The Soft Drink Industry consists of establishments primarily engaged in manufacturing non-alcoholic, carbonated beverages, mineral waters and concentrates and syrups for the manufacture of carbonated beverages. Establishments primarily engaged in manufacturing fruit juices and non-carbonated fruit drinks are classified in canned and Preserved Fruit and Vegetable Industry.
Principal activities and products:
- Aerated waters;
- Carbonated beverages;
- Mineral and spring waters;
- Soft drink concentrates and syrup;
- Soft drink preparation carbonating.
What is Soft Drink? Soft drinks are enormously popular beverages consisting primarily of carbonated water, sugar, and flavouring. A nonalcoholic, flavored, carbonated beverage usually commercially prepared and sold in bottles or cans. Applying Porter’s Five Forces to the soft drink industry
- 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 corporation nourishing the global community with the world’s largest selling soft drink concentrates since 1886, returned to India in 1993 after a 16 year hiatus, giving a new thumbs up to the Indian soft drink market. In the same year, the Company took over ownership of the nation’s top soft-drink brand and bottling network. It’s no wonder Their brands have assumed an iconic status in the minds of the world’s consumers. The Indian operations comprises of 50 bottling operations, 25 owned by the Company, with another 25 being owned by franchisees. That apart, a network of 21 contract packers manufacture a range of products for the Company.
On the distribution front, 10-tonne trucks – open bay three-wheelers that can navigate the narrow alleyways of Indian cities – constantly keep their brands available in every nook and corner of the country’s remotest areas. Coca-cola- product and the brands: Coca-Cola is a carbonated soft drink sold in stores, restaurants, and vending machines internationally.
The Coca-Cola Company claims that the beverage is sold in more than 200 countries. It is produced by The Coca-Cola Company in Atlanta, Georgia, and is often referred to simply as Coke (a now genericized trademark) or (in European and American countries) as cola or pop. The company produces concentrate, which is then sold to licensed Coca-Cola bottlers throughout the world.
The bottlers, who hold territorially exclusive contracts with the company, produce finished product in cans and bottles from the concentrate in combination with filtered water and sweeteners. The bottlers then sell, distribute and merchandise Coca-Cola to retail stores and vending machines. Such bottlers include Coca-Cola Enterprises, which is the largest single Coca-Cola bottler in North America and Western Europe.
Operation in India is divided into 5 regions and has a corporate entity by the name of Coca-Cola India. Marketing as an operation also is divided into 2 roles, Coca-Cola India marketing (corporate role) and Region marketing (local role). While the corporate marketing is involved in developing the brand personality and ensuring share of voice (through above the line marketing spends), the region marketing is responsible for the on ground activation and ensuring share of throat (through effective below the line spends). There is a marketing resource allocated to each unit under a region to carry out local activation and execution of brand plans, hence each unit is self sufficient. Basic marketing philosophy and marketing objectives:
Marketing philosophy is to, be the most preferred brand in all the categories of beverage that they operate in & the marketing objective is to provide an integrated approach towards being the most preferred brand and top of mind in all categories. This is enabled through their innovative advertising (in all mediums) and effective promotions on respective brands. This is also triggered through launches of new packaging & flavours Advertising Strategies: Coca Cola, India- The Field of advertisement is one area where Coca-Cola has always emphasized Advertisement Objectives: Type of advertising with respect to product life cycle that Coca-cola adopts is reminder type.
The reason behind this fact is that Coke is such a product that is at its maturity level currently, so for such a product companies mostly go for reminder type of advertisement so that they can penetrate more and more and the same is the case with Coke. Setting of Advertising budget: Coca-Cola sets its advertisement budget on the basis of competitor based budgeting. The Major competitor of Coke is Pepsi and as Coke realizes that Pepsi has increased its advertising budget, straight away Coca-Cola management plans to do the same so that they can compete in advertising department as well Advertising Strategy: Before creating advertising message the Coca-Cola Company gives lots of time to the factor that the message must gain customer attention.
