ArticlesHub123.blogspot.com

 Hello and welcome to Articaleshub123..

All of us have had at least some of these fizzy soft drinks. This is me during my childhood and I used

to love these fizzy drinks, well guess I still do.

But I surely didn't know the stories, the politics, the egos, and the cutthroat competition

behind these seemingly simple drinks. Where the players keep changing and only few survive.

Let’s travel across time and explore this fascinating Journey of, The Cola Wars of India.

We will begin our journey from a simpler time, 1837 in Mumbai. A chemist named Henry Rogers,

sets up probably India’s first "aerated water" factory. The manufactured soda was

called, Rogers. Soon a number of Parsi businesses started

venturing into the new soda business. In 1865 came Pallonji Soda, in 1884 came Ardeshir’s,

and by 1889 Dinshwaji launched Duke Soda. Their Raspberry Sodas became very popular

in Mumbai & Pune. Meanwhile far away in the US, around the early

1890s Coca-Cola & Pepsi, initially called as Brad's Drink, started their journey.

While in the rest of India locally made Sodas like Banta or Goli Soda served in a Codd-neck

bottle also became popular and in southern India regional players like Kalimark emerged.

Time moved at its own pace and then came 1947. India finally gained its Independence.

That’s when the battle to capture India's soft drink market truly started.

Coca-Cola and Pepsi were now eyeing India. Will they succeed or will there be a local

challenger?

We are right now outside the then Parle Gluco building in Mumbai, the makers of the popular

biscuit. In 1949, Parle decided to venture into the

cola market and released independent India's first Cola, Gluco Cola.

But Coke had already registered their trademark in India and objected to the use of "Cola"

word in their product. So, Parle had to change the name to Parle

Cola. But still, Coca-Cola was not satisfied, and finally, after nearly two years of tussle,

Parle discontinued their Cola. Meanwhile, Coca-Cola had began its production

in India with a bottling plant in New Delhi. While Pepsi also entered India around that

time. The two American Colas were now all set to

easily capture the Indian market. But Parle had still not given up.

In 1952, Parle launched an orange-flavored drink called “Gold Spot”. Gold Spot became

an instant hit, especially among children. Cola-Cola also started gaining strength in

India, But Pepsi was lagging behind. The national battle between Coca-Cola & Parle

was getting fierce. By 1962, Pepsi was lagging behind very far.

And finally, due to poor sales, it took a decision of leaving India.

Later in 1971, Parle launched Limca, which became popular especially among the females.

Moreover, to increase the market share of Gold Spot, Parle introduced a popular ad campaign

along with a new promising actress Rekha. Still, Parle avoided direct competition with

Coke and did not launch a similar cola drink. But the near future was going to turnaround

the whole story.

We have reached 1973. Indra Gandhi was then the Prime Minister of

India and she once described 1973 as “A Very Difficult Year".

As India's economy was badly affected post the 1971 War, Monsoon failures and a global

oil-shock which has created major problems. Now with a declining economy, Indra Gandhi

had to protect the foreign outflows. Therefore, the Foreign Exchange Regulation

Act of 1973, was passed. Maximum holding by a multinational company was reduced to 40%.

During that time Coca-Cola had emerged as the market leader, while Parle was comfortably

placed at number two position. This new law would mean Coca-Cola India has

to reduce its stake in the Indian venture in 2 years.

As the negotiations began between the Government and Coca-Cola.

Something very unexpected happened in 1975. "The President has proclaimed Emergency. There

is nothing to panic about.” On 26th June, these words of Indira Gandhi thundered from

the All India Radio. A state of emergency was declared across the country.

Soon the Indian economy and the political climate changed drastically.

Meanwhile in 1976, Parle was working hard to gain its footprint in the soft drinks market,

and therefore launched a fruit drink called Maaza.

At that time, the future seemed uncertain, but next year was going to become probably

the most eventful year of India’s Cola Industry.

In early 1977, after the revocation of Emergency, Elections were held in which Congress lost.

A Govt was formed by Janata Party and Morarji Desai became the first non-Congress Prime

Minister of India. The new Janata Party government was focused

on nationalization, and MNC's like Coca-Cola were under its radar.

