PepsiCo India has taken quite a pounding lately. Its title sponsorship of the Indian Premier League did not go too well. As if that wasn't bad enough, media reports based on Nielsen retail audit data said it lost vital market share to arch-rival Coca-Cola India. In an aggressive marketing move, Coca-Cola cut the price of its returnable glass bottles from Rs 10 to Rs 8. And PepsiCo India president Manu Anand quit.
Many in the industry say PepsiCo's Rs 160-crore IPL spend for the year was too much to begin with. Coca-Cola India was not even present for the bidding for this year. To make matters worse, a betting controversy hit the headlines mid-way through the matches, drawing attention away to the Board of Control for Cricket in India (BCCI) and the cricketers who were allegedly involved.
Some argue, however, that the cricket sponsorship was not all bad. "I do believe IPL 6 was a success for Pepsi - it got mind shares that were big," says Harish Bijoor, Brand Specialist and CEO, Harish Bijoor Consultants. But he also points to the "hurtful" disrepute resulting from the betting controversy, and says: "I do believe Pepsi should consider pulling out of IPL altogether until the game format cleans up its act."
Sunil Alagh, Founder and Chairman of SKA Advisors, says the IPL sponsorship was a good strategic marketing move. "It's in the peak summer season, which generally accounts for over 60 per cent of annual sales and has high viewership," he says. "However, they have paid a very high price... in terms of value for money spent, it has not been a success."
The company does not agree. "Yes, we have consciously stepped up our marketing spend this year, compared to the past, but it was a good decision," says Deepika Warrier, Vice President of Marketing for beverages at PepsiCo India. "All measures show that our visibility was high during the IPL matches."
She quotes Repucom International, which runs an independent sponsorship evaluation business matrix, to say that brand Pepsi had the lion's share during the season, with a 67 per cent share of exposure among the central sponsors. She also cites the Brand Buzz Index, an independent monitoring body that measures online traction, to show that Pepsi is gaining mileage over many brands, including Coke.
But Pepsi's woes are about more than a season of brand exposure. The company's senior management has seen some key departures, with the most recent being India head Manu Anand's sudden resignation in June. Last year, Varun Berry, former CEO of PepsiCo Foods, quit, and Punita Lal, former head of a PepsiCo-Tata Global Beverages joint venture called NourishCo, announced a sabbatical.
Industry observers are quick to link Anand's departure to PepsiCo's performance issues, but the company denies this. Sources say Anand is set to join
US confectionery giant Mondelez in an Asia-Pacific role.
A source in a leading executive search firm says PepsiCo has not responded swiftly enough to replace key people, and news of departures has tended to get bunched, suggesting poor management rather than lack of leadership talent. The company appears to have been caught off guard and the delay in announcing a successor suggests a lack of planning.
To be fair to PepsiCo, all vacancies so far have been filled internally. "The recent exit appears to be abrupt, but the company has filled all its positions through backfills and has a large pool of Indian talent," says K. Sudharshan, Managing Partner, EMA Partners International, a global executive search firm.
For instance, Pratik Pota, who headed PepsiCo's South Market Unit, took over at NourishCo, Gautam Mukkavilli returned from his Dubai posting as Senior Vice President in charge of the Global Nutrition Group for Asia, Middle East and Africa to take over as CEO India Beverages, and Praveen Someshwar, who was CEO India Beverages, took charge as CEO, India Foods.
But the buzz about performance issues refuses to die down. According to Nielsen data obtained from industry sources, Coca-Cola India has 56.7 per cent of the market, while PepsiCo has 34.1 per cent. NourishCo, formed in 2010 to launch health beverages, is moving slowly.
Many analysts say that despite its head start in the market, PepsiCo has failed to overtake Coca-Cola, which strategically acquired local brands Thums Up and Limca in 1993 from Parle Products. Its recently launched cola Atom is seen by critics as a "me-too" product that seeks to rival Thums Up.
"Coke's front-end market strategy has been well honed," says Bijoor. "Its price-point edge has been superior as well. Coke has activated the market at the top of the pyramid with just as much panache as it has oiled and activated the market at the bottom. As of today, Coke is most certainly ahead."
He adds: "Coke has a 360-degree smart strategy in place. Pepsi has got it right in parts, but has gaps as well - gaps that point to the loss of valuable market share points."
SKA Advisors's Alagh says PepsiCo lost out tactically to Coke this summer. "Not because of poor strategy but weak execution," he says. "Also, their new product Atom suffers in terms of taste, and there seems to be uncharacteristic slowness in their response to Coke's pricing move of Rs 8 per bottle."
It is early days yet for Atom. "We launched Atom as consumption patterns reveal a clear need for a stronger cola in a certain age bracket," says Warrier. She adds that Pepsico is in the midst of rolling out a new pricing strategy to take on Coke's price cut.
"We have had double-digit revenue growth this year, and we have been high on innovation," says Gautam Mukkavilli, CEO Beverages, PepsiCo India. "Moutain Dew remains the fastest growing beverage brand in the industry."
One of the innovations he is referring to includes the pilot launch of Tropicana juice in powder form, sold in sachets priced at Rs 10 in Bangalore and Mumbai. It has also launched Nimbooz Masala Soda in North India.
Coca-Cola India has been perfecting its reach and strategy not only with tactical price cuts but also by increased spending on marketing and visibility. For example, local events such as Thums Up's Jalsa initiative seeks to rope in rural audiences with action-based events. The company has also embarked on an environment-friendly initiative to use solar-powered cooling equipment to overcome the vagaries of power supply in the country.
A Coca-Cola spokesperson says: "Sparkling beverage volume growth in the quarter was led by brand Coca-Cola at 30 per cent, and driven by strong integrated marketing campaigns and continued expansion of packaging choices to consumers."
Alagh says: "The current winner in the cola battle is Coke, but the winner of the war is yet to play out."