CHAPTER-1
CHAPTER-1
INTRODUCTION
INTRODUCTION
Beverage industry is one of the fast growing industries in India .it can be divided into two Beverage industry is one of the fast growing industries in India .it can be divided into two sect
sections ions i.ei.e. . carbcarbonatonated ed and and non-non-carbcarbonatonated. ed. The The carbcarbonatonated ed drindrinks ks that that can can be be furtfurther her classified into cola, lemon orange, mango and apple segments.
classified into cola, lemon orange, mango and apple segments.
Marketing includes all the activities like promotion, distribution, advertising etc. To fulfill all Marketing includes all the activities like promotion, distribution, advertising etc. To fulfill all th
the e segsegmementnts s of of conconsumsumersers. . MaMarkerketiting ng is is alalso so to to conconvevert rt socsociaial l neneeds eds intinto o proprofifitatableble opportuni
opportunities. ties. So So this this topic topic provides provides all all the the essentiaessentials ls to to theoretitheoretical cal knowledknowledgege with
with practicapractical l knowledknowledge ge and and to to inculcainculcate te the the efficienefficiency. cy. It It is is also also requiremrequirementent for the company to improve their service and product quality for achieving their ultimate for the company to improve their service and product quality for achieving their ultimate goal.
goal.
As far as the soft drink market is concerned, it is facing the cut throat As far as the soft drink market is concerned, it is facing the cut throat
Competition because of the availability of a large number of indirect as well as direct Competition because of the availability of a large number of indirect as well as direct Competitors. Single company offers the soft drink to the market in different taste and flavors. Competitors. Single company offers the soft drink to the market in different taste and flavors. In this industry entire range of flavors are produced by other competitors also. More often it In this industry entire range of flavors are produced by other competitors also. More often it become
becomes impossible to s impossible to differentdifferentiate between the same iate between the same flavors of two flavors of two differendifferent brands, whent brands, when ser
served ved in in plaplane ne concontaitainener, r, ranrange ge alsalso. o. AlAll l thethese se facfactotors rs totogetgether her mamake ke ththe e sisituatuatitionon complicated. Besides both corresponding brands have the similar price.
INTRODUCTION
INTRODUCTION
Beverage industry is one of the fast growing industries in India .it can be divided into two Beverage industry is one of the fast growing industries in India .it can be divided into two sect
sections ions i.ei.e. . carbcarbonatonated ed and and non-non-carbcarbonatonated. ed. The The carbcarbonatonated ed drindrinks ks that that can can be be furtfurther her classified into cola, lemon orange, mango and apple segments.
classified into cola, lemon orange, mango and apple segments.
Marketing includes all the activities like promotion, distribution, advertising etc. To fulfill all Marketing includes all the activities like promotion, distribution, advertising etc. To fulfill all th
the e segsegmementnts s of of conconsumsumersers. . MaMarkerketiting ng is is alalso so to to conconvevert rt socsociaial l neneeds eds intinto o proprofifitatableble opportuni
opportunities. ties. So So this this topic topic provides provides all all the the essentiaessentials ls to to theoretitheoretical cal knowledknowledgege with
with practicapractical l knowledknowledge ge and and to to inculcainculcate te the the efficienefficiency. cy. It It is is also also requiremrequirementent for the company to improve their service and product quality for achieving their ultimate for the company to improve their service and product quality for achieving their ultimate goal.
goal.
As far as the soft drink market is concerned, it is facing the cut throat As far as the soft drink market is concerned, it is facing the cut throat
Competition because of the availability of a large number of indirect as well as direct Competition because of the availability of a large number of indirect as well as direct Competitors. Single company offers the soft drink to the market in different taste and flavors. Competitors. Single company offers the soft drink to the market in different taste and flavors. In this industry entire range of flavors are produced by other competitors also. More often it In this industry entire range of flavors are produced by other competitors also. More often it become
becomes impossible to s impossible to differentdifferentiate between the same iate between the same flavors of two flavors of two differendifferent brands, whent brands, when ser
served ved in in plaplane ne concontaitainener, r, ranrange ge alsalso. o. AlAll l thethese se facfactotors rs totogetgether her mamake ke ththe e sisituatuatitionon complicated. Besides both corresponding brands have the similar price.
NEED FOR THE STUDY:
NEED FOR THE STUDY:
The significance and need of choosing “Promotion of soft drinks – Role of Modern Retail The significance and need of choosing “Promotion of soft drinks – Role of Modern Retail out
outlelets” ts” is is to to stustudy dy the impothe importrtancance e of of PrPromomotiotionaonal l acactitivitvitieies s as as it it is is ththe e key factkey factor or inin determining budgeted sales figures for the company for future and then comparing the determining budgeted sales figures for the company for future and then comparing the Promotional activities with its competitor and also to study the outlets, promoting Pepsi Promotional activities with its competitor and also to study the outlets, promoting Pepsi product
products in s in over the over the area covered in, Visakhapatnamarea covered in, Visakhapatnam. To . To evaluate the role of evaluate the role of Modern RetailModern Retail outl
outlets ets in in prompromotinoting g soft drinks soft drinks by by studstudyinying g the the custcustomeomer r satisatisfacsfactiotion n on on the the retaretailerilerss promot
promotional activitieional activities of s of Pepsi products and finally to find out Pepsi products and finally to find out the ways to enhance the the ways to enhance the salessales of Pepsi.
OBJECTIVES OF THE STUDY
To know the merchandising of Pepsi in the Modern Retail outlets.
To know the Promotional activities such as sales promotion, advertising, etc…
To find the effectiveness of various Promotional activities.
To know the strategy of Pepsi and its Competitors regarding the Promotional activities.
To identify the consumers opinion towards the Promotional activities of the Modern Retail outlets on the Pepsi products.
METHODOLOGY:
The information for the study has been obtained from two sources namely. Primary Data
Secondary Data
Primary data:
The data for study has been collected with the help of a questionnaire targeting the customers who are step in the Retail outlets regarding the promotional activities of the retailer on soft drinks and the questionnaire consists of several questions, which give the necessary data.
Secondary Data:
Some secondary data required for the study is obtained from the Pepsi company records, journals, magazines and websites. It means the data is already available.
LIMITATIONS OF THE STUDY
The following are the limitations of the study:• As the sample is small in number it is difficult to analyze the overall opinion of the
customers on the Promotional activities on soft drink products.
• As the study is limited to the few Modern Retail outlets undertaken for the study it
may not be accurate to generalize the opinion of the customers who are using the soft drinks.
• The study is only limited for the period of 2 months it is not possible to study the
total opinions and the collection of preferences given by the customers.
• Unavailability of some information due to lack of awareness of customers.
• The study of soft drink industry which is known to be seasonally fluctuating one,
present study does not take into account seasonal fluctuations and the results may not suit for all the seasons.