This is basically called “ Clutter Buster” which means that only that advertisement will leave an impact on the customers mind because of some speciality or uniqueness in it. For example Coke’s current slogan “Thanda Matlab Coca-Cola” has gained reasonable customer attention. Advertisement Media: Coca-Cola Company advertises its products mainly through electronic media that includes Television, Radio and Internet as well. Moreover leading newspapers of India are also targeted by Coke for advertising. So we can say that coke not only uses electronic but print media for advertisement as well.
Coca Cola in India is doing market penetration through the selling of its products to the business buyer, who are huge multinational organizations like McDonalds, Subway, Dunkin Donuts & many more & they are also keeping the local market in focus. They are selling the Coca Cola as the only beverage in their restaurants. Market Development is exploring new markets for the products you are already selling. Many flavours of Coca Cola are not being sold in India.
Coca Cola can develop a new market if they introduce those flavours in India. Many people in India want a change in the beverage industry, as they are having the same flavours for many years A company takes a risk when it is to do product development, there is a chance that it may lose its customers or there will be a crowd of people demanding their product. Coca-Cola Company can do product development by introducing the new flavours in India.
Diversification strategy is one which every company really wants to practice. There are lots of chances of growth but the risk is also there. The company can manufactureproducts,which are not manufactured by it before. Coca-Cola is dealing only in beverages but it can also manufacture its own snacks item as the company name is known all over the world,so it can cash in on its brand value. PepsiCo Inc: PepsiCo, Incorporated is a Fortune 500, American multinational corporation headquartered in Purchase, NY with interests in manufacturing and marketing a wide variety of carbonated and non-carbonated beverages, as well as salty, sweet and grain-based snacks, and other foods.
Besides the Pepsi-Cola brands, the company owns the brands Quaker Oats, Gatorade, Frito-Lay, SoBe, Naked, Tropicana, Copella, Mountain Dew, Mirinda and 7-Up (outside the USA). Indra Krishnamurthy Nooyi has been the chief executive of PepsiCo since 2006. During her time, healthier snacks have been marketed and the company is striving for a net-zero impact on the environment. This focus on healthier foods and lifestyles is part of Nooyi’s “Performance With Purpose” philosophy. Today, beverage distribution and bottling is undertaken primarily by associated companies such as The Pepsi Bottling Group and Pepsi Americas : PepsiCo in India PepsiCo entered India in 1989 and has grown to become one of the country’s leading food and beverage companies.
One of the largest multinational investors in the country, PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India. PepsiCo India and its partners have invested more than U. S. $1 billion since the company was established in the country. PepsiCo provides direct and indirect employment to 150,000 people including suppliers and distributors.
PepsiCo nourishes consumers with a range of products from treats to healthy eats, that deliver joy as well as nutrition and always, good taste. PepsiCo India’s expansive portfolio includes iconic refreshment beverages Pepsi, 7 UP, Mirinda and Mountain Dew, in addition to low calorie options such as Diet Pepsi, ydrating and nutritional beverages such as Aquafina drinking water, isotonic sports drinks – Gatorade, Tropicana100% fruit juices, and juice based drinks – Tropicana Nectars, Tropicana Twister and Slice. Local brands – Lehar Evervess Soda, Dukes Lemonade and Mangola add to the diverse range of brands. PepsiCo’s foods company, Frito-Lay, is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG.
It manufactures Lay’s Potato Chips, Cheetos extruded snacks, Uncle Chipps and traditional snacks under the Kurkure and Lehar brands. The company’s high fibre breakfast cereal, Quaker Oats, and low fat and roasted snack options enhance the healthful choices available to consumers.
Frito Lay’s core products, Lay’s, Kurkure, Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets. The group has built an expansive beverage and foods business. To support its operations, PepsiCo has 43 bottling plants in India, of which 15 are company owned and 28 are franchisee owned. In addition to this, PepsiCo’s Frito Lay foods division has 3 state-of-the-art plants. PepsiCo’s business is based on its sustainability vision of making tomorrow better than today. PepsiCo’s commitment to living by this vision every day is visible in its contribution to the country, consumers and farmers.
