The Startup20 initiative of G20 nations aims to create a global narrative, shape G20 policy, and provide a platform for startups to connect and showcase their innovations. The G20 targets to raise $1 trillion by 2030 in the global startup ecosystem.
The G20’s Startup20 initiative is an official engagement group established under the Indian presidency of the G20 2023. It is the first-of-its-kind engagement group for startups and aims to act as the voice of the global startup ecosystem, bringing together varied stakeholders on a common platform. It aims to create a global narrative, shape G20 policy, and provide a platform for startups to connect and showcase their innovations.
G20’s Startup20 Initiative Sets Ambitious $1 Trillion Investment Target by 2030, Igniting Global Collaboration
G20, home to more than 8,50,00 startups and over 1,500 unicorns, now has become the worldâs new economic trailblazer. For Indian startups and entrepreneurs, the Startup20 initiative is a significant step forward on the global stage. Following the recently concluded G20 Summit, business leaders and entrepreneurs are eyeing global collaboration to facilitate growth, enhance funding opportunities, and break into newer markets.
The New Delhi Declaration has announced a dauntless target of generating $1 trillion in G20âs investment in the global startup ecosystem by 2030. The Startup-20 Communique, developed by India in collaboration with representatives from other G20 countries, explicitly points out that there is minimal alignment concerning policy frameworks, regulatory histories, and market development levels among the group.
While talking to ANI, Prince Fahad Bin Mansour Al-Saud of Saudi Arabia said, âWe have signed an MoU that bridges both startup ecosystems and entrepreneurship and investorsâŠwe are part of this MoU to initiate a joint fund between Saudi and India to invest into startups in both countries and I believe that this is just the beginning, and this is the foundation for what is coming.â
Indian Entrepreneurs Embrace Startup20 Initiative, Paving the Way for Innovation and Global Impact
India, once termed as the worldâs BPO, is now being transformed into the center of innovation. StartupTalky spoke with startup founders and entrepreneurs to analyze the benefits of the New Delhi Declaration for Indian startups. With the rapid digitalization across all sectors, Bhavik Vasa, Founder and CEO, of GetVantage believes that there could not be a better time to launch a new brand, business, or startup than in India right now. He mentioned that the market dynamics are playing out favorably for startups and small businesses.
Mr.Dev Arora, Co-founder & CEO of Alt Mobility, said, “This will ideally lead to a far higher degree of understanding, respect, and commitment on the part of every G20 government in every G20 nation to focus on startups. As is well known, India boasts the third-largest startup ecosystem in the world. Over the past seven or eight years, the Indian government has placed a strong emphasis on the startup sector, in contrast to the majority of G20 nations.”
Deep Bajaj, Co-founder and CEO, of Sirona Private Hygiene Limited, said, âI am inspired by the remarkable potential and innovation that the G20âs Startup20 initiative represents. These startups are not just shaping the future of industries; they are crafting the narrative of progress and transformation on a global scale. Together, we stand at the intersection of entrepreneurship and impact, where the power of innovation converges with the commitment to make a meaningful difference in the world. Let us harness this collective energy and creativity to redefine the future of our industries and pave the way for a more sustainable and inclusive world.”
Mr. Nageen Kommu, CEO, of Digitap, mentioned that this Startup20 initiative is an opportunity to unfold themselves in the international market. However, he also believes that the Indian fintech ecosystem is well ahead of a lot of countries in terms of innovations, especially from the West. âYou are now seeing a lot of startups mushrooming around the account aggregator ecosystem which is one of the flagship initiatives of the Indian government,â he added.
Mr. Kommu said, âNow we are seeing countries like UAE and France adopting our UPI ecosystem. So, we have that edge in terms of some of the technology and some of the innovations that we have gotten about, especially around the digital infrastructure like Aadhaar, UPI, and account aggregators. It will help us, the Indian startups, to take these initiatives outside our country and then start internationalizing them,â
He also said that there is a huge potential around the lendingtech industry as well. âWhile Western markets possess the digital infrastructure to support underwriting, there remains a substantial need for LOS and LMS solutions of the kind that Indian companies have developed at scale to serve a vast customer base within India,â Mr. Kommu added.
Amitabh Kant explains Indiaâs contribution to G20 – âStartup 20â
Mr. Rohit Boda, Group Managing Director, J B Boda Group and Founder, R B Ventures shared that this recognition not only encourages governments to cultivate environments conducive to start-ups but also underscores the significant contribution start-ups make to GDP growth and job creation.
Mr. Boda said, âThe Start-up 20 initiative encourages an innovation culture by promoting collaboration among start-ups, academia, and industry. It can also help to address some of the global challenges that we face today, such as climate change and poverty. By supporting startups that are developing innovative solutions to these challenges, this initiative can help to create a better future for all.â âAs we engage with initiatives like Start-up 20, we contribute to a brighter, more innovative, and prosperous global economy that benefits us all, whether as investors seeking returns or as start-up founders driving transformative change,â he added.
Ms. Zaiba Sarang, Co-founder, of iThink Logistics mentioned that this initiative catalyzes enhancing their global logistics solutions through strategic collaborations and partnerships. It also provides a framework for sustainable growth, rather than mere expansion.
Pramod Kathuria, Founder and CEO, of Easiloan, praises the Startup20 initiative and believes that it would help in attracting talent and cross-border technologies and would broaden market access, providing a more conducive environment for startups.
Mr. Kathuria also said, âThe Startup20 initiative is a pivotal development for Indian startups, as it secures their inclusion in the Leader’s Declaration. This strategic move aims to remove obstacles, simplify access to capital, and decrease regulatory burdens. The policy framework will not only benefit India but also strengthen the startup ecosystems throughout the G20 nations.â
As we embrace initiatives like Startup20, we contribute to a brighter, more innovative, and prosperous global economy. Whether as investors seeking returns or as startup founders driving transformative change, the Startup20 initiative paves the way for a future where entrepreneurship and impact converge, shaping a more sustainable and inclusive world for all.
The realm of Software as a Service (SaaS) is constantly evolving, with an array of pricing models designed to cater to the requirements of businesses and customers. In this digital environment, SaaS providers are consistently exploring new and creative ways to determine the prices for their offerings.
In this article, we will explore the SaaS pricing models that are currently influencing the industry in 2023.
As the name suggests, in Flat-rate pricing, there is only one price that covers the product and all its features. All the customers have access to the same set of tools.
It is a very attractive pricing model as it does not discriminate between premium features and free features. It allows every user to unlock its full potential. It provides an even ground for both small and big companies to use all the features.
However, this pricing model does not provide flexibility, which means it does not let the user customize. This means that a user of this model may have the possibility to fall out to competitors that offer flexible options.
Usage-based Pricing
Usage-based pricing is the best example of pay-as-you-go pricing. As the name suggests, this pricing model lets the customers pay based on their usage.
In this model, rates are determined by factors like the number of logins or the extent of usage within the product. Customers benefit from locking in a low base price, but they are restricted by the limitations imposed on their usage, such as the number of team members logged in simultaneously. This is an advantage to a business that aims to offer competitive pricing while maintaining healthy profit margins, making it appealing to customers who appreciate lower costs.
However, it may not suit all SaaS offerings, as the value perceived by customers may be tied more to their access to the system rather than the actual usage. The advertised price is often lower than the actual monthly bill, making it attractive to individuals and small businesses, who perceive it as a cost-effective option compared to larger enterprises
An example of usage-based pricing in SaaS can be seen in Oracle’s data integration platform.
Public Cloud Application SaaS End-user Spending Worldwide from 2015 to 2024
User-based Pricing
User-based pricing in SaaS is a pricing model where customers are charged based on the number of users actively or passively engaging with the SaaS platform.
There are two main variations: the user-based model and the active-user-based model. In the user-based model, customers are charged for every user account created, whether or not they are actively using the platform. In contrast, the active-user-based model charges customers only for users who are actively utilizing the SaaS platform, such as by logging in, making calls, accessing reports, or scheduling posts. Inactive users, such as those on sabbatical or no longer with the company, are not counted in this model.
This form of pricing can also be combined with other pricing models like Feature-Based or Tiered pricing. This pricing approach is straightforward and aligns with the number of individuals using the product, making it scalable with the platform’s adoption within a company.
Although it simplifies billing for both customers and SaaS companies, still it is important to look out for potential misuse like users sharing accounts to reduce their costs.
