A study of the current brand image of Pepsi in India and suggestions of new products to improve the brand image and improve their market penetration

1. MARKETING MANAGEMENT
PEPSI INDIA
Submitted By
Group - 1
Group Members:
Chandramouli Suresh
Jitenkumar Pankajkumar Patel
Mehjabee Khan
Shiang Ting Wong
Sudharshan Rammesh Garg
Vijay Maruti Patil
Yasemin Hatipoglu
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2. Index
Executive Summary……………………………………………………………………………………………………………..3
Part A
Scope…………………………………………………………………………………………………………………………………..4
Pepsi in India – background………………………………………………………………………………………………….4
The Pepsi brand in India – A SWOT analysis………………………………………………………………………….5
Product Mix………………………………………………………………………………………………………………………….6
Points of Difference, Points of Parity and Brand Recall………………………………………………………..8
Market positioning and Segmentation………………………………………………………………………………….9
Distribution Channels…………………………………………………………………………………………………………12
Pricing Strategies & Brand Loyalty; the Indian Consumer and Price……………………………………13
Creating Shared Value the Pepsi way………………………………………………………………………………….14
Pepsi’s Promotional & Marketing Strategy………………………………………………………………………….14
Part B
Current Image of Pepsi……………………………………………………………………………………………………….18
Current Market Share…………………………………………………………………………………………………………18
Revised Market Segmentation……………………………………………………………………………………………19
Introduce Pepsi X as a direct rival to Thums up in rural India……..………………………………………19
Introduction of Pepsi Masala………………………………………………………………………………………………20
Replacement of Diet Pepsi with Pepsi Max in Urban India………………………………………………….22
Summary…………………………………………………………………………………………………………………………….24
Appendix A.............................................................................................................................27
Academic References………………………………………………………………………………………………………….28
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3. Executive Summary
The soft drinks market in the advanced economies like the US is saturated or in some cases
declining sales (Reuters). Given a fast growth rate of the Indian GDP, and consequently,
higher levels of income distribution in the population, Pepsi is increasingly turning to
emerging economies like India to sustain its global growth (Wikinvest).
The Indian packaged food market is huge with the packaged tea and biscuit segments on
top. Although soft drinks constitute the third largest segment, compared to other developing
countries the market penetration is still very low. This indicates a further potential for rapid
growth. It is a telling point that the average per capita consumption of soft drinks in the US is
700 bottles per capita / year, while in India it is only 10 bottles a year; the rural areas with an
estimated 700 million people accounting for only 4 bottles per capita / year.
According to a report by Euromonitor International, soft drinks in India have been estimated
to have a market of 3.108 million US $. Soft drink volume sales are expected to rise by 8.6%
per year. The sales of bottled water are also expected to rise rapidly in the next five years
with an annual growth rate of 16.5%. Growing health awareness and increasing demand for
hygienic products will fuel the dynamic growth of juices by an annual rate of almost 22%.
Penetration in rural markets will also contribute to sales increase in soft drinks.
(Euromonitor International 2011).
India is a unique market for Pepsi in that, it is one of the few markets, where Pepsi outsells
Coke, however 2 of Coca Cola’s products hold the top 3 spots in terms of market share, so
Pepsi does have an opportunity to increase its market share. Its biggest competitor is a
home grown brand called Thums Up which had been acquired by Coca-Cola when it entered
India in 2003.
Pepsi which has true to its global image always been seen as a young, trendy brand,
however after a spurt of creative marketing in the late 90’s, early 2000’s which boosted the
Pepsi brand immeasurably, it has for some time been using generic global marketing
campaigns which have not struck a chord with the young in India, and neither has it
attempted to tap into the family, feel good segment which has been Coca-Cola’s consistent
strategy.
Pepsi has a lot of inherent brand equity in the Indian market, which while has been dented
by the Pesticide controversy in 2003 & 2006 has still not hampered its growth in the India.
If Pepsi can capitalise on this and build on it, it can create a legion of loyal customers which
can sustain the revenues potentially lost in other saturated markets.
We have in our report attempted to completely understand Pepsi’s current brand image,
positioning, and the inherent equity in the brand, and compared it with Coca-Cola’s, and then
in part B suggested a way forward for Pepsi encompassing all the above elements.