INDUSTRY PROFILE
Indian Soft drink Industry
For a number of years the main competition in the non - alcoholic sector was the battle between Coke and Pepsi for the cola market. But as the customer preferences and concerns started to change, the industry's giants have begun relying on new product flavors and looking to noncarbonated beverages for growth. Globally, the market size of this industry has been changing. Soft drink consumption has a market share of 46.8% within the non-alcoholic drink industry. Data monitor (2005) also found that the total market value of soft drinks reached $307.2 billion in 2004 with a market value forecast of $367.1 billion in 2009.
The modern soft drink industry started in 1886, when Dr. John S. Pemberton invented "Coca Cola" in Atlanta, Georgia. This was followed by the invention of "Pepsi cola" in 1898 by Caleb Bradham. In India the two major player Coca cola and Pepsi made their entries in 1977 but then the market was not that much friendly to the foreign companies. More over the political situation was also not conducive for the foreign companies. But later on the
situation post reforms began to look up for these two giants. In 1990 Pepsi-Cola went on sale in India for the first time in 28 years after a six-year battle to sell the US soft drink in India. In 1997, to ensure fast re-entry, Coca Cola paid $40 million to buy the biggest Indian soft-drink brands, including ThumsUp, from a family-owned business. In recent years the soft drink industry in India has been hit by the concerns over health and environmental aspects. The soft drinks industry continued on its path to recovery from the low growth seen between 2005 and 2006, with higher volume growth in 2008 than that seen in 2007. The mature sectors of bottled water, fruit/vegetable juice and carbonates saw a dynamic year, with companies refreshing their products’ brand image and packaging to attract new consumers. Emerging product categories, such as energy drinks and reconstituted 100% juice, saw high double-digit growth rates, as companies increased their products’ penetration in India. Off-trade volume growth was slightly higher than on-Off-trade volume growth, as convenient on-the-go packaging, company sponsored chillers in kiranas and attractive supermarket displays fuelled off-trade sales across the market.
With the industry back on the upward growth curve, companies refreshed their brands by introducing new and more premium packaging designs, pack sizes and communication campaigns. In 2008, bottled water was especially dynamic, with all the major national brands following the cue of Bisleri’s rebranding in late 2007. Carbonates and juice drinks were also reinvigorated with new pack sizes that targeted on-the-go consumption by young adults. With “naturally healthy” becoming a key focus for consumers and manufacturers, fruit/vegetable drinks companies focused their efforts on highlighting their products’ fresh fruit content and health attributes. Companies put in motion plans to extend their product portfolios to emerging categories such as 100% juice, energy drinks and flavored water.
Domestic players thrive
The multinationals Coca-Cola India and PepsiCo India Holdings saw their off-trade value shares of soft drinks in India decline over the review period, as other national and regional players updated their brand portfolios and increased the penetration of their brands in India. Bottled water players, such as Parle Bisleri and Dhariwal Industries, were particularly successful in expanding their consumer base through a concerted effort to increase their manufacturing capacity and move to newer regions within India. Dabur India and Parle Agro benefited from their first mover advantage in being present in high-growth emerging product
categories, such as 100% juice and other non-cola carbonates.
Modern retailing thrives alongside kiranas
With companies increasing their spend on below-the-line marketing activities, the ubiquitous kiranas were the beneficiaries of efforts such as branded glass door refrigerators, regional language banners and displays, and the roll-out of on-the-go packaging for carbonates and juice drinks. Supermarkets, which are still something of a novelty in many small cities,
continued to attract a combination of regular grocery shoppers and young impulse buyers. Bundling and discount promotions for fruit/vegetable juice and concentrates drove product sampling in supermarkets. Emerging categories, such as energy drinks and RTD tea, received a boost from impulse buyers in supermarkets, while attractive displays and imported products in up market shopping centers introduced consumers to new products, such as
Double-digit growth expected
With rising consumer affluence and companies tailoring their product designs and marketing specifically to target the young adult population group, the trend of robust double-digit annual volume growth is expected to continue over the forecast period. The foray of leading national players into emerging categories, such as energy drinks and 100% juice will help sustain high growth rates in the future.
Corporate Profile
PepsiCo in India
“In everything we do, we strive for honesty, fairness and integrity”
PepsiCo India is striding ahead rapidly towards enabling the global vision to be the world's premier consumer products company focused on convenience foods and beverages. PepsiCo India seeks to produce healthy financial rewards for investors as it provide opportunities of growth and enrichment to its employees, business partners and the communities in which it operates.
It has more than 42 bottling plants in India, of which 13 are company owned and 29 franchisee owned.
3 State-of-the-art food plants in Punjab, Maharashtra and West Bengal
Establishment
PepsiCo established its business operations in India in 1989 and has grown to become one of the country’s leading food and beverage companies. One of the largest multinational investors in the country, PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India.
Investment
PepsiCo India and its partners have invested more than USD1 billion since the company was established in the country.
Employment
PepsiCo India provides direct and indirect employment to 150,000 people including suppliers and distributors.
PepsiCo Boilerplate
PepsiCo offers the world’s largest portfolio of billion-dollar food and beverage brands, including 18 different product lines each generating more than $1 billion in annual retail sales. Our main businesses – Frito-Lay, Quaker, Pepsi-Cola, Tropicana and Gatorade – also make hundreds of other nourishing, tasty foods and drinks that bring joy to our consumers in
over 200 countries. With more than $43 billion in 2008 revenues, PepsiCo employs 285,000 people who are united by our unique commitment to sustainable growth, called Performance with Purpose. By dedicating ourselves to offering a broad array of choices for healthy, convenient and fun nourishment, reducing our environmental impact, and fostering a diverse and inclusive workplace culture, PepsiCo balances strong financial returns with giving back to our communities worldwide.
Brand Facts
PepsiCo nourishes consumers with a range of products from tasty treats to healthy eats that deliver enjoyment, nutrition, convenience as well as affordability
The group has built an expansive beverage and foods business. To support its operations, PepsiCo has 42 bottling plants in India, of which 13 are company owned and 29 are franchisee owned. In addition to this, PepsiCo’s Frito Lay division has 3 state-of-the-art plants. PepsiCo’s business is based on its sustainability vision of making tomorrow better
than today. PepsiCo’s commitment to living by this vision every day is visible in its contribution to the country, consumers and farmers.
Beverages
PepsiCo India’s expansive portfolio includes iconic refreshment beverages Pepsi, 7 UP, Nimbooz, Mirinda and Mountain Dew, in addition to low calorie options such as Diet Pepsi, hydrating and nutritional beverages such as Aquafina drinking water, isotonic sports drinks -Gatorade, Tropicana100% fruit juices, and juice based drinks – Tropicana Nectars, Tropicana Twister and Slice. Local brands – Lehar Evervess Soda, Dukes Lemonade and Mangola add to the diverse range of brands.