Examples of companies using user-based pricing include Zendesk, a CRM system, and Microsoft, which employs a familiar user-based pricing model.
Feature-based Pricing
Feature-based SaaS pricing is a strategic model pricing model that is suited for businesses offering products with diverse and customizable features. It is advantageous for both vertical and horizontal SaaS providers who seek to provide tailored options to clients. This approach begins with a base rate for the product and allows customers to selectively add features, tailoring the product to their unique requirements.
The advantage of feature-based pricing lies in its flexibility, making feature launches seamless as new functionalities can be added as optional add-ons. However, it demands close attention to individual customer needs, as each client essentially possesses a personalized version of the product.
Similar to tiered pricing, feature-based SaaS pricing charges customers per feature used. For instance, a base customer service system may offer add-on options like email automation and chatbot services for an additional fee. Pricing packages vary based on the number of included features, with higher-priced packages encompassing all features from lower tiers.
Examples of companies using feature-based pricing include Amazon AWS and Canva among others.
Tier-based pricing is a widely adopted SaaS pricing model that offers various package options for different user needs. In this model, each package, or tier, comes with its unique pricing and a set of features. Customers are given the freedom to personalize their subscription according to their needs enabling them to cater to types of buyers.
The main benefit of tiered pricing is its flexibility, which allows businesses to select the package that best aligns with their budget and requirements.
However, offering too many tiers with varying features can overwhelm customers and lead them to choose a competitor with simpler options. Striking the right balance, typically with three to five tiers, is crucial to prevent confusion. Tiered pricing is advantageous to SaaS companies as it enables upselling and recurring revenue growth.
HubSpot’s feature-based tiered pricing is a prime example of this strategy in action, intelligently catering to diverse customer feedback management needs.
SaaS Pricing Models Explained (Perfect Tiered Pricing and the Subscription Based Business Model)
Cost-based Pricing
Cost-based SaaS pricing, also known as cost-plus pricing, is a straightforward and fundamental pricing strategy where organizations calculate the total expenses associated with providing their service, such as product development and employee salaries, and then add a predetermined percentage as a profit margin. This means if it costs $100 to develop software, adding a 25% profit margin would result in a sale price of $125.
Cost-based pricing model lacks the flexibility to adapt to rapidly changing costs, such as marketing expenses or hiring new employees, which are common in the dynamic SaaS sector. Subscription prices cannot be continually adjusted to accommodate cost fluctuations, potentially impacting profit margins.
While cost-based pricing provides a simple and predictable way to set prices, it overlooks critical factors like competitor pricing, perceived product value, and customer price sensitivity. In the SaaS industry, where the cost of delivering a single account can be relatively low, pricing should be primarily based on the value customers derive from the product rather than just covering development and operational costs.
Freemium Pricing
The Freemium pricing model is a prevalent strategy in the SaaS industry where businesses provide a free, limited version of their software to attract users and encourage sign-ups. While the free version offers basic functionality and can be used indefinitely, advanced features are often restricted, incentivizing users to upgrade to a paid subscription.
Freemium is particularly appealing to B2B buyers as it allows them to try out a product without the need for sales consultations or demos. HubSpot, for example, utilizes the freemium pricing model to attract users.
This allows the customers to test the product before committing to a purchase. Users can sign up easily and experience the software firsthand, reducing the risk of them staying on a free plan indefinitely.
However, one major disadvantage of the Freemium pricing model is that it can strain resources without guaranteed returns and may leave free users dissatisfied if they lack access to essential company resources like support and bug fixes.
Mailchimp is a good example of the Freemium pricing model.
Value-based Pricing
Value-based pricing in the SaaS model is a strategy where the price of a product or service is determined by the perceived value it offers to the target audience, rather than being solely based on production costs or competitor prices. This approach prioritizes understanding what the customers truly want and how they perceive the worth of the software or service.
Unlike cost-based or competitor-driven pricing, value-based pricing allows SaaS businesses to charge a premium if customers recognize the significant value they receive. It is a dynamic strategy that permits periodic price reassessment, enabling adjustments or updates to the service.
While value-based pricing offers advantages like the potential to charge higher prices and achieve a favorable LTV: CAC ratio, it can be complex due to the ongoing need to understand customer needs and value perceptions. Nonetheless, for SaaS businesses, this strategy is highly recommended as it can drive growth and profitability by aligning pricing with the value delivered to customers.
Adobe is a good example of the Value-based pricing model.
Competitor-based pricing in the SaaS model is a pricing strategy that relies on competitor pricing as a reference point for setting the price of a product or service. A company can use this pricing model to make its offering higher, lower, or at the same level as that of its competitors.
This pricing strategy is particularly valuable for new SaaS software companies entering the market. In the early stages when the product’s value hasn’t been established and cost structures are still evolving, using competitors’ pricing as a reference point helps the user to find a competitive pricing sweet spot. It also accommodates cases where a company is still in the process of understanding the complete cost structure of its service.
Competitor-based pricing is straightforward but comes with limitations. It does not consider factors like market demand or production costs, which can lead to a lack of pricing innovation and missing revenue opportunities. Although it is a practical approach for staying competitive in crowded markets, it still may not fully exploit the unique value a product or service can offer.
Penetration Pricing
Penetration pricing is a dynamic pricing model which is usually adopted by new entrants in the SaaS market. This model involves initially setting the price of a product significantly lower than competitors to rapidly gain traction and establish a strong presence.
The key characteristic of penetration pricing is its temporary nature, often marked by a specific time frame that may or may not be disclosed to customers. While penetration pricing can be effective for market entry and gaining an initial customer base, it comes with the risk of short-term losses due to reduced pricing.
However, the strategy is often part of a broader “land and expand” approach, where companies later upsell and cross-sell additional features or higher-priced packages to their established customer base. Slack and New Relic are examples of companies that have successfully used penetration pricing to capture a significant market share before competitors can catch up.
FAQs
What are the most popular SaaS pricing models?
The most popular SaaS pricing models are:
Flat-rate Pricing
Usage-based Pricing
User-based Pricing
Feature-based Pricing
Tiered Pricing
Cost-based Pricing
Freemium Pricing
Value-based Pricing
Competitor-based Pricing
Penetration Pricing
What is Tiered Pricing?
Tier-based pricing is a widely adopted SaaS pricing model that offers various package options for different user needs. In this model, each package, or tier, comes with its unique pricing and a set of features. Customers are given the freedom to personalize their subscription according to their needs enabling them to cater to types of buyers.
Which company uses the Freemium Pricing Model?
Mailchimp is one of the companies that uses the Freemium Pricing Model.
Which companies use the Penetration Pricing Model?
Slack and New Relic are examples of companies that have successfully used penetration pricing to capture a significant market share before competitors can catch up.
The new 28% GST on online gaming has produced divided opinions about the industryâs future in India. Some experts condemn the GST hike, while others see it as boosting government revenues.
The Parliamentâs new amendments in the Goods and Services Tax (GST) laws to levy a 28% tax on the face value of all bets made in online gaming, casinos, and horse racing destabilized the online gaming industry in the country. Further, the GST Council also agreed that there should be no distinction between a ‘game of skill and a game of chanceâ.
The online gaming sector, worth Rs 13,500 crore, accounted for 77% of Indiaâs gaming sector revenue in 2022. As per the FICCI-EY report, these revenues were expected to grow to Rs 16,700 crore and Rs 23,100 crore in 2023 and 2025 respectively. Revenue Secretary Sanjay Malhotra has predicted that the new levy would fetch an estimated additional revenue of Rs 20,000 crore to the government.
However, the new GST law to levy a 28% tax on the face value of online games curtailed the growth of the industry resulting in large-scale lay-offs and cost cuts in prominent companies operating in the sector.
GST Sentimeter | GST Council Decides On 28% Tax On Online Gaming | CNBC TV18
Government’s Motive to Impose 28% GST on Online Gaming
StartupTalky spoke with several key figures in the online gaming industry regarding the governmentâs decision to increase the GST on Real Money Gaming (RMG). Most experts opine that this move is an effort to increase government revenue, while others think that this also carries an underlying motive of curbing the unregulated expansion of RMG in India.
Dr. Aruna Sharma, a policy advisor and practitioner development economist by profession and the former Secretary of the Ministry of Electronics and IT, Government of India, believes that the governmentâs decision to increase the GST on RMG is a complex one, and there are likely multiple factors at play.
