Category: Pepsi

Critical Analysis of Marketing Strategy of Pepsi Cola

Product Variety

Pepsi Cola is produced by a pharmacist, Calleb Bradham in 1898. There are many varieties of Pepsi Cola only sold in specific countries. In the consumer market of Malaysia, Pepsi Cola is sold with many varieties which are Pepsi Regular, Pepsi Black, Pepsi Black Ginger, Pepsi Black Vanilla, Pepsi Light currently (Figure 1). Pepsi Black edition serves with bolder taste and zero calorie content (Figure 2). It is approved with healthier choice logo by Malaysia in the sugar free category. Pepsi Light is a no-calorie carbonated cola soft drink and it is free from sugar.

Branding

In 1893, it is called as Brad’s Drink, the name created from Called Bradham. After 5 years, he changed the name to Pepsi. The reasons behind it was to let customers know that it was more than just a refreshment, but in his mind, a “healthy” cola that aided digestion. The word “Pepsi” comes from the word “dyspepsia”, which means indigestion (Dunn 2018). In 1989 to 1940, they are using the logo filled with red colour and the words written out and a long swirly line connecting the P of ‘Pepsi’ with the ‘C’ of Cola. Then, in 1940 the company changed its Pepsi logo. The circle in the design indicates the slogan of Bradham’s original group which is Original Pure Food Drink. The colours of red with white indicates the Second World War. In 1943, Pepsi incorporated the bottle cap to its logo, with the logo tagline ‘Bigger Drink, Better Taste’. In 1991, there was a crucial modify when the company decided that the Pepsi and the circle that had contained it were no longer meant for each other and make them separate. Last, the design in 2008 until today, with the circle resuming its superiority, scrambled up on top of the word, the swirly line sloping upward and also taking on a far more wave-like pattern or a smiley. The design of this logo was finished by the Arnell group, costs one million dollars (Gordon 2017).

Labelling

PepsiCo is providing an easy understanding information on the pack of Pepsi Cola to help the customers to choose what are the needs they want especially. They provide the details about nutrition such as amount of energy, protein, carbohydrate, total sugars, total fat, saturated fat and sodium per 100g/ml or per serving. Besides that, they do provide our products will include information on energy such as calories, kilocalories or kilojoules per 100g/ml or per serving on front-of-pack labeling in all countries. Furthermore, they also provide the percentage of the official Guideline Daily Amounts, Daily Values or equivalents for energy, total fat, saturated fat, sodium or salt and total sugars on either the front, side or back of the pack in countries where such values are available (PepsiCo 2014). For instance, in 240 ml of serving size, the amount per serving of calories per bottle contained 250 kcal, the total fat contained 0g, the sodium contained 50mg, the potassium contained 78mg, the total carbohydrates contained 69g,the total sugars contained 69g and protein contained 0g (Figure 3).

Style and Design

The edition of “Pepsi Generations” which purposes to celebrate the brand’s rich history in pop culture for 120 years have reached Malaysia in 2018. It will be having 4 design editions which are 1940s, 1950s, 1960s and 1980s (Figure 4). The featuring of Pepsi Generation with the 1940s design is exclusively available at Petronas from 1st until 30th of September 2018 (Figure 5). The 1950s design is offering for sale at petrol station (Tan 2018) (Figure 6). In 2016, PepsiCo’s emoji bottles have been launched in Malaysia which is ‘Say it with Pepsi’ campaign (Figure 7). Its price selling is only at RM0.99 per 390ml bottle. One thing that stands out from Malaysia version of the ‘Say it with Pepsi’ campaign is PepsiCo has finally strike back at Coca-Cola (Tan 2016). In 2018, they design a Chinese New Year edition for the can of Pepsi and it is only sold in Malaysia during Chinese New Year festival (Figure 8).

Place

Address of Headquarters

The headquarters of PepsiCo are located in Harrison, New York City, United States (Wikipedia 2019). PepsiCo created operating division that covers Asia, including Malaysia (Wikipedia 2019). The main office of PepsiCo in Malaysia is located in Bandar Sunway, Subang Jaya (JobStreet n.d.). Yeo Hiap Seng Berhad (Yeo’s) announced on 2nd July 2016 that it had lost the exclusive bottling agreements with PepsiCo, ending a link that began in year 1975 (Leong 2016). After that, Malaysian beverage and dairy manufacturer Etika Beverages, formerly known as Permanis, start to be PepsiCo’s new appointed exclusive bottling partner serving Malaysian and Singapore markets (Leong 2016). Starting from 1st November 2016 Pepsi carbonated soft drinks are bottled and distributed from across the causeway Singapore (Figure 9).

Type of Ownership

Etika Group of Companies is the beverage and dairy manufacturer holds an exclusive PepsiCo franchise for Malaysia (Permanis n.d.). The consolidation strengthens Etika’s position in the Malaysian beverage industry as the company will be the only fully integrated Halal beverage company to offer all 12 categories of beverages. Etika Group has exclusive rights to manufacture, distribute and marketing PepsiCo brands such as Pepsi carbonated soft drinks in Malaysia (Ruby 2016). Etika Group is the main producer and distributor of Pepsi soft drinks. These rights along with sales offices and warehouses worldwide and a broad distribution network will also now come under Etika’s wing (Ruby 2016). More recently PepsiCo has awarded Etika its franchise for Singapore to commence from November, 1st 2016 (Figure 9).

Location and Retail Strategy

Pepsi carbonated soft drink are easily find and reach by all the people in Malaysia. Etika Group pays major attention on the distribution channels to make sure that their Pepsi carbonated soft drinks are available at the right places. The distribution strategy in Pepsi marketing mix is focuses through distributor relationships and the broad network of retailers, restaurants, vending machines spread all over Malaysia. Pepsi soft drinks are available nationwide across retailers, such as 7-Eleven convenience stores, Tesco supermarkets, Giant hypermarkets. Convenience stores usually place all kinds of beverages in refrigerators, included Pepsi (Figure 10). Supermarkets and hypermarkets usually sell Pepsi with cartons, bottles and cans. Bottles and cans of Pepsi are arranged in the refrigerator, meanwhile cartons of Pepsi are located at shelf space in beverages categories which place with all kinds of beverages (Figure 11&12). Furthermore, Pepsi carbonated soft drinks can also be found in vending machines (Figure 13). PepsiCo’s places for distributing its products are mostly non-online retailers (Young 2017). Extensive distribution network and easy availability of Pepsi soft drinks has helped it kill regional competition present in different countries and regions.

