Saturday, May 5, 2012

Coca Cola vs Pepsi

This weeks article "Competitor Analysis: Understand Your Opponents" talks about frameworks for analyzing your competition.
For this post, I want to discuss Coca Cola's launch strategy in India and how it managed to survive and become profitable despite strong competition from Pepsi.

Indian soft-drink Market
Every country has its challenges when it comes to local consumers and India is no exception. With a highly segregated consumer market and a significant portion of the population being illiterate, marketing your product and gaining an advantage over your competition can be tough. Also, despite the large number of consumers, major chunk of the market consists of low-capita consumers of soft drinks. Another aspect to consider is the lack of infrastructure and technology in India when Coke re-launched its brand  in 1993. The cultural shift required in creating brand awareness and marketing to the local middle class consumer was a challenge for an American company.

What went wrong and how Coke recovered
Coca Cola was a strong brand in India until the late 70’. They left India when the new regulations required them to reveal their formula1. Coca Cola reentered the Indian market again in 1993 after the liberalization policy in 1991. However, it took them almost 16 years, before they could become profitable again2. During that time, Pepsi was the biggest competition and Coca Cola struggled to get a major market share. Some of the important reasons Coke struggled while Pepsi succeeded were:

      1.       Pricing - With a very low capita consumer, Coke could not charge the Indian consumers as much as they charged the consumers in other countries. Pepsi clearly had figured it out back then.
      2.       Culture - The marketing strategies for the Indian audiences had to be significantly different than the American audience. Pepsi, in my opinion, had a marketing campaign that immediately connected with the Indian consumers.
      3.       Distribution - Infrastructure in India is still an issue especially in rural markets (which is a major chunk of Coke’s consumers)

It took some time before Coca Cola finally could get itself around these issues and in 2001 they launched the brand with the “Think Local, Act Local” mantra. They introduced the Rs. 5 coke bottle that their biggest competitor Pepsi did not have. They rebranded their image to be more consumer friendly. And they used different local distribution strategies for each state based on the state’s policies and cultural differences.

The effect
Coca Cola became profitable again in 2009, almost 16 years after it launched in India. They have rebranded themselves from “the Ugly American” company to one with a positive social image. And they are among the two brands in the beverage category followed immediately by Pepsi3.

However, the questions remains, how long will Coke be able to sustain in India? As the literacy rate in India improves and more people start using the internet (including Social Media), and the marketing channels shift online, will Coke be able to maintain the same image through these new online channels, or will Pepsi use it’s experience in the Indian market and get the first movers advantage?

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