“Impact of celebrity endorsement on brand equity of pepsi”


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“Impact of celebrity endorsement on brand equity of pepsi”

  1. 1. A Project Study Report On “Impact of celebrity endorsement on Brand Equity of Pepsi” Submitted in partial fulfillment for the Award of degree of Master of Business AdministrationSubmitted By: 2011-2012 Submitted TO:JAIDEV MEENA Jaya pareekYear - 2nd year [IVth Sem.] Nidhi Tak POORNIMA SCHOOL OF MANAGEMENT ISI-2, RIICO Institutional Area, Goner Road, Sitapura, Jaipur.
  2. 2. CERTIFICATE Poornima School of ManagementThis is to certify that Mr.JAIDEV MEENA student of MBA 4th semester from Poornimaschool of management, Jaipur had completed its project report on the topic of “IMPACTOF CELEBRITY ENDORSEMENT ON BRAND EQUITY OF PEPSI” under thesupervision of Ms.Jaya Pareek,Mrs Nidhi Tak .faculty member DMS PGC.To best of my knowledge report is original and has not been copied or submittedanywhere else. It is an independent work done by him. Dr. Vandana Sharma Director, PSOM
  3. 3. DeclarationHereby I declare that the project report entitled “IMPACT OF CELEBRITYENDORSEMENT ON BRAND EQUITY OF PEPSI” submitted for the degree of MBA ismy original work and the project report has not formed the basis for the award of anydiploma, degree, associated ship, fellowship or similar other title. It has been notsubmitted to any other university or institution for the award of any degree or diploma. JAIDEV MEENA MBA 2nd year 4th sem
  4. 4. PrefaceStars, who are known to shape destinies, cast an enormous influence. We‟re referringto the powerful effect of celebrities on destinies of brands. One approving nod from afamous face can translate into millions in brand sales. People love to live in dreams.They worship celebrities. Celebrities may be sports stars like Sachin Tendulkar,Mahindra Singh Dhoni,Roger Federer.Ronaldo and tiger woods‟ or Film Stars like tomcruise, bredd pitt, Salman Khan, John Abraham. They treat them as God. . Perhapsthat‟s why the world over, companies have been using stars to endorse everything, fromfood to food chains, from soft and hard drinks to health drinks, from clothes andaccessories to cars. For this they rope in these celebrities and give them whoppingamount of money. They believe that by doing this they can associate their products withtheir target customers. This is called celebrity endorsement. But do this celebrityendorsement acts as a source of brand-building and have impact over the purchasingbehavior of customers in case of automobiles? For this I decided to conduct this varyresearch and objectives of my research are: To identify the influence of celebrity endorsement on consumer buying behavior. To study celebrity endorsement as a source of brand- for pepsi To find which type of celebrity persona is more effective.Secondary data used for this study are article of different authors, experts articles onthis study, magazines, market survey of pepsi, interview with distributers and Internet.The main key elements of this study are as marketing strategies, product endorsement,celebrity endorsement, marketing mix and advertising. Brand equity, Brand image,Celebrities‟, Product endorsement etc.Conclusion of this study is that Whether Celebrity endorsement has a positive or anegative impact on the brand is a debate that is open to interpretation. But till the timethe corporate world continues to foot fancy bills of celebrity endorsers and tillconsumers continue to be in awe of the stars, the party is not likely to break up and thishelp companies to earn more profit and increase brand equity.
  5. 5. AcknowledgementI express my sincere thanks to my project guide, Ms.Jaya Pareek Mrs. Nidhi Takmadam, faculty department of management studies, for guiding me right from theinception till the completion of the project. I sincerely acknowledge them for extendingtheir valuable guidance, support for literature, critical reviews of project and above allthe moral support they had provided to me with all stages of this project.I would also like to thanks Mr. R. K. Agarwal (advisor, PGC) and Mr. Abhayjeet Singh (Asst.dean) of college DMS, PGC for their help and cooperation throughout our project, JAIDEV MEENA
  6. 6. EXECUTIVE SUMMARY:The field of consumer behavior is the study of individuals, groups or organizations andthe processes they use to select, secure, use and dispose of product, services,experiences, or ideas to satisfy needs and impacts that these processes have on theconsumer and society. And understanding the consumer behavior is the prime andtoughest task in front of every marketer. There are a lot of factors, which influenceconsumer buyer behavior. This study aimed at to understand the influence of celebrityendorsement on consumer buying behavior. Marketers pay millions of Dollars tocelebrity endorsee hoping that the stars will bring their magic to brand they endorse andmake them more appealing and successful. But all celebrity glitter is not gold.Celebrity sources may enhance attitude change for a variety of reasons. They mayattract more attention to the advertisement than would non-celebrities or in many cases,they may be viewed as more credible than non-celebrities. Third, consumers mayidentify with or desire to emulate the celebrity. Finally, consumer may associate knowncharacteristics of the celebrity with attributes of the product that coincide with their ownneeds or desire. The effectiveness of using a celebrity to endorse a firms product cangenerally be improved by matching the image of the celebrity with the personality of theproduct and the actual or desired serf concept of the target market.What therefore seems relevant by the study is that, yes, definitely celebrity endorseeinfluence consumer buying behavior and brand building but while using celebrityendorsee, marketer has to take care of all the aspect that whether they broughtpersonality and image of celebrity matches or not, whether celebrity endorsee has deeppenetration among the masses or not, whether he is considered as credible source ornot etc.
