How India Became Pepsi's Right Choice
Total Page：16
File Type：pdf, Size：1020Kb
STILL FIZZING > How India became Pepsi’s right choice half the turnover. A new clause said soft Twenty-five years ago, PepsiCo sowed its India entry through an agrarian route, drink concentrate could not rise beyond THE PEPSI CEOs 25 per cent per cent of the venture’s despite opposition from several powerful people, and became a brand to be reckoned turnover and it would also not be able to import ingredients. RAMESH VANGAL with. Surajeet Das Gupta looks at the strategies and the people who made it possible PepsiCo started rolling out its colas CEO-Beverages, PepsiCo India in June 1990. Within two to three years, (1989-1993) epsiCo thought it had a winner in Pepsi would be a good name. Vangal had places cold. Indians now have a per it sold over 20 million cases a year, Present : Chairman of Katra Group “Pepsi Era”. A bizarre rule in the fought for three years to secure permis- capita consumption of 22 bottles of soft though a much small brand compared P 1980s allowed multinationals to sion to launch his company’s drinks. He drinks each year, up from three in 1989. with Parle. In 1991, India faced a bal- Joined PepsiCo in 1985 and was given the task of use only hybrid brand names for their gave in when the minister said he could PepsiCo is trying to dislodge Coca-Cola ance of payments crisis and went in for setting up operations in India. Was confronted with products in India. For PepsiCo, Pepsi hold back the clearance. in drinks, though the gap is still large, economic restructuring, as suggested virulent opposition from cola king Ramesh Chauhan, Era seemed apt for creating history in A couple of years ago — in but is streets ahead of the competition by the International Monetary Fund. members of Parliament and other lobbies who 1989: A cola company was re-entering September 1988 — the Congress gov- in snacks. Multinationals were suddenly welcome, opposed entry of MNCs. But he fought 25 India 12 years after Coca-Cola was ernment wanted to make PepsiCo the The company had to fight every inch and Coca-Cola arrived in 1993 without back and after numerous proposals, shown the door. showpiece of its foreign direct invest- of the way to get to where it is today. the welter of restrictions imposed on got clearance to set up shop, with But PepsiCo India’s first chief execu- ment policy. But the media walked out With around ~140 crore coming in every PepsiCo. Chauhan, who realised his tive officer (CEO), 34-year-old Ramesh of a press conference in which then year as foreign direct investment in the time was up, sold his brands, and a 70 stiff conditions on exports and Vangal — who would go on to spend ~10 Food Processing Minister Jagdish late eighties, multinational cola makers per cent share of the market, to Coca- investment in food processing, in crore to print the brand on reusable bot- Tytler was to announce the clearance were definitely out of favour. Local Cola. The cola war had begun. 1989. By the time he left the tles — was in for a shock. Food Processing because he refused to state his views on competitors led by Parle’s Ramesh Priya Mohan (Suman) Sinha, a for- company, Pepsi was selling 20 million in India Minister Sharad Yadav who was part of Rajiv Gandhi’s controversial anti- Chauhan — who had filled the void left mer director of Hindustan Lever who cases. But he lost out in buying the new National Front, which had came defamation Bill. Tytler made the by Coca-Cola’s exit — wielded immense took over from Vangal, got headquar- Chauhan’s Parle to power a few weeks ago, summoned announcement through a press release. political clout and had sworn to keep ters to sanction him a $1-billion war him to his office in 1990 and said the cola India over the past quarter of a cen- foreign colas out. PepsiCo made an chest. Sinha began an aggressive expan- should have a “desi” flavour, and Lehar tury has provided a roller-coaster ride aborted attempt to enter India through sion of bottling capacity — there were P M SINHA to one of the world’s most enduring a venture with R P Goenka to import 44 plants, including ones owned by the CEO-Beverages (1993-2002) beverage brands. It began with a fizzy concentrate. But Goenka’s closeness to company, across the country by the Present: On the board of Azim Premji Trust national debate over a small bottle of the Gandhi family did not help. time he left — and offered interest-free sweetened water, followed by a leg- loans to bottlers to expand. Then he Consolidated the bottling business, endary cola war with rival Coca-Cola, Finally, a way in turned to markets where he had