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10 Chapter 1 Introduction 1.1 Soft Drink Industry in India: A soft drink is a non-alcoholic beverage that typically contains carbonated water, a sweetener, and a flavoring agent. The sweetener may be sugar, high-fructose corn syrup, or a sugar substitute in the case of diet drinks. Soft drinks are available in glass bottles, aluminum cans and PET bottles for home consumption. Fountains also dispense them in disposable containers 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 drinks. Cola, lemon and oranges are carbonated drinks while mango drinks come under non carbonated category. The market can also be segmented on the basis of types of products into cola products and non- cola products. Cola products account for nearly 61-62% of the total soft drinks market. The brands that fall in this category are Pepsi, Coca- Cola, Thumps Up, diet coke, Diet Pepsi etc. Non-cola segment which constitutes 36% can be divided into 4 categories based on the types of flavors available, namely: Orange, Cloudy Lime, Clear Lime and Mango. In 2011, soft drinks registered its highest off-trade value growth rate for the review period. This growth was helped by high double-digit volume sales growth in most categories as well as appreciably higher unit prices in 2011. Sports and energy drinks, bottled water, ready to drink (RTD) tea and fruit/vegetable juice all maintained bullish growth even as abundant rainfall seemed to halt the spectacular recovery of carbonates witnessed in 2010. Table 1.1: Sales volume of non-alcoholic drinks in India Liters mn 2009 2010 2011 2012 2013 Growth Rate Bottled water 3.290 3.885 4.515 5.169 5.825 14.5% Carbonated drinks 1.323 1.430 1.536 1.639 1.731 6.7% Juice 456 538 623 709 796 14.9%

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Page 1: Comparative Analysis between PepsiCo and Coca-Cola to Improve the Market Share and Distribution

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Chapter 1 Introduction

1.1 Soft Drink Industry in India:

A soft drink is a non-alcoholic beverage that typically contains carbonated water, a sweetener,

and a flavoring agent. The sweetener may be sugar, high-fructose corn syrup, or a sugar

substitute in the case of diet drinks. Soft drinks are available in glass bottles, aluminum cans and

PET bottles for home consumption. Fountains also dispense them in disposable containers 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 drinks. Cola, lemon and oranges are

carbonated drinks while mango drinks come under non carbonated category.

The market can also be segmented on the basis of types of products into cola products and non-

cola products. Cola products account for nearly 61-62% of the total soft drinks market. The

brands that fall in this category are Pepsi, Coca- Cola, Thumps Up, diet coke, Diet Pepsi etc.

Non-cola segment which constitutes 36% can be divided into 4 categories based on the types of

flavors available, namely: Orange, Cloudy Lime, Clear Lime and Mango. In 2011, soft drinks

registered its highest off-trade value growth rate for the review period. This growth was helped

by high double-digit volume sales growth in most categories as well as appreciably higher unit

prices in 2011. Sports and energy drinks, bottled water, ready to drink (RTD) tea and

fruit/vegetable juice all maintained bullish growth even as abundant rainfall seemed to halt the

spectacular recovery of carbonates witnessed in 2010.

Table 1.1: Sales volume of non-alcoholic drinks in India

Liters mn 2009 2010 2011 2012 2013 Growth Rate

Bottled water 3.290 3.885 4.515 5.169 5.825 14.5%

Carbonated drinks 1.323 1.430 1.536 1.639 1.731 6.7%

Juice 456 538 623 709 796 14.9%

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1.2 Company Profile:

PepsiCo, Inc. is one of the world's top consumer product

companies with many of the world's most important and

valuable trademarks. Its Pepsi-Cola Company division is the

second largest soft drink business in the world, with a 21

percent share of the carbonated soft drink market

worldwide. Pepsi was founded in New York in 1965. Its

head quarter is in Purchase, New York. It is Producing Non-

alcoholic beverage and Food processing items. Pepsi is a carbonated beverage that is produced

and manufactured by PepsiCo. It is sold in retail stores, restaurants cinemas and from vending

machines.

It was first introduced as "Brad's Drink" in New Bern, North Carolina in 1898 by Caleb

Bradham, who made it at his pharmacy where the drink was sold. It was later named Pepsi Cola,

possibly.

Fig 1.1: PepsiCo‘s LogoPepsiCo gained entry to India in 1988 by creating a joint venture with

the Punjab government-owned Punjab Agro Industrial Corporation (PAIC) and Voltas India

Limited. This joint venture marketed and sold Lehar Pepsi until 1991, when the use of foreign

brands was allowed; PepsiCo bought out its partners and ended the joint venture in 1994 and in a

short period of 20 years has grown into the largest and one of the fastest growing food &

beverage business in the country. The company has an extremely positive outlook for India.

"Outside North America two of our largest and fastest growing businesses are in India and

China, which include more than a third of the world‘s population." (PepsiCo‘s annual report,

1999)

This reflects that India holds a central position in Pepsi‘s corporate strategy. India is a key

market for PepsiCo, and at the same time the company has added value to Indian agriculture and

industry. PepsiCo is concentrating in three focus areas – Soft drink concentrate, Snack foods and

Vegetable and Food processing.

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1.2.1 Brands:

Fig 1.2: PepsiCo‘s Brands

A. Foods

PepsiCo‘s foods division Frito-Lay is the leader in the branded salty snack market. All its

products are free of trans-fat and MSG. It manufactures Lay‘s potato chips; Cheetos extruded

snacks, Uncle Chipps and traditional snacks under the Kurkure and Lehar brands. The

company‘s high-fibre breakfast cereal, Quaker Oats and low-fat and roasted snack options like

Aliva increase the number of healthy choices available to consumers.

1. Kurkure : tedhahai par merahai

Launched in 1999, developed entirely in India.

100 percent vegetarian.

2. LAY‘S – ‗BE A LITTLE DILLOGICAL‘

Launched in 1995.

100 percent vegetarian.

