Coca-Cola controlled the Indian market until 1977, when the Janata Party beat the Congress Party of then Prime Minister Indira Gandhi.
To punish Coca-Cola's principal bottler, a Congress Party stalwart and longtime Gandhi supporter, the Janata government demanded that Coca-Cola transfer its syrup formula to an Indian subsidiary.
Coca-Cola balked and withdrew from the country. India, now left without both Coca-Cola and Pepsi, became a protected market. In the meantime, India's two largest soft-drink producers have gotten rich and lazy while controlling 80% of the Indian market.
These domestic producers have little incentive to expand their plants or develop the country's potentially enormous market.
Some analysts reason that the Indian market may be more lucrative than the Chinese market.
India has 850 million potential customers, 150 million of whom comprise the middle class, with disposable income to spend on cars, VCRs, and computers.
The Indian middle class is growing at 10% per year. To obtain the license for India, Pepsi had to export $5 of locally made products for every $1 of materials it imported, and it had to agree to help the Indian government to initiate a second agricultural revolution.
Pepsi has also had to take on Indian partners. In the end, all parties involved seem to come out ahead: Pepsi gains access to a potentially enormous market; Indian bottlers will get to serve a market that is expanding rapidly because of competition; and the Indian consumer benefits from the competition from abroad and will pay lower prices.
Even before the first bottle of Pepsi hit the shelves, local soft drink manufacturers increased the size of their bottles by 25% without raising costs.
To punish Coca-Cola's principal bottler, a Congress Party stalwart and longtime Gandhi supporter, the Janata government demanded that Coca-Cola transfer its syrup formula to an Indian subsidiary.
Coca-Cola balked and withdrew from the country. India, now left without both Coca-Cola and Pepsi, became a protected market. In the meantime, India's two largest soft-drink producers have gotten rich and lazy while controlling 80% of the Indian market.
These domestic producers have little incentive to expand their plants or develop the country's potentially enormous market.
Some analysts reason that the Indian market may be more lucrative than the Chinese market.
India has 850 million potential customers, 150 million of whom comprise the middle class, with disposable income to spend on cars, VCRs, and computers.
The Indian middle class is growing at 10% per year. To obtain the license for India, Pepsi had to export $5 of locally made products for every $1 of materials it imported, and it had to agree to help the Indian government to initiate a second agricultural revolution.
Pepsi has also had to take on Indian partners. In the end, all parties involved seem to come out ahead: Pepsi gains access to a potentially enormous market; Indian bottlers will get to serve a market that is expanding rapidly because of competition; and the Indian consumer benefits from the competition from abroad and will pay lower prices.
Even before the first bottle of Pepsi hit the shelves, local soft drink manufacturers increased the size of their bottles by 25% without raising costs.