PepsiCo’s food division, Frito-Lay, is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG. It manufactures Lay’s Potato Chips; Cheetos extruded snacks, Uncle Chips and traditional snacks under the Kurkure and Lehar brands. The company’s high fiber breakfast cereal, Quaker Oats, and low fat and roasted
snack options enhance the healthful choices available to consumers. Frito Lay’s core products, Lay’s, Kurkure, Uncle Chips and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets.
Mission and Vision
Mission
"To be the world's premier consumer Products Company focused on convenience food and beverages. We seek to produce healthy financial rewards to investors as we provide
opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity.”
Vision
"To build India’s leading total beverage company, delighting consumers by best meeting their everyday beverage needs, and stakeholders, by delivering performance with purpose, through our talented people."
PepsiCo Sustainability Vision
"PepsiCo’s responsibility is to continually improve all aspects of the world in which we operate – environment, social, economic – creating a better tomorrow than today”
‘Tomorrow is better than Today’
‘Tomorrow is better than Today’
Organizational Values
Our commitment is to deliver sustained growth, through empowered people, acting with responsibility and building trust.
Commitment
Values reflect our aspirations - the kind of company we want PepsiCo to be. We express our values in the form of a commitment.
Sustained Growth
Sustained Growth is fundamental to motivating and measuring our success. Our quest for sustained growth stimulates innovation, places a value on results, and helps us understand whether today's actions will contribute to our future. It is about growth of people and company performance. It prioritizes making a difference and getting things done.
Empowered People
Empowered People means we have the freedom to act and think in ways that we feel will get the job done, while being consistent with the processes that ensure proper governance and being mindful of the rest of the company's needs.
Responsibility & Trust
Responsibility and Trust form the foundation for healthy growth. It's about earning the confidence that other people place in us as individuals and as a company. Our responsibility means we take personal and corporate ownership for all we do, to be good stewards of the resources entrusted to us. We build trust between ourselves and others by walking the talk and being committed to succeeding together.
PepsiCo (symbol: PEP) shares are traded principally on the New York Stock Exchange in the United States. The company is also listed on the Chicago and Swiss stock exchanges. PepsiCo has consistently paid cash dividends since the corporation was founded.
Corporate Citizenship
At PepsiCo, we believe that as a corporate citizen, we have a responsibility to contribute to the quality of life in our communities. This philosophy is expressed in our sustainability vision which states: “PepsiCo’s responsibility is to continually improve all aspects of the world in which we operate – environment, social, economic -- creating a better tomorrow than today.”
Our vision is put into action through programs and a focus onenvironmental stewardship, activities to benefit society, and a commitment to build shareholder value by making PepsiCo a trulysustainable company.
PepsiCo Headquarters
PepsiCo World Headquarters is located in Purchase, New York, approximately 45 minutes from New York City. The seven-building headquarters complex was designed by Edward Durrell Stone, one of America's foremost architects. The building occupies 10
acres of a 144-acre complex that includes the Donald M. Kendall Sculpture Gardens, a world-acclaimed sculpture collection in a garden setting.
The collection of works is focused on major twentieth century art, and features works by masters such as Auguste Rodin, Henri Laurens, Henry Moore, Alexander Calder, Alberto Giacometti, Arnaldo Pomodoro and Claes Oldenberg. The gardens originally were designed by the world famous garden planner, Russell Page, and have been extended by François Goffinet. The grounds are open to the public, and a visitor's booth is in Operation during the spring and summer.
Logos and Slogans
1898 Brad's Drink
1903 Exhilarating, Invigorating, Aids Digestion 1906 Original Pure Food Drink
1908 Delicious and Healthful 1915 For All Thirsts - Pepsi: Cola
1919 Pepsi: Cola - It makes you Scintillate 1920 Drink Pepsi: Cola - It Will Satisfy You 1928 Peps You Up!
1929 Here's Health!
1932 Sparkling, Delicious
1933 It's the Best Cola Drink Double 1934 Refreshing and Healthful
1938 Join the Swing to Pepsi 1939 Twice as Much for a Nickel 1943 Bigger Drink, Better Taste 1947 It's a Great American Custom
PEPSI-COLA IN INDIAN SCENARIO
Since the entry of Pepsi-Cola to India in 1989, the soft drink industry has under gone a
Radical change. When Pepsi-Cola entered, Parle was the leader with the Thums-up being its flagship brand. Other products offering by Parle included Limca & Goldspot, another upcoming player in
the market was, the erstwhile bottler of Coca-Cola, “ pure drinks” . Its offering includes Campa- Cola, Campa-Lemon & Campa-Orange.
With the re-entry of Coca-Cola in the Indian market, Pepsi-Cola had to go in for more aggressive marketing to sustain its market share. The chronology of the initial phase of the Cola wars in India was:
• 1977:Parle launched Thums-up and pure drinks launched Coca-Cola.
• 1998: In September, final approval for the Pepsi Foods Ltd. Project granted by the
“Cabinet Committee” on economic affairs of the“Rajeev Gandhi Govt.”
• 1990: In March, “Pepsi-Cola and 7-up” launched markets in north India • 1990:In May, The government cleared the Pepsi-Cola project again but with a
change
In brand name to “ Lehar Pepsi”, simultaneously it rejects the Coca-Cola application
“Citra” from the Parle, stable hited the market.
• 1991: Pepsi-Cola extended its soft drinks business and reached at national scale.
Pepsi-Cola launched its product in Delhi and Bombay.
• 1992: In January, Brito foods application is cleared by the FIPB. Pepsi-Cola and Parle start
initial negotiation for a strategic alliance but took break off after a while.
• 1993: Pepsi-Cola launched “Slice and Teem” captured about 25-30% of the soft drink
market in about 2 years.
• 1994:Pepsi bought“Dukes & Sones”.
• 1995:Pepsi-Cola lunched cans, having capacity of 330ml in various flavors
• 1996: Pepsi-Cola domestic and international operations combined into a Pepsi-Cola
Company. International and domestic operations combined into one business unit called “Frito-lay Company”.
• 1998:Pepsi-Cola launched“Mirinda Lemon” opposite to“Limca”.
• 1999: Pepsi-Cola launched “ Diet Pepsi” in can and 1.5 Lit. “PET” bottle for health
conscious people.
• 2001:Pepsi-Cola launched Slice in“Tetra” Pack.
• 2003:Pepsi-Cola launched“Pepsi Blue” to get the favor of world cup season. • 2005:Pepsi-Cola launched Mirinda in “Straw Berry” flavor to get the favor of movie
Batman.
• 2005:Pepsi-Cola launched 7-up as“7-up ice”.
