A

SEMINAR REPORT
ON
“INDUSTRIAL VISIT OF VARUN BEVERAGES”
Submitted in partial fulfillment for the

MASTER OF BUSINESS ADMINISTRATION

3RD SEMESTER (2008-2010)

Under the Supervision to: - Submitted by:-

Prof. Ashwini Agrawal Abhishek Chouhan
M. B. A. 3rd emester

G.D. MEMORIAL COLLEGE OF MANAGEMENT &

TECHNOLOGY
OVERVIEW – PEPSICO
The PepsiCo challenge (to keep up with archrival The Coca-Cola Company) never
ends for the world's 2nd carbonated soft-drink maker. The company's soft drinks
include Pepsi, Mountain Dew, and Slice. It owns Frito-Lay, the world's 1st maker
of snacks such as corn chips (Doritos, Fritos) and potato chips (Lay's, Ruffles).
Cola is not the company's only beverage: PepsiCo sells Tropicana orange juice
brands, Gatorade sports drink, and Aquafina water. PepsiCo also sells Dole juices
(licensed) and Lipton ready-to-drink tea (licensed from Unilever). Its Quaker
Foods division offers breakfast cereals (Life), pasta (Pasta Roni), rice (Rice-A-
Roni), and side dishes (Near East). Wal-Mart is PepsiCo's largest customer,
accounts for 9% of sales.
PepsiCo may be vying for more Pepsi-drinking people but its hefty snacks and
juice sales help to quench the company's thirst for bottom-line growth. Frito-Lay's
salty snacks rule the US market; the snack division accounts for about one-third of
company sales.
The company announced a major restructuring in 2007, splitting its two business
units (Pepsi-Cola North America and PepsiCo International) into three: one for US
food, a second for US drinks, and a third for food and drinks abroad. CEO of
PepsiCo Indra Nooyi said that due to the company's healthy growth in recent years,
PepsiCo is approaching a size that can be better managed as three units rather than
two.
The split looks like this: PepsiCo Americas Foods includes Frito-Lay North
America, Quaker, and the Latin American food and snack businesses; PepsiCo
Americas Beverages includes North American beverage sales, including Gatorade
and Tropicana; and PepsiCo International includes business in the UK, the rest of
Europe, Asia, the Middle East, and Africa.
With a saturated soft-drink market, the company continues to try new iterations: In
2007 the company introduced its first vitamin-enhanced water, called Aquafina
Alive. It signed a licensing agreement with Ben & Jerry's in 2006 for the sale of
Ben & Jerry's milkshakes in the US, as well as a deal with Starbucks for the
distribution of the coffee purveyor's Ethos water brand. Hot on the heels of Coke's
introduction of Blak, in 2006 Pepsi launched a coffee-flavored cola, named, Pepsi
Max Cino, in the UK.
Venturing further into the non-cola category, PepsiCo acquired sparkling juice
companies IZZE and Naked Juice in 2006. It also began selling Fuelosophy, a
smoothie drink, at organic grocery store chain Whole Foods, and struck a deal to
develop products with juice maker Ocean Spray Cranberries.

2|Page
Bowing to the public's growing concern about childhood obesity, in 2006 Pepsi,
along with Coca-Cola, Cadbury Schweppes, and the American Beverage
Association agreed to sell only water, unsweetened juice, and low-fat milk to
public elementary and middle schools in the US. As for high schools, the
agreement calls for no sugary sodas to be sold and one-half of the offered drinks to
be water, diet sodas, lemonade, or iced tea. The agreement was facilitated by
former president Bill Clinton.
CEO Steve Reinemund stepped down as CEO in 2006 in order to spend more time
with his family. His replacement was Indra Nooyi, the company's president and
CEO. Indian-born Nooyi, the 11th female CEO of a FORTUNE 500 company, has
been instrumental in strategic decisions at the company, such as the acquisition of
Tropicana and merger with Quaker Oats.
Shortly after her appointment, Nooyi restructured the top level of power at the
company. She appointed John Compton, previously head of the Quaker-Tropicana-
Gatorade unit, to the newly created position of CEO for PepsiCo North America,
reporting directly to her.

3|Page
HISTORY OF PEPSICO

1893--Caleb Bradham, a young pharmacist from New Bern, North Carolina,

begins experimenting with many different soft drink concoctions; patrons and
friends sample them at his drugstore soda fountain.