Marketing System and Distribution Channel

Etika Group of Companies uses a vertical marketing system and acts as a unified organisation. The vertical marketing system integrates stages of production and distribution under single ownership (Touhey 2015). In Malaysia, Etika Group act as full merchant wholesalers in a contractual channel. They provide manufactures, distribution and selling services to PepsiCo (Etika n.d.). Also, they implement PepsiCo’s sales and merchandising plans for the soft drinks that they bottle and distribute (Bailey n.d.). PepsiCo’s products reach the market through the three types of distribution channels: direct store delivery (DSD), third-party distributor networks, and customer warehouse. PepsiCo chooses the relevant distribution channel depends on product characteristics, customer needs, and local trade practices. Under the DSD system, PepsiCo delivers products directly to retail stores. Of the three channels, DSD enables PepsiCo to merchandise with maximum visibility and appeal. DSD is especially well-suited for products that are restocked often and are sensitive to promotions and marketing (Bailey n.d.). Next, PepsiCo also distributes Pepsi through third-party distributors. Etika Company distributes beverage products to restaurants, businesses, schools, and stadiums through third-party food service and vending distributors and operators (Bailey n.d.). In addition, some of the Pepsi soft drinks are delivered from the manufacturing plants and warehouse to customer warehouse. The customer warehouse system is a less expensive distribution channel (Bailey n.d.).

Number of Intermediaries

PepsiCo follows an intensive distribution strategy. Intensive distribution is when a business ignores market segmentation and decides to supply their product to every market available. The idea of intensive distribution is that your product can be found anywhere where a person shops, so that the product will be available for as many customers as possible. PepsiCo has plan that places their soft drinks product in many different locations for distribution (Gkekas 2012). Pepsi carbonated soft drinks are a kind of convenience product, the purpose of this type of strategy is to make sure the products available in anytime anywhere. The ideal market exposure for Pepsi soft drinks is to distribute the product through as many places as possible (Chlachma 2016).

Price

Competition-Based Pricing

Competition-based pricing is one of PepsiCo’s pricing strategies. Before PepsiCo entered the market, Coca-Cola was the only non-alcoholic drink industry in the market and conducting the price of cola beverages. It formed the competition between Pepsi and Coca-Cola after Pepsi entered the market (Abhijeet Pratap 2018). Their competition is fierce, especially in terms of pricing. The reasonable price given by PepsiCo allows middle-class families and even low-income families can afford to buy their products..The price of Pepsi shows a flexible attitude compared with the price of Coca Cola. For example, a bottle of 500 ml Pepsi is RM2.21, and a bottle of 500ml Coca-Cola is RM2.43 (Figure 14). In this regard, PepsiCo is slightly better at a small gap of RM0.22. Sometimes, the lower price is available to attract customers to buy its products (UKEssay 2017). PepsiCo believes that the strategy can bring greater benefits to the company and brings maximum satisfaction to its customers. For instance, Pepsico annual revenue for 2017 was 63.53 billion dollars, 1.16% increase from 2016. Then, Pepsico annual revenue for 2018 was 64.66 billion dollars, 1.78% increase from 2017 (Figure 15).

Product Form Pricing

Product form pricing is a pricing strategy that is implemented by PepsiCo. The major purpose of PepsiCo’s pricing strategy is to improve customer fidelity by keeping the average price of the product, without the impression of inferior quality products. Even, PepsiCo serves a larger customer base without affecting the company’s profits. PepsiCo has designed products of different bottle sizes according to the needs of consumers such as Pepsi has 320ml, 500ml and 1.5L bottle sizes (Figure 16). The larger the bottle size that the consumer buys, the lower the price (Heartofcodes 2018). For example, a bottle of 320ml Pepsi is priced at RM1.65, a bottle of 500ml Pepsi is priced at RM2.21, and a bottle of 1.5L Pepsi is priced at RM1.69 (Figure 17).

Discounts and Allowances

Discounts and allowances are a pricing strategy which is implemented by PepsiCo. The main promotional discount offered by PepsiCo is a seasonal discount (Bhasin 2019). PepsiCo will carry out this program through specific festivals, and the promotional discounts offered at specific festivals will be cheaper than usual, more attracting customers to purchase its products in large quantities. For example, major supermarkets will make promotion discounts during Chinese New Year. Price of Tesco of 24 bottles of 320ml Pepsi is RM20.88 and the original price is RM32.20. (Figure 18&19).

Odd/Even Pricing

The pricing strategy used by PepsiCo is odd/even pricing in psychological pricing. Psychological pricing is setting the price to a bit lower than rounding because they believe that customers will not raise these prices and then consider the price to be lower than the actual price (Bragg 2018). Based on this belief, consumers think that they have saved a lot of money. For example, the original price of 24 bottles of 500ml Pepsi is RM54.00, and the current discount price is RM47.59, saving a total of RM6.41 (Figure 20).

Promotion

Direct Marketing Tools

Direct marketing tool had implemented by PepsiCo through agreements to provide products to organizations at wholesale prices. One of the direct marketing tools that have been used by PepsiCo is website. Towards launching their product, Pepsi worked with Etika (Etika n.d.) (Admin 2018). The purpose to create website is to show the detail information of the product, marketing campaigns and conduct business online (Chirkova 2011). Through the website, customers can find the contact number, email address and location of PepsiCo, for them to ask their questions and also feedback. Next, PepsiCo create their own social profile like Facebook, Instagram, Google, Youtube and Twitter (PepsiCo Malaysia 2018). Nowadays people are using social media frequently, this is why PepsiCo can use this benefit to promote their product (Customer Service Numbers n.d.).