Pepsi-Cola launched“Mountain Dew” to be more competitive with Coca-Cola
•
2009: Bangalore, March 9 PepsiCo India has launched itsPackaged nimbu paani ‘Nimbooz by 7Up.
PEPSI-COLA PHRASES
The Pepsi-Cola marketing phrase has also changed many times
1909-1939: Delicious and Healthful
1939-1950: Twice As Much For A Nickel Too 1950-1963: The Light Refreshment
1953-1961: Be Sociable
1961-1963: Now It's Pepsi for Those Who Think Young 1963-1967: Come Alive! You're In the Pepsi Generation 1967-1969: Taste That Beats the Others Cold
1969-1973: You've Got A Lot to Live, Pepsi's Got A Lot to Give 1973-1975: Join the Pepsi People Feeling' Free
1975-1978: Have a Pepsi Day 1978-1981: Catch That Pepsi Spirit
1981-1982: Pepsi's Got Your Taste For Life! 1983-1983: Pepsi Now!
1984-1990: official about it
1990-1994: Yeh dil mange more (Pepsi India) 1995-2004: My Pepsi my world
2004-2007: Pepsi, the Choice of a New Generation 2007-now: Yeh pyas hai badi
PEPSI – BRANDS AND PACK PROFILE
GLASS BOTTLES
DISPOSABLE CANS
The Soft Drink Bottling Industry
Over 1,500 U.S. patents were filed for a cork, cap, or lid for the carbonated drink bottle tops during the early days of the bottling industry. Carbonated drink bottles are under a lot of pressure from the gas. Inventors were trying to find the best way to prevent the
carbon dioxide or bubbles from escaping. In 1892, the "Crown Cork Bottle Seal" was patented by William Painter, a Baltimore machine shop operator. It was the first very successful method of keeping the bubbles in the bottle.
Automatic Production of Glass Bottles
In 1899, the first patent was issued for a glass-blowing machine for the automatic
production of glass bottles. Earlier glass bottles had all been hand-blown. Four years later, the new bottle-blowing machine was in operation. It was first operated by the inventor, Michael Owens, an employee of Libby Glass Company. Within a few years, glass bottle production increased from 1,500 bottles a day to 57,000 bottles a day.
Ninety years after the invention of what becomes one of the most favored drinks globally in 1988. Pepsi entered India flanged with heavy resources and riding the winds of change of a newly opened economy. First, Pepsi has only franchise unit. Pepsi gave his concentrate to small factory and they make beverage.
In 1988, Pepsi set up its offices in India. In this company Pepsi
Operates as PEPSI Foods Pepsi Co. India Holdings and Pepsi India marketing. The mission was to change the tastes and life style of a common
Indian, who identified soft drinks and beverages as a few available cold drinks, squashes and concentrates.
When it came to a refreshing drink conservative consumers would back to traditional nimboo pani, jaljeeram lassi etc.
Although India has a per capita consumption as low as 3 per person as compared to 400 in USm India has one of the largest number of potential consumers in a world with a population of an Arab, Every Indian guzzles 27 bottles of soft drink every year, an increase of one bottle per capita consumption would mean stating 900 bottles extra. India soft drink is of worth RS. 1800 crores with annual growth at the rate of20% to 25%.
All the activities of Pepsi Foods Pepsi Co, India Holdings and Pepsi India Marketing Company are controlled by business Unit (BU) located at GURGAON. This BU is
divided into various marketing units (MU's). All except the North and Market Units have common borders with states comprising them.
The market units demarcate the areas, which are "Coboised" i.e. have Company owned bottling operations (COBO). In these units there are company owned bottling plants while in other areas the operations are run by a franchisee these areas
are referred to as Franchisee Owned Bottling Operations (FOBO'S) and some and in some others Joint Venture operate.
COBO - In the COBO, the company has total control of the decisions and implementations undertaken, but for this the company has to invest its own money.
FOBO - The FOBO’S are independent to take their own marketing and Operational decisions with no major interference form the company.
The FOBO's are supplied the concentrate from the company and they have to run the show, thereafter. Pepsi maintains ownership of the trademarks and is primarily responsible for ownership in a local bottling operation. This helps Pepsi maintain strong trademark on the other party's resource and expertise. The PCI workflow concentrates on Selling, Making and Delivering Pepsi- Cola.
Pepsi -Cola is a company with a "Low margin, high volume business" Pepsi Co. deals in the carbonated Soft Drinks (CSD's) Market.
CSD's fall in two categories-Cola and flavors. Coals concentrate on Pepsi whereas flavors deal with orange and Lemon. In India the flavors are Mirinda Orange and Lime. Slice is a fruit Juice concentrate based Drink.
Starting out in 1989, with that name of "Lehar Pepsi", the company has grown leaps and bounds ever since with competition increasing with reentry of coke a few years ago. Thanks
to an early lead and a better understanding of the market, India remains amounts the handful of markets worldwide where Pepsi is ahead of its archival Coke.
Despite being the global Pepsi has build its success on meeting out the Indian customer's needs. Pepsi has made its brand synchronize with localized events and traditions. Pepsi maintained its top of mind awareness with roadside signage and reminders. The partner type relationship with bottles, FOBOs as well as COBOs cover most of the company adequacy. One of the strongest weapons in Pepsi's armory is the flexibility it has empowered its people with. Ht Pepsi every employee, may be a manager of a salesman, have an
and increase its consumption. Thus Pepsi believed in establishing and nurturing creditability of the salesman and making the joint commitment to grow business in accounts, all these factors together led to a high froth in the Indian market and constantly increasing market share.
Product wise comparison of Pepsi with competitor Coca-Cola
Pepsi Coke, Thumps Up
Mirinda ( orange+lemon+apple) Fanta(orange),Limca
Slice Maaja
7UP Sprite
Mountain dew Kinley(soda)
Diet Pepsi Diet Coke
Aquafina (mineral water) Kinley (mineral water)
THE RKJ GROUP
It can be said with absolute certainty that the RKJ Group has carved out a special niche for itself.
Their services touch different aspects of commercial and civilian domains like those of Bottling,
Food Chain and Education. Headed by Mr. R. K. Jaipuria, the group as on today can lay claim to expertise and leadership in the fields of education, food and beverages.
Franchisee (pearl Bottling Pvt.Ltd.,)
Often new flavors are to be added to the product line of cool drinks to prevent a competitor. To establish a relation with retailers it is desirable to sell more than
one flavor of cool drinks. To decrease the security seasonal products are added to the resources available so as to lessen its risks. Pepsi has given the franchise of Visakhapatnam region to Pearl Beverages which belongs to Pearl Group with Head quarters at Delhi and Mr. C.K. Jaipuria as the chairman and the Managing Director of the group. Pepsi Foods Ltd., declared Krishna Mohan Beverages and Constructions as franchise, in 1992.Last year it was changed to Pearl Beverages was taken by the Pearl Group. Campa-cola Soft Drinks has originally owned the premises since 1980 at Madhurawada. After the insolvency of campa-cola, KMBC purchased the premises in1990 in the auction by APSFC. Initially, it used to produce McDowell’s soda and Bagpiper soda. It produced these drinks under franchise
products.
