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Penetration of Mango Drinks in Siliguri Market - Free Essay Example

Penetration of Mango Drinks in Siliguri Market A Project Report On â€Å"PENETRATION â€Å"PENETRATION OF MANGO DRINKS IN SILIGURI SILIGURI MARKET† Undertaken at HINDUSTAN COCA COLA BEVERAGES PRIVATE LIMITED SILIGURI, WEST BENGAL (Submitted In Partial Fulfilment of the Requirements for the Award of PGDM) Submitted By Sourav Paul DCSMAT Business School, Kerala DCSMAT Business School Page 1 Penetration of Mango Drinks in Siliguri Market Under the Corporate guidance of Mr. Arindam Sikdar Area Sales Manager, Coca-Cola, North Bengal Sikkim Under the faculty guidance of Mr. Umesh Neelakantan DCSMAT BUSINESS SCHOOL DC COUNTY, PULLIKKANAM, VAGAMON IDUKKI, KERALA 685503 DCSMAT Business School Page 2 Penetration of Mango Drinks in Siliguri Market CERTIFICATE This is to certify that the project entitled â€Å"_Penetration of Mango Drinks in Siliguri Market___† is the bona fide record of the work done by _Sourav Paul_, PGP_09048_, _3rd_trimester PGDM student of _2009-2011_ batch, submitted in partial fulfilment of the requirements for the award of Post Graduate Diploma in Management. Faculty Guide: ________ Director: ____________ Date: Place: DCSMAT Business School Page 3 Penetration of Mango Drinks in Siliguri Market ACKNOWLEDGEMENT In my endeavour to learn management and industrial practices and apply my theoretical knowledge as stipulated by our curriculum, I would like to thank ‘Hindustan Coca Cola Beverages Pvt Ltd’ for providing me an opportunity to work with their department of sales and marketing, Siliguri- West Bengal. I hereby take this opportunity to thank my project guide, Mr. Arindam Sikdar, Area Sales Manager, HCCBPL, Siliguri, who was always there to provide me with necessary inputs and keeping me motivated during the project. Without his experience about the market and the people whom I was introduced by him, this project would not have been possible. I also extend my gratitude to Mr. P. S Gupta, STL (Sales Team Leader), HCCBPL, Siliguri, who was always there to analyze the project progress and to give valuable inputs for the procedure and in helping me to collect data. I would like to thank the entire Siliguri team of HCCBPL for their co-operation and for giving me a platform to hone my skills. Special mention needs to be made here of Mr. Subhasish Dey and all MD’s (Market Developers) of HCCBPL, Siliguri unit. I also extend my special gratitude to Mr. Umesh Neelakantan, faculty of DCSMAT Business School, Kerala for giving me suggestions encourage me to do this project. I thank all my friends and my family members for contributing towards the completion of this project. A special thanks to Mr. Bimal Sikdar Mrs. Sikdar for giving me an opportunity to do this project. DCSMAT Business School Page 4 Penetration of Mango Drinks in Siliguri Market CONTENTS ExecutiveSummary.. Introductions.. 9 Industry Overview.. 10 Key Success Factors 11 Variant Available.. 2 Overall Carbonated Soft Drink.. 13 Product Coverage.. 13 Market Trends Industry Challenges. .. 13 Bottled Water Market. 15 Growth Promotional Activities. 6 Retailer’s Power Continuously Increasing.. 16 Competition Becomes More and Difficult.. 17 Trends and Opportunities in Soft Drink Industry 19 Porter’s Five Force Analysis.. 20 Beverage Industry in India. 4 The Soft drink Industry.. 26 Company Overview 28 The Coca Cola Comp any 29 International Expansion.. 9 The World’s Most Powerful Brand.. 30 Patents, Copyrights, Trade Secrets Trademarks 31 Employees. 31 Core Capabilities 32 The Coca Cola System 4 Mission of Coca Cola.. 34 Vision of Coca Cola. 35 Vision 2020.. 37 Value 37 DCSMAT Business School Page 5 Penetration of Mango Drinks in Siliguri Market Hindustan Coca Cola Beverages Private Limited.. 38 Coke in India 38 Marketing Strategy 39 Brand Localization Strategy. 40 Rural Success 1 HCCBPL Structure 41 COBO.. 41 FOBO 42 Production Process. 3 Organizational Chart of HCCBPL. 44 Organizational Structure. 45 Sales Department Structure.. 47 Product Mix of Coca Cola. . 48 Competition to HCCBPL.. 0 Marketing Mix. 52 Corporate Social Responsibility. 55 Market Segmentation of Coca Cola.. 56 Classification of Outlets.. 56 Channel Cluster 7 Brand Order System of Coca Cola.. 58 Product Description of Cocacola 59 Project Profile.. 68 Penetration of Mango Drinks in Siliguri Market. 69 Market Analysis for Understanding the market scenario position of Maaza.. 9 Analysis of Product Maaza in Respect of Siliguri Market.. 70 Analysis of Supply History Forecast the Future Sales. 70 Objectives.. 71 Data Collection.. 71 DCSMAT Business School Page 6 Penetration of Mango Drinks in Siliguri Market Tools used For Data Collection 71 Collected Survey Data.. 72 Market Analysis Report for Understanding the market scenario 73 Market Share of Mango Drinks Brands in Siliguri Market. 73 Effective Supply of Mango Drinks in Siliguri Market 4 Market Share of Mango Drinks Brands According to Margin 75 Market Share of Mango Drinks Brands According to Schemes. 76 SWOT Analysis of Mango Drinks in India.. 77 SWOT Analysis of Maaza. 77 SWOT Analysis of Slice. 8 SWOT Analysis of Frooti.. 79 Differential Price Analysis of Different Mango Drinks in Siliguri Market. 80 SWOT Analysis of Maaza in Siliguri Market 82 Sales Forecasting.. 83 Recommendations Conclusion.. 5 Learning Outcome. 86 Annexure 87 Reference 88 DCSMAT Business School Page 7 Penetration of Mango Drinks in Siliguri Market Executive Summery Penetration of mango drinks in Siliguri market implies the market share of mango drinks in Siliguri market. Here main three mango drinks giants Coca Cola, PepsiCo Parle Agro marketed their mango drinks i. e. Maaza, Slice Frooti respectively. Indias mango obsession might be as old as the fruit but the business opportunities it is creating for food processing sector is something that has never happened before. While mango drink brands like Coca-Cola (Maaza), Pepsi (Slice), Dabur (Real Mango juice) and Parle Agro (Frooti) are promoting the category with new marketing and advertising campaigns. New capacities, driven by the mango juice and drink segment, are being added even as the industry consolidates itself. The total domestic processing capacity for the king of fruits has gone up many times in the past two years and now is estimated at 12,000 tonne per day during the season. The demand for processed Indian mango products is growing by about 25% in both the (1) domestic and the export markets. The organised beverage market in India is ruled by mango juices, nectars and drinks that have about 85% of the market share; about 38 million cases of mango-based drinks are consumed by (1) Indians every year. Similarly Coca-Cola, whose Maaza is said to have more than 35% market share for mango (1) drinks in India. The demand for this mango drinks not only in Siliguri but all over India is abnormal. Anybody can’t forecast the exact demand growth of this mango drinks eying on market. In Siliguri market 15 % sales solely comes from Maaza. Study on Penetration of mango drinks gives a vivid idea about the present situation of mango drinks market in Siliguri area and above all the role