Advertising

Advertising is a way to promote Pepsi beverage. By the Star newspaper, customers can know that Pepsi has offered a new flavour in April 2018 which is Pepsi Black Ginger (Figure 21). Therefore, many people have been attracted by this product because it produced boler taste with no calories soft drink which healthy to having it (The Star 2019). Furthermore, GrabAds with online-to-offline. There are four types of GrabAds, which are car wraps, in-car branding, in-car retail and in-car tablets (Grab n.d.). In August 2018, Grab announced the launch of GrabAds, PepsiCo used this opportunity to promote their products (Digital News Asia 2018). In addition, PepsiCo used billboard advertising by the roadside (Figure 22). They bought billboard advertising from Big Tree and placed at the LRT station, LRT KLCC station as one of the examples (Figure 23). It can survive in the long term and it does not higher cost than electronic media (UKEssay 2016). Pepsi advertisement also displays in the cinema, such as TGV cinema and GSC cinema. It is because the cinema ads processed are more awareness and boosting your brand recall.

Sale Promotion

The promotion strategy that used by PepsiCo is sale promotion. Through the Etika Sdn.Bhd., PepsiCo had the chance to cooperate with TGV Cinema, which selling their product in the cinema. Consumers can enjoy Pepsi Black alongside with the TGV Cinema’s combo set or ala-carte (Lynd 2018). PepsiCo also worked with PizzaHut and KFC. In PizzaHut, there is only RM16.50 to get a set, which included 1 personal pizza, 1 cream of mushroom soup, and 1 Pepsi Black (320ml) (Figure 24); In KFC, Pepsi drink is included in their combo set like Bucket B Combo RM46.50 and Bucket C Combo RM69.90 comes with 6 pieces of nuggets, 1 whipped potato (L) and 1 Pepsi (1.5L) (Figure 25). Next, in May 2018, they organized a sampling event at Deen Maju Nasi Kandar in Jalan Gurdwara, Penang. The customers only pay RM1 to get a can of Pepsi. In the event, there were a lot of customers have good response for Pepsi Black beverage (Tan 2018). In otherwise, PepsiCo worked with Shell Select for a “Futuristic Monobike” contest in April 2018. Throughout the month, consumers can head to the nearest Shell Select store and buy two bottles of Pepsi Black PET 400ml in a single receipt, answer a simple question and send it to the number provided via WhatsApp, together with a clear photo of the receipt as proof of purchase. Prizes up for grabs include the Pepsi Monobike for two grand-prize winners, Macbook Air 128GB for five first-prize winners and iPhone 8 64GB for five second-prize winners. Cash vouchers worth RM100 will be given away to 100 consolation winners (The Star 2018). Another sales promotion is product bundle pricing. If customers buy Pepsi in bulk, they will get a bigger discount (Abhijeet Pratap 2018). For example, a bottle of 320ml Pepsi is priced at RM1.65, 4 bottles of 320ml Pepsi is priced at RM5.85, and 24 bottles of 320ml Pepsi is priced at RM32.20 (Figure 26). This means that if the consumer buys more Pepsi, the price will be cheaper.

Public Relation

Lastly, public relation is also the promotion strategy that implemented by PepsiCo. For example, in Ramadan 2016, PepsiCo Malaysia would donate RM 0.10 for each 1.5L PET bottle of Pepsi, Revive, Mountain Dew, Mirinda and 7UP for the “Liter of Light” (PepsiCo Malaysia 2016). The project purposes to eliminate the 1% of energy poverty in Malaysia (Tan 2016).

Recommendations

There are many things that PepsiCo have to improve for the future. First and foremost, Pepsi should organize charity as much as possible like American Beverage Foundation. American Beverage Foundation’s mission is to make a large contribution to the health of local communities by providing grants to support charitable programs at community organizations. For example, they sponsor their healthy beverage to the programs or physical activities and they also organized their own charity event like Boys And Girls Club (American Beverage Foundation n.d.). Thus, PepsiCo should organize more charity event to promote their products and to build up their image. In addition, PepsiCo should emphasize on corporate social responsibility (CSR). For instance, provide free drinks for public like Milo. In Merdeka Day on 31 August 2017, there were about 35 Milo vans giving out free drinks in 35 different locations and selected Petronas station (Tara Thiagarajan 2017). Otherwise, they should make more donations to orphanages or low-income families like ‘Liter of Light’, which the project that PepsiCo organized before (Figure 27). As a result, CSR is important for PepsiCo to engage more customers and attract more shareholders to invest.

In addition, the recommendation that I would like to make to PepsiCo is that they should pay more effort on creating products that can be considered healthy alternatives to their customers. It is because people nowadays are looking for ways to eat better and stay healthy. PepsiCo can go about this by creating a new brands that provide healthy beverages such as vitamin water. Vitamin Water is very popular among young people these days. Therefore, it would be good when people get another healthier options to purchase. Next, PepsiCo can also make their existing products more healthy. PepsiCo can reformulating their existing drinks or introduce less sugar, low calorie drinks and more natural drinks (Geller 2016). When people see that Pepsi is more involved with the epidemic of obesity, more people will be loyal to Pepsi. Overall, this focus will give PepsiCo an edge in an environment where unhealthy snacks and beverages are starting to become less and less profitable every day.

Furthermore, PepsiCo has been working to improve product packaging into biodegradable, compostable, recyclable plastic bottles in recent years (PepsiCo n.d). However, traditional packaging design cannot provide consumers with quality visual enjoyment (Figure 28). However, competitor Coca-Cola’s design packaging is more diverse, innovative and creative. The Coca-Cola Company will launch a limited-edition copyright based on current trends. For example, after the 2018 FIFA World Cup boom (Tan 2018), Coca-Cola launched a series of products (Figure 29). On the occasion of the 60th anniversary of Malaysia’s independence (Bates 2017), Coca-Cola launched a packaging design with a Malaysia unique style (Figure 30). Pepsi is clearly at a disadvantage in packaging design, so Pepsi should learn from Coca-Cola how to improve the packaging design of its products. For example, after the Avengers 4: Endgame (Figure 31), PepsiCo should use the film’s craze to launch a limited edition of Avengers series’ packaging design, so those consumers who like the Avengers’s movie is attracted to buy and collect this series of product.

