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MARKETING MANAGEMENT

PEPSI INDIA

Submitted ByGroup - 1

Group Members:Chandramouli Suresh

Jitenkumar Pankajkumar PatelMehjabee Khan

Shiang Ting WongSudharshan Rammesh Garg

Vijay Maruti PatilYasemin Hatipoglu

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Index

Executive Summary……………………………………………………………………………………………………………..3Part AScope…………………………………………………………………………………………………………………………………..4Pepsi in India – background………………………………………………………………………………………………….4The Pepsi brand in India – A SWOT analysis………………………………………………………………………….5Product Mix………………………………………………………………………………………………………………………….6Points of Difference, Points of Parity and Brand Recall………………………………………………………..8Market positioning and Segmentation………………………………………………………………………………….9Distribution Channels…………………………………………………………………………………………………………12Pricing Strategies & Brand Loyalty; the Indian Consumer and Price……………………………………13Creating Shared Value the Pepsi way………………………………………………………………………………….14Pepsi’s Promotional & Marketing Strategy………………………………………………………………………….14Part BCurrent Image of Pepsi……………………………………………………………………………………………………….18Current Market Share…………………………………………………………………………………………………………18Revised Market Segmentation……………………………………………………………………………………………19Introduce Pepsi X as a direct rival to Thums up in rural India……..………………………………………19Introduction of Pepsi Masala………………………………………………………………………………………………20Replacement of Diet Pepsi with Pepsi Max in Urban India………………………………………………….22Summary…………………………………………………………………………………………………………………………….24Appendix A.............................................................................................................................27Academic References………………………………………………………………………………………………………….28

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Executive Summary

The soft drinks market in the advanced economies like the US is saturated or in some casesdeclining sales (Reuters). Given a fast growth rate of the Indian GDP, and consequently,higher levels of income distribution in the population, Pepsi is increasingly turning toemerging economies like India to sustain its global growth (Wikinvest).

The Indian packaged food market is huge with the packaged tea and biscuit segments ontop. Although soft drinks constitute the third largest segment, compared to other developingcountries the market penetration is still very low. This indicates a further potential for rapidgrowth. It is a telling point that the average per capita consumption of soft drinks in the US is700 bottles per capita / year, while in India it is only 10 bottles a year; the rural areas with anestimated 700 million people accounting for only 4 bottles per capita / year.

According to a report by Euromonitor International, soft drinks in India have been estimatedto have a market of 3.108 million US $. Soft drink volume sales are expected to rise by 8.6%per year. The sales of bottled water are also expected to rise rapidly in the next five yearswith an annual growth rate of 16.5%. Growing health awareness and increasing demand forhygienic products will fuel the dynamic growth of juices by an annual rate of almost 22%.Penetration in rural markets will also contribute to sales increase in soft drinks.(Euromonitor International 2011).

India is a unique market for Pepsi in that, it is one of the few markets, where Pepsi outsellsCoke, however 2 of Coca Cola’s products hold the top 3 spots in terms of market share, soPepsi does have an opportunity to increase its market share. Its biggest competitor is ahome grown brand called Thums Up which had been acquired by Coca-Cola when it enteredIndia in 2003.

Pepsi which has true to its global image always been seen as a young, trendy brand,however after a spurt of creative marketing in the late 90’s, early 2000’s which boosted thePepsi brand immeasurably, it has for some time been using generic global marketingcampaigns which have not struck a chord with the young in India, and neither has itattempted to tap into the family, feel good segment which has been Coca-Cola’s consistentstrategy.

Pepsi has a lot of inherent brand equity in the Indian market, which while has been dentedby the Pesticide controversy in 2003 & 2006 has still not hampered its growth in the India.If Pepsi can capitalise on this and build on it, it can create a legion of loyal customers whichcan sustain the revenues potentially lost in other saturated markets.

We have in our report attempted to completely understand Pepsi’s current brand image,positioning, and the inherent equity in the brand, and compared it with Coca-Cola’s, and thenin part B suggested a way forward for Pepsi encompassing all the above elements.

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PART A

Scope

We have explored in depth the background, current status and future potential of the PepsiCola (and its variants, Diet Pepsi, Pepsi Max) in the Indian market. We have not consideredin our study the wide bouquet of products that PepsiCo offers to the Indian customers.

