• India denied this – Pepsi was held to this since they entered India in a different year. – Coke asked the Foreign Investment Promotion Board to block the
– Disadvantages • Were forced to change their name to Lehar Pepsi • Govt. limited their soft drink sales to less than 25% of total sales • Struggled to fight off local competition
Political Environment in India
• Key Issues
– India seen as unfriendly to foreign investors for many years – The “Principle of Indigenous Availability”
• Policy banning imports being sold in India – The Liberalization of India’s Government in 1991
• “New Industrial Policy” • Trade rules & regulations simplified • Foreign investment increased – Pepsi enters in 1986 – Coca-Cola follows in 1993
• Could these problems have been forecasted prior to market entry?
– Probably not • Inconsistent, and changing government
• How could these developments in the political arena have been handled differently?
Timing of Market Entry
• Pepsi (earled the market Before Coca-Cola and was able to gain a foothold in the market while it was still developing • Gained 26% market share by 1993
votes of the Indian shareholders who would control 49% of Coke – Change in oversight of the FIPB
• Past lobbying efforts made useless
Political Environment in India
Political Environment in India
• Indian Laws
– Unlawful to market under their Western name in India • Pepsi became “Lehar Pepsi” • Coca-Cola merged with Parle and became “Coca-Cola India”
– Different Laws for Pepsi and Coke • Coca-Cola agreed to sell off 49% of its stock as a condition of entering and buying out an Indian company • Pepsi entered earlier, and was not subject to this
– Coke could of agreed to start new bottling plants instead of buying out Parle, and thus wouldn’t of had to agree to sell 49% of their equity
Timing of Market Entry
Political Environment in India
• Problems
– India forced Coke to sell 49% of its equity to Indian investors in 2002 – Coke asked for a second extension that would delay it until 2007
• Coca-Cola’s past in India
– Present from 1958 until 1977
• Industry Shakeup in 1988 • State of the Industry in 1993
– 45% of market consisted of small manufacturers – $3.2 million market share
Coke and Pepsi Learn to Compete in India
By Diana Berger, Arthur Catlin, Ian Cavanaugh, Larry Cenotto, Dave Christiansen, and Matt Ross
Background of Beverage Industry in India
• Low Demand for Carbonated Drinks
– Average of 3 servings a year/person in 1989 – Average of 1404 servings a year/person in U.S. in 2003
Political Environment in India