PepsiCo adapts in India

07 June 2011

NEW DELHI: PepsiCo, the food and beverage giant, is transforming its approach in India, as the company seeks to attract shoppers across a range of price points.

The US multinational has outlined a worldwide goal of reaching the "next billion" consumers who currently have relatively low, but rising, incomes.

In India, this involves attempting to provide goods appropriate for the 330m potential buyers moving from the "C"-level demographic into the more affluent "B"-level socioeconomic category.

"It's a big transformation for us; we are targeting the next tier of consumers," Manu Anand, PepsiCo's chairman/ceo in India, told the Economic Times.

"We are looking at everything differently and doing this in a very structured way. But it's not as if we are under-investing in our core business; it's more about creating new consumption spaces."

PepsiCo's NourishCo arm, a partnership with Tata Global Beverages, has been testing the market for a lemon drink, Gluco Plus, which costs five rupees per 200ml container.

Lehar Foods, another division of PepsiCo, is focusing on introducing snacks available for the same amount or less.

Such efforts have incorporated biscuits and snacks commanding just two rupees, rolled out under the Lehar Iron Chusti brand, and trialled in the Andhra Pradesh region of the country.

These lines formed part of the "Project Asha" programme being implemented by PepsiCo, which aims to ensure under-nourished people can access healthy food.

While they are not anticipated to generate concrete profits for the short term, PepsiCo hopes volume sales could hit a critical mass in around two years.

PepsiCo splits the activities for each of its sub-units into sales, marketing and operations practices, and is now making additional adaptations to the prior organisational model.

This includes running individual distribution systems for brands sold at varying prices throughout its portfolio.

High-end ranges such as Tropicana fruit juices, Gatorade sports drinks and Quaker cereals are thus delivered separately from mid-range like Pepsi and Slice aerated beverages and Kukure or Lay's crisps.

Equally, offerings with the broadest intended appeal, such as Lehar Iron Chusti, are distributed by a specialist unit.

"Had we put, for example, Iron Chusti in the Kurkure system, it would have been another product - hence the decision to set up dedicated sales teams," said Anand.

"Communication and marketing for these products will be different too."

This strategy also yields significant flexibility when it comes to areas like packaging, as the firm can write labels in Telugu, a language which is widely-spoken in Andhra Pradesh, on Lehar Iron Chusti.

"We need to act like local players, but offer products that don't compromise on taste or quality," Anand said.

He further suggested packs priced at three rupees and five rupees supply between 45% and 50% of PepsiCo's domestic food sales, and are among the segments seeing demand climb at the fastest pace.

The company is cautious about selling its leading carbonated drinks at low price levels, and therefore expects the tie-up with Tata Global Beverages to serve as the main conduit in this sector.

More broadly, as three-quarters of PepsiCo's customer base buys goods both from its food and beverage stable, there are considerable possibilities for incremental growth.

Data sourced from the Economic Times; additional content by Warc staff