Description and Launch of products
Brand
name
Flavor
Date
Pepsi Cola April-1992
Mirinda Orange April-1992
7 Up Clear Lemon April-1992 Mirinda Lime Cloudy Lemon April-1992
Soda Soda April-1992
Pepsi market share:
Pepsi : 47% Coca-cola : 53%
Pepsi foods (Pvt.) Ltd
Pepsi cola was in India from 1956 to 1961. It left this country, as its products were not found acceptable to the Indian market. Pepsi foods Ltd. Joint venture between Pepsi Co. international of US(which is holding 40% of the equity)and Tata concerns Voltas and the Punjab Ago industries Corporation (each of which have as round 25% of the equity),has 25%of its output reserved for beverages with a 50% export commitment fo9r fruit and vegetable products. According to Pepsi officials the project guarantees that for every American dollar the company takes out of India, it will bring five back. They started concentrated factory in Punjab. This company named as Pepsi Foods Ltd.
Pepsi Co. international’s direct investments in India so far amounts to Rs.165 corer. Two thirds of this however has gone into food processing. Pepsi foods are exporting fruits and vegetables to UK etc.
The Pepsi’s foods processing unit directly supervised 1,200 hectors under tomato cultivation covering 183 villages and 319 farmers. The company’s technical inputs enabled the farmer to achieve a yield of 35 to 50 tones a hector against the average of was
after discontinuing teems.
PRODUCT PROFILE
Indian Beverages industry’s size is Rs. 8000 Crores and it is dominated by two player’s viz. Pepsi & Coke only. This high profile industry has lot of potential for growth as per capita consumption in India is 8 bottles a year as compared to 20 bottles in Sri Lanka, 14 in Pakistan, while 12 bottles a person in Nepal.
The RKJ group is India's leading supplier of retailer brand Carbonated and Non-Carbonated soft drinks, with beverage manufacturing facilities in India and Nepal. Its experience in the beverage industry dates back to the sixties when it had the first franchise at Agra.
The group manufactures and markets carbonated and Non-Carbonated Soft Drinks and Mineral Water under Pepsi brand. The various flavors and sub-brands are Pepsi, Mirinda Orange, Mirinda Lemon, Mountain Dew, and 7UP, Slice Mango, Evervess Soda and
Aquafina.
It has the license to supply beverages in the territories of Western U.P., part of M.P., half of Haryana, whole of Rajasthan, Goa, 3 districts of Maharashtra, 9 districts of Karnataka and whole of Nepal. The group has in total 18 bottling plants in India & Nepal and is responsible for producing and marketing 44% of Pepsi requirement in India.
In order to later to this increasing demand, new bottling plants are being set up at alwer, kosi, Jodhpur, Kathmandu and goa to produce400-600 bottles per minute, which would
mainly cater to northern markets of India. And in future, they will also be used to manufacture fruits mince-based soft drinks like Slice and Mangola.
INGREDIENTS OF SOFT DRINK:
We only use the finest ingredients to make Pepsi-Cola products. To guarantee our consumers consistent quality, each ingredient must pass our high standards, rigorous quality control tests and strict bottling procedures.
Pepsi-Cola products contain natural flavors, including extracts of the kola nut ND flavor oils derived from natural sources such as citrus and other fruits. Caramel (made from corn sugar) adds color and flavor to our colas. Other ingredients add a refreshing taste: phosphoric acid in colas; citric acid and sodium citrate in Mountain Dew, Slice and Diet Pepsi.
We also put a freshness date on every can and bottle. Soft drinks may lose some flavor over time so our freshness date tells consumers when the product is freshest and best tasting.
Every can and bottle of Pepsi-Cola products has a Nutrition Facts panel, which shows the number of calories and other nutrients per serving. There is essentially no fat in any Pepsi-Cola a product. The main ingredients found in Pepsi-Cola products include carbonated water, carbohydrates, sugar, sodium, potassium and caffeine. For a complete breakdown by ingredients by product, see our product information for Pepsi, Diet Pepsi, Mountain Dew, Slice and Aquafina.
Ascorbic Acid ,Aspartame,Blue1,Brominated Vegetable Oil (BVO) , Caffeine,Caramel,Citric Acid, Gum Arabic, High Fructose Corn Syrup, Natural Flavorings, Phosphoric Acid,Potassium,Quillaia,Red 40,Sodium,Sugar,Total Carbohydrates,Yellow5
The Pepsi Co. is known for the development and introduction of world-class brands & products. Their portfolio is organized into three core business, which consists of snacks, Beverages and Restaurants. Pepsi products are constantly changing themselves to develop new products. They encourage consumer to explore their wide range of brands.
Main objectives:
The objectives of the company set out in memorandum of association and franchise agreements are as follows:
To manufacturing soft drinks by concentrating supplied by Pepsi Foods. To market and advertise within specified areas for Pepsi products.
To sell soft drinks at fixed prices.
ORGANIZATION STRUCTURE
CHAIRMAN
UNIT MANAGER
GENERAL MGR. TERRITORY DEVP MANAGER
PRODUCTION MGR AREA DEV. Co ORDINATOR
QUALITY CONTROL MANAGER MARKETING EXECUTIVE
TRANSPORT MGR CUSTOMER EXECUTIVE
SALESMAN .
Financial structure
:
To start and operate business, any company has to invest its capital in fixed assets and floating assets and also in meeting the daily requirements of the company. However, depending on the nature of business and product being offered by the company, the ratio of investment of capital in fixed and floating assets differ.
Working Capital:
It means capital required for daily management of the company ex. Wages, salaries, canteen expenses and transportation expenses etc.Plant layout: the machine and equipment have been imported from Germany, which are arranged in the plant according to the sequence of operation. All the operations are carried on a continuous movement. The reasons for choosing the product layout are:
1. There is continuous supply of material. 2. The brands are all standardized products.
3. The demand for the product brands is reasonable stable.
4. The volume of production is adequate for the reasonable utilization of equipment.
Since the company follows continuous operation movement, the cost of material handling goes low. The total floor space required by the machine is less than other types of
plant layouts.
Plant Capacity:
The company installed latest up to date automatic plant conforming to plant layout. The installed production capacity is 400 bottles per minutes i.e. 24,000 bottles per day. The plant also is having 100 bottles per 1-leter line. During off-season the plant runs one shift.
The company has to produce enough bottles of soft drinks at a speed to keep in space with the disappearance of soft drinks form shelves of the retailer.
Production Schedule:
The production schedule is fixed by taking into consideration.
