INTRODUCTION Soft Drink Industry: An overview It all began in 1886, when a tree legged brass kettle in Hohn Styth pemberton’s backyard in Atlanta was brewing the first P of marketing legged. Unaware the pharmacist has given birth to a caramel colored syrup, which is now the chief ingredient of the world’s favorite drink. The syrup combined with carbonated the soft drink market. It is estimated that this drink is served more than one thousand million times in a day. Equally oblivious to the historic value of his actions was Frank Ix. Robinson, his partner and book keeper. Pemberton & Robinson laid the first foundation of this beverage when an average nine drinks per day to begin with, upping volumes as sales grew. In 1894, this beverage got into bottle, courtesy a candy merchant from Mississippi. By the 1950’s Colas were daily consumption items, stored in house hold fridges. Soon were born other non- cola variants of this product like orange & Lemon. Now, the soft drink industry has been dominated by two major player – (1) The New York based Pepsi co. Inc. (2) The Atlanta based Coca Cola co. Though out the glove these major players have been battling it out for a bigger chunk of the ever-growing cold drink market. Now this battle has begun in India too. India is now the part of cold drink war. Gone are days of Ramesh Chauhan, India’s one time cola king and his bouts of pistol shooting. Expect now to hear the boon of cannons when the Coca Cola & Pepsi co. battle it out for, as
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INTRODUCTION
Soft Drink Industry: An overview
It all began in 1886, when a tree legged brass kettle in Hohn Styth pemberton’s backyard in
Atlanta was brewing the first P of marketing legged. Unaware the pharmacist has given birth
to a caramel colored syrup, which is now the chief ingredient of the world’s favorite drink.
The syrup combined with carbonated the soft drink market. It is estimated that this drink is
served more than one thousand million times in a day. Equally oblivious to the historic value
of his actions was Frank Ix. Robinson, his partner and book keeper. Pemberton & Robinson
laid the first foundation of this beverage when an average nine drinks per day to begin with,
upping volumes as sales grew. In 1894, this beverage got into bottle, courtesy a candy
merchant from Mississippi. By the 1950’s Colas were daily consumption items, stored in
house hold fridges. Soon were born other non- cola variants of this product like orange &
Lemon. Now, the soft drink industry has been dominated by two major player – (1) The New
York based Pepsi co. Inc. (2) The Atlanta based Coca Cola co. Though out the glove these
major players have been battling it out for a bigger chunk of the ever-growing cold drink
market. Now this battle has begun in India too. India is now the part of cold drink war. Gone
are days of Ramesh Chauhan, India’s one time cola king and his bouts of pistol shooting.
Expect now to hear the boon of cannons when the Coca Cola & Pepsi co. battle it out for, as
the Jordon goes a bigger share of throat. By buying over local competition, the two American
Cola giants have cleared up the arena and are packing all their power behind building the
Indian franchisee of their globe girdling brands. The huge amount invested in fracture has
never been seen before. Both players seen an enormous potential in his country where
swigging a carbonated beverage is still considered a treat, virtually a luxury. Consequently,
by world standards India’s per capita consumption of cold drinks as going by survey results is
rock bottom, less than over Neighbors Pakistan & Bangladesh, where it is four times as
much.
Behind the hype, in an effort invisible to consumer Pepsi pumps in Rs 3000 corers (1994) to
add muscle to its infrastructure in bottling and distribution. This is apart from money that
company’s franchised bottles spend in upgrading their plants all this has contributed to
substantial gains in the market. In colas, Pepsi is already market leader and in certain cities
like Gorakhpur, Pepsi outlets are on one side & all the other colas put together on the other.
While Coca Cola executive scruff at Pepsi’s claims as well as targets, industry observers are
of the view that Pepsi has definitely stolen a march over its competitor Coca Cola. Apart
from numbers, Pepsi has made qualitative gains. The foremost is its image. This image
turnaround is no small achievements, considering that since it was established in 1989, taking
the hardship route prior to liberalization and weighed down by export commitments. Now, at
present as there are two major players Coca Cola & Pepsi and there is stiff competition
between the two, both Pepsi and Coca Cola have started, sponsoring local events and staging
frequent consumer promotion campaigns. As the mega event of this century has started, and
the marketers are using this event – world cup football, cricket events and many more other
events. Like Pepsi, Coca Cola is picking up equity in its bottles to guarantee their financial
support; one side Coca Cola is trying to increase its popularity through. Eat Food, enjoy
Food. Drink only Coca Cola. Eat cricket, sleep cricket. Drink only Coca Cola. Eat movies,
sleep movies. Drink only Coca Cola. On the other side of coin Pepsi has introduced
AMITABH BACHHAN for capturing the lemon market through MIRINDA – Lemon with “
zor ka jhatka dhere se lage”.
