Pepsi: from joint venture to fully-own subsidiary

Pepsi is no longer a joint venture company with its Indian partners. taking full advantage of
liberalized policies, it has taken full control of pepsi foods. in 1994,pepsi made a offer to both
voltas and panic to buy their equity at ‘attractive’ terms. Voltas sold all its shares to pepsi while
paic, being a public enterprise, was forced to pull out and now it holds less than 1% of the total
equity in pepsi foods ltd. Instead of taking strict action against pepsi for not followings its
commitments, the Indian government has given more concession to it in the post-liberalization
period. for instance,it has allowed pepsi to increase its turnover of beverage component to
beyond 25%,and pepsi is no longer restricted by its commitment to export 50% of its turnover.
Recently the government also allowed pepsico to set up a new company in India called pepsico
India holdings pvt.ltd,a wholly owned subsidiary of pepsico international. surprisingly, the new
company is also engaged in beverage manufacturing, bottling and exports activities as pepsico
foods ltd . all the new investments by pepsico international have been channelised through this
new venture.it now handles 28 bottling plants with a sales turnover of Rs.500cr which is higher
than pepsi food turnover of Rs.375cr in 1996.
According to surveys conducted by market research agencies ,pepsi now hold over 40% shares in
Indian soft drink market. in 1995 alone, the company’s beverage business grew 50%,well ahead
of the market, which expanded by 20%.another important recent shift in Pepsi’s marketing
strategy has been its focus on cola over other non-cola brands.” we have single-mindedly
focused on brand Pepsi” admits rishi,vice-president, marketing, pepsi.(business India ,January
15-28,196).at the international level, PepsiCo international has been focusing more on India
where the consumption of soft drinks is expected to increase many-fold.

Entry of coke in India

The US oft drink giant, coca-old reentered Ida in the 1990s after abounding its busing in the
wake of foreign exchange regulation ct of 1973. The act meant to “indianite foreign co., made it
mandatory for foreign co. to duet their hare holdings to 40% instead of diluting its hare holdings
to the required limit prescribed by the act, coca-cola opted to discontinue in India.
In the new liberalized and deregulated environment of the 90s. coke made its reentry into India
through its 100% owned subsidiary, Hindustan coca-cola holdings. However, coke’s reentry was
based upon several commitments and stipulations which the company agreed to implement in
due course. One such major commitment was that Hindustan coca-cola holdings would divest
49% of its shareholdings in favour of resident shareholders by june, 2003.
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Recent performance

Coca cola India today claimed thus it has increased its market share from 57% in the carbonated
soft drinks (csd) category in 2002 to 61% at the end of dec 2003, as per the org-marg figures.
Pepsi, however contested the figure by saying that its market share stood at 47.6% during the
same period and coca cola India had combined market share of only 52.4%, as per IMRB
figures.
In a release issued by coca cola, the company said that it owns four of the top five soft drink
brand in India.
Pepsico, however, said that pepsi cola has ended the year 2003 with 24% of the soft drinks
market contributing to be the single largest soft drink brand in India.
These brands include coca cola, fanta, sprite with individual market share of 13.9%, 6% and
4.1% respectively .the pepsi statement said while pepsico ended 2003 with 47.6% share of the
soft drinks market in India, coca cola ended year with its international brand clocking a market
share of 26.7% and its brand formerly owned by Parle garnering 25.7% at the end of December
2003.
While coming on the performance of the CSD category, coca cola India claimed that it has its
sales grow by 23%.it added that during the year, its packaged water brand kindly become the
largest selling brand with 37% market share.