Last but not least, everybody knows that the greatest rival of Pepsi is Coca-cola. Both of these companies has spent a large investment on promotion and marketing. In 2017, the marketing budget of Pepsi was 4.1 billion dollars and Coca Cola was 3.9 Billion dollars. From the research, Pepsi has spent 2.4 billion dollars on advertising merely (Abhijeet Pratap 2018). Nowadays, the marketing strategy has changed a lot when the digital technology era has come. Therefore, the company can use the strength of social media such as Facebook, YouTube, Twitter and Instagram to promote Pepsi in a convenient way. It also can earn some revenues from the views of YouTube video therefore it can be a money to do further promotion videos. Not only that, nowadays artists has the influence power on social media account. The company can invite some famous artists to take a selfie with the Pepsi then upload to Instagram to attract their followers to buy the products and then they will follow the artists to do so. Therefore, the product will be a trendy on the social media and gain more purchasers. Before, they invite the famous artist such as Jay Chou become spokesperson for Asia area (Figure 32). Recently, the K-pop culture is becoming more influencing day by day. Pepsi can use it as an advantage to promote their product which is inviting the famous K-pop artist to shoot a commercial video.

Essay on Pepsi: PESTLE Analysis, Five Forces Analysis, Product Life Cycle Theory

Introduction

International trade allows countries to expand their markets for goods and services that may not have been available locally. As a result of international trade, the market has greater competition and hence more competitive prices, making the product cheaper home for the consumer. Global trade allows rich countries to use their resources – be they labor, technology or capital – more efficiently. Because countries have different natural assets and resources, some countries may produce the same commodity more efficiently and therefore sell it at a cheaper price than other countries (Gunaratne, 2018). If a country cannot produce an item efficiently, it can obtain it by trading with another country that can.

Pepsi is one of the largest food and beverage industries. Pepsi was founded in 1898 in the United States by Caleb Bradham. Pepsi now generates more than $ 60 billion in revenue with one million employees globally working in the industry. The company that looks to be the world’s largest consumer producer is working to improve the standard day by day. Pepsi cola has always focused on product innovation, helping the company maintain stability and value throughout the industry (Monica, 2017).

Despite being the leading brand in the beverage industry, Pepsi is not immune to various political, social or economic fluctuations. Political or economic changes can adversely affect their profits. There are laws and regulations that vary from country to country and directly affect them. At the same time, cultural factors are important. Pepsi operates in more than 200 countries. Social and cultural factors are particularly important in this case (Barry, 2016). Pepsi’s PESTLE analysis will identify all these factors that can affect its business in the global environment.

Political factors

Political factors include external factors such as government factors. Effects of government policies and regulations that directly affect the company. These policies are derived from the government. These policies may sometimes have tax reforms that directly affect the company. Political stability in the region where the company operates will certainly be an opportunity for the company. Similarly, good intergovernmental relations are a source of global companies such as Pepsi. Threat factors include many of the government’s soft drink and population health policies are one of the main threats to Pepsi (MEYER, 2017). For example, good economies like the USA and Canada are businesses for Pepsi the best, whereas in third world regions the opportunity process is indirectly stopped.

Economic factors

The performance of a company like Pepsi is directly proportional to the economic stability of the country in which the company operates. Similarly, in regions where countries are more developed, there are more ways to company opportunities (Haseeb, 2017). The potential threat in this perspective is a slowdown in the Chinese economy, as the Chinese economy is now one of the largest in the world.

Social factors

Social factors include people’s beliefs and lifestyle, and most importantly the culture of the region (Dudovskiy, 2016 ). For example, people in the modern state are more likely to fast food and soft drinks, and this culture becomes an opportunity for beverage companies like Pepsi. In countries where the population is more aware of their health, such statements can sometimes be a threat and sometimes an opportunity for the world. The frenzy of life and the habits of soft drinks after a few hours and with every meal is Pepsi’s main opportunity.

Technological factors

Moderate R&D in the food and beverage industry has always been a great opportunity for companies like Pepsi. Improving the knowledge management system with the help of technological advances is an opportunity. The growing trend of automation in business strategies certainly represents a great opportunity to expand business to recognized international companies such as Pepsi (Newhart, 2018). Other technological factors include the trend of Internet marketing and many of the latest technological tricks. Therefore, this technological renaissance has explored many new ways as opportunities for modern contemporary brands such as Pepsi.

Legal factors

Legal elements are always present to connect competitors and Pepsi. For example, various regulations such as health safety regulations are great opportunities for the Pepsi industry. Many other legal aspects of government reforms have had a direct impact on companies such as Pepsi. Sometimes laws act as bonds that are an obstacle to the expansion of a company (FERGUSON, 2017 ). However, there are potential benefits to these legal issues, as they have provided because they provide more organized work environments for related companies such as Pepsi.

Environmental factors

These factors include high standards and policy expectations for waste disposal. There must be a focus on business sustainability. One of the world’s concerns about climate change is the threat and sometimes an opportunity for global companies like PepsiCo. PepsiCo was one of the greatest companies. The bottom line in the discussion above is that there is a whole lot of opportunities for PepsiCo. If the right strategies and the right future plan are developed, the company can keep the name in the market (Kiran, 2012). Careful planning and taking the company in the right direction will always provide a new space for opportunities. On the other hand, there are also many potential threats in terms of competitors and change in the global scenario of new business laws and practices.