contribution of Maaza in this Siliguri market. Maaza is produced only in three plants all over India. They are Dasna in UP, Khurda in Orissa Wada in Maharashtra. These 3 plants produced supply only 40 % of India’s Maaza demand. So, identifying the exact demand delivering the product accordingly is the major challenge. DCSMAT Business School Page 8 Penetration of Mango Drinks in Siliguri Market INTRODUCTION DCSMAT Business School Page 9 Penetration of Mango Drinks in Siliguri Market INDUSTRY OVERVIEW SOFT DRINKS INDUSTRY â€Å"For years the story in the non alcoholic sector centred on the power struggle between Coke and Pepsi. But as the pop fight has topped out, the industry’s giants have begun relying on new product flavours and looking to non carbonated beverages for growth† Barbara Murray. Three leading companies have prominent presence in the soft drink industry. The leaders include the Coca-Cola Company, PepsiCo, and Cadbury Schweppes. According to the Coca-Cola annual report, it has the most soft drink sales with $32 billion. The Coca-Cola product line has several popular soft drinks including Coca-Cola, Diet Coke, Fanta, Barq’s, Sprite, Maaza etc selling over 400 drink brands in about 200 nations. PepsiCo is the next top competitor with soft drink sales grossing $28 billion for the two beverage subsidiaries, PepsiCo Beverages North America and PepsiCo International. PepsiCo’s soft drink product line includes Pepsi, Mountain Dew, Miranda, Slice etc which make up more than one quarter of its sales. Cadbury Schweppes, the third major player had soft drink sales of $13 billion with a product line consisting of soft drinks such as A Root Beer, Canada Dry, and Dr. Pepper. These companies products occupy large portions of any supermarkets shelf space, often covering more territory than real food categories like dairy products, meat, or produce. The prototype of all marketing and branding struggles, the Cola Wars keep expanding. The Pepsi and Coca Cola keep rolling out the big guns: duelling pop stars, and new branded products in the form of â€Å"Vanilla Coke and â€Å"Pepsi Blue. † They are fighting on the TV, in the fast-food restaurants, and in the supermarkets; they are also duelling in the schools. One of the biggest pushes of the last few years has been convincing school districts, universities, and other institutions to go all-Coke or all-Pepsi, in return for a (small) cut of the gross sales. Selling costly sugared water and building an increasing demand for it, even in Third World countries, involves DCSMAT Business School Page 10 Penetration of Mango Drinks in Siliguri Market marketing in its purest form, unsullied by any pre-existing need or local tradition. Markets in Eastern Europe, China, India, and Mexico, among others, are expanding fast, and both Coke and Pepsi are finding local partners (bottlers) in these countries to keep extending their reach. And while the American market may be mature, theres still an opportunity worldwide to replace hot beverages like coffee and tea that require some preparation with these cold, iconic ready-to-drink brands. KEY SUCCESS FACTORS Key factors for competitive success within the soft drink industry branch from the trends of the macro environment. Primarily, constant product innovation is imperative. A company must be able to recognize consumer wants and needs, while maintaining the ability to adjust with the changing market. They must keep up with the changing trends. Another key factor is the size of the organization, especially in terms of market share. Large distributors have the ability to negotiate with stadiums, universities and school systems, making them the exclusive supplier for a specified period of time. Additionally, they have the ability to commit to mass purchases that significantly lower their costs. They must implement effective distribution channels to remain competitive. Taste of the product is also a key factor for success. Furthermore, established brand loyalty is a large aspect of the soft drink industry. Many consumers of carbonated beverages are extremely dedicated to a particular product, and rarely purchase other varieties. This stresses the importance of developing and maintaining a superior brand image. Price, however, is also a key factor because consumers without a strong brand preference will select the product with the most competitive price. Finally, global expansion is a vital factor in the success of a company within the soft drink industry. The United States has reached relative market saturation, requiring movement into the global industry to maintain growth. DCSMAT Business School Page 11 Penetration of Mango Drinks in Siliguri Market Market trends and Industry challenges In order to survive in this environment, companies must consider the market trends that will likely shape the industry over the next few years. This will help soft drink companies to understand the challenges they will encounter and to turn them into opportunities for process improvement, enhanced flexibility and, ultimately, greater profitability. Market trends for the soft drink industry can be summarized by six fundamental themes: Changing consumer beverage preferences, Featuring a shift toward health-oriented wellness Drinks. Growing friction between bottlers and DCSMAT Business School Page 12 Penetration of Mango Drinks in Siliguri Market Manufacturers in the distribution system. Continually increasing retailer strength. Fierce competition. Complex distribution system composed of multiple Sales channels. Beverage safety concerns and more-stringent Regulations. Consumers turn to wellness and healthy drinks In much of the developed world, a significant portion of the population is overweight or obese. This includes two-thirds of Americans and an increasing number of Europeans. Consequently, many people have started to actively manage their weight and change their lifestyles, a shift that is reflected in their choices in the beverage aisles: †¢ Demand has increased for beverages that are Perceived to be healthy †¢ Energy drink consumption has also climbed, due to The increasingly active lifestyles of teenagers This trend towards healthier drinks has created a number of new categories, and changed the consumption trends of the beverage industry as a whole. While previously dominated by carbonated soft drinks, the industry is now more evenly balanced between carbonates, and product categories with a healthier image, such as bottled water, energy drinks and juice: While carbonates are still the largest soft drink segment, bottled water is catching up fast, with an average of 58 litters consumed annually per capita. Among individual countries, Italy ranks number one in bottled water consumption, with the average Italian drinking177 litters per year. Overall, bottled water represents the fastest growing soft drink segment, expanding at 9percent annually. This growth is being partially driven by increasing awareness of the health benefits of proper hydration. The industry has responded to consumers’ desire for healthier beverages by creating new categories, such as energy drinks, and by diversifying within existing ones. For example, the leading