âThe online gaming industry is a growing sector, and it is a potential source of revenue for the government. The governmentâs decision to increase the GST on both games of skill and games of chance is primarily aimed at increasing government revenue. The state governments have supported this decision, as they believe that it will generate more revenue for them. The government has been facing a fiscal deficit for some time now, and it is looking for ways to raise revenue.â
Mr. Rohit Bansal, Founder, of Super 4, said, âIt’s a delicate balance between revenue generation and addressing the broader societal concerns associated with RMG, highlighting the government’s efforts to strike equilibrium in a rapidly evolving industry.â
Mitesh Gangar, Co-Founder & Director, PlayerzPot commented, âA 28% GST on the entire face value of online gaming is poised to significantly impede the growth of the online gaming industry. Previously, companies were willing to take risks and invest substantial resources in their operations, but this new taxation scheme renders such endeavors unviable. It presents a series of challenges, including constraints on cash flow, which in turn limits a company’s capacity to allocate funds towards research, innovation, expansion, and even its overall survival.”
Indian Online Gaming Sector from the Year 2019 to 2023 With Forecasted Value for the Year 2025
Impact on Online Gaming Companies
The GST hike has caused serious hindrances in the revenue and workforce of several companies including unicorns. Fantasy gaming platform Mobile Premier League (MPL) has laid 350 employees so far, citing additional tax burdens. Other smaller players in the industry are dealing with layoffs, shutdowns, and funding challenges amidst the 28% GST on online gaming at full face value.
It also has undoubtedly imposed an increased financial burden on the companies. The additional tax has led to higher entry fees and reduced prize pools, making it more expensive for players to participate in fantasy leagues. This has ultimately resulted in a decline in player engagement and overall revenue for us as a brand.
When asked about the impact of the new tax on the company’s workforce, Bansal said, âTo manage increased expenses resulting from higher GST rates, we have implemented cost-cutting measures. We have also made some operational adjustments, leading to shifts in workforce allocation, and job roles to optimize efficiency and reduce costs.â
Joy Bhattacharjya, Director General, Federation of India Fantasy Sports (FIFS) said that the decision would massively affect the $2.5 billion of Foreign Direct Investment (FDI) already invested and would jeopardize any further FDI in the industry.
Bhattacharjya also warned that this decision could result in users shifting towards unauthorized betting platforms, thereby posing a risk to users and causing a loss in government revenue.
Zacharias Tegefeldt, CEO and Co-founder, of TrophyRoom, while speaking about his company’s strategy to maintain a strong presence in the market and ensure positive growth, said, âConsumers will surely be pickier about where to place their funds going forward. It puts an increased emphasis on customer experience, support, etc. It also likely means that operators that do something new and different may be looked at differently. If I pay more, I want to experience more, so there’s an opportunity for companies like TrophyRoom, who focus a lot on product and gameplay innovation, to grab a larger piece of the market, by providing that extra spice to the experience. In a sense, it puts us in a rather unsuspected good position, since innovation and customer experience already make out the core pillars of our right to exist.â
However, when the 28% GST hike was announced, there were a lot of speculations about its impact on the esports industry as well. Clearing the confusion regarding whether the GST will have any sort of impact on the Esports or video gaming industry of the country, Mr. Vinod Tiwari, President, of the Esports Federation of India (ESFI) & acting Director General, of the Olympic Council of Asia states, âIt is imperative to first understand that the 28% GST is going to apply to the iGaming sector, including Real Money Gaming (RMG), fantasy sports, teen patti, rummy, and poker which are categorized under gambling or betting in the rest of the world. Contrary to some media reports, this GST is neither applicable nor will it have any impact on the âVideo Gamesâ or the Esports industry.â
âEsports has been officially recognized as a sport by the government which finally and thankfully distinguishes it from any activities like iGaming such as fantasy, teen patti, rummy, poker, betting, and gambling, among others. It will carry on being taxed the way it always has been. Theories of ‘game of skill’ and ‘game of chance’ which only exist in our country neither apply nor are relevant in the Esports ecosystem,â says Mr. Tiwari.
In April of this year, the government made amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 to lay out a comprehensive framework for the Online Gaming Ecosystem. According to Tiwari, instead of using the umbrella term of âonline gamingâ, the GST council should have ideally used the more specific term âiGamingâ which is known worldwide, or even âonline real money gameâ which is defined in âThe Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules to avoid the confusion.
“We must acknowledge the TRUTH that the primary objective of the 400 million Indian video gamers (and approximately 3 billion gamers worldwide) is âpurely entertainmentâ, and not financial gains or making money. It is regrettable that in India, our video games or esports industry is often unjustifiably associated with ‘iGaming, betting, RMG, gambling, and many more, which creates unnecessary confusion and misperceptions,” he adds.
Additionally, it is crucial to highlight that video game publishers have strict policies against implementing entry fees for any Esports events organized using their video games, further separating it from iGaming.
Gangar, when asked about the impact of the new GST on the willingness of aspiring entrepreneurs to enter this industry, said, âAspiring entrepreneurs eyeing the online gaming sector will now think twice before venturing into it, primarily due to the burdensome GST. Consequently, the burgeoning gaming economy will face a substantial setback, resulting in economic strain, diminished job opportunities, and a stifled growth trajectory within the industry.â
Finance Minister Nirmala Sitharaman has targeted October 1 to roll out the tax along with an assured review of the levy six months after its implementation.
Tegefeldt said, âI hope for an amendment that addresses these quite serious issues. There needs to be a balance, which I don’t think has been achieved yet. If this needed amendment happens, I think it’s likely that the industry will see a rather quick dip, a new low, and then a resumption of growth after a while. If not, there are several different outcomes.â
On the other hand, being optimistic about growth in the industry, Bansal believes that trends like mobile gaming, localized content, and innovative gameplay are likely to drive expansion. He also shared that government regulations and consumer protection measures might become more stringent which in turn would affect the dynamics of the market. Collaboration between industry stakeholders and regulatory bodies will be pivotal for sustainable growth.
âOverall, the industry’s future will depend on its ability to adapt to changing tax structures, navigate regulatory hurdles, and meet evolving consumer preferences,â Bansal added.
However, Dr Sharma thinks that the Indian gaming industry has a huge potential to thrive, and the new regulation would foster a suitable environment for its development.
She said, âThe governmentâs decision to increase the GST on online gaming is not intended to discourage the development of the gaming industry in India. The government believes that the Indian gaming industry has the potential to become a major hub, and it has already taken steps to regulate the industry and create a favorable environment for its growth. The increase in GST is simply a way for the government to raise revenue, and it is not expected to have a significant impact on the industry.â
Tegefeldt, anticipating the future, said, âA brighter future, from where I’m sitting, is indeed one where the hungry underdogs that actually bring something new and fresh to the table, get increased attention from the players. It would be an incredibly cool thing if the faster, leaner, and more creative underdogs can put some pressure on the larger operators and lead the way to a more fun future in gaming.â
While it is still one month away from the implementation of the Act, it is too early to predict the outlook for the online gaming industry or iGaming in India. The RMG industry in India faces a mixed outlook due to the change in tax regulations. While increased taxation may present challenges for operators, the industry is expected to continue its growth trajectory as online gaming gains popularity.
Havas Media report reveals how technology is shaping e-commerce and consumer experience in India. Increased smartphone usage and internet connectivity are providing comfort and accessibility to shoppers across the country.
The recent report- âShaping Consumer Experiences: How India Buys & How Tech is Shaping E-Commerce Adoption & Experienceâ, published by Havas Media in collaboration with YouGov and NFX across 10 key markets, dug into the core of the Indian e-commerce realm. The report reflected the extensive incorporation of advanced technologies like Artificial Intelligence (AI), Augmented Reality/ Virtual Reality (AR/VR), AI-driven Chatbots, Web 3.0, and Open Networks for Digital Commerce (ONDC) and its pivotal role in facilitating business growth. The study also sheds light on how these technologies are playing a catalytic role in evolving consumer behaviors, preferences, and expectations.
Data collected from tech enthusiasts and online shoppers between 18 to 45 years old revealed that comfort and convenience are more important to both millennials (78%) and Gen Z (76%).