Pepsi’s Five Forces Analysis

Pepsi and Coca Cola are leading brands in the soft drink industry. However, the soda industry has felt cold during the past few years. Apart from comprehensive health awareness, other factors also affect their profitability. Pepsi had a bad 2015, and it seems that things don’t take a big turn. There are economic and social factors that affect business in the industry. The following is an analysis of the five forces analyzing the state of competition in the soft drink industry and how Pepsi controls it. The five forces model was developed by Michael E Porter (Karanis, 2013). These five forces are part of every industry and market and have an important impact on profitability.

Bargaining power of the suppliers:

Suppliers form a strong group and exert little pressure or pressure in the case of Pepsi. The reason is that they are fragmented and there is a high number as well. Therefore, Pepsi has many options and low conversion costs. Pepsi has more control and suppliers want to keep their business with the soda giant. These individual suppliers are not very large in size, and their chances of integrating forward and competing with Pepsi are very low. All of these factors work for Pepsi and give it a higher bargaining power than its suppliers (Gunaratne, 2018).

Bargaining power of buyers:

Individual buyers do not exert significant influence and do not exert any significant pressure on Pepsi business. Except for large corporations / retailers or distributors, small businesses and individual buyers have no significant bargaining power. No matter how big the bargaining power of big buyers, they buy in large quantities. Retailers like Costco have some negotiating power and influence because they buy in bulk. Moreover, the Pepsi market is not concentrated in a particular region but is spread all over the world. Given all these factors, the bargaining power of clients is weak (Jurevicius, 2018).

Threat of new entrants:

Global brands such as Pepsi cannot be established overnight. It takes both investment and great efforts. From operations to marketing, all regions require huge investments and highly skilled staff. Not only this, to build a brand image and gain customer loyalty, it is a difficulty. Small brands are still competitive in local markets. However, these brands are still generally confined to small areas. Pepsi has very few direct competitors and with the exception of Coca Cola, no one has the ability to look at it in the eye. Therefore, the threat of new entrants to a brand like Pepsi is reduced with a strong brand image. Becoming a key player in the soft drink industry is not easy. Apart from product quality and brand image, there are many other challenges that discourage new players (Monica, 2017).

Threat of substitutes:

There are many alternatives to Pepsi products in the market. Switching costs for customers are also low. Apart from Coca Cola products, fruit juices, energy drinks and many hot and cold drinks are alternatives. This threat is mitigated to some extent by Pepsi commercial image and global presence. The brand also invests a lot in marketing to keep the threat from alternatives under control (Gunaratne, 2018). Moreover, alternative products are generally good in quality. Pepsi focuses heavily on customer engagement for this purpose. In general, the threat of alternatives is a powerful force that Pepsi must constantly confront.

Competitive rivalry among the existing players:

Without the competition between Pepsi and Coca Cola, the soda giants would have invested less in marketing and advertising. These two brands remain preoccupied with intense competition and people also believe that the cola wars continue. Dr. Pepper Snapple is also a competitive threat to the soda giant. The competitive threat from other brands is lower, but among the major players is a very strong force (Haseeb, 2017). Therefore, overall competitive competition in the industry is the strength of the chain. The competition between Coca Cola and Pepsi has always attracted a lot of publicity and interest.

Product Life Cycle Theory

The International Product Life Cycle Theory was written by Raymond Vernon in the 1960s to explain the product cycle when it is exposed to an international market. Cycle describes how the product matures and declines as a result of the internationalization. It contains four stages; research and development, introduction, growth, maturity and decline (Newhart, 2018).

Research and development:

This is when the product is developed. Market research and analysis is conducted to find out the four points of marketing – product, price, location and promotion. Pre-release of the product may also be performed at this stage – this is done by advertising harassment of the product either through electronic media printing (Kush, 2017). Keep in mind that there is no profit or sale as the product is still under development at this stage.

In 1898, Bradham developed ‘Brads drink,’ a formula designed to aid digestion. After receiving a strong positive response from consumers in the pharmacy, Brad renamed the drink as ‘Pepsi-Cola’ and bought the brand ‘Pep-Cola’ for $ 100. Although $ 100 does not appear much, after adjusting for inflation, this amount of money in the 19th century is equivalent to $ 2,516.34 at present (Murphy, 2018). This indicates the difficulties faced by companies in the pre-launch phase with continuing periods of negative cash flow, significant research costs and development expenses. Within PepsiCo R&D, they knew they needed to shape their business environment rather than just respond to it. So, starting in 2007, they decided to help transform their company and food and beverage portfolio by expanding it. Commit to evolve from the Go-do function that simply implements product line extensions to the global R&D “Go-to” function that delivers innovative precision with new products and new categories; Contains less sugar, salt and fat; the ‘go to’ function is recognized by shareholders as contributing to the growth of their company’s highest level, as a result of the accuracy of their R&D strategy (Jurevicius, 2018).

Introduction:

New products are introduced to meet local (i.e. national) needs, and new products are first exported to similar countries, countries with similar needs, preferences and incomes. Initial sales are made for innovators, retailers and consumers looking to try new products, yet the profits received are still insufficient to recover development costs (FERGUSON, 2017 ). Brad started selling Pepsi-Cola and achieved sales of 7,968 gallons of syrup in the first year. His first goal, or in terms of marketing, was only to generate initial awareness and experience of his product. Thus, to begin, only a basic product – Pepsi-Cola, which was initially sold by soda fountains found in Brad Pharmacies, was launched instead of bottles (Monica, 2017). Therefore, a simple cost and price strategy was used. Pepsi-Cola can be applied in a smart and safe way, by starting a skimming strategy, so that you quickly withdraw from start-up costs. When it comes to Place, a highly selective distribution is initially recommended, and this is only offered with the launch of Pepsi-Cola in Brad’s pharmacies. To generate awareness, for example, to advertise the product, celebrity endorsement was used with race car driver Barney Oldfield (above). Pepsi-Cola has not been launched with any promotions (Barry, 2016).

