Please read the case and then answer the questions that is provided after the case in bullet points:

THE BEVERAGE BATTLEFIELD

In 2007, the president and CEO of Coca-Cola asserted that Coke

has had a rather rough run in India, but now it seems to be getting

its positioning right. Similarly, PepsiCo's Asia chief asserted that

India is the beverage battlefield for this decade and beyond.

Even though the government had opened its doors wide to foreign companies, the experience of the world's two giant soft drink

companies in India during the 1990s and the beginning of the new

millennium was not a happy one. Both companies experienced a

range of unexpected problems and difficult situations that led them

to recognize that competing in India requires special knowledge,

skills, and local expertise. In many ways, Coke and Pepsi managers

had to learn the hard way that "what works here" does not always

"work there." "The environment in India is challenging, but we're

learning how to crack it," says an industry leader

THE INDIAN SOFT DRINK INDUSTRY

In India, over 45 percent of the soft drink industry in 1993 consisted of small manufacturers. Their combined business was worth

$3.2 million. Leading producers included Parle Agro (hereafter

"Parle"), Pure Drinks, Modern Foods, and McDowells. They

offered carbonated orange and lemon-lime beverage drinks. CocaCola Corporation (hereafter "Coca-Cola") was only a distant

memory to most Indians at that time. The company had been present in the Indian market from 1958 until its withdrawal in 1977 following a dispute with the government over its trade secrets. After

decades in the market, Coca-Cola chose to leave India rather than

cut its equity stake to 40 percent and hand over its secret formula

for the syrup.

Following Coca-Cola's departure, Parle became the market

leader and established thriving export franchise businesses in

Dubai, Kuwait, Saudi Arabia, and Oman in the Gulf, along with Sri

Lanka. It set up production in Nepal and Bangladesh and served

distant markets in Tanzania, Britain, the Netherlands, and the

United States. Parle invested heavily in image advertising at home,

establishing the dominance of its flagship brand, Thums Up.

Thums Up is a brand associated with a "job well done" and personal success. These are persuasive messages for its target market

of young people aged 15 to 24 years. Parle has been careful in the

past not to call Thums Up a cola drink, so it has avoided direct

comparison with Coke and Pepsi, the world's brand leaders.

The soft drink market in India is composed of six product segments: cola, "cloudy lemon," orange, "soda" (carbonated water),

mango, and "clear lemon," in order of importance. Cloudy lemon

and clear lemon together make up the lemon-lime segment. Prior

to the arrival of foreign producers in India, the fight for local

dominance was between Parle's Thums Up and Pure Drinks'

Campa Cola.

In 1988, the industry had experienced a dramatic shakeout following a government warning that BVO, an essential ingredient in

locally produced soft drinks, was carcinogenic. Producers either

had to resort to using a costly imported substitute, estergum, or

they had to finance their own R&D in order to find a substitute

ingredient. Many failed and quickly withdrew from the industry.

Competing with the segment of carbonated soft drinks is

another beverage segment composed of noncarbonated fruit

drinks. These are a growth industry because Indian consumers

perceive fruit drinks to be natural, healthy, and tasty. The leading

brand has traditionally been Parle's Frooti, a mango-flavored drink,

which was also exported to franchisees in the United States, Britain, Portugal, Spain, and Mauritius.

OPENING INDIAN MARKET

In 1991, India experienced an economic crisis of exceptional severity, triggered by the rise in imported oil prices following the first Gulf

War (after Iraq's invasion of Kuwait). Foreign exchange reserves fell

as nonresident Indians (NRIs) cut back on repatriation of their savings, imports were tightly controlled across all sectors, and industrial

production fell while inflation was rising. A new government took

office in June 1991 and introduced measures to stabilize the economy in the short term, then launched a fundamental restructuring

program to ensure medium-term growth. Results were dramatic. By

1994, inflation was halved, exchange reserves were greatly increased,

exports were growing, and foreign investors were looking at India, a

leading Big Emerging Market, with new eyes.

