Daily Management Review

In His Battle With Coke And Pepsi In India, Indian Billionaire Ambani Follows A Tried-And-True Strategy


In His Battle With Coke And Pepsi In India, Indian Billionaire Ambani Follows A Tried-And-True Strategy
With plans to exploit its extensive retail network, reduce costs, and capitalize on nationalist sentiment, Indian industrial juggernaut Reliance is reviving a legendary regional cola brand in an effort to compete with PepsiCo and Coca-Cola in a crucial market.
Reliance, a company owned by billionaire Mukesh Ambani, this month debuted redesigned Campa beverages, sweet sodas that were formerly widely available in India but went out of style as US corporations grew quickly in a liberalizing market.
First, it might appear that Ambani will struggle to break Pepsi and Coca-monopoly Cola's over a market that Euromonitor estimates to be worth $4.6 billion and is expected to expand 5% annually until 2027.
Other well-known businessmen have attempted to compete directly with the beverage oligopolies but have fallen short, most notably Richard Branson with his Virgin Cola.
Yet, the richest man in Asia famously upended India's telecoms industry seven years ago with aggressive pricing, elevating Reliance to the top position. And he's using a portion of that same tactic in his soft drink business.
"Coca-Cola and Pepsi are unused to a nationwide challenge, and Reliance has the financial muscle and reach to challenge them with a local brand with high nostalgic value," said Amulya Pandit, a consultant at Euromonitor International.
Reliance intends to construct some plants on its own or in joint ventures to produce Campa and sell the soda at hotels, eateries, and on airplanes, according to a person with direct knowledge of the company's strategy. After purchasing the brand last year for $2.7 million, Campa's production is currently outsourced.
The business is significantly reducing in-store prices. According to reports, a two-litre Campa Cola bottle costs 49 rupees (60 U.S. cents) in stores, which is close to 50% less than the label price and about a third less than 2.25-litre Coke and Pepsi variations. While Pepsi starts at 12 rupees, the smallest bottles of Campa Cola and Coke are also 10 rupees.
"The price will be disruptive across," said the person, who added Reliance is planning an advertising spree during the upcoming popular IPL cricket tournament and is in talks with at least three teams to make Campa their refreshment partner.
Due to the confidentiality of the plan, the person did not want to be named. Reliance declined to comment, while Pepsi stated that it has a policy of not commenting on competition.
Coca-Cola stated that it has mostly maintained the cost of its small bottles since last year and was concentrating on growing distribution. It stated that the introduction of new competitors "presents a wonderful potential for investments to develop the sector further."
As part of its new consumer products drive, Reliance, India's largest retailer, would provide Campa to its 2,500 grocery shops and thousands of smaller non-network retailers. Reliance has set an internal goal of $6.5 billion in annual revenues within five years from this push.
In addition, the business has a grocery shopping app and a wholesale division that it uses to sell Campa products to 500,000 mom-and-pop shops.
T. Krishnakumar is the CEO driving Reliance's push into consumer products and cola. He spent nearly 17 years in several top positions at Coca-Cola.
Coca-Cola and Pepsi will also be wary of Reliance's marketing tactics after they successfully appealed to sentiments of nationalism and nostalgia by positioning Campa as a domestic brand with "Great Indian Taste" and a "deep legacy."
Due to the delicate nature of the topic, a former Pepsi executive who did not wish to be named claimed the US company has long been concerned about local products being marketed with a "India First" goal, particularly at a time when Prime Minister Narendra Modi himself supports independence.
The competition is already evident in the marketplace.
Campa cola or lemon plastic bottles were displayed at the main entry gates or put on shelves right next to the competitors in the five Reliance stores that Reuters visited in Mumbai in western India, Chennai in the south, and Lucknow in the north.
A Reliance shop manager in one of the company's outlets in Chennai claimed that in order to promote Campa this year, competitors were tucked behind it and concealed from view. 30 Campa bottles were sold for every 100 Pepsi and Coca-Cola bottles, according to another city store clerk.
The U.S. adversaries currently hold the upper hand. According to Alok Shah, a consumer analyst at India's Ambit Capital, Pepsi and Coca-Cola beverages are offered in at least 3 million Indian outlets, and the firms have a vast logistics network, dozens of plants, and the advantage of a flavor that is well-liked by most people.
"We'll need to wait and watch to see if consumers switch to Campa," he said, adding that Pepsi and Coke remain aspirational foreign brands for many Indians, offered at largely similar small-pack prices.
In contrast to the United States, where Coca-Cola is the market leader, Srinivas Rao claimed that he still adores Thums Up, a homegrown brand that the company bought in 1993.
"We buy Thums Up every time we eat biryani or meat at home. We are not drawn to discounts from other brands including Campa," Rao said outside a Reliance store in Chennai.