Growth:

A copy product is produced elsewhere and is introduced in the home country (and elsewhere) to attract growth in the local market. This transports production to other countries, usually based on the cost of production. At this stage, sales begin to increase rapidly as the product gains popularity among the early majority, and this leads to the first generation of profits (Murphy, 2018). After bankruptcy and after becoming Loft Inc. Having acquired it, Pepsi-Cola’s sales increased dramatically in the Great Depression. Consumers were fascinated by the competitive position of value for money: 5 cents would buy consumers 12 ounces of PepsiCo, while only 6 ounces of Coca-Cola. During growth, market share acquisition is critical. Thus, PepsiCo was aggressively marketed against Coca-Cola to encourage consumers to imbalance and build a larger consumer base (Newhart, 2018). To support the goal of gaining market share, the low price penetration strategy was one of the main reasons for the brand to grow significantly in this time period. A wide distribution network is needed to support rapid sales growth; therefore, the exclusivity in pharmacies has ended and the product has become the mainstream consumer commodity. It is necessary to capture the early majority stage, and so, the ads are designed to effectively reach a large audience. For example, the radio was chosen as an intermediary because of the low cost of access. PepsiCo continues to invest in expanding its business in developing and emerging markets. For example, PepsiCo plans to invest nearly $ 5.5 billion by 2020 in India, one of the company’s main global markets (Newhart, 2018). PepsiCo also enters into key alliances and develops products that meet local tastes and preferences. For example, in 2012, the company entered into a strategic alliance with Tingyi Holding, a leading food and beverage company in China. Under this alliance, PepsiCo has made Tingyi Beverage Company a subsidiary of China Beverage Bottling Company. Tingyi’s strong network has helped PepsiCo strengthen its business in China (Murphy, 2018).

Maturity:

This is the longest phase and generates the majority of product sales and profits from the late majority. In order to ensure the product to achieve the greatest possible profit, extension strategies are often implemented for maturity (Harshill, 2014). Industry contracts and concentrates – the least expensive product wins here. Since the 1980s, Pepsi has been maturing in the product life cycle, helping the parent company earn nearly $ 20 billion in annual revenue. At this point, the products are more profitable, which is why PepsiCo is likely to consider Pepsi as a cash cow and aim to maximize profits from the brand (Harshill, 2014). Now that the product is firm, full ranges can be introduced that serve as extension strategies to extend the most profitable phase of product life. These include the highly successful Pepsi Max, to the Pepsi Raw disaster. It is clear that PepsiCo and Coca-Cola do not want to engage in a price war, which is very dangerous during this very competitive phase. As a result, the price rarely fluctuates away from the market average. Also, the product now has a global distribution to penetrate emerging economies. The main focus of Pepsi ads during maturity is the distinction between brands. This was mainly achieved by using celebrity endorsements – such as Beyoncé and Michael Jackson – to position the product as a smaller, richer alternative to Coca-Cola (Barry, 2016). To maintain consistency with brand value determination, Pepsi often offers to increase value and added value. An example of the first offers larger bottle sizes – to this day – of Coca-Cola; the latter can be seen in competitions advertised on Pepsi bottles.

Conclusion

Pepsi enjoys a worldwide reputation as a key player in the soft drink market as well as a leader in the snack industry. This has been done by creating a healthy environment for its customers all the time while maintaining its integrity. They are currently facing stiff competition from Coca-Cola, but with their various marketing projects, Pepsi is preparing to give Coke a definite battle in the future over what Cola consumers want. PepsiCo’s success is a product of superior products, high levels of performance, distinctive competitive strategies, and high integrity for its people. Their main objective is to increase the value of shareholders’ investments through integrated operating, investment and financing activities. Their strategy is to focus their resources on growing their business, through internal growth and carefully selected acquisitions. Their strategy is constantly adjusted to address opportunities and risks in the global market. The company’s success reflects their continued commitment to growth and focus on those companies where they can lead their growth and create opportunities.

References

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Analytical Essay on Market Environment of PepsiCo Inc.

Executive Summary

This study is done to examine the market environment of PepsiCo Inc. PepsiCo is one of the world’s leading food and beverage brand. It’s a renowned brand and a very well organized multinational Company operating in more than 200 countries. PepsiCo Inc. was formed in 1965 as a result of the merger of two established companies including Pepsi Cola Company and Frito Lay, Inc. The multinational giant has a great interest in manufacturing, distributing and marketing of beverages, grain-based snack foods and many other products. In 1941 the brand was rebranded and from that to onward Pepsi Cola has successfully expanded its areas of production via mergers and acquisitions with other companies. In 1905 Caleb purchased two bottling franchises and just after the short period of five years, there were 250 bottling franchises spanning around 40 states. From that to up until now different bottling groups are acquired by the organization including Pepsi Bottling group, Pepsi Americas Inc. Pepsi Bottling Group Inc. and Pepsi Americas.

Currently, the company is comprised of six main division including North America Beverages, Frito Lay North America, Quaker Foods North America, Latin America, Europe, and Sub-Saharan Africa, Asia Middle East and North Africa.

The report provides analysis and evaluation of PepsiCo’s market segmentation as well as the marketing mix of the organization. SWOT analysis and BCG Matrix analysis is done in the reporting providing different PepsiCo products current performances and their market share.

2. Introduction

PepsiCo Inc. headquartered in Purchase, Harrison of New York is American multinational food, snack, and beverages giant formed in 1965 with as a result of merger of two established companies including Pepsi Cola Company and Frito Lay, Inc. the multinational giant has a great interest in manufacturing, distributing and marketing of beverages, grain-based snack foods, and many other products. The snack and soda company now has transformed into a collection of global brands including Pepsi, Quaker Oats, Tropicana, Gatorade, and Frito Lay. This transformation has made the organization of the world’s most respectable organization serving more than 200 countries and territories with twenty-two billion dollars brands. The company is comprised of six main division including North America Beverages, Frito Lay North America, Quaker Foods North America, Latin America, Europe, and Sub-Saharan Africa, Asia Middle East and North Africa (PepsiCo, 2019).

