Soft Drink Market in India: It Just Beginning

Soft drink market in India: It just beginning

I still remember when I first drink Coca-Cola. My parents were very conservative and healthy-oriented, so I had a chance to try Coca-Cola in age of 23, and after that first trial, I became a loyal consumer of Coke. Like many other countries, Coke and Pepsi dominated Korea market easily since they are huge multinational companies and capable of conducting the smart marketing strategies specialized to dominate the soft drink market. That does not mean that companies from Korea did not resist. We already had cola products that are named as 8.15 Cola (August 15 was the date when Korea became independent from Japan in 1945) and Pear Cola. However, all those small soft drink companies disappeared after few years, and now, like other countries, Coke and Pepsi dominates our soft drink market. However, these two big companies suffered from India market. India is considered as very attractive market for any type of business. Like China, large number of population means large number of potential consumers, and it is relatively new market because prior to 1991, market was not opened to foreign companies who want to sell their products in India. According to Leo Paul Dana, 250 million people are considered as middle class consumers, and 360 million people will be middle class consumers within few years. This is more than entire population of Taiwan (457). Therefore, this market has a lot of opportunities, and thus it is worth to analyze how Coke and Pepsi penetrated India market regardless of tough policies, regulations, and different cultural contexts, to give lessons to others who want to do their business in India.  

First of all, we have to analyze soft drink market in India. According to the case article, soft drink industry in India was consisted of many small companies, and whole industry was worth 3.2 million dollars. Considering the number of population in India, 3.2 million is relatively small which also means that the demand for soft drink in India is very low. Article also mentioned that in 1989, the average soft drink consumption in India was only three bottles per year. However, the reason why Coke and Pepsi were eager to succeed Indian market was that they realized the fact that India market will bring huge benefits to them. This assumption is pretty accurate because the reasons for Indian’s the low demand on soft drink is that first, there are lots of people who are not able to afford soft drinks and second, India was suffering from water problems. Therefore, this represented that a lot of Indians cannot really think of entertaining themselves with flavored or carbonated drinks unless they are fully stabled with water problems. However, on the bright side, GDP tends to grow every year, and with the fact that a lot of huge corporations conducts sustainability initiatives in order to provide clean drinkable water to India, soon or later India will be free from water shortage. Another important fact in India market is that the liberalization started in 1991, and this represented that India slowly gave opportunities for foreign companies. Prior to 1991, the government attitude towards foreign companies were very negative. According to the case study, in 1958 when Coke first jumped into the India market, there were lots of disadvantages as being a foreign company, and furthermore the government asked Coke to provide the company’s confidential information. Therefore, due to the liberalization, the Indian government became friendly to foreign investors and products unlike before.

Then what were the major challenges for Coke and Pepsi in India market. According to the textbook, in order to succeed in international market, the company has to deal with two levels of uncontrollable uncertainty which are domestic uncontrollable factors and foreign uncontrollable factors (11). Foreign environment uncontrollable factors means such as political forces, economic forces, cultural forces, competitive forces, available technologies, distribution systems, and infrastructures. Since both corporations are rooted in United States and they both are considered as leading companies in soft drink market in USA, distribution systems or technologies were not big obstacles for them to operate in India market. However, in terms of political and economic forces, Coke and Pepsi had hard to time to penetrate those difficulties. According to Ajit Prasad, before liberalization, India’s trade exposure ratio was 15%. Considering the fact that Thailand was 40% and Singapore was 60%, India was very strict to imported goods unlike other developing countries (140). Additionally, India was not a member of WTO at that time which makes Coke and Pepsi more difficult to compete in India market in terms of pricing. Furthermore, as I mentioned earlier, the government position to imported goods were highly negative. According to the article, it mentioned about ‘principle of indigenous availability’. This means that it is forbidden by India government to import similar goods that are already available in domestic market. This is huge obstacles for both Coke and Pepsi since India at that time already had similar products that are named as cola by Parle Agro. Parle Agro itself was another challenges for them in terms of competitive forces. After Coke’s departure in 1977 because of the pressures and regulations from the India government, Parle Agro became the leading company in soft drink industry in India. This competitor became more powerful after establishing a brand named “Thums Up”. This particular brand succeeded in appealing to younger generation who are considered as millennials, and with the combination of excellent distributing channels and brand recognition, Thums Up became a national leading brand. Moreover, another challenge came from cultural aspect. According to Leo Paul Dana, India is the number one tea producer, and the second largest milk producer. Additionally, India is also the second largest producer of sugar and fruits (458). This fact implies many things. For example, consumers in India are more familiar with tea, milk, and fruit juices rather than carbonated drinks. Therefore, basically, middle or lower classes have very low buying power and upper classes are more likely to purchase tea, freshly-squeezed sugar cane juice, or fruit juice. Nevertheless, the opportunity comes with India’s liberalization. This government reform reduced many regulations and obstacles for foreign companies. Therefore, unlike before, foreign firms are able to manufacture in India, and perform their own power. As a result, foreign investment and the number of manufacturing facilities increased dramatically.

        After landing in India market, it was not easy to generate profits for both Pepsi and Coke. They needed efficient approaches to Indian consumers in order to increase the market share and record more sales. Because of the cultural problems that are mentioned above, Coke and Pepsi first needed to make Indian consumers to be familiar with their prime products, carbonated soft drinks. Therefore, both Coke and Pepsi employed familiar cultural contents in their public advertisements. Among TV campaigns by Coke and Pepsi, they collaborated with local festivals and sports events. For example, Pepsi’s campaign slogan was “keep it cool” to align with India’s cricket series. Cricket is the one of popular sports in India. Therefore, by aligning with sports event, it gives huge advantage to Pepsi to expand its brand recognition within the demographic of sports fans. Other than TV commercials, Coke and Pepsi also sponsored national festivals in India during the summer period. Especially, summer season are extremely important for any soft drink companies around the world. According to the article, in summer, 50 percent of the year’s carbonated beverages are consumed domestically. This means that summer period is the best chance for them to increase the number of loyal consumers and increase the profit at the same time. In case of Coke, they sponsored Gujarati festival with the business plan of ‘think and act as local’. Therefore, Coke provided almost 20,000 free passes with their drinks, and provided events for local people to get a chance to win the trip to Goa where the place is famed for worthy of spending vacations. These activities are very effective to increase the brand recognition because all the people in the festival unconsciously be able to link the color of red to Coke which can make them to feel safe and satisfied when they purchase the Coke products later. Moreover, these activities also give a chance to introduce their products to large number of people simultaneously, so in terms of cost-benefit perspective, sponsoring large national festivals are very efficient.