The turnaround could not be overstated; as one commentator

said, "India has been in economic depression for so long that everything except the snake-charmers, cows and the Taj Mahal has faded

from the memory of the world." The Indian government was viewed

as unfriendly to foreign investors. Outside investment had been

allowed only in high-tech sectors and was almost entirely prohibited in consumer goods sectors. The "principle of indigenous availability" had specified that if an item could be obtained anywhere

else within the country, imports of similar items were forbidden. As

a result, Indian consumers had little choice of products or brands

and no guarantees of quality or reliability.

Following liberalization of the Indian economy and the dismantling of complicated trade rules and regulations, foreign investment

increased dramatically. Processed foods, software, engineering

plastics, electronic equipment, power generation, and petroleum

industries all benefited from the policy changes.

PEPSICO AND COCA-COLA ENTER THE INDIAN MARKET

Despite its huge population, India had not been considered by foreign beverage producers to be an important market. In addition to

the deterrents imposed by the government through its austere trade

policies, rules, and regulations, local demand for carbonated drinks

in India was very low compared with countries at a similar stage

of economic development. In 1989, the average Indian was buying

only three bottles a year, compared with per-capita consumption

rates of 11 bottles a year in Bangladesh and 13 in Pakistan, India's

two neighbors.

PepsiCoPepsiCo entered the Indian market in 1986 under

the name "Pepsi Foods Ltd. in a joint venture with two local partners, Voltas and Punjab Agro." As expected, very stringent conditions were imposed on the venture. Sales of soft drink concentrate

to local bottlers could not exceed 25 percent of total sales for the

new venture, and Pepsi Foods Ltd. was required to process and distribute local fruits and vegetables. The government also mandated

that Pepsi Food's products be promoted under the name "Lehar

Pepsi" ("lehar" meaning "wave"). Foreign collaboration rules in

force at the time prohibited the use of foreign brand names on

products intended for sale inside India. Although the requirements

for Pepsi's entry were considered stringent, the CEO of Pepsi-Cola

International said at that time, "We're willing to go so far with India

because we want to make sure we get an early entry while the market is developing."

In keeping with local tastes, Pepsi Foods launched Lehar 7UP

in the clear lemon category, along with Lehar Pepsi. Marketing and

distribution were focused in the north and west around the major

cities of Delhi and Mumbai (formally Bombay). An aggressive pricing policy on the one-liter bottles had a severe impact on the local

producer, Pure Drinks. The market leader, Parle, preempted any

further pricing moves by Pepsi Foods by introducing a new 250-ml

bottle that sold for the same price as its 200-ml bottle.

Pepsi Foods struggled to fight off local competition from

Pure Drinks' Campa Cola, Duke's lemonade, and various brands

of Parle. The fight for dominance intensified in 1993 with Pepsi

Food's launch of two new brands, Slice and Teem, along with the

introduction of fountain sales. At this time, market shares in the

cola segment were 60 percent for Parle (down from 70 percent),

26 percent for Pepsi Foods, and 10 percent for Pure Drinks.

Coca-ColaIn May 1990, Coca-Cola attempted to reenter India by means of a proposed joint venture with a local bottling company owned by the giant Indian conglomerate Godrej.

The government turned down this application just as PepsiCo's

application was being approved. Undeterred, Coca-Cola made its

return to India by joining forces with Britannia Industries India

Ltd., a local producer of snack foods. The new venture was called

"Britco Foods."

Among local producers, it was believed at that time that

Coca-Cola would not take market share away from local companies because the beverage market was itself growing consistently from year to year. Yet this belief did not stop individual

local producers from trying to align themselves with the market

leader. Thus, in July 1993, Parle offered to sell Coca-Cola its

bottling plants in the four key cities of Delhi, Mumbai, Ahmedabad, and Surat. In addition, Parle offered to sell its leading

brands Thums Up, Limca, Citra, Gold Spot, and Mazaa. It

chose to retain ownership only of Frooti and a soda (carbonated

water) called Bisleri.

