Rajeev Bakshi, CEO, PepsiCo India: He's ready to play now

It's a sunny January afternoon in Mumbai and at South Mumbai's Radio Club everyone's eyes are on a slightly built-5'8" and 150 pounds if you must know-24-year-old who's doing these incredible things with a BMX (that's Bicycle Moto Cross) bike.

Chad Kagy is a champion BMC rider and he is in India for the launch of one of the brands that sponsors him, Mountain Dew, a PepsiCo label, which is the third largest selling soft beverage in the US after the colas Coke and Pepsi. The Dew is an energy drink that seeks to associate itself with daring high-intensity alternate sports-hence Kagy and the BMX biking display.

It's a sunny January afternoon in Mumbai and at the Radio Club no one really pays much attention to a more-imposing-than-Kagy-5'11'' and 180 pounds if you must know-45-year-old who, in a way, is responsible for it all. They should: the event is as much a vehicle for Mountain Dew's launch as a symbol of Rajeev Bakshi's coming out.

The man who replaced Priya Mohan ('Suman') Sinha as CEO of PepsiCo India early last year, after a high-profile search exercise, spent much of 2002 plotting his moves and tweaking the company's innards-he's got a new structure and savings of some Rs 40 crore to show for his efforts.

OPERATION NEW PEPSI The challenges facing Bakshi and how he hopes to double consumer base to 250 million in three years.

PEPSI IS SUDDENLY UNDER FIRE... » Coke's aggressive pricing strategy for its cola and water has forced Pepsi to blink » Coke's launch of Georgia tea and coffee gives it a full bouquet of beverage offerings » Forced to react by slashing prices, Pepsi finds its profits under pressure » Coke is riding high after its successful more-Indian-than-Indian Aamir Khan campaign ... BUT BAKSHI HAS A LONG-TERM STRATEGY... » Focus on costs. Pepsi has saved some Rs 40 crore in 2002-03, and hopes to save Rs 50 crore in 2003-04 » Restructure operations. By moving to a structure where one executive in a region is responsible for both company owned and franchise owned operations, Bakshi hopes to increase accountability » Positioning. The company will continue to position itself around youthfulness. Mountain Dew, its second largest global brand that has just been launched in India will do this too. » Build a bouquet. Bakshi's aim is to have a product in every space: cola, orange, lemon, tea and coffee, energy, and sports ... WHICH IS ALREADY EVIDENT IN PEPSI'S RECENT TACTICS » Mountain Dew will be launched on the Cricket World Cup platform » The World Cup campaign will stress leadership; the next quarter will see a fresh campaign » Pepsi Blue, a limited edition World Cup special launched » Alliance with HLL to enhance bouquet » Pepsi will soon enter the bulk water business » Pepsi will launch a Tropicana sub-brand with lower juice content at a lower price point

Things weren't expected to be as quiet. Everyone believed Bakshi, his marketing reputation honed to messianic levels through successful stints at Lakme and Cadbury India, would shake things up at the Rs 3,890-crore company. Instead, much to the delight of executive trackers who asserted that he was a hands-off marketing strategist, he hunkered down and focused, almost exclusively, on the company's insides.

The Dew launch signalled a shift in his approach. Bakshi had sweated the company into shape; his strategy was in place; and things were ready to roll. As if to emphasise this, a week after the Dew launch, the man was at it again-this time getting some glass walls to shatter for the launch of Pepsi Blue, a limited edition blue cola that seeks to leverage the brand's association with the Cricket World Cup and the Indian team's colours.

Only, some things have changed since Bakshi took charge. Coca-Cola was a red cherry lost in the wilderness of the arid Indian marketplace in early 2002.

Everything that could have gone wrong with a brand had happened to Coke in India: a succession of CEOs that meant there was little strategic continuity, soporific advertising, much-publicised scraps with bottlers, and that famous $450 million (Rs 2,100 crore at the then exchange rate) write-off.

Circa February 2003, the company seems to have worked things out. Its latest ad campaign, with Bollywood superstar Aamir Khan is a huge success; the launch of tea and coffee brand Georgia gives the company a range of offerings and, ergo, greater leverage with distributors; and its aggressive pricing strategies for its cola and water brands appears to have paid off. Did Bakshi wait too long?

The Other Guy Blinked

One successful Coke campaign, some not-so-hot Pepsi ones, and marketing mavens are already convinced of Coke's Great Indian Turnaround.

"Pepsi's advertising in 2002 didn't have the bite of the past," says Piyush Pandey, President and National Creative Director, O&M. "And Coke has been getting its act together."

Worse still, some of Pepsi's recent efforts are being compared to Coke's earlier campaigns. "Using celebrities for the sake of using them is not of much use; that's something Coke used to do," adds Kiran Khalap, Founder, Chlorophyll, a Mumbai-based brand consultancy. "Of late, Pepsi ads-especially the Sachin-Amitabh one-have looked more like Coke ads."

Bakshi doesn't take kindly to such remarks. He's armed with an array of numbers that show how Pepsi has been gaining at Coke's expense.

Coke has a similar set of numbers to bolster its claim, but that's another story (See Cloudy Numbers). Bakshi is dismissive of the Aamir Khan ad and Coke's aggression on the price front. "If some people do not have a strategy, they move to the price platform," he explains. "It takes two minutes to match that."

