Sandesh Prabhudesai
28 November 1997
The global war between Coca-Cola and Pepsi Cola has taken an
interesting turn in Goa where Coke's local franchisee has changed
sides to join hands with Pepsi.
The desertion has left Coke in total disarray, putting under threat
its slightly less than 70 per cent stake in the market just as the
tourist season has begin. Tourism is, of course, Goa's main industry.
The Goa Bottling Company, a franchisee of Coca-Cola and Parle, has
struck an alliance with Universal Beverages Limited, Pepsi's local
franchisee, on the basis of the theme "Produce separately, Market
jointly."
Though Coke managers are tight-lipped over the developments, an
advertisement war has already begun in Goan newspapers. Goa Bottling
Company chairman Avdhoot Timblo, who also controls the Fomento mining
group, describes the move as a reaction to the way Coke tried to force
him to sell his bottling unit and buy equity in a $ 70 million joint
venture which Coca-Cola is planning to float shortly.
Giving advice to Coca-Cola, he added, "Dont ask the farmer to sell his
land; tell him to produce more efficiently." Timblo says he is happier
with the new deal as Pepsi respects local talent and Indian-ness.
The official reason cited for the split is prices. GBC said when Coke
raised the price of its concentrate, it refused to fall in line and
submitted a 90-day termination notice to end the contract on June 18.
However, the date was extended, but finally expired on November 22.
Coca-Cola India director Rahul Dhawan told Goan newspapers that Coke
had offered two choices to all its 53 bottlers in the country once the
contracts end in 1999: either sell the bottling plants to Coca-Cola or
become partners in the new joint venture.
Pepsi's marketing tactic is different. "We believe in franchise
bottling," says P M 'Suman' Sinha, chairman, Pepsi Foods Ltd. "We have
nothing foreign except our product," Sinha says, adding that Pepsi
will never buy out a local franchisee unless the bottler wishes to
sell the unit.
To maintain its 66 per cent marketshare in Goa, Coke has now stocked
around 100,000 crates in a local godown, transported from different
bottling units in neighbouring states. Coke has also lured a large
number of GBC employees on lucrative terms. But marketing one of the
world's most famous brands in Goa has become an extremely difficult
job for the company, with a lack of vehicles for distribution and a
shortage of bottles. Most of the bottles are in GBC's custody.
The per capita consumption of soft drinks in Goa, at 62 per year, is
the highest in the country compared to the national average of around
52. GBC, with a capacity of 3.5 million cases (of 24 bottles each),
sold 1.6 million cases of Coke, Fanta and the Parle products (Thums
Up, Gold Spot, Limca, now owned by Coca-Cola), whereas Pepsi was able
to distribute only 0.8 million cases.
Pepsi has now set a target of five million cases for the coming year
besides expanding into the markets of neighbouring southwest
Maharashtra and northwest Karnataka. To achieve the same, Pepsi has
struck franchise deals with three more bottling units.
One of them is with Nectar Beverages Ltd, situated in Dharwar
district, northwest Karnataka. The Nectar bottling unit, also
controlled by Timblo and with a capacity of three million cases,
bottled Parle products until recently. Its loss is another blow to
Coke.
The other two bottling units are owned by Dempo, a leading Goa
businesshouse which owns UBL, a beverage company, and with stakes in
mining. UBL is already the bottler for Pepsi in Goa. Reacting to the
GBC-Coke divorce, Dempo vice-chairman V V Dempo said: "We see it
happening even in developed countries like Japan while fighting
American aggression."
Dempo has welcomed the Pepsi-GBC alliance which will make Pepsi a
clear market leader in the beachside state, especially as Dempo's
bottling capacity is only 1.8 million cases.
GBC has also staked its claim to the Coke and Parle bottles and
crates, worth Rs 130 million. This has forced Coke to market its
brands without taking empty bottles in return. "Let them quote a price
to buy the bottles," says Timblo.
To hold on to its market share, Coke has deputed six managers from
Delhi to take charge of the marketing and distribution while senior
Coke managers from the US are also currently in Goa to resolve the
crisis.
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