Profile… Pepsi is a soft drink produced and manufactured by PepsiCo. It is sold inmany places such as retail stores, restaurants, schools, cinemas and fromvending machines. The drink was first made in the 1890s by pharmacistCaleb Bradham in New Bern, North Carolina. The brand was trademarkedon June 16, 1903. There have been many Pepsi variants produced over theyears since 1898. PepsiCo brands are available in nearly 200 countries and territories. Manyof PepsiCos brand names are over 100-years-old, but the corporation isrelatively young. PepsiCo was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay. Tropicana was acquired in 1998 and PepsiCo mergedwith The Quaker Oats Company, including Gatorade, in 2001. PepsiCo (symbol: PEP) shares are traded principally on the New York StockExchange in the United States. The company is also listed on theAmsterdam, Chicago, Swiss and Tokyo stock exchanges. PepsiCo hasconsistently paid cash dividends since the corporation was founded. PepsiCo World Headquarters is located in Purchase, New York,approximately 45 minutes from New York City.
Cont… Revenues in 2007 is more than $39 billion. 37 bottling plants in India, of which 16 are company owned and 21 arefranchisee owned. PepsiCo’s Frito Lay snack division has 3 state of the art plants. It has more than 185,000 employees across the world. In India, PepsiCo provides direct employment to 4,000 people and indirectemployment to 60,000 people including suppliers and distributors. CEO : Ms. Indra K Nooyi India Headquarters : Gurgaon.
Brand Image of Pepsi Pepsi is a brand that every youngster relates to. But this definitely doesn’t mean that other age groups are not it’s user’s. Thus Pepsi’s brand image is it’s hip, cool, lively and refreshing attitude.
Advertising Strategy of Pepsi Pepsi’s target audience are mostly teens and young adults and theiradvertising reflects this in every possible way. The company changes its advertising strategy and image to reflect the targetsinterests. Pepsi makes sure that the advertisements reflect to the target audience’sinterests and nostalgia. The advertising strategy includes cool, hip promos to attract more of the targetaudience. The advertising is mostly creative and has different elements like music andsports other than bollywood. Pepsi.com also plays an important role in advertising and attracts targetaudience by giving access to options like downloads, gaming, music mixingapplications etc..
Advertising History Pepsi has continuously focused on the current teen generation. How Pepsi has used humor, music, sex appeal in advertising. Ad expenditures for 2001 is $ 1,800,000,000
Slogans 1939 - “Twice as Much for a Nickel” 1950 - “More Bounce to the Ounce” 1958 - “Be Sociable, Have a Pepsi” 1961 - “Now It’s Pepsi for Those Who Think Young” 1963 - “Come Alive, You’re in the Pepsi Generation” 1967 - “(Taste that beats the others cold) Pepsi Pours It On” 1969 - “You’ve Got a Lot to Live, Pepsi’s Got a Lot to Give” 1984 - “Pepsi. The Choice of a New Generation” 1985 - “New Generation” advertising continues 1992 - “Gotta Have It” 1993 - “Be Young, Have Fun, Drink Pepsi” 1997 - “Generation Next” 2000 - “Joy of Cola”
North American brands…
Generation Y- Market Influence Huge market – 80 million people Spending power – 600 million annually Many Geb Yers do household grocery shopping 90% parents say kids influence what they buy Many work and have their own money to spend They have proven to be brand loyal
How to reach Generation Y Creates promotion tailored to their needs and interests. Gen Yers like entertainment and music They like to laugh, but not at anothers expense To attract the teen market radio and television should be used They are internet savvy
What does Generation Y like? Free stuffs and discounts Contests/drawings Music Club cards Team sporting events They are into clothes and the latest styles Teen friendly retail stores and internet site
Pepsi and Generation Y Pepsi targets Generation Y specifically Current campaigns use of effective techniques By targeting 12 to 21 year olds, Pepsi is attempting to establish a loyal;pepsi drinker for life and the largest group of soft drink consumer.
Michael Jackson Michael received the biggest sponsorship fromthe company in 1993. In 1993 Pepsi had a “Search for MichaelJackson” campaign. Used musical and sex appeal.
Jeff Gordon Made a commercial with HallieEisenberg Sells many Pepsi collectablemerchandise. Drove the Pepsi car in races
Hallie Eisenberg First appeared in a Pepsi commercial in1998 at age 5 Introduced the “Joy of Cola” campaign. Starred in commercials with Faith Hill,KISS, and Ken Griffey Jr. Her commercials used humor.
Spice Girls Promotional single “Move over” availableonly through Pepsi. Used musical and sex appeal. As international stars they affected manycountries
Type A & B celebrities Type A celebrity = one that is well known and well liked by their targetmarket. Type B celebrity = one that is known by their market
Issues Hard to differentiate product in terms of taste as productvariety is very limited within cola based beverages. Coca-cola has such a strong base of loyal customers, whoidentify with the cola brand. Consumer tastes are changing, away from carbonated drinkstowards functional soft drinks. (Mintel, et al. 2009)
Competitive Aids SWOT Analysis Porters strategies for competitive environment
SWOT analysisStrength: Pepsi has a broader product line and outstanding reputation. Merger of Quaker Oats produced synergy across the board. Record revenues and increasing market share. Lack of capital constraints (availability of large cash flow). Great brands, strong distribution, innovative capabilities. Number of maker of snacks, such as corn chips and potato chips. PepsiCo sells three products through the same distribution channel.Weakness: Pepsi hard to inspire vision and direction for large global company. Not all PepsiCo products bears the company name. PepsiCo is far away from leader Coca-cola in the international market –demand is highly elastic.