Pepsi in India- Background

Pepsi had a 5 year head start over Coke in the Indian market, when it launched operations inpartnership with one of India’s leading business house – the RP Goenka group ofcompanies. Pepsi later on partnered with the state government of Punjab and launched the“Lehar Pepsi Brand”. It quickly identified some rising movie stars (Aishwarya Rai and AamirKhan), and had them endorse the Lehar Pepsi brand, blanketing Indian television with anadvertising blitz, and quickly entering the consciousness of the Indian consumer.

It also customised its ad campaigns to suit the Indian market, and came up with a hybridisedset of slogans which had both English and Hindi elements (a slang called Hinglish, which iswhat the Urban Indian speaks), some of the catchy slogans that captured the attention of theIndian market were,

Yehi Hai right choice baby aha (this is the right choice baby- Aha!)

Yeh Dil Mange More (This heart asks for more)

Azadi Dil ki ( Freedom of the heart), these slogans were backed up by a long running TV &Print media campaign, and helped establish Pepsi in the Indian market, however the Marketleader by a long margin continued to be a local Cola brand called Thums Up with 35%market share in 1993.

The Entry of Coca-Cola in 2003 changed things drastically in Pepsi’s favour with its archrival choosing to disregard the strengths of Thums Up in an effort to position the Coke brandas the premier offering in the Coca-Cola company portfolio. This helped Pepsi maintain itsmarket share; however Coca-Cola re launched Thums Up in the Indian market, and thisbrand now leads the Indian market in terms of its sales volumes.

The Cola wars as they are so aptly termed have been bitterly fought, as it is increasinglycrucial for both the companies to tap into the emerging markets to sustain their momentum,as they are seeing sales plateau in the developed markets.

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The Pepsi Brand in India – A SWOT Analysis

Some of the key points to be noted – which have caused Pepsi as a brand to lose marketshare to Thums Up & Sprite, and also not expand into the untapped rural markets are,

(1) It has over time lacked creativity in its ad-campaigns, and its campaigns have been acopy of the global marketing campaigns, whereas Coke has been able to ensure highbrand recall with its clever use of slogans that use “Hinglish” like Thanda MatlabCoca Cola – Thanda literally means cold, but it is also used as a word forrefreshments, so this clever play on words has aided in its recall amongst the Indianconsumers

(2) In 2003 & 2009, there were outcries from both Legislators, and the consumers on thelevels of Pesticides found in Cola products, and the effects of these controversies stilllinger on in public memory

(3) The biggest competitor Pepsi faces today is not from other soft drink manufacturers,but the low priced, easy to store / sell local products like Lime juice, and thin buttermilk (called Lassi) - these suit the Indian palette and also the weather conditions, andare easily made by small household firms, and sold in small dispensers at asubstantially lower cost when compared to bottles of Cola.

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Product Mix

We have projected Pepsi’s current product offerings alongside its main competitor Coke, andanalysed in which segments they currently belong to.

It is clearly evident that Pepsi lacks a product of the stature of Thums Up which is the maincash cow for Coke – Despite having been taken off the shelves after Coca-Cola purchasedits parent company, and not having any Branding / Ad campaign for nearly 4-5 years, andalso being available only in a limited number of geographies (Thums Up is available only in 9states in India of 28 states) it outsells every other Cola brand in the market. If Coca-Coladecides to launch it in more states, it could easily move into the Stars quadrant, and couldpose a major threat to Pepsi sales.

The future of the diet Pepsi is uncertain, as it has thus far proven to be an unviable product-Diet Cola’s market share is roughly between 2%-3% of the overall Soft drinks market, andhas not seen any sustained growth in this segment.

The diet categories of colas contribute to less than one percent of the total soft drinkconsumption in India. Further, 'Diet' is seen as a very metro (top 10 cities in India)phenomenon. (Bhattacharyya and Joshi).

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Points of Difference, Points of Parity & Brand Recall

The biggest problem facing Pepsi (and also a big area of opportunity) is that it does not haveany product that has a clearly established POD, and its taste in comparison to Coke is seenas similar, whereas its main competitor Thums Up is seen as having a rather unique taste,that suits the Indian palette, and hence has a clearly established POD over Pepsi, and it’simportant to Pepsi to develop a competing brand that has a unique and “Indian” flavour.