That time Coca-Cola was the biggest Cola player. In the new government, George Fernandes became

Minister of Industries. He was one of the most vocal opponents of

Coca-Cola and wanted Coke to leave India. So, he laid two demands in front of Coca-Cola.

To dilute its stake in its Indian subsidiary to just 40% and also reveal the secret formula

of making Coke. As According to “Indian Patents Act 1970” the mere formulation of

Coke was not considered an invention. If Coke cannot agree to these demands, they

would have to quit India. George Fernandes knew Coke will never share

their secret formulation and this is what happened, shortly the company shut down their

factories and started leaving. 22 Indian bottling plants and around 10,000

workers became jobless. Some workers even protested outside the house

of George Fernandes to bring Coca-Cola back. George Fernandes later said, "I made the point

that 90 percent of India’s villages did not have safe drinking water, whereas Coke

had reached every village. Do we really need Coke? Do we need Pepsi?”

Now the newly formed government has to do something about the job creation of these

workers. Soon the reports started coming in of Coke bottles being smuggled from Pakistan

and sold at thrice the price in India. To fill this void of Coke, the government

took a bold decision. They decided to manufacture its own cola drink,

which would taste similar to Cola-Cola and also has less caffeine.

They called the new drink "77" or "Double Seven", which signified the end of Emergency,

defeat of Indira Gandhi and leaving of Cola-Cola. The tagline of the drink was, “For the Good

Times”. Soon Double Seven was launched by the Prime

Minister with much fanfare, but the response from the public was lukewarm, as it tasted

nothing like the Cola-Cola. The government then contacted the biggest

Coke bottler Pure Drinks to become the bottler for Double Seven. But Pure Drinks had other

plans. It also wanted a stake in the market left

by Coke. Pure Drinks created their own cola drink and called it Campa Cola. The drink

even had very similar branding and taste like the Coca-Cola.

Campa Cola got a better reception than Double 7.

As these two Cola drinks were trying to win the market, Parle too had shifted its goal

to conquer the Coca-Cola market share. But unlike others, Parle wanted to create

an original drink by using Indian ingredients. Parle’s team started working on it and eventually

they created a new Cola drink, which was going to change the Indian market, for a very long

time.

Happy days are here again, this was the first ad campaign of Parle's new cola drink called,

Thums Up. Initially the drink was named Thumbs Up, but the “B” was removed to make the

brand name unique. Post its release, the different taste of Thums

Up, went down well with customers and the brand became an instant success.

Then the competition between Thums Up and Campa Cola started.

Campa Cola, played the first move and reduced the price on its 200 ml bottle.

Now Parle had to counter it. And they applied an interesting strategy.

Instead of reducing the price, Parle increased the bottle size to 250 ml with the same price

and called it, Maha Cola. Maha Cola made Thums Up even more popular.

And with the help of aggressive marketing, Thums Up inched closer to become a market

leader. But it wasn't going to be a cakewalk for Thums

Up, other players too wanted the slice of the pie, brands like “Tarino” an orange

drink, and “Dixi Cola” emerged. Vijay Mallya too launched his own cola brand called

Thril Cola. While, regional brands, like Bovoto, Sosyo

were also gaining market share. Therefore, to get further hold of the market.

In the 1980s, Parle started the “Zing Thing” ad campaign, for Gold Spot, which targeted

the youth and the "Lime n Lemony " Ad campaign for Limca with Salman Khan.

Parle also released newer drink, Citra, and positioned it as a “super cooler”.

For Thums Up, Parle began one of the longest Indian advertising campaigns named “Taste

the Thunder”. During this time Pepsi was still eying for

the Indian market. And in 1985, Pepsi proposed to the government

a joint venture with the RP Goenka group. But Pepsi’s proposal was rejected by the

government. By 1987, Parle was the undisputed king of

the soft drink market. And Thums Up the highest-selling cola in the country with around 60% to 70%

market share. But all this was soon going to change drastically.