"Slashing prices by 25 per cent doesn't take marketing genius," adds on-her-way-to-Purchase Executive Director, Marketing, Vibha Paul Rishi. "It just takes someone who thinks nothing of losing $450 million and writing it off-this isn't aggression but imprudence." Coca-Cola India refused to go on record with its response.

DOWING THE DEW Pepsi's Bakshi is livid at suggestions that he is being forced to react to Coke's blitzkrieg.

Pepsi has always set the agenda in the industry. Now, in terms of advertising, pricing, new products, Coke seems to be calling the shots. There is one Aamir Khan ad-this is not a new mantra from heaven. It (suggestions of Pepsi's reactive strategy) is nothing but irresponsible media hype. The figures do not show a change. My December figures from five cities show a 47 per cent share as opposed to a 45.8 one in November. Theirs show a decline from 50.9 per cent to 49 per cent. In the first 15 days of the year what have they done-dropped prices across the board. Look at my agenda: the launch of Mountain Dew, announcement of the World Cup plans, the alliance with HLL. We are also launching bulk water. Against that they announce one price drop and people say they are driving the agenda! Such a move can be neutralised within hours. But you were forced to slash prices as a result. I was anyway planning to reduce prices in February. I was not planning to do it across the board-only where there is a strategic advantage. (In) Delhi city, for instance, what difference does it make if you drop prices in the fog and cold. You drop prices but expect sales to be the same? Is that a strategic answer to Mountain Dew and the World Cup? What about Pepsi's hasty entry into tea/coffee with HLL to counter Georgia? As far as I am concerned it is a reaction but only in terms of timing. I am clear that I want to stick to my core competence; in this case that means distribution. What does the fact that we were able to counter their move in 10 days tell you? I can't sign up with HLL in 10 days. This was part of my strategy drawn up in January 2002. I felt the best way to get into tea/coffee was not by getting into plantations and growing a new brand for a market segment that at best makes up 10 per cent of the (total) market (out-of-home consumption). Why launch Mountain Dew now? The market has started expanding in terms of needs and choices-we think the market is ready for something new. We expect it to do 10 per cent of brand Pepsi sales in the first year itself.

Perception that Pepsi blinked first also comes from its announcement of a marketing alliance with HLL to jointly distribute beverages less than a month after Coca-Cola India launched Georgia. "Deals like this don't happen in a month," laughs Bakshi. "We have been planning this for more than a year."

Under the alliance, Pepsi, which has around 4,000 fountains largely in retail outlets and HLL, which boasts a network of 15,000 vending machines, largely in offices, get to pool their infrastructure. "It makes for a strong customer and consumer proposition to provide a complete range of hot and cold beverages under one umbrella," says S. Ravindranath, Director (Beverages), HLL.

Bakshi admits that Pepsi's moves in the water business haven't exactly set the market on fire but claims that the pace has been dictated by a desire to maintain standards-for the record, Aquafina does score better than Kinley in a recent CSE (Centre for Science and Environment) study.

This year, the company will enter the bulk segment where the volumes lie. "We are not playing a leadership game right now," he says. "Will we make #1 this year?" "I don't know." "In the future?" "Yes."

Anywhere. Anytime. Anything. Burp

It'll be a new PepsiCo India that backs Bakshi's game plan. "Rajeev is very numbers-driven," points out a former Pepsi exec who has worked with both Bakshi and former CEO Sinha. "He presents his game plan and expects you to deliver results; earlier, there was much more interference at the micro level."

The focus on numbers is critical to Bakshi's long-term strategy. "I am very clear that to increase the customer base, I have to play the price card-our aim is to be the lowest cost producer."

That emphasis on efficiency and results is also evident in the new CEO's restructuring of bottling operations. The world over, Pepsi has more franchise bottlers (termed FOBO or Franchise Owned Bottling Operations) than company-owned bottling operations (COBOs).

In India, where the company has had to consciously invest in growing the market, the situation is different-the ratio of COBOs to FOBOs is 55:45. Regional targets were the source of much confusion (and pain) in the past because the teams overseeing the operations of the COBOs and the FOBOs were different. Now, the same executive heads both operations at the regional level. The result? More P&L accountability.

Bolstered by aggressive pricing, innovative advertising and new offerings, Coke surged ahead in 2002 Sanjeev Gupta, Deputy President, Coca-Cola India

Now, claims Bakshi, Pepsi is ready to take the great leap forward. "I am not talking price cuts," he says. "I'm talking long-term strategic advantage." Mountain Dew is the first visible manifestation of that strategy-a $5 billion (Rs 24,500 crore) brand, PepsiCo is betting it will extend its franchise with the youth segment.

A marketing and communication offensive coinciding with the Cricket World Cup is another. This includes the launch of Pepsi Blue (a limited edition variant-blue is India's colour at the cup), special commemorative non-returnable bottles, promos involving World Cup merchandise, and an Adnan Sami video that the company hopes will emulate Ricky Martin's The Cup of Life World Cup Football hysteria. "Pepsi in India has a historic relationship with cricket," says Rishi.

The other strand of that strategy revolves around more new launches-some new, some, mere extensions. The company is considering the launch of sports drink Gatorade. And launching a sub-brand of Tropicana with lower juice content at a lower price point. That should help, although, as Bakshi himself admits, pricing won't make much difference in that market; it's the concept and the benefit that needs selling.

By the summer of 2003-crunch season for soft drink companies-Pepsi will have a product offering in every niche in the market, some its own brands, others, Hindustan Lever's. The internal restructuring too should be over by then. Will Bakshi's New Pepsi click? We should know by then.