As can be seen, while Pepsi does have a strong brand recall, it does not have any brandthat is in the Top of Mind segment- and having a brand that is top of the mind would aid inincreasing its market share substantially. A brand is a long-term vision. Major brands holdcertain significance within the product category, not just a specific dominating position. Pepsi

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if is posed with the question “What would the market lack if Pepsi did not exist?” would havea rather uncertain answer, as they have not managed to create a unique impact in the Indiancontext, and this needs to be a key area of focus (Kapferer Dawsonera, 2008)

Market Positioning & Segmentation

The two key elements of positioning are the Target market & the Differential advantage(David Jobber, 2007) – and PepsiCo’s strategy in India has been described below.

PepsiCo positions its products in the mid-priced and premium segment as contrast to itscompetitor, Coca-Cola which positions its products at mid-range consumers in the market.

Target Market: By its very nature, the target market for Pepsi is vast- it encompasses theUrban & the rural market, and is mainly focussed on fulfilling a functional need; quenchingthirst. However, the consumption of soft drinks in the rural markets remains an aspirationalevent, and despite India having close to 600 million people living in the rural areas, percapita consumption of soft drinks is only at 4 bottles / year, whereas the Urban areas has ahigher consumption rate of 10 bottles / year.

Differential advantage: The 2 key ways in which a firm can drive a differential advantageare shown below (David Jobber, 2007)

(1) Differentiation Strategy : Pepsi has been unable to promote a clear POD over itscompeting products in the market whereas its rival product Thums Up has managedto clearly establish a POD through its unique taste which is more suited to the Indianpalette

(2) Cost Leadership: Achieving the lowest cost position in the industry is the primary aimof this strategy, but Pepsi has once again been caught lagging on this front. RivalCoke reduced serving sizes to 200 ML, and reduced prices to Rs 5 a unit, and wasable to steal a march over Pepsi, given that the Indian market is extremely pricesensitive, Pepsi can launch its products at lower price points hence opening uppotentially new markets– however, any move of Pepsi is likely to be replicated byCoke, so creating a differential only based on price might not be sustainable.

Segmentation: “Finding the most revealing way to segment a market is more an art than ascience, any useful segmentation scheme will be based around the needs of customers andshould be effective in revealing new business opportunities” – Peter Doyle, Value basedmarketing.

Segmenting the market involves breaking down a large diverse market into a number ofsmaller sub – markets. Identifying groups of customers with similar tastes and requirementswill help in serving them efficiently but insufficient size of group will also cause the product orservice to be supplied inefficiently. (David Jobber, 2007)

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Pepsi targets the affluent with disposable incomes which they can spend on discretionarypurchases like Cola.

The Indian market in terms of income levels is shown below,

Category IncomeBand

Willingness to purchase foreignproducts

In Millions

Level 1 > $ 20,000 High 7

Level 2 $10,000- $ 20,000 Medium 63

Level 3 $ 5,000- $ 10,000 Very Low 125

Level 4 < 5000 $ None 700

(R Ramachandran, 2000)

Continued high rates of GDP growth would result in greater amounts of disposable incomeacross a wide segment of the population.

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(http://www.mckinsey.com)

Pepsi at the moment caters to the Level 2 and Level 1 segments which gives it a targetpopulation of 70 million people, but this chart also clearly indicates the opportunity availableto Pepsi in the level 3 category which would vastly expand its potential to increase sales andconsequently revenue.

Changing population mix (low average of citizens): With Pepsi’s target demographybeing in the age group of 15-30, a burgeoning middle class with a young population resultsin a stable target segment for Pepsi in the near future; efforts to improve its brand Loyalty atthis stage would pay rich dividends in the future.

.

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Distribution Channels

Pepsi uses mainly small retailers spread across the Indian landscape to generate its salesvolumes. It has substantial reach in the urban areas, however does not have the same reachin the rural areas; for that matter even established consumer-goods companies do not havesignificant reach in India, covering only about a tenth of the country's 600,000 villages, andthis once again establishes the potential for Pepsi’s expansion into a vastly untappedmarket. However, with the expansion of the country’s major supermarkets/hypermarkets, thesale generated from this channel is expected to increase gradually (Soft Drinks in India,Euromonitor International, 2011).