carbonated soft drink companies DCSMAT Business School Page 13 Penetration of Mango Drinks in Siliguri Market ave recently introduced products with 50%less sugar that fall mid-way between regular and diet classifications. Similarly, a South African juice company has recently released a fruit-based drink that contains a Full complement of vitamins and nutrients. Bottled Water Market Over the past 20 years, bottled water has been the beverage industry’s fastest growing segment the world over, fuelled first by the desire for clean, safe drinking water and then by the demand for single serves water as an alternative to other refreshment beverages. Bottled water is a multi- million rupee growth industry on its way to becoming the most consumed beverage. In India, bottled water market is valued at more than Rs 10 billion (Rs 1000cr) while maintaining an unimaginable annual growth rate of more than 60%. Even though it accounts for only 5 percent of the total beverage market in India; branded bottled water is the fastest growing industry in the beverage sector. Seeing the ever increasing potential, experts predict that the market size of bottled water would surpass the size of the soft drinks market in the near future. Many major Indian FMCG and multinational food corporation are also expected to join the market, which has already more than 250, brands in the organized and unorganized sector with large, medium and small scale production units. The market is also expected to undergo a major consolidation phase. But even as the bottled water industry is in a powerful position, of late it has come under increased scrutiny and criticism. Bottled water continues uninhibited growth growing the fastest among all soft drinks, bottled water threw in another strong performance in 2005 with double digit volume and current value growth. Home delivery sales garnered pace, supported by population migration from rural to urban areas. This meant increasing pressure on an already crumbling public water distribution system in most cities. Tourism also boosted bottled water, with an increasing number of domestic and foreign tourists creating greater demand for bottled water. Trade sources point to the presence of over 600 bottled water manufacturers in India and the number is predicted to grow in the forecast period as demand continues unabated. DCSMAT Business School Page 14 Penetration of Mango Drinks in Siliguri Market The market preference in India is highly region based. Whole cola drinks have main markets in metro cities and northern states of UP, Punjab, Haryana etc. Orange flavoured drinks are popular in southern states. Sodas too are sold largely in southern states besides sales through bars. Western markets have preference towards mango flavoured drinks. Diet Coke and Diet Pepsi constitute just 0. 7% of the total carbonate beverage market. Growth promotional activities The government has adopted liberalized policies for the soft drink trade to give the industry a boast and promote the Indian brands internationally. Although the import and manufacture of international brands like Pepsi and Coke is enhanced in India the local brands are being stabilized by advertisements, good quality and low cost. The soft drinks market till early 1990s was in hands of domestic players like campa, thumps up, Lima etc but with opening up of economy and coming of MNC players Pepsi and Coke the market has come totally under their control. The distribution network of Coca cola had6. lacks outlets across the country in FY00, which the company is planning to increase to 10 lacks by FY10. On the other hand Pepsi Cos distribution network had 6 lacks outlets across the country during FY00 which it is planning to increase to 9 Lacks by FY10. Retailers’ power continuously increases With Wal-Mart leading the charge, the world’s dominant retailers are demanding bet ter service and shorter order-to-delivery cycles from soft drink companies. This is dramatically reshaping the industry, forcing soft drink companies to become more efficient, while taking pricing power out of their hands. The dual need for improved supply chain agility and cost efficiency is challenging suppliers to revaluate the ways in which they plan and manage their supply chains, as they constantly search for approaches that will help them achieve the rock-bottom prices and operational excellence now expected in the industry. Furthermore, the growth of private-label products is encouraging manufacturers to take a number of steps to compete more effectively. Increasingly, they are turning to innovation and new product introduction as a means to achieve real ifferentiation as well as growth. Branded manufacturers are also looking to get closer to the DCSMAT Business School Page 15 Penetration of Mango Drinks in Siliguri Market consumer, with many of the larger ones piloting direct-to-consumer marketing approaches. They are also trying to better understand the in-store consumer experience by monitoring the execution of in-store activities. Nevertheless, many suppliers are losing brand equity. In rec ent years, a couple of factors have been fuelling the growing competition between manufacturers and Retailers: Retailers are using their power to set higher standards for marketing and operational excellence, including escalating demands for improved service quality and shorter orderto-delivery cycles from manufacturers and distributors. Many of these demands, such as RFID, not only squeeze margins but also require significant capital investments. Because of their direct relationships with consumers, retailers have a deeper knowledge of consumer behavior. Competition is becoming more and more difficult In the beverage manufacturing industry, competition is growing due to the following factors: Constant demand for new niche products related to consumer preferences for healthier and more diversified offerings Industry consolidation, which has significantly raised the bar for the â€Å"scale needed to compete† The growth of private-label products. These competitive pressures have led to: DCSMAT Business School Page 16 Penetration of Mango Drinks in Siliguri Market SKU proliferation number of SKUs in a typical beverage company has doubled from 1991 to 2001 A plethora of new product failures: †¢ †¢ †¢ Only 20% are effective Only 10% generate significant revenue Most fail within the first two years Further consolidation and rationalization to capture cost savings by improving operations and eliminating redundancy: †¢ Industry leaders are acquiring small, high growth Companies †¢ Mid-market players are vertically integrating †¢ Profitability can only be improved through greater efficiency in the supply chain or through more-effective trade promotions, which usually require considerable expenditures. Statutory regulation is increasing Governments around the world are concerned about food safety and quality. Periodically, safety failures make big news in the global press. Amid this growing concern, regulators are cracking down on sanitation and variety of other food-safety requirements. While food safety is the major focus in Europe, the emphasis in the US is more on bio-terrorism and food