Pepsi Max Product’s Market Entry Strategy into India

“International marketing is a process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, and services to create exchanges between nations that satisfy individual and organizational objectives”. And according to the American Marketing Association, International Marketing is the performance of business activities designed to plan, price, promote and direct the company’s flow of goods and services to consumers or users in more than one nation for a profit”

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Pepsi Co has entered Indian Market in 1985, making a tie-up with one of India’s leading business houses, the R P Goenka (RPG) group, to begin the soft drink operations in the country. RPG Group Company is an Agro Product Export Ltd., which helped Pepsi co, to import the cola concentrate to sell soft drinks under the Pepsi label.

Then Pepsi made a large venture of its products into Indian Market and became one of the favorite soft drinks of the Indians. In 1988, Pepsi leashed the Indian market under the product name “Lehar Pepsi”. This attempt was noted by marketing gurus like Philip Kotler, as an attempt to use an additional 2 Ps called Politics and Public Opinion along with the 4Ps of regular marketing.

Now as Pepsi is looking out to launch Pepsi Max into Indian Market, the following is the proposed marketing strategy for the product launch.

Indian Economy

The Indian economy is on an ever-growing path. The GDP of the country grew by 9.4% in 2006-07 which is more than the government’s previous estimate of 9.2%, which is also high in the past 19 years. The economy was valued in a huge way with a value of $569,631 million last fiscal, up by 9.3% as compared with 2005-06. According to Finance Minister P.Chidambaram, the results confirm the belief that the “Indian economy has shifted to a higher growth trajectory.”

The minister anticipates that the high growth of economic value brings high investments into the economy which, in turn, reinforces growth. And according to the estimates, if the Indian economy grows at 8 percent, Pepsi’s growth is at 12 percent plus 2.5 (the incremental GDP growth) into 3, or 19.5 percent. This is because the GDP growth is accompanied by a sharper rise in the number of rich families which have more disposable income to spend on.

International trade relations that make Pepsi enter into Indian Market

Until 1977, the Soft drink market in India was under the total monopoly of Coca-Cola during which year, the Janata Party beat the Congress Party of then Prime Minister Indira Gandhi. At that time the Janata government demanded that Coca-Cola should transfer its soft drink syrup formula to an Indian subsidiary. Coca-Cola did not agree to the proposal and withdrew its operations from the country. At that time according to some analysts, the Indian market has 850 million potential customers, 150 million of whom comprise the middle class, with disposable income to spend on cars, VCRs, and computers.

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The growth in the Indian middle class is presumed at 10% per year. At that time Pepsi got a license into the Indian market, with an agreement of export of $5 of locally-made products for every $1 of import. This was made as a mutually beneficial agreement between the Indian government and Pepsi to initiate a second agricultural revolution in India.

Along with an Indian partner, Pepsi gained access to a potentially enormous market; Pepsi facilitated the Indian bottlers to serve a rapidly expanding soft drink market by making tie-ups at several places in the country. The bottling units are happy to offer soft drinks to beat competition from foreign marketers. The brand name of Pepsi made its work in raising the size of the local soft drink bottles by 2.5% even before the first bottle of Pepsi hit the Indian shops.

At Present Pepsi is successfully running its cold beverage business in India through 37 bottling plants, 17 company-owned bottling plants that account for 55% of total production.

Trade regulations

At once upon a time, there was a control on the foreign investments in India, which also affected the Soft drink industry. To serve the demands of the Foreign Exchange Regulation Act (FERA), Coca-Cola left India in resistance to dilute its stake in India. But Pepsi made the Indian entry as a Joint Punjab government-owned Punjab Agro Industrial Corporation (PAIC) and Voltas India Limited during 1988.

But during 1991, the Indian Government has adopted a Liberalization and Globalization policy and allowed foreign brands to invest on their own; But as coca-cola made its return in 1993 into India, things changed and in 1994, Pepsico has ended up its Joint Venture with its partners. In 2004, the company sales were $700 million. By 2005, the two giants of the soft drink world have gained a market share of 95% in India. During this time, Pepsi co India’s market share was around 35%.

Positioning Scenario for Pepsi Max

As the Indian Economy is growing, the majority of the high-Income people are spending on quality food and drink. Consumption of soft drinks expanded at an average annual rate of 11% by volume from 2002 to 2006, and this is forecast to accelerate only slightly to 12% from 2007 to 2011. According to the estimates, the Indian market potential for Soft drinks was 6540 million by 2007.