(Don J Palathinkal, 2008)

Given its vast size and poor infrastructure, the Indian market does not support conventionaldistribution and retail networks used in the more advanced economies. The retail vendingoutlets tend to be small and are decentralised, and Pepsi has had to evolve a moreinnovative approach to support its operations. For instance, bumpy roads in India result in ahigher breakage of glass bottles, this has necessitated the usage of PET (plastic) bottleswhich resulting in a slightly higher pricing model with its own set of consequences (Rahmanand Bhattacharya, 2003).

To counter the fragmented network of small retailers (as against huge centralised Super &Hyper markets in the advanced economies), rather than send out the goods from the bottlingplants to the retailers directly, Pepsi has evolved a hub and spoke model to meet itsdistribution needs. The products are sent out to a hub (a major distribution point), and thensent out to spoke centres in the vicinity as and when orders need filling, this has helpedreduce costs because it reduces the number of long haul journeys over poor roads (Wall StreetJournal).

Given that the storage space of the average retailer in India is small and needs constantrefilling, having a hub closer to the end retailer helps in ensuring the shelves are stockedconstantly. A common method used in the more advanced economies, namely the Vendingmachine has not really been used effectively in India; however there are certain challengesin using this channel (Euromonitor International, 21 July 2005).

(1) Lack of suitable coin denominations in India is the single most reason for theimmaturity of the vending channel and its slow development. The existingdenominations are too small and also number of coin types too varied and disparate.

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(2) Machine Security: There are increased chances of vandalism & fraud in a countrylike India, and this is a big concern.

Pricing Strategies & Brand Loyalty; the Indian Consumer and Price

The Indian consumer is very price conscious and cost has a significant influence on hisbuying behaviour.

Price aware & Frugal: The Indian consumer is very price aware, and is prone toshopping on the basis of price, especially more so in the segment of Soft drinks, as itcomes under discretionary spending.(http://knowledge.wharton.upenn.edu/article.cfm?articleid=2011).

Loyalty to Traditional products: While the Indian customer is prone toexperimentation, they will often return to traditional products as they are mostcomfortable with them. A large segment of the FMCG segment operates in the non-branded segment.

Not very Brand Loyal: The Indian consumer is not very loyal to brands; Indianconsumers will on an average try 6 brands of the same packaged goods productcompared to 2 for USA.

Price Inelastic: Indian consumers are highly price inelastic, especially in the FMCGsegment, and as a thumb rule, the lowest price gains most customers

Price Promotions: Price promotions normally do not work, as effectivecommunication channels do not exist, and a retailing is still done via the unorganisedsector (Kirana stores- the Indian equivalent of Mom & Pop stores) – The strategymost FMCG companies use is to price the product as low as possible, and attract the

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most number of customers at the earliest, rather than use pricing gimmicks like 2 forthe price of 1.(R Ramachandran, 2000)

Given the above constraints, Pepsi has closely mirrored Coke in its pricing strategies- andhas not taken the role of a price leader / loss leader and has always chosen to let Coke setthe strategy when it comes to pricing. Both Cola majors have chosen not to engage in pricewars over the last 5 years, and have chosen to increase sales through publicity campaigns &promotions.

Creating Shared Value the Pepsi way

Faced with the mar in reputation due to the pesticide scandals in India, Pepsi has takenefforts to improve its brand image through the creation of shared value. (Refer "Testing times; thePesticide controversy & its impact on the soft drinks market in India" in Appendix A)

(1) Environment Sustainability: PepsiCo was water positive in India in 2010; this wasachieved by saving and recharging 10.1 billion litres of fresh water- exceeding the 5.8billion litres of water used for manufacturing Pepsi products.

(2) Long term relationships with farmers: Pepsi has a network of 22,000 small holdingfarmers, the farmers are provided access to advanced farming techniques thatincrease the quantity and quality of their yield, thereby assuring Pepsi also ofproducts grown to the highest standards

(3) Increasing usage of renewal sources of energy: In 2010, 40% of the energyrequirements for the soft drink operations were met through renewable sources.