security. However, the provisions in the 2005traceability legislation in the US, which stemmed from the Bioterrorism Act of 2002, and those in the EU Directive 178, Articles 18 and DCSMAT Business School Page 17 Penetration of Mango Drinks in Siliguri Market 19, are very similar. The U. S. Food and Drug Administration (FDA) is proposing the registration and tracking of almost all domestic and imported food articles, but some are concerned that the complexity of the rules will overwhelm both the food industry and the FDA. Each soft drink company must take these industry challenges into consideration, as well as its own strengths and market position, when looking for ways to drive innovation, accelerate growth and increase margins. The next section outlines where some of the most promising opportunities for accomplishing these objectives can be found. Trends and Opportunities in the Soft Drink Industry The Ingredients for Success Soft drinks are gradually overtaking hot drinks as the biggest beverage sector in the world, with consumption rising by around 5 percent a year according to a recent report from Zenith International. But while the US remains the biggest market for now, Asia is likely to be the main driver of sales growth in the future. The industry on the whole is encountering new opportunities and challenges. Changing consumer demands and preferences require new ways of maintaining current customers and attracting new ones. Amid ever-increasing competition, beverage companies must intensely court customers, offer high quality products, efficiently distribute them, ensure safety, and keep prices low – all while staying nimble enough to exploit new markets by launching new products. Market trends for the soft drink industry can be characterized by six fundamental themes: 1. Changing consumer beverage preferences, featuring a shift toward health-oriented. 2. Growing friction in the distribution system, induced by bottlers and manufacturers with conflicting interests DCSMAT Business School Page 18 Penetration of Mango Drinks in Siliguri Market 3. Continually increasing retailer strength and a corresponding decrease in the power of soft drink companies 4. Fierce competition fueled by growth of private labels and product proliferation. 5. A complex sales environment, composed of multiple channels all with unique management requirements 6. Beverage safety issues, driven by newly enacted US and EU regulatory requirements each soft drink company must take these industry challenges into consideration, as well as its own strengths and market position, when looking for ways to drive innovation, PORTER’S FIVE FORCE ANALYSIS OF SOFT DRINK INDUSTRY Defining the industry: Both concentrate producers (CP) and bottlers are profitable. These two parts of the industry are extremely interdependent, sharing costs in procurement, production, marketing and distribution. Many of their functions overlap; for instance, CPs does some bottling, and bottlers conduct many promotional activities. The industry is already vertically integrated to some extent. They also deal with similar suppliers and buyers. Entry into the industry would involve developing operations in either or both disciplines. Beverage substitutes would threaten both CPs and their associated bottlers. Because of operational overlap and similarities in their market environment, we can include both CPs and bottlers in our definition of the soft drink industry. In 1993, CPs earned 29% EBIT profits on their sales, while bottlers earned 9% profits on their sales, for a total industry profitability of 14%. This industry as a whole generates positive economic profits. Rivalry: Revenues are extremely concentrated in this industry, with Coke and Pepsi, together with their associated bottlers, commanding 73% of the case market in. Adding in the next tier of soft drink DCSMAT Business School Page 19 Penetration of Mango Drinks in Siliguri Market companies, the top six controlled 89% of the market. In fact, one could characterize the soft drink market as an oligopoly, or even a duopoly between Coke and Pepsi, resulting in positive economic profits. To be sure, there was tough competition between Coke and Pepsi for market share, and this occasionally hampered profitability. For example, price wars resulted in weak brand loyalty and eroded margins for both companies in the 1980s. The Pepsi Challenge, meanwhile, affected market share without hampering per case profitability, as Pepsi was able to compete on attributes other than price. Substitutes: Through the early 1960s, soft drinks were synonymous with â€Å"colas† in the mind of consumers. Over time, however, other beverages, from bottled water to teas, became more popular, especially in the 1980s and 1990s. Coke and Pepsi responded by expanding their offerings, through alliances (e. g. Coke and Nestea), acquisitions (e. g. Coke and Minute Maid), and internal product innovation (e. g. Pepsi creating Orange Slice), capturing the value of increasingly popular substitutes internally. Proliferation in the number of brands did threaten the profitability of bottlers through 1986, as they more frequent line set-ups, increased capital investment, and development of special management skills for more complex manufacturing operations and distribution. Bottlers were able to overcome these operational challenges through consolidation to achieve economies of scale. Overall, because of the CPs efforts in diversification, however, substitutes became less of a threat. Power of Suppliers: The inputs for Coke and Pepsi’s products were primarily sugar and packaging. Sugar could be purchased from many sources on the open market, and if sugar became too expensive, the firms could easily switch to corn syrup, as they did in the early 1980s. So suppliers of nutritive sweeteners did not have much bargaining power against Coke, Pepsi, or their bottlers. NutraSweet, meanwhile, had recently come off patent in 1992, and the soft drink industry gained DCSMAT Business School Page 20 Penetration of Mango Drinks in Siliguri Market nother supplier, Holland Sweetener, which reduced Searle’s bargaining power and lowering the price of aspartame. With an abundant supply of inexpensive aluminium in the early 1990s and several can companies competing for contracts with bottlers, can suppliers had very little supplier power. Furthermore, Coke and Pepsi effectively further reduced the supplier of can makers by negotiating on behalf of their bottlers, thereby reducing the number of major contracts available to two. With more than two companies vying for these contracts, Coke and Pepsi were able to negotiate extremely favorable agreements. In the plastic bottle business, again there were more suppliers than major contracts, so direct negotiation by the CPs was again effective at reducing supplier power. Power of buyers: The soft drink industry sold to consumers through five principal channels: food stores, convenience and gas, fountain, vending, and mass merchandisers. Supermarkets, the principal customer for soft drink makers, were a highly fragmented industry. The stores counted on soft drinks to generate consumer traffic, so they needed Coke and Pepsi products. But