  7. 7. INDEXS.NO CONTENT PAGE NO.1. INTRODUCTION TO INDUSTRY 1-192. INTRODUCTION TO ORGANIZATION 20-503 REVIEW OF LITERATURE 51-754 76-79 RESEARCH METHODOLOGY 4.1. Title of study 76 4.2. Duration of the project 76 4.3. Objective of the project 77 4.4. Type of research 77-78 4.5. Sample size , method of selecting sample 78 4.6. Scope of study 785 Analysis and interpretation 796 Facts and finding 81-957 Limitation of study8 SWOT analysis 99-1009 Conclusion 99-1008. Recommendation/ suggestion 1019. Appendix 102-103 10. Bibliography 104-106
  8. 8. Introduction to the industry:Background:The industry began in mid 1900‟s with leading companies like Pepsi Co. and CocaCola controlling the beverage business sector with sweetened soft drinks andcarbonated soda water. American audiences attached excitement and convenienceto these popular drinks, and a variety of soft drink brands began to originate such asDr.Pepper, Sprite, etc. The beverage industry has undergone rapid expansion overthe last decade.The only obstacle for these beverage companies was the high number of caloriesand sugar levels their drinks contained; a drawback for health-conscious consumers.A soft drink (also called pop, soda, coke, soda pop, fizzy drink, or carbonatedbeverage) is a non-alcoholic beverage that typically contains carbonated water, asweetening agent, and a flavoring agent. The sweetening agent may be sugar, high-fructose corn syrup, or a sugar substitute (in the case of diet drinks). A soft drink mayalso contain caffeine or juice. Products such as energy drinks, Kool-Aid, and pure juiceare not considered to be soft drinks. Other beverages not considered to be soft drinksare hot chocolate,hot,tea,coffee,milk,milkshakes,and schooled.Small amounts of alcohol may be present in a soft drink, but the alcohol content mustbe less than 0.5% of the total volume. If the drink is to be considered non-alcoholic.Widely sold soft drink flavors are cola, lemon-lime, root beer, orange, grape, vanilla,ginger ale, fruit punch, sparkling lemonade, squash, and water. Soft drinks may beserved chilled or at room temperature. They are rarely heated.The first marketed soft drinks (non-carbonated) in the Western world appeared in the17th century. They were made from water and lemon juice sweetened with honey. In1676, the Companies des Lemonades of Paris was granted a monopoly for the saleof lemonade soft drinks. Vendors carried tanks of lemonade on their backs anddispensed cups of the soft drink to thirsty Parisians. 1
  9. 9. Carbonated drinks made without any alcohol are called Soft Drinks. They are alsoknown as Coke/Soda/Pop etc. Hot chocolate, teas, coffee etc are usually excludedfrom this classification. They are sold in a variety of sizes and manner. In the U.S.,they are often sold in two-liter bottles, one liter plastic bottles, 24 and 20 US fluidounce bottles and in 12 US fluid ounce cans. Packaging is also available in manydifferent quantitiesIn Japan, 1.5 liter bottles, 500 mL and 350 mL bottles and cans are sold. At times,the fizzy soft drinks are served as fountain drinks in which carbonation is added to aconcentrate immediately prior to serving. In Europe, plastic and glass bottles of sizes2, 1.5, 1, 0.5, 0.35, 0.33 liters, aluminum cans of 0.33, 0.35, and 0.25 liters arepopular. Almost all soft drinks are made of refined sugars. Hence, they are oftencriticized for causing obesity and other health related problems. A link to problems ofsleep, bones, and teeth has been proven by many studies.Market Structure:The soft drink industry is a global marketing phenomenon. In essence, it is simply ablended water drink with sweeteners, flavors and additives. The success inadvertising and marketing this product lies in convincing billions of consumers todrink these instead of straight water or other less expensing alternatives. The brandrecognition of this industry is extraordinarily high. In 2002, world sales exceeded US$193 billion. In contrast, fruit sales were just US $69 billion. Global consumption iscurrently in excess of 327 billion liters.Pepsi and Coca-Cola, between them, hold the dominant share of the world market.Cadbury Schweppes follows a close third. Coca-Cola has approximately half of theworld market share and sells 4 out of the top 5 soft drink brands in the world. CocaCola sales for 2006 reached US $24.1 billion. It has profit margins of 20% and a 2
