PepsiCo India, in the past couple of years has been struggling and trying to move towards the franchise model. It has recently sold off its bottling operations in the South and West to long-standing franchise partner RJ Corp.
PepsiCo India announced that from now on it will only own its snack maneuvers and will have total custody of its concentrates and the marketing operations of all its brands in India.
Getting rid of huge operation costs, Pepsi can focus better on promoting its brand in India This certainly is a more profitable way of doing business. The industrialists and industrial analysts are of the view that the company should have thought about this 10 years before when the business was soaring healthier heights.
What seems today is that the company happens to be in distress sale. Shares of the various Pepsi brands are continuously falling in the last five years. Its beverage brands are not just losing out sales to Coke but also to brands like Parle Agro and Dabur. “For a brand of Pepsi’s stature to go for 100 per cent franchise means their situation is bad,” said an owner of a leading beverage company.
“Pepsi has a bigger challenge to handle and that is to win over the consumers whose interest to consume carbonated beverages has been on a rapid decline,” added former Dabur COO, now venture partner at Fireside Partners, Kannan Sitaram. With public awareness of less sugar content, both Pepsi and Coke have been focusing unsuccessfully on reducing their sugar content and are also looking at healthier beverages. Coca-Cola is still striding with success of Maaza and Thumps Up acquired from Parle Agro.
“Indians are moving faster to healthier alternatives, but not completely towards natural as they are expensive. So, one has to guide them from moving from synthetic towards natural by coming up with options, which are neither completely synthetic nor fully natural. I don’t think Coke and Pepsi have really understood the Indian consumer psyche,” explained an expert from beverage industry.
Most of the markets with Pepsi’s franchise operations are either small, but India is diverse. “In an environment like India there is immense value if one can control the entire value chain, from the brand to manufacturing to sales and distribution,” agreed Kannan.
The market of PepsiCo franchisee operation in the north andeEast differs from western and southern regions. To establish a standard demand it will take a while for the franchise to create the required and profitable market.
Experts are confused with findings of Pepsi’s situation. Actually speaking both Pepsi and Coke are in troubled waters. Both are facing the wrath of reducing consumer’s interest for carbonated drinks. Still Pepsi seems to be affected more than Coke.
“India certainly is not priority for PepsiCo. They never understood Indian consumer’s needs. They only listened to global diktats. Now that the business hasn’t performed, selling it to a franchise is the easiest way out,” said a veteran from beverage industry.