category. In the past, domestic brands like Campa, Thumps Up, and Limca dominated the soft drinks market until the early 1990s. However, multinational corporations such as Pepsi and Coke entered the market after the economy opened up, gaining complete control over it. While Coke is globally leading in carbonated drinks, Pepsi currently holds the top position in India. Nevertheless, this gap is rapidly closing due to significant advertising investments from both companies.
Pepsi first entered the Indian market in 1991, while Coke made a re-entry in 1993 after being expelled by the central government in 1977. Pepsi India, a major player in the carbonated soft drink industry, is now aiming to expand its presence in the fruit juice market. Following the successful launch of its lemon drink Twist as Pepsi Aha in India, Pepsi is ready to introduce another global product tailored to the local market. In June 2002, Pepsi introduced its international fruit drink Twister in India, but with a twist. The Twister blends were released as mixed fruit cocktails under Pepsi’s existing juice brand Slice.
The Slice fruit blends are globally available under the Twister brand and can be found in over 10 flavors, with various packaging options. However, in India, the blends will be customized according to local preferences and fruit pulp availability, and will only be packaged in cartons. Strawberry-peach and kiwi-guava are among the planned flavors. The new product may have a slightly higher price compared to Slice due to Twister’s higher juice content, believed to be over 15%. Slice is positioned as a 15% juice drink for the mass market, while Tropicana offers 100% fruit juice at a higher price point.
Pepsi has chosen to release Twister flavors under the Slice brand instead of creating a new brand, aligning with their strategy of positioning Slice as the top juice brand in India. Although there were talks within Pepsi about whether to introduce Twister as its own brand or focus on developing Slice, they ultimately decided against the former. Industry experts believe that this decision is primarily motivated by cost savings attained from utilizing an existing juice brand rather than launching a completely new one. Originally introduced as a mango drink sold in returnable glass bottles, Slice has become a successful Rs 200-crore brand.
The introduction of a Rs 10 price point for a 300 ml bottle has not been successful in attracting new consumers in urban and semi-urban areas, as well as in rural markets with low per capita consumption. The sales of the Rs. 10 bottle were disappointing. However, the introduction of the “chota Pepsi,” a smaller 200ml Pepsi priced between Rs. 5 to Rs. 7, proved to be effective in expanding the rural market.
Pepsi predicts that the 30% rise in volumes this year will be due to the smaller-sized option, compared to its previous year’s share of 18%. Nevertheless, there is a worry about how the sales of the 200 ml option might affect the sales of the 300 ml option. To guarantee market growth, pricing is anticipated to be crucial.
Pepsi has determined that reducing the amount of cola given to consumers by 33% (100 ml) and selling it at 50% of the regular price (Rs 5) is not a sustainable option. They have found that this strategy can only be used as an introductory offer, supported by factual evidence. Last year, Pepsi conducted a test market where they sold 200 ml bottles at a price of Rs 5. However, instead of experiencing growth, Pepsi observed that consumers who normally purchased 300 ml bottles simply switched to the smaller variant. As a result, the market remained stagnant and everyone involved experienced financial losses. This led to the clear conclusion that reducing prices does not necessarily lead to market expansion.
Regarding distribution, “place” encompasses both physical locations where products are sold and methods used for distribution.
However, the concept of “place” in the market of a product is also considered important. Businesses have to make decisions regarding various aspects of “place,” including access, parking, competition, and physical location. In the cola wars, “place” is considered the most significant factor, and distribution is a topic that generates intense passion in Pepsi and Coke. Pepsi is currently undergoing major innovations in distribution, with pre-selling being the most significant development. This strategy has been successfully tested in Bangalore, Baroda, and Coimbatore and might soon be implemented nationwide. The distribution network does not involve wholesalers but rather functions as an agent network.
The country has been divided into different regions by the companies, with a franchisee established in each region. These franchisees have their own bottling plants and are responsible for day-to-day operations. However, recently, the soft drinks companies have started setting up their own bottling units and acquiring some of the franchised bottles. In the Delhi market, the current strike rate is 40%, but this can be improved to 80% during peak season according to a franchise director. This improvement could result in significant savings for Pepsi. Compared to other FMCG players who service three times the number, colas only service 7.5-8 lakh accounts.