Non-alcoholic soft drink beverage market can be divided into fruit drinks and soft drinks. Soft drinks can be further divided into carbonated and non-carbonated drinks. Cola, lemon and oranges are carbonated drinks while mango drinks come under non-carbonated category. The soft drinks market till early 1990s was in hands of domestic players like campa, thumps up, Limca etc but with opening up of economy and coming of MNC players Pepsi and Coke the market has come totally under their control. While world wide Coke is the leader in carbonated drinks market in India it is Pepsi which scores over Coke but this difference is fast decreasing (courtesy huge ad-spending by both the players).
Pepsi entered Indian market in 1991 coke re-entered (After they were thrown out in 1977, by the then central government) in 1993. Carbonated soft drinks major Pepsi India is now putting together a ‘cocktail’ to take a bigger ‘slice’ of the fruit juice market. Close on the heels of the launch of its global lemon drink Twist in an Indian avatar as Pepsi Aha, Pepsi, once again, is all set to roll out another global product—in a localized version. In June 2002, Pepsi rolled out the blends of its international fruit drink Twister in the country, albeit, with a difference. In India, Twister blends were launched as mixed fruit cocktails under Pepsi’s existing juice brand Slice.
Globally, the proposed Slice fruit blends exist under Twister brand and are available in over 10 flavors and in various Packaging options However, in India, while the blends will be decided as per local tastes and as per the availability of fruit pulp, packaging was restricted to cartons only. Among the four to five flavors planned, strawberry-peach and kiwi-guava are some of them. However, the new product could be priced a little higher than Slice since Twister—originally—is believed to have more than 15 per cent juice content. Slice, on the other hand, is a 15 per cent juice drink positioned at the mass-end; against the 100 per cent fruit juice Tropicana, which is at the top-end.
Pepsi’s decision to launch Twister flavors as Slice variants rather than the original brand itself follows the company’s decision to make Slice the mother juice brand in India. The company had at one time contemplated bringing Twister in its original self to India but the plan was later shelved. “Internally we have been debating whether to go ahead with Twister or keep Slice as a mother brand for juices,” the Pepsi spokesperson said. The move, point out industry observers, is clearly aimed at saving costs of launching an altogether new brand and instead cash in on the potential of a existing juice brand. A Rs 200-crore brand, Slice was originally launched as a mango drink in returnable glass bottles.
A price point of Rs 10 for a 300 ml bottle has proved a major deterrent: it has kept away new consumers in the urban and semi-urban pockets, and it has blanked out the far larger rural markets where annual per capita consumption is less than a bottle. So the Rs. 10 bottle was not that successful. But their sales increased after introducing the “chota Pepsi”. This 200ml Pepsi was reasonably priced between Rs. 5- Rs. 7. This was a major weapon for the expansion of the rural market.
Pepsi expects the small-size offering to account for 30 per cent of volumes this year compared with 18 per cent last year. But there are other areas of concern — principally that the 200 ml offering should not cannibalize 300 ml sales. In that case, there will be no market growth. That is why pricing could be crucial.
Pepsi, for instance, has reckoned that giving consumers 33 per cent (100 ml) less cola at 50 per cent of the price (Rs 5) is not a sustainable option and can, at best, be used as an introductory offer. The conclusion is based on hard facts. Last year, the beverage giants test-marketed 200 ml bottles at a price of Rs 5. Instead of growth, Pepsi discovered that 300 ml drinkers merely shifted to the 200 ml variant, the market remained stagnant and everyone lost money. The conclusion was clear: cutting prices does not necessarily expand the market. Place This generally refers to the physical locations of product sales as well as the methods of distribution.