FAST FORWARD TO THE NEW

MILLENNIUM

Seasonal Sales Promotions2006 Navratri

CampaignIn India the summer season for soft drink consumption lasts 70 to 75 days, from mid-April to June. During

this time, over 50 percent of the year's carbonated beverages are

consumed across the country. The second-highest season for consumption lasts only 20 to 25 days during the cultural festival of

Navratri ("Nav" means nine and "ratri" means night). This traditional Gujarati festival goes on for nine nights in the state of

Gujarat, in the western part of India. Mumbai also has a significant Gujarati population that is considered part of the target market for this campaign

As the Regional Marketing Manager for Coca-Cola India stated,

"As part of the 'think localact local' business plan, we have tried

to involve the masses in Gujarat with 'Thums Up Toofani Ramjhat,' with 20,000 free passes issued, one per Thums Up bottle.

['Toofan' means a thunderstorm and 'ramjhat' means 'let's dance,'

so together these words convey the idea of a 'fast dance.'] There are

a number of [retail] on-site activities too, such as the 'buy oneget

one free' scheme and lucky draws where one can win a free trip

to Goa." (Goa is an independent Portuguese-speaking state on the

west coast of India, famed for its beaches and tourist resorts.)

For its part, PepsiCo also participates in annual Navratri celebrations through massive sponsorships of "garba" competitions

in selected venues in Gujarat. ("Garba" is the name of a dance,

done by women during the Navratri festival.) The Executive Vice

President for PepsiCo India commented: "For the first time, Pepsi

has tied up with the Gujarati TV channel, Zee Alpha, to telecast

'Navratri Utsav' on all nine nights. ['Utsav' means festival.] Then

there is the mega offer for the people of Ahmedabad, Baroda, Surat,

and Rajkot where every refill of a case of Pepsi 300-ml. bottles will

fetch one kilo of Basmati rice free." These four cities are located in

the state of Gujarat. Basmati rice is considered a premium-quality

rice. After the initial purchase of a 300-ml bottle, consumers can

get refills at reduced rates at select stores.

The TV CampaignBoth Pepsi-Cola and Coca-Cola

engage in TV campaigns employing local and regional festivals and

sports events. A summer campaign featuring 7UP was launched

by Pepsi with the objectives of growing the category and building

brand awareness. The date was chosen to coincide with the India-

Zimbabwe One-Day cricket series. The new campaign slogan was

"Keep It Cool" to emphasize the product attribute of refreshment.

The national campaign was to be reinforced with regionally adapted

TV campaigns, outdoor activities, and retail promotions.

A 200-ml bottle was introduced during this campaign in order to

increase frequency of purchase and volume of consumption. Prior

to the introduction of the 200-ml bottle, most soft drinks were sold

in 250-ml, 300-ml, and 500-ml bottles. In addition to 7UP, Pepsi

Foods also introduced Mirinda Lemon, Apple, and Orange in

200-ml bottles.

In the past, celebrity actors Amitabh Bachchan and Govinda,

who are famous male stars of the Indian movie industry, had

endorsed Mirinda Lemon. This world-famous industry is referred

to as "Bollywood" (the Hollywood of India based in Bombay).

Pepsi's Sponsorship of Cricket and Football

(Soccer)After India won an outstanding victory in the India-

England NatWest One-Day cricket series finals, PepsiCo launched

a new ad campaign featuring the batting sensation Mohammad

Kaif. PepsiCo's lineup of other cricket celebrities includes Saurav

Ganguly, Rahul Dravid, Harbhajan Singh, Zaheer Khan, V. V. S.

Laxman, and Ajit Agarkar. All of these players were part of the

Indian team for the World Cup Cricket Series. During the two

months of the Series, a new product, Pepsi Blue, was marketed

nationwide. It was positioned as a "limited edition," icy-blue cola

sold in 300-ml, returnable glass bottles and 500-ml plastic bottles,

priced at 8 rupees (Rs) and Rs 15, respectively. In addition, commemorative, nonreturnable 250-ml Pepsi bottles priced at Rs 12

were introduced. (One rupee was equal to US 2.54 cents in 2008.)

In addition to the sponsorship of cricket events, PepsiCo

also has taken advantage of World Cup soccer fever in India by featuring football heroes such as Baichung Bhutia in Pepsi's celebrity

and music-related advertising communications. These ads featured

football players pitted against sumo wrestlers.

