BRAND BATTLES: Cola offensives drive expansion of India market

After almost a decade of slugging it out in India, both Coca-Cola and Pepsi are realising the futility of taking swipes at each other when huge consumer potential is waiting to be unlocked. In a country of a billion people, soft drinks are consumed by just 140 million consumers.

As of last year, India's per capita consumption of carbonated soft drinks (CSD) stood at fewer than seven servings a year. It made more sense to rope in new consumers than fight over the existing set.

Last year, Coca-Cola India kick-started what its president Sanjiv Gupta called an affordability strategy. It slashed prices by 20-30 per cent, and launched a 200 ml bottle priced at just 10 cents (Rs 5) across the country. "We aim to double per capita consumption for carbonated soft drinks (CSDs) in India by 2010," Gupta announced.

Not to be left behind, Pepsi reacted. Both brands have intensified forays into small towns and the rural markets - the new lower price points will help, and their distribution machinery is being primed for this. PepsiCo CEO Rajeev Bakshi hopes to take Pepsi's rural sales to 10-15 per cent by the end of 2003, up from less than eight per cent last year.

Both brands say the 'pricing action' has worked brilliantly. Pepsi claims a 20-25 per cent surge in volume during 2003: "The pricing action has not just helped increase the depth and width of the market, it has also helped create new consumption occasions," says Shashi Kalathil, EVP of marketing, Pepsi. Coca-Cola claims volume growth of nearly 40 per cent: "Our affordability strategy was significant in bringing in new users," says Shripad Nadkarni, vice-president of marketing, Coca-Cola.

Coca-Cola and PepsiCo completely control India's $1.6 billion soft drink market, dominated by the CSD segment that accounts for 74 per cent ($1.2 billion) and 56 per cent by value and volume respectively. The Indian challengers remain confined to low-end products, such as non-carbonated soft drink concentrates, squashes, syrups and some fruit-based drinks and juices.

Growth in the market this year is expected to be 10-15 per cent in value terms and 20-25 per cent in volume terms. Last year, according to the Asia-Pacific Marketing Pocket Book, Coca-Cola was the second biggest spender in India, committing $78 million. Pepsi's spend of $43 million puts it in sixth spot.