However, it is also considered to be the “place” or “position” in the market of the product; refer to information below. Businesses need to make many decisions related to “place”: access, parking, competition, physical location etc. It’s the most important P in the cola wars — Place. And nothing evokes more passion in Pepsi and Coke than distribution. Major innovation is underway on the distribution front at Pepsi, pre-selling being the biggest of all. It’s been successfully test marketed in Bangalore, Baroda and Coimbatore — and may soon roll out nationally. In case of the distribution network, there is no involvement of wholesalers in the distribution of products. It is more like an agent network.
The companies have divided the country into various regions and established a franchisee in each region. The franchisees have their own bottling plants and manage all the day-to-day operations. However, of late, the soft drinks companies have started setting up company owned bottling units have been acquiring some of its franchise bottles. In the current system, the strike rate in the Delhi market is about 40 per cent, which can be improved to 80 per cent in the peak season, claims a franchise director. The result for Pepsi could be significant savings. “Colas service just 7. 5-8 lakh accounts compared to the other FMCG players who service three times the number.
Innovation in our distribution system will take us closer to the 21 lakh figure,” says Vats, a franchise director. Pepsi believes in direct distribution whereas Coke doesn’t. It mainly concentrates on dealers and most importantly cutting costs. “There are plenty of innovations possible in distribution that can cut costs”, says a Pepsi official. For Pepsi, the rural market is a chosen thrust this year. It has targeted to reach 20 to 28 per cent of the rural population in the first year of this operation. In the first stage, the corporation is planning a massive roll out in villages with populations of 5000. To do this effectively, Pepsi is focusing on establishing a cold chain.
The company has developed special freezers that allow its products to stay chilled despite power cuts of three to four hours. It will also use traditional iceboxes to sell its product in rural India. For the rural markets, Pepsi is looking at the wholesale route since the logistics of direct distribution are too huge to handle in the interiors. Promotion This refers to the promotion of the product to the target market. This is achieved through a combination of: advertising: use of electronic and print media. The “reach” (how many people will see the advert), frequency (how many times will I advertise the product? ) and impact of the advertising must also be evaluated.
Personal selling: what happens in the “shop”, contact between sales people and consumers or customers. Sales promotion: use of gimmicks and incentives e. g. competitions. Sponsorship and promotional licensing: including specific products sold under license that promotes the business (e. g. football jumpers). Publicity or public relations: “adversarial” in local papers or special promotional materials. Advertising Strategies & Objectives: It’s now cool and hip to carry water and the ads are targeted at the Young and the health – conscious those who care about their bodies.
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 uses advertising to trigger desire as often and in as many ways as possible. Cola Wars in India For the Cricket World Cup 1996, Pepsi was not the official sponsor of the tournament, Coke was but Pepsi had a whole kitty of best players from the sub continent and abroad. The ad campaign of “Nothing Official About it rocked the country and knocked the wind from Coke’s Lungs.
Possibly from this time onwards Coke also realized the value of celebrities in India and henceforth went ahead with that strategy. Another consequence of this campaign was that from the next Cricket World Cup, advertisers began signing exclusive contracts which stipulated that competitors can’t have players who are in the tournament acting in their ads. And sadly for Coke, it was Pepsi which was “official” this time. In 1998, the movie Kuch Kuch Hota Hai took the country by storm.
Pepsi then took out another ace from its sleeve. This time SRK, Rani and Kajol starred in the ad. Also starring was the future star Shahid Kapoor who was noticed by the industry. The punchline this time was “Yeh Dil Maange More” which was an iconic line and struck a chord amongst the people.
The Coke people responded to this ad in a different and unique way. They actually spoofed the ad, the product used being Sprite, again to hilarious effect. Pepsi responded with a spoof on it’s on its own, starring Azhar and Jadeja hitting on the Coke line of “Eat Cricket, Sleep Cricket, Drink Only Coca Cola” with the punch line of “More More Cricket, More More Pepsi”. Coke again hit back, this time with Thumbs Up ad. They portrayed the cricketers as monkeys and ended the ad with “Don’t be a bunder (monkey!! ) Taste The Thunder!! ” Things turned ugly with Pepsi going to court and finally ended with Coke withdrawing the ad. The year 2000 heralded the rise of a new superstar, Hrithik Roshan.