Industry Profile
Soft drinks are typical and necessary consumer products, which are generally consumed by
the individuals to quench the thirst and for a good flavor, and it is considered to be the
symbol of social status.
The two main reasons, which classify the soft drinks under consumer products, are their easy
availability and their reasonable high degree standardization. Among the listed consumer
goods (i.e., perishable items) soft drinks is considered non-essential and as a luxury item.
Soft drinks can be classified into two broad categories- carbonated drinks and non-carbonated
drinks. Both have enormous market. In case of carbonated beverages the effectiveness of
carbon-dioxide is the main factor in determining the quality. Cola, lemon and orange are
carbonated drinks while mango drinks come under non-carbonated category.
A prolonged visible and sparking effervescence is sought after to produce soda taste in such
drinks. The basic constituents of soft drinks are water, sweeteners, acidulates, flavorings,
colorings, foaming agents and preservatives. The soft drink market is dominated by a few
brands. Coca Cola and Pepsi products for example.
Soft drink industry in India has witnessed phenomenal growth in the recent past, particularly
after the exit of Coca-Cola. The exit of Coca-Cola from India during the late seventies gave a
bolter scope to several Indian soft drink companies to grow. These were a rapid growth in
this industry but each one aggressively competed with one another to capture a major share in
the market. The competition was very high even in terms of advertising.
The perishable items like soft drinks need a lot of advertisement, as they are not necessary for
the consumer. Most of the consumer consume just for fun & refreshment purpose and not and
for any other special reason.
For that reason the soft drink marketers concentrate more on the advertisement part and they
keep on designing new advertisements, which conquer the heart of the consumer. They take
special care in casting the popular figures. These soft drink markets also include some offers
like tours to someplace and so on. These soft drink companies will sponsor for many of the
sport events in order to have good edge over the competitor as per as the publicity is
considered.
Soft Drink Industry in India
India with a population of more than 1.1 billion is potentially one of the largest consumer
markets in the world after china. The consumer market is popularly known as the FMCG
market or the fast moving consumer goods market. Soft drinks come under this category. Soft
drink is basically purchased in India basically for two reasons namely to quench thirst and for
refreshment. The Indian economy currently is passing through a bullish phase with increasing
per capita income. Subsequently the lifestyle of the Indian consumer is also changing with
increased spending on entertainment, refreshment etc. that is why soft drink companies are
looking forward to India with great enthusiasm in the future to increase their revenue. The
soft drink industry in India dates back to the 1940’s when Parle introduced the first branded
soft drink called Gold Spot. Cola giant Coca cola was the first foreign soft drink company to
setup its shop in India in 1965. Coca cola made a very good beginning and dominated the
market right from the word go. It faced no competition at that time. The marketing people did
not even need to publicize Coca cola. This extraordinary success of Coca cola can be
attributed to the following factors:-
Absence of contemporary competitive brand.
The giant image of Coca cola in the western countries preceded their entry into the
Indian market, and
Indians at that time were very fond of foreign goods.
Parle Exports Pvt. Ltd later introduced a lemon flavored soft drink called Limca in 1970.
Before this they had introduced a cola flavored drink called Pepping which they had to
withdrew in the face of stiff competition from Coca cola. But the overtly conservative Indian
government of that time with special interest in safe guarding the interest of the Indian
companies started insisting that Coca cola should agree on the following points in order to
continue in India. Coca cola decided to windup its operations in 1977 rather than bowing to
the Indian government. The main demands of the Indian government were:-
Dilution of equity, as the government felt that lots of foreign currency was being
wasted.
Manufacturing of the secret concentrate in India.
Disclosure of the chemical composition of the concentrate.
The exit of Coca cola left a large vacuum in the soft drink market. But this also accelerated
the growth of several Indian soft drinks. Many new soft drinks like Frooti, Jump-in etc. were
launched in the form of Tetra pack. However the bottling plants and the distribution networks
of these companies were not up to the mark and left much to be desired. It took these
companies almost one year to come up with new flavors like Campa cola, Rush etc. to
survive in the industry.