In terms of consumer behavior, gender-based segmentation reflects that women are conventionally more discerning by nature. User reviews have been the major decision-making factor for 85% of consumers while 81% of them check for offers and deals before shopping.
There is also a major change in behavior with a shift in geography from the North to the South. While 78% of consumers in the north and 80% in the west prefer to have a wider range of products, the consumers from the south and tier-3 cities, about 76%, are more budget-oriented. The study also showed that a large number of people from tier 2 and 3 cities end up spending more while shopping online than they would have spent while shopping traditionally.
Number of Annual Online Shoppers in India from 2019 to 2021, With an Estimate for 2027
Category-wise, grocery, personal care, fashion, and F&B are ranked higher in shopping habits. While appliances are the least shopped online products, online medicine/pharmacy shopping has seen a surge of 33% in the last year. The study also showed that social media has emerged as the main platform to discover new brands for 44% of shoppers. The platform is a stronghold in the category where visuals play a pivotal role, like fashion, make-up, grocery, and smartphones. While Instagram has the highest traffic among younger consumers, the older generation is still relying on Facebook.
Comfort and accessibility have been the key elements of online shopping. For the time-crunched urban residents, it brings the shopping experience to the comfort of their fingertips, thus enabling them to avoid the hustle and bustle of the city. On the other hand, it makes it more accessible for the smaller town people, providing them with wider choices and alluring deals. The shoppers are mostly in favor of shopping from top e-commerce websites like Amazon and Flipkart which offer facilities like easy returns, better service, and superior quality products.
Challenges and Concerns
However, the digital advancements still have left the users with uncertainty about the quality of the products. Even data privacy issues have ranked higher among shoppers across most regions barring the North, where there are more concerns regarding returns and limited control over the sellers.
Leadership Insights
Mohit Joshi, CEO, of Havas Media Network India said that the findings of this report emphasized the transformative power of technology in reshaping the retail landscape in India. He also shared that as consumers embrace the convenience and possibilities offered by e-commerce, businesses must adapt to these changing dynamics.
âAt Havas, we recognize the significance of these trends and remain committed to innovating strategies that bridge the gap between businesses and tech-savvy consumers. Our data-driven approach enables us to create resonant and meaningful connections, ensuring that brands thrive in this evolving business environment,” Joshi added.
Sanchita Roy, Chief Strategy Officer, Havas Media India, added, “Understanding the nuances of consumer behavior at various city tiers is pivotal for brands to connect meaningfully with their audiences. The insights from this study underline the importance of localized strategies that align with distinct preferences.”
She also added that, as the retail landscape evolves, customization of marketing approaches becomes a powerful tool for capturing consumer loyalty and driving growth.
Once Indiaâs leading coffee chain, Cafe Coffee Day, faced its biggest challenge when its founder and the then Managing Director, V.G. Siddhartha, tragically passed away in 2019. Several marketing pundits anticipated an exit from the market following the staggering debts and lack of prominent leadership. Most thought the corporation would not manage to recover from its existing condition.
Cafe Coffee Day: the brand that refuse to die | Mint Explains | Mint
Siddhartha committed suicide by jumping off to the Netravat River near Mangalore. According to a typewritten note, reportedly found after his demise, Siddhartha took this extreme step following his overwhelming debts and his failure to create the âright profitable business model.â He also shared that the extreme pressure from the lenders, private equity partners, and the harassment from the Income Tax Department had made his life unbearable. He expressed his grievances by saying that his intention was ânever to cheat or mislead anybody, I have failed as an entrepreneur.â
Malavika Takes Charge as CCD CEO
Without leaving much room for speculation regarding the company leadership, Malavika Hegde, the widow of Siddhartha, addressed all realities and showed radical honesty by taking charge of the sinking ship in December 2020. She is the daughter of the former Chief Minister of Kerala SM Krishna. She has a degree in engineering and has been associated with the coffee business since 2008. She was appointed as a non-executive director of the company in 2013.
Malvika took office at the most unprecedented time, burdened with the multiple responsibilities to take the company out of the debt mountain of whooping Rs 7000 crore, make the company profitable, and retain the trust of her employees.
However, as a thoughtful leader, Malavika issued a letter to her 25,000 employees to win their trust, to assure them of her commitment to the future of the company, and to assure them that the Coffee Day story was âworth preservingâ. She also communicated in the letter assuring that she would significantly reduce the company’s debts to a manageable level by selling a few more investments and assets.
Malavika took a courageous approach to save her company from the verge of bankruptcy. She decided to:
Fast forward three years since taking office, Malavikaâs resilience, determination, and leadership have driven CCD towards the light and instilled in employeesâ and investorsâ confidence. The companyâs overall debt has been reduced by over Rs 6,000 crore, with the current debt standing at Rs 465.25 as of March 31, 2023. Following the reduction of debts, CCD stock soared by 56% on January 14, 2023. Once the sinking ship, now has been profitable for the last two consecutive years, with a net profit of Rs 100 crore and Rs 125 crore in 2021 and 2022 respectively. As compared to Rs 2,000 crore in 2020, the revenue has also increased by Rs 250 crore, making it to Rs 2,250 in 2023.
Consolidated Revenue of Coffee Day Global from FY 2018 to 2022
Criticisms of Malavika
However, Malavikaâs success in turning CCD into a profitable venture came with its fair share of criticisms as well. She has been blamed by some marketing experts for focusing more on debt reductions and not on growth. According to reports, CCD had 1,752 outlets in FY19, but the figures drastically dropped to just 469 outlets across the country in FY23. CCD has also experienced stark competition in the market from competitors like Starbucks, Barista, and Costa Coffee among others, leading to a substantial decrease in the market share by 7% with the current share reduced to 18%. Malavika has also been criticized for not being innovative enough. She has been accused of being slow to introduce new products and services, and her branding has been said to be backdated as well. Some experts, who are still doubtful regarding her leadership qualities, commented that she is still far away from making CCD a sustainable company.
Current Market Strength
Currently, CCD owns 572 cafes along with 332 CCD Value Express kiosks spread out over the nation. It is a âsubstantial businessâ with more than 36,000 vending machines providing coffee to CCD customers.
Malavika, so far, has been an example of strategic leadership. Moving on from her loss, she has dedicated her efforts to fulfilling her husbandâs vision. It is too early to comment on how they will behave in the future, but for now, it can be assured that, against all odds, CCD is not going to exit.
FAQs
How did Malavika Hegde try to overcome the heavy debt amount?
Malavika took a courageous approach to save her company from the verge of bankruptcy. She decided to cut costs, improve operational efficiency, diversify revenue streams, and renegotiate company debts.
How many cafes and kiosks does CCD own in India?
CCD owns 572 cafes along with 332 CCD Value Express kiosks spread out over the nation.
How much debt does CCD have at present?
The companyâs overall debt has been reduced by over Rs 6,000 crore, with the current debt standing at Rs 465.25 as of March 31, 2023.
Who are the competitors of CCD?
A few cafe coffee day competitors are Starbucks, Costa Coffee, and Barista.
Small and medium enterprises (SMEs) are perceived as the foundation of all economies. India, a nation of small businesses, is home to more than 64 million SMEs, collectively contributing about 30% of the countryâs GDP. However, a lack of financial resources has been a pertinent hindrance to the constant and positive growth of these SMEs. The lack of traditional assets as collateral for loans from conventional financial institutions has been a major roadblock to securing funds. Hence, came the concept of alternative financing.
This article discusses different alternative finance options available for SMEs so that securing funds does not pose a hindrance to acquiring their working capital and sustainable development.
The following are the alternative finance options available to Indian SMEs in 2023:
Securitized debt refers to a financial arrangement where an entity, often a bank, also referred to as the originator, provides loans to a group of borrowers, usually small and medium-sized enterprises (SMEs). These loans are then combined into a package or portfolio, which is sold to investors in the capital market through the issuance of notes. This entire process is facilitated by a Special Purpose Vehicle (SPV), which is a separate legal entity established specifically for this purpose and is backed by the loan portfolio. These asset-backed notes are evaluated and rated by credit rating agencies and are made available for purchase by capital market investors. Additionally, it is also to be noted that the originator bank may choose to retain a portion of these notes.