  10. 10. market capitalization of US $130 billion. Pepsi sales stood at US $36 billion but this also includes snacks and other foods. Some analysts view the definition of soft drinks incomplete and wish to add ready to drinks also, to this industry. If they are added as well, these would add another 1.3 billion servings to 50 billion servings for these drinks. Industry Definitions : Fizzy drinks: drinks injected with carbon dioxide at high pressure are called Fizzy drinks. Floats: soft drink with scoops of ice-cream Soda: another term for soft drink Pop: another U.S. term for soft drinks Coke: a derivative and brand name of Coca-Cola, often used as a label for soft drinks in general. Market Metrics: Soft drink market size for FY00 was around 270mn cases (6480mn bottles). The market witnessed 5- 6% growth in the early„90s. Presently the market growth has growth rate of 7- 8% per annum compared to 22% growth rate in the previous year. The market size for FY01 is expected to be 7000mn bottles. Soft Drink Production area The market preference is highly regional based. While cola drinks have main markets in metro cities and northern states of UP, Punjab, Haryana etc. Orange flavored drinks are popular in southern states. Sodas too are sold largely in southern states besides sale through bars. Western markets have preference towards mango flavored drinks. Diet coke presently constitutes just 0.7% of the total carbonated beverage market. 3
  11. 11. Growth promotional activitiesThe government has adopted liberalized policies for the soft drink trade to give theindustry a boast and promote the Indian brands internationally. Although the importand manufacture of international brands like Pepsi and Coke is enhanced in India thelocal brands are being stabilized by advertisements, good quality and low cost.U.S. MarketThe U.S. is closely linked with soft drinks with Coca Cola being an American in muchof the world. About 500 soft drinks companies operate in the U.S. Annual sales ofrefreshments total approximately US $88 billion, of which three quarters are soft drinksales. There are about 500 soft drink bottlers in the United States.Soft drink companies manufacture and sell beverage syrups which are essentiallybases to bottling operators that then add sweeteners and/or carbonated water toproduce the final product. Independent bottlers work under license with various softdrink manufacturers and are generally allotted specific territories to serve.Manufacturers not only provide the bottlers with syrups and bases, but also oftenprovide other business services such as product quality control, marketing,advertising, and engineering as well as financial and personnel training.In return, the bottlers furnish the required capital investment for land, buildings,machinery, equipment, trucks, bottles and cases. As noted previously, the soft drinkindustry distributes and sells its product in two primary forms: packaged and fountainservice. In fountain service, the soft drink product is dispensed and served in cups inrestaurant or other retail oriented location with a food service station.Coke, Pepsi and Cadbury Schweppes control over 91% of the U.S. market share.They employ about 63,000 people in the U.S. 4
  12. 12. World Market:Global sales of soft drinks exceed 327 billion liters and are valued at more than US$393 billion annually. North America, Europe and Japan are the most mature marketsfor global soft drinks. Coco Cola and PepsiCo Inc have significant control over theglobal soft drinks market and both have similar business organizations andprocesses worldwide. The industry includes other than the soft drink manufacturesthemselves, the bottlers and various raw material suppliers. Suppliers of cans, plasticand glass bottles are included in this category.Globally, the soft drinks majors continue to face challenges. One key global trend is amove away to healthier drinks, which may put some pressure on yearly growth insales of soft drinks. The push to diet beverages have been well covered by the majorproducers – with sales of diet Coke and diet Pepsi still strong. A recent trend is therise in popularity of sports drinks. Bottled water has also experienced very stronggrowth. Finally the quality of water used in the manufacture of soft drinks posesserious issues for the industry. Major players are working on the issue as waterscarcity becomes a global issue. 5
  13. 13. Industry Players:The Coca-Cola CompanyCoca Cola is the number one brand globally and has been for over 40 years It is soldin virtually every country of the world. The successful expansion that began in WorldWar II has continued unabated up to this date. Now, the company has more than 400brands in its portfolio. Tab, produced in 1963 was one of the company‟s landmarkmarketing successes.PepsiCo Inc.Pepsi-Cola was created in 1898 in New Bern, North Carolina, by druggist Caleb D.Brad ham. PepsiCo Inc. holds about one-third of the U.S. market and is the secondlargest soft drink major in the world. It owns Frito-Lay snacks and other businesses.Pepsi soft drinks include brands such as Pepsi, Diet Pepsi, Slice, Mountain Dew andMug Root Beer.Cadbury SchweppesCadbury Schweppes PLC is the number three global soft drink producer. Theportfolio includes Squirt, La Casera, TriNa, Spring Valley, and Wave. It has corneredmore then 17% of the world market. Total sales exceed US $12.9 billion. 6
