Pepsi Enters India

Pepsi struggled getting into the beverage market in India. In 1988, the soft drink industry in India suffered because a government warning was issued that BVO, a necessary ingredient in the drinks, was a proven carcinogenic. Many companies could not afford importing substitutes of this ingredient and withdrew from the industry. This reduced amount of competition, and the fact that India experienced an economic crisis in 1991, allowed Coke and Pepsi to enter the Indian market. In 1993 about 45 percent of the soft drinks industry consisted of small manufacturers and was worth over 3.2 million dollars. Coca Cola had once been in India, until 1977, when it was mandated to leave because of a dispute with the Indian government. PepsiCo entered India, in a joint venture with local businesses, in 1986 as “Pepsi Foods Ltd.”.

In order for PepsiCo to sell their products, they had to comply with the many rules put in place by India’s government. One rule required PepsiCo to change their name, simply because Pepsi cola is a foreign product. PepsiCo was willing to appease the government in efforts to remain in India’s market. A large part of PepsiCo’s success in India’s market was credited to their strategic advertising. They sponsored the cricket matches, marketing a lifestyle towards India’s youth. Both PepsiCo and Coca-Cola, however, were accused by an environmental organization of having pesticide residue in their products. The companies ran tests that proved their products were safe but it was too late; people were banning and protesting their products. This hurt their image even more, including in the U.S. The contaminated groundwater incident only expanded further for Coke, and people began accusing the company of using sparse groundwater in its products and taking the water supplies away from the locals and from farming uses. So PepsiCo would need to go back to the drawing board.

Key Issue: Why PepsiCo globalizes with India

* To Broaden the markets

* To...