Crowdfunding
Crowdfunding is a form of external funding from a large audience where everyone contributes a small amount of the funding requested. Instead of securing funds from a small group of specialized investors, this method allows small borrowers to raise funds who are unable to do so through conventional means due to credit scores and higher interest rates. It is a web-based method to seek substantially smaller funds through social platforms to fund new ventures. Crowdfunding relies heavily on social media penetration, and India, with its high number of Facebook users, is well-positioned for this financing method.
According to the World Bank report titled ‘Crowdfunding’s Potential for the Developing World,’ Facebook usage could prove to be a useful tool because in crowdfunding the âsingle most predictive factor for the rate of emergence is social media penetration.â
Your Guide to Understanding Crowdfunding
Factoring
Factoring is a financial arrangement that provides short-term financing to businesses, especially SMEs, by allowing them to sell their accounts receivable (invoices) to a specialized institution called a “factor” at a discount. This provides the SMEs with working capital financing. The primary benefit of factoring is that it provides immediate money to the seller to finance the business. Factors buy the right to accept payments against the sellerâs receivables and release 80-90% of the invoice value to the seller. A CRISIL study on 5,000 SMEs reveals that SMEs can increase their profit by at least 15% if they receive time payments from large corporations. It would facilitate SMEs to reduce interest costs, improve profitability, and have a positive impact on the long-term health and sustainability of Indiaâs SME sector. Another major advantage it provides is that the factored receivables are removed from the bankruptcy estate of the seller and become the property of the factor.
Supply chain financing is quite similar to factor. Here the supplier gets advanced payment on the outstanding invoices from a third-party funder for a small fee. But the difference is that here the financing solution is being initiated by the buyer where the buyer agrees to pay an invoice early for a discount. The benefit of the buyer here is the discount on the invoice price, whereas, the benefit of the supplier is early payment, typically at a discounted rate less than factoring. Supply chain finance can be made possible at any point of sale, purchase, production, and at the point of delivery as well.
Warehouse Receipts
In this setup, commodity producers deposit their commodities at a warehouse facility known for its secure and trusted storage practices. The warehouse issues a receipt that certifies its possession of a particular quantity of a commodity that adheres to specific standards. The deposit is then used as collateral to the depositor to secure loans from lending institutions. The lender places a lien on the stored commodity, preventing its sale until the loan is repaid. SMEs often face challenges in providing conventional collaterals, such as real estate or assets, to secure loans from banks and financial institutions. This mechanism reduces risks for the lenders and serves as a viable option for SMEs to secure credit for their working capital.
Participating Loans
Participating loans are a type of loan agreement where the interest or repayment to the lender is not fixed but is instead dependent on the financial performance of the debtor firm or the borrower. The remuneration or returns to the lender can be tied to various factors such as sales or turnover, profits, and share price. The lender’s returns may increase or decrease based on the borrower’s sales or revenue. If the company’s sales go up and generate more profit, the lender may receive higher returns.
However, participating loans do not share in the losses incurred by the borrower. If the debtor firm faces financial losses or difficulties, the lender does not bear the burden of those losses. The lender’s returns are contingent on positive financial performance but do not involve assuming any of the financial risks.
Also, if the debtor firm goes bankrupt or undergoes liquidation, the providers of participating loans are treated similarly to other loan creditors. They receive a share of the proceeds from the liquidation process, but this distribution is not influenced by the borrower’s financial performance at that point. In essence, during bankruptcy, participating loan providers become regular creditors and do not have any special privileges based on the loan’s contingent nature.
Purchase Order Finance
Purchase Order Finance (POF) allows a supplier to secure funds during the production or manufacturing stage. It is designed to address the working capital needs of SMEs when they have received a confirmed purchase order from one or more customers but lack the necessary funds to fulfill the order. The SMEs receive a verified purchase order from the buyer and subsequently estimate the cost required for the production and delivery of the product, which includes labor, raw materials, packaging, shipping, and insurance. The purchasing order is submitted to the financer, and following the approval of the loan, the approved costs are typically paid directly to the suppliers. The loan supports the SMEs in preparing final goods for shipment to the buyers as part of working capital finance.
FAQs
What are the alternative finance options available to Indian SMEs?
Following are the alternative finance options available to Indian SMEs:
Securitized Debt
Crowdfunding
Factoring
Supply Chain Financing
Warehouse Receipts
Participating Loans
Purchase Order Finance
What is Securitized Debt?
Securitized debt refers to a financial arrangement where an entity, often a bank, also referred to as the originator, provides loans to a group of borrowers, usually small and medium-sized enterprises (SMEs).
What is Supply Chain Financing?
In Supply Chain Fiancing the supplier gets advanced payment on the outstanding invoices from a third-party funder for a small fee. Supply chain finance can be made possible at any point of sale, purchase, production, and at the point of delivery as well.
The I-T department slaps notices on Indian startups asking fortheir investorâs identity and last three yearsâ ITRs to verify their creditworthiness and genuineness of the transactions. Ashneer Grover jumped on X to question the pragmatism of this notice.
The ITR notices to Indian startups since earlier this year continue to create uncertainty and anxiety for the startups, making it difficult for them to raise funding. The turmoil started following the Income Tax Return (ITR) notices that were sent, under Section 68 of the Income Tax Act, 1961, to various startups earlier this year asking for the ITRs of the last three years of their investors and shareholders. The Income Tax Department slapped the notices to seek information about the creditworthiness of their investors and shareholders to verify whether the amount invested aligns with the income declared by them.
The I-T department has been sending these notices to startups that have raised large amounts of money from angel investors or venture capital firms. The I-T department is concerned that some of these investments may be disguised as loans and that the startups may be avoiding paying taxes on the interest income.
Ashneer Grover, former Co-Founder, and Managing Director of BharatPe, took his concern to X to ridicule and raise questions on the grounds on which the notices are being sent. He acknowledged that in the last month, several startups, including some under his portfolio as well, have received the ITR notices seeking the shareholderâs information.
He said, âIn the last 1 month, a number of startups (a few in my portfolio as well) have received Income Tax notices asking to furnish information about shareholders.â
Grover even raised questions on how and why would a startup have their shareholdersâ last three yearsâ ITR details and why would the shareholder or individual share the same with a private company.
He said, âBahut interesting hai (It is very interesting) – they are asking start-up companies to furnish 3 year ITR of all shareholders. 1) How and why will companies have ITR of shareholders? 2) Why would a shareholder/individual share their ITR with a private company?â
In the last 1 month, a number of startups (a few in my portfolio as well) have received Income Tax notices asking to furnish information about shareholders.
Bahut interesting hai – they are asking start-up companies to furnish 3 year ITR of all shareholders. 1) How and why will⊠pic.twitter.com/f48593uE4T
Replying to Groverâs post, the I-T department clarified that the notices were sent as per Section 68 of the Income Tax Act, 1961, when being asked by an Assessing Officer (AO), it is the responsibility of the company to provide the required information about their investor, their creditworthiness and their legitimacy.
His post also contained an image of the notice issued under Section 142(1) of the Income-Tax Act, 1961 which gives the Assessing Officers (AOs) the power to seek data from those filing the ITRs.
It reads, âProvide documentary evidence to substantiate the identity and ITR of last three years of shareholders to substantiate creditworthiness (of) the shareholders as well as the proof of the genuineness of the transaction in respect of fresh credit of the share capital/premium account,â
The reply from the I-T department on X reads, âSection 68 of Income-tax Act, 1961 (the Act) under which the AO has made the enquiry about the creditworthiness of the shareholder/investor, places the initial onus on the assessee-company to prove the following: the identity of the investor, the creditworthiness of the investor and genuineness of the transactionâ
âFinance Act, 2012 mandated that the nature and source of any sum credited as share capital, share premium, etc., in the books of a closely held company (excluding Venture Capital Fund or a Venture Capital Company registered with SEBI) shall be treated as explained u/s 68 only if the source of funds from a resident shareholder is also explained by the investor,â the I-T department added.
The I-T department also mentioned that in this case the notices are sent as the AO has sought to assess the genuineness of the transaction and source of investment by the shareholder or investor. This is to be done to verify if the amount invested is commensurate with the income declared in the ITR of the investor.
However, it was also mentioned by the I-T department that the companies have the liberty to share the PANs of their investors instead, for verification.
âThis has been the practice,â the I-T department added.
