The battle to quench Indian consumers' thirst is now a year-round affair for rivals PepsiCo and Coca-Cola - and it's not just about colas.
There was a time, not so long ago, when Coca-Cola and PepsiCo came alive only in summer. As the sun got hotter, the earth underneath baked and people moved around with parched throats, the two rivals launched new campaigns and, if they could, new products. Spoofs were hurled at each other, the trade was plied with goodies and the sky littered with hoardings. Once the summer got over, it was back to blissful somnolence.
Not any longer. Coca-Cola came out with a brand new campaign for its flagship brand, Thums Up, (India is one of the handful of countries where the company’s largest-selling brand is not Coke) in September 2008 — when summer was on its last legs. In October, when the mercury dipped further, it launched the “express pack” of Sprite for on-the-move customers who look for a smaller helping.
The case is no different for PepsiCo. For instance, it put SoBe, a premium energy drink, in the market some time last October. And it launched the nimbu paani (lemonade) variant of 7Up called Nimbooz in February — weeks before the onset of summer in large parts of the country. All this would have passed as marketing heresy till a few years ago. Now, it is the norm.
And this has started showing in the numbers. During PepsiCo’s fourth-quarter (October-December) 2008 earnings conference call this February, Mike White, CEO of PepsiCo International, confirmed the company “…had a strong fourth quarter (in emerging market beverages) with volume in China up 20 per cent and India up 25 per cent.”
“Our over-dependence on the summer season is declining,” admits PepsiCo India Executive Director (marketing) Punita Lal. “Yes, summer is a significant season in terms of sales but it no longer constitutes the bulk. We now have a year-round calendar of activity for each of our brands since we have consistently found that the share of our business which comes from winter months continues to rise,” adds Coca-Cola India Vice-president (marketing) Venkatesh Kini.
Some analysts say this is because of global warming which has led to seasons, other than just summer, getting hotter. Still others say summer plays a role in beverage sales only in the north. Whatever be the case, the fight for the Indian consumer is now a tough, round-the-year affair. The stakes are huge. “Around 120 billion litres of beverages are consumed by Indians every year, of which only 5 per cent are in the packaged segment,” explains an industry observer. PepsiCo has lined up investments totaling $500 million (Rs 2,500 crore). Coca-Cola’s budget is $250 million (Rs 1,250 crore).
Not just colas
Till recently, colas (Thums Up, Coca-Cola and Pepsi) drove sales in the Rs 7,500-crore per annum carbonated soft-drink market in the country. Three years ago, their share was as high as 46 per cent. All others — clear lime, cloudy lime, orange and apple — accounted for 47 per cent. Colas, according to industry estimates, now comprise only 38 per cent of the market, while the other category’s contribution has risen to 54 per cent.
The reasons are not far to seek. The pesticides-in-cola controversy that broke some years ago still lingers in the collective memory. Consumers, not just in India but the world over, are looking at healthier alternatives.
An evidence of this shift came recently when Sprite, a clear lemon drink from Coca-Cola, replaced PepsiCo’s flagship brand, Pepsi, at the number-two spot in soft-drink sweepstakes. PepsiCo, too, has noted the shift in demand for lime/lemon drinks, and introduced Nimbooz, the lemonade.
PepsiCo has, in fact, witnessed a big shift from a portfolio dominated by carbonated beverages to a more balanced one. Lal admits the company is now focusing on the liquid refreshment beverage category — a fundamental shift — as opposed to just carbonated soft drinks. This is aimed at “widening our portfolio in India,” says she.
The category now accounts for nearly a third of the company’s revenue from the earlier 20 per cent (approximately). “The carbonated category remains our engine of growth. In fact, it’s enabling us to invest in other categories. However, it has reached a relative state of maturity. Hence, the other categories are bound to grow,” she adds.
Lal says the company is working towards servicing the “underserviced” packaged category. “Over the last 15 years or so, this category has been largely untapped. Most beverages like tea, coffee, sugarcane juice and (till recently) lemonade came unpacked. It’s this market that we are now concentrating on,” says she.
One option could be new flavours. But PepsiCo Executive Vice-president (flavours) Alpana Titus says flavour is a wide terminology and could be of varying kinds — sometimes a limited edition product for an impulse category or a new category like an energy sports drink.
Coca-Cola, too, is identifying new flavours even though its core cola brands continue to contribute more to revenues. “We have a balanced portfolio and all our eight brands have contributed around 10 per cent or more to the mix,” says Kini.
In the recent past, Coca-Cola launched its pulpy orange drink, Minute Maid, in the country and supported it with a huge advertising budget. It has sunk good amounts on promoting its mango offering called Maaza, complete with a sensuous commercial featuring actress Katrina Kaif. (Aam Sutra, the tagline says.)
Now, Coca-Cola is launching non-cola products from its international range and also experimenting on packing local beverages. For instance, it has experimented with mango panna. Moreover, while it does have Fanta Apple in other countries, its research revealed that apples are the third-most popular flavour in India after orange and lemon. So it launched “apple” in the south and has now gone national.
“We need to make sure that we don’t proliferate stock-keeping units. Hence, we are launching products at a slow pace, generating success with them and then moving onto a new offering,” says Kini.
