Will Indians Remain Pepsi Loyalists or Move to Coke? (KO, PEP)

Reports that Coca-Cola Company (NYSE: KO) is set to invest up to $2 billion in India over the next five-year period brings up an interesting question regarding its arch-rival Pepsico Inc. (NYSE: PEP).  Will Indians remain loyal to Pepsi in India?

The question is one which most Americans might care less about unless the are trying to decide if Coca-Cola or Pepsi will win the most financially in India from now to 2020.  For people living in India, this may be a very pertinent question.  The big consideration is that Pepsi’s Chairman and CEO Indra Nooyi is, after all, an Indian-born American.

This story has garnered rather little news for two brands which are very different but which are fighting for more and more market share in the great opportunity in emerging markets.  Consider this: United States is listed as having 312.6 million as its resident population as of today; India is listed in the CIA World Factbook as having nearly 1.9 billion as of July 2011.  Only China is larger at 1.336 billion residents projected in its population according to the CIA World Factbook.

Nooyi has been making decisions to expand internationally and she has led Pepsi’s global strategy for more than ten years.  She was also featured in CNBC’s ‘Pepsi’s Indra Nooyi: Rule-Breaker’ series noting, “Pepsi in India is the generic word for cola and it outsells Coke by a three to two margin. India and other emerging markets provide opportunities for higher market shares and are critical to PepsiCo’s growth.”

Many regions say I would like a Coke, when they simply mean a cola.  In the Midwest of the U.S. it is “I’ll have a pop.”  $2 billion might sound like a large effort, but frankly it is not. If Coca-Cola can bridge part of that gap then it could be a huge pay off for what was a small investment.

Pepsi and Coke are very different because of Pepsi’s play in snacks and beverages versus mostly just the belief that Coke is a beverage player.  Pepsi’s 2010 sales were $57.8 billion and its market cap is $98 billion, while Coca-Cola’s 2010 sales were $35.1 billion and its market cap is $154 billion.  Pepsico also has a higher dividend rate at nearly 3.3% versus 2.8% from Coca-Cola.

Our big question remains… Will India stay loyal to Pepsi and Indra Nooyi?

JON C. OGG