To consolidate its investment in its promotional campaigns, PepsiCo sponsored a music video with celebrity endorsers including

the Bollywood stars, as well as several nationally known cricketers.

The new music video aired on SET Max, a satellite channel broadcast mainly in the northern and western parts of India and popular

among the 15-25-year age group.

Coca-Cola's Lifestyle AdvertisingWhile Pepsi's

promotional efforts focused on cricket, soccer, and other athletic

events, Coca-Cola's India strategy focused on relevant local idioms

in an effort to build a "connection with the youth market." The

urban youth target market, known as "India A," includes 18-24 year

olds in major metropolitan areas.

Several ad campaigns were used to appeal to this market segment. One campaign was based on use of "gaana" music and ballet.

("Gaana" means to sing.)

The first ad execution, called "Bombay Dreams," featured A.

R. Rahman, a famous music director. This approach was very successful among the target audience of young people, increasing sales

by about 50 percent. It also won an Effi Award from the Mumbai

Advertising Club. A second execution of Coke's southern strategy

was "Chennai Dreams" (Chennai was formerly called Madras), a

60-second feature film targeting consumers in Tamil Nadu, a region

of southern India. The film featured Vijay, a youth icon who is

famous as an actor in that region of south India.

Another of the 60-second films featured actor Vivek Oberoi

with Aishwarya Rai. Both are famous as Bollywood movie stars.

Aishwarya won the Miss World crown in 1994 and became an

instant hit in Indian movies after deciding on an acting career.

This ad showed Oberoi trying to hook up with Rai by deliberately leaving his mobile phone in the taxi that she hails, and then

calling her. The ad message aimed to emphasize confidence and

optimism, as well as a theme of "seize the day." This campaign

used print, outdoor, point-of-sale, restaurant and grocery chains,

and local promotional events to tie into the 60-second film. "While

awareness of soft drinks is high, there is a need to build a deeper

brand connect" in urban centers, according to the Director of

Marketing for Coca-Cola India. "Vivek Oberoiwho's an up and

coming star today, and has a wholesome, energetic imagewill help

build a stronger bond with the youth, and make them feel that it

is a brand that plays a role in their life, just as much as Levi's or

Ray-Ban."

In addition to promotions focused on urban youth, Coca-Cola

India worked hard to build a brand preference among young people

in rural target markets. The campaign slogan aimed at this market

was "thanda matlab Coca-Cola" (or "cool means Coca-Cola" in

Hindi). Coca-Cola India calls its rural youth target market "India

B." The prime objective in this market is to grow the generic soft

drink category and to develop brand preference for Coke. The

"thanda" ("cold") campaign successfully propelled Coke into the

number three position in rural markets.

Continuing to court the youth market, Coke has opened its

first retail outlet, Red Lounge. The Red Lounge is touted as a onestop destination where the youth can spend time and consume

Coke products. The first Red Lounge pilot outlet is in Pune, and

based on the feedback, more outlets will be rolled out in other

cities. The lounge sports red color, keeping with the theme of the

Coke logo. It has a giant LCD television, video games, and Internet surfing facilities. The lounge offers the entire range of Coke products. The company also is using the Internet to extend its

reach into the public domain through the website www.happiness

.coca-cola.com. The company has created a special online "Spriteitude" zone that provides consumers opportunities for online gaming and expressing their creativity, keeping with the no-nonsense

attitude of the drink.

Coca-Cola's specific marketing objectives are to grow the percapita consumption of soft drinks in the rural markets, capture a

larger share in the urban market from competition, and increase

the frequency of consumption. An "affordability plank," along with

introduction of a new 5-rupee bottle, was designed to help achieve

all of these goals.

The "Affordability Plank"The purpose of the "affordability plank" was to enhance affordability of Coca-Cola's products, bringing them within arm's reach of consumers, and thereby

promoting regular consumption. Given the very low per-capita

consumption of soft drinks in India, it was expected that price

reductions would expand both the consumer base and the market

for soft drinks. Coca-Cola India dramatically reduced prices of its

soft drinks by 15 to 25 percent nationwide to encourage consumption. This move followed an earlier regional action in North India

that reduced prices by 10 to 15 percent for its carbonated brands

Coke, Thums Up, Limca, Sprite, and Fanta. In other regions

such as Rajasthan, western and eastern Uttar Pradesh, and Tamil

Nadu, prices were slashed to Rs 5 for 200-ml glass bottles and

Rs 8 for 300-ml bottles, down from the existing Rs 7 and Rs 10 price

points, respectively.