1898--One of Caleb's formulations, known as "Brad's Drink," a combination of

carbonated water, sugar, vanilla, rare oils and cola nuts, is renamed "Pepsi-Cola"
on August 28, 1898. Pepsi-Cola receives its first logo.

1902-- Bradham applies for a trademark with the U.S. Patent Office, Washington
D.C., and forms the first Pepsi-Cola Company.

1905--Pepsi-Cola's first bottling franchises are established in Charlotte and

Durham, North Carolina. Pepsi receives its new logo, its first change since 1898.

1934--A landmark year for Pepsi-Cola. The drink is a hit and to attract even more
sales, the company begins selling its 12-ounce drink for five cents (the same cost
as six ounces of competitive colas).
Caleb Bradham, the founder of Pepsi-Cola and "Brad's Drink," dies at 66 (May
27th, 1867-February 19th, 1934).

1941--The New York Stock Exchange trades Pepsi's stock for the first time.
In support of the war effort, Pepsi's bottle crown colors change to red, white, and
blue.

1960--Young adults become the target consumers and Pepsi's advertising keeps
pace with "Now it's Pepsi, for those who think young."
1963-- Pepsi-Cola continues to lead the soft drink industry in packaging
innovations, when the 12-ounce bottle gives way to the 16-ounce size.

Twelve-ounce Pepsi cans are first introduced to the military to transport soft drinks
all over the world.
4|Page
1965--Expansion outside the soft drink industry begins. Frito-Lay of Dallas,
Texas, and Pepsi-Cola merge, forming PepsiCo, Inc.
Military 12-ounce cans are such a success that full-scale commercial distribution
begins.
1970--Pepsi introduces the industry's first two-liter bottles. Pepsi is also the first
company to respond to consumer preference with light-weigh, recyclable, plastic
bottles.
1984--Pepsi advertising takes a dramatic turn as Pepsi becomes "the choice of a
New Generation."

1985--After responding to years of decline, Coke loses to Pepsi in preference tests

by reformulating. However, the new formula is met with widespread consumer
rejection, forcing the re-introduction of the original formulation as "Coca-Cola
Classic."
The cold war takes "one giant sip for mankind," when a Pepsi "space can" is
successfully tested aboard the space shuttle.

1991-- Pepsi introduces the first beverage bottles containing recycled polyethylene
terephthalate (or PET) into the marketplace. The development marks the first time
recycled plastic is used in direct contact with food in packaging.
1992-- Pepsi-Cola and Lipton Tea Partnership is formed. Pepsi will distribute
single serve Lipton Original and Lipton Brisk products.

1994-- Pepsi Foods International and Pepsi-Cola International merge, creating the
PepsiCo Foods and Beverages Company.
1997-- PepsiCo. announces that it will spin off its restaurant division to form
Tricon Global Restaurants, Inc. Including Pizza Hut, Taco Bell, & KFC, it will be
the largest restaurant company in the world in units and second-largest in sales.
1998-- Pepsi celebrates its 100th anniversary.

5|Page
Introduction and Origin of PepsiCo

In 1965, PepsiCo, Inc. was founded by Donald M.

Kendall, president and chief executive officer of Pepsi-Cola and Herman W. Lay,
chairman and chief executive officer of Frito-Lay, through the merger of the two
companies. Caleb Bradham, a New Bern, N.C. pharmacist, created Pepsi-Cola in
the late 1890s.
No single foreign investment project has been the center of much attention and
controversy in the late 1980s and early 1990s as the Pepsi Co project in India. The
project, Pepsi Foods Limited, was cleared by the Indian government in September
1988 as a joint venture of Pepsi Co, Punjab government-owned Punjab Agro
Industrial Corporation (PAIC) and Voltas India Limited. Before this project was
cleared, PepsiCo made an attempt to enter into India as early as in May 1985, when
it teamed up with Agro Product Export Ltd., a company owned by R. P. Goenka
group, and sought permission from the central government to import cola
concentrate and to sell a PepsiCo brand soft drink in the Indian market, in return
for the export of juice concentrate from Punjab. Under this proposal, the main
objectives put forward by PepsiCo were 'to promote the development and export of
Indian made and agro-based products and to foster the introduction and
development of PepsiCo products in India'. This proposal which was submitted to
the Secretary at Ministry of Industrial Development received rejections on the
grounds that the import of concentrate could not be agreed to and the use of foreign
brand names as domestic tariff area (DTA) was not allowed.