The present or current market demands. The availability of empty bottles.
The inventory position filled bottles of different flavors.
The production schedule for each brand is fixed daily, filling the bottles of each branded flavors. This has an advantage in manufacturing the branded product is one at a time.
Quality control
Pearl Beverages Pvt. Ltd. takes great care to maintain the quality control of the products in their factory. The Bottles are visually examined for impurities continuously, as the bottles move out. Samples are checked every ten minutes of production time by the chemist for its quality and hygiene condition. The chemical analysis is also made for flavors, gas content and sugar percentages. The appearance, smell and taste of the products are also checked. If any defects are noticed, the production is suspended and the correcting measures are taken so as to set right the bottling process irregularities. Further, samples from each batch are dispatched to the affiliated parent agency company in each week for quality
checkup. Moreover, agency of the company also lifts sample form the market at the random for quality checkup at any time to make sure that the quality is maintained to the exact standard of the parent company.
At the end of the production schedule, daily all the equipment floor and wet patches are cleaned with bleaching powder or some other solution. The standards of hygiene maintained inside the production shops are commendable.
The word organization has two common meanings. The meaning signifies an institution or function as group and the second meaning refers to the process of organizing the way of work which is arranged and allocated among members often organization so that the goal of the organization can be achieved efficiently. The organizing involves balancing the companies. Needs both for stability on one hand and change on the other hand, an organization structure means adopting a change or it can be a source of resistance to change. There are mainly five elements of organization structure.
Specialization of activities. Standardization of activities. Coordination of activities.
Centralization and decentralization of deviation making.
Size of the work unit.
The M.D, Mr. Ruchirans Jaipuria is the head of the organization and administration. The company is managed by able director, and is assisted by a team of well-qualified & experience senior management personnel.
Indra K. Nooyi {
Chairman and CEO}
Biography
Indra Nooyi is Chairman and Chief Executive Officer of PepsiCo. Mrs. Nooyi leads one of the world’s largest convenient food and beverage companies, with 2008 annual revenues of more than $43 billion. The company’s products are sold in approximately 200 countries, and it employs more than 198,000 people worldwide. Its principal businesses include Frito-Lay snacks, Pepsi-Cola beverages; Gatorade sports drinks, Tropicana juices and Quaker foods. In total, the PepsiCo portfolio includes 18 brands that generate $1 billion or more each in annual retail sales.
Mrs. Nooyi is the chief architect of PepsiCo’s multi-year growth strategy, Performance with Purpose, which is focused on generating robust financial returns from designing products for and finding sustainable ways to give back to communities the company serves.
Performance with Purpose is premised on offering food and beverages that provide responsible nourishment, minimizing impact on the environment and creating a diverse and inclusive culture that attracts, develops and retains the most talented people. In keeping with this growth strategy, PepsiCo is proud to be listed on the Dow Jones North America Sustainability Index and Dow Jones World Sustainability Index.
Mrs. Nooyi was named President and CEO on October 1, 2006 and assumed the role of Chairman on May 2, 2007. She has directed the company's global strategy for more than a decade and led PepsiCo's restructuring, including the divestiture of its restaurants into the successful YUM! Brands, Inc.; the spin-off and public offering of company-owned bottling operations into anchor bottler Pepsi Bottling Group (PBG); the acquisition of Tropicana and the merger with Quaker Oats that brought the vital Quaker and Gatorade businesses to PepsiCo.
Prior to becoming CEO, Mrs. Nooyi served as President and Chief Financial Officer beginning in 2001, when she was also named to PepsiCo's board of directors. In this position,
she was responsible for PepsiCo’s corporate functions, including finance, strategy, business process optimization, corporate platforms and innovation, procurement, investor relations and
information technology
2008 Milestones
• PepsiCo Foundation announces two major new grants to Water Partners and Safe
Water Network programs to provide access to safe water and sanitation in developing countries
• PepsiCo Again Named to the Dow Jones Sustainability Index
• PepsiCo Agrees to Buy Bulgaria's Leading Nuts and Seeds Company
• PepsiCo Announces Initiatives with the Earth Institute and H2O Africa to Drive
Sustainable Water Practices
• Forbes Names PepsiCo among Its Best Big Companies
• PepsiCo India Commissions First Remote Wind Turbine to Generate Renewable, Clean
Energy
• CRO Names PepsiCo to Top 25 100 Best Corporate Citizens 2008 • PepsiCo to Buy Russian Juice Leader, Lebedyansky
• Employees Lead Effort to Make Chicago Plaza First LEED-Certified PepsiCo
Headquarters
• Gatorade Launches Gatorade Tiger with Comprehensive Integrated Marketing Campaign • PepsiCo Honored with 2008 Energy Star Partner of the Year Award
• UK Vitamin Water Brand- V Water Acquired by PepsiCo
• Quaker Plant in Cedar Rapids Closes and Reopens Facility Due to Flooding to Protect
Employees
• PepsiCo Foodservice and Naked Juice Expand Starbucks Presence
• Gatorade Sports Science Institute Gathers World's Leading Researchers on Protein
Nutrition
• PepsiCo International's China Foods Wins "China's Top Leaders 2008" Award
• Wall Street Journal Article Recognizes PepsiCo for Leadership in Employment of People
with Different Abilities
• PepsiCo and Frito-Lay Join Smart Way in Commitment to Reduce Greenhouse Gas
Emissions
• PepsiCo Beats Coke in Race to Launch New Natural Sweetener (Stevia) • PepsiCo France Recognized as "Great Place to Work" by Institute Survey
• PepsiCo Commits to Reducing Acryalmide Levels in Potato Chip Products and
Restructured Potato Snacks in California
• Subway Names PepsiCo "Vendor of the Year" for Sustainability Leadership • Tazo Tea Joins Pepsi Lipton Partnership
PepsiCo India’s commitment to Performance with Purpose
Performance with Purpose articulates PepsiCo India's belief that its businesses are intrinsically connected to the community and world that surrounds it. Performance with Purpose is about delivering more than financial performance, it’s about staying committed to continuously giving back to the community and helping enrich society.
To deliver on this commitment, PepsiCo continues to build on its strong foundation of achievements and scale up its initiatives while focusing on the following 4 critical areas that are linked to its business and where it can have the most impact.
Replenishing water
PepsiCo India continues to replenish water and aims to achieve positive water balance by 2009, which means it, is committed to saving and recharging more water than it uses in its beverage plants.
Waste to Wealth
PepsiCo India continues to convert Waste to Wealth, to make cities cleaner. This award winning initiative has established Zero Solid Waste centers that benefit more than 2, 00,000 community members throughout the country
Partnership with Farmers
PepsiCo India’s Agri-partnerships with farmers help more than 15,000 farmers across the country earn more...