These are some of the key initiatives through which Pepsi is striving to create shared valuein the Indian community at large. (Pepsi Corporate Citizenship Report 2010/2011)

Pepsi’s Promotional & Marketing Strategy

Pepsi is present in every avenue of advertising and promotion- both traditional and modernsocial media. Pepsi, Cricket and Bollywood have been joined at the hip since the cola’s entryinto India. Its top brand endorser the captain of the Indian cricket team (Puja Khatri, 2006), alsogiven the fact that they have been consistently advertising in the popular TV & Print mediafor a decade now, they have managed to create a strong sense of market awarenessespecially in the urban areas. They recently promoted the 2011 Cricket world cup, which is asignature event in the Indian sporting calendar,

Pepsi pours millions of rupees every year into celebrity advertising, and this is done byhaving a Pan India celebrity like the Indian Cricket teams captain MS Dhoni, or SachinTendulkar, while at the regional level, stars with a more local fan following are used.

The one area where Pepsi has not been focussing much is in the online domain, with verylittle focus in areas of a viral / guerrilla campaign, despite having an increasing number of

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young Indians using social media like Facebook, You tube and twitter in India.

Pepsi has been taking efforts to improve its brand presence in the social media. Thoughthese efforts have been sincere, their results are yet to be fully achieved. For the Pepsibrand to be popular, the company must be intelligent in the manner of propagation in thesocial media. The social media is all about consumers and not about brands. Hence Pepsimust take efforts that make the customer to share information about the brand. This can bedone through designing innovative advertisements that have the potential to be shared bynetworks and hence virally marketed (Fournier and Avery, 2011). A critical aspect is for Pepsi togive up control to the users and make them participate in the propagation of the brand. Forinstance, there could be "Make you own jingle campaigns" and "Demonstrate your Attitude"video campaigns where Pepsi is central in the campaigns that the users participate in.

We have shown below Pepsi’s MARCOM model which will establish the area’s Pepsi carriesout brand promotional activities

Pepsi’s branding strategy has been further elaborated below in the brand value chain. BrandEquity of Pepsi is evaluated and measured using the Customer Based Brand Equity Pyramidand Brand Awareness framework; Young, Urban, Trendy, Rebellious are some of the traitsPepsi has acquired in India. This has been achieved by sending a consistent message intheir advertising campaign over a decade.

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Pepsi has invested a lot in its branding efforts and in building brand salience, andthis is shown in the diagram below

Pepsi's branding efforts have gone beyond the traditional advertising formats, andencompasses the entire spectrum of the environment - this has resulted in a greater /increasing level of brand awareness and resonance.

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PART B

Current Image of Pepsi

The current image of Pepsi is that of a youthful brand that targets the trendy, fun loving,exciting and sporty customers in India. Though this image of Pepsi has made it a wellrecognized brand in the youth segment of India who are the highest consumers of softdrinks, it does not appeal as a family based drink - something coke has successfullymanaged.

The current marketing strategy of Pepsi though effective lacks some poise. For instance thestrategy makers have not taken advantage of latest trends of marketing such as guerrilla andviral marketing which are both cost effective as well as effective in spreading awarenessamong the customers. It is indeed an issue of concern for Pepsi that the most recentsuccessful campaign was the "Youngistan" campaign back in 2003.

Furthermore, the presence of Pepsi in the digital media such as in social media is verynegligible. Though there are evidences of a lot of investments towards the propagation of thebrand through these channels, the benefits are yet to be reaped.

Diet Pepsi has not been able to make any headway in the Indian market with salesstagnating at approx 4% of the total Pepsi sales volumes

Pepsi Max was introduced only on the internet and delivered based on the orders that werereceived online. The culture of purchasing online is very much dormant in the Indianpopulation. Hence the efforts to promote Pepsi Max through the digital channels have notyielded expected results.

Current Market share

The following table shows the current market share by the various brands of beverages inIndia. It is to be noted that the brands Thums up, Sprite and Limca belong to the Coca Cola.Another interesting fact to be pointed out here is that Thums up is available only in 9 of the27 states of India and yet holds the highest position in sales. The threat that Pepsi now facesis that of Coca Cola attempting a triage and releasing Thums up in all states of India andletting go of their own market share for Coke.