The earlier scenario of less expense is reducing, which is replaced by the thrust for choosy food and drink. Indians are now open to varieties and are willing to shop on their own picking up the stuff from the shelves, instead of the satisfying with old choices and products on shelves. This is apparently visible through the increasing demand of Food world retails and retail malls. The average Indian is looking for choice and variety more than the price.

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Types of Soft drinks in India

The soft drinks in India are promoted under two classes- one is fruit-based drinks and the second one is carbonated drinks.

Type of carbonated drinks under promotion in India

Pepsi Cola is a carbonated beverage produced and manufactured by PepsiCo with the following product line.

  • Pepsi Blue: A blue-colored fruity soda (non-cola) sold for a brief period of time during the winter of 2003/2004.
  • Pepsi A-ha: Lemon flavored Pepsi sold in India.
  • Pepsi Cafechino: Pepsi with a touch of coffee only sold in India.
  • Pepsi Cappuccino: A cappuccino-flavored carbonated soft drink produced by PepsiCo and currently marketed and sold in India.

Major competition

Pepsi has a rivalry with coke since the beginning. And the competition spills in all the areas like pricing, suppliers, spokespeople, retail space, and the taste sense of consumers.

Both Pepsi and Coke bottles are released in pet bottles costing at Rs/-5 in reach to the average Indian consumer. However, Pepsi’s approach to ‘Ye dil Mange More’ and ‘Thanda chalega Kya’ made big sales to the earlier Pepsi versions.

Pepsi Max- the sustainability

Pepsi Max is known on the grounds as Max Taste, No Sugar sift drink. Pepsi Max will be a most wanted new taste to the Indians for the segment who seeks a sugar-free diet and drinks. Until now Indians are enjoying the taste of sugar-concentrated carbonated drinks from Coke and Pepsi. But the recent sustainability of other coke items like coke Zero, New Coke, Diet Coke, etc., Many Indians due to their changing lifestyle is looking for a sugar-free diet. Presently, India has the largest number of diabetes in the world. India has 25 to 30 million adult diabetes (type 2) as per different estimates. At this rate, India is projected to have more than 37 million diabetics in the year 2010 and more than 57 million in the year 2025. Eventually, all these people can turn to a big market for the sugarless Drink-Pepsi Max

The proposed Place of sale

Pepsi Max can be sold in stores, restaurants, bakery shops, food courts, theatres, and vending machines. But this type of product placing can face the following problem.

  • Disorganized visibility among its various brands in the display making the consumer search the shelves for the product and brand

In order to solve this, special promotions like flyers and banners for the launch and TV advertisements with the celebrities preferably old and renowned would gain much popularity within the brand itself. Also regarding the competition with coke, in other countries like US Coke believed that Diet Coke was an impressive drink, but now Coke Zero is so much less than Diet Coke

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Pricing strategy

The Pepsi model should be priced differently from the old price-penetration model which is running for the existing models. Though Pepsi had to slash its price for the earlier models from Rs. 12/ to Rs. 5/- depending on the price-sensitive market of India, the country has the signs to act as an economically growing nation. The price penetration model for Pepsi products has delivered a single-digit growth.

But now the company is looking to target a higher income level population for 20-25 percent topline growth, with the offer of choice in the product selection. The target consumers that like to have the sugar-free drink mostly fall in the age group above 25, who also fall into the category of the income-earning group and who want to prefer taste than just availability. The higher income group people can now afford to buy more expensive drinks. Gatorade, Diet Pepsi, Tropicana, Cafe Chino are all making their way to reach this segment in India. If I want a, I can no longer use the old one-size-fits-all pricing strategy.

The Indian consumption behavior is changing from price to income and esteem. The price of a Pepsi bottle on the street corners is going for Rs 7-8 per bottle, where the same is going for Rs 25 in a multiplex. Consumers pay Rs 20 for a can of Diet Pepsi and pay Rs 12 for a non-returnable glass bottle of Diet Pepsi. So when Pepsi Max is offered in this way, through more cans than bottles, the intake will also be more as a strategy of pushing the bundle pack sale. This Way Pepsi Max can make success through the Indian entry.

References

Pepsi Max vs Coke Zero. 2008. Web.

Preston McAfee, Pepsi’s Strategy in the Carbonated Soft Drinks Market. 2008. Web.

Pepsi-Cola Company – Delaware. 2008. Web.

Sunil Jain & Suveen K Sinha, Pepsi India chief on cola pricing. 2008. Web.

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