Pepsi’s India answer: 10 cent Gatorade

Pepsi's India answer is to go more and more local, pushing beyond the conventional solution of smaller, cheaper packages, Forbes India writes in a compelling article on the marketing drive to penetrate the country's massive rural market.

Starting a year-and-a-half ago, under its chairman Sanjeev Chadha’s leadership in India, [Pepsi] began a series of experiments with product concepts that were tailored for BoP consumers. At least two such concepts have already been successfully tested. One of them is Lehar Iron Chusti, a range of iron fortified biscuits and puffs, targeted at adolescent girls, priced at Rs. 2 [1 U.S. cent]. It was tested in Guntur in Andhra Pradesh. And across rural Maharashtra and Gujarat, through its joint venture with Tata GlucoPlus, a lemon drink, priced at about Rs. 6 [12 U.S. cents], with isotonic salts and rehydration capabilities being marketed to urban labourers and rural agricultural workers.

Interestingly, the drive has meant more than offering poor consumers a utilitarian benefit along with their snack. Pepsi has also abandoned the common multinational strategy of buying and then ignoring local brands, and instead put a lot of muscle into its local arm, Lehar.

The article is worth a read for anybody who wants to understand what's happening in the Indian fast moving consumer goods business, but a quick summary of what Pepsi's doing might run:

1. Cutting costs by choosing products that only require locally available ingredients.

2. Slashing advertising and instead offering bigger incentives to distributors and sellers to push items.

3. Giving higher margins to storekeepers to build loyalty.

4. Working harder to tailor products to local tastes — and with stuff like Lehar Iron Chusti — local needs.