Lehar Namkeen: KhushionKaKhazana

Launched in 1996 and re-launched in 2006.

Range of varied Namkeen using fresh and good quality oil

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3. QUAKER OATS – ‗SAY GOOD MORNING TO YOUR HEARTS‘

Launched in 2006.

Nutritious breakfast which helps reduce cholesterol.

4. UNCLE CHIPPS – ‗BOLE MERE LIPS, I LOVE UNCLE CHIPPS‘

Launched in 1992

Pioneer in branded potato chips in India.

5. ALIVA – CHATPATE CRACKERS WITH WHEAT AND DAAL

Launched in 2009.

Baked savory crackers.

B. Beverages

PepsiCo India‘s expansive portfolio includes iconic refreshment beverages Pepsi, 7UP,

Nimbooz, Mirinda, Slice and Mountain Dew, in addition to low-calorie options such as Diet

Pepsi, hydrating and nutritional beverages such as Aquafina drinking water, isotonic sports drink

Gatorade and fruit juices such as Tropicana and Tropicana Twister.

1. Pepsi: ‗YEH HAI YOUNGISTAN MERI JAAN‘

Flagship brand of PepsiCo.

100 year old brand loved by over 200 million people worldwide.

An iconic youth brand in India.

The single largest selling soft drink brand in India.

2. 7UP – ‗MOOD KO DO LEMON KA LIFT‘

7UP was created in 1929

7UP was launched in India in 1990

3. MOUNTAIN DEW – ‗DARR KE AAGE JEET HAI‘

Mountain Dew was invented in Virginia in 1948.

It was launched in India in 2003.

4. SLICE – ‗PURE MANGO PLEASURE‘

Slice was launched in India in 1993

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Slice Mangola was introduced in 1994

5. MIRINDA – ‗WEEKEND AAYE THO PAGALPANTI CHAYE‘

Mirinda Orange launched in India in 1991.

Mirinda Lemon launched in India in 1998.

6. NIMBOOZ – ‗EKDUM ASLI INDIAN‘

India‘s first nationally available packaged NimbuPani.

It was launched in India in 2009.

7. AQUAFINA – ‗THE PUREST PART OF YOU‘

Aquafina was launched in India in 2000.

1.2.2 Mission:

PepsiCo‘s mission is to be the world's premier consumer products Company focused on

convenient foods and beverages. They seek to produce financial rewards to investors even as

they provide opportunities for growth and enrichment to their employees, business partners and

the communities in which they operate. And in everything they do, they strive for honesty,

fairness and integrity.

1.2.3 Vision:

PepsiCo's responsibility is to continually improve all aspects of the world in which they operate

– environmental, social, economic – creating a better tomorrow than today.

Our vision is to put in to action through programs and a focus on environmental stewardship,

activities to benefit society, and committed to build shareholder value by making PepsiCo truly

sustainable company.

1.2.4 Performance with Purpose:

At PepsiCo, we‘re committed to achieving business and

financial success while leaving a positive imprint on

society – delivering what we call performance with

purpose.

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Our approach to superior financial performance is straightforward –drive shareholders value. By

addressing social and environmental issues, we also deliver on our purpose agenda, which

consists of human, environmental, and talent sustainability.

PepsiCo believes that its performance is fundamentally connected to its purpose agenda which

represents the commitment to give back as the company grows.

Indra Krishnamurthy Nooyi has been the chief executive of PepsiCo since 2006. During her

time, healthier snacks have been marketed and the company is striving for a net-zero impact on

the environment. This focus on healthier foods and lifestyles is part of Nooyi‘s "Performance

with Purpose" philosophy. Performance with purpose agenda is comprised of three platforms:

A. Human Sustainability:

This reflects PepsiCo‘s goal of nourishing consumers with products that range

from treats to healthy eats. PepsiCo‘s products have always offered consumers

nutrition as well as great taste.

The progress that PepsiCo has made under the Human Sustainability pillar includes

reformulating some of its products to improve their nutritional profile while launching products

that reflect consumer demand for healthier nutritious snacks and beverages. PepsiCo partners

with Governments, health officials and Non Governmental Organizations to help address obesity

concerns and it continues to provide consumers with new product choices and innovations.

B. Environment sustainability:

This is based on PepsiCo‘s commitment to strive to replenish the resources used

where possible, and minimize the impact on the environment. PepsiCo continues

to work to further reduce its water and electricity consumption and improve its

packaging sustainability. Across the world, PepsiCo has re-used water from its

processing plants and has worked with local communities to provide access to clean water, while

supporting farmers to deliver ―More crop per drop.

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C. Talent sustainability:

This is founded on PepsiCo‘s belief that cherishing its extraordinary group of

people is crucial to building an empowered workforce. PepsiCo pursues diversity

and creates an inclusive environment which encourages associates to bring their

whole selves to work. PepsiCo has increased female and minority representation

in the management ranks and has encouraged employees to participate in community service

activities while continuing to create rewarding job opportunities for people with different

abilities

1.2.5 Commitment:

PepsiCo is one of the great companies dealing with customer and their employee in good

manner. PepsiCo is committed to delivering sustained growth through empowered people acting

responsibly and buildingtrust. They uphold this commitment with six guiding principles:

I. Care for our customers, our consumers and the world we live in.

II. Sell only products we can be proud of.

III. Speak with truth and candor.

IV. Balance the short term and long term.

V. Win with diversity and inclusion.

VI. Respect others and succeed together.

Fig 1.3: Commitment and Guiding Principles of PepsiCo

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1.3 Purpose of the Project:

The Indian food and drinks market has observed strong growth over the past few years.

Economic liberalization and rising income of middle class population have had a positive impact

on consumer spending and consumption in both rural and urban areas. Indian consumer now

spends a significant proportion of disposable income on food and other essential commodities.

Several other factors like demographic and macro economic conditions have also given fillip to

expenditure on food and beverages in the country.

