PepsiCo in India

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PepsiCo entered the Indian market in 1991, because of the economic reforms during that period. Initially it focused completely on the soft drinks market with a major thrust on the carbonated beverage segment. Pepsi Cola, Mirinda Orange and Lime, 7up and Slice were some of its offerings. With the arrival of Coke in 1993, the competition in the segment intensified with both players trying to grab a larger share of the market. Focusing heavily on promotions Pepsi advertised its products using celebrities, mega events such as Cricket tournaments and award ceremonies. New products were launched, such as Aquafina (mineral water), Mountain Dew etc in a bid to expand the market. Increasingly the company has focused on introducing products in hitherto untapped segments to chart out newer avenues for growth and profitability.

Gatorade

Gatorade was developed in 1965 in Gator country, Florida, as a rejuvenating drink for the football players of the University of Florida, after it was discovered that the intense heat and trying conditions were dehydrating the players, due to which their performance suffered. Drinking Gatorade improved the players’ performance significantly and this resulted in a huge demand for the drink. Constant scientific research and product development have led to Gatorade being established as a leader in the U.S energy drink market today.

Gatorade prevents dehydration, provides fluid carbohydrates electrolytes and other vital salts that the body loses because of vigorous activity. Although it is meant primarily for professional sportsmen, other classes of people can also drink it for its benefits. For example:

> It can serve as a rejuvenating and refreshing drink during the hot summer months.

> It can be used for convalescing patients to help them cope with loss of vital body fluids during illness

> It can serve as an evening drink for young children.

> It can simply be used as a thirst quencher or as a substitute for ‘fizzy’ drinks on social occasions

The Indian Market

The Indian market for sports drinks is quite underdeveloped with very few players such as Red Bull, in the market. However, the market is all set to grow because of the following reasons:

> Increasing popularity of sport in India because of enhanced television coverage. This has also resulted in an increase in the number of youth opting engaging themselves in physical sports.

> Increasing awareness about health and nutrition standards.

> Growth in the purchasing power of the urban consumer. The middle and high income class in India has grown at a rapid pace since the mid nineties and simultaneously their purchasing power has also grown

> Influence of the western culture due to an increased exposure to foreign channels and the internet. This has led to the increased acceptability of artificially flavored drinks vis-�-vis the natural drinks such as fruit juice.

Pepsi plans to launch Gatorade in India to exploit the possibilities offered by the growing market in India. However, its final decision will be based on a market research exercise and quantitative analysis of the Indian market and consumer behavior.

Decision Problems

Pepsi has a two fold decision to make

1. Should Pepsi launch Gatorade as a part of its product offering?

2. If yes, how should the product be positioned? Gatorade has been termed/ positioned in different markets worldwide as a sports drink, thirst quencher, cold drink, refresher, etc. This part aims at deciding the positioning of Gatorade

Criteria

* Demand >= Break Even Point (after including a minimum profit)

* Acceptable Price >= X

* Positioned Attribute ‘not equal to’ Attribute of Competing Products

Research Problems

To verify the validity of the above propositions, it is necessary that information be gathered. In this light, the following can be defined as the key research problems:

1. To identify the gaps between existing product range and consumer needs.

2. To assess the available demand for Gatorade

3. Ascertaining the dominant attributes that help a consumer differentiate and choose a soft drink

4. To identify the best positioning for Gatorade.

The data analysis plan will be divided according to these

Information Needs

The information needs of the above research problems

1. Consumer Profiling

2. Aggregate Demand for soft drinks

3. Served Demand

4. Preferred attributes of soft drinks

Sources of data

* Primary data

Primary data collection would consist of a survey through a structured questionnaire (Shown in Exhibit I & II ). The questionnaire would be administered on the respondents by trained personnel.

* Secondary Data

The basic data for the research to start with will have to be pooled out from the following sources of data:

1. Demographic Information as to the number of people in various age brackets, income categories, urban areas – preferably cross-tabbed

2. General attributes observed in past which act as determinants for the consumption of soft drinks.

3. Data as to the consumption and market share of various cold drinks, sport drinks (esp. Red Bull and Shock), health drinks, Iced Tea and Ready-to-serve tea(organized sector)

4. Estimated costs of manufacture, advertisement etc. to determine the base price for Gatorade and the desired Break-even sales.

5. Level of sports promotion, and involvement in the various regions of the country.

The process of the formulation of decision problems and research problems has been shown in Exhibit III, in the research matrix.

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