  14. 14. Trends and Recent DevelopmentsPrivate labels are becoming more prominent. Private Labels are brands owned bystores and retailed through them. These private label manufacturers are retailing theirbrands very aggressively these days. Although, lowering of prices is an open optionfor the soft drink majors, it reduces their profits. Private labelers offer heavierdiscounts and sales are increasing.In 2007, a new issue is the lack of recycling of plastic bottled water containers.Although the trend to bottled water is high, environmentalists point out many of theseare simply filtered tap water and that the discarded bottles are causing environmentaldamage. The fallout among consumers is unclear at mid-point 2007.After nearly a year of deliberation, Cadbury has finally announced a date for the de-merger of its US soft drinks arm, American Beverages. Although it appears to makesense to separate this group from the companys confectionery operations, theseparation could leave Cadbury vulnerable to a takeover, which its turnaround planmay be unable to prevent.The de-merger, which was first announced as a possibility back in March 2007, willnow take place in May and will see the creation of Dr Pepper Snapple Group as aseparate entity with a listing on the New York Stock Exchange and its ownmanagement team. The confectionery arm is to be renamed Cadbury plc and will belisted in London. 7
  15. 15. Carbonated drinks:Soft drinks displayed on supermarket shelves.In late 18th century, scientists made important progress in replicating naturallycarbonated mineral waters. In 1767, Englishman Joseph Priestley first discovered amethod of infusing water with carbon dioxide to make carbonated water which has3.4 mg in the drink when he suspended a bowl of distilled water above a beer vat ata local brewery in Leeds, England.His invention of carbonated water, (also known as soda water), is the major anddefining component of most soft drinks. Priestley found water thus treated had apleasant taste, and he offered it to friends as a refreshing drink. In 1772, Priestleypublished a paper entitled Impregnating Water with Fixed Air in which he describesdripping oil of vitriol (or sulfuric acid as it is now called) onto chalk to produce carbondioxide gas, and encouraging the gas to dissolve into an agitated bowl of water.Another Englishman, John Mervin Nooth, improved Priestleys design and sold hisapparatus for commercial use in pharmacies. Swedish chemist Torbern Bergmaninvented a generating apparatus that made carbonated water from chalk by the useof sulfuric acid. Bergmans apparatus allowed imitation mineral water to be producedin large amounts. Swedish chemist Jöns Jacob Berzelius started to add flavors(spices, juices and wine) to carbonated water in the late 18th century. 8
  16. 16. Soft drink bottling industryOver 1,500 U.S. patents were filed for either a cork, cap, or lid for the carbonateddrink bottle tops during the early days of the bottling industry. Carbonated drinkbottles are under great pressure from the gas. Inventors were trying to find the bestway to prevent the carbon dioxide or bubbles from escaping. In 1892, the "CrownCork Bottle Seal" was patented by William Painter, a Baltimore, Maryland machineshop operator. It was the first very successful method of keeping the bubbles in thebottle.Production:Soft drink productionSoft drinks are made by mixing dry ingredients and/or fresh ingredients (e.g. lemons,oranges, etc.) with water. Production of soft drinks can be done at factories, or athome.Soft drinks can be made at home by mixing either a syrup or dry ingredients withcarbonated water. Carbonated water is made using a home carbonation system or bydropping dry ice into water. Syrups are commercially sold by companies such asSoda-Club.Ingredient quality:Of most importance is that the ingredient meets the agreed specification on all majorparameters. This is not only the functional parameter, i.e. the level of the majorconstituent, but the level of impurities, the microbiological status and physicalparameters such as color, particle size, etc. 9