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4. PART A
Scope
We have explored in depth the background, current status and future potential of the Pepsi
Cola (and its variants, Diet Pepsi, Pepsi Max) in the Indian market. We have not considered
in our study the wide bouquet of products that PepsiCo offers to the Indian customers.
Pepsi in India- Background
Pepsi had a 5 year head start over Coke in the Indian market, when it launched operations in
partnership with one of India’s leading business house – the RP Goenka group of
companies. Pepsi later on partnered with the state government of Punjab and launched the
“Lehar Pepsi Brand”. It quickly identified some rising movie stars (Aishwarya Rai and Aamir
Khan), and had them endorse the Lehar Pepsi brand, blanketing Indian television with an
advertising blitz, and quickly entering the consciousness of the Indian consumer.
It also customised its ad campaigns to suit the Indian market, and came up with a hybridised
set of slogans which had both English and Hindi elements (a slang called Hinglish, which is
what the Urban Indian speaks), some of the catchy slogans that captured the attention of the
Indian market were,
Yehi Hai right choice baby aha (this is the right choice baby- Aha!)
Yeh Dil Mange More (This heart asks for more)
Azadi Dil ki ( Freedom of the heart), these slogans were backed up by a long running TV &
Print media campaign, and helped establish Pepsi in the Indian market, however the Market
leader by a long margin continued to be a local Cola brand called Thums Up with 35%
market share in 1993.
The Entry of Coca-Cola in 2003 changed things drastically in Pepsi’s favour with its arch
rival choosing to disregard the strengths of Thums Up in an effort to position the Coke brand
as the premier offering in the Coca-Cola company portfolio. This helped Pepsi maintain its
market share; however Coca-Cola re launched Thums Up in the Indian market, and this
brand now leads the Indian market in terms of its sales volumes.
The Cola wars as they are so aptly termed have been bitterly fought, as it is increasingly
crucial for both the companies to tap into the emerging markets to sustain their momentum,
as they are seeing sales plateau in the developed markets.
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5. The Pepsi Brand in India – A SWOT Analysis
Some of the key points to be noted – which have caused Pepsi as a brand to lose market
share to Thums Up & Sprite, and also not expand into the untapped rural markets are,
(1) It has over time lacked creativity in its ad-campaigns, and its campaigns have been a
copy of the global marketing campaigns, whereas Coke has been able to ensure high
brand recall with its clever use of slogans that use “Hinglish” like Thanda Matlab
Coca Cola – Thanda literally means cold, but it is also used as a word for
refreshments, so this clever play on words has aided in its recall amongst the Indian
consumers
(2) In 2003 & 2009, there were outcries from both Legislators, and the consumers on the
levels of Pesticides found in Cola products, and the effects of these controversies still
linger on in public memory
(3) The biggest competitor Pepsi faces today is not from other soft drink manufacturers,
but the low priced, easy to store / sell local products like Lime juice, and thin butter
milk (called Lassi) - these suit the Indian palette and also the weather conditions, and
are easily made by small household firms, and sold in small dispensers at a
substantially lower cost when compared to bottles of Cola.
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6. Product Mix
We have projected Pepsi’s current product offerings alongside its main competitor Coke, and
analysed in which segments they currently belong to.
It is clearly evident that Pepsi lacks a product of the stature of Thums Up which is the main
cash cow for Coke – Despite having been taken off the shelves after Coca-Cola purchased
its parent company, and not having any Branding / Ad campaign for nearly 4-5 years, and
also being available only in a limited number of geographies (Thums Up is available only in 9
states in India of 28 states) it outsells every other Cola brand in the market. If Coca-Cola
decides to launch it in more states, it could easily move into the Stars quadrant, and could
pose a major threat to Pepsi sales.
The future of the diet Pepsi is uncertain, as it has thus far proven to be an unviable product-
Diet Cola’s market share is roughly between 2%-3% of the overall Soft drinks market, and
has not seen any sustained growth in this segment.
The diet categories of colas contribute to less than one percent of the total soft drink
consumption in India. Further, 'Diet' is seen as a very metro (top 10 cities in India)
phenomenon. (Bhattacharyya and Joshi).
