MARKETING: The Pepsi Way to localisation!!

After cracking the snack food market in India with localised products, Pepsi is taking the formula to its beverages. How far will that take the firm?

Recent years have seen foods and beverages major PepsiCo referring to India as the company’s greatest learning lab, a place where product ideas, innovations and strategies are devised, tested, perfected, and gradually exported to PepsiCo’s other markets, with their own local twist. This “indovation” or innovation, keeping India and Indians in mind, has spawned several profitable and popular products to the company’s food and beverages portfolio. Some prime examples include salty finger snack Kurkure, baked chips Aliva, and potato chips Lay’s with local flavours. Today, Kurkure is the fastest growing snack in the PepsiCo portfolio, with revenues in excess of Rs.800 crore, as compared to the internationally acclaimed Lay’s which pulls in over Rs.1,000 crore in turnover towards PepsiCo India’s revenue of more than Rs.6,000 crore.

So far most of these innovations have been on the food side of the business, particularly in the snacks segment. In India, PepsiCo acquired local snacks brand Lehar and Uncle Chipps, which are doing decent business. In fact Lehar along with Kurkure is a focus brand for the company to crack the rural India market. In keeping with its strategy of pushing for regional market innovations, PepsiCo is currently test-marketing Lehar Iron Chusti brand snacks in India. The product is priced between Rs.2-Rs.5 and it’s fortified with iron, a vital nutrient that has been found wanting among the young Indian population.

All this is part of Pepsi’s plans of achieving $30 billion in revenue from healthy offerings like juices, oatmeals and healthy snacks. In India, Pepsi is aiming for doubling its revenue every five years, with the intention of reaching Rs.40,000 crore in revenue by 2020.

Apart from putting its food business on the fast track in India, the company is also focusing on strengthening its local offerings in the beverage portfolio. Currently, Pepsi is pilot testing a 200-ml noncarbonated energy drink called ‘Gluco Plus’. The product is a result of a collaboration between PepsiCo and Tata Group. In the fruit-based drinks, where mango flavours dominate, led by Coca-Cola owned Maaza, PepsiCo has been of late strongly pushing Slice (roping in Katrina Kaif as brand ambassador). It recently launched ‘Nimbooz’, a lemony drink, which competes with Coca Cola’s Minute Maid, which is a leader in the lemon drinks catgeory.

But most significantly, the firm has been taking strong steps towards going local with its beverage offerings. To this end, it has recently re-launched its long acquired (and on a sleep mode) Duke’s range of soft drinks in Mumbai, whose variants like Lemonade, Mangola and Ice Cream Soda were once popular among consumers in the country’s commercial capital. After the acquisition by Pepsi, while Duke’s Lemonade was retained, the others were withdrawn some seven years ago from the market. Pepsi has now launched its Duke brand of drinks in Raspberry, Gingerade, Ice Cream Soda and Masala Soda flavours, along with retro-packaging to remind consumers of the brand. Pepsi’s strategy of local innovation is in keeping with its CEO Indra Nooyi’s game plan to offer local twang and taste in beverages (after foods) as well. Nooyi’s agenda for PepsiCo’s growth lays down that since food and beverages are local in nature and varies from country to country, local innovation holds the key for the company’s success in its various markets.

Manu Anand, Chairman and CEO of PepsiCo India, says: “Our aim is to be an integrated food and beverage company. We will continue to enter new product categories.” The idea behind new launches is not to just introduce new products but to be region-specific with product offerings and innovations. “So you will be see interesting product launches from us in next few months, even as we continue to invest in our bottling infrastructure, in expanding capacity, in agri-processing,” says Anand.

On the other hand, Pepsi is aggressively pushing into regional products in India’s diversified marketplace. Besides providing an overall local touch to its product offerings, Pepsi is also working on adding fresh variants of its products in different geographies across India. Hence, Pepsi has introduced variants of Kurkure, which cater to specific region-wise flavours like Punjabi Tadka, Bengal Jhaal, Rajma and Daal flavours. Duke’s beverage is being pushed in Mumbai. Gluco Plus is being test marketed in Maharashtra, while Lehar Iron Chusti in on pilot run in Andhra Pradesh. Similarly Uncle Chipps is being pushed vigorously in Northern India, to ensure than local snacks don’t take away the pie from Lay’s.

But Pepsi still needs to do a lot more to establish itself as an undisputed leader in the Rs.10,000-crore organised food & beverage market in India, which is growing at roughly 15% year-on-year. For one it still does not have a local hit product like Kurkure in the beverage space. Then, in the food and beverage industry as a whole, it could look around for some tuck-in acquisitions so that it can acquire strong local brands like Haldiram’s, Rasna or parts of Dabur. Reportedly, the company is looking for alliances with milk co-operatives to offer milk-based drinks, like cold coffee, lassi and milk shakes. If Pepsi’s plans and strategy in India play out successfully, it could very well become a truly integrated food and beverage company.

My Story for 4Ps Business & Marketing in December 2012