Billionaire Ambani employs old strategy in cola war with Coke, Pepsi

Owned by billionaire Mukesh Ambani, Reliance last month unveiled updated Campa beverages, sugary sodas popular in India in the 1970s and 1980s before vanishing from stores as the U.S. titans grew swiftly in a liberalizing economy. Billionaire Ambani employs old strategy in cola war with Coke, Pepsi.

Indian industrial behemoth Reliance is resurrecting a historic local cola brand with intentions to utilize its enormous retail network, lower costs, and exploit nationalist emotion to rival U.S. beverage giants PepsiCo and Coca-Cola in a crucial market.

Owned by billionaire Mukesh Ambani, Reliance last month unveiled updated Campa beverages, sugary sodas popular in India in the 1970s and 1980s before vanishing from stores as the U.S. titans grew swiftly in a liberalizing economy.

At first look, it may appear that billionaire Ambani will find it impossible to remove Pepsi and Coca-stronghold Cola from a market Euromonitor estimates is worth $4.6 billion and forecast to increase 5% a year until 2027. Some highly recognized tycoons have attempted to go toe-to-toe with the beverages giants, and failed, most notably Richard Branson with his Virgin Cola.

Yet Asia’s wealthiest person has notoriously disrupted India’s telecommunications business seven years ago with cut-throat pricing to become Reliance the major player in that field. And he’s adopting some of the same tactics in his soft drinks company.

“Coca-Cola and Pepsi are unaccustomed to a statewide competition, and Reliance has the financial strength and reach to attack them with a local brand with strong nostalgia value,” said Amulya Pandit, a consultant at Euromonitor International.

A source with direct knowledge of Reliance’s strategy said it plans to establish some plants of its own or as joint ventures to create Campa and take the soda to hotels, restaurants, and in-flight sales. Manufacturing of Campa is presently outsourced, following its $2.7 million purchase of the brand last year.

The corporation is drastically lowering in-store pricing. A two-liter Campa-Cola bottle is priced at 49 rupees (60 U.S. cents) in retailers, a nearly 50% reduction on its label price, and approximately a third cheaper than 2.25-litre Coke and Pepsi equivalents, a Reuters check found. The smallest bottles of Campa Cola and Coke both cost 10 rupees, while Pepsi begins at 12 rupees.

“The pricing will be disruptive everywhere,” said the individual, who said Reliance is planning a promotional campaign during the next famous IPL cricket competition and is in negotiations with at least three teams to make Campa their refreshment partner.

The individual did not want to be named since the plan is private. Reliance did not react to a request for comment, while Pepsi said it doesn’t comment on competition as a policy.

Coca-Cola said it had mainly maintained the pricing of its small bottles stable since last year and was focused on boosting distribution. “Having new competitors in the industry gives a fantastic chance for investments to expand the market further,” it stated.

Reliance, India’s leading retailer, will provide Campa to its 2,500 grocery outlets and thousands of smaller non-network shops as part of its new consumer products drive from which it has set an internal aim of $6.5 billion in annual sales within five years.

The firm also has a grocery shopping app and a wholesale component under which it provides consumer items to 500,000 mom-and-pop retailers, which it will also access for Campa sales.

GREAT INDIAN TASTE’ VS FOREIGN BRANDS

Reliance’s cola and consumer products incursion is being spearheaded by T. Krishnakumar, an executive who worked for almost 17 years at Coca-Cola in several senior capacities.

Pepsi and Coca-Cola will also closely observe Reliance’s marketing plan after it targeted nationalist feelings and nostalgia by pushing Campa as an indigenous brand with “Great Indian Taste” and a “deep legacy”.

A former Pepsi executive who did not want to be named because of the sensitive nature of the matter said the U.S. corporation has long been apprehensive about local goods sold with an “India First” ideology, particularly at a time when Prime Minister Narendra Modi himself backs self-reliance.

The competition is already playing out in the market.

At five Reliance stores that Reuters visited in Mumbai in India’s west, Chennai in the south, and Lucknow in the north, Campa cola or lemon plastic bottles were exhibited at the main entrance gates or put on shelves directly next to the competitors.

At one Chennai branch, a Reliance store manager claimed this year they were displaying Campa near the door for advertising it, with competitors hidden behind it and not apparent at first sight. Another city shop clerk reported 30 Campa bottles were being sold for every 100 Pepsi and Coca-Cola.

For now, the U.S. opponents have an upper hand. Pepsi and Coca-Cola beverages are accessible in at least 3 million Indian shops and the businesses have a large logistical network, dozens of plants, and the benefit of a flavor favored by many, said Alok Shah, a consumer analyst at India’s Ambit Capital.

“We’ll need to wait and watch to see whether customers convert to Campa,” he added, noting that Pepsi and Coke remain aspirational international brands for many Indians, supplied at basically identical small-pack costs.

Srinivas Rao said he still enjoys Coca-Thums Cola’s Up, a native brand it purchased in 1993 and remains its best-selling one in India, unlike in the U.S. where Coke prevails.

“We purchase Thums Up every time we eat biryani or beef at home. We are not tempted to discounts from other brands like Campa,” Rao stated outside a Reliance shop in Chennai.