Coca Cola India's Thirst for the Rural Market

EXHIBIT III

PEPSICO's RURAL MARKETING INITIATIVES Contd..

Apart from the distribution set up, Pepsi also looked at the pricing aspect. Although rivals Pepsi and CCI both had good distribution networks covering rural markets, in pricing, CCI had scored over Pepsi by introducing 200 ml Coke bottles for Rs 5. This put pressure on Pepsi and it was forced to decrease price of its 300 ml bottles. In some regions it was reported that Pepsi had cut the prices of 300 ml bottles to as low as Rs 6/- per bottle. Though the price cut would have an adverse impact on the company's bottomline, it helped the company to increase volumes. In some regions, volumes from the rural market doubled and overall the volume increase was reported to be 45%. Said Kalathil, “Several states have touched 10 million cases in the month of May alone. This has never happened before^[21].”

On the advertising front also, it was CCI which scored over Pepsi with its – Thanda Matlab Coca Cola advertisement series. CCI's advertisement series featuring popular actor Aamir Khan connected with rural and urban consumers alike. Analysts pointed out that the Pepsi advertisements featuring popular film actors– Saif Ali Khan, Preity Zinta, Kareena Kapoor and Fardeen Khan, focused only on urban youth However, the company felt that its ads had clicked with rural consumers. Kalathil said, “It's a misconception that a rural-looking ad will appeal only to rural audiences, and that an urban backdrop ad will go down well only with city people. As long as the advertising is aspirational, it works.

The currently-on-air Kareena-Preity Zinta ad, for example, has gone down well with the rural youth.” In addition to television advertising, Pepsi also focused on event-related factors such as the wedding season in the rural market. Company sources felt that in rural areas, with the penetration of cable television, consumers were aspiring to urban lifestyles, particularly on social occasions when they felt their prestige was on display. This is why many wealthy rural consumers had started offering cool drinks rather than traditional drinks such as lassi and lemon juice, particularly at wedding receptions. This offered a great market for the company.

With both cola major diverting their energies towards the untapped rural markets, it seemed evident that the great Indian cola wars would be fought on rural turf.

Adapted from various newspaper articles.

ADDITIONAL READINGS & REFERENCES

^[21] Gupta, Parul, Ghosh, Partho, Drinks Sales up Sharply, www.rediff.com, June 7, 2003.