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Coca-Cola: Fighting the battle for the “thanda” market
Ankit Dhasmana
Down the memory lane…
Coca-Cola, started out as an insignificant one-man business and
over the last one hundred and ten years has grown into one of the
largest companies in the world. Dr. John Pemberton, an Atlanta
pharmacist, invented Coca-Cola. He concocted the formula in a
three-legged brass kettle in his backyard on May 8, 1886. He mixed
a combination of lime, cinnamon, coca leaves, and the seeds of a
Brazilian shrub to make the fabulous beverage. Coca-Cola debuted
in Atlanta's largest pharmacy, Jacob's Pharmacy, as a five-cent
non-carbonated beverage. Later on, the carbonated water was added
to the syrup to make the beverage that we know today as Coca-Cola.
In the
mid-1970, more than half Coca-Cola sold was outside of the U.S.
Coca-Cola products outsell closest competitor by more than two to
one. One in every two cola and one in every three soft drinks is a
Coca-Cola product. The best-known trademark in the world is sold
in about one hundred and forty countries to 5.8 billion people in
eighty different languages. This is why Coca-Cola is the largest
soft drink company in the world. For more than 65 years, Coca-Cola
has been a sponsor of the Olympics.
Advertisements for Coca Cola started on the radio in the 1930s and
on the television in 1950. Currently Coca-Cola is advertised on
over five hundred TV channels around the world.
Coke’s Corporate Vision…
For more than a century, Coke has consistently delivered the
simple promise of “Coca-Cola”. This has enabled Coke to sustain a
long track record of growth. Amidst all the years of success, the
most pivotal moments in Coke’s history came when they had to
change their business dramatically. They had to do this to meet
new challenges of the evolving world. But each time, Coke’s
predecessors sustained growth momentum because of three consistent
factors:
-
The Company remained focus on the basic promise of Coca-Cola,
which has not only endured, but also indeed carried Coke.
Coca-Cola has been Coke’s consistent theme throughout the
115-year history.
-
Working with strong ideals, always striving to behave in ways
consistent with the brand itself.
-
Coke’s leaders had the vision, foresight and the courage to
innovate and adapt the mechanics of business to be enabled to
thrive within the business conditions of each particular day.
Coke’s
ouster from India…
The company
left India in 1977 after the newly elected Janaty Party Government
came to power at the Centre for the first time. They asked the
company to divest 60 % of its business and divulge its secret
Coca-Cola formula. Coke preferred to quit rather than dilute its
equity to 40 per cent in compliance with the provisions of FERA.
The
Re-launch of Coca Cola…
Coca Cola
came back to India after 16 years when it was launched on October
24, 1993, at Agra. The Godrej group, Great Eastern Shipping and
the Britannia Industries Ltd, led by Rajan Pillai, initially wooed
Coca-Cola. In March 1991, it signed an MOU with BIL and the
Chandrasekhar government accepted this proposal. But relationship
between the two companies turned sour over the export- oriented
clause and finally on June 23, 1993, Coca-Cola got the permission
to enter the country with a 100 per cent unit in India.
On
September 22, 1993, the company bought out the
Parle brands.
The Market Changes and The
Industry Growth…
The industry, prior to 1990,
was witnessing sluggish growth rates (CAGR: around 5 per cent)
with two domestic players: Parle and Pure Drinks. The entry of the
cola giants, Coke and Pepsi, led to a rapid expansion in the size
of the market (CAGR for the first half of the 1990s: around 20 per
cent). Coke's
acquisition of Parle has turned the market into a Duopoly.
Also not only the market
size is increasing, there is also a shift of consumer preference
between the different soft drink segments. Whereas in 1990, cola
was accounting for a third of all soft drinks sold, today it
accounts for well over a half.
The Soft Drink Industry
Today…
The companies have continued
to wage their war in India. Coke, with the strategic move of
buying out Parle, gained a huge market share overnight. But Pepsi
is sparing no efforts to gain a larger share of the market. The
potential in the Indian market is tremendous. The Indian market is
roughly more than Rs
6500 crore (2000-2001);
moreover, the per capita
consumption of 6 bottles in India is lagging way behind the US's
astounding 700 bottles per capita consumption.
Brand
Extensions…
Coke brands include Coca-Cola, Fanta, Thums Up,
Sprite, Limca, Diet Coke, Kinley, Maaza and other regional brands.
Pepsi brands include Pepsi, Mirinda Orange, Mirinda Lemon, 7Up and
Aquafina.
The Ad War..
A battle is hotting up in India between the two international Cola
giants, Coke and Pepsi, to corner a bigger share of the nearly
Rs.6500 crore market.
“Share my dream,”
said
Coca-Cola to the Indian consumer in 1993. Older Coke lovers
welcomed the world's best-known brand back with misty eyes. The
younger lot just shrugged.
