Friday
July 15
2011

Scott Anderson

Friday Roundup ? 7/15/11 In Pepsi Vs. Coke Battle, Low-Income Consumers May Win

Several months ago, a consultant who shall remain nameless, told me that PepsiCo Inc. had only recently started to get serious about the base of the pyramid market in India. Up until then, the soda giant and owner of brands like Lays potato chips, had conducted only the briefest of market tests to determine what types of products consumers making $5 a day or less would be willing to purchase.

In the consultant’s view, PepsiCo was missing out on a golden opportunity and rival Coca-Cola was several steps ahead toward capturing the base of the pyramid market. This seems to have been borne out to some extent, considering Coke’s dominance with its 5-rupee small-sized Chhota Coke, which Pepsi has been unable to match on price.

Well, the cola battle at the BoP apparently has been joined. However, the weapons of war might not be of the fizzy, sugar-filled variety, but rather the iron fortified, health-conscious, nutritional variety. So goes the narrative of a recent Wall Street Journal story (subscription required) on PepsiCo’s major push in India around iron-rich snacks, such as cookies and cheese puffs, packaged in small portions and costing around 2 rupees (4 cents) apiece.

Quoting the WSJ:

“The healthy-foods initiative is focused on dairy, juices and products like oatmeal but in a first for the Purchase, N.Y., company, it has developed three new products targeting the poor – a 24-gram, or 0.84 ounce, pack of half a dozen cookies; a 10-gram pack of spicy puffs made with rice, cornmeal and millet; and a 200-milliliter, or 6.8-ounce, noncarbonated energy drink called Gluco Plus, which contains glucose, electrolytes and iron. It says others are in the pipeline.”

This effort falls under the banner of the company’s Global Nutritional Group, which represents a pittance of PepsiCo’s $60 billion in annual revenue, but possibly, not for long. As the WSJ reports, PepsiCo is eying the healthy snacks to pull in $30 billion in global sales by 2029 with a large chunk presumeably from low-income consumers.

But as Pepsi has discovered, India is not a whole lot different than developed markets. Its consumers prefer taste over health attributes, that is, if you can include sugar-free soda as healthy food. Example: Pepsi recently pulled its no-sugar Pepsi Max soda from the shelves after a dismal customer response.

PepsiCo may be late to this game, but the multinational can’t be counted out considering its market leverage when it comes to suppliers and its infrastructure footprint. It’s also marketing a 5 rupee energy drink with Indian Goliath Tata Group in western India, which no doubt will boost Pepsi’s understanding of the market.

The healthy snacks program is definitely a business school case study in the making – one complete with a multimedia advertising campaign, door-to-door marketing in the southern state of Andhra Pradesh where this project is being piloted and a clearly defined target market: females between the ages of 15 and 49 – half of whom are estimated to experience iron deficiency.

Here’s hoping India and other emerging markets can join the Pepsi Generation – minus the high fructose corn syrup and the relatively high price tags.

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