Nevertheless, taking advantage of the ongoing political problem in Punjab at that

time, PepsiCo successfully played the 'Punjab Card' and again put forward a
proposal in 1986 with stress more on diversification of Punjab agriculture and
employment generation rather than on soft drinks. The proponents of project called
it as a second 'Green Revolution' in Punjab and projected it as harbinger of a
horticultural revolution, which would end stagnation in Punjab's rural sector and
would help in promoting small and middle farmers. A strong argument was put

6|Page
forward that this project will create ample employment opportunities for the
unemployed youth who has taken the path of terrorism and thereby will help in
restoration of peace in Punjab. This argument was well received in the political
circles in Delhi and Punjab, which finally led to PepsiCo’s entry into India in the
form of a joint venture with PAIC, and Voltas as its partners. The equity of Pepsi
Foods Limited was divided among the partners with PAIC holding 36.11 percent,
Voltas 24 and PepsiCo 36.89 percent. Coupled with the 'Punjab Card', PepsiCo
also made certain commitments to Indian government, which also formed the basis
of its entry. Some important commitments made by PepsiCo included:
➢ The project will create employment for 50000 people nationally, including
25000 jobs in Punjab alone;
➢ 74 percent of the total investment will be in food and agro- processing.
Manufacturing of soft drinks will be limited to only 25 percent;
➢ PepsiCo will bring advanced technology in food processing and provide
thrust by marketing Indian products abroad;
➢ State of the art technology would be provided in the fields of food
processing and soft drink manufacturing at no foreign exchange outflow;
➢ 50 percent of the total value of production will be exported;
➢ An agro-research center will be established by PepsiCo in consultation with
ICAR and PAU;
➢ No foreign brand name will be used for domestic sales;
➢ The export-import ratio will be 5:1 over 10 years, which means that for
every dollar spends in foreign exchange on this project, the company will
ensure an export earnings of 5 dollars for 10 years;
➢ 25 percent of the total fruits and vegetable crops in Punjab will be processed
in the project;
➢ A substantial increase in government revenue due to consumer market
expansion and tax collection.

PEPSICO IN INDIA

PepsiCo entered India in 1989 and in the span of a little more than a decade it
became the country's largest selling soft drinks company. The Company has
invested heavily in India making it one of the largest multinational investors. The
group has built an expansive beverage, snack food and exports business and to

7|Page
support the operations are the group's 43 bottling plants in India, of which 15 are
company owned and 28 are franchisee owned.
PepsiCo stays committed to providing its consumers with top quality beverages. Its
diverse portfolio of brands include the flagship cola brand - Pepsi; Diet Pepsi; 7Up;
Mirinda; Mountain Dew; Slice fruit drink; Tropicana brand 100% fruit juices in
various flavours; Aquafina packaged drinking water; Gatorade plus local brands
Lehar Evervess Soda, Dukes Lemonade and Mangola.
PepsiCo is also a dominant player in the snack food segment in India. PepsiCo's
snack food company Frito-Lay is the leader in the branded potato chip market. It
manufactures Lay's Potato Chips; Cheetos extruded snacks, Uncle Chips;
traditional namkeen snacks under the Kurkure and Lehar brands; and Quaker Oats.
PepsiCo is one of the largest MNC exporters in India and its export business
consist of three categories - agri business, commodities and Pepsi system sales.
PepsiCo has made significant investments with the Punjab Agriculture University
to develop a comprehensive agro-technology program that has helped thousands of
farmers across India improve the yield of their farms and the quality of their
agricultural products. PepsiCo has leveraged its knowledge in contract farming to
develop seaweed cultivation in Tamil Nadu and has partnered with the
Government of Punjab to help farmers of the state through the utilization of
developed technology for citrus farming.
As part of its sustainable development initiatives, PepsiCo India has been a
committed leader in the promotion of rain water harvesting, water conservation
recycling and the reduction of effluent discharge. PepsiCo has also established zero
waste centers and PET recycling supply chains and assisted victims of natural
disasters. PepsiCo stays dedicated in its endeavor to develop community outreach
programs by supporting rural water supply schemes, administering medical camps
in villages, providing computers to rural schools and creating opportunities for
women in rural areas through vocational training as an alternate means of
livelihood.
Different Product of PepsiCo