1.Section 68 of Income-tax Act, 1961 (the Act) under which the Assessing Officer (AO) has made the enquiry about creditworthiness of the shareholder/investor, places initial onus on the assessee-company to prove the following:
PTI reported that Mohandas Rai, Co-founder, of Infosys, who is also an investor, posted on X, tagging Prime Minister Narendra Modi and Prime Ministerâs Office (PMO) on Groverâs initial post, to say it was âmisleadingâ. He also added, âSir tax terrorism is increasing! This is against what you have stood for. Please intervene.â
In the same post, he also tagged a multitude of politicians and ministers, including Tejasvi Surya, MP and BJP Yuva Morcha National President, and PC Mohan, BJPâs Bengaluru Central MP.
In response to the clarification issued by the I-T department, stating that companies have the option to furnish their investorâs PANs as an alternative to their last three yearsâ ITRs, Rai expressed his disagreement, condemning it – âagain this is misleading.â He also tagged the Union Ministry of Finance, Prime Minister Narendra Modi, and Finance Minister Nirmala Sitharaman in his response, which was later reposted by Grover on X.
“Asking for the PAN is the law. But how can you also ask for 3-year tax returns of the investor from the startup? Does the law permit this? @IncomeTaxIndia itself says that Pan is sufficient. Why this overreach?â Rai asked.
The collaborative report by GetVantage and Redseer Strategy Consultants – The India Digital SME Credit Report 2023 – finds a potential $220 billion credit deficit in MSME funding. Analysts suggest that alternate financing is the way forward for MSMEs to secure funds.
The India Digital SME Credit Report 2023 indicates a potential $220 billion credit deficit that poses a major roadblock for the Indian MSMEs to secure financing. The collaborative report between GetVantage and Redseer Strategy Consultants states that only $53 billion was infused into the market through various channels, serving only 30% of the overall addressable demand, resulting in an alarming capital gap of more than $150 billion.
Bhavik Vasa, Founder and CEO, of GetVantage, shared that the credit deficit is larger than the GDP of some developing countries, and it is anticipated to widen further, due to the prevalent economic and regulatory setting.
âAs more businesses enter the market, it is evident that the demand for credit presents a potential to reach nearly $570 billion in the next few years,â he added.
India is home to 64 million MSMEs which contributes about 30% to the countryâs GDP, but is highly plagued with limited digitalization and limited access to capital. The report reveals that only 12% of them, or 7.7 million, MSMEs in India have been digitized to the fullest. These are the merchants who have already designed their platform and generate 30% of their revenues digitally. The major boost occurred during the pandemic when forced digitalization facilitated exponential growth, leading to lower transformation costs, increased utility, increased revenue, and improved communication and flexibility.
Pandemic-Driven Increase in Working Capital Demand
Before the pandemic, the working capital demand was growing at a stable annual rate of $70 billion. However, the forced digitalization during the pandemic hiked the demand by more than $100 billion in just two years. According to the Redseer consultants, over the next few years, the demand for working capital is expected to rise steadily at a CAGR of about 20% and is projected to reach approximately $570 billion.
Growth in Digitized SMEs FY17-FY27, in Million
Traditional Funding Challenges for MSMEs
The funding challenges ranging from accessibility to red-tapism have been preventing the growth of MSMEs for decades. While the government has made dedicated efforts to tackle liquidity issues faced by SMEs, conventional financial institutions for long made little headway in effectively addressing the accessibility concerns of these businesses. Traditional lending institutions perceived SMEs as risky investments. Their multiple working models and non-conventional payment terms prohibited them from securing funds. Also, financial institutions require 90-120 days to disburse credits, therefore hindering the workflow of the SMEs as they require timely working capital to meet their operational needs.
The report also noted that the absence of collateral and comprehensive documentation has consistently posed obstacles for traditional lenders like commercial banks in offering sufficient funding to SMEs.
Opportunities for NBFCs and Digitally Oriented SMEs
Public and private banks are currently able to fulfill only 30 percent of the total demands from SMEs, creating opportunities for NBFCs (Non-Banking Financial Companies) and third-party lenders. Consequently, 40 percent of the overall capital investment in the SME market has been directed toward digitally oriented SMEs, which represent just 12 percent of the total MSMEs, as reported by Redseer.
Kanishka Mohan, Partner at Redseer said, âSmall businesses account for 90% of credit demand but continue to struggle to raise capital, owing to poor business metrics, limited assets, and uncertain growth projections. If the current economic and regulatory climate continues, this gap is likely to widen significantly over the next five years.”
Rise of Alternative Financing Solutions
Alternative financing has emerged as a vital resource for SMEs, where innovative lending models like revenue-based financing, recurring-revenue advances, and trade receivable financing offer accessibility, flexibility, and transparency. These solutions, which resemble quasi-equity options, are well-suited to support SMEs in scaling their operations.
Vasa commented that alternate financing has a vital role to play in extending the limited reach of traditional lenders to serve millions of new-economy businesses and emerging sectors. He said, âThe $570 billion credit requirement for digital SMEs in the coming five years represents an unprecedented opportunity for alternate financing platforms, NBFCs, and traditional financial lenders like banks to collaborate and catalyze economic growth by prioritizing compliance, governance, inclusion, and innovation.â
Currently, approximately 5% of the lending market is supplied by alternative finance channels. This segment experienced significant growth during the pandemic and is expected to double over the next five years, reaching approximately 11%. This growth can be attributed to increased market awareness, a focus on serving SMEs, and the flexibility offered in repayment options.
According to Harsh Somaiya, Co-Founder, of The Bear House, the economic growth in India has been fueled by the SMEs as they play a vital role in generating employment and contributing to the overall GDP of the country. As digitalization is increasing rapidly, having access to this credit opportunity would alleviate fund-raising challenges that small businesses generally face, which would help with their rapid expansion as well. “New-age credit platforms are keeping the business goals at the forefront. This along with the credit opportunity will help build a healthy financial ecosystem for SMEs and MSMs to thrive in,â he added.
Importance of Revenue-Based Financing (RBF)
The Redseer analysts stated that RBF is now more relevant than ever before. Being data-driven, revenue-based, and flexible has made RBF one of the most robust and popular forms of alternative funding. With a standard flat fee structure ranging from 6% to 12% and loan amounts tailored to suit the working capital requirements of a variety of businesses, SMEs can benefit from convenient, unbiased access to capital at competitive costs.
Sameer Seth, Founder and CEO, of Hunger Inc., said, âThe growth challenges faced by millions of MSMEs today have in a way helped shape the ecosystem, making it easier for businesses to raise capital and be much aware of what kind of capital to be raised when. This is how India is reshaping credit accessibility within the founder community.â
There are hundreds of beverage brands offering a variety of drinks to consumers. But PepsiCo, Inc. and Coca-Cola Co. are leaders in the global beverage industry. They are the world’s largest beverage manufacturers. Their business models are similar in terms of flagship products and ideal consumers and industry.
The Coca-Cola company was founded in 1892 with its headquarters situated in Atlanta, USA. The PepsiCo Company was founded in 1898. At that time, its name was Pepsi-Cola. The company merged with Frito-Lay, Inc. in 1965. After that, its name changed to PepsiCo. The headquarters of the company is situated in New York, USA.
PepsiCo operates several brands including Tropicana, Frito-Lay, Gatorade, Quaker, etc. The world’s top soft drink brands, such as Coke Sprite, and Fanta are brands owned by Coca-Cola company. We can find so many key similarities and differences between these two business models. The comparisons between these two business models are given below. Also, we’ve listed the pricing strategies of Coca-Cola and PepsiCo and the Marketing Strategies of Coca-Cola and PepsiCo.
PepsiCo has a brand value of over $18.2 billion and has ranked 36th in the most valuable brands in the 2020 list prepared by Forbes. Sales of beverages and snack foods of the company are coming under one umbrella. It made PepsiCo a diversified and stronger business. It had 60% of its revenue from the food business and the remaining 40% from the beverage industry in 2022.
Products of PepsiCo
The company has 23 brands, including Pepsi, Fritos, Doritos, Pepsi Max, Diet Pepsi, etc. Each one makes more than $ 1 billion annually from sales. PepsiCo has a strong global presence in more than 200 countries around the world. It utilizes Direct Store Delivery (DSD) for its distribution network and supply chain. So the distributors deliver snacks and beverages directly to small stores.
The target audience of PepsiCo is the younger generation. They stand as a brand for the youth. To face the challenges and increase resource sustainability, the PepsiCo Company works with many community-based organizations.
In the case of Coca-Cola, it has strong a and unique brand identity. In 2011, it got the “highest brand equity award” from Interbrand. The company has a larger global presence. They are selling products in more than 200 countries. They also sell 1.9 billion bottles per day.
Customer loyalty is another strength of Coca-Cola. They are one of the most emotionally connected brands in the US. It is difficult to find substitutes for them. Coca-Cola has the 3rd rank in the Best Global Brand list annually prepared by Interbrand. According to the Forbes List of Most Valuable Brands, it ranked 6th with a brand value of $64.6 Billion in 2020. Also, it has more market share than PepsiCo in the beverage industry.
Products of Coca-Cola
Diet Coke, Sprite, Limca, Maaza, and Fanta are the top-growing brands of Coca-Cola. The distribution network of the company is more extensive and efficient in the world. They have almost 250 bottling partners. In 2016, Coca-Cola acquired the largest soy-based beverage brand in Latin America named “Ades” and expanded its beverage portfolio through this.
PepsiCo is over-dependent on soft drinks and packaged foods. It decreases the agility and flexibility of the company. Most soft drinks of PepsiCo have high sugar concentrations and its snackscontain chemical additives. It is not good for your health. Unsuccessful PepsiCo products, such as Pepsi Blue, Crystal Pepsi, etc. have made employees frustrated, and it allowed the growth of competition.
Companies must use their highest position to achieve the common good of society. But in 2017, PepsiCoâs advert featured by Kendall Jenner received criticism. That advert trivialized the Black Lives Matter movement.
Coca-Cola’s biggest competitor is Pepsi and it is preventing them from becoming a leader in the beverage market. In the case of Coca-Cola, the product diversification of the company is very low. They are lacking in the snack food category. At the same time, PepsiCo presented snack items like Kurkure and Lays. This puts Pepsi ahead of Coca-Cola.
Carbonated beverages are one of the main sources of sugar consumption. It causes health problems such as diabetes and obesity. Coca-Cola is the largest producer of carbonated beverages. Most health experts advise decreasing the use of soft drinks. The company hasn’t found any solution to this problem yet.
Coca-Cola vs. PepsiCo: Business Model
Both Coca-Cola and PepsiCo are towering brands well-renowned in the beverage industry for years and a significant part of their popularity surely comes from their robust business models. Though Coca-Cola and PepsiCo seem quite similar in their product lines and business models, there are slight differences that make each of them unique and speak for themselves.
Diversified Product Portfolio
PepsiCo and Coca-Cola are undoubtedly famous for their beverages under a range of brands but along with that they also bring out many different ancillary products.
When it comes to PepsiCo, it exhibits a truly diversified product portfolio and manages to put equal emphasis on each of its products. The consumer packaged goods industry is the other industry where PepsiCo has its footprints. The products of PepsiCo in the snack food category account for nearly 50% of the companyâs total revenues. This diversified business model of the company has made it create and acquire several complementary products in both the food and beverage industries.
On the other hand, when it comes to Coca-Cola, the company purely relies on its beverages and beverage brands for the revenues it collects. The company possesses around 100-plus beverage products of its own.
Coca-Colaâs policy of dominion
Coca-Cola believes in a more focused form of business thereby dominating the beverage industry almost exclusively. Therefore, it minimizes the cross-promotion of multiple products across a wide range of industries.
Pepsiâs unique way of branding
PepsiCo has been successful in branding all of its beverage brands along with its consumer packaged goods interestingly. Unlike the Coca-Cola company, Pepsi manages to equally focus on each of its products with the help of its unique branding, which leads the customers to purchase a second product of Pepsi as soon as they buy the first one owned by the brand.
After a successful run of Coca-Cola and Pepsi in the beverage industry with their soft drinks/fizzy drinks, the growing concern of the masses for maintaining their health and fitness led them to opt for newer and healthier options. This resulted in the emergence of energy drinks.
Some new beverage companies hit the markets with their new products but the beverage giants didnât take a step back and yield to it, but take their steps valiantly forward to make their mark even in this new segment. To diversify its offerings further, Coca-Cola bought a large stake in Monster Drink back in 2014 while Pepsi started producing its energy drink labeled as Mountain Dew Kickstart.
Coca-Cola’s pricing is based on the value that its products create for customers in different situations. The pricing strategy of Coca-Cola is what they refer to as “meet-the-competition pricing“: Coca-Cola product prices are set around the same level as their competitors because Coca-Cola has to be perceived as different but still affordable.
Pricing Strategy of PepsiCo
Pepsi is taking this value-based pricing strategy a bit further with its âHybrid Everyday Valueâ model. This pricing strategy is an effort to make customers buy Pepsi not only when it is on sale. They have various sizes of bottles offered at various rates. This is priced according to the quantity of the drinks supplied. The promotion is also done keeping in mind the targeted customers.
PepsiCo’s Net Revenue Worldwide from 2012 to 2022
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Coca-Cola vs. PepsiCo: Marketing Strategies
Coca-Cola and PepsiCo, being two of the most loved beverage brands dominating the industry for decades surely sport foolproof marketing strategies. When it comes to big flashy advertisements and marketing campaigns, both of them play their parts incredibly well to drive their sales effortlessly.
Both of the brands keep on introducing popular flavors into their drinks. Furthermore, they are also claiming a good foothold even in the relatively new segment of diet drinks and energy drinks. Besides, it is important to note that as the millennials form the core of the customer base that the soft drinks and beverage industry boasts of, both Coke and Pepsi aim to target them first.
Memorable Campaigns of Coca-Cola
Coca-Cola has had its share of brilliantly made ad campaigns that not only went on to drive a considerable amount of sales but also have the brand etched in the minds of the customers. One such advertisement campaign is âShare a Coke with.â This campaign introduced the Coke bottles listed with peopleâs names on them. It went well with the customers, who not only wanted to see their name printed on Coca-Cola bottles on TV ad commercials but possess the actual bottle with them as a souvenir. The campaign resulted in around 7% growth in the consumption of Coke by young adults.
Coca-Cola Advertisement – Share a Coke with
Coke then launched the famous campaign âTaste the Feeling.â This initiative revolved around the good old feelings and emotions of the people associated with the legendary brand, Coca-Cola. The advertisement picturized groups of friends drooling over ice-cold bottles of Coke and having them together, toasting to their friendship and reliving the memories of their past, evoking a sense of friendship and togetherness.
The advertisement âHolidays are Comingâ is yet another one of the famous Coke campaigns that went on to be a huge success. With the idea of holidays, most people associate the feelings of positivity, joy, homecoming, and summer or Christmas holidays. Therefore, this is another campaign that hits on the peopleâs emotions about Coca-Cola, as a drink, which is associated with fun, relaxation, vacation, and togetherness, and feelings of warmth, friendship, and brotherhood.
Coca-Cola Christmas Commercial
Coke has also scored big with its effective reactive marketing campaigns after the implementation of the sugar tax. This campaign had the advertisements of the company saying âThey donât make them like they used to – we do.â With this campaign, Coca-Cola tried to hint at the authenticity of the taste of Coke, which has not changed in the 132 years that the brand has seen, thereby encouraging people to taste the authentic flavor of Coke.
Pepsiâs advertising campaigns are a lot different than Coke’s. This brand likes to experiment with the latest developments and work with current celebrities. Pepsiâs advertisements are either purely witty or catapulted by its rivals, with a tint of humor.
Pepsi is also big in terms of the celebrity collaborations they make for their advertisements. Over the years the brand has been associated with a whole range of big names from the singing and acting industries. People like Britney Spears, Cindy Crawford, Cardi B, and more have already been roped in by the brand so far, which resulted in multiplying the overall sales of the brand.
A popular campaign brought out by Pepsi featured a young boy standing on 2 Coke cans to reach a can of Pepsi. These kinds of adverts have proven quite successful for the brand that believes in coloring their campaigns with a tinge of humor. However, on some occasions such humor also resulted in backfiring against the brand, even harming their reputation at times.
Pepsi Commercial
The Prominent Difference in the Marketing Campaigns of Pepsico and Coca-Cola
While Coca-Cola wants to empower friends, college-goers, students, and other professionals to come together and relive their days as young adults and toasting to their brotherhood, PepsiCo has marketed the products in such a way that the present generation can connect with them. PepsiCo on the other hand has been successful in creating advertising campaigns that bring in the newer elements of the age, a bit of wit, and ooze âcoolnessâ or inject the perception of being âcoolâ and thus different and superior to other tastes.
No doubt both of them have been equally successful with the help of their innovative ideation and the implementation of unique marketing campaigns.
The organizational structure for Coca-Cola is designed in such a way as to suit the changing needs of the customers. It uses a decentralized system of management, which is divided into two operating groups; the Bottling Corporate and Bottling Investment.
What is the production cost of Coca-Cola?
It should be around 15â16 Rs, including the cost of sugar which is over 100 Mg in one liter of the bottle.
What is the pricing strategy of Coca-Cola in India?
The pricing strategy of Coca-Cola is what they refer to as “meet-the-competition pricing”: Coca-Cola product prices are set around the same level as their competitors because Coca-Cola has to be perceived as different but still affordable.
What is the difference between Coca-Cola and Pepsi’s marketing strategies?
A large part of Pepsi’s marketing budget goes to digital marketing and advertising. Apart from that, a large sum is also spent on television advertising and other traditional methods of advertising. Any leading brand is investing heavily in digital technology for marketing and a better customer experience.
Coca-Cola works on building Customer relationships and making their production and distribution more efficient and cost-effective.
What is Coca-Cola’s business strategy?
Coca-Cola is evolving its business strategy to become a total beverage company by giving people more of the drinks they want â including low and no-sugar options across a wide array of categories â in more packages sold in more locations.
Letâs Picture this: Imagine you’re holding your iPhone, asking Siri to play your favorite song or call your contacts while unlocking it with your fingerprint. And for this, you have Apple’s strategic acquisitions to thank for these convenient features.
Apple gadgets are known for their innovative features and products that have transformed the tech industry. However, the company’s success is not solely due to its in-house development and research efforts. Apple has also made several strategic acquisitions over the years, acquiring companies that have helped it expand its offerings and remain at the forefront of the tech industry.
Apple has made 12 investments in addition to 107 acquisitions. The corporation has invested more than $28.51 billion in acquisitions. The Apple business has been at the forefront of innovation since its establishment in the year 1976, creating some of the most recognizable and ground-breaking gadgets of recent years. Yet, Apple’s success is not only attributable to its own brilliance; throughout the years, the business has also made a number of wise acquisitions that have helped it grow its product line and remain ahead of the competition.
Let us now examine some of the most important acquisitions made by the company in more detail in this piece of writing! The acquisitions paved the way for the Palo Alto-based giant to become.
NeXT Computer is known to be one of Apple’s greatest significant purchases in history and was purchased by the company in 1997. This was considered crucial not just because it allowed Steve Jobs to return to Apple, but also because it allowed the business to employ the NeXTSTEP operating system’s technologies. This program is known to have served as the model for Apple’s current macOS operating system, which is still in use. Avie Tevanian and Jon Rubinstein, who’ve been instrumental in the creation of the iPod, iPhone, and iPad, were two of the key NeXT employees who became available to Apple as a result of the acquisition.
FingerWorks
Founded
1998
Industry
Gesture recognition
Acquired
2005
Apple’s Key Acquisition – FingerWorks
A business that became popular and is known to be specialized in creating touch-based user interfaces for computers, Fingerworks, was bought by Apple in 2005. This purchase helped the company pave the way for the creation of the iPhone, which completely changed the smartphone industry for good. With the use of Fingerworks’ technology, Apple was able to develop a touch-based user interface that was simple to understand and operate which later became the future of mobile phones. In the years to come, this strategy is expected to become a defining feature of Apple’s products.
PA Semi
Founded
2003
Industry
Fabless semiconductor company
Acquired
2008
Apple’s Key Acquisition – PA Semi
In 2008, Apple purchased PA Semi, a semiconductor business with a focus on creating low-power processors that later became a successful part of the company. The semiconductor design team that Apple gained access to through this acquisition was crucial in the creation of the A-series processors that power the iPhone and iPad. Apple gained a substantial competitive edge in the mobile device industry by inventing its own CPUs, enabling it to produce devices that were more effective and potent than those of its rivals.
AuthenTec
Founded
2003
Industry
Fabless semiconductor company
Acquired
2008
Apple’s Key Acquisition – AuthenTec
Apple purchased AuthenTec, a firm that specialized in creating fingerprint recognition technology, in 2012. Apple’s acquisition of AuthenTec provided Apple with the technology required to create Touch ID, a feature that allows customers to unlock their iPhones and make transactions with their fingerprints. Touch ID has become a regular feature on the majority of Apple’s products, aiding in the security and simplicity of using Apple’s gadgets.
Beats Electronics
Founded
2006
Industry
Consumer electronics
Acquired
2014
Apple’s Key Acquisition – Beats Electronics
Apple paid $3 billion for Beats Electronics in 2014, one of its biggest purchases made by Apple to date. Beats was a prominent headphone and speaker company developed by rapper Dr. Dre and music mogul Jimmy Iovine. Apple’s acquisition of Beats Electronics provided it with access to a well-known consumer electronics brand as well as a music streaming service (Beats Music) that would later become Apple Music. The acquisition also brought Jimmy Iovine and Dr. Dre onto Apple’s management team later, providing the business with vital insight into the music industry.
Why Apple Bought Beats
Texture
Founded
2006
Industry
Consumer electronics
Acquired
2014
Apple’s Key Acquisition – Texture
Texture, a digital magazine subscription service, was purchased by Apple in 2018. This acquisition provided Apple with access to a collection of high-quality periodicals that could be incorporated into Apple’s services, such as Apple News and Apple News+. Texture’s technology also assisted Apple in improving its curation and recommendation algorithms, making it simpler for consumers to find new material. The acquisition was part of Apple’s bigger drive into the services sector, which has been an increasingly crucial source of income for the business in recent years.
Drive.ai
Founded
2006
Industry
Consumer electronics
Acquired
2014
Apple’s Key Acquisition – Drive.ai
In 2019, Apple purchased Drive.ai, a firm that was developing self-driving car technology. This acquisition provided Apple with access to a team of specialists in autonomous vehicle technology, which would be useful in the development of Apple’s own self-driving car project (known as Project Titan). While specifics regarding Project Titan are still scant, Apple’s acquisition of Drive.ai demonstrates that the company is serious about participating in the self-driving car business.
Vilynx
Founded
2006
Industry
Consumer electronics
Acquired
2014
Apple’s Key Acquisition – Vilynx
More recently, in 2020, Apple purchased Vilynx, a firm that develops artificial intelligence technologies for evaluating and categorizing video footage. This purchase is part of Apple’s larger push into the video and streaming markets, and it might help the firm improve the recommendations and discovery capabilities of its video streaming services (such as Apple TV).
Conclusion
Apple has made several strategic purchases throughout the years, ranging from semiconductor businesses to virtual assistant startups. These purchases have allowed the corporation to broaden its offers, develop its products, and remain ahead of the competition. While certain purchases (such as NeXT Computer and Fingerworks) had a significant effect on Apple’s product development, others (such as Texture and Vilynx) were more focused on expanding the company’s services and content offerings. Regardless of their precise emphasis, Apple’s acquisitions have played a vital role in the company’s development throughout the years.
As Apple continues to expand and change, it will be intriguing to watch what acquisitions it makes next and how they will affect the company’s future. Further acquisitions are inevitable in the future as Apple continues to expand and innovate. The corporation has previously stated its desire to broaden its service offerings, and it is probable that it will seek to purchase companies that may assist it in this endeavor. Furthermore, as the technology environment shifts and new technologies develop, Apple will need to stay ahead of the curve by purchasing firms that specialize in these emerging areas. Whatever the future holds, one thing is certain: Apple’s acquisitions will continue to be critical to the company’s development and evolution for many years to come.
FAQs
What are Apple’s key acquisitions?
Below is the list of the main companies acquired by Apple-
NeXT Computer
FingerWorks
PA Semi
AuthenTec
Beats Electronics
Texture
Drive.ai
Vilynx
What role did Apple’s key acquisitions play in the company’s success?
The acquisitions have allowed Apple to broaden its offers, develop its products, and remain ahead of the competition. While certain purchases had a significant effect on Apple’s product development, others were more focused on expanding the company’s services and content offerings.
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