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"Balancing Global & Local"

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Today, it may seem unimaginable that it took more than 20 debates in Parliament and 25 years before PepsiCo was allowed entry into India in 1988 as a joint venture partner (36.89 per cent) with Tata group’s Voltas (36.11 per cent) and Punjab Agro Industrial Corporation (24 per cent). The opposition to a ‘foreign’ brand meant PepsiCo had to append a prefix ‘Lehar’ to its name to comply with the law.

Today, its suite of brands includes household names such as Pepsi, Kurkure, Lehar, Tropicana and Mountain Dew, giving the company an edge in its local revenues over beverage-focused arch-rival, Coca-Cola India. Pepsi India’s newly appointed chairman and CEO D. Shivakumar spoke to BW. Edited excerpts:

How do multi-national companies (MNC) decide between global and local strategies?
MNCs go global when they have exhausted their local markets. If you go back in time, one of the earliest MNCs was the East India Company. It was listed on the London Stock Exchange. Its only source of revenue was taxes. Every year it presented a budget and ensured that the taxes went up.

The other reason why MNCs were born was the Second World War. Even today, you will find a great correlation between American naval bases and American brands. The third key reason is the whole concept of globalisation. Especially, globalisation of media — starting with the 1991 Iraq war, which was telecast globally by CNN.

Now, you have the spread of social and digital media. As the world has become one, either because of media or cellphones and Internet, all these things have enabled the spread of brands and culture.

MNCs tend to win when they find a happy combination of leveraging global assets while localising to suit the needs of the country.

Fast-moving consumer goods (FMCG) and food companies make the most of opportunities when they glocalise. What about Pepsi?
Most multinational FMCG companies have more than 30 per cent of sales coming from developing markets. This number is expected to grow in the coming years. FMCG products, especially food products, are about the local palate. Take something, say a Tropicana juice, which is a global product. In India, we have flavours such as coconut and litchi.

In the PepsiCo range in India, Kurkure is a local brand, built by local talent. And, so is the whole range of Lehar. Quaker products such as Poha and Upma, are local, too. Our products in the Nourishco (a JV with Tata) family — Tata Gluco+ and Tata Zinc Water are also local. We have a history of building a lot of localisation into our global brands and properties.

What percentage of the total revenue comes from locally made or developed products?
Almost all, except Pepsi, original Tropicana and Quaker Oats. The bulk of our portfolio is tailored for local needs. Lay’s Magic Masala and 7Up Nimbooz are localised products. All our brand names are local. Most of our positioning of brands is global. Only in a few cases is our advertising global — Aquafina and  Diet Pepsi. But most other campaigns are completely local. So, the totality of it is that Pepsi may be a global brand with a global position targeting youth, but it is quintessentially local in its formulation, product and communication.        

Does that hold true for Pepsi around the world? Or, is it a very Indian and Chinese phenomenon?
It will, by and large, be local. We take care of global guidelines. We derive enormous advantage from our global supply chain. Most local brands don’t have that benefit. They have narrow learnings. A global corporation picks up learnings from everywhere.

The scale of the market determines how local or global you can go. If a market is very small, developing something will be unprofitable. By 2020, there will be 13 countries with a population of more than 100 million. In 2040, there will be 16. Of the 13, only three are developed countries. If you really want to localise, you need a certain population cut-off if your product category appeals to the mass of the market. That could be the cut-off for FMCG.

There are global brands with the same positioning, same retailing, same product, finish, etc. They are the high-end brands. Like a Hermes, Ferragamo or Prada.  

What’s the learning-sharing process in Pepsi between global and local?
It happens in meetings and in guide books on why a certain brand did well in some markets. For instance, the learnings from Mountain Dew, one of the fastest growing brands across the Pepsi portfolio, are huge  in India, Pakistan and across the world. The core of the learning is that the youth have a certain fear to overcome, for which they need courage. The brand addresses that. Around the world, the message is the same — Darr ke agey jeet hai — in various renditions. It is a Rs 1,000-crore brand in India.

In a fast globalising world, will there be far more global and far fewer local products and brands?
Some brands sell because of the American-ness in them, some for the German-ness, some for the Italian-ness and some, like brands of champagne, for the French in them. There is a certain expertise that people tap into for the gold standard. The world cannot be served by just those propositions. It will be served by many more propositions.

The job for most MNCs is to build big, powerful and global master brands. You will not have a brand in every category as much as you will have a master brand that will straddle many categories — shampoo, skin, etc.

Obviously, global or master brands will have to find a way to tap into opportunities. If there was no Haldiram bhujia, would there be a Kurkure at all?
Serving needs, wants and desires is what a brand does best. Consumers don’t see if a brand is foreign or local. They look at a brand as one that solves, appeals to or handles their needs, wants and desires. Whichever does it best, they go for that. Very rarely will a consumer be able to tell you the origin of a brand. As MNCs have grown, they have grown organically and with acquisitions. Over a period of time, people don’t know what is what. 

Where do you draw the line between global standardisation and local customisation?
Every business has a tipping point. If you become too local, you won’t get scale. And, if you become too global, you won’t get local relevance. Where is that fine tipping point is a judgement to make. Similarly, if you have too many variants either globally or locally, it’s confusing. Most of our brands are global. But the way they are distributed and advertised is very local. The formulation, packaging, look and positioning of Mountain Dew is global, but advertising and distribution is completely local.        

Do you tinker with the formulation for local markets?
In a general sense, you will try and adjust a product for the best taste palate of the local country. Local ingredients might determine it. But, by and large, big brands will standardise formulation, localise delivery and proposition.

How many of your products have gone out of India and become international?
Kurkure is in Canada and the Middle East. And Slice is being discussed.

Have Indians from Pepsi gone to the global organisation?
Over a hundred Indians are in the Pepsi fold. We have more than 20 CEOs from the Pepsi Leadership University who are now CEOs in India.

If trade between countries is growing and trade costs are falling, will they make ‘local’ a minority?
Business evolves on common interests. In some countries, ‘local’ is a minority. Hong Kong, Singapore and Dubai have only a few local brands. 

How local is Pepsi’s research and development?
You want to leverage research in as many places as possible. When you start R&D in a country, you quickly want to work with other countries with similar needs, wants and desires. Pepsi Atom was developed by our global and Indian R&D. 

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(This story was published in BW | Businessworld Issue Dated 07-04-2014)