Question

re-entry of coke and introduction of pepsi in the indian market

Answer 1

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After two years of debate, the Indian Government has cleared the way for Pepsi-Cola to enter the soft drink market, Minister of Food Processing Jagdish Tytler announced today.

The agreement, a decade after Coca-Cola was forced out of India by a wave of economic nationalism, allows Pepsico, which will initially invest $17 million, and two Indian partners to open bottling and food-processing plants in Punjab. Separatist violence in the region has meant a loss of industries and jobs.

The terms of the accord are not acceptable to all Indians, however. There is expected to be stiff resistance to an American soft drink from local soft drink makers who cashed in on the departure of Coca-Cola. No Pepsi Label

Coca-Cola's departure reflected its unwillingness to turn over to the Indian Government its secret formula for its mainstay soft drink, as well as its desire to import the formula concentrate into India.

Ken Ross, a Pepsico International spokesman in Somers, N.Y., said Pepsico had agreed to manufacture the concentrate in India and that the issue of its ingredients had not entered into negotiations.

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Today's deal with Pepsico reflects several arrangements that are intended to assuage economic nationalists.

Pepsico will be a minority partner in a joint venture with Punjab State Agro Industries, a government organization, and Voltas International, a subsidiary of the Tata industrial conglomerate. Pepsico has agreed not to market its drink under the Pepsi-Cola label, and at least 75 percent of the soft-drink concentrate produced in India will be exported. That will produce export earnings for India as well as buffering Indian soft-drink manufacturers.

The approval came two days before Prime Minister Rajiv Gandhi's scheduled visit to Punjab to discuss economic aid for the state, where Sikh militants have been waging a guerrilla war against the Government and moderate Sikh leaders. Four Operations

The Pepsico investment involves four operations - a factory that makes soft drink concentrate and provides it to bottlers; a plant that turns agricultural products into such snacks as corn chips and potato chips; a fruit and vegetable concentrate plant, and an agricultural research center.

Pepsico has agreed to limit its sales in India to 25 percent of the soft drink concentrate. The balance will be exported. The snack food will be sold domestically; the vegetable and juice concentrate exported.

The projects are expected to provide at least 20,000 jobs. Some local politicians see 50,000 jobs in the effort. The state government says 5,000 local farmers will benefit from sales of fruit and grain crops.

Indians consume more than 2.5 billion bottles of soft drinks a year, and the potential market is thought to be much larger. With a population of 800 million, India is just beginning to develop tastes for brand-name consumer goods.

Indian officials say that Pepsico will generate export earnings of about $150 million a year through sales of bottled drinks and snacks. Symbol of Commitment

For Punjabi government officials and political leaders who believe economic development is necessary to reduce violence, the Pepsico accord had become a symbol of the central Government's commitment to encourage more foreign participation in developing high-technology industries.

Answer 2

Coke and pepsi are substitute goods. This means that when one purchases coke he has to fore go pepsi since these are two competing goods. Re entry of coke in the market and introduction of pepsi in the market means that they are all competing for similar customers this means that there will be a drop of price of one commodity to attract more customers.

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