The year is 1988. We are right now outside the Indian parliament and after over 20 debates,

15 review committees an important decision is about to take place, which will change

the face of the Indian Soft Drink Industry. Pepsi is finally given permission to re-enter

the Indian markets. PepsiCo and its Indian joint-venture partners

are jubilant. But how did that happen? Why suddenly Pepsi

is being allowed to enter India? To understand this, we have to move to 1984,

Prime Minister Indira Gandhi was assassinated. Later her son Rajiv Gandhi formed the government

with a resounding mandate. At that time, the violence in the state of

Punjab had endangered the state and also left its youth jobless.

In 1985, Rajiv Gandhi decided to begin the process of decreasing Government control in

the private sector. Pepsi still eying for the Indian market, did not want to miss this

opportunity, and proposed setting up a joint venture with the Govt run Punjab Agro and

Voltas (a subsidiary of Tata), with PepsiCo holding around 39% stake. It committed itself

to an Initial investment of $14 million and proposed setting up an Agro research center,

open bottling & food processing plants in Punjab. In return, they wanted to sell Pepsi

in the Indian market. As the re-entry of Pepsi would address the

unemployment problem in the state of Punjab, after years of negotiations and debates, finally

in 1988 India said Yes to Pepsi. But Indian Cola makers were not happy with

this decision. While George Fernandes wrote a strongly worded letter to Pepsi.

"I learned that you are coming here. I am the one that threw Coca-Cola out, and we are

soon going to come back into the government. If you come into the country, you have to

remember that the same fate awaits you as Coca-Cola."

During the late 1980s, three billion bottles of branded soft drinks were sold annually

in India. Pepsi knew it cannot leave such a huge market,

due to threats from the opposition. But they didn't know one thing, in just a

year the opposition was going to form the new government.

Congress failed to form the government and V P Singh became the Prime Minister of India

with a minority government. V.P. Singh’s first visit as prime minister,

was to Amritsar’s Golden Temple, to announce that he hoped to bring back a “healing touch”

to Punjab’s then torn state. There in Punjab itself, Pepsi had already

started working on its bottling & food processing plant. They were keenly observing the new

governments policy, and also which portfolio will be given to George Fernandes, the one

who drove away Coca-Cola. At that time, the local bottlers & Cola companies

too had started a campaign to stop PepsiCo’s entry in India.

Meanwhile, United States was concluding an investigation of India’s trade practices

under its Super 301 provisions of the 1988 Trade Act, which could result in sanctions.

Eventually, India’s new prime minister will have to decide the fate of PepsiCo in India.

VP Singh knew that his decision about PepsiCo could not only impact US - India relations

but also India’s global business reputation. Finally, V. P. Singh decided that it would

be a bad precedent to stop a contract that took so long to negotiate.

PepsiCo was given the final go-ahead. Seeing Pepsi's entry, Coca-Cola also submitted

its own proposal to enter the Indian market. But was rejected by the government.

While, the American Double Cola was given permission to enter India, with a restriction

that they will not be able to withdraw profits from India for a certain period of time.

Soon PepsiCo began production of Snack Foods and was all set to launch Pepsi, Mirinda,

and 7-Up in the summer of 1990. Their flagship drink was named, Pepsi Era.

Just before the release of Pepsi, the opponents started challenging the name Pepsi Era, as

at that time it was against the law to use foreign names for Indian products.

Now Pepsi has to change the name, but they have already printed the name Pepsi Era on

its bottles. Permanently labeled bottles were scrapped and new ones made at a cost exceeding

$1 million. Now the drink was called, Lehar Pepsi.

And this is how after 28 years, Pepsi went on sale in India, in the year 1990.

To hold the fort, Parle continued its aggressive marketing strategy. And to promote Limca it

launched Limca Book of Records, which documented world records held by Indians.

Meanwhile, Coca-Cola was grimly observing the entry of Pepsi, they knew they have to

do something to re-enter India.

At the start of 1991, India was facing its worst foreign exchange crisis. India was close

to defaulting its financial obligations. To get an emergency loan, over 100 tons of Indian

gold was airlifted and mortgaged in foreign banks.

