Pepsi's Entry into India: A Lesson in Globalization


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Case Details:

Case Code : BSTR062
Case Length : 11 Pages
Period : 1994 - 2003
Organization : Pepsi
Pub Date : 2003
Teaching Note : Available
Countries : USA
Industry : Beverages & Snack Food

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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EXCERPTS Contd...

Pepsi Goes Farming - Finally

Though Pepsi attracted a lot of criticism, many people felt there was a positive side to the company's entry into India. According to a www.agroindia.org article, Pepsi's tomato farming project was primarily responsible for increasing India's tomato production.

Production increased from 4.24 million tonnes in 1991-92 to 5.44 million tones in 1995-96. The company's use of high yielding seeds was regarded as one of the reasons for the increase in productivity in tomato cultivation during the same period. Commenting on the above issue, Abhiram Seth, [Seth, the company's Executive Director (Exports and External Affairs)] said, "When we set up our tomato paste plant in 1989, Punjab's tomato crop was just 28,000 tonnes, whereas our own requirement alone was 40,000 tonnes. Today, the state produces 250,000 tonnes. Per hectare yields, which used to be 16 tonnes, have crossed 50 tonnes." Pepsi was, however, not as successful in the chili contract farming venture that was started soon after the tomato venture stabilized...

Doing Business on its Own Terms

The company's contract farming initiatives and its focus on improving Punjab's agricultural sector seemed to indicate that Pepsi had been working towards fulfilling its pre-entry commitments. However, the reality was quite different.

In 2000, the company's exports added up to Rs 3 billion. The items exported included not only processed foods, basmati rice and guar gum , but also soft drink concentrate. Though the company did not make the figures public, in all probability, the portion of soft drink concentrate in its exports was much higher than that of any other product. In fact, the company met the soft drink concentrate requirements of many of its plants worldwide through its Indian operations. Even by 2000, of its annual requirement of 25,000 tonnes of potatoes per annum, Pepsi got only 3,000 tonnes from its contract farmers. Given these figures, it would be interesting to see how it planned to achieve its objectives of meeting its complete requirement of potatoes through the contract farming route by 2004...

 

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