Among soft drinks, Coke was stronger than Pepsi among the older
people (evidently nostalgia was at work) while Pepsi obviously
scored above Coke with 'Generation next'.
Coke was the official drink for the Wills World Cup but Pepsi blew
officialdom to bits with its cheeky 'Nothing official about it'.
After losing the world cup rights to Coke, Pepsi launched an
aggressive campaign signing up leading Indian cricketers.
In 1998, Coke's teen strategy finally moved into place. It signed
on Saurav Ganguly and Srinath and came up with the peppy
'Eat
cricket, sleep cricket, drink only Coca-Cola'.
A near winner was
'Peeti kya Coca-Cola?'
The aim was to
fix the brand's message in consumer mindspace.
Just as Coke ads were finally telling stories the way Indian
consumers like it, aided by Aamir-appeal, Hrithik-mania and
Aditi-gaze, comes a damp squib about four friends growing up
with Coke, too desperate and too dull.
The stakes are high and the two Cola giants are slugging it out
for every bit of this market share, even if it means bitter
tactics at times.
Between Coke and Pepsi they have signed on nine players of the
Indian cricket team.
And Bollywood
seems to be the next hot spot they want to cool. For now, it's
Shah Rukh, Manisha Koirala, Rani Mukherjee, Kajol, Preity Zinta
and Superstar Amitabh Bachchan in the blue (Pepsi) corner and
Karisma Kapoor, Rambha and Amir, Hrithik, Aditi Gowatrikar and
Aishwarya, in the red (Coke).
The battle continues with Aamir Khan and Aishwariya Rai both
wooed away from Pepsi by tempting offers from Coke.However
this is just the beginning and things are likely to get even
hotter.
THUMPS UP VS. PEPSI: The latest row in the ongoing battle
The latest Coke’s strategy is to engage Pepsi in war with Thumps
up and playing safe with Coca-Cola. The latest ads of thumps up
which features
Salman Khan
tries to make fun
of Pepsi and
it’s sweeter taste.
Pepsi also has
retaliated by its latest ad of
Lehar Soda,
which features a look alike of Salman Khan.
Future plan: Coke’s foray into new
segments
Coca Cola India (CCI) has positioned itself as the largest soft
drink manufacturer in the country with a market share of more than
50 per cent and is now planning to become a ‘Total Beverage
Company’ by capitalizing on all new opportunities that may
arise here in the near future.
While the company still wants to focus on the soft drinks segment
of the nonalcoholic commercial
beverages industry in India,
it is also studying the market for other products like
energy drinks (including flavored milk), iced tea
and iced coffee.
Coca-Cola Co's has tied up globally with Procter & Gamble and
Nestle SA, Switzerland. These tie-ups are aimed at developing and
marketing innovative juices, juice-based beverages, snacks, ready
to drink tea, coffee and health drinks on a global basis. However
it is too premature to comment about their immediate impact on the
Indian market.
Coca-Cola
India is putting its strategy in place to launch
‘‘ready-to-drink’’ tea and coffee in Indian market. It will also
introduce a coconut-flavored drink in Kerala as part of its
strategy to promote region/ community targeted flavored drinks.
They are looking at a ready-to-drink tea and coffee product
available from vending machine.
Coke is aiming to become a complete consumer beverage company in
India and tea/coffee segment is the biggest segment in consumer
beverage. As part of a community-based drink strategy, the
coconut-flavoured drink will be priced at Rs 10 for a 300ml
bottle. It could be carbonated or non-carbonated.
Recently it has introduced its
Georgia brand
of coffee in collaboration with MC Donald’s.
Coca-Cola also entered the bottled water market in India a little
over year ago with its Kinley brand and has established itself
as the second largest brand in the country. The company has
garnered a 24 percent share of the market. Instead of
setting up manufacturing facilities for Kinley, Coke has tied up
with existing plants and taken the contract-manufacturing route
for expansion. And that's the route the company is planning to
take to facilitate future expansion of the brand in India.
Meanwhile, the reason why Coke is so bullish about its water
business is evident. Even though packaged water accounts for only
around five per cent of the total ready-to-drink beverage market
in India, its growth rate is the highest at 40 per cent.
In
fact, according to an industry analyst, the packaged water market
currently estimated at Rs 800 crore is expected to grow to Rs
1,200 crore in the next two to three years.
Coca-Cola India has acquired existing business in the 20-litre
bulk water pack segment across major cities. The company expects
to garner a market share of 40 percent by 2003 and is also
planning to enter other beverages category in the country.
Probably for some time the message best suited for them is:
Let’s Hope For The Best (Coke) But Prepare For The Worst (Pepsi)!!
Submitted By;
Ankit Dhasmana,
Masters In International Business,
Delhi School of Economics, Delhi University.
ankitdhasmana@yahoo.com
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