Another initiative by Coca-Cola was the introduction of a

new size, the "Mini," expected to increase total volume of sales

and account for the major chunk of Coca-Cola's carbonated soft

drink sales.

The price reduction and new production launch were

announced together in a new television ad campaign for Fanta

and Coke in Tamil. A 30-second Fanta spot featured the brand

ambassador, actress Simran, well-known for her dance sequences

in Hindi movies. The ad showed Simran stuck in a traffic jam.

Thirsty, she tosses a 5-rupee coin to a roadside stall and signals to

the vendor that she wants a Fanta Mini by pointing to her orange

dress. (Fanta is an orangeade drink.) She gets her Fanta and sets

off a chain reaction on the crowded street, with everyone from

school children to a traditional "nani" mimicking her action.

("Nani" is the Hindi word for grandmother.) The director of marketing commented that the company wanted to make consumers

"sit up and take notice."

A NEW PRODUCT CATEGORY

Although carbonated drinks are the mainstay of both Coke's and

Pepsi's product lines, the Indian market for carbonated drinks is

now not growing. It grew at a compounded annual growth rate

of only 1 percent between 1999 and 2006, from $1.31 billion to

$1.32 billion. However, the overall market for beverages, which

includes soft drinks, juices, and other drinks, grew 6 percent from

$3.15 billion to $3.34 billion.

To encourage growth in demand for bottled beverages in the

Indian market, several producers, including Coke and Pepsi,

launched their own brands in a new category, bottled water. This

market was valued at 1,000 crores.1

Pepsi and Coke responded to the declining popularity of soft

drinks or carbonated drinks and the increased focus on all beverages that are noncarbonated. The ultimate goal is leadership in the

packaged water market, which is growing more rapidly than any

other category of bottled beverages. Pepsi is a significant player in

the packaged water market with its Aquafina brand, which has a

significant share of the bottled water market and is among the top

three retail water brands in the country.

PepsiCo consistently has been working toward reducing its

dependence on Pepsi-Cola by bolstering its noncola portfolio

and other categories. This effort is aimed at making the company

more broad-based in category growth so that no single product or

category becomes the key determinant of the company's market

growth. The noncola segment is said to have grown to contribute

one-fourth of PepsiCo's overall business in India during the past

three to four years. Previously, the multinational derived a major

chunk of its growth from Pepsi-Cola.

Among other categories on which the company is focusing

are fruit juices, juice-based drinks, and water. The estimated fruit

juice market in India is approximately 350 crores and growing

month to month. One of the key factors that has triggered this

trend is the emergence of the mass luxury segment and increasing

consumer consciousness about health and wellness. "Our hugely

successful international brand Gatorade has gained momentum

in the country with consumers embracing a lifestyle that includes

sports and exercise. The emergence of high-quality gymnasiums,

fitness and aerobic centres mirror[s] the fitness trend," said a

spokesperson.

Coca-Cola introduced its Kinley brand of bottled water and in

two years achieved a 28 percent market share. It initially produced

bottled water in 15 plants and later expanded to another 15 plants.

The Kinley brand of bottled water sells in various pack sizes:

500 ml, 1 liter, 1.5 liters, 2 liters, 5 liters, 20 liters, and 25 liters. The

smallest pack was priced at Rs 6 for 500 ml, while the 2-liter bottle

was Rs 17.

The current market leader, with 40 percent market share, is the

Bisleri brand by Parle. Other competing brands in this segment

include Bailley by Parle, Hello by Hello Mineral Waters Pvt. Ltd.,

Pure Life by Nestl, and a new brand launched by Indian Railways,

called Rail Neer.