due to their tremendous degree of fragmentation (the biggest chain made up 6% of food retail sales, and the largest chains controlled up to 25% of a region), these stores did not have much bargaining power. Their only power was control over premium shelf space, which could be allocated to Coke or Pepsi products. This power did give them some control over soft drink profitability. Furthermore, consumers expected to pay less through this channel, so prices were lower, resulting in somewhat lower profitability. National mass merchandising chains such as Wal-Mart, on the other hand, had much more bargaining power. While these stores did carry both Coke and Pepsi products, they could negotiate more effectively due to their scale and the magnitude of their contracts. For this reason, the mass merchandiser channel was relatively less profitable for soft drink makers. The least profitable channel for soft drinks, however, was fountain sales. Profitability at these DCSMAT Business School Page 21 Penetration of Mango Drinks in Siliguri Market ocation was so abysmal for Coke and Pepsi that they considered this channel â€Å"paid sampling. † This was because buyers at major fast food chains only needed to stock the products of one manufacturer, so they could negotiate for optimal pricing. Coke and Pepsi found these channels important, however, as an avenue to build brand recognition and loyalty, so they invested in the fountain equipment and cups that were used to serve their products at thes e outlets. As a result, while Coke and Pepsi gained only 5% margins, fast food chains made 75% gross margin on fountain drinks. Vending, meanwhile, was the most profitable channel for the soft drink industry. Essentially there were no buyers to bargain with at these locations, where Coke and Pepsi bottlers could sell directly to consumers through machines owned by bottlers. Property owners were paid a sales commission on Coke and Pepsi products sold through machines on their property, so their incentives were properly aligned with those of the soft drink makers, and prices remained high. The customer in this case was the consumer, who was generally limited on thirst quenching alternatives. The final channel to consider is convenience stores and gas stations. If Mobil or Seven-Eleven were to negotiate on behalf of its stations, it would be able to exert significant buyer power in transactions with Coke and Pepsi. Apparently, though, this was not the nature of the relationship between soft drink producers and this channel, where bottlers’ profits were relatively high, at $0. 40 per case, in. With this high profitability, it seems likely that Coke and Pepsi bottlers negotiated directly with convenience store and gas station owners. So the only buyers with dominant power were fast food outlets. Although these outlets captured most of the soft drink profitability in their channel, they accounted for less than 20% of total soft drink sales. Through other markets, however, the industry enjoyed substantial profitability because of limited buyer power. DCSMAT Business School Page 22 Penetration of Mango Drinks in Siliguri Market Barriers to Entry: It would be nearly impossible for either a new CP or a new bottler to enter the industry. New CPs would need to overcome the tremendous marketing muscle and market presence of Coke, Pepsi, and a few others, who had established brand names that were as much as a century old. Through their DSD practices, these companies had intimate relationships with their retail channels and would be able to defend their positions effectively through discounting or other tactics. So, although the CP industry is not very capital intensive, other barriers would prevent entry. Entering bottling, meanwhile, would require substantial capital investment, which would deter entry. Further complicating entry into this market, existing bottlers had exclusive territories in which to distribute their products. Regulatory approval of intrabrand exclusive territories, via the Soft Drink Interbrand Competition Act of 1980, ratified this strategy, making it impossible for new bottlers to get started in any region where an existing bottler operated, which included every significant market in the US. DCSMAT Business School Page 23 Penetration of Mango Drinks in Siliguri Market BEVERAGE INDUSTRY IN INDIA India is home to one of the most ancient cultures in the world dating back over 5000 years. Beverages industry in India plays an important role in the Indian FMCG market. It is an industry, in which the players constantly innovate, in order to come up with better products to gain more market share and to satisfy the existing consumers. BEVERAGES Alcoholic Non-Alcoholic NonCarbonated Non-Cola Carbonated Cola Non-Cola The beverage industry is vast and there various ways of segmenting it, so as to cater the right product to the right person. The different ways of segmenting it are as follows: †¢ Alcoholic, non-alcoholic and sports beverages Page 24 DCSMAT Business School Penetration of Mango Drinks in Siliguri Market †¢ †¢ †¢ †¢ Natural and Synthetic beverages In-home consumption and out of home on premises consumption. Age wise segmentation i. e. beverages for kids, for adults and for senior citizens Segmentation based on the amount of consumption i. e. high levels of consumption and low levels of consumption. If the behavioural patterns of consumers in India are closely noticed, it could be observed that consumers perceive beverages in two different ways i. e. everages are a luxury and that beverages have to be consumed occasionally. These two perceptions are the biggest challenges faced by the beverage industry. In order to leverage the beverage industry, it is important to address this issue so as to encourage regular consumption as well as and to make the industry more affordable. Four strong strategic elements to increase consumption of the products of the beverage industry in India are: †¢ The qu ality and the consistency of beverages needs to be enhanced so that consumers are satisfied and they enjoy consuming beverages. The credibility and trust needs to be built so that there is a very strong and safe feeling that the consumers have while consuming the beverages. †¢ Consumer education is a must to bring out benefits of beverage consumption whether in terms of health, taste, relaxation, stimulation, refreshment, well-being or prestige relevant to the category. †¢ Communication should be relevant and trendy so that consumers are able to find an appeal to go out, purchase and consume. The beverage market has still to achieve greater penetration and also a wider spread of distribution. It is important to look at the entire beverage market, as a big opportunity, for brand and sales growth in turn to add up to the overall growth of the food and beverage industry in the economy. DCSMAT Business School Page 25 Penetration of Mango Drinks in Siliguri Market THE SOFT DRINK MARKET The soft drink markets can be segmented on the basis of place of consumption or on the basis of type of products. The segmentation on the basis of place of consumption divides the market into two parts: †¢ On-premise- 55% of the consumption of