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7. ---------------------------------------------------------------------------------------------------------------------------
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8. Points of Difference, Points of Parity & Brand Recall
The biggest problem facing Pepsi (and also a big area of opportunity) is that it does not have
any product that has a clearly established POD, and its taste in comparison to Coke is seen
as similar, whereas its main competitor Thums Up is seen as having a rather unique taste,
that suits the Indian palette, and hence has a clearly established POD over Pepsi, and it’s
important to Pepsi to develop a competing brand that has a unique and “Indian” flavour.
As can be seen, while Pepsi does have a strong brand recall, it does not have any brand
that is in the Top of Mind segment- and having a brand that is top of the mind would aid in
increasing its market share substantially. A brand is a long-term vision. Major brands hold
certain significance within the product category, not just a specific dominating position. Pepsi
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9. if is posed with the question “What would the market lack if Pepsi did not exist?” would have
a rather uncertain answer, as they have not managed to create a unique impact in the Indian
context, and this needs to be a key area of focus (Kapferer Dawsonera, 2008)
Market Positioning & Segmentation
The two key elements of positioning are the Target market & the Differential advantage
(David Jobber, 2007) – and PepsiCo’s strategy in India has been described below.
PepsiCo positions its products in the mid-priced and premium segment as contrast to its
competitor, Coca-Cola which positions its products at mid-range consumers in the market.
Target Market: By its very nature, the target market for Pepsi is vast- it encompasses the
Urban & the rural market, and is mainly focussed on fulfilling a functional need; quenching
thirst. However, the consumption of soft drinks in the rural markets remains an aspirational
event, and despite India having close to 600 million people living in the rural areas, per
capita consumption of soft drinks is only at 4 bottles / year, whereas the Urban areas has a
higher consumption rate of 10 bottles / year.
Differential advantage: The 2 key ways in which a firm can drive a differential advantage
are shown below (David Jobber, 2007)
(1) Differentiation Strategy : Pepsi has been unable to promote a clear POD over its
competing products in the market whereas its rival product Thums Up has managed
to clearly establish a POD through its unique taste which is more suited to the Indian
palette
(2) Cost Leadership: Achieving the lowest cost position in the industry is the primary aim
of this strategy, but Pepsi has once again been caught lagging on this front. Rival
Coke reduced serving sizes to 200 ML, and reduced prices to Rs 5 a unit, and was
able to steal a march over Pepsi, given that the Indian market is extremely price
sensitive, Pepsi can launch its products at lower price points hence opening up
potentially new markets– however, any move of Pepsi is likely to be replicated by
Coke, so creating a differential only based on price might not be sustainable.
Segmentation: “Finding the most revealing way to segment a market is more an art than a
science, any useful segmentation scheme will be based around the needs of customers and
should be effective in revealing new business opportunities” – Peter Doyle, Value based
marketing.
Segmenting the market involves breaking down a large diverse market into a number of
smaller sub – markets. Identifying groups of customers with similar tastes and requirements
will help in serving them efficiently but insufficient size of group will also cause the product or
service to be supplied inefficiently. (David Jobber, 2007)
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10. Pepsi targets the affluent with disposable incomes which they can spend on discretionary
purchases like Cola.
The Indian market in terms of income levels is shown below,
Category Income Willingness to purchase foreign In Millions
Band products
Level 1 > $ 20,000 High 7
Level 2 $10,000- $ 20,000 Medium 63
Level 3 $ 5,000- $ 10,000 Very Low 125
Level 4 < 5000 $ None 700
(R Ramachandran, 2000)
Continued high rates of GDP growth would result in greater amounts of disposable income
across a wide segment of the population.
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11. (http://www.mckinsey.com)
Pepsi at the moment caters to the Level 2 and Level 1 segments which gives it a target
population of 70 million people, but this chart also clearly indicates the opportunity available
to Pepsi in the level 3 category which would vastly expand its potential to increase sales and
consequently revenue.
Changing population mix (low average of citizens): With Pepsi’s target demography
being in the age group of 15-30, a burgeoning middle class with a young population results
in a stable target segment for Pepsi in the near future; efforts to improve its brand Loyalty at
this stage would pay rich dividends in the future.
.
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12. Distribution Channels
Pepsi uses mainly small retailers spread across the Indian landscape to generate its sales
volumes. It has substantial reach in the urban areas, however does not have the same reach
in the rural areas; for that matter even established consumer-goods companies do not have
significant reach in India, covering only about a tenth of the country's 600,000 villages, and
this once again establishes the potential for Pepsi’s expansion into a vastly untapped
market. However, with the expansion of the country’s major supermarkets/hypermarkets, the
sale generated from this channel is expected to increase gradually (Soft Drinks in India,
Euromonitor International, 2011).
