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Rediff.com  » Business » How Pepsi, Coke plan to quench India's thirst

How Pepsi, Coke plan to quench India's thirst

November 29, 2018 18:25 IST

PepsiCo has tie-ups with KFC, Pizza Hut, Domino's, Burger King, and Subway in India, while Coca-Cola has a partnership with McDonald's only

When Ramon Laguarta, PepsiCo’s new chief executive officer, who succeeded Indra Nooyi in October, visited India last week, he took time out to visit a Domino’s outlet in Gurugram, Haryana.

 

The objective was to understand the relevance of the channel to the beverage company’s scheme of things and what PepsiCo was doing there.

Out-of-home is growing in importance for both PepsiCo and Coca-Cola in India, given the manner in which the two companies have been tying up with players, including quick-service restaurants (QSRs) and multiplexes in recent months as exclusive beverage partners.

In October, PepsiCo signed a deal with Jubilant FoodWorks, Domino’s master franchisee in the country as a beverage partner, locking its fifth alliance in the space.

While out-of-home is used mainly for sampling, promotions, and new launches by beverage majors, retail analysts said that onsite consumption of drinks is also high at these joints, increasing the interest of companies.

The estimated contribution to sales of this channel to beverage companies in India is pegged at 5-8 per cent, though globally it is higher, they said.

“In the US market, for instance, the out-of-home channel contributes about 30-35 per cent to sales for beverage companies,” said Harminder Sahni, founder and managing director, Wazir Advisors, a Gurugram-based retail consultancy.

“It is a big channel there. But given the number of fast food brands in the country, out-of-home is growing in importance for companies here too.

"This is because a tie-up with a chain will ensure a captive consumer base for a company. This counts in the competitive beverage landscape,” said Sahni.

PepsiCo has tie-ups with KFC, Pizza Hut, Domino’s, Burger King, and Subway in India, while Coca-Cola has a partnership with McDonald’s only.

However, the latter has more tie-ups on the multiplex front, including with Inox and Cinepolis, though PepsiCo has a partnership with PVR, the country’s largest multiplex chain, industry sources said.

Coca-Cola is also expected to rejuvenate the Costa Coffee brand in India, acquired globally in August, giving its domestic retail presence a boost in the future.

“Consumer buying habits and preferences are rapidly evolving and at the same time Coca-Cola is also evolving into a total beverage company. In India, we provide a larger choice to the consumer and we also ensure we are present across all segments and channels.

"We are also constantly evaluating opportunities to partner accounts across the country to drive consumption,” a Coca-Cola India spokesperson said.

“Out-of-home is a growing and important channel for us as is evidenced with the number of tie-ups we have in the area, including five out of the top six fast food joints as well as the country’s top multiplex chain,” PepsiCo India said when contacted.

A recent report by the National Restaurant Association of India had said the overall restaurant market will touch Rs 510 billion in the next four years, from the current Rs 20,500 crore.

The QSR space, it said, would be amongst the fastest-growing, touching nearly Rs 25,000 crore of the overall market in the next few years.

Photograph: Carlo Allegri/Reuters

Viveat Susan Pinto in Mumbai
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