  17. 17. Soft drink packaging :USsoftdrinkcontainersin2008.8, 12, 20, 24 oz and 2L sizes are shown in a can and in glass and plastic bottles.In the United States, soft drinks are sold in a large number of different sizes including500 mL (16.9 U.S. fl  oz), 1 liter, 1.5L, 2 liter, 3L, and in 8, 12, 14, 16, 20 and 24 U.S.fluid ounce plastic bottles, 12 U.S. fluid ounce cans, and short eight-ounce cans.Some Coca-Cola products can be purchased in 8 and 12 U.S. fluid ounce glassbottles. Jones Soda and Orange Crush are sold in 16 U.S. fluid ounce (1 U.S. pint)glass bottles. Cans are packaged in a variety of quantities such as six packs, 12 packs and casesof 24, and 36. With the advent of energy drinks sold in eight-fluid-ounce cans in theU.S., some soft drinks are now sold in similarly sized cans. It is also common forcarbonated soft drinks to be served as fountain drinks in which carbonation is addedto a concentrate immediately prior to serving. Containers have deposits in a fewstates.In Europe, soft drinks are typically sold in 2, 1.5, 1-liter, 500 mL plastic or 330 mLglass bottles; aluminum cans are traditionally sized in 330 mL, although 250 mL slimcans have become popular since the introduction of canned energy drinks and 355 10
  18. 18. mL variants of the slim cans have been introduced by Red Bull more recently. Cansand bottles often come in packs of six or four. Several countries have standardrecyclable packaging with a container deposit, typically ranging from € 0.15 to 0.25.The bottles are smelted, or cleaned and refilled; cans are crushed and sold as scrapaluminum.In Australia, soft drinks are usually sold in 375 mL cans or glass or plastic bottles.Bottles are usually 390 mL, 600 mL, 1.25 or 2 liter. However, 1.5 liter bottles havemore recently been used by the Coca-Cola Company. South Australia is the onlystate to offer a container recycling scheme, recently having lifted the deposit from 5cents to 10 cents. This scheme is also done in the Philippines; people usually buyglass bottles and return them in exchange for a small amount of money.In Canada, soft drinks are sold in 237 mL (8.3 imp fl oz) and 355 mL (12.5 imp fl oz)aluminum cans and 591 mL (20.8 imp fl oz), 710 mL (25.0 imp fl oz), 1 L (35.2 impfl oz), 1.89 L (66.5 imp fl oz), and 2 L (70.4 imp fl oz) plastic bottles. The odd sizesare due to being the metric near-equivalents to 8, 12, 16, 20, 24 and 64 U.S. fluidounces. This allows bottlers to use the same-sized containers as in the U.S. market.This is an example of a wider phenomenon in North America.Brands of more international soft drinks such as Fanta and Red Bull are more likelyto come in round-figure capacities. In India, soft drinks are available in 200 mL and300 mL glass bottles, 250 mL and 330 mL cans, and 600 mL, 1.25 L, 1.5 L and 2 Lplastic bottles. 11
  19. 19. Producers:In every area of the world there are major carbonated beverage producers, howevera few major North American companies are present in most of the countries of theworld, such as Pepsi and Coca Cola.Producers by region : North AmericaPepsi co.Coca ColaRC ColaSouth AmericaAjegroup: (Peruvian origin, operates in 14 countries, now headquartered in Mexico),producers of Big Cola, Cielo (mineral water), Cifrut (fruit juice), Free Tea, Free WorldLight (referred to locally as Free Light), Kola Real, Oro, Pulp (nectar), Sporade(sports drink) and Volt (energy drink)AmBev: (Brazil, operates in 14 countries, owned by Anheuser-Busch InBev), thelargest bottler of Pepsi Cola products outside the United States, also producesGuarana Antarctica, Soda Limonada, Sukita, H2OH! and Guara!Corporación José R. Lindley S.A.: (Peru), producers of Aquarius (flavored water),Burn (energy drink), Coca-Cola, Crush, Fanta, Frugos (nectar), Inca Kola, KolaInglesa, Powerade (energy drink), San Luis (mineral water) and SpriteEmbotelladora Don Jorge S.A.C.: (Peru), producers of Agua Vida (mineral water),Click(fruit drink), Isaac Kola and Perú ColaEmbotelladora Latinoamericana S.A. (ELSA): (Colombia), producers of Cyro,Liv(mineral water), RC Cola and ShipPepsico Inc Sucursal Del Peru: (Peru), producers of Pepsi Cola, Seven Up, TripleKola, Concordia, San Carlos (mineral water), Evervess, Gatorade (sports drink) andAdrenalina Rush (energy drink) 12
