In today’s Finshots, we tell you how Coca-Cola and PepsiCo might be seeing the Indian beverages and snacks market.

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The Story

Coca-Cola and PepsiCo. Two brands synonymous with cola in India, locked in a fierce rivalry for decades. But while PepsiCo has built a snacking empire (think Lay’s, Kurkure, and Doritos), Coca-Cola has remained laser-focused on beverages.

And that’s surprising because PepsiCo gets nearly 80% of its revenue from snacks.

So why hasn’t Coca-Cola ventured into the Indian snacks market too, you ask?

Let’s take it from the top.

India is Coca-Cola’s fifth largest market by sales volumes. It holds a 60% market share in carbonated drinks with a portfolio of 60+ products, including Coca-Cola, Thums Up, Sprite, Minute Maid, and Limca. And with over 50 manufacturing plants, including 16 under its bottling arm Hindustan Coca-Cola Beverages Pvt. Ltd (HCCB), it’s deeply entrenched in the beverage market.

But things haven’t been as fizzy of late. Because in FY24, Coca-Cola India’s profits plunged 40% (from ₹722 crore to ₹420 crore) while sales grew a sluggish 4%. The culprit? Surging advertising and promotional expenses.

So at first glance, Coca-Cola might seem to be missing out. After all, India’s snacks market is booming and is expected to hit ₹1 lakh crore in a few years, delivering 9% compounded annual growth returns. But Coca-Cola is doubling down on defending its beverage dominance in India.

You see, PepsiCo has already thrived in the snacks space by localizing flavors and launching high-margin products like Doritos. And it’s aggressively pushing to expand its snacks portfolio further.

But Coca-Cola still sees lucrative growth potential in beverages. In 2023, it had only 41% urban and 32% rural household penetration. That means a massive untapped market. So instead of diversifying, it’s expanding deeper in a huge market where it already is a leader. It is doubling down and aiming to further penetrate the rural market as well as focus on the urban space with premiumisation. And that makes sense since there’s plenty of room to grow with the Indian non-alcoholic beverage market projected to hit ₹1.47 lakh crore by 2030 (up from Rs 67,100 crore in 2019).

Then there’s the Campa Cola factor. The Reliance-acquired brand is already shaking up the beverage market and aiming to challenge Coca-Cola and PepsiCo’s dominance with aggressive pricing and Reliance’s extensive retail network. And that means Coca-Cola needs to defend its turf and not divert resources into an entirely new segment.

Plus, Coca Cola also has to keep its marketing in check. If it enters snacks, it’s left with the choice to either split its advertising budget or spend significantly more to promote both categories. And as we saw, it’s already spending a lot on these expenses which are dragging profitability. PepsiCo has managed this balance well. But Coca-Cola’s global branding is built around beverages and spreading itself too thin could dilute its identity.

And lastly, there’s the pricing power. You see, beverages allow companies to tweak bottle sizes, introduce premium variants, and adjust pricing to maintain margins. But snacks rely on various raw materials like potatoes, corn, and oil which can be very volatile, and that could make margins harder to control. And maybe that’s a risk Coca-Cola’s isn’t willing to take.

Now by this point, you might be wondering – Why did PepsiCo take a different route after all?

Well, it is all thanks to its bold bet early on. In 1965, PepsiCo merged with Frito-Lay, believing that salty snacks and sodas were a perfect match. And this strategy worked wonders in India—the company went on investing and expanding its snacking operations and today, Lay’s and Kurkure dominate store shelves. So even when beverage sales dip, PepsiCo still rakes in cash. And over the years, PepsiCo has nailed localization—Magic Masala Lay’s and Kurkure’s unique flavors cater well to Indian taste.

Coca-Cola, meanwhile, never had an entry point into snacks. After exiting India in 1977 and making its comeback in 1993, it prioritized aggressively reclaiming market share over diversification—just as it has historically done worldwide.

But all this is not to say that Coca-Cola won’t ever enter the Indian snack market. If it does, it’s more likely to acquire an existing brand rather than build one from scratch. Or it might test co-branded snack products through its fast-food partnerships. 

In fact, it’s already making moves. It recently sold a 40% stake in HCCB to Jubilant Bhartia Group—the company behind Domino’s India. Now, Jubilant operates 2,000 Domino’s outlets across 421 cities, most of which serve PepsiCo beverages. But with Jubilant now part of Coca-Cola’s bottling operations, we could see more Coca-Cola and Sprite in Domino’s soon. And maybe this could be Coca-Cola’s sneaky way of getting a share of the snacks market without diving in headfirst.

So yeah, for now, the rivalry rages on and Coca-Cola is busy defending its beverages empire. PepsiCo is expanding its snack fortress. And Campa Cola seems all ready to shake up both the markets.

Few brands. Different strategies. One fierce battle. And who wins is something only time (and consumer preferences) can tell.

Until then…

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