A pharmacist and industrialist, Caleb Bradham, for the very first time developed the recipe for Pepsi in the 1880s in New Bern, North Carolina. Later in 1898, it was renamed to Pepsi Cola. With the development and popularity in the Cola industry, Caleb founded the Pepsi Cola Company in 1902 and the first patent for the recipe was registered in 1903. In 1905 Caleb purchased two bottling franchises and just after the short period of five years, there were 250 bottling franchises spanning around 40 states. However, in 1931, Pepsi Cola Company went bankrupt and Charles Guft acquired the trademark and recipe to the Loft Inc. Pepsi was formally acquired to Loft, and Loft Inc. and was rebranded to its original name the Pepsi Cola Company in 1941. From that to up until today Pepsi Cola has successfully expanded its areas of production via mergers and acquisitions with other companies mentioned above.

For the sake of improving, financial returns and restaurant operations company took up aggressive re-franchising. In 1990, with total revenue of $17.8 billion, the organization was ranked at 25th among the fortune 500 companies. By the end of 1995, the organization sales touched $30.40 billion with 480000 employees working at different places. This made the organization the world’s 3rd largest employer after Wal-Mart and General Motors. PepsiCo’s market share lags behind the Coca Cola share with maximum margins. This happened once when the Coca Cola’s Sprite left behind the Diet Pepsi which dropped from the world’s 6th largest selling product to 7th (ICMR Centre for Management Research, 2014).

2.1. Vision and Mission Statements

2.1.1. Vision Statement

Performance with Purpose via integrating sustainability into a business strategy for delivering top tier financial performance for the long term, leaving a positive impact over society and environment.

2.1.2. Mission Statement

To provide customers around the globe with convenient, affordable and delicious beverages and foods from wholesome breakfasts to healthy and fun daytime snacks and beverages to evening treats.

Pepsi is committed to the company, with the people and communities where the business is conducted in order to stay in the business for the long term with sustainable growth. (PepsiCo, 2019).

3. Current Market Analysis:

Competition is getting intense day by day in the carbonated beverage industry. In order to stay in the business companies face intense competition against global, regional and local manufacturers on the basis of several factors including quantity, distribution, variety, and the most important price. In the beverage industry, PepsiCo major competitor is the Coca Cola Company and this competition negatively impact PepsiCo sales. Coca Cola enjoys larger market shares not only in the U.S but also in the other markets such as Asia and Africa. Coca Cola has been listed at number 1 in the Interbrand’s Best Global Brands (UK Essays, 2016). From many years Coca Cola has actively dominated the world soft drink market and this dominance has always been considered an important factor for PepsiCo Management.

Figure 1 (BrandWatch, 2016)

3.1. SWOT Analysis

3.1.1. Strengths

• Strong Leadership. With a strong leadership of Indra Nooyi Pepsi has been doing well and managed to stay at the number two position in the complete food and beverage industry.
• Loyal Customers: Pepsi through its ads and advertising campaigns actively targets youth with its products providing it with the more loyal customers.
• Brand Equity: Pepsi is a worldwide established brand with its presence in more than 200 nations enjoying a high brand recognition and reputation comprised of a large product portfolio.
• Strong Distribution: the company holds a strong distribution channel with an effective distribution strategy that helps it with on-time delivery to its customers.
• More motivated employees
• Attractive price.

3.1.2. Weaknesses

• Intense competition from its biggest rival Coca Cola.
• Pepsi suffers from its dependence over the U.S markets for its revenue. Any impact at U.S market directly affects Pepsi sales.
• Pepsi does not provide any incentive or discounts to its retailers.
• The tin pack is not available in most rural areas.
• Pepsi lacks the innovation and popularity of its most brands.
• Health issues related to carbonated drinks.
• Pepsi advertisements only target youngsters that do not display value advertising.

3.1.3. Opportunities

• Presence in more than one industry including the fastest growing industry (noncarbonated drinks).
• Media promotions
• Innovations
• Partnerships with well-established brands including Starbucks.
• New product penetration in markets.
• More CSR activities.
• Focusing more on the R&D sector

3.1.4. Threats

• Changes in consumer taste.
• Strong competition from rivals including Coca Cola and Dr. Pepper.
• Entry of new Rivals.
• Entry to barriers.
• Water scarcity.
• Strong U.S Dollar.
• Changes in consumer taste.

3.2. BCG Matrix

For multi-category/multi-product companies Boston Consulting Group (BCG) matrix is used. BCG matrix helps in understanding different products performance. It helps in determining which product in the organization is profitable and which one needs more investment and attraction and which one can provide competitive advantages (Hitesh Bhasin, 2019).

3.2.1. Cash Cows:

Cash cows are products that enjoy a higher market share in low-growth markets. Cash cows yield maximum revenues because of their higher market share and therefore provide with maximum advantages. In PepsiCo’s case, Pepsi Cola falls in Cash Cows category because among all of PepsiCo products Pepsi Cola generates higher market shares.

3.2.2. Question Marks:

Question marks are the products that provide higher returns but at the same time there are risks associated with question marks and they can be taken out of the market if they don’t get the attention of the organization. However, if a substantial investment is made on question marks they have the chances to grow rapidly in the market and to become a Star that results in producing higher outputs. Diet Pepsi and 7up Nimbooz and Mirinda are the question marks for PepsiCo.

3.2.3. Stars:

Stars are the products that generate higher market shares in high-growth markets. Products that are expected to grow and hold higher market shares fall into the star category. Because of stars strong relative market shares, they produce a large amount of cash and if special attention is paid to stars they have the potential to become cash cows in long run. In case of PepsiCo, Aquafina, Pepsi, and Mountain Dew can be placed into the star category.

3.2.4. Dogs:

Dogs are the cash traps and even in mature industries they produce smaller market shares and because of their smaller market share dogs don’t need enough cash. Dogs are more likely to be taken out of the markets. Pepsi Max is considered as the dog product of PepsiCo.