The shift has made PepsiCo and Coca-Cola calibrate their communication strategy. “Imagery” works for carbonated soft drinks, while “functionality” works for the other category. For instance, to entrench the “imagery” that Pepsi is the brand for youthfulness and irreverence, the company introduced the Youngistaan commercial with an attitude, self-belief and can-do spirit. In contrast, Tropicana commercials need to tell consumers “it’s 100 per cent juice.”
Similarly, there is a rethink on the medium as well. “Our portfolio is an impulse category. We create desire on air but bulk of it gets converted into purchase only by reminding them of the desire by using outdoor media,” notes Kini. Industry observers say dependence on TV is down to 75 per cent from 95 per cent till a few years ago. Investments are now going into out-of-home advertising, merchandising, point-of-sale promotion and emerging media like the radio and Internet.
“There was a time when we had tried to appeal to the masses through a 200 ml bottle priced at Rs 5,” admits Kini.
Coca-Cola’s prices in the market place now start with the basic introductory pack which is a 200 ml returnable glass bottle priced at Rs 8 and is available across low-income and rural areas. The next pack size up is 300 ml at Rs 10 and is focused on those willing to pay more for more within the immediate consumption arena. It is sold more in eateries, dhabas and so on where people consume at leisure and are less price-sensitive.
The company recently introduced an on-the-go pack as research showed it that the next pack of 600ml (mobile, PET) was too much to consume on the go. The new on-the-go consumption pack is called the “express pack” and is doing well in channels such as travel, malls and so on, where people want a single serve. The company also launched a fridge pack last year as consumers found the 2-litre pack too large for consumption unless it’s a party.
PepsiCo, too, hopes to maintain prices at a time when it is feeling some pain given the economic situation. The company, says Lal, has maintained the returnable glass bottle pricing between Rs 8 and Rs 10 (same as in 2002). Its 600 ml PET bottle is stable at Rs 20 per bottle (the lowering of excise duty did help).
Its SoBe is a premium product (not a mass one like Nimbooz) priced at Rs 75. In the past, PepsiCo had launched its famous sports drink, Gatorade, in the country at Rs 35 for 500 ml. Its promotion is largely restricted to the sporting arena.
Both Coca-Cola and PepsiCo have shown the door to older celebrity endorsers and are betting big on emerging stars. Over the last one year, PepsiCo has parted ways with Shah Rukh Khan, Sachin Tendulkar, Rahul Dravid and Sourav Ganguly only to strengthen its “Youngistaan” brigade — Mahendra Singh Dhoni, Ranbir Kapoor, Deepika Padukone, Ishant Sharma, Rohit Sharma, Shreeshanth and Virender Sehwag.
Coca-Cola, too, parted ways with Rani Mukherjee, only to take on board Genelia D’Souza for Fanta. PepsiCo signed on actress Asin (of Ghajini fame) to take the war to the orange flavour category. The company, however, renewed its contract with Coke brand ambassador Aamir Khan for Coca-Cola. It also has Hrithik Roshan and Aishwarya Rai available to endorse the brand. The Thums Up campaign, however, has been led by Akshay Kumar with his gravity-defying stunts in the forefront.
PepsiCo India had signed a $12.5-million (Rs 62.5 crore) deal with the Indian Premier League (IPL) in 2008 for five years as the event’s official beverage partner, only to walk out of the deal soon after. This time around, the company has restricted itself to team-sponsorship opportunities. While it has become the official hydration partner for Chennai Super Kings with its clear lemon drink 7UP, it is the “Official Partner and Official Pouring Partner” for Mumbai Indians.
The partnership with Mumbai Indians allows Pepsi exclusive branding rights on players’ uniform, besides strong in-stadia visibility and activation rights. The company has rolled out a new thematic TV commercial that stars Dhoni, Shreeshant, Ishaant Sharma and Sehwag.
Coca-Cola, on the other hand, is the beverage partner for the Shah Rukh Khan co-owned Kolkata Knight Riders with Sprite. This allows the company branding rights on players’ apparel and on the helmet as “pouring” partner. It has roped in Gautam Gambhir as brand ambassador for the company’s new “Coca-Cola Open Happiness” campaign ahead of the IPL season.
While a single national ad campaign works wonders, given the difference in consumption patterns in the south, the cola majors have decided to customise their advertising for the four southern states. PepsiCo, for instance, tied-up with Chennai Super Kings for its 7UP brand which is the most-preferred drink there.
PepsiCo also signed on Telugu movie actor Ram Charan Teja as part of its Youngistaan campaign to endorse Pepsi in Andhra Pradesh.
Coca-Cola, on the other hand, identified the southern market as a great testing ground for its new brands, so much so that both its pulpy orange drink, Minute Maid, and Fanta Apple were first launched, marketed and advertised there before a pan-India roll-out and a national campaign.
Given that south Indian cine stars are considered larger than life, Coca-Cola India roped in Tamil actor Vijay as the company’s face for Tamil Nadu. It has already signed up with actors Mahesh Babu and Ganesh for Andhra Pradesh and Karnataka. Apart from this, south Indian actress Trisha has signed a contract to endorse Fanta.