soft drinks is on premise i. e. restaurants, railways stations, cinema etc. †¢ At-home- the rest 45% of the market compromises of the soft drink purchased for consumption at home. The market can also be segmented on the basis of types of products into cola products and noncola products. †¢ Cola products account for nearly 61-62% of the total soft drinks market. The brands that fall in this category are Pepsi, Coca-Cola, Thumps Up, and diet coke, Diet Pepsi etc. †¢ Non-cola segment which constitutes 36% can be divided into 4 categories based on the types of flavors available, namely: o o o o Orange Cloudy Lime Clear Lime Mango Orange flavor based soft drinks constitute around 20% of the market. The segment is largely dominated by national brands like Fanta of Coca Cola and Mirinda Orange of PepsiCo, which collectively form15% of the market rest of the market is in hands of smaller brands like Crush (earlier of Cadbury Schweppes and now of coca Cola), Gold Spot etc. i. ii. Cloudy Lime flavor constitutes 17% of the market and is largely dominated by Limca of coca cola and Mirinda Lemon of PepsiCo. Limca is the market leader with around 70-75% of the market followed by Mirinda Lemon. DCSMAT Business School Page 26 Penetration of Mango Drinks in Siliguri Market iii. Clear Lime: this segment of the market witnessed good growth initially with all the players launching their brands in the segment. But now the growth in the segment has slowed down. The brands available in this segment are 7 Up, mountain dew of Pepsi, Sprite, nimbu fresh of Coca Cola. The segment constitutes 3% of the total soft drinks market. iv. Mango: this flavor segment constitutes 2% of the total soft drinks market and it directly competes with mango based fruit drinks like Frooti. The leading brands in this segment are: Maaza of Coca Cola, Mangola (Earlier of Dukes now of PepsiCo) and Slice of PepsiCo. Product Profile Variant Available Soft drinks are available in glass bottles, aluminium cans and PET bottles for home consumption. Fountains also dispense them in disposable containers. Non- alcoholic soft drinks beverage market can be divided into carbonated and non carbonated drinks. Cola, Lemon and Oranges are carbonated drinks while mango drinks come under non carbonated category. The market can also be segmented on the basis of types of products in the cola products and non-cola products. Cola products accounts for nearly 61-62% of the total soft drinks market. The brands that fall in this category are Pepsi, Coca-Cola, Thumps Up, Diet Coke, Diet Pepsi etc Non Cola segment which constitutes 36% can be divided into four categories based on the types of flavours available namely: Orange, Cloudy Lime, Clear Lime and Mango. . Robust time ahead for soft drinks Soft drinks are expected to see robust volume growth over the forecast period. This will occur despite a total volume and constant value decline for carbonates. Growth will be led by bottled water and, from a smaller base and with slower growth, fruit/vegetable juice. Health and convenience are predicted to be the two most important factors affecting buying behaviour, as carbonates and concentrates play second fiddle to healthier bottled water and fruit/vegetable juice. DCSMAT Business School Page 27 Penetration of Mango Drinks in Siliguri Market Overall Carbonated Soft Drink In fact, Coke and Pepsi have a third major rival on the bottled soft drink shelves, namely Cadbury-Schweppes. The big three carbonated beverage makers now exist in a stable oligopoly those changes only by small increments and which controls over 90% of the market. Over the years, Cadbury-Schweppes (the result of a merger between a British candy company and a British beverage company) has improved its position by acquiring key brands in the US, namely Dr. Pepper and Seven Up, along with A W and Canada Dry. In 2001, however, Cadbury acquired moribund RC Cola, giving it a cola drink to battle against the big guys. This gave the company more shelf position and immediately gave the RC Cola brand, long a distant also-ran with weak marketing muscles, more sales and market presence. Pepsi gave itself a small boost because of the popularity of newly introduced Mountain Dew Code Red, a hyper-caffeinated soda. Cokes numbers declined slightly. Its pretty indicative of this mature market that the only major move in market share comes through a takeover. Moreover, the takeover targets that are left are so small that the biggest remaining brand doesnt make more than 1% difference in total volume. Product Coverage Asian speciality drinks; Bottled water; Carbonates; Concentrates; Fruit/vegetable juice; Functional drinks; RTD coffee; RTD tea. DCSMAT Business School Page 28 Penetration of Mango Drinks in Siliguri Market COMPANY OVERVIEW COCA COLA COMPANY DCSMAT Business School Page 29 Penetration of Mango Drinks in Siliguri Market THE COCA COLA COMPANY Coca-Cola was created in 1886 by John S Pemberton, a pharmacist in Atlanta, Georgia, who sold the syrup mixed with fountain water as a potion for mental and physical disorders. The formula changed hands three more times before Asa D. Candler added carbonation and by 2003, Coca-Cola was the world’s largest manufacturer, marketer, and distributor of nonalcoholic beverage concentrates and syrups, with more than 500 widely recognized beverage brands in its portfolio. With the bubbles making the difference, Coca-Cola was registered as a trademark in 1887 and by 1895, was being sold in every state and territory in the United States. In 1899, it franchised its bottling operations in the U. S. , growing quickly to reach 370 franchisees by 1910. Headquartered in Atlanta with divisions and local operations in over 200 countries worldwide, Coca-Cola generated more than 70% of its income outside the United States by 2003 INTERNATIONAL EXPANSION Coke’s first international bottling plants opened in 1906 in Canada, Cuba, and Panama. By the end of the 1920’s Coca-Cola was bottled in twenty-seven countries throughout the world and available in fifty-one more. In spite of this reach, volume was low, quality inconsistent, and effective advertising a challenge with language, culture, and government regulation all serving as barriers. Former CEO Robert Woodruff’s insistence that Coca-Cola wouldn’t â€Å"suffer the stigma of being an intrusive American product,† and instead would use local bottles, caps, machinery, trucks, and personnel contributed to Coke’s challenges as well with a lack of standard processes and training degrading quality. Coca-Cola continued working for over 80 years on Woodruff’s goal: to make Coke available wherever and whenever consumers wanted it, â€Å"in arm’s reach of desire. † The Second World War proved to be the stimulus Coca-Cola needed to build effective capabilities DCSMAT Business School Page 30 Penetration of Mango Drinks in Siliguri Market around the world and achieve dominant global market share. Woodruff’s patriotic commitment â€Å"that every man in uniform gets a bottle of Coca-Cola for five cents, wherever he is and at whatever cost to our company† was more than just great public relations. As a result of Coke’s status as a military supplier, Coca-Cola was exempt from sugar rationing and also received government subsidies to build bottling plants around the world. TURN OF THE CENTURY GROWTH IMPERATIVE The 1990’s brought a slowdown in sales growth for the Carbonated Soft Drink (CSD) industry in the United States, achieving only 0. 