8|Page
 Pepsi
 Diet Pepsi
 Pepsi Aha
 Slice
 Mirinda
 7-Up
 Aquafina Mineral Water

TYPES OF PRODUCTS:
Non-alcoholic soft drink beverage market can be divided into fruit drinks and soft
drinks. Soft drinks can be further divided into carbonated and non-carbonated

9|Page
drinks. Cola, lemon and oranges are carbonated drinks while mango drinks come
under non-carbonated category. The soft drinks market till early 1990s was in
hands of domestic players like campa, thumps up, Limca etc but with opening up
of economy and coming of MNC players Pepsi and Coke the market has come
totally under their control. While worldwide Coke is the leader in carbonated
drinks market in India it is Pepsi which scores over Coke but this difference is fast
decreasing (courtesy huge ad-spending by both the players). Pepsi entered Indian
market in 1991 coke re-entered (After they were thrown out in 1977, by the then
central government) in 1993.
Carbonated soft drinks major Pepsi India is now putting together a ‘cocktail’ to
take a bigger ‘slice’ of the fruit juice market. Close on the heels of the launch of its
global lemon drink Twist in an Indian avatar as Pepsi Aha, Pepsi, once again, is all
set to roll out another global product—in a localized version. Come June 2002, and
Pepsi will roll out the blends of its international fruit drink Twister in the country,
albeit, with a difference. In India, Twister blends will be launched as mixed fruit
cocktails under Pepsi’s existing juice brand Slice. Pepsi spokesperson, when
contacted, confirmed the launch but said the products will be launched on an
‘experimental basis’ for three to four months beginning June 2002. However,
confirmed sources said that the product has been test-launched and is ready for a
formal launch in June. Globally, the proposed Slice fruit blends exist under Twister
brand and are available in over 10 flavors and in various packaging options.

However, in India, while the blends will be decided as per local tastes and as per
the availability of fruit pulp, packaging will be restricted to cartons only. Among
the four to five flavors planned, strawberry-peach and kiwi-guava are some of
them. However, the new product could be priced a little higher than Slice since
Twister—originally—is believed to have more than 15 per cent juice content.
Slice, on the other hand, is a 15 per cent juice drink positioned at the mass-end;
against the 100 per cent fruit juice Tropicana, which is at the top-end. Pepsi’s
decision to launch Twister flavors as Slice variants rather than the original brand
itself follows the company’s decision to make Slice the mother juice brand in
India.

The company had at one time contemplated bringing Twister in its original self to
India but the plan was later shelved. “Internally we have been debating whether to
go ahead with Twister or keep Slice as a mother brand for juices,” the Pepsi
spokesperson said. The move, point out industry observers, is clearly aimed at
saving costs of launching an altogether new brand and instead cash in on the
potential of a existing juice brand. A Rs 200-crore brand, Slice was originally
launched as a mango drink in returnable glass bottles. Last year, in fact, Pepsi

10 | P a g e
launched a new advertising campaign to rejuvenate the brand’s mango positioning.
And early this year, it was launched in cartons and more recently—three new
flavors—orange, leechi and guava—were added to the brand.
Burdened by high cost of production of returnable glass bottles, Pepsi India has
decided to look at the most sought after packaging alternative—flexible packaging
—more seriously. The company through one of its prime bottler Mr. Ravi Jaipuria
of Varun Beverages Ltd is now setting up a new carton line (tetrapack) at its
existing bottling plant at Noida in Uttar Pradesh.