Cont…Opportunity: Food division should expand internationally. Noncarbonated drinks are the fastest-growing part of the industry. There are increasing trend towards healthy foods. Focus on most important customer trend – “Convenience”Threats: F&B industry is mature. Pepsi is blamed for pesticide residues in their products in one of theirpromising emerging market e.g. in India. PepsiCo now competes with Cadbury Schweppes, Coca-cola, and Kraftfoods (because of their broader product line) which are well-run andfinancially sound competitors. Size of company will demand a varied marketing program; Social, cultural,economic, political and governmental constraints.
Porter’s 5 Force Model
Porter’s 5 forces model The five forces model of Porter is and outside-in business unit strategy toolthat is used to make an analysis of the attractiveness (value…) of anindustry structure Allows the development of a competitive strategy Suggests 5 main forces may be decisive in helping shape the outcome:SuppliersNew entrantsSubstitutesBuyersIndustrial competitors
Threats of new entrants New entrants bring increased capacity to the industry and are often backedby substantial resources. New entrants can be deterred by “barriers to entry”
Threat of new entrantThe main barriers are……. Economies of scale Patents Product differentiation Capital requirements (financial & specialist equipment) Skills Reaction/strategic decisions of incumbents (ex-all undercut new entrant) Government policy (ex-de-regulation)
The bargaining power of suppliers Supplier exert power in the industry by threatening to raise prices or reducequality. Powerful suppliers can squeeze industry profitability if firms are unable torecover cost increases.
The bargaining power of suppliersSuppliers are likely to be powerful if: Supplier industry is dominated by a new firms. Suppliers products have few substitutes. Buyer is not an important input to buyers product. Suppliers products have high switching cost.
The bargaining power of buyersBuyers compete with the supplying industry by: Bargaining down prices Forcing higher quality Playing firms off of one another
The threat of substitute productsProducts with similar function limit the prices firms can chargeKeys to evaluate substitute products: Products with improving price/performance tradeoffs relative to presentindustry products
The threat of substituteproducts…..Questions? How many substitute products/services have appeared in your industry inthe last 5 years? What are they? How different are they? Were they introduced by your organization or others? Which organization in your industry does the most Research andDevelopment? What happens to price, profits and market share when substitutes areintroduced?
Rivalry among existing competitors Intensive rivalry often plays out in the following ways: Price competition Advertising battles Increasing consumer warranties and service New product roll-outs Price competition often leaves the entire industry worse off
Porter’s 5 model – PepsiCoTraditional competition: Prices of Coca Cola, local brands Market share Promotional actions of competitionNew entrants: New “look-alike” manufacturersSubstitute products: Fashionable new drinks, milk drinks, coffee, beer, water, smoothies…
Porter’s 5 model – PepsiCoSuppliers: Price and availability of ingredients on world market. Quality, speed, safety, traceability, flexibility of supply chain.Buyers/consumers: High as a result of intense competition both among branded and unbrandedproducts. Combined purchase power of shops, bars, supermarkets
Pepsi’s Successes and Failures inBrazil and Germany PesiCo has been operating in Brazil since 1953 “Pepsi’s heavy new investment in Brazil, which actually started early thisyear, is funneled through a joint venture with Baesa, a bottler based inBuenos Aires that operates in Argentina, Chile, Costa Rica and PuertoRico.” PepsiCo in Germany made a smarter move by acquiring Punica, Germany’spremiere juice provider. PepsiCo is one of the world’s largest manufacturer, seller and distributor ofbeverages Pepsi has very limited brands in Germany. Their struggles in Germany include Coca-cola and a rash of suicidalcommercials for Pepsi Max that depicts a single lonely calorie committingsuicide.
Marketing Products and Services Taste testing Television, Billboard and Print Media Interactive/Web-based marketing
Recommendations Adopting a Cost-Leadership Stratergy New Product Development
Cost-Leadership Strategy Advertising and innovative promotion. Optimal outsourcing for production and vertical integration. Improving production efficiencies through Kaizen.
New Product Development Produce a range of ‘healthy’ alternativesunder the brand name ‘Pepsi Fresh’. Our suggestion would be a range ofVitamin enrinched waters under the name‘Pepsi Fresh’
Conclusion It can be seen then that differences do exist between Coca-Cola and PepsiCola. This can be seen in the marketing variables which are the basis forsegmentation such as age and geographic variables. In a competitive market, both companies must identify and target differentmarket segments in order to remain at the cutting edge. Differences between the companies are evident with respect to product,pricing, place and promotion. Coca-cola relies heavily on value: quality is more than something we see ortaste. (http://www.coca-cola.com). Pepsi, on the other hand, relies on its success resulting from superiorproducts and high standards of performance (http://www.pepsico.com).