Both Coke and Pepsi rushed to sign him, but Coke won (possibly due to the fact that they promised that all the ads starring the superstar would be directed by his father). The first ads starring Hrithik Roshan were launched in Diwali Season. Pepsi hit back this time with a SRK ad which also had a Hrithik look alike. This ad was directed by Prahlaad Kakkar and was in a bad taste. Rumors ran about SRK’s insecurity and rest but the episode really was a footnote in the epic battle. Around this time Coke’s market share surpassed Pepsi for the first time since Coke’s launch in 1994 (Trivia: Coke was first re-launched in India in Agra) and suddenly Coke was defending and Pepsi attacking the market share. Now the wars shifted from cola to clear lime segment.
Coke realizing that in India Thumbs Up was a valuable brand and it could not use it for opponent bashing. This time it was between Sprite and Pepsi’s Mountain Dew. Pepsi had launched Dew with “Do the Dew” tagline emphasizing on Adventure sports. Sprite killed the ad with “Do The Do” ad which was funny and memorable. The ongoing cola war between global rivals Pepsi and Coca-Cola has taken a weird twist in India with the former dragging the latter to court. The charge: Coca-Cola has snatched employees, bottlers, and agents, all of whom are bound to Pepsi by a contract. Pepsi has charged Coke with having entered into a conspiracy to disrupt its business operations by inducing key employees and associates to break existing contracts illegally.
Pepsi has sought a permanent injunction and an ex parte order against coke, restraining it from taking away Pepsi’s employees and business associates. Pepsi has also reserved the right to seek financial damages from Coke at a later date if necessary. Pepsi has claimed that a dozen middle-level managers and three territory managers broke their contracts with Pepsi to join Coke in recent months, while during the last year and half, seven managers quit Pepsi to join Coca-Cola. The Cola Wars are here to stay. It’s been just 10 odd years in India for them to start. In the USA they are on since a 100 years. The battle actually throws up some amazing ads and let’s hope they continue. Yeh Dil Maange More!!! Conclusion and Suggestions
Capturing the market is the main issue facing any company and when it comes to Beverage market, it becomes more intense because there are just two players and they are fighting strongly to capture each others market and don’t have any other option. Both Coke and Pepsi are trying to gain market share in this beverage market, which is valued at over $30 billion a year. Just how is this done in such a competitive market is the underlying issue.
The facts are that each company is coming up with new products and ideas in order to increase their market share. Pepsi has always taken the lead in developing new products, but Coke soon learned their lesson and started to do the same. Coke hired marketing executives with good track records.
Coke also implemented cross training of managers so it would be more difficult for cliques to form within the company The creativity and effectiveness of each company’s marketing strategy will ultimately determine the winner with respect to sales, profits, and customer loyalty. These two companies are constructing new ways to sell Coke and Pepsi, but they are also thinking of ways in which to increase market share in other beverage categories.
Although the goals of both companies are exactly the same, the two companies rely on somewhat different marketing strategies. Pepsi has always taken more risks, acted rapidly, and was always developing new advertising ideas. Both companies have also relied on finding new markets, especially in foreign countries. In the foreign markets, Coke has been more successful than Pepsi. For example, in Eastern Europe, Pepsi has relied on a barter system that proved to fail.
However, in certain countries that allow direct comparison, Pepsi has beat Coke. In foreign markets, both companies have followed the marketing concept by offering products that meet consumer needs in order to gain market share. For instance, in certain countries, consumers wanted a soft drink that was low in sugar, yet did not have a diet taste or image. Pepsi responded by developing Pepsi Max. The next step is to take fast action to develop a product that meets the requirements for that particular region. Both companies cannot just sell one product; if they do they will not succeed. They have to always be creating and updating their marketing plans and products.
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