(Don J Palathinkal, 2008)
Given its vast size and poor infrastructure, the Indian market does not support conventional
distribution and retail networks used in the more advanced economies. The retail vending
outlets tend to be small and are decentralised, and Pepsi has had to evolve a more
innovative approach to support its operations. For instance, bumpy roads in India result in a
higher breakage of glass bottles, this has necessitated the usage of PET (plastic) bottles
which resulting in a slightly higher pricing model with its own set of consequences (Rahman
and Bhattacharya, 2003).
To counter the fragmented network of small retailers (as against huge centralised Super &
Hyper markets in the advanced economies), rather than send out the goods from the bottling
plants to the retailers directly, Pepsi has evolved a hub and spoke model to meet its
distribution needs. The products are sent out to a hub (a major distribution point), and then
sent out to spoke centres in the vicinity as and when orders need filling, this has helped
reduce costs because it reduces the number of long haul journeys over poor roads (Wall Street
Journal).
Given that the storage space of the average retailer in India is small and needs constant
refilling, having a hub closer to the end retailer helps in ensuring the shelves are stocked
constantly. A common method used in the more advanced economies, namely the Vending
machine has not really been used effectively in India; however there are certain challenges
in using this channel (Euromonitor International, 21 July 2005).
(1) Lack of suitable coin denominations in India is the single most reason for the
immaturity of the vending channel and its slow development. The existing
denominations are too small and also number of coin types too varied and disparate.
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13. (2) Machine Security: There are increased chances of vandalism & fraud in a country
like India, and this is a big concern.
Pricing Strategies & Brand Loyalty; the Indian Consumer and Price
The Indian consumer is very price conscious and cost has a significant influence on his
buying behaviour.
 Price aware & Frugal: The Indian consumer is very price aware, and is prone to
shopping on the basis of price, especially more so in the segment of Soft drinks, as it
comes under discretionary spending.
(http://knowledge.wharton.upenn.edu/article.cfm?articleid=2011).
 Loyalty to Traditional products: While the Indian customer is prone to
experimentation, they will often return to traditional products as they are most
comfortable with them. A large segment of the FMCG segment operates in the non-
branded segment.
 Not very Brand Loyal: The Indian consumer is not very loyal to brands; Indian
consumers will on an average try 6 brands of the same packaged goods product
compared to 2 for USA.
 Price Inelastic: Indian consumers are highly price inelastic, especially in the FMCG
segment, and as a thumb rule, the lowest price gains most customers
 Price Promotions: Price promotions normally do not work, as effective
communication channels do not exist, and a retailing is still done via the unorganised
sector (Kirana stores- the Indian equivalent of Mom & Pop stores) – The strategy
most FMCG companies use is to price the product as low as possible, and attract the
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14. most number of customers at the earliest, rather than use pricing gimmicks like 2 for
the price of 1.
(R Ramachandran, 2000)
Given the above constraints, Pepsi has closely mirrored Coke in its pricing strategies- and
has not taken the role of a price leader / loss leader and has always chosen to let Coke set
the strategy when it comes to pricing. Both Cola majors have chosen not to engage in price
wars over the last 5 years, and have chosen to increase sales through publicity campaigns &
promotions.
Creating Shared Value the Pepsi way
Faced with the mar in reputation due to the pesticide scandals in India, Pepsi has taken
efforts to improve its brand image through the creation of shared value. (Refer "Testing times; the
Pesticide controversy & its impact on the soft drinks market in India" in Appendix A)
(1) Environment Sustainability: PepsiCo was water positive in India in 2010; this was
achieved by saving and recharging 10.1 billion litres of fresh water- exceeding the 5.8
billion litres of water used for manufacturing Pepsi products.
(2) Long term relationships with farmers: Pepsi has a network of 22,000 small holding
farmers, the farmers are provided access to advanced farming techniques that
increase the quantity and quality of their yield, thereby assuring Pepsi also of
products grown to the highest standards
(3) Increasing usage of renewal sources of energy: In 2010, 40% of the energy
requirements for the soft drink operations were met through renewable sources.