PepsiCo want to take the advantage of this opportunity by expanding its market in the weak

areas. Hence the main purpose of this project is to find out the weak patch areas in Aurangabad

and improve the distribution by understanding the needs of customers i.e. outlet owners.

1.4 Objectives of the Project:

The objective of study is ―Comparative analysis between PepsiCo and Coca-Cola to improve

the distribution in weak areas in Aurangabad‖ & also to understand various marketing strategy

by PepsiCo to attract non users & current users (Retailers).

My main area of working was –To Activate ―No sale outlets‖ (Those who sold Pepsi before not

now) and ―New sale Outlets‖ (Those who never sold Pepsi) finalize the total no. of outlets in

weak areas why they are not selling Pepsi and activate no. of sells outlet by convincing them. It

was also to plan their new course of action keeping in mind the current market position of Pepsi

as well as of Coke. This was an analysis of the market share of Pepsi in comparison of Coke.

This report gives information to management about the outlets uncovered by Pepsi in weak areas

and their requirements towards the company.

To study the overview of PepsiCo Company.

To know the merchandising of Pepsi in retail outlets.

To improve the distribution in weak areas.

Increase sales ratio and opening of new sales outlets.

To analyze the reasons of not selling Pepsi at retailers level.

To study the retailers satisfaction.

To study supply chain management in PepsiCo.

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1.5 Outline of the Project Report:

This report gives us a general preview of soft drink industry in India, mainly about the Pepsi.The

first chapter of report is introduction which gives the rising popularity of soft drinks in India and

preview about the PepsiCo India. It also highlights the problem poser and defines the topic,aim

and scope of the project work. The second chapter of report is the literature survey which talks

about the critical appraisal of the previous work published in the literature related withthe project

work. The third chapter is the research methodologyin this chapter technique andmethodologies

adopted for implementing the research work are explained. The fourth chapter isresults and

interpretations which include a thorough evaluationof the field work. The fifthchapter is

conclusions it includesconclusions derived from the logical analysis presented in theresults and

discussions chapter. The sixth chapter gives limitations of the project and lastly theseventh chapter

which is recommendations gives the recommendation based on theconclusions. After this there is

appendix and bibliography.

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Chapter 2 Review of Literature

2.1 Analysis of Soft Drink Industry:

The carbonated soft drinks industry in India comprises over 100 plants across all states. It

provides direct and indirect employment for over 125.000 employees. It has attracted one of the

highest foreign direct investments in the country amounting to around 1049 US $ million.

Soft drinks constitute the third largest packaged food segment in India after packaged tea and

packaged biscuits. But the penetration level of carbonated soft drinks in India is still low

compared with other developing markets, an indication for further potential for rapid growth.

The market size for bottled water in India has been estimated at 670 US $ million in 2012. With

an annual growth rate of 14.5 percent volume sales of bottled water will increase rapidly within

the next five years. The market size for juice will grow also dynamically within the next years

with an annual growth rate of almost 15 percent.

Every food companies have their competition. Pepsi‘s main competitor is Coca-Cola co. Both

have been selling thirst quenchers for 100 years that are now global brands. Coke was born 11

years before Pepsi in 1887 and, a century later it still maintained its lead in the global cola

market. Pepsi, having always been number two, kept trying harder and harder to beat Coke at its

own game.

The two companies and their principal products are complete substitutes for each other. Coca-

Cola and Pepsi are perfect substitutes; an increase in consumption on Pepsi would result in a

proportionate decrease in the consumption of Coca-Cola. Coca-Cola and PepsiCo together

control about 90% of the carbonated beverage market in India.

Their bottles move through the world‘s most pervasive distribution network.

Coke is mainly a franchise driven operation with a company supplying its soft drink concentrate

to its soft bottles around the world Coke management releases that a soft drink is a convenience

as well as an impulse product. According the company‘s expertise lies in consumers marketing.

Idea is to reduce the effect span as Also coke will be experimenting with mobile dispensing units

at beaches and stadiums going out towards consumers the much as possible. Cokes infrastructure

plan include setting up new subsidiaries. It is also considering a 35 Greenfield venture to set-up a

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model plant in westerns corridor most likely in Gujarat. This will have 4 product lines with a

capacity of 600 bottles per minutes with a build in flexibility to about top different and flavors

and sizes. Another option for building capacity is to bringing in bottlers from overseas to invent

jointly in fresh capacity. The company wants to go a stem further and set-up COCA-COLA

institute a training facility for bottlers. Coke continues to stay with its multi brand strategy. This

enhances the ability to leverage self-space at the retail outlet. It also gives then flexibility to offer

price on brand others then lead once. Coke has launched MAJA pineapple and MAJA orange. As

far as new product launched is concerned coke plans a dual brand approach by bringing in

FANTA lemon. This comes about because volumes of LIMCA have increased by 20% shares,

which have an 80% - share of the cloudy lemon segment—so this dual brand approach will

extend to those flavors too. Pepsi‘s decision to take in company owned bottling operation

(COBO) alongside franchise has proved to be winning edge over its competitor. By 1994 Pepsi‘s

has bought over five bottles in the key markets. This ensuring maximum control. The franchise

now sees the company not just as advisor but also as carrying the weight of experience.

Company system and franchisee system can now be properly aligned to meet the required

objectives.

On expanding reach and availability 80% of all cold drinks are consumed at the point of

purchase (POP) rather than at home. The fountain initiative has paid off in higher of countrywide

and they offer consumers a whole new way experience soft drinks. Also expanding teach and

availability. Coke tied up with Indian oil to set up dispensing units at petrol pumps. Pepsi

followed suit by striking a deal with Bharat Petroleum. Pepsi has mainly focused a brand Pepsi.