Healthy Kids
PepsiCo India stays committed to the health and well-being of kids. It will continue to provide children with a diverse, healthful and fun portfolio, while simultaneously
encouraging active lifestyle by expanding its Get Active programme for kids, especially for school going children.
ADVERTISING & PUBLICITY
Pepsi Co. is one of the biggest and spenders in India. It is also one of the biggest global ad spenders. It has long a list of endorsers from pop star Ricky martin to file stars Shahrukh Khan, Amitabh Bacchan etc. & Cricket stars Sachin Tendulkar, V.V.S Laxman, Harbhajan Singh etc. Hindustan Thompsom Associates, the big gets advertising agency of India has the account of Pepsi Co. is known for its board cast advertising but it alsospends a lot in non board cast advertising i.e. hoarding, banners, posters stickers, specialties, hangar, dealer board, glow signboards, wall painting and news paper. The expenses on this type of advertising are made at territory or unit level
PEPSI COLA INTERNATIONAL SRATEGY
Focus on Business growth Target core brands
Satisfy Market Priorities
Pepsi's Global Strategy
When the "You're in the Pepsi Generation" advertising campaign launched in 1963, it may have been the first time a brand was marketed primarily with an association to its consumers' aspirational attitudes. A decidedly youth-oriented strategy, the campaign hoped to hook young Baby Boomers while they were still young. In 1984 Pepsi launched another long-running campaign, "The Choice of a New Generation," and in 1997 they debuted the "GeneratioNext" concept.
The newest campaign slogan, introduced this year, is "More Happy," which definitely coincides with one concrete example of "more" in the packaging of Pepsi products today—more designs. Many more. At least 35 distinct design ideas will grace the packaging of Pepsi's cans and bottles this year alone, and this design strategy may continue indefinitely.
Though not "generational" in word, the campaign certainly has a youth-oriented feel with package designs, advertising, and websites that are fun and playful. PepsiCo worked closely with Peter Arnell and Arnell Group, based in New York City, to devise a comprehensive new strategy that would connect with Pepsi's core consumers. Arnell reinvented the Pepsi package as a meaningfuland appealing communications tool for the latest generation of youth that are not overwhelmed by media, music, or digital distractions.
The Pepsi can designs roll out one at a time, but the two-liter Pepsi Bottles will have three or four designs out at any given time.Mike Doyle, creative director at Arnell Group, explains that there was a great depth of exploration and research that was conducted before even beginning to formulate a new Pepsi packaging strategy. PepsiCo and Arnell Group traveled extensively to emerging markets to find key consumer product drivers for youth cultures and to learn how the Pepsi brand was perceived in different countries.
They found, somewhat surprisingly, that there were very few differences around the world in how consumers felt about Pepsi's fun, Effervescent brand image. "The brand equity is really consistent," says James Miller, marketing director, Pepsi-Cola North America. They also Found many consistencies in youth cultures around the world in how Today’s youth is preoccupied with newness, discovery, and personalization of their possessions. Miller describes the design campaign's goal
as "sustainable discovery," where the consumer audience is constantly intrigued and engaged.
Designers at Arnell Group created the dozens of new and vibrant Designs with only a handful of blue and gray shades. Each design tells a Story of sorts and each can design has a unique website address on the Side of the can. The first one on the "Your Pepsi" can allows web users to Design a digital billboard that will appear in Times Square, and one coming Shortly will allow users to mix their own music online.
"We redefined packaging as media in the marketplace for Pepsi,"
Says Doyle. "It speaks to youth in their language." Doyle believes that the Designs succeed because they are able to capture the audience's mind Space. "The designs are reflecting back
to the culture instead of talking to The culture or imposing on it."
The Indian retail industry is the fifth largest in the world. Comprising of organized and unorganized sectors, India retail industry is one of the fastest growing industries in India, especially over the last few years. Though initially, the retail industry in India was mostly unorganized, however with the change of tastes and preferences of the consumers, the industry is getting more popular these days and getting organized as well. With growing market demand, the industry is expected to grow at a pace of 25-30% annually. The India retail industry is expected to grow from Rs. 35,000 crore in 2004-05 to Rs. 109,000 crore by the year 2010.
Growth
According to the 8th Annual Global Retail Development Index (GRDI) of AT Kearney, India retail industry is the most promising emerging market for investment. In 2007, the retail trade in India had a share of 8-10% in the GDP (Gross Domestic Product) of the country. In 2009, it rose to 12%. It is also expected to reach 22% by 2010.
According to a report by Northbride Capita, the India retail industry is expected to grow to US$ 700 billion by 2010. By the same time, the organized sector will be 20% of the total market share. It can be mentioned here that, the share of organized sector in 2007 was 7.5% of total retail market.
Retail formats in India
Hyper marts/supermarkets: large self-servicing outlets offering products from a variety of categories.
• Mom-and-pop stores: they are family owned business catering to small sections; they
are individually handled retail outlets and have a personal touch.
• Departmental stores: are general retail merchandisers offering quality products and
services.
• Convenience stores: are located in residential areas with slightly higher prices goods
due to the convenience offered.
• Shopping malls: the biggest form of retail in India, malls offers customers a mix of all
types of products and services including entertainment and food under a single roof.
• Discount stores: these are factory outlets that give discount on the MRP.
• Vending: it is a relatively new entry, in the retail sector. Here beverages, snacks and
other small items can be bought via vending machine.
• Category killers: small specialty stores that offer a variety of categories. They are
known as category killers as they focus on specific categories, such as electronics and sporting goods. This is also known as Multi Brand Outlets or MBO's.
• Specialty stores: are retail chains dealing in specific categories and provide deep
assortment. Mumbai's Crossword Book Store and RPG's Music World is a couple of examples.
Challenges facing Indian retail industry
• The tax structure in India favors small retail business • Lack of adequate infrastructure facilities
• High cost of real estate
• Dissimilarity in consumer groups
• Restrictions in Foreign Direct Investment • Shortage of retail study options
• Shortage of trained manpower • Low retail management skill
The Future
The retail industry in India is currently growing at a great pace and is expected to go up to US$ 833 billion by the year 2013. It is further expected to reach US$ 1.3 trillion by the year 2018 at a CAGR of 10%. As the country has got a high growth rates, the consumer spending has also gone up and is also expected to go up further in the future. In the last four year, the consumer spending in India climbed up to 75%. As a result, the India retail industry is expected to grow further in the future days. By the year 2013, the organized sector is also expected to grow at a CAGR of 40%.
ALONGSIDE the multitude flocking to empty their wallets in any shopping mall, supermarket or hypermarket, there is another queue of people lining up. Marketers of every hue and color — banks, credit card companies, cars, airlines, you name it — are trying to grab the opportunity to interact closely with their target audience. Be it co-branding activities with retailers, the selling of wall space within outlets, signages, end-of-aisle spaces, carry bags, trolleys or even in-store TV — modern trade is acting as the medium for brands to
connect directly with consumers.