Brand Market Share

Thumps up 16.40%Sprite 15.60%Pepsi 13%Limca 11%

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Changes proposed in the marketing strategy

Revised Market Segmentation

The main consumers of Pepsi are centred in the urban sectors of India. Coca cola andThums up are the more prevalent brands in the rural sectors. Hence Pepsi must target toexpand its market in the rural sectors too. The following are some suggestions that Pepsicould implement in order to gain the market share in rural market.

(1) Since the purchasing power of rural population is significantly lesser than the urbanpopulation, Pepsi could introduce a low priced, smaller bottled (150 ml) variant. Thiscould compete directly with traditional products such as butter milk and lime juicewhich are normally sold in 150-200 ml units and are priced at lower prices comparedto the traditional 200 ml bottles of Cola.

(2) Pepsi could use a loss leader strategy by pricing the rural variant at a price lowerthan that of contemporary beverages (Lassi, Butter milk, Flavoured drinks, Aerateddrinks etc) available in the rural markets.

(3) The usage of 150 ml plastic water packets is highly prevalent in rural India. Pepsicould enter this market which is yet to be explored by any of the other beveragebrands. This would give Pepsi the first mover advantage in this category. This wouldalso enable easier portability and storage, and help open up the previously untappedrural markets.

Introduce Pepsi X as a direct rival to Thums up in rural India

The point of differentiation of Thums up with the other popular cola brands, Pepsi and Cokeis its extra sweet and fuzzy flavour. Hence we recommend Pepsi to launch a variant X,which has the same properties as that of Thums Up and market it in rural areas of the 10states Thums Up is present in to test the response. The strategy of promotion in this casewould be to establish a POP with Thums Up and hence eat into the market share of Thumsup.

Pepsi could also consider taking advantage of Coke's reluctance to release Thums up in theother 21 states of India and release Pepsi X in them. Though this would cannibalize themarket share of Pepsi, it would gain a bigger market share for the parent company, PepsiCothrough the infiltration into the market shares of Sprite, Limca and other subsidiary brands ofCoca Cola which are higher ranked as shown in the table. Moreover, the sale of Pepsi Xwould be concentrated on the rural side and hence will not affect the net sales of Pepsiwhich is dominated by sales in urban areas.

The introduction of Pepsi X has its own share of disadvantages. As indicated in the abovediagram, the product runs the major risk of being perceived as a me too product by thedrinkers of Thums Up and negatively affect Pepsi's reputation as a company that churns outinnovative products. Before launching this product Pepsi must weigh its advantages anddisadvantages.

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Introduction of Pepsi Masala

As Michael Porter says, "Strategy is choosing to run a different race because it's the one youhave set yourself up to win. “The Return of Michael Porter," Fortune (February 1, 1999):135-137

Over the years, many of the brands in the beverage industry have looked to create a marketniche for themselves by tweaking their existing products. Pepsi has attempted the same byintroducing a combination of cola and coffee flavour through Cappuchino. Coke attempted tointroduce the Lemon variant of Thums Up. The drawback of both these campaigns were thatthe companies over estimated the demand for these flavours. A more practical approachwould be to research on the different combinations of using Pepsi that are common in theIndian public and officialise them.

The practise of using a combination of Pepsi and local spices (masala) is prevalent in ruralIndia. The drink is called 'Masala Pepsi'. Hence Pepsi could capitalize on this and officialisethis practise. If the drink is priced at the same price of that of the cola variant of Pepsi, itwould attract a lot of consumers.

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The addition of spices like "Jal Jeera" into Pepsi can aid in improving the image of Pepsi asa more 'hygiene friendly' product. This could be taken advantage of and the message can bespread in the urban health conscious society too. With the rapid industrialization of thecountry, there is a lot of migration of youth between North and South India for jobs. Thismigration and mingling of culture could be taken advantage of by Pepsi to promote theusage of Masala Pepsi in the southern states where the culture as such is non-existent.Cleverly planned advertisements can help in creating and promoting this culture in a bigway.

The BAV power grid model shows the direction forward for the promotion of Pepsi Masala totake place. Advantages that Pepsi enjoys such as a strong distribution network, establishedbrand identity and a youthful attitude will help in rapid progression of this product from a newentrant to a high potential product.