These are some of the key initiatives through which Pepsi is striving to create shared value
in the Indian community at large. (Pepsi Corporate Citizenship Report 2010/2011)
Pepsi’s Promotional & Marketing Strategy
Pepsi is present in every avenue of advertising and promotion- both traditional and modern
social media. Pepsi, Cricket and Bollywood have been joined at the hip since the cola’s entry
into India. Its top brand endorser the captain of the Indian cricket team (Puja Khatri, 2006), also
given the fact that they have been consistently advertising in the popular TV & Print media
for a decade now, they have managed to create a strong sense of market awareness
especially in the urban areas. They recently promoted the 2011 Cricket world cup, which is a
signature event in the Indian sporting calendar,
Pepsi pours millions of rupees every year into celebrity advertising, and this is done by
having a Pan India celebrity like the Indian Cricket teams captain MS Dhoni, or Sachin
Tendulkar, while at the regional level, stars with a more local fan following are used.
The one area where Pepsi has not been focussing much is in the online domain, with very
little focus in areas of a viral / guerrilla campaign, despite having an increasing number of
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15. young Indians using social media like Facebook, You tube and twitter in India.
Pepsi has been taking efforts to improve its brand presence in the social media. Though
these efforts have been sincere, their results are yet to be fully achieved. For the Pepsi
brand to be popular, the company must be intelligent in the manner of propagation in the
social media. The social media is all about consumers and not about brands. Hence Pepsi
must take efforts that make the customer to share information about the brand. This can be
done through designing innovative advertisements that have the potential to be shared by
networks and hence virally marketed (Fournier and Avery, 2011). A critical aspect is for Pepsi to
give up control to the users and make them participate in the propagation of the brand. For
instance, there could be "Make you own jingle campaigns" and "Demonstrate your Attitude"
video campaigns where Pepsi is central in the campaigns that the users participate in.
We have shown below Pepsi’s MARCOM model which will establish the area’s Pepsi carries
out brand promotional activities
Pepsi’s branding strategy has been further elaborated below in the brand value chain. Brand
Equity of Pepsi is evaluated and measured using the Customer Based Brand Equity Pyramid
and Brand Awareness framework; Young, Urban, Trendy, Rebellious are some of the traits
Pepsi has acquired in India. This has been achieved by sending a consistent message in
their advertising campaign over a decade.
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16. Pepsi has invested a lot in its branding efforts and in building brand salience, and
this is shown in the diagram below
Pepsi's branding efforts have gone beyond the traditional advertising formats, and
encompasses the entire spectrum of the environment - this has resulted in a greater /
increasing level of brand awareness and resonance.
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17. 17

18. PART B
Current Image of Pepsi
The current image of Pepsi is that of a youthful brand that targets the trendy, fun loving,
exciting and sporty customers in India. Though this image of Pepsi has made it a well
recognized brand in the youth segment of India who are the highest consumers of soft
drinks, it does not appeal as a family based drink - something coke has successfully
managed.
The current marketing strategy of Pepsi though effective lacks some poise. For instance the
strategy makers have not taken advantage of latest trends of marketing such as guerrilla and
viral marketing which are both cost effective as well as effective in spreading awareness
among the customers. It is indeed an issue of concern for Pepsi that the most recent
successful campaign was the "Youngistan" campaign back in 2003.
Furthermore, the presence of Pepsi in the digital media such as in social media is very
negligible. Though there are evidences of a lot of investments towards the propagation of the
brand through these channels, the benefits are yet to be reaped.
Diet Pepsi has not been able to make any headway in the Indian market with sales
stagnating at approx 4% of the total Pepsi sales volumes
Pepsi Max was introduced only on the internet and delivered based on the orders that were
received online. The culture of purchasing online is very much dormant in the Indian
population. Hence the efforts to promote Pepsi Max through the digital channels have not
yielded expected results.
Current Market share
Brand Market Share
Thumps up 16.40%
Sprite 15.60%
Pepsi 13%
Limca 11%
The following table shows the current market share by the various brands of beverages in
India. It is to be noted that the brands Thums up, Sprite and Limca belong to the Coca Cola.
Another interesting fact to be pointed out here is that Thums up is available only in 9 of the
27 states of India and yet holds the highest position in sales. The threat that Pepsi now faces
is that of Coca Cola attempting a triage and releasing Thums up in all states of India and
letting go of their own market share for Coke.
