Reasons for Pepsi’s globalization
Saturation of markets in USA
Emerging economies opening up
India’s vast population was an attractive proposition
Arch rival Coca-Cola was also globalizing
Various methods for companies to enter a foreign market
Joint venture – The cooperation of two or more individuals or businesses in which each agrees to share profit, loss and control in a specific enterprise.
Wholly owned subsidiary – A company whose common stock is 100% owned by another company, called the parent company. A company can become a wholly owned subsidiary through acquisition by the parent company or spin off from the parent company.
Franchising – The party in a franchising associated
s3brands and other proprietary knowledge in order to open a branch.
Licensing – A written agreement entered into by the contractual owner of a property or activity giving permission to another to use that property or engage in an activity in relation to that property.
Greenfield investments – A form of foreign direct investment where a parent company starts anew venture in a foreign country by constructing new operational facilities from the ground up.
Hurdles for Pepsi while entering India
No intent to invest locally in industries or provide employment2.
Opposition to promotion of carbonated drink
Fear of invasion of foreign brand
Severe restrictions in equity through FERA2.
Dispute in relation to ownership of Pepsi brand name
Closed and foreign exchange starved economy2.
Aerated drinks industry in nascent stage
Socio cultural environment1.
Fear of invasion of MNC culture2.
Fear of impact on Health/die
Strategies adopted by Pepsi to enter Indian markets
PepsiCo teamed up with Agro Product Export Ltd., a company owned by RPG group.2.
Objectives to attain permission
To promote the development and export of Indian made and agro based products. (b) To import cola concentrate and to sell a Pepsi Cobrand soft drink in India3.The proposal was rejected on the grounds that import of concentrate was not allowed and the use of a foreign brand name was also not allowed.
The Punjab card1.
Second attempt with more stress on diversification
of Punjab’s agriculture and employment generation rather than on soft drinks.2.
Green revolution in Punjab which would end the stagnation there and promote small and medium farmers. Also help divert the youth away from terrorism and bring peace.3.
The ruling parties agreed to this proposition and PepsiCo formed a joint venture with PAIC and Voltas.
The bundle offered by Pepsi turned the scale on their side.1.
The project was to create employment for 50000 people nationally.2.
74% of the total investment was to be in food and agro processing. The rest to be used for manufacturing soft drinks.3.
Pepsi was to bring advanced agricultural technologies to India and market Indian products abroad.4.
50% of the production to be exported, thereby boosting India’s exports.
All this led the conservative Indian govt. to believe that Pepsi’s intentions were of boostingexports, bringing in latest technology and helping farmers with the production in Punjab. Due to the political situation there was unrest in Punjab and the government thought that this decision will help Punjab stabilize in terms of providing employment to the youth and also in increasing
Punjab’s stagnant agricultural produce.
Pepsi’s game in the post liberalization era
Pepsi greatly benefited from India’s liberalization as the business environment was relaxed andt was no longer liable to honour its commitments made previously to enter the country.
Pepsi bought off its partners and established itself as wholly owned subsidiary and devoted itself to the soft drinks business completely. Lehar Pepsi was changed to Pepsi.
Pepsi consolidated its business and sold off its tomato paste business to HLL. Their exports of plastic bottles were as high as 67% and their beverages business grew by 50%.