CONTAMINATION ALLEGATIONS

AND WATER USAGE

Just as things began to look up for the American companies, an

environmental organization claimed that soft drinks produced in

India by Coca-Cola and Pepsi contained significant levels of pesticide residue. Coke and Pepsi denied the charges and argued that

extensive use of pesticides in agriculture had resulted in a minute

degree of pesticide in sugar used in their drinks. The result of tests

conducted by the Ministry of Health and Family Welfare showed

that soft drinks produced by the two companies were safe to drink

under local health standards.

Protesters in India reacted to reports that Coca-Cola and Pepsi

contained pesticide residues. Some states announced partial bans

on Coke and Pepsi products. When those reports appeared on the

front pages of newspapers in India, Coke and Pepsi executives were

confident that they could handle the situation. But they stumbled.

They underestimated how quickly events would spiral into

a nationwide scandal, misjudged the speed with which local

politicians would seize on an Indian environmental group's report

to attack their global brands, and did not respond swiftly to quell

the anxieties of their customers.

The companies formed committees in India and the United

States, working in tandem on legal and public relations issues.

They worked around the clock fashioning rebuttals. They commissioned their own laboratories to conduct tests and waited

until the results came through before commenting in detail. Their

approaches backfired. Their reluctance to give details fanned consumer suspicion. They became bogged down in the technicalities

of the charges instead of focusing on winning back the support of

their customers.

At the start, both companies were unprepared when one state

after another announced partial bans on Coke and Pepsi products; the drinks were prevented from being sold in government

offices, hospitals, and schools. Politicians exploited the populist

potential.

In hindsight, the Coke communications director said she could

see how the environmental group had picked Coca-Cola as a way of

attracting attention to the broader problem of pesticide contamination in Indian food products. "Fringe politicians will continue to be

publicly hostile to big Western companies, regardless of how eager

they are for their investment," she said.

Failing to anticipate the political potency of the incident, Coke

and Pepsi initially hoped that the crisis would blow over and they

adopted a policy of silence. "Here people interpret silence as guilt,"

said an Indian public relations expert. "You have to roll up your

sleeves and get into a street fight. Coke and Pepsi didn't understand that."

Coca-Cola eventually decided to go on the attack, though indirectly, giving detailed briefings by executives, who questioned the

scientific credentials of their products' accusers. They directed

reporters to Internet blogs full of entries that were uniformly proCoke, and they handed out the cell phone number for the director

of an organization called the Center for Sanity and Balance in Public Life. Emphasizing that he was not being paid by the industry,

Kishore Asthana, from that center, said, "One can drink a can of

Coke every day for two years before taking in as much pesticide as

you get from two cups of tea."

The situation continued to spin out of control. Newspapers

printed images of cans of the drinks with headlines like "toxic cocktail." News channels broadcast images of protesters pouring Coke

down the throats of donkeys. A vice president for Coca-Cola India

said his "heart sank" when he first heard the accusations because

he knew that consumers would be easily confused. "But even terminology like P.P.B.parts per billionis difficult to comprehend," he

said. "This makes our job very challenging."

PepsiCo began a public relations offensive, placing large advertisements in daily newspapers saying, "Pepsi is one of the safest

beverages you can drink today."

The company acknowledged that pesticides were present in the

groundwater in India and found their way into food products in

general. But, it said, "compared with the permitted levels in tea and

other food products, pesticide levels in soft drinks are negligible."

After all the bad press Coke got in India over the pesticide content in its soft drinks, an activist group in California launched a

campaign directed at U.S. college campuses, accusing Coca-Cola

of India of using precious groundwater, lacing its drinks with

pesticides, and supplying farmers with toxic waste used for fertilizing their crops. According to one report, a plant that produces

300,000 liters of soda drink a day uses 1.5 million liters of water,

enough to meet the requirements of 20,000 people. Other unsubstantiated reports surfaced that farmers in India were spraying

Coke on their crops because it is one-tenth the cost of pesticide but

just as effective at killing bugs.

The issue revolved around a bottling plant in Plachimada,

India. Although the state government granted Coke permission to

build its plant in 1998, the company was obliged to get the locally

elected village council's go-ahead to exploit groundwater and other

resources. The village council did not renew permission in 2002,

claiming the bottling operation had depleted the farmers' drinking

water and irrigation supplies. Coke's plant was closed until the corporation won a court ruling allowing it to reopen.