Their strategy has been to keep pace with the market growth rate in non-Colas but to emerge as

the definite cola they have put there might behind the brand Pepsi as the flagship brand. In 1987,

Pepsi ranked 29 in the fortune list of the 500 largest industrial corporations in the U.S. Coca Cola

was way down at 54, while Pepsi Co. improved its position from 34 in 1986 Coca Cola tumbled

to 38 after missive public outcry; the company had to reintroduce the original coke classic. Pepsi

has so far made inroads in 151countries (150 before India) including the much-publicized

ventures in the Soviet Union and China. Patience in Pepsi Co.‘s long suit. At the base of every

beverage business lays the all important secret formula of success the ―Concentrate‖. In India the

concentrate is prepared by Pepsi food limited representatives of Pepsi-Cola international.

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They came, spent, and conquered. The size of their combined business adds up to more than Rs.

5500 Cr. The equity investment put in it tots up to a humungous $ 1347 million (Rs. 5700 Cr.).

Yet almost 10 year after Pepsi Coca-Cola Company entered India, birth is yet to turn a profit.

Their accumulated losses are estimated to over Rs. 800 Cr. In a bid to comer a larger market

share, invariably, either Pepsi or Coke ends up raising the stakes to a point where the math

simply doesn‘t add up. Just that the two cola giants have been in an unseemly hurry to grow the

Indian market and, at the same time deny each other any advantages, irrespective of whether it

makes economic sense. In the mid 90‘s breakeven was pegged at 40 million cases. Today, both

players together do 150 million cases, but break-even is still elusive. The battle spilled into

almost every area of operations in early 1999, that discounts were also unleashed. If the industry

norm was around three to four bottles free with every case, the Cola majors began to offer six to

seven bottles. In 2000 particularly in the month coke went berserk, giving 500/0 discounts.

Both cola warriors targeted a clutch of key accounts about 67% of the total retail base, primarily

restaurants, movie halls and hotels. In many cases the owner would play one against the other

and drive a hard bargain. In many cases the cola companies, paid close to Rs. 100 per case of

expected off take as advance to secure a monopoly over the key account. The gross margins a

case of returnable glass bottles was just Rs. 40. Aluminum cans too suffered from the same

problem effective. Aluminum cans too suffered from the same problem. Now every year, both

companies had to invest in fresh glass capacity and crates. Back-of-the envelop calculations

suggested that to put an additional million bottles in the market required close to Rs. 40 Cr.

investment in glass and carats, and glass bottles had to be replaced every four year after they had

done 40 cycles, during which time depreciation had been charged. Till the cola companies began

to concentrate on the urban centers. As soon as they pushed into the winter land, the first signs of

problems surfaced. In a state like Tamil Nadu the off take per 1000 people was barely 0.9 as a

result, when a Pepsi or a coke truck went into interior markets, the glass simply wouldn‘t come

black fast, either consumption was low or the volumes were being split between the volumes

were being split between the two competitors as a market. But that would have been completely

out of character for the company. ―It is a bit like asking the Brazilian Soccer team to adopt

German-Style total football‖. Across global market Pepsi has always reveled in grabbing share

away from coke. But in India it finds itself in a peculiar position. It is the Numero Uno brand,

outselling both coke and Thums up put together. That‘s helped Pepsi‘s Indian team to build quite

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a reputation. Pepsi has managed to constantly find ways to connect with the youth. So it Coke is

the universal drink, which cuts across-age groups, Pepsi is the icon of the real cola aquifers

Young-people between the age 0f 15-29.

In order to fully understand the competition between the two companies we have to understand

the soft drink industry, for the same following should be considered: the dominant economic

factors, five competitive sources and SWOT analysis.

2.1.1 Dominant Economic Factors:

Market size, growth rate and overall profitability are three economic indicators that can be used

to evaluate the soft drink industry.

The market size of this industry has been changing. Soft drink consumption has a market share

of 46.8% within the non-alcoholic drink industry, clearly, the soft drink industry is lucrative with

a potential for high profits, but there are several obstacles to overcome in order to capture the

market share.

The growth rate has been recently criticized due to the U.S. market saturation of soft drinks.

Datamonitor (2010) stated, ―Looking ahead, despite solid growth in consumption, the global soft

drinks market is expected to slightly decelerate, reflecting stagnation of market prices.‖ The

change is attributed to the other growing sectors of the non-alcoholic industry including tea and

coffee (11.8%) and bottled water (9.3%). Sports drinks and energy drinks are also expected to

increase in growth as competitors start adopting new product lines.

Profitability in the soft drink industry will remain rather solid, but market saturation especially in

the U.S. has caused analysts to suspect a slight deceleration of growth in the industry. Because

of this, soft drink leaders are establishing themselves in alternative markets such as the snack,

confections, bottled water, and sports drinks industries. In order for soft drink companies to

continue to grow and increase profits they will need to diversify their product offerings.

2.1.2 Porter’s Five Forces:

An industry analysis through Porter‘s Five Forces reveals that market forces are favorable for

profitability. The Five Forces Model provides a way to think about how information resources

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can create competitive advantage. Using Porter‘s Model one can identify key sources of

competition, uses of information resources to enhance the competitive position against

competitive threats.

Power of Suppliers: The inputs for Coke and Pepsi‘s products were primarily sugar and

packaging. Sugar could be purchased from many sources on the open market, and if sugar

became too expensive, the firms could easily switch to corn syrup, as they did in the early 1980s.

So suppliers of nutritive sweeteners did not have much bargaining power.

Selection of supplier

Industry Competitors: Revenues are extremely concentrated in this industry, with Coke and

Pepsi, together with their associated bottlers, commanding 90% of the case market in 2011. In

fact, one could characterize the soft drink market as an oligopoly, or even a duopoly between

Coke and Pepsi, resulting in positive economic profits.