Vats, a franchise director, believes that innovation in our distribution system will bring us closer to the goal of 21 lakh. Unlike Coke, Pepsi is a firm believer in direct distribution, while also putting a significant emphasis on dealers and cost cutting. A Pepsi official points out that there are numerous opportunities for innovative distribution methods that can help reduce costs. This year, Pepsi has chosen to focus on the rural market and aims to reach 20 to 28% of the rural population in its first year of operation. The first step in achieving this target is to launch an extensive distribution plan in villages with populations of 5000 or more. To ensure the success of this initiative, Pepsi is concentrating on establishing an efficient cold chain.
The company has developed specialized freezers to keep its products chilled during power outages lasting three to four hours. In addition, it will utilize traditional iceboxes to sell its products in rural areas of India. When targeting rural markets, Pepsi plans to use the wholesale distribution route due to the immense challenges associated with direct distribution in remote regions. As for advertising, it involves utilizing electronic and print media to promote the product. The effectiveness of the advertising campaign should be assessed by considering factors such as reach (the number of people who will see the advertisement), frequency (how often the product will be advertised), and impact.
Personal selling is the interaction between salespeople and consumers in the “shop”. Sales promotion involves the use of gimmicks and incentives such as competitions. Sponsorship and promotional licensing include products sold under license that promote the business, like football jumpers. Publicity or public relations include adversarial content in local papers or special promotional materials. Advertising Strategies & Objectives target the young and health-conscious individuals who care about their bodies, making it cool and hip to carry water.
These are the advertising objectives of the company:
- To stimulate demand.
- To strengthen offer, promotion mix elements, i. . preselling of Product.
- To develop brand preference.
- To cut cost as sales increase.
- To lower price as it increases competition.
- To be a competitive weapon. Advertising has played an important role in the success of Pepsi’s Products all over the world .
The Company utilizes advertising to incite desire in numerous ways and as frequently as possible. In India’s Cola Wars during the 1996 Cricket World Cup, Pepsi, despite not being the official sponsor, had a strong lineup of top players from both the subcontinent and overseas. Their ad campaign, “Nothing Official About it,” made a significant impact in the country and greatly affected Coke’s position.
Coke may have realized the importance of celebrities in India during this period and decided to incorporate that strategy. Consequently, advertisers started signing exclusive contracts for the next Cricket World Cup, restricting competitors from featuring players participating in the tournament in their advertisements. Unfortunately for Coke, Pepsi held the “official” status this time. The movie Kuch Kuch Hota Hai became immensely popular in 1998.
Pepsi then introduced another surprise. This time, the advertisement featured SRK, Rani, and Kajol, alongside upcoming star Shahid Kapoor, who gained industry attention. The iconic punchline for this ad was “Yeh Dil Maange More,” which resonated with the audience.
The Coke people responded to this ad in a unique way by creating a spoof using Sprite, which resulted in hilarious effects. In response, Pepsi also created a spoof, featuring Azhar and Jadeja, mocking Coca Cola’s slogan of “Eat Cricket, Sleep Cricket, Drink Only Coca Cola” with their own punchline of “More More Cricket, More More Pepsi”. Coke retaliated with a Thumbs Up ad, depicting cricketers as monkeys and ending with the slogan “Don’t be a bunder (monkey!!) Taste The Thunder!!”. The situation escalated as Pepsi took legal action and eventually led to Coke withdrawing the ad. Furthermore, in the year 2000, a new superstar, Hrithik Roshan, emerged.
Both Coke and Pepsi competed to sign him, with Coke emerging as the winner, possibly because they promised that his father would direct all the ads featuring the superstar. The first ads featuring Hrithik Roshan were launched during Diwali season. In response, Pepsi released an ad featuring SRK, who had a striking resemblance to Hrithik. This ad, directed by Prahlaad Kakkar, was considered distasteful. There were rumors about SRK’s insecurity and other issues, but this incident was ultimately insignificant in the grand battle between the two brands. During this time, Coke’s market share surpassed Pepsi’s for the first time since Coke’s initial launch in 1994 (Trivia: Coke was reintroduced in India in Agra). Suddenly, Coke was on the defensive while Pepsi aggressively targeted market share. The focus of the competition shifted from cola to the clear lime segment.