The plant with a capacity of 5,000 to 7,000 cases per day will be used to pack
Pepsi’s juice drink Slice and its new variants in 200-ml cartons. The product is
currently being packaged at Varun Beverages at Boranada Road Jodhpur.The
Noida slim line carton plant—which is expected to take off shortly—will cater to
the north market and will help the company cut huge transportation costs.
Products, Operations & Technology:
Nonalcoholic beverages include sodas (carbonated soft drinks, or CSD), bottled
waters, juices, and a large variety of mixtures. Sodas account for about 60 percent
of the market. The manufacture and distribution of most national soda brands,
including Coke and Pepsi, is a two-tiered process. The primary manufacturer
produces a flavored syrup called concentrate that is sold to local bottlers who
manufacture and distribute the finished product. In a typical bottling operation, the
flavored syrup, corn syrup (sugar), and filtered water are mixed in appropriate
proportions, carbon dioxide gas is injected, and the finished soda product is poured
into bottles or cans, which are capped, labeled, and packaged.
The two-tiered structure is most efficient for national companies with large
volume, because the manufacturing process is simple and because water, the main
ingredient of sodas, is expensive to ship and is available locally. Smaller
companies combine the syrup production and bottling operations in one plant. For
soft drink bottlers, the major raw materials, aside from the flavored syrup, are corn
syrup and containers -- glass bottles, aluminum cans, or plastic bottles made from
polyethylene terephthalate (PET).
Bottlers frequently operate sizable distribution systems, including warehouses and
fleets of specialized delivery trucks. Production and distribution volume is usually
measured in cases of 192 ounces, although actual cases of 12-ounce cans now
contain 288 ounces. Coca-Cola produces more than 4 billion cases of soft drinks
per year PepsiCo, over 3 billion. In addition to producing canned and bottled soft
drinks, large manufacturers sell sweetened syrups to restaurants and other retailers
that produce the finished product at the point of sale by mixing the syrup with
11 | P a g e
carbonated water to produce fountain products. About 35 percent of Coca-Cola's
US product is in the form of fountain sales and 60 percent in bottled sales.
The manufacturing process for most non-soda beverages is usually more
complicated than the mix-carbonate-and-bottle soda process and therefore isn't
usually handled by local bottlers. In most cases, non-soda products are bottled by
the manufacturer and distributed through the same types of channels--wholesalers,
distributors, brokers--used by food manufacturers, although bottlers may also
participate. Bottled waters, a rapidly growing category of beverage, are either
bottled at specific springs or made locally from filtered tap water.
Manufacturers and bottlers typically operate under contracts, called Bottler
Agreements that specify the territory within which the bottler has an exclusive
right to make, sell, and distribute the manufacturer's brand in bottles or cans.
Fountain products are often sold separately through wholesalers, under Distributor
Agreements. Bottle and fountain territories may overlap and bottlers may also be
fountain distributors. Coca-Cola sells products through about 80 local bottlers and
500 fountain wholesalers.
Bottler Agreements usually require that container and packaging materials be
bought from suppliers that are approved by the manufacturer, and that the bottlers
not handle competing products. Agreements also specify the price that the bottler
must pay for concentrate. The manufacturer has no control over the prices the
bottler charges customers, and usually isn't obligated to spend money for
marketing or promotions in the bottler's territory. Often, however, the manufacturer
will provide marketing and promotion support. In one year, for example, Coca-
Cola provided about $600 million in marketing support to Coca-Cola Enterprises,
its largest bottler. Many Coke and Pepsi bottlers hold perpetual contracts that can
be terminated only for breach of contract.
The industry depends on technology for developing new products in the labs
and packaging product at the plants. Most bottling plants are highly automated
with a combination of mechanical automation and computerized robotics.
Sales & Marketing:
Beverage manufacturers, bottlers, and wholesalers sell products through a variety
of channels, such as food and convenience stores, restaurants, vending machines,
mass merchandisers, and institutions, including schools and colleges. Soda bottlers
typically own local vending machines. The marketing approach to each of these
channels is quite different and often includes promotional spending. Large
manufacturers may also sell directly to national accounts and usually advertise on
national or regional TV and in print.