Cost Effectiveness

Market Access

Fig 2.1: Porter‘s Five Forces Model

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Substitutes: Through the early 1970s, soft drinks were synonymous with ―colas‖ in the mind of

consumers. Over time, however, other beverages, from bottled water to teas, became more

popular, especially in the 1980s and 1990s. Coke and Pepsi responded by expanding their

offerings, through alliances, acquisitions, and internal product innovation, capturing the value of

increasingly popular substitutes internally. Proliferation in the number of brands did threaten the

profitability of bottlers through 1986, as they more frequent line set-ups, increased capital

investment, and development of special management skills for more complex manufacturing

operations and distribution.

Improve price

Improve performance

Power of buyers: The soft drink industry has different level of bargaining power exist among

the group of buyers such as Supermarkets, the principal customer for soft drink makers, were a

highly fragmented industry. The stores counted on soft drinks to generate consumer traffic, so

they needed Coke and Pepsi products. But due to their tremendous degree of fragmentation these

stores did not have much bargaining power. On other hand the buyers with dominant power were

fast food outlets. Although these outlets captured most of the soft drink profitability in their

channel, they accounted for less than 20% of total soft drink sales. Through other markets,

however, the industry enjoyed substantial profitability because of limited buyer power.

Buyer selection

Switching Cost

Differentiation

Potential Threat of New Entrants:It would be nearly impossible for either a new CP or a new

bottler to enter the industry. New CPs would need to overcome the tremendous marketing

muscle and market presence of Coke, Pepsi, and a few others, who had established brand names

that were as much as a century old.Entering bottling, meanwhile, would require substantial

capital investment, which would deter entry. Further complicating entry into this market,

existing bottlers had exclusive territories in which to distribute their products.

Switching cost

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Access to distribution channels

Economics of scale

2.2 Distribution:

The main objective of the marketing process is to distribute the products to the actual users. This

function involves a number of sub-functions to be performed by a producer or manufacturer.

These two functions are most important first, the creation of demand is made through the process

of advertising and sales promotion activities. On the other hand the distribution through the

channels of distribution. The decision relating to the channel of distribution is a very important

decision from the firm point of view because the selected channels affect considerable other

marketing decision. Such decisions are of long term nature and exercise their impact on the cost

structure of the firm also.

Channel distribution means the intermediaries or the process through which the goods products

are transferred from the producer to the ultimate users. Now a day any of the producers possibly

do not sell their goods directly to the final users. There are a lot of intermediaries between

producers and consumer, bearing a variety of name performing various kinds of function. Some

intermediaries like wholesalers and retailers buy and resale taking the bill. They are known as

merchant middle men and other are brokers, representative sales agent who seeks or search for

customers and negotiate on the behalf of the producer but do not take of goods. These are called

as middlemen.

The manufacturer and its distributive outlets share common objective to sell the manufactured

products at a profit. No doubt its objective differs with the marketing circumstance. Even though

many variation of specific objective fits into some categories. These are as follows:-

To built distribution network loyalty

To stimulate distribution

To develop managerial efficiency in distribution organization

To identify the source of supply for the product line at the final buyers level

The channel of distribution is a structure which organized and presents a choice among

alternative channels of distribution of the different marketing situations faced by retailers, whole

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sellers and producers within the structure. It may be considered as a series of function which

must be performed in order to make producers efficiency.

To bearing maximum profits of all institutions concerned a channel of distribution should be

treated as a unit of total system of action. The activities of the manufacturer need to be

coordinated with these middlemen used in the distribution of given product. The whole market

depends on the availability of product. One of the important things in soft drink industry is to

packaging wich is returnable i.e the company takes back the glass bottle for refilling to mack

them available once again in market.

Fig 2.2 Distribution Channel

2.2.1 Distribution Channel in Aurangabad:

There are two categories of plants such as Franchise Owned Bottling Operation (FOBO) and

Company Owned Bottling Operation (COBO) where the bottling takes place and from here; the

soft drink is supplied to different destinations.

There are plants at Paithan, Chembur and Roha where the bottles are filled and dispatched to

Aurangabad warehouse where loading and unloading of bottles take place. There are three

Manufacturers/products

Agents/brokers

Wholesalers/distributors

Retailers Retailers

Consumers and organizational end users

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intermediaries involved in the transfer of product from company to end consumers which are

hubs, distributors and retailers.

A. Hubs:

The hub (warehouse) serves as the nodal point for a particular region and supplies to various

distributors and they cater to all surrounding market.

At Aurangabad there is only one hub which is the main warehouse.

B. Distributors:

Distributors are appointed agents of the company who make orders to the company by paying in

advance through drafts, stock the products in their godowns and supply them to outlets through

their fleet of delivery was and a team of salesmen and drivers. They are allowed to sell to

company's product to the retailers in a specified area. The company divides this area into routes.

Each route is covered by one unit i.e. one de livery van, one salesman one driver, one helper etc.

These units and godown are their main investment. Distributors have to invest in empty bottles

and crates too, so t hat they can maintain a specified quantity of reserve stock and facilitate the

quick rotation of glass crates.

The company evaluates its distributors at the end of the year and makes plans for the next year.

Company fixes the targets for each distributor according to market size, last year‘s sales,

potential growth assumption based on deposit of empties and installation of coolers at outlets.

Distributors are awarded with a fair margin of Rs. 10 per crate for their service. This margin

could be increased for the sale above the targets, company offers are met with distributors before

appointing them. Distributor complying with many schemes and contests for its customers for

pushing different brands and giving various services. Company also offers many gifts like,

briefcase, and handbags, T-shirts, and capsetc to encourage the distributors. If distributor does

not agree with the conditions of these agreement company may reduce the area of distributor or

may even terminate the relationship.

C. Retailers:

Includes all the activities involved in selling goods or services directly to final consumers for

personal non-business use. A retailer or retail store is any business enterprise whose sales

volume comes primarily from retailing.

