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.

Market Shares…

All India Shares:

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)!!

Report Prepared By:

Ankit Dhasmana
Masters In International Business
Delhi School of Economics
Delhi University
Email: ankitdhasmana@yahoo.com

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