12 | P a g e
Manufacturers typically produce a line of brands and often test and introduce new
products into the market through their existing distribution channels.
CHANNELS OF BEVERAGE INDUSTRY

Analysis and Industry Challenges:

In order to survive in this environment, companies must consider the market trends
that will likely shape the industry over the next few years. This will help soft drink
companies to understand the challenges they will encounter and to turn them into
opportunities for process improvement, enhanced flexibility and, ultimately,
greater profitability.
Market trends for the soft drink industry can be summarized by six fundamental
themes:
• Changing consumer beverage preferences, featuring a shift toward health-
oriented wellness drinks

13 | P a g e
 • Growing friction between bottlers and manufacturers in the distribution
system
• Continually increasing retailer strength
• Fierce competition
• Complex distribution system composed of multiple sales channels
• Beverage safety concerns and more-stringent regulations
• Consumers turn to wellness and healthy drinks

In much of the developed world, a significant portion of the population is

overweight or obese. This includes two-thirds of Americans and an increasing
number of Europeans. Consequently, many people have started to actively manage
their weight and change their lifestyles, a shift that is reflected in their choices in
the beverage aisles:
• Demand has increased for beverages that are perceived to be healthy
• Energy drink consumption has also climbed, due to the increasingly active
lifestyles of teenagers

This trend towards healthier drinks has created a number of new categories, and
changed the consumption trends of the beverage industry as a whole. While
previously dominated by carbonated soft drinks, the industry is now more evenly
balanced between carbonates, and product categories with a healthier image, such
as bottled water, energy drinks and juice:

14 | P a g e
While carbonates are still the largest soft drink segment, bottled water is catching
up fast, with an average of 58 liters consumed annually per capita. Among
individual countries, Italy ranks number one in bottled water consumption, with the
average Italian drinking 177 liters per year. Overall, bottled water represents the
fastest growing soft drink segment, expanding at 9 percent annually. This growth is
being partially driven by increasing awareness of the health benefits of proper
hydration.
The industry has responded to consumers’ desire for healthier beverages by
creating new categories, such as energy drinks, and by diversifying within existing
ones. For example, the leading carbonated soft drink companies have recently
introduced products with 50% less sugar that fall mid-way between regular and
diet classifications. Similarly, a South African juice company has recently released
a fruit-based drink that contains a full complement of vitamins and nutrients.

Sales and Marketing Hierarchy of PepsiCo India

15 | P a g e
 MARKETING
SALESPERSONS
UM
MUM
MDM
MDC
TDM
ADC
ME
CE
ASSISTANTS

ME - Marketing Executive
CE - Customer Executive
MDC - Marketing Development Coordinator
ADC - Area Development Coordinator
MDM - Marketing Development Manager
TDM - Territory Development Manager
UM - Unit Manager
MUM – Marketing Unit Manager

16 | P a g e
 RECOMMENDATION

Some of the important recommendations are as follows:

• There should be and correct feedback from the retailers on the performance
of salesmen. This will help improve their efficiency and accountability.
Moreover, this will also help in reducing the confusing that the retailers have
at times because the salesmen do not explain the schemes properly.

• As already mentioned Vizicoolers are a major reason of dissatisfaction

among retailers. The periodical maintenance check of Vizicoolers is done at
three months. This should be done at an interval of 45 days or 60 days
instead of the current practice of 90 days.

• There should be incentives for salesmen for every display they enroll
because they are assigned this task and if they get incentives for the same
then it will greatly increase the efficiency of the promotional activities.

• Pepsi should also introduce a version of Diet Pepsi Cola as a sports drink
range this is a completely new and untapped market which will help in
providing the impetus for Diet Pepsi.

• Pepsi should start more aggressive marketing of its Diet Pepsi range of
products as they have very good growth and future prospects while there is
not much growth in the carbonated beverages sector.

17 | P a g e
 CONCLUSION

• The Sales and Distribution Network of Pepsi is very strong and almost
flawless.
• PepsiCo India had the first mover advantage when it entered the market and
it capitalized on that advantage to grab the market.
• Franchisee based operations combined with the Company’s operations add
strength to the overall presence of the Company in the market.
• Promotional activities within every territory are under the territory office
and the officials of that office are responsible for the effectiveness and
successful implementation of these campaigns.
• Because of fierce competition PepsiCo has spend heavily on Ads in order to
increase the brand recall and successfully face the competition.
• Pepsi has good brand image and recall in the customer’s mind but the most
surprising thing is that when compared with Coke, Pepsi lags behind in
terms of brand image.
• PepsiCo is finding it difficult to counter the competition from Coke in
carbonated Beverages Segment but it has distinct advantage and upper in
almost all the other segments like snack food, non carbonated beverages,
sorts drink, restaurants etc.
• Diet Pepsi even though newly introduced hasn’t yet caught up with Diet
Coke the way it should.

18 | P a g e