This post is about the re-entry strategy followed by Coca-Cola. Why did Coca-Cola had to re-enter and when did the brand moved out of India? Why did it happen? And which was the other brand that refused to die? Let’s delve deeper to unwind these wonderful stories of marketing and strategies at play.
In 1956, Coca-Cola entered the Indian market and made a very good fortune owing to the absence of foreign exchange act. Within a span of two decades, Coca-Cola made a huge profit of 250 million rupees over a meagre 6 lac invested in India. Post elections in 1977, Foreign Exchange Regulation Act (FERA) came into effect. This act mandated the foreign MNC's to invest at least 40% of their foreign equity in Indian associates and entities. Coca-Cola refused to comply and decided to abandon its operations from India. According to RBI, around 54 companies decided to exit India during that period.
Coca-Cola was the leading soft drink brand in India when it decided to forfeit operations. Two brothers, Ramesh and Prakash Chauhan, who already owned a part of the Parle Company having two brands of soda, Limca and Gold spot, saw this as a golden opportunity. They decided to launch Thums Up in India. Thums Up was launched keeping in mind the image of a man with an eye-patch. Now such a brand had to be ruthless, youthful, energetic and thunderous. Product wise, the brand was based on a different base (orange) compared to Pepsi and Coca-Cola which were lemon based. Thums Up ruled the Indian market in the 80’s and the 90’s backed by strong marketing communications and engaging slogans ‘Happy days are here again’ to ‘Taste the Thunder’. It connected to the sense of boldness in the youth at that point in time.
The dramatic period of re-entry of Coca-Cola happened when the liberalisation policies were enacted in 1991. Thums Up had a 36% market share and Pepsi’s was 26% when Coca-Cola decided to re-enter India in 1993. The strategy followed was to acquire Parle brands which constituted 60% of the Indian market. This tactic followed by Coca-Cola was a marvellous stroke in terms of strategic frontal attack to the market leader. Thums Up was the leading brand following a franchise system having 58 bottlers. They had only 4 own bottlers. Entering into India and poaching bottlers of market leader forced Parle to concede.
Parle sold Thums Up, Limca and Gold Spot to Coca-Cola for 60mn $. Coke instantly had access to 60% of the market.
Post-acquisition, Coca-Cola was faced with another hurdle.
There was a conflict among brands as Coca-Cola and Thums Up both were cola drinks. They killed Gold Spot competing with Fanta immediately. They even tried to kill Thums Up. In the absence of unavailability of Thums Up, the ardent fans switched to Pepsi. Coca-Cola later on realised that it was offering a ready-made market share for Pepsi to munch. By late 1990’s Thums Up regained its leading share and Coca- Cola could again gain an edge over Pepsi in terms of overall brands’ market share.
A drink which was stronger and spicier in taste with a more convincing and unaltered positioning throughout sustained in the consumer’s mind over decades. This is a classic example of channelised marketing efforts which re-incarnated the brand Thums Up.