Subtitle: A Case Study on Campa Cola's Comeback and the Price War with Coca-Cola and PepsiCo
Introduction
The Indian soft drink market has long been dominated by multinational giants Coca-Cola and PepsiCo, who have battled fiercely for consumer loyalty. However, Reliance Consumer Products Limited (RCPL) has reignited a cola price war by relaunching the iconic Indian soft drink brand, Campa Cola. With a disruptive pricing strategy, Campa-Cola has entered multiple markets, offering its products at prices as low as half of Coca-Cola and PepsiCo's. This case study delves into how RCPL is using low prices to challenge the dominance of the established cola giants and reshape the competitive landscape of India's beverage market.
Company Background
RCPL, a subsidiary of Reliance Industries, reintroduced Campa Cola to the Indian market in 2022, after acquiring the heritage brand. Campa Cola was a household name in India during the 1970s and 1980s but lost its prominence following the entry of Coca-Cola and PepsiCo in the early 1990s. Reliance’s move to relaunch Campa Cola represents a business revival and an emotional appeal to Indian consumers, leveraging nostalgia for the once-popular domestic brand.
Since its relaunch, Campa Cola has expanded across multiple states, including the southern region, West Bengal, Bihar, Odisha, and Uttar Pradesh. RCPL’s strategy is to offer Campa Cola at 30-50% lower prices than its competitors, positioning it as a more affordable alternative to Coca-Cola and PepsiCo’s products.
Problem Faced by Coca-Cola and PepsiCo
Coca-Cola and PepsiCo, which have enjoyed a near duopoly in the Indian soft drink market for decades, now find themselves in a challenging position. They face a dilemma: reduce prices to compete with Campa Cola or risk losing market share to the new entrant. However, reducing prices could lead to lower profitability and would require negotiations with independent bottling partners. To date, neither Coca-Cola nor PepsiCo has lowered their prices but have instead increased promotional activities at grocery stores and on quick-commerce platforms
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Why Coca-Cola and PepsiCo are Vulnerable to Campa Cola’s Disruptive Pricing
1. High Pricing Model: Coca-Cola and PepsiCo have long relied on premium pricing strategies. A 250 ml bottle of Coca-Cola or Pepsi is priced at Rs 20, whereas Campa Cola offers the same size at Rs 10. Similarly, a 500 ml bottle of Campa Cola costs Rs 20, compared to Rs 30-40 for Coca-Cola or Pepsi.
2. Dependence on Bottling Partners: Pricing decisions for Coca-Cola and PepsiCo must be made in agreement with their independent bottling partners. This makes it difficult for them to react quickly to changes in market conditions.
3. Seasonality of Demand: The demand for soft drinks in India is heavily seasonal, peaking during the summer and festive months. This leaves Coca-Cola and PepsiCo vulnerable to aggressive pricing tactics by competitors like Campa-Cola during critical sales periods.
Reliance's Disruptive Strategy: Learning from Jio
Reliance’s approach with Campa Cola mirrors its earlier disruptive strategy with Jio in the telecom sector. By offering data and voice services at dramatically lower prices, Jio forced competitors to merge or exit the market. Similarly, Campa Cola is using a penetration pricing strategy to attract price-sensitive Indian consumers, particularly in rural areas where 68% of households are highly concerned about inflation. This aggressive pricing, combined with Reliance’s vast retail network, gives Campa Cola a significant advantage over its multinational rivals.
Campa Cola’s re-entry also comes at a time when more than half of Indian households consume bottled soft drinks, and the category is growing rapidly. According to Kantar, the soft drink market grew by 41% in 2023, and Campa Cola is poised to tap into this expanding demand by appealing to both nostalgic and price-sensitive consumers.
The Teaching Notes:
Lessons from Campa Cola’s Pricing Strategy
1. Penetration Pricing as a Competitive Weapon: Campa Cola’s success shows how companies can use low pricing to disrupt established markets. This strategy is particularly effective in
markets where consumers are price-sensitive, such as India.
markets where consumers are price-sensitive, such as India.
2. Importance of Nostalgia in Branding: Campa Cola has a unique advantage in its heritage, evoking nostalgia among older generations. The brand’s appeal to national pride and localism also strengthens its position against multinational competitors.
3. Challenges for Incumbents: Coca-Cola and PepsiCo are struggling to balance profitability with maintaining market share. Their reliance on premium pricing and external bottlers makes it difficult to compete with low-cost challengers.
4. Strategic Use of Brand Ambassadors and Events: RCPL’s use of cricket, a sport beloved by millions in India, to promote Campa Cola highlights the importance of aligning marketing campaigns with popular cultural events. Sponsorship of teams and athletes can significantly enhance brand visibility and customer engagement.
Failure of Coca-Cola and PepsiCo in Competing with Campa Cola on Pricing
Coca-Cola and PepsiCo have yet to reduce their prices, which puts them at risk of losing market share. Their focus on consumer promotions and brand loyalty may not be enough to compete with Campa Cola’s aggressive pricing strategy. While both multinationals continue to perform well financially, with Coca-Cola India reporting a 57% increase in profit in FY23, their failure to adjust pricing in response to Campa Cola’s challenge could erode their dominance over time.
Discussion Questions
1. How should Coca-Cola and PepsiCo respond to Campa Cola’s disruptive pricing strategy?
2. What role does nostalgia play in Campa Cola’s success, and how can multinational brands combat this advantage?
3. Is it sustainable for Campa Cola to continue offering such low prices, or will it eventually have to increase them to maintain profitability?
4. How can Coca-Cola and PepsiCo leverage their brand power and distribution networks to counter Campa Cola’s price advantage?
5. In what ways could Coca-Cola and PepsiCo innovate their products or marketing strategies to retain their market share in light of Campa Cola’s comeback?
Conclusion
The price war between RCPL’s Campa Cola and Coca-Cola and PepsiCo marks a new chapter in the Indian soft drink market. As Campa Cola expands its footprint with lower prices, Coca-Cola and PepsiCo will need to rethink their pricing and promotional strategies to stay competitive. This case study illustrates the power of disruptive pricing in challenging established market leaders and the importance of adapting quickly in a rapidly changing market
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