2% growth by 2000 (just under 10 billion cases) in contrast to the 5-7% annual growth experienced during the 1980’s. While per capita consumption throughout the world was a fraction of the United States’, major beverage companies clearly had to look elsewhere for the growth their shareholders demanded. The looming opportunity for twenty-first century was in the world’s developing markets with their rapidly growing middle class populations. THE WORLD’S MOST POWERFUL BRAND Interbrand’s Global Brand Scorecard for 2003 ranked Coca-Cola the #1 Brand in the World and estimated its brand value at $70. 45 billion . The ranking’s methodology determined a brand’s valuation on the basis of how much it was likely to earn in the future, distilling the percentage of revenues that could be credited to the brand, and assessing the brand’s strength to determine the risk of future earnings forecasts. Considerations included market leadership, stability, and global reach, incorporating its ability to cross both geographical and cultural borders. From the beginning, Coke understood the importance of branding and the creation of a distinct personality. Its catchy, well-liked slogans (â€Å"It’s the real thing† (1942, 1969), â€Å"Things go better with Coke† (1963), â€Å"Coke is it† (1982), â€Å"Can’t beat the Feeling† (1987), and a 1992 return to â€Å"Can’t beat the real thing†) linked that personality to the core values of each generation and established Coke as the authentic, relevant, and trusted refreshment of choice across the decades and around the globe. DCSMAT Business School Page 31 Penetration of Mango Drinks in Siliguri Market PATENTS, COPYRIGHTS, TRADE SECRETS AND TRADEMARKS Company owns numerous patents, copyrights and trade secrets, as well as substantial know-how and technology, which we collectively refer to as ‘‘technology. ’’ This technology generally relates to Company’s products and the processes for their production; the packages used for products; the design and operation of various processes and equipment used in business; and certain quality assurance software. Some of the technology is licensed to suppliers and other parties. Company’s sparkling beverage and other beverage formulae are among the important trade secrets of Company. Company own numerous trademarks that are very important to business. Depending upon the jurisdiction, trademarks are valid as long as they are in use and/or their registrations are properly maintained. Pursuant to company’s bottler’s agreements, company authorize bottlers to use applicable Company trademarks in connection with their manufacture, sale and distribution of Company products. In addition, we grant licenses to third parties from time to time to use certain of company’s trademarks in conjunction with certain merchandise and food products. EMPLOYEES Company refer to its employees as ‘‘associates. ’’ As of December 31, 2009 and 2008, Company had approximately 92,800 and 92,400 associates, respectively, of which approximately 17,900 and 16,500, respectively, were employed by consolidated variable interest entities (‘‘VIEs’’). The increase in the total number of associates in 2009 was primarily due to an increase in the Latin America operating group driven by its finished product business, as well as an increase in the Bottling Investments operating group. These increases were partially offset by the impact of the Company’s ongoing productivity initiatives. As of December 31, 2009 and 2008, Company had approximately 11,700 and 13,000 associates, respectively, located in the United States, including Puerto Rico, of which approximately 190 and 90, respectively, were employed by consolidated VIEs. Coca cola company, through its divisions and subsidiaries, has entered into numerous collective bargaining agreements. Company currently expect that it will be able to renegotiate such DCSMAT Business School Page 32 Penetration of Mango Drinks in Siliguri Market agreements on satisfactory terms when they expire. The Company believes that its relations with its associates are generally satisfactory. CORE CAPABILITIES Consumer Marketing Marketing investments are designed to enhance consumer awareness of and increase consumer preference for brands. This produces long-term growth in unit case volume, per capita consumption and share of worldwide non alcoholic beverage sales. Through company’s relationships with bottling partners and those who sell coke products in the marketplace, coke create and implement integrated marketing programs, both globally and locally, that are designed to heighten consumer awareness of and product appeal for coke brands. In developing a strategy for a Company brand, coke conduct product and packaging research, establish brand positioning, develop precise consumer communications and solicit consumer feedback. Coke integrated marketing activities include, but are not limited to, advertising, pointof-sale merchandising and sales promotions. Coke have disciplined marketing strategies that focus on driving volume in emerging markets, increasing coke’s brand value in developing markets and growing profit in most developed markets. In emerging markets, Company is investing in infrastructure programs that drive volume through increased access to consumers. In developing markets, where consumer access has largely been established, coke’s focus is on differentiating its brands. In company’s most developed markets, coke continue to invest in brands and infrastructure programs, but at a slower rate than revenue growth. Company has focused on affordability and ensuring they are communicating the appropriate message based on the current economic environment. Commercial Leadership The Coca-Cola system has millions of customers around the world who sell or serve our products directly to consumers. Coke focus on enhancing value for its customers and providing solutions to grow its beverage businesses. Company’s approach includes understanding each DCSMAT Business School Page 33 Penetration of Mango Drinks in Siliguri Market customer’s business and needs, whether that customer is a sophisticated retailer in a developed market or a kiosk owner in an emerging market. Coke focus on ensuring that its customers have the right product and package offerings and the right promotional tools to deliver enhanced value to themselves and the company. Company is constantly looking to build new beverage consumption occasions to its customers’ outlets through unique and innovative consumer experiences, product availability and delivery systems, and beverage merchandising and displays. Coke participate in joint brand-building initiatives with our customers in order to drive customer preference for its brands. Through coke’s commercial leadership initiatives, coke embed ourselves further into its retail customers’ businesses while developing strategies for better execution at the point of sale. Franchise Leadership Coke