  20. 20. Europe . PerrierEast Asia RamuneAustralia Bundaberg As consumers became more health educated and aware of their nutritional intake, large beverage companies acted quickly with the creation of the “diet”, no-calorie soda in 1959 (Bells). The diet, or “light” soft drinks kept American audiences content for a number of years because they offered what was thought to be a healthier alternative to soft drinks with the same great taste. More recently, however, consumers have become aware that even these “diet” drinks contain unnatural and unhealthy nutritionalingredients.For the last decade, industry leaders have been forced to switch their focus fromsweetened soft drinks and calorie-free diet drinks to healthier, natural beverages. Healthconscious consumers have lost interest in beverages with unnatural ingredients andhave begun focusing on beverages that offer more than just hydration.The latest trend in the beverage market is functional, healthy drinks. Industry leadershaveintroduced vitamin-enhanced waters, sports beverages, energy drinks, andfunctional beverages.All of these beverages offer healthy alternatives to soft drinks, with the added bonus ofincorporating specificingredients targeted for different functions. Energy drinks havehigh levels of caffeine and Vitamin C tokeep consumers alert and awake, while offeringdifferent varieties such as caffeine-free and zero-sugaradded. Vitamin-enhanced waters 13
  21. 21. give consumers the same hydration as water, with added vitamins.Sports drinks andfunctional beverages both work similarly to the vitamin waters, with particularvitamins,antioxidants and other ingredients specified for athletics and other functions.A relatively new functional beverage company is Function Drinks, located in RedondoBeach, California. Function distributes their products through MD Drinks, Inc. Thecompany began in 2004,with an orthopedic surgeon Dr. Alex Hughes, a graduate fromUCLA Medical School.While in school, Hughes realized that many of the powerful, all-natural ingredients usedto treat patients in medical facilities were available to the public, yet not widelyrecognized or known-about. Soon after his epiphany, Hughes began working on acompany that would incorporate these ingredients into beverages that could beavailable to the public. The company instantly gained a strong following of people, fullofactive and health-conscious consumers. Function Drinks offers a line of eightbeverages, each with a unique function and flavor.The line includes: Urban Detox, Shock Sports, Braniac, Alternative Energy, Night Life,Vacation and Light Weight. The strongest seller is Urban Detox, which comes in PricklyPear or Goji Berry flavors, incorporates a combination of “prickly pear extract and the“smog-scrubbing” super-antioxidant N-Acetyl Cesteine” in order to “support healthylungs and sinuses in the face of particulate airborne pollution. These same ingredientssupport the liver‟s efforts in combating hangovers” as well (Functiondrinks.com).Another prominent seller is Light Weight, available in Blueberry Raspberry, PinkGrapefruit, and Acai Pomegranate.This specific drink functions to speed up the body‟s natural metabolism, withingredients Polygonum Cusidatum and EGCG from green tea specified to support thebody‟s natural calorie burning engine (Functiondrinks.com)As this beverages market increases, the competition among industry producers will alsorise. Industry leaders have grown to their market and size because of their uniqueproducts and aggressive marketing skills. They have successfully achieved brand 14
  22. 22. recognition among target consumers through a variety of promotional strategies andadvertising methods, including television commercials, celebrity sponsorship,promotion through in-store displays, demonstrations, and through social mediawebsites.The Top Selling Soft Drinks CompaniesWorldwideThe Top 10 Soft Drinks Companies in 2009 by market share Coca-Cola (& bottling partners) Red Bull PepsiCo (& bottling partners) Danone Nestle Kirin Suntory Asahi Breweries Dr Pepper Snapple Ito EnUSAThe Top 10 Carbonated Soft Drinks Brands in the US in 2010 by volume Coke Sprite Diet Coke Diet Pepsi Pepsi-Cola Diet Mtn Dew (PepsiCo) Mtn Dew (PepsiCo) Diet Dr Pepper (Dr Pepper Snapple) Dr Pepper (Dr Pepper Snapple) FantaSource: Beverage DigestThe Top 10 Carbonated Soft Drinks Manufacturers in the US in 2010 by volume 15
  23. 23. Coca-Cola Hansen Natural PepsiCo Red Bull Dr Pepper Snapple Big Red Soda Cott Corp Rockstar National Beverage private label & otherSource: Beverage DigestThe Top 10 Bottled Water Brands Worldwide by sales in 2008 Nestle Pure Life (Nestle Waters) ($3.8bn) Crystal Geyser (CGWC) ($1.5bn) Dasani (Coca-Cola) ($2.9bn) Volvic (Danone) ($1.4bn) Aquafina (PepsiCo) ($2.8bn) Arrowhead (Nestle Waters) ($1.3bn) Poland Spring (Nestle Waters) ($2.1bn) Perrier (Nestle Waters) ($1.1bn) Evian (Danone) ($1.9bn) S Pellegrino (Nestle Waters) ($1.1bn)Source: NestleUKThe UKs Top 10 Soft Drinks Manufacturers by take-home sales value in 2009 Coca-Cola Enterprises Red Bull Britvic Soft Drinks AG Barr GlaxoSmithKline Innocent Drinks Danone Gerber Foods 16