FMCG companies find it easier to manage sales at the point-of-purchase because of effective inventory management systems that characterize the modern format. “It is easier for a company to introduce a new product through a large retail chain having national presence. It can give the initial visibility support that can translate into sales
“The other advantage is — for companies, it is easier to push premium products through modern retail as against the regular kirana store,”
In a fragmented retail environment as in India, it is important for FMCG companies to focus on point-of-purchase and get consumer insights to evolve a retail approach. “Modern retail format allows that space for on-ground promotion and other initiatives, which help in consumer, connect. Further, it allows the company to collect consumer insights and data to measure its success
At present, modern retail initiative contributes about 4.5 per cent to its overall sales. The company conducted a customer preference study as part of its strategy to strengthen sales in the organized retail channel and is enhancing its customer-centric capabilities such as supply chain management, in-store execution, category expertise, and joint buiness planning.
Modern trade also allows more space and provides an established route to launch new products
The consumer who enters a modern retail store is more exposed to the choice of products. Thus, he can make a choice of buying a bigger pack that lasts a month in place of a smaller one that he would pick on other days.”
Modern trade accounts for about 5-10 per cent of urban sales for FMCG companies and this can go up to 25 per cent for southern markets, where the channel has a stronger presence.
THEORITICAL FRAMEWORK
Introduction to Soft Drinks:
Soft drink market size for FY00 was around 270mn cases (6480mn bottles). The market witnessed 5- 6% growth in the early‘90s. Presently the market growth has growth rate of 7-8% per annum compared to 22% growth rate in the previous year. The market size for FY01 is expected to be 7000mn bottles.
Soft Drink Production area
The market preference is highly regional based. While cola drinks have main markets in metro cities and northern states of UP, Punjab, Haryana etc. Orange flavored drinks are popular in southern states. Sodas too are sold largely in southern states besides sale through bars. Western markets have preference towards mango flavored drinks. Diet coke presently
constitutes just 0.7% of the total carbonated beverage market.
Growth of promotional activities
The government has adopted liberalized policies for the soft drink trade to give the industry a boast and promote the Indian brands internationally. Although the import and manufacture of
international brands like Pepsi and Coke is enhanced in India the local brands are being stabilized by advertisements, good quality and low cost.
The soft drinks market till early 1990s was in hands of domestic players like Campa, Thumps up, Limca etc but with opening up of economy and coming of MNC players Pepsi and Coke the market has come totally under their control.
The distribution network of Coca cola had 6.5lakh outlets across the country in FY00, which the company is planning to increase to 8 lakhs by FY01. On the other hand Pepsi Co's distribution network had 6 lakh outlets across the country during FY00 which it is planning to increase to 7.5Lakh by FY01.
Types of soft drinks
Soft drinks are available in glass bottles, aluminum cans and PET bottles for home consumption. Fountains also dispense them in disposable containers Non-alcoholic soft drink beverage market can be divided into fruit drinks and soft drinks. Soft drinks can be further divided into carbonated and non-carbonated drinks. Cola, lemon and oranges are carbonated drinks while mango drinks come under non carbonated category.
The market can also be segmented on the basis of types of products into cola products and non-cola products. Cola products account for nearly 61-62% of the total soft drinks market. The brands that fall in this category are Pepsi, Coca- Cola, Thumps Up, diet coke, Diet Pepsi etc. Non-cola segment which constitutes 36% can be divided into 4 categories based on the types of flavors available, namely: Orange, Cloudy Lime, Clear Lime and Mango.
The soft drink industry is so profitable
An industry analysis through Porter’s Five Forces reveals that market forces are favorable for profitability. Defining the industry both concentrates producers (CP) and bottlers are profitable. These two parts of the Industries are extremely interdependent, sharing costs in procurement, production, marketing and distribution. Many of their functions overlap; for
instance, CPs does some bottling, and bottlers conduct many promotional activities. The industry is already vertically integrated to some extent. They also deal with similar suppliers and buyers. Entry into the industry would involve developing operations in either or both disciplines. Beverage substitutes would threaten both CPs and their associated bottlers. Because of operational overlap and similarities in their market environment, we can include both CPs and bottlers in our definition of the soft drink industry. In 1993, CPs earned 29% pretax profits on their sales, while bottlers earned 9% profits on their sales, for a total industry profitability of 14% (Exhibit 1). This industry as a whole generates positive economic profits.
Rivalry:
Revenues are extremely concentrated in this industry, with Coke and Pepsi, together with their associated bottlers, commanding 73% of the case market in 1994. Adding in the next tier of soft drink companies, the top six controlled 89% of the market. In fact, one could characterize the soft drink market as an oligopoly, or even a duopoly between Coke and
Pepsi, resulting in positive economic profits. To be sure, there was tough competition between Coke and Pepsi for market share, and this occasionally hampered profitability.
For example, price wars resulted in weak brand loyalty and eroded margins for both companies in the 1980s. The Pepsi Challenge, meanwhile, affected market share without hampering per case profitability, as Pepsi was able to compete on attributes other than price.
Substitutes:
Through the early 1960s, soft drinks were synonymous with “colas” in the mind of consumers. Over time, however, other beverages, from bottled water to teas, became more popular, especially in the 1980s and 1990s. Coke and Pepsi responded by expanding their
offerings, through alliances (e.g. Coke and Nestea), acquisitions (e.g. Coke and Minute Maid), and internal product innovation (e.g. Pepsi creating Orange Slice), capturing the value of increasingly popular substitutes internally.
Proliferation in the number of brands did threaten the profitability of bottlers through 1986, as they more frequent line set-ups, increased capital investment, and development of special management skills for more complex manufacturing operations and distribution. Bottlers were able to overcome these operational challenges through consolidation to achieve economies of scale. Overall, because of the CPs efforts in diversification, however, substitutes became less of a threat.
Power of Suppliers:
The inputs for Coke and Pepsi’s products were primarily sugar and packaging. Sugar could be purchased from many sources on the open market, and if sugar became too expensive, the firms could easily switch to corn syrup, as they did in the early 1980s. So the suppliers of nutritive sweeteners did not have much bargaining power against Coke, Pepsi, and their bottlers. NutraSweet, meanwhile, had recently come off patent in 1992, and the soft drink industry gained another supplier, Holland Sweetener, which reduced Searle’s bargaining power and lowering the price of aspartame. With an abundant supply of inexpensive aluminum in the early 1990s and several can companies competing for contracts with bottlers, can suppliers had very little supplier power. Furthermore, Coke and Pepsi effectively further reduced the supplier of can makers by negotiating on behalf of their bottlers, thereby reducing the number of major contracts available to two. With more than two companies