Cash Cows

Pepsi Cola, Frito Lay

Question Marks

Diet Pepsi, 7up Nimbooz, Mirinda

Stars

Pepsi, Mountain Dew, Aquafina

Dog

Pepsi Max

Table 1

4. Marketing objectives for PepsiCo

PepsiCo currently holds at least 50% market share in the snacks and beverage industry because of Frito Lay and Pepsi-Cola, therefore, the company’s first and foremost marketing objective should be to lower the product prices Frito Lay and Pepsi Cola as because they are the cash cows for the company and can yield more even higher market share for the company. In order to achieve this, the price marketing objective should be focused with a help of cost reduction strategy that will help in keeping the product’s prices lower as compared to its biggest rivals Coca Cola and Dr. Pepper.

In this intensely competitive environment, customers need and want very rapidly. They want change and innovation in products. As innovation is one of PepsiCo’s opportunities its marketing objective should be to introduce innovative and new products for its customer to keep them attached with their brand and to satisfy their varying needs and wants.

Customers are becoming more conscious about their health and they consider carbonated drinks unhealthy for themselves so there is some health issue related to PepsiCo carbonated drinks. Therefore the company should set an objective of refining its carbonated drinks by reducing the amount of sugar added that will result in a reduction of calorie intake.

5. Segmentation:

Segmentation is the process of dividing the broad potential customers’ markets into smaller groups or segments that exhibit the same or different characteristics. Segmentation helps in understanding customers’ need and want more accurately and make it easier for marketers to personalize their offerings and marketing campaigns (TrackMaven, 2019). The primary target groups of PepsiCo are those people with an age limit of between18-40. With a huge product portfolio, PepsiCo targets different cultural and regional aspects of different countries (UK Essays, 2016).

• As PepsiCo has a large product portfolio it, targets more than one customer segments with its products and services at the same time. Pepsi Cola is positioned as the soft drink and actively target the young consumer. However, Pepsi Cola has a high amount of sugar in it and most customers because of their health consciousness they don’t consider it good for their health. PepsiCo targets such customers with its Diet Pepsi that has less amount of sugar and therefore fewer calories intake as compared to Pepsi Cola.
• Another main important market segment of PepsiCo are that customer who are athletic and adventurous. For such customer, PepsiCo has its Mountain Dew. All of Mountain Dew ads are designed in such a way that they actively target the customers seeking for adventures. Mountain Dew further has more flavor under it such as Mountain Dew Voltage, Mountain Dew Baja Blast etc. actively targeting different specific groups of customers. However, in most countries, these products are banned but there PepsiCo targets its customer with it Sting Energy drink to keep its customer attached with its brand.
• In India and Pakistan PepsiCo targets a broad market segment with its 7Up Lemonade targeting those who like traditional lemon drinks.

5.1. Segmentation at a Glance

Graph 1

6. Marketing Mix of PepsiCo

Marketing mix or 4Ps are strategy and tactics combinations used by the organization to implement their marketing plan. The marketing mix is a dynamic process and keeps changing with respect to market variations (The Marketing Mix, 2018).

Figure 2 (The Marketing Mix, 2018)

PepsiCo marketing mix addresses a wide range of products. In this regard, PepsiCo adopts various strategies and tactics based on its products and different brands.

6.1. Product

A product is any tangible item that can be offered to a market for satisfying customer needs and wants.

PepsiCo product mix includes the following product:

• Beverages
• Pepsi-Cola, Mirinda, Mountain Dew, 7 up, Slice, Tropicana, Aquafina
• Food Products
• Snacks-Cheetos, Kurkury, Lays, Uncle Chips, Breakfast Quaker Oats.

Most of these products were added into its product mix after various acquisitions. For example, after the acquisition of PepsiCo with Frito Lay, snacks products were added into its product mix.

6.2. Place

With a wide distribution network, PepsiCo products are easily accessible everywhere. A global distribution network is used by the organization to make sure that its all products are reached to its target customers. Products are places at both retailer’s shops and online merchandisers. Most products are available at retailer shops, supermarkets, grocery shops.

6.3. Promotion

Because of the intense competition with Coca-Cola, a huge annual budget is spent on promotional activities to attract and retain the target customers. The following tactics are used for the promotional mix by PepsiCo.

• Advertising
• Sponsorships
• Sales Promotions
• Public Relations
• Direct Marketing

All of these major expenditures are done at Advertising. The advertising is done using different media including T.Vs, Radio, Print Media and especially the most effective social media while endorsing famous celebrities. Different sports and adventurous events are sponsored by Mountain Dew because a huge target audience is available there.

6.4. Price

The amount of money that customer pay for a specific product or service. Price is a very important element of the marketing mix and considers a lot for any organization for its success.

Following pricing strategies are adopted from PepsiCo:

• Market-Oriented Pricing Strategy
• Hybrid Everyday Value Pricing Strategy

Most products are priced based on the market-oriented pricing strategy. The main reason for using this strategy is to make sure that the prices are competitive based on prevailing market conditions. The latter strategy is used especially for the soft drink products to close the gap between the regular prices and discounted holidays prices (Justin Young, 2017).

7. Conclusion

After carefully examining the areas the positive and negative aspect of PepsiCo’s market situation is visible. PepsiCo does not hold a strong market position because of the intense competition from the Coca-Cola company and because most of its products are considered unhealthy from customers which greatly affects its sales volume. However, there are products that are widely used by the customers as compared to competitor’s products such as Aquafina as compared to Coca Cola’s Dasani. Another major factor that affects PepsiCo is its dependency over the U.S, half of PepsiCo sales are observed only in the U.S. There is a great need for PepsiCo to take steps to cope up with this dependency. Any impact over the U.S economy directly affects Pepsi sales. There are investment and innovation opportunities available for PepsiCo. PepsiCo needs to invest more in its products especially in BRIC countries because these markets are rapidly growing in the beverage and foods industries. This step will help the organization to take advantage and increase market share as well as to lower its dependency over the U.S market. As the major target audience of PepsiCo is the youngsters. There are several opportunities associated with youngsters. PepsiCo should know the importance of advertising targeting youngsters and should increase its advertising budget a bit more than before.

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