For many years, the rest of the world has assumed that India’s governing body is a closed minded regime, avoiding outside investments almost entirely, especially consumer good. This was an obvious obstacle for both Coca-Cola and Pepsi Co. when contemplating entrance into this new market. Although Pepsi had not attempted to enter the market before 1986, Coke had been there many years before, since 1958 but was forced to leave, in 1977, as a result of political actions and policies. This is an obvious example of how political actions and policies can affect, and have affected, the market for soft drinks in India. Therefore, Coca-Cola’s relationship with the Indian government was tarnished, which made it harder for Coke to re-enter. Coca-Cola was worried about the partnership with India that would have drastically cut its equity stake. Also, as a result of this Coca-Cola would have had to hand over its secret formula which had previously been so successful, this could have led to possible confiscation by the Indian government once they had control of their formula and equity shares.
Apparently, Coca-Cola and Pepsi Co. managers had no idea what was in store for them when entering the Indian market and underestimated certain aspects of culture, political and economical differences. Coca-Cola underestimated how, and to what lengths, India’s government would protect their infant industries.
As shown earlier, political actions and policies has definitely had an impact the market for soft drinks in India. The soft drink market in the country of India consists of only six product distinctions. They are cola, cloudy lemon, orange, soda, mango, and clear lemon. India’s government would prefer to ideally protect its local industries and their main producer in Parle and others such as Pure Drinks, Modern Foods and McDowells. Up until 1991, Indian customers had no say in what brands or products they needed and wanted. During 1991, the Indian economy became liberalized and abolished old trade policies and regulations, which previously had nearly prohibited all foreign investment in India. This opened the doors for new foreign investments in nearly all sectors of trade, including the soft drink and the processed food industries.
Although both Coca-Cola and Pepsi Co. entered the market, they did so in different ways and at different times. Since Coca-Cola entered the market nearly 50 years ago but was forced to make the choice to leave after a dispute with the government concerning trade secrets in 1977. Finally, after years over 20 years of absence, Coca-Cola decided to attempt to re-enter the Indian market in 1990 in a joint venture, which lessens political vulnerability. The application for re-entry was denied until 1993, when the Coca-Cola Corporation by joining with Britannia Industries India Ltd., who locally produced snack foods, the newly formed corporation, Coca-Cola India, was finally allowed to produce and sell in India, the first time...