Coca-Cola is one of the most popular brands all over the world. Globalization makes it possible to find Coca-Cola products on every continent. Of course, one of the most attractive markets for the Coca-Cola Company in India. This country has a huge population, which brings huge profits to Coca-Cola each year. However, Coca-Cola faced the problem of unfitting certain standards set by the Indian government. This situation had a significant negative impact on Coca-Cola’s image and decreased profits.
The problem that Coca-Cola Company faced in India was influenced by multiple factors. Firstly, it is necessary to note that regulations in India are weak. Norms adopted by the Indian government were borrowed from the EU and the U.S. Obviously, it is not right to use the standards of developed countries in developing countries. India has numerous problems related to ecology. Thus the concentration of pesticides in soil may be significantly higher than in the U.S. These pesticides can be found in water, which is later used to produce Coca-Cola. So The Center for Science and Environment (CSE) has issued a press release criticizing Coca-Cola for its high content of pesticides. As a result, the sales of Coca-Cola products had dropped by 30-40% just in two weeks. Before this accident, Coca-Cola gained a competitive advantage in the Indian market of beverages. In addition, there was a 20-25% year-to-date growth. The stock prices have also dropped by 10%, from 55 to 50$. This press release caused serious damage both to the reputation of Coca-Cola and to its income. Nowadays, Coca-Cola still experiences some problems in India because protestors blame it for the high consumption of groundwater. According to The Guardian, “Authorities in northern India have ordered the closure of a Coca-Cola bottling plant at the center of protests that it is extracting too much groundwater, an official said Wednesday.” (2014).
India is a country with a high percentage of people belonging to the middle class. However, only about 4% of the population lives in urban areas. 74% of India’s population lives in rural areas. There is a significant difference between these areas. Coca-Cola considered them as two totally different markets and developed a unique marketing strategy for each of them. People living in urban areas have more money. Thus the main idea was to create an effective positioning and attractive slogan. The marketing strategy for rural areas was more complicated because people living in rural areas earned less, and it was a luxury for them to buy Coca-Cola for 10 Rs. per bottle. In addition, there was a huge amount of traditional soft drinks popular in rural areas. Prices for traditional drinks were quite low because India is rich in fruits and different components used in soft drinks. Thus, Coca-Cola decided that the price should be lowered. As a result, Coca-Cola created a 200ml bottle instead of 300ml and cut the price two times. The strategy was very successful, and Coca-Cola acquired leading positions in the soft drinks market in India.
It is necessary to note the main competitor of Coca-Cola is Pepsi. Due to strict government regulations adopted in 1977, Coca-Cola had to leave India. It came back to India only in 1993. However, the competitive advantage belonged to Pepsi. The thing is that Pepsi created a joint venture in 1988. Collaboration with an Indian government-owned corporation opened Pepsi a way to the Indian market. This joint venture allowed Pepsi to gain precious experience and become the leading soft drink brand in the Indian market.
Coca-Cola used different marketing strategies in India. However, the most effective marketing strategy was the localization of the brand. Each region is unique. Thus needs of customers are also unique. Therefore, Coca-Cola created a strategy focused specifically on the Indian market, allowing becoming more successful than PepsiCo. According to the case study, Pepsi and Coke dominated the market and had a consolidated market share of over 95%.
The environmental analysis shows that Coca-Cola has a very strong position in India. There are almost no competitors, which would pose a potential threat to the company. In addition, the soft drink category in rural areas is undeveloped. Thus there is a huge potential for development in India. It means that the profits of Coca-Cola will increase every year, making India a valuable market for Coca-Cola Corporation. It is also important to mention that Coca-Cola employs about 10,000 people. Thus it creates a lot of working places. Being a developing country, India faces numerous problems related to employment. Moreover, India needs taxes to fill the budget, and Coca-Cola pays a huge amount of money to the government. These facts clearly show that it is not profitable for government to stop Coca-Cola production. Each year Coca-Cola creates different programs teaching people to preserve water. Coca-Cola supported rainwater-harvesting projects and created educational projects for children. The public image of Coca-Cola was very good before the accident described in the case study. Coca-Cola was positioned as a reliable employer, sustainable, and socially responsible company.
Coca-Cola Company should be focused on restoring its positive image. Firstly, it is necessary to involve an independent organization, which would conduct tests and find out whether Pollution Monitoring Laboratory (PML) and The Center for Science and Environment (CSE) were right or not. In this case, if PML and CSE were wrong, it is necessary to make them publicly apologize to Coca-Cola, so the image would be restored. In addition, Coca-Cola should invest money in developing soft drinks standards and regulations in India. All standards were borrowed from Europe and the U.S., which makes them unsuitable for India. Secondly, it is necessary to note that this crisis is only temporary. There always will be loyal customers of the Coca-Cola Company who will continue drinking it. They will show others that Coca-Cola is safe and can be consumed by everyone. Therefore, the main task of Coca-Cola is to reduce the length of this crisis. Finally, Coca-Cola Company should invest money in ecology. It is necessary to reduce the number of pesticides in water in India because the quality of water negatively influences the quality of all soft drinks. Finally, the most radical decision is to export clean water to India from other countries. According to Kazmir, “India is one of the most water-stressed countries in the world, and it’s not going to be easy for Coke to grow here,” said anti-globalization activist Amit Srivastava, co-ordinator of the India Resource Centre.” (2015).
Before PML and CSE acknowledge that their results are a mistake, Coca-Cola Company should export Coke to India from other countries. People will certainly continue buying Coca-Cola if they are sure that it was not made in India. When the hysteria related to the CSE press release becomes lower, then Coca-Cola Company should stop exporting and continue producing Coca-Cola in India. In addition, Coca-Cola should do everything to make government develop objective laws regulating soft drinks. The problem can be solved by making the water used in Coke production more clear. Therefore, Coca-Cola Company should invest money in improving the ecology of India.
Kazmin, A. (2015, April 22). Coca-Cola forced to abandon India bottling plant plans – FT.com. Retrieved September 28, 2015, from http://www.ft.com/cms/s/0/9e7d36da-e8e5-11e4-87fe-00144feab7de.html#axzz3n4H8MYPE
The Guardian. (2014, June 18). Indian officials order the Coca-Cola plant to close for using too much water. Retrieved September 28, 2015, from http://www.theguardian.com/environment/2014/jun/18/indian-officals-coca-cola-plant-water-mehdiganj