New launches
 The third largest soft drinks brand in the US has touched down on Indian stores and in great
style. Pepsi has unleashed one of the largest selling brand from its international portfolio,
mountain dew , at a first of it brand launch, living up to its brand profile and pedigree.
The unique neon colored mountain dew is available in 500ml pet and 3000ml (single serve)
returnable glass bottles(RGB) at an introductory price of Rs. 15 and Rs.8,respectively, in all
outlet, pubs, restaurants and eateries. Internationally, mountain dew has an integral association
with alternative sports, encompasses a whole gamut of culture, music and fashion trends. In
keeping with 4 year old Chad that trend two of the most popular international ambassadors of
mountain dew 23 years old Fabiola da silva of brazil, the top female in the field of aggressive
inline professionals, and 24 year old Chad kagy of the US, the world’s top BMX competitors
accompanied mountain de won its vogue to India, and performed spectacular feats at its
unveiling.
Additionally, pepsico has also installed some never seen before fun games at some of the most
popular youth hangouts in cities and towns. Dew Velcro, dew twin peaks and bungee running are
some of the world class fun game pepsico will bring for the purpose.
Mountain dew joins the already strong brand portfolio of pepsico in India: pepsi, diet pepsi ,
pepsi aha , the Miranda range of flavors(orange,lemon,and apple),7up, slice, the Tropicana
range of 100% fruit juices, aquafina and lehar evervess soda.
Let us look at the respective strength and weakness of coca cola and pepsi cola.

Pepsi strengths:
 Pepsi has a strong, concentrated bottlers, which because of their large size, have good economies
of scale and are thus low cost producers.
 The lack of diversity of in its product line helps control production costs and advertising can be
more focused.
 Pepsi has more flexibility in its pricing policies since the company is not hampered by a fixed
priced contract with its bottlers.

Pepsi weaknesses:-
 Pepsi lacks substantial diversification into the International market.
 Pepsi’s weakness in the fountain side of the business is evident with only 20 % share of market.
 With only about 30% of its total revenue coming from soft drinks, management’s attention may
be diverted form the important aspect of the business.

Coke Strengths:-
 Coca-Cola has a strong lead in the International arena, with about 60% of its products derived
from overseas soft drink operations.
 Decentralized management allows Coke to make quick decisions in the domestic and
International market.
 Coke is the number one supplier of syrup for fountain sale. Coke is especially strong in sales to
fast-food restaurants.

Coke weakness:-
 Many small bottlers, lacking the economics of scale to complete in today’s marketplace, still
exist in the system.
 The extensive product line could be considered a weakness as well s strength, as more and more
product and more fragmentation result in a higher cost of production, inventory and distribution.
Future development and investments

Coke has out placed Pepsi’s investment by 2:1. Overall, its invested over Rs480crore and ask its
bottlers to cheap in with close to Rs.100crore. For Coke this investment is going in to capacity
expansion and infrastructure. The company has added 25 new line in its 27 plants across the
country during the last six month. The entire operation will see 2lac new refrigerator and
visicoooler, 5000 new truck and autos getting sucked in to the system this summer. Coke has
added 50% more glass bottle during the last 3 month alone.
Not to be left behind, Pepsi is trying to match Coke in its own restrained manner. The
company and its bottle put together have pumped in upwards of Rs400crore so far in to
operation, debottlenecking capacities and building infrastructure. In March 2002, Pepsi has be
steadily building on its glass bottle. Its intention is to more then double the number of Pepsi
refrigerator and chillers in the market.
CHAPTER:-2

REVIEW
OF
LITERATURE
 REVIEW OF LITERATURE

As far as, our topic discussion is concerned a lot of work and studies had been by many
researcher on it. But consume behavior is unpredictable and it keeps on changing. Different
people had done different studies by talking different hypothesis, objectives and by facing
different limitations. As mentioned earlier, a lot of works studies earlier had been come earlier, a
lot of works studies earlier had been come earlier also but this study is the original work and has
relevance of its own. The existing literature always helps a researcher to start with confidence.
It’s always difficult for a researcher to know from where to start and what are the critical factors
that should be kept in mind. The existing literature helps the researcher to find out the relevant
data related to the topic. A project can’t be started without the help of the secondary data as it
shows the light to researcher to go on a particular path and for that I had collected data from
several literatures and web-sites.
The best beverage for India in the new millennium seems to be soft drinks. At seven servings per
capital annually, India holds tremendous potential. By contrast per capital consumption is higher
even in neighboring Pakistan (15 servings), china (89) and Mexico with a mind boggling 1500
servings! Analysis believe that new consumer’s entry in the urban market will be driven by
products moving down the income ladder, but in rural areas, it will be a combination of
affordability and availability. In other words, expect the market to explode this summer. While