By mid-1991, Congress again came back in power and P. V. Narasimha Rao became the 9th Prime

Minister of India. P. V. Narasimha Rao selected the former Governor

of the Reserve Bank of India, Manmohan Singh as his finance minister.

To resolve the grave crisis in hand, they both decided to do something which was never

done before in the 44 years history of Independent India.

In parliament, the finance minister said, “No power on earth can stop an idea whose

time has come.” And this budget speech began the process of

liberalisation of the Indian economy. Restriction of 40% holding by a foreign company was raised

to 51%. This is the moment Coca-Cola was waiting for,

it immediately declared its intention to return back to India.

And within months Coca-Cola plans were approved. Meanwhile, Pepsi started using its financial

muscle to run extensive campaigns by using Bollywood and sports personalities.

The competition between Thums Up & Pepsi started heating up. Pepsi began downplaying Thums

Up as tasting like medicine while Thums Up also started hitting back at Pepsi by implying

it as a product for Kids. Both these companies knew the competition

was going to heat up further, as Coca-Cola is soon going to join the Indian market.

Billboards with taglines like “Happy to be here” were splashed all over.

After 16 years, Coca-Cola has re-entered India. The company made of goal to again make Coca-Cola

the biggest-selling soft drink company in India.

But they also realized that building multiple new bottling plants will be a lengthy process.

At that time, Parle was the undisputed market leader and had 62 bottlers across India. But

there was one problem in Parle's business model, they owned only 4 bottlers and the

rest 58 were franchises. Coke saw this as an opportunity and started

approaching the franchises to join Coke instead of Parle.

And soon, the majority of them agreed to switch to Coca-Cola.

Parle soon faced the crunch; it cannot maintain its Soft drink business if the majority of

bottlers switched to Coke. Therefore, in September, Parle took a difficult

decision, it agreed to sell its soft drink business, for an estimated value of $60 million.

And overnight, Coca-Cola became the biggest soft-drink company in India.

Now, Coca-Cola made a new goal, they want to replace Thumb Up and instead make Coca-Cola

as the most selling soft drink in India. A plan which might not be achieved that easily.

After taking over Parle, Coca-Cola decided to end all Parle brands and promote only Coca-Cola

products. First to go was Gold Spot to make space for

Fanta, few months later Limca was replaced by Sprite.

But Coke had eyes on Thums-Up as it would be replaced by their main brand Coca-Cola.

They thought it will be easy for Coke to replace Thums-Up.

So soon Coke started reducing the budget and production of Thums-Up and aggressively started

promoting Coca-Cola, through ads, retailer incentives and even by distributing free samples.

During that time Pepsi was quickly gaining the market share, and they also acquired one

of the oldest soda brand, Duke’s. As the battle to reach the top was gaining

traction. 1996 Cricket World Cup arrived.

Coca-Cola spent a huge money and defeated Pepsi to become the official sponsor & official

drink of the Cricket World Cup. To counter it, during the world cup Pepsi

launched a hugely successful advertising campaign with tagline “Nothing official about it”.

Indirectly striking at Coca-Cola, that official sponsorship does not matter.

This campaign captured the imagination of the public. While Coke even after being the

official sponsor lost out. In the absence of Thums Up, most of its fans

started switching to Pepsi. Seeing the market share of Thums-Up slipping daily to Pepsi.

Coca-Cola finally realized the importance of Thums-Up.

They brought back Thums-Up, and unlike the rest of the world, in India they made Thums-Up

as their key brand against Pepsi. Soon in the early 2000's, Limca, another Parle

brand, was recalled back into production. For the next decade, Thums Up remained the

largest selling fizzy drink brand in the country, which was overtaken then by Coca-Cola’s

Sprite in 2013. Still even after losing the top spot, Thums

Up the brand made locally in India by using Indian Ingredients, continues to sell more

than Cola-Cola & Pepsi. Now Coca-Cola is still India’s biggest soft-drink

maker with around 50% market share. But now, hundreds of local brands have also

emerged and together are giving a tough competition by accounting for around 24% of the Indian

market. Who knows which turn the future might take?

All I can say this was the fascinating Journey of, The Cola Wars of India.