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19. Changes proposed in the marketing strategy
Revised Market Segmentation
The main consumers of Pepsi are centred in the urban sectors of India. Coca cola and
Thums up are the more prevalent brands in the rural sectors. Hence Pepsi must target to
expand its market in the rural sectors too. The following are some suggestions that Pepsi
could implement in order to gain the market share in rural market.
(1) Since the purchasing power of rural population is significantly lesser than the urban
population, Pepsi could introduce a low priced, smaller bottled (150 ml) variant. This
could compete directly with traditional products such as butter milk and lime juice
which are normally sold in 150-200 ml units and are priced at lower prices compared
to the traditional 200 ml bottles of Cola.
(2) Pepsi could use a loss leader strategy by pricing the rural variant at a price lower
than that of contemporary beverages (Lassi, Butter milk, Flavoured drinks, Aerated
drinks etc) available in the rural markets.
(3) The usage of 150 ml plastic water packets is highly prevalent in rural India. Pepsi
could enter this market which is yet to be explored by any of the other beverage
brands. This would give Pepsi the first mover advantage in this category. This would
also enable easier portability and storage, and help open up the previously untapped
rural markets.
Introduce Pepsi X as a direct rival to Thums up in rural India
The point of differentiation of Thums up with the other popular cola brands, Pepsi and Coke
is its extra sweet and fuzzy flavour. Hence we recommend Pepsi to launch a variant X,
which has the same properties as that of Thums Up and market it in rural areas of the 10
states Thums Up is present in to test the response. The strategy of promotion in this case
would be to establish a POP with Thums Up and hence eat into the market share of Thums
up.
Pepsi could also consider taking advantage of Coke's reluctance to release Thums up in the
other 21 states of India and release Pepsi X in them. Though this would cannibalize the
market share of Pepsi, it would gain a bigger market share for the parent company, PepsiCo
through the infiltration into the market shares of Sprite, Limca and other subsidiary brands of
Coca Cola which are higher ranked as shown in the table. Moreover, the sale of Pepsi X
would be concentrated on the rural side and hence will not affect the net sales of Pepsi
which is dominated by sales in urban areas.
The introduction of Pepsi X has its own share of disadvantages. As indicated in the above
diagram, the product runs the major risk of being perceived as a me too product by the
drinkers of Thums Up and negatively affect Pepsi's reputation as a company that churns out
innovative products. Before launching this product Pepsi must weigh its advantages and
disadvantages.
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20. Introduction of Pepsi Masala
As Michael Porter says, "Strategy is choosing to run a different race because it's the one you
have set yourself up to win. “The Return of Michael Porter," Fortune (February 1, 1999):135-137
Over the years, many of the brands in the beverage industry have looked to create a market
niche for themselves by tweaking their existing products. Pepsi has attempted the same by
introducing a combination of cola and coffee flavour through Cappuchino. Coke attempted to
introduce the Lemon variant of Thums Up. The drawback of both these campaigns were that
the companies over estimated the demand for these flavours. A more practical approach
would be to research on the different combinations of using Pepsi that are common in the
Indian public and officialise them.
The practise of using a combination of Pepsi and local spices (masala) is prevalent in rural
India. The drink is called 'Masala Pepsi'. Hence Pepsi could capitalize on this and officialise
this practise. If the drink is priced at the same price of that of the cola variant of Pepsi, it
would attract a lot of consumers.
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21. The addition of spices like "Jal Jeera" into Pepsi can aid in improving the image of Pepsi as
a more 'hygiene friendly' product. This could be taken advantage of and the message can be
spread in the urban health conscious society too. With the rapid industrialization of the
country, there is a lot of migration of youth between North and South India for jobs. This
migration and mingling of culture could be taken advantage of by Pepsi to promote the
usage of Masala Pepsi in the southern states where the culture as such is non-existent.
Cleverly planned advertisements can help in creating and promoting this culture in a big
way.
The BAV power grid model shows the direction forward for the promotion of Pepsi Masala to
take place. Advantages that Pepsi enjoys such as a strong distribution network, established
brand identity and a youthful attitude will help in rapid progression of this product from a new
entrant to a high potential product.