little which included acquiring bottlers as and PepsiCo’s eventual transforma- Then Vangal spotted the chance to share. One was Mumbai. PepsiCo had a tion into India’s largest food and make PepsiCo’s entry more palatable plant outside the city and had to pay a well as setting up company-owned beverage company. through food processing. He cultivated high tax to bring the drinks in. Sinha’s bottling plants. Acquired Duke’s in PepsiCo and its bottlers have support in Punjab, a state desperately solution lay with the Pandole family, Mumbai and snack food company invested more than ~12,000 wooing food processing industry after owner of local drinks maker Duke’s that Uncle Chipps and sold the crore to bottle and sell its Operation Bluestar — the Golden had a bottling plant in Mumbai. After 27 company’s tomato drinks across two million Temple violence in 1984. The plan meetings, the family sold their business processing plant shops countrywide, in many worked. PepsiCo, in a tie-up with state- to PepsiCo for ~46 crore. owned Punjab Agro Industries Sinha also took apart the venture Corporation and Voltas, applied on that brought PepsiCo in. He bought June 6, 1986, to set up a snack food over the partners and big bottlers. He RAJEEV BAKSHI plant a fruit and vegetable unit that also hawked the tomato processing unit CEO-Beverages (2002-2006) would initially process tomatoes and a in Punjab to Hindustan Lever, inviting Present: Managing director, Metro Cash & Carry soft drinks concentrate plant. criticism that PepsiCo’s real intention Predictably, all hell broke loose. was always drinks and not developing He bore the brunt of the pesticide controversy, Vangal recalls there were more agriculture — it came under attack for which impacted sales despite his 1 than 250 questions in exporting rice and seaweed. But the attempts to allay concerns by Parliament attacking the proj- cola maker says it introduced contract featuring in an advertisement ect, 7,000 articles in the farming to India, improved tomato campaign saying the product was media and half-a-dozen yields and potato varieties. safe. Pepsi also lost money Cabinet meetings on the By now PepsiCo was ready to take on responding to Coke’s ~5 challenge, pros and cons of allowing Coca-Cola. So when Coca-Cola in PepsiCo. At one count, launched in Agra in 1993, PepsiCo exec- though it grew in volumes. Tried over 150 Members of utives lined soda fountains all the way to push premium pricing Parliament were to the launch site. When it realised strategy to push growth opposed. Coca-Cola would sell 300 ml bottles at Gokul Patnaik, a bright the same price, PepsiCo destroyed 250 bureaucrat and managing ml bottles worth ~60 crore and sold the SANJEEV CHADHA director of Punjab Agro, larger bottles wherever Coca-Cola went. Chairman and CEO (2007-2010) and Zahed Baig, a senior Coca-Cola splurged ~10 crore on spon- Present: Pepsi’s CEO for the Asia, Middle East Tata executive, met Vangal sorship of the cricket World Cup in 1997; and Africa regions virtually every week, occasion- PepsiCo spent the same amount on a ally joined by lawyer Jyoti Sagar, campaign, Nothing Official About It. By Company grew to become the country’s largest 2 to counter this onslaught. Patnaik’s 2003, PepsiCo had narrowed the market foods and beverages company from its wife, cut up by his travelling, adopted a share gap with Coke. number three ranking when he took dog and named it Pepsi, promising to Hiccups over. Gave a huge push to snack foods rename it after the venture was cleared. with Kurkure becoming a household The plan had its backers, too: 5,000 Yet the challenges refused to go away. name. As many as six brands under his panchayats in Punjab wrote in favour. The pesticide-in-cola controversy hit portfolio had turnovers of over Punjab Governor Siddharth Shankar both companies. Some fancied brands Ray briefed Rajiv Gandhi on the like Pepsi Max, a zero-calorie drink, had ~1,000 crore. Also tied up project. Politicians, irrespective of to be withdrawn due to low response. with Tatas to set up a JV to their political parties, in Punjab Aliva, a roasted biscuit priced at nearly experiment with mass- supported the venture. double the competition, did not provide based beverages Agriculture Minister Devi Lal met volumes. PepsiCo was also rattled by the PepsiCo team early in the the sudden departure of its CEO Manu morning and he was supportive. Anand: The post remained unfilled for The media began to shed its bias. months. MANU ANAND Vangal says an India Today article Yet, PepsiCo has not flinched from Chairman and CEO (2011-13) with Vangal and Chauhan on the uncharted markets.