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The introduction of Pepsi Masala in the rural market gives Pepsi a unique opportunity tocreate brand loyalty, a luxury that no beverage enjoys in India due to its inelastic nature ofprice sensitivity. The above Marcom model shows the strategic interventions and promotionsthat Pepsi must take in order to create such a Loyalty. Pepsi must take efforts in creation ofa new market segment and a culture of drinking soft drinks on a more regular basis in ruralIndia which currently has a per capita annual consumption of 4 bottles.

Replacement of Diet Pepsi with Pepsi Max in Urban India

The existence of Diet Pepsi and Diet Coke for the health conscious segment of the Indianpublic poses a challenge for Pepsi Max to be marketed in India. The introduction of PepsiMax in this niche market would pose the problem of choice and confusion in the minds of theconsumer.

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As Barry Schwartz, author of The Paradox of Choice explains, "People are so overwhelmedwith choice that it tends to paralyze them. Too much choice makes people more likely todefer decisions. It raises expectations and makes people blame themselves for choosingpoorly." Barry Scwartz, The Paradox of Choice (New York: HarperCollins, 2004), p 13

As already mentioned, due to the image of Diet Pepsi being a feminine drink and its sournature which does not suit the Indian palette, the sales of Diet Pepsi in India remainsunimpressive. Hence we propose that Diet Pepsi should be faced out of the Indian marketand replaced by Pepsi Max.

The sweeter and fizzier nature of Pepsi Max, along with its image as 'a unisexual drink’places it in a position to be the ideal replacement for Diet Pepsi. Pepsi Max achieves thePOP with diet Pepsi in that it caters to the health conscious consumers through its zerosugar nature and hence ensures they are not left behind during transition.

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Summary

The proposed marketing strategy for Pepsi can be summarised by the above BCG matrix.This involves in the facing out of Diet Pepsi, which is currently the weakest of the Pepsibrands and substituting it with Pepsi Max which has a higher potential for success.

Two new variants of Pepsi, namely the Pepsi X and Pepsi Masala are introduced. Due to theoverwhelming sales of Thums Up and the underlying demand for a similar flavour, Pepsishould look to create a star with the Pepsi X variant.

If the Pepsi X variant is successful on a pan India scale, it would cannibalize the sales of thebase cola variant of Pepsi. Though this would mean a drop in sales, efforts can be taken byPepsi to make the brand to function as a cash cow and reap the financial benefits from it.

The per capita consumption of beverages in India is significantly lower than that ofeconomically similar/ poorer countries. Hence Pepsi must take efforts to create a culture ofconsuming beverages and cash into the untapped market.

Though the use of Pepsi with Masala is prevalent in North India which indicates an untappedmarket for Pepsi, the success of the brand in the other parts of India is still unknown andhugely depends on the degree of promotional efforts taken by Pepsi to create the culture.

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The above Ansoff model represents the various market dynamics that are available for Pepsi

to capitalize on.

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The success of the brand depends on its ability to move in pace with time. Over the years,Pepsi has a rich tradition of keeping pace with the changing customer needs and churningnew and trendy soft drinks that shape the attitude of the generations. With the introduction ofnew brands and the techno savvy ways of propagating them, Pepsi finds itself resonating toall its customers about the youthfulness and energy that to them is what 'Pepsi' is all about.

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Appendix A

Testing times; the Pesticide controversy & its impact on the softdrinks market in India

In 2003, the Center for Science and Environment (CSE) published a report indicatingpresence of pesticides which greatly exceed European & Global standards. This reportindicted both PepsiCo and Coca Cola Companies. The pressure of both the Indian media &the Indian public forced the Indian parliament to set up a parliamentary probe to examine theissue further. In an unprecedented move, both Coca-Cola and Pepsi Co responded to theseallegations by holding joint press conferences, and by issuing joint press ad’s and managedto ride the storm out.

The issue erupted once again in 2006 when the CSE released another report indicting PepsiCo and Coca Cola. Pepsi and Coca-Cola were banned in educational institutions, severalstates have still banned the sale of colas in educational institutions. There were also widelycovered public protests in which crates of Cola bottles were smashed publicly (Neeraj Vedwan).

Over time this controversy also died down, however this issue is now deep suited into theIndian consumers psyche, and Pepsi needs to take a lot of efforts to ensure that this issue isput to rest and move forward. This Pepsi Co is doing by creating shared value, and ensuringthat it is visible.

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