However Parle, the pioneer in the soft drinks market blazed its way to national prominence
with their product Thumps-Up bearing the slogan unhappy days are here again which became
a craze. This particular slogan helped to win over the loyalists of Coca cola who were in a
state of cola shock or cola depression! Soon the soft drink industry started registering
phenomenal growth rates and all parley products namely Gold Spot, Limca and Thumps-Up
became the brand leaders in their own segments. In spite of this the soft drink market had a
huge untapped potential. In 1990, coming of the multinational brand Pepsi and immediately
started giving stiff competition to Parley and Coca Cola. The parent company of Pepsi was
founded in 1890 at North Carolina in USA. Its CEO is Roger Enrico. Pepsi Co. India
Holdings Pvt. Ltd. in headquartered in Gurgaon and its CEO is Ms. Indra Nyui. In India it has
34 bottling plants of which 8 are company owned bottling outlets (COBO) and 26 are
franchise owned bottling outlet (FOBO).
Profile of Pepsi Company
PepsiCo is a world leader in the food chain business. It consists of many companies amongst
which the prominent once are Pepsi-Cola, Frito-Lay and Pepsi Food International. The group
is presently into two of the most profitable and profitable and growing industries namely,
beverages and snack foods. It has scores of big brands available in nearly 150 countries
across the globe. The group has established for itself once of the strongest brands in various
segments of its operations. The beverages segment primarily markets its Pepsi, Diet Pepsi,
Mountain Dew and other brands worldwide and 7-UP outside the U.S. markets. These are
positioned in close competition with Coca-Cola Inc. of USA. A point which is worth a
mention is that Coca-Cola gets 80% of its profits for International operations while the same
figure for PepsiCo stands at 6%. The segment is also in the bottling plants and distribution
facilities and also distributes the ready to drink tea products of Lipton in North America. In a
joint venture with orient spray juice products PepsiCo also manufactures and distributes fruit
juices. The snack food division manufactures and distributes and markets chips and other
snacks worldwide. The international operations of this segment extend to the markets of
Mexico, the UK and Canada. Frito-Lay represents this segment of PepsiCo. The restaurant
segment earlier primarily consists of the operations of the worldwide Pizza Hut, Taco Bell
and KFC chains. PFS. Pepsi Co’s restaurant distribution operation, supplies company owned
and franchise restaurants in the U.S. The company ventured into restaurant business with
Taco Bell, KFC, Pizza Hut ended last year when they were sinned off from the company. A
packaged goods company comprised of Pepsi-Cola Company and Frito-Lay will continue to
bear the PepsiCo name. The move should enhance both corporations ability to prosper with
their own fully dedicated structure and management team.
Coca Cola India Pvt. Ltd maintains its leading position. Coca Cola India Pvt. Ltd maintained
its leading position in soft drinks in India, followed by Pepsi India Holdings Pvt. Ltd in 2006.
Whilst the retail volume shares of Coca-Cola India and Pepsi, India slipped in 2006, as a
result of the growing health concerns caused by the aftermath of the pesticides controversy,
both maintained a comfortable lead over the other manufacturers. Parle Bisleri Ltd has
steadily gained shares from the carbonates giants over the review period, to emerge as the
third ranked company in 2006. The battleground for beverages has moved from carbonates to
bottled water and fruit/vegetable juice, with manufacturers turning their attention towards
these healthier beverages, as consumer interest continues to surge forward. A number of new
players have entered fruit/vegetable juice and bottled water, vying for a slice of the growing
pie. Future soft drinks growth to come from healthier beverages. Soft drinks are expected to
grow at a healthy pace over the forecast period. Much of the demand for soft drinks is
expected to be for healthier beverages. With consumer preferences shifting towards healthier
options worldwide, India is following suit. Growing consumer awareness about healthier soft
drinks and the effects of the pesticides controversy mean that consumers are likely to opt for
healthier alternatives over the forecast period. Thus, sales of carbonates are expected to
stagnate over the forecast period while fruit/vegetable juice and bottled water are projected to
experience robust growth. Functional drinks and RTD tea are expected to reproduce the
dynamic growth of 2005-2006, albeit from a low base.
History of Pepsi
PepsiCo is the 18th largest American Company with its worldwide operations in 190
countries. The company employees over half a million persons and is possibly the largest
employer.
PepsiCo has set up a fully integrated operation in India- manufacturing, research and