Coca-Cola recognized the value of the Thumbs Up brand in India and realized that it could not use it to criticize its competitors. Instead, a new battle emerged between Sprite and Pepsi’s Mountain Dew. Pepsi launched its Dew campaign, focusing on adventure sports with the slogan “Do the Dew”. However, Sprite cleverly countered with their ad campaign “Do The Do”, which was both humorous and memorable. This ongoing rivalry between global cola giants Pepsi and Coca-Cola has taken an unexpected turn in India, with Pepsi taking Coca-Cola to court. Pepsi alleges that Coca-Cola has unlawfully recruited employees, bottlers, and agents who were previously contracted with Pepsi. They accuse Coke of conspiring to disrupt their business operations by persuading these individuals to break their existing contracts illegally.
Pepsi has filed a request for a permanent injunction and an ex parte order against Coke in order to prevent the company from hiring Pepsi employees and business associates. Additionally, Pepsi has expressed the intention to pursue financial damages from Coke at a later date if deemed necessary. Pepsi alleges that twelve middle-level managers and three territory managers have recently breached their contracts with Pepsi in order to join Coke, while seven managers have quit Pepsi to join Coca-Cola over the past year and a half. The Cola Wars have become a long-standing competition, having been present in the United States for a century and only recently starting in India ten years ago. Despite the rivalry, the advertising campaigns produced during this battle have been remarkable, and it is hoped that they will continue. Yeh Dil Maange More!!! In conclusion, it is recommended that…
The primary challenge for any company is to capture the market. In the Beverage industry, this challenge becomes even more intense as there are only two players competing fiercely to gain each other’s market share. With no other option available, both Coke and Pepsi are striving to dominate in this lucrative beverage market, which has an annual value of over $30 billion. The method used to achieve success in such a competitive market is the fundamental question at hand.
The reality is that every company is striving to introduce innovative products and concepts to expand their market presence. Pepsi has historically been at the forefront of product development, prompting Coke to follow suit. To achieve this, Coke recruited marketing executives renowned for their successful track records.
Coke also introduced cross training for managers to prevent the formation of cliques within the company. The success of their marketing strategies will ultimately determine which company will excel in terms of sales, profits, and customer loyalty. Both Coke and Pepsi are exploring innovative approaches to market and sell their products, as well as seeking ways to expand their market share in other beverage categories.
Despite having similar goals, the two companies employ distinct marketing strategies. Pepsi has consistently embraced risk-taking, agility, and innovation in advertising. Concurrently, both companies have pursued expansion into new markets, particularly on an international scale. However, Coca-Cola has achieved greater success than Pepsi in foreign markets. Notably, Pepsi’s utilization of a barter system in Eastern Europe has proven to be unsuccessful.
However, in certain countries where direct comparison is allowed, Pepsi has surpassed Coke. In foreign markets, both companies have embraced the marketing concept by offering products that satisfy consumer demands in order to gain a larger market share. For instance, in specific countries, consumers desired a low-sugar soft drink that did not have a diet taste or image. Pepsi responded by creating Pepsi Max. The next step involves taking swift action to create a product that fulfills the requirements of that particular region. Both companies cannot rely on selling just one product; doing so would lead to failure. They must continually innovate and enhance their marketing strategies and offerings.
The companies must be willing to accommodate their “target markets”. Gaining market share occurs when a company stays one-step ahead of the competition by knowing what the consumer wants. My recommendation is to make sure the company is always doing market research. This way they are able to get as much feedback as possible from consumers. Next, analyze this data as fast as possible, and then develop the new product based upon this data. Once the product is developed, get it to the marketplace quickly. Time is a very critical factor. In my opinion, with all of these factors taken into consideration any company could give any company a good jump on market share.