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22. The introduction of Pepsi Masala in the rural market gives Pepsi a unique opportunity to
create brand loyalty, a luxury that no beverage enjoys in India due to its inelastic nature of
price sensitivity. The above Marcom model shows the strategic interventions and promotions
that Pepsi must take in order to create such a Loyalty. Pepsi must take efforts in creation of
a new market segment and a culture of drinking soft drinks on a more regular basis in rural
India which currently has a per capita annual consumption of 4 bottles.
Replacement of Diet Pepsi with Pepsi Max in Urban India
The existence of Diet Pepsi and Diet Coke for the health conscious segment of the Indian
public poses a challenge for Pepsi Max to be marketed in India. The introduction of Pepsi
Max in this niche market would pose the problem of choice and confusion in the minds of the
consumer.
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23. As Barry Schwartz, author of The Paradox of Choice explains, "People are so overwhelmed
with choice that it tends to paralyze them. Too much choice makes people more likely to
defer decisions. It raises expectations and makes people blame themselves for choosing
poorly." Barry Scwartz, The Paradox of Choice (New York: HarperCollins, 2004), p 13
As already mentioned, due to the image of Diet Pepsi being a feminine drink and its sour
nature which does not suit the Indian palette, the sales of Diet Pepsi in India remains
unimpressive. Hence we propose that Diet Pepsi should be faced out of the Indian market
and replaced by Pepsi Max.
The sweeter and fizzier nature of Pepsi Max, along with its image as 'a unisexual drink’
places it in a position to be the ideal replacement for Diet Pepsi. Pepsi Max achieves the
POP with diet Pepsi in that it caters to the health conscious consumers through its zero
sugar nature and hence ensures they are not left behind during transition.
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24. Summary
The proposed marketing strategy for Pepsi can be summarised by the above BCG matrix.
This involves in the facing out of Diet Pepsi, which is currently the weakest of the Pepsi
brands and substituting it with Pepsi Max which has a higher potential for success.
Two new variants of Pepsi, namely the Pepsi X and Pepsi Masala are introduced. Due to the
overwhelming sales of Thums Up and the underlying demand for a similar flavour, Pepsi
should look to create a star with the Pepsi X variant.
If the Pepsi X variant is successful on a pan India scale, it would cannibalize the sales of the
base cola variant of Pepsi. Though this would mean a drop in sales, efforts can be taken by
Pepsi to make the brand to function as a cash cow and reap the financial benefits from it.
The per capita consumption of beverages in India is significantly lower than that of
economically similar/ poorer countries. Hence Pepsi must take efforts to create a culture of
consuming beverages and cash into the untapped market.
Though the use of Pepsi with Masala is prevalent in North India which indicates an untapped
market for Pepsi, the success of the brand in the other parts of India is still unknown and
hugely depends on the degree of promotional efforts taken by Pepsi to create the culture.
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25. The above Ansoff model represents the various market dynamics that are available for Pepsi
to capitalize on.
25

26. The success of the brand depends on its ability to move in pace with time. Over the years,
Pepsi has a rich tradition of keeping pace with the changing customer needs and churning
new and trendy soft drinks that shape the attitude of the generations. With the introduction of
new brands and the techno savvy ways of propagating them, Pepsi finds itself resonating to
all its customers about the youthfulness and energy that to them is what 'Pepsi' is all about.
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27. Appendix A
Testing times; the Pesticide controversy & its impact on the soft
drinks market in India
In 2003, the Center for Science and Environment (CSE) published a report indicating
presence of pesticides which greatly exceed European & Global standards. This report
indicted both PepsiCo and Coca Cola Companies. The pressure of both the Indian media &
the Indian public forced the Indian parliament to set up a parliamentary probe to examine the
issue further. In an unprecedented move, both Coca-Cola and Pepsi Co responded to these
allegations by holding joint press conferences, and by issuing joint press ad’s and managed
to ride the storm out.
The issue erupted once again in 2006 when the CSE released another report indicting Pepsi
Co and Coca Cola. Pepsi and Coca-Cola were banned in educational institutions, several
states have still banned the sale of colas in educational institutions. There were also widely
covered public protests in which crates of Cola bottles were smashed publicly (Neeraj Vedwan).
Over time this controversy also died down, however this issue is now deep suited into the
Indian consumers psyche, and Pepsi needs to take a lot of efforts to ensure that this issue is
put to rest and move forward. This Pepsi Co is doing by creating shared value, and ensuring
that it is visible.
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