The reopening of the plant in 2006 led students of a major

Midwestern university to call for a ban on the sale of all CocaCola products on campus. According to one source, more than 20

campuses banned Coca-Cola products, and hundreds of people in

the United States called on Coca-Cola to close its bottling plants

because the plants drain water from communities throughout

India. They contended that such irresponsible practices rob the

poor of their fundamental right to drinking water, are a source of

toxic waste, cause serious harm to the environment, and threaten

people's health.

In an attempt to stem the controversy, Coca-Cola entered talks

with the Midwestern university and agreed to cooperate with an

independent research assessment of its work in India; the university

selected the institute to conduct the research, and Coke financed

the study. As a result of the proposed research program, the university agreed to continue to allow Coke products to be sold on

campus.

In 2008 the study reported that none of the pesticides were

found to be present in processed water used for beverage production and that the plants met governmental regulatory standards.

However, the report voiced concerns about the company's use of

sparse water supplies. Coca-Cola was asked by the Delhi-based

environmental research group to consider shutting down one of

its bottling plants in India. Coke's response was that "the easiest

thing would be to shut down, but the solution is not to run away. If

we shut down, the area is still going to have a water problem. We

want to work with farming communities and industries to reduce

the amount of water used."

The controversies highlight the challenges that multinational

companies can face in their overseas operations. Despite the huge

popularity of the drinks, the two companies are often held up as

symbols of Western cultural imperialism.

THE BATTLEGROUND SHIFTS

Coca-Cola turned a profit in India in 2010 for the first time since

its reentry in 1993. Coca-Cola now leads the industry in sales: It

owns the #1 and #2 brands, Thums Up and Coke, respectively.

Rather than killing the Thums Up brand, Coca-Cola executives

wisely have maintained that name, with its nationalistic popularity.

The nonalcoholic beverage industry also has experienced a growth

surge in the past decade, at some 10 percent per year. And now

the competitive battle is shifting from urban areas to the vast rural

regions of India.

In a community relations campaign, Coke also pointed out

the company is supporting sustainable development and inclusive growth by focusing on issues relating to water, environment, healthy living, women empowerment, sanitation, and social

advancement. In 2010 Coca-Cola India launched its 5by20 initiative, which is the company's global program to empower economically 5 million women entrepreneurs across six segments

by 2020.

In 2017, Coke and Pepsi were once again accused of nonsustainability in the production of its product. More than a million

wholesalers and small retailers in India's soft drink channel boycotted the products, along with other carbonated drinks, over allegations of the amount of water used. Amit Srivastava, director at

the NGO India Resource Centre, said, "According to our research

Coca-Cola is the number one buyer of sugarcane in India and

Pepsi is number three. If you take into account the water used for

sugarcane, then we're using 400 litres of water to make a bottle of

Cola. . . . Sugarcane is a water-guzzling crop. It is the wrong crop

for India." The controversy was heightened by a severe drought

that small farmers faced that year in the Tamil Nadu region in

southern India.

The Indian Beverage Association (IBA), which represents many

soft drink manufacturers, said it was disappointed with the boycott.

"Coca-Cola and PepsiCo India together provide direct employment

to 2,000 families in Tamil Nadu and more than 5,000 families indirectly. . . . IBA hopes that good sense will prevail and that consumers will continue to have the right to exercise their choice in Tamil

Nadu," it said.

In 2017 government officials were considering a "sin tax" on

sweetened, carbonated soda drinks in India.

Questions:

1)To capture the huge market that India has to offer, both Coca-Cola and PepsiCohave consistently tailoring their strategies to meet local needs and tastes. Thisincluded offering a range of bottle sizes and increasing the sweetness level in theirproducts.

1a. What product strategy are the two companies implementing?

1b. What are the advantages of this strategy?

1c. What are the disadvantages of this strategy?

1d. What strategy would the two companies use if the same products marketed inthe US were marketed in India?

1e. What are the advantages of this strategy?

1f. What are the disadvantages of this strategy?