must continue to improve its franchise leadership capabilities to give Company and our bottling partners the ability to grow together through shared values, aligned incentives and a sense of urgency and flexibility that supports consumers’ always changing needs and tastes. The financial health and success of coke’s bottling partners are critical components of the Company’s success. Company work with its bottling partners to identify system requirements that enable coke to quickly achieve scale and efficiencies, and we share best practices throughout the bottling system. Coke system leadership allows company to leverage recent acquisitions to expand our volume base and enhance margins. With coke’s bottling partners, we work to produce differentiated beverages and packages that are appropriate for the right channels and consumers. Coke also design business models for sparkling and still beverages in specific markets to ensure that coke appropriately share the value created by these beverages with our bottling partners. Coke will continue to build a supply chain network that leverages the size and scale of the Coca-Cola system to gain a competitive advantage. DCSMAT Business School Page 34 Penetration of Mango Drinks in Siliguri Market THE COCA COLA SYSTEM We are a global business that operates on a local scale in every community where we do business. We create global reach with local focus because of the strength of the Coca-Cola system, which comprises our Company and our bottling partners—more than300 worldwide. Our Company manufactures and sells concentrates, beverage bases and syrups to bottling operations; owns the brands; and is responsible for consumer brand marketing initiatives. Our bottling partners manufacture, package, merchandise and distribute the finished branded beverages to our customers and vending partners, who then sell our products to consumers. All bottling partners work closely with customers—grocery stores, restaurants, street vendors, convenience stores, movie theatres and amusement parks, among many others—to execute localized strategies developed in partnership with our Company. Customers then sell our products to consumers at a rate of 1. 6 billion servings a day. Our business operations are divided into the following geographies: Eurasia and Africa, Europe, Latin America, North America and Pacific as well as our Bottling Investments Group. MISSION OF COCA-COLA Create consumer products services and communications customer service and bottling system strategy process and tools in order to create competitive advantage and deliver superior value toConsumers as a superior beverage experience. Consumers as an opportunity to grow profit through the use of finished drinks. Bottlers as an opportunity to make reasonable to grow profits and value added Suppliers as an opportunity to make reasonable when creating real value added in environment of system wide teamwork, flexible business system and continuous improvement. Indian society in form of contribution to economic and social development. DCSMAT Business School Page 35 Penetration of Mango Drinks in Siliguri Market VISION OF COCA-COLA VISION FOR SUSTAINABLE GROWTH PROFIT: Maximizing return to shareowners while being mindful of our overall responsibilities. PEOPLE: Being a great place to work where people are inspired to be the best they can be. PORTFOLIO: Bringing to the world a portfolio of beverage brands that anticipate and satisfy peoples’ Desires and needs. PARTNERS: Nurturing a winning network of partners and building mutual loyalty. PLANET: Being a responsible global citizen that makes a difference. DCSMAT Business School Page 36 Penetration of Mango Drinks in Siliguri Market DCSMAT Business School Page 37 Penetration of Mango Drinks in Siliguri Market VISION 2020 The world is changing all around us. To ensure our business will continue to thrive over the next 10 years and beyond, we are looking ahead to understand the trends and forces that will shape our industry in the future. Our 2020 Vision creates a long-term destination for our business. It provides us with business goals that outline what we need to accomplish with our global bottling partners in order to continue winning in the marketplace and achieving sustainable, quality growth. For each goal, we have a set of guiding principles and strategies for winning throughout the entire Coca-Cola system. VALUE Coca-Cola is guided by shared values that both the employees as individuals and the Company will live by; the values being: †¢ †¢ †¢ †¢ †¢ †¢ †¢ LEADERSHIP: The courage to shape a better future PASSION: Committed in heart and mind INTEGRITY: Be real ACCOUNTABILITY: If it is to be, it’s up to me COLLABORATION: Leverage collective genius INNOVATION: Seek, imagine, create, delight QUALITY: What we do, we do well DCSMAT Business School Page 38 Penetration of Mango Drinks in Siliguri Market HINDUSTAN COCA COLA BEVERAGES PRIVATE LIMITED COKE IN INDIA: Coca-Cola was the leading soft drink brand in India until 1977 when it left rather than reveals its formula to the government and reduce its equity stake as required under the Foreign Exchange Regulation Act (FERA) which governed the operations of foreign companies in India. After a 16-year absence, Coca-Cola returned to India in 1993, cementing its presence with a deal that gave Coca-Cola ownership of the nations top soft-drink brands and bottling network. Coke’s acquisition of local popular Indian brands including Thums Up (the most trusted brand in India21), Limca, Maaza, Citra and Gold Spot provided not only physical manufacturing, bottling, and distribution assets but also strong consumer preference. This combination of local and global brands enabled Coca-Cola to exploit the benefits of global branding and global trends in tastes while also tapping into traditional domestic markets. Leading Indian brands joined the Companys international family of brands, including Coca Cola, diet Coke, Sprite and Fanta, plus the Schweppes product range. In 2000, the company launched the Kinley water brand and in 2001, Shock energy drink and the powdered concentrate Sunfill hit the market. From 1993 to 2003, Coca-Cola invested more than US$1 billion in India, making it one of the country’s top international investors. By 2003, Coca-Cola India had won the prestigious Woodruf Cup from among 22 divisions of the Company based on three broad parameters of volume, profitability, and quality. Coca-Cola India achieved 39% volume growth in 2002 while the industry grew 23% nationally and the Company reached breakeven profitability in the region for the first time. Encouraged by its 2002 performance, Coca-Cola India announced plans to double its capacity at an investment of $125 million (Rs. 750 crore) between September 2002 and March 2003. Coca-Cola India produced its beverages with 7,000 local employees at its twenty-seven wholly owned bottling operations supplemented by seventeen franchisee-owned bottling operations and a network of twenty- nine contract-packers to manufacture a range of products for the company. DCSMAT Business School Page 39 Penetration of Mango Drinks in Siliguri Market The complete manufacturing process had a docum