  24. 24. Tropicana UK (PepsiCo) Nestle WatersThe UKs Top 10 Soft Drinks by take-home sales value in 2009 Coca-Cola Red Bull Lucozade (GlaxoSmithKline) Ribena (Glaxo SmithKline) Robinsons (Britvic) Schweppes (Coca-Cola) Pepsi (Britvic) Actimel (Danone) Tropicana (PepsiCo) Volvic (Danone)Source: Britvic/Nielsen ScanTrack Britvics 2010 report on the UK Soft Drinks marketOther Non-Alcoholic Beverage Companies & Brands Profiled in Adbrands Unilever Starbucks Ocean Spray Tchibo Britvic Soft Drinks Glaxo SmithKline Nescafe Sunny Delight Procter & Gamble Innocent Drinks Lipton Folgers Nestea Cott Corp Fanta Japan Tobacco AmBev 17
  25. 25. The soft drink industry is so profitableAn industry analysis through Porter‟s Five Forces reveals that market forces arefavorable for profitability. Defining the industry Both concentrate producers (CP) andbottlers are profitable. These two parts of the Industries are extremely interdependent,sharing costs in procurement, production, marketing and distribution. Many of theirfunctions overlap; for instance, CPs do some bottling, and bottlers conduct manypromotional activities. The industry is already vertically integrated to some extent. Theyalso deal with similar suppliers and buyers. Entry into the industry would involvedeveloping operations in either or both disciplines. Beverage substitutes would threatenboth CPs and their associated bottlers. Because of operational overlap and similaritiesin their market environment, we can include both CPs and bottlers in our definition ofthe soft drink industry. In 1993, CPs earned 29% pretax profits on their sales, whilebottlers earned 9% profits on their sales, for a total industry profitability of 14% .This industry as a whole generates positive economic profitsRivalry:Revenues are extremely concentrated in this industry, with Coke and Pepsi, togetherwith their associated bottlers, commanding 73% of the case market in 1994. Adding inthe next tier of soft drink companies, the top six controlled 89% of the market. In fact,one could characterize the soft drink market as an oligopoly, or even a duopoly betweenCoke and Pepsi, resulting in positive economic profits. To be sure, there was toughcompetition between Coke and Pepsi for market share, and this occasionally hamperedprofitability.For example, price wars resulted in weak brand loyalty and eroded margins for bothcompanies in the 1980s. The Pepsi Challenge, meanwhile, affected market sharewithout hampering per case profitability, as Pepsi was able to compete on attributesother than price. 18
  26. 26. Substitutes:Through the early 1960s, soft drinks were synonymous with “colas” in the mind ofconsumers. Over time, however, other beverages, from bottled water to teas, becamemore popular, especially in the 1980s and 1990s. Coke and Pepsi responded byexpanding their offerings, through alliances (e.g. Coke and Nestea), acquisitions (e.g.Coke and Minute Maid), and internal product innovation (e.g. Pepsi creating OrangeSlice), capturing the value of increasingly popular substitutes internally.Proliferation in the number of brands did threaten the profitability of bottlers through1986, as they more frequent line set-ups, increased capital investment, anddevelopment of special management skills for more complex manufacturing operationsand distribution. Bottlers were able to overcome these operational challenges throughconsolidation to achieve economies of scale. Overall, because of the CPs efforts indiversification, however, substitutes became less of a threat. 19
  27. 27. 2 Introduction to the organization : PepsiCoType Public FoodIndustry Beverages Delaware - June 8, 1965Founded reincorporated in North Carolina – 1986 Donald M. KendallFounder(s) Herman W. LayHeadquarters Purchase, Harrison, New YorkArea served Worldwide Indra NooyiKey people (Chairperson and CEO) Pepsi Diet Pepsi Mountain Dew Aquafina Sierra MistProducts Lipton Teas 7up (outside the U.S.) Mirinda Tropicana Products Naked Juice Gatorade 20
  28. 28. Quaker Oats Company Lays Doritos Cheetos Walkers snack foods Fritos TostitosRevenue US$ 57.838 billion (2010)[2]Operating US$ 8.332 billion (2010)[2]incomeNet income US$ 6.338 billion (2010)[2]Total assets US$ 68.153 billion (2010)[2]Total equity US$ 21.476 billion (2010)[2]Employees 294,000 (2010)[2] PepsiCo Americas Foods; PepsiCo Americas Beverages;Divisions PepsiCo Europe; PepsiCo Asia, Middle East & Africa NYSE: PEPTraded as S&P 500 ComponentWebsite PepsiCo.comPepsiCo, Incorporated (NYSE: PEP) is a Fortune 500, American global corporation 21