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The sale of particular soft drinks depends a lot entirely on retailer‘s wish. Like if he does not

keep Aquafina and if his shop is at the prime location then certainly the customer with turn

towards other cola drinks like Bisleri, Bailley, and Kinley etc. This all goes to prove that retailer

is king. So retailers require special focus from the company. Pepsi Co. helps the retailers to serve

its customer better by providing good margin to them for storing its product using merchandising

to improve in-store product display, installing cooling. There are different types of retailers in

India such as following:

1. Department stores: Department stores are general merchandisers. They offer to the

customers mid- to high-quality products. Though they sell general goods, some

department stores sell only a select line of products. Examples in India would include

stores like "Westside" and "Lifestyle"--popular department stores.

2. General Stores: These are small family-owned businesses, which sell a small collection

of goods to the customers. They are individually run and cater to small sections of

the society. These stores are known for their high standards of customer service.

3. Malls: One of the most popular and most visited retail formats in India is the mall. These

are the largest retail format in India. Malls provide everything that a person wants to buy,

all under one roof. From clothes and accessories to food or cinemas, malls provide all of

this, and more.

4. Modern Trade: Modern trade mean to supply product in high quantity to big retail store

like Big Bazaar, Spencer, More, & Vishal mega mart.

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2.3 PepsiCo Eight Steps of Calling:

Fig 2.3: PepsiCo Eight Steps of Calling

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2.4 Market Share:

Market share is the portion or percentage of sales of a particular product or service in a given

region that are controlled by a company. If, for example, there are 100 widgets sold in a country

and company A sells 43 of them;then company A has a 43% market share.

It in strategic management and marketing is the percentage or proportion of the total

available market or market segment that is being serviced by a company. It can be expressed as a

company's sales revenue (from that market) divided by the total sales revenue available in that

market. It can also be expressed as a company's unit sales volume (in a market) divided by the

total volume of units sold in that market. It is generally necessary to commission market

research (generally desk/secondary research) to determine. Sometimes, though, one can

use primary research to estimate the total market size and a company's market share.

Following are different concepts which are used to evaluate market shares of PepsiCo in weak

area in Aurangabad.

2.4.1 Market Penetration:

When a company enters/penetrates in a market with existing products; the best way to achieve

this is by gaining competitors & customer‘s part of their market share. Other ways include

―Attracting non-users‖ of your product or convincing current users to use more of your

product/service (by advertising). It was required to find out those outlets which are either not

selling Pepsi or selling in very less proportion. The project was conducted in Aurangabad city.

This project was aimed at finding out the shops, which were not promoting or selling Pepsi and

selling competitor brands and activate them by convincing. It was also aimed at knowing the

reason for not selling Pepsi, their requirements from company and willingness to sell Pepsi

brands.

2.4.2. Signage:

Here Signage refers to visibility of brand names and different flavors in the outlet. There a

various ways through which the brand names and different flavors are made visible to the

consumers. They are: Dealer boards Glow sign boards shop painting counter rack floor rack.

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One of the important philosophy company follows is: ―JO DIKHTA WO BIKTA HAI‖ means

the thing which is visible in any outlet, consumer demands for it. And this philosophy of

company is very much true.

2.4.3 Chilling equipments:

There are series of chilling equipment of Pepsi and its competitor. They are namely

PBI code (Visicooler) – Chilling machine provided by the company free of cost to the retailers

having goodwill in the soft drink market.PBI OYC & CCI OYC – The equipments provided by

Pepsi and its competitor respectively on the payment and the mode of payment is draft.

2.4.4 Numeric Distribution and Weighted distribution:

Numeric distribution is simply the number of items that have that thing divided by the total

number of the sample, regardless of size or contribution. If you sell to 1 outlet out of 10, then

your NumDist=10%

ND = No. of outlets where company‘s product is present /Total No of Outlets * 100

Weighted distribution is the number of items that have that thing multiplied by the weight of that

thing divided by the total number of the sample.

WD=Industry volume of outlets where company‘s product is present/ Total Industry

Volume * 100

Terminology used in ACNielsen or IRI retail audits. Basically numeric distribution is the % of

stores that a product is sold in. Weighted distribution is the % of stores that a product is sold in

but weighted by the importance of the outlets (usually on category volume).Therefore if you

have a universe (sample or geography) that contains 4 stores and the product is present in one

store then numeric distribution = 25%.

However, if that one store was for example a supermarket and the other three were corner stores

then that single outlet might account for 75% of all category sales. In this case weighted

distribution would be 75%.

Numeric distribution gives you an idea of the reach of distribution whilst weighted gives you an

idea of the quality of distribution. If companys strategy is to have a product available to

consumers 100% of the time then it would go with numeric. If company were looking to have a

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focused availability that met the majority of demand (for the category) you would use weighted.

But to incerase the over all market share company need to use both numeric as well as weighted.

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Chapter 3 Research Methodology

3.1 Research Design:

The research process designed was conclusive and statistical in nature. Which would enable the

company to take rational decision? This is because the sample size taken was large and the

techniques adopted were for mass data. The data obtained from each locality was tabulated and

the results were obtained in from of percentages.

It was required to visit all the outlets in the specified area of his distributor, which was told to us

by the CE concerned. We were required to be given the route map of the specified area. The area

was to thoroughly survey without leaving any of the outlets.

Table 3.1: Research Design

Time period Six weeks

Sample area Weak Areas in Aurangabad (Joyti Nagar,

Usmanpura and Padampura)

Research type Descriptive

Research Approach Observation & Survey

Research Instrument Questionnaire

Contact Method Visit to Outlets

Survey population 100 outlets

Total Population 1000 + outlets

Initially the survey was to start with the route vehicle of the distributor of that area. Two days

had to be devoted with the route vehicle and noting down the name of the outlets and other

particulars where ever their route vehicle visited the outlets. It was to get familiarized with the

area. The next couple of days had to be surveyed individually in the same area trying to find out

those outlets in that area which was not attended by the route vehicle. This was how the whole

survey was to be conducted. The main aim of this survey was to find out those outlets which are

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either new or remain unnoticed/unattended by the route vehicle or where the Pepsi products were

not reaching.

3.1.1 Data collection sources:

A. Primary sources

Primary data is collected, by first hand information from the concerned company person.

Primary data is collected by three different ways such as:

a) Observation – The observation was done by the following meted:

• Keeping the markets in view

• Keeping the customers and consumers in view

• Interacting with various group of retailers and consumers

b) Survey- which includes various categories of retailers. A questionnaire was prepared to

get the relevant information from retailer.

c) Personal interviews : This method of date collection involves the interviewers asking

question in a face to face con tact situation there in direct personal investigation and the

interview inn properly structured as it involves the use of set of predetermined questions

which are asked in the form and order pre-decided. This technique is preferred as it is

economical; more informative, non responses are low, spontaneous reactions which are

realistic. Lots of supplementary information comes up.

B. Secondary Data:

Secondary data consists of information that already exists somewhere and may have collected for

a different purpose, it provide a starting point. The list of retailers was obtained from company

officials, designed by company.

3.1.2 Data Collection Instrument:

Under Research Methodology there are two types of methods for marketing research. They are:

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A. The Observation Method: In observation method data are collected on the direct

observation. No talks take place. By observing the person the analysis makes the

inventory as to product used by him at his home or kept as retailers stocks.

B. The Survey Method: It is an inclusive of panel method. In survey method information is

gathered directly from individuals by Personal Interview. The survey method is also

mentioned as the Questionnaire Technique. For my projectt point of view, the methods

mainly used are:

i. Survey by route ride:

The survey method by route ride I usually went with Pepsi van also with salesman. I met the

retailers from outlets to outlets. This survey method helps me a lot to understand about the

distribution system and to understand the problem of retailers and other people.

ii. Personal Interview by Questionnaire Technique:

In addition to the personal interview by questionnaire technique; in this survey method I saw that

the respondent was shown the exhibit and advertisement to give his personal opinion and

attitude. In this method the direct interaction of occurred with the retailers and I could collect the

reliable information from them it has also cost disadvantage that‘s why some were difficult to

covered. The final questionnaire is shown in Appendix I.

3.2 Processing and Analysis of Data:

Data collected from personal interview is processed and tabulated so that the data analysis

becomes easy. Appendix II gives the data tabulated form.

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Chapter 4 Results and Interpretations

Q-1: Which company‘s stock do you have?

This gives total number of monopoly outlets in weak areas. When it was asked about the brand

preference from the customer the answer varied from one route to another. In routes like railway

station route, Cidco N-11, N-3 etc. which are considered the best route of Aurangabad the

figures are impressive. About 57% of costumer prefers Pepsi and the remaining 33% goes in the

hand of the competitors.Whereas when it was asked in the routes which company considers it as

its week routes there was marginal difference in the in the figures generated in comparison to

strong routes. The brand preference of customer in the week route is Pepsi 39% and Coke 61%.

Table 4.1: Result for Q-1

Before After

Pepsi 22 22

Cole 29 24

Both 33 38

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Q-2: Is there regular supply of Pepsi?

When asked about the regular supply of PEPSI the response was very bad in weak areas the sales

man visits on once in a week.

Table 4.2: Result for Q-2

Before After

Yes 34 41

No 21 19

Can‘t Say 29 24

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Q-3: Does PEPSI salesman behave properly?

Since the satisfaction level of customer is measured, so the behavior of sale personnel is one of

the important things to be measured in this context. So talking about interpersonal relationship

with the costumer it is quite satisfactory but some reasons are there which do not supports the

satisfaction of the customer that is the routes for a sales man is never permanent so the sales man

faces difficulty in establishing good relation with the customers.

Table 4.3: Result for Q-3

Before After

Yes 40 46

No 44 38

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Q-4: Does salesmen provide you with right scheme given by the Company?

When the above question was asked the reply of the costumer was satisfactory.This is one of the

important finding surveyed in different routes.

Table 4.4: Result for Q-4

Before After

Yes 25 30

No 20 18

Can‘t Say 39 36

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Q-5: Which company‘s Visi you have?

Table 4.5: Result for Q-5

Before After

Pepsi 37 38

Coke 35 35

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Q-6: How much stock do you have in hand?

Table 4.6: Result for Q-6

Before After

Pepsi 217.5 253.5

Coke 279 284

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Q-7: How much stock do you take in a month?

Table 4.7: Result for Q-7

Before After

Pepsi 1118 1230

Coke 2124 2124

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Q-8: Did you sold Pepsi in the past?

Table 4.8: Result for Q-8

Yes 64

No 20

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Q-9: Are u satisfied by Pepsi‘s product line?

Table 4.9: Result for Q-9

Yes 50

No 34

Q-10: Any suggestions:Some common suggestions are:

1. Scheme should be clear to costumers.

2. There should be uniformity in the schemes.

3. The outlet should be provided with proper signage index and Visi cooler.

4. There should be regular visit of company officials for the problem hearings and the

remedies to the problem.

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Chapter 5 Conclusions

The cold-drink industry is fighting it hot war since years and in the times to come it will only

intensify. The only weapons to be used are the distribution and marketing strategies. The

company that usages its weapons properly will survive and the rest will vanish.

Pepsi has built a reputation around the world as a major player in the soft drink market as well as

the leader in the snack food industry. Creating a whole some environment for their customer all

the while maintaining its integrity has done this. Currently they are facing stiff competition from

Coca-cola, but their various distribution and marketing ventures , Pepsi is posed to give Cock a

definite battle in the future as to which cola consumer want.

Since last five years the sales of PepsiCo‘s are increasing in Aurangabad city the promotional

activity of the seasons are quite good and the work force in Aurangabad city in PepsiCo India

Holding Pvt. Ltd. are working tremendous hard to increase the market shares of PepsiCo in

Aurangabad.

5.1 Observation:

1) Route vehicles are not regular on weak routes and on other routes they are regular but

they reach to their destination late.

2) It is observed that the competitor vehicle reaches quite early and fills the empty glasses;

this may be one of the reasons of decrease in the sale.

3) Even key outlets are very unsatisfied with the signage efforts put on by company even all

Pepsi exclusives are not having signage.

4) Complains handling was not proper, there were some old cases or complaints.

5) Big retailer / fat agent are involved in undercutting which should be stopped

immediately.

6) Most of the cooling equipments are not working properly.

7) Due to the shortage of Pepsi product in the market in this season Pepsi could not reach to

that mark where it can reach.

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5.2 SWOT Analysis:

A. Strength:

1) Good market penetration.

2) Motivated channel partner.

3) Well defined routes.

B. Weakness:

1) All brands were not available in at least 80% shops.

2) Complaint handling was not up to mark.

3) Supply in certain area is very irregular and also route agents are not covering full

routes.

4) Poor signage and display is making the routes week for the sale of Pepsi.

5) Interpersonal relationship with the company officials and the route agent is not

satisfactory.

C. Opportunity:

1) It is observed that in some newly establishing areas many new outlets are opening,

Pepsi needs to concentrate on these new outlets and can gradually increase its sale in

these areas.

2) Large number of mix outlets can be changed to Pepsi exclusive and coke exclusive to

mix only by luring them good and efficient supply, glow sign and cooling equipments.

D. Threats:

1) Coke is the only nearest competitor and it is catching up in the market penetration

through price skimming and other promotional scheme.

2) Local Brands.

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Chapter 6 Limitations of Study

It is well known fact that constraint and limitations are bound to be present in any study;

Following are some limitation as:-

1. The survey has been conducted only in few areas of Aurangabad due to limited time

2. It is very difficult to make people understand the significance of conducting survey.

3. Lack of retailer‘s interest to answer the questions is also an important limitation.

4. Lack of knowledge of area has affected the research.

5. The information given by the client may be false and biased.

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Chapter 7 Recommendation

7.1 Recommendation based on conclusions:

1) Signage: Majority of outlets is not satisfied with signage and they are also very unsatisfied

with the shortage problem. This problem results in the multiple problems leading to the marginal

level of dissatisfaction. There for it is very necessary to provide with effective signage to the

outlets.

2) Uniformity in the routes of sales agent: It was observed that none of the salesmen is

permanent to any route but to build up a good interpersonal relation proper interaction with the

outlets should be there so that company can position its product to the respective routes and

outlets.

3) Communication and motivational class: There is need of proper communication and

motivational class for the sales agent and the employs so that they can give their best effort and

contribute to the target announced by the company.

4) Display and Seasonal scheme: If display or seasonal scheme is allotted to any outlet it is

necessary to provide the outlets with the gifts items to encourage them, so that they can follow

the display or seasonal scheme in next season.

5)Complaint handling and its rectification: To enhance the effectiveness in complain handling

about cooling equipment it is advised to authorized at least one shop per two route , this will help

in complain handling which is biggest dissatisfaction in this season.

6) Awareness policies: The outlet needs awareness about the routes and daily scheme announced

by the company. It is recommended that the sales agent should carry some proof, document

concerned with the daily scheme so as the outlets can be satisfied.

7.2. Procedure for implementation:

1. CE needs to personally contact with retailers who help in knowing the activities of the

distributors as well as help in Promoting the business.

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2. The company should try to increase the point‘s availability of its product by increasing its

breadth distribution.

3. All the outlets in the route should be covered, as sometimes the salesman tries to escape

the small outlets, which purchase less.

4. Salesman should be motivated so that they remain with company.

5. There should be timely reimbursement of the monetary and other type of schemes to the

retailers.

6. Regular check should be made by company‘s executive to see that the promotional

scheme reaches each outlet if it is eligible.

7. It should focus its attention to the untapped market where it can considerably increase its

market share

8. Distributors should from time to time take the pain of finding out the requirement of

retailers and the problem they are facing.

9. The process of Visi installation should be made easy.

10. There should attention be paid to the repairing of Visi out of order.

11. Advertisement and publicity in the untapped market by way of signage, racks, paintings,

banners, hoarding etc. should be expanded.

12. Distributors should check the working of route agents or salesman on regular basis.

13. Shortages of the product during the summer season if possible should be reduced. It

communicates bad message among the retailers as well as the consumers.

14. Signages& merchandise should be installed against the sale performance of the outlets as

well as the need of the market.

15. The company should keep contest for the

a. Best salesman

b. Best Retailers

c. Best distributors

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Appendix

Appendix I: Questionnaire for Retailers

Name of Outlet: __________ Address/Contact No.: _____________

________________________ _______________________________

Appendix II: Data collected form weak areas before implementing the recommendations.

Appendix III: Data collected form weak areas after implementing the recommendations.

Q-

1:

Which company‘s stock do you have?

a) Pepsi b) Coke c) Both

Q-

2:

Is there regular supply of Pepsi?

a) Yes b) No

Q-

3:

Does PEPSI salesman behave properly?

a)Yes b)No

Q-

4:

Does a salesman provide you with right scheme given by the Company?

a)Yes b)No c)Can‘t Say

Q-

5:

Which company‘s Visi you have?

a) Pepsi b)Coke c)Both

Q-

6:

How much stock do you have in hand?

a) Pepsi: ______ b) Coke:________

Q-

7:

How much stock do you take in a month?

a) Pepsi:______ b) Coke:_______

Q-

8:

Did you sold Pepsi in the past?

a)Yes b)No

Q-

9:

Are u satisfied by Pepsi‘s product line?

a) Yes b) No

Q-

10:

Any suggestions: ---------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------

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Bibliography

Websites:

1) www.pepsicoindia.co.in

2) www.pepsico.com

3) www.coca-colaindia.com

4) www.drinktec.com

5) www.businessweek.com