How Mukesh Ambani’s RIL is planning to take on Coke and Pepsi in India

Finance Bill

TAMIL NADU/NEW DELHI: Reliance, a major Indian industrial company, is reviving a well-known regional cola brand with plans to compete with PepsiCo and Coca-Cola in a crucial market by leveraging its extensive retail network, lowering prices, and appealing to nationalist sentiment.
Reliance, a company owned by billionaire Mukesh Ambani, last month introduced redesigned Campa beverages, sweet sodas that were popular in India throughout the 1970s and 1980s before going out of style as US corporations expanded quickly in a liberalising economy.
First, it might appear that Ambani will struggle to break Pepsi and Coca-monopoly Cola’s over a market that Euromonitor estimates to be worth $4.6 billion and is expected to expand 5% annually until 2027. Some highly recognised tycoons have tried to go toe-to-toe with the beverages giants, and failed, most notably Richard Branson with his Virgin Cola.
Yet, the richest man in Asia famously upended India’s telecoms industry seven years ago with aggressive pricing, elevating Reliance to the top position. And he’s using a portion of that same tactic in his soft drink business.

Amulya Pandit, a consultant at Euromonitor International, stated that Coca-Cola and Pepsi are unaccustomed to competition on a national scale and that Reliance has the resources and reach to compete against them with a regional brand with strong sentimental value.
Reliance intends to construct some plants on its own or in joint ventures to produce Campa and sell the soda at hotels, eateries, and on aeroplanes, according to a person with direct knowledge of the company’s strategy. Manufacturing of Campa is presently outsourced, after its $2.7 million acquisition of the brand last year.

The corporation is drastically lowering in-store prices. A Reuters check revealed that the price of a two-liter Campa Cola bottle is currently 49 rupees (60 US cents) in stores, which is nearly 50% less than the label price and about a third less than 2.25-liter Coke and Pepsi variants. While Pepsi starts at 12 rupees, the smallest bottles of Campa Cola and Coke are also 10 rupees.

“The pricing will be disruptive worldwide,” the source claimed, adding that Reliance was in talks with at least three teams to become Campa’s refreshment partner and was preparing a massive advertising campaign for the 2018 IPL cricket competition.

Due to the confidentiality of the plan, the person did not want to be named. Reliance declined to comment, while Pepsi stated that it does not comment on competition as a matter of policy.

Coca-Cola said that it has largely maintained small bottle prices since last year and that it is concentrating on growing distribution. The entry of new businesses “presents a significant potential for investments to develop the sector further,” the statement read.

As part of its new consumer goods push, which has an internal target of $6.5 billion in annual revenues within five years, Reliance, India’s largest retailer, will provide Campa to its 2,500 grocery outlets and thousands of smaller non-network stores.

Also, the business offers a grocery shopping app and a wholesale division through which it provides consumer items to 500,000 mom-and-pop shops. Both divisions will also be used for Campa sales.

‘Excellent Indian taste’ against Western brands

T. Krishnakumar, an executive who held several top positions at Coca-Cola for for 17 years, is the man behind Reliance’s push into the cola and consumer goods industries.

Coca-Cola and Pepsi will watch Reliance’s marketing strategy closely after it exploited sentiments of nationalist nostalgia by positioning Campa as a domestic brand with “Great Indian Taste” and a “rich heritage.”
The US company has always been concerned about local products marketed with a “India First” agenda, especially at a time when Prime Minister Narendra Modi himself supports self-reliance, according to a former Pepsi executive who asked to remain anonymous due to the sensitive nature of the subject.

The rivalry is already playing out in the market.

Campa cola or lemon plastic bottles were displayed at the main entry gates or put on shelves right next to the competitors in the five Reliance stores that Reuters visited in Mumbai in western India, Chennai in the south, and Lucknow in the north.

One Reliance shop manager in Chennai claimed that this year they were positioning Campa near the door to promote it, with competitors hidden behind it and hidden from view. A second city store employee claimed that for every 100 Pepsi and Coca-Cola bottles sold, 30 Campa bottles were sold.

For now, the US rivals have an upper hand. According to Alok Shah, a consumer analyst at India’s Ambit Capital, Pepsi and Coca-Cola beverages are offered in at least 3 million Indian outlets, and the firms have a vast logistics network, dozens of plants, and the advantage of a flavour that is well-liked by most people.

He said that Pepsi and Coke remain aspirational foreign brands for many Indians, supplied at basically comparable small-pack costs, and that “we’ll need to wait and watch to see if consumers migrate to Campa.”

According to Srinivas Rao, Coca-Thums Cola’s Up, a domestic brand it purchased in 1993 and which is its best-selling one in India as opposed to the US, where Coke dominates, is still his favourite beverage.

“Every time we eat biryani or pork at home, we buy Thums Up. Discounts from other brands, including Campa, do not entice us “Rao stated in front of a Chennai Reliance store.