  29. 29. Pepsi - Yeh Hai Youngistan Meri JaanBrand HistoryPepsi is a hundred year old brand loved by over 200 million people worldwide. Thelargest single selling soft drink brand in India is the ubiquitoussocialiserat everyoccasion. Youngistaan loves it. 200 million people worldwide love it. But what has made Pepsi the single largest selling soft drink brand in India is actually a formula concocted a century ago in a far away continent. 1886, United States of America. Caleb Bradman, the man with a plan, got on to formulate a blockbuster digestive drink and decided to call it Brad‟s drink. It was this doctor‟s potion that was to become Pepsi Cola in 1898, and eventually, Pepsi in 1903. 22
  30. 30. Pepsi has always played on the front foot and since its inception has come outwith revolutionary concepts like Diet, 2L bottles, recyclable plastic cola bottlesand the enviable My Can.Brand AdvantagePepsi has become a friend to the youth and has led many youth cultures.Youngsters over the generations have grown up with Pepsi and share anemotional connect with it, unlike any other cola brand. Be it parties, hangouts, orjust another day at home, a day is never complete without the fizz of Pepsi!Pepsi, Cricket and Bollywood have been joined at the hip since the beginning.Shah Rukh Khan, Sachin Tendulkar, Saif Ali Khan, Amitabh Bachchan, KareenaKapoor, Priyanka Chopra, Virender Sehwag, M. S. Dhoni, John Abraham, RanbirKapoor and Deepika Padukone are a few celebrities who will go any length for achilled Pepsi.The Pepsi My Can is undoubtedly the most popular cola pack of all times. It isnot just a pack but a style statement for today‟s youth. 23
  31. 31. PepsiCo is a world leader in convenient snacks, foods and beverages. 1. Solid Philosophy, Solid Company Creating a Better Tomorrow for Future Generations 2. Our Mission and Vision At PepsiCo, we believe being a responsible corporate citizen is not only the right thing to do, but the right thing to do for our business. 3. PepsiCo Values & Philosophy Our Values & Philosophy are a reflection of the socially and environmentally responsible company we aspire to be. They are the foundation for every business decision we make. 24
  32. 32. 4. Corporate Governance PepsiCo has adopted strict corporate standards that govern our operations and ensures accountability for our actions. Learn more about the processes and policies guiding our business.World-Class, Muscular BrandsPepsiCo is home to hundreds of brands around the globe. Listed here are some of ourmost recognized. More » 25
  33. 33. Our LeadershipPepsiCo is a company full of strong, talented individuals starting with the company leadership.Get to know the inspiring people helping lead PepsiCo on its Performance with Purposejourney. 1. 3 Indra K. Noo Massimo dAmoreChairman and CEO, PepsiCo CEO, PepsiCo Beverages Americas 2. 4 John Compton Eric Foss CEO, PepsiCo Americas Foods CEO, Pepsi Beverages Company 5 6 Zein Abdalla Saad Abdul-Latif CEO, PepsiCo Europe CEO, PepsiCo Asia, Middle East, Africa 26
  34. 34. PepsiCo, Incorporated (NYSE: PEP) is a Fortune 500, American global corporationheadquartered in Purchase, Harrison, New York, with interests in the manufacturing,marketing and distribution of grain-based snack foods, beverages, and other products.PepsiCo was formed in 1965 with the merger of the Pepsi-Cola Company and Frito-Lay,Inc. PepsiCo has since expanded from its namesake product Pepsi to a broader rangeof food and beverage brands, the largest of which include an acquisition of Tropicana in1998 and a merger with Quaker Oats in 2001 - which added the Gatorade brand to itsportfolio as well.As of 2009, 19 of PepsiCos product lines generated retail sales of more than $1 billioneach,[4] and the company‟s products were distributed across more than 200 countries,resulting in annual net revenues of $43.3 billion. Based on net revenue, PepsiCo is thesecond largest food & beverage business in the world.[5] Within North America, PepsiCois ranked (by net revenue) as the largest food and beverage business.Indra Krishnamurthy Nooyi has been the chief executive of PepsiCo since 2006, and thecompany employed approximately 285,000 people worldwide as of 2010. [6] Thecompany‟s beverage distribution and bottling is conducted by PepsiCo as well as bylicensed bottlers in certain regions.[7] PepsiCo is a SIC 2080 (beverage) company. 27
  35. 35. History:OriginsThe recipe for Pepsi, the soft drink, was first developed in the 1890s by a New Bern,North Carolina pharmacist and industrialist, Caleb Bradham, who named it "Pepsi-Cola"in 1898. As the cola developed in popularity, he created the Pepsi-Cola Company in1902 and registered a patent for his recipe in 1903. The Pepsi-Cola Company was firstincorporated in the state of Delaware in 1919. Ownership of this company traded handsseveral times throughout the 1920s and 1930s, and in the early 1960s its product lineexpanded with the creation of Diet Pepsi and Mountain Dew.Separately, the Frito Company and H.W. Lay & Company - