Pepsi Bets on Fading Cricket League to Tip Coke: Corporate India

PepsiCo Inc. is betting on India’s annual cricket tournament to arrest at least five years of decline in market share and close the gap with leader Coca-Cola Co. in the South Asian nation’s soft drink market.

The world’s second-largest beverage company, which is spending 3.97 billion rupees ($73 million) over five years on sponsoring the Indian Premier League, will introduce a special edition 500 milliliter can and offer fans opportunities to watch games with celebrities, Deepika Warrier, vice president for beverage marketing at Purchase, New York-based PepsiCo’s India unit, said.

The popularity of the Indian Premier League, that opened last night with performances by Bollywood star Shah Rukh Khan and American rapper Pitbull, has been on the wane with television ratings dropping and advertising rates falling as much as 15 percent. Still, PepsiCo agreed to spend double the previous sponsor to ride on the passion for the sport in a country where the market for soft drinks is estimated by Euromonitor to expand twofold to $18.2 billion by 2017.

“The timing of Pepsi IPL coincides with a peak selling season for our business,” said Warrier. “Nearly 50 percent of beverage consumption happens in these months, so driving brand relevance and consumer engagement during this period will give us a big competitive advantage in the marketplace.”

Coca-Cola, the world’s largest soft-drink maker, will buy “airtime on IPL,” the local unit of the Atlanta-based company said in an e-mailed response. It has also started selling a 200 ml bottle of the soda in some parts of the country at 8 rupees (15 U.S. cents).

Rapid-Fire Appeal

The IPL, where nine teams compete in a Twenty20 game of cricket, started in 2008 when the Board of Control for Cricket in India auctioned off the league’s clubs to investors including billionaire Mukesh Ambani, chairman of Reliance Industries Ltd., and movie star Khan.

The rapid-fire appeal of a Twenty20 match has won huge audience in a cricket crazy country. The sport, invented in England more than four centuries ago, has largely been played in former British colonies. The league capitalizes on the growing popularity of the shorter version of the game compared with the more traditional one played over five days with breaks for lunch and tea.

Still, the league’s popularity is on the wane. Television rating point, a measure used by India’s television and advertising industry to assess the size of the audience reached by a particular show, declined to 3.27 for the IPL last year from its peak of 4.81 in the first edition, Edelweiss Financial Services Ltd. said in a report citing data from TAM Media Research.

IPL Fatigue

“There is an element of fatigue from the viewers in the sense that there is too much of cricket happening throughout the year,” Ankur Bisen, vice president for retail at consultant Technopak Advisors Pvt. said. “A Manchester United or Real Madrid or Barcelona exhibit a sort of stickiness with the fan and as a result they don’t struggle when the football season starts. Indian clubs haven’t invested the time and effort in making this connect with the fans.”

Manchester United is the world’s most valuable sports team brand with a value of $853 million, Brand Finance Plc, a brand valuation consultancy, said in October. Mumbai Indians, an IPL team owned by Ambani, was ranked 146th out of 250 with a value of $48 million, it said.

Ad Rates

That’s reflecting in television advertising rates. This year the charges have fallen as much as 15 percent from last year, Edelweiss said in a March 26 report. A 10-second advertising slot costs between 400,000 rupees to 425,000 rupees this year, analysts Abneesh Roy and Alankar Garude wrote in the report.

PepsiCo said the tournament still has the biggest appeal among all age groups and demographics. The IPL ratings last year were 47 percent higher than the International Cricket Council’s T20 Cricket World Cup in 2012, Warrier said in an e-mailed response to questions.

“There is no single format which delivers the cumulative viewership and reach like the IPL,” said Warrier. “The format is evolving much beyond traditional TV into the online and mobile space.”

That view is shared by Parle Products Ltd., a maker of cookies and confectionery set up in 1929, which for the first time this year became an associate sponsor of the league.

‘Lot of Buzz’

“This is a high-impact property where a lot of buzz is generated in the media so we got involved,” said P.V. Kulkarni, general manager for marketing at Parle. The sporting event gets higher viewership than any other television program, he said.

Wireless operator Vodafone Group Plc., the biggest sponsor of the IPL after PepsiCo, aims to boost Internet usage on mobile devices with a trial offer for as little as 25 rupees, according to an e-mailed statement today.

Both PepsiCo and Coca-Cola are counting on growth from a low consumption base of soft drinks in India to drive sales of their products.

The per capita consumption of Coca-Cola’s products in India is 12, compared with 38 in China and 728 in Mexico in 2011, the company said.

‘Dominate Airwaves’

“While Pepsi looks to dominate the airwaves and the imagery of IPL, I think Coke is concentrating on beefing up its ground level activity,” said Harish Bijoor, whose Harish Bijoor Consults Inc. in Bangalore advises companies on brands. “I am sure Coke hopes that if its distribution is in place, it will also gain.”

Coca-Cola’s share of the Indian carbonated-beverage market rose to 61 percent last year from 57 percent in 2007, according to Euromonitor data. PepsiCo’s share declined to 36.4 percent from 40 percent.

The league, that starts today with the first game to be played between last year’s winners Kolkata Knight Riders and the Delhi Daredevils, will run through May 26 with the final to be held in the eastern city of Kolkata.

“Its going to provide Pepsi with plenty of hype and hoopla for 54 days continuously,” said Bijoor. After the IPL ends, the company will need to maintain its investment in promotion and marketing for the rest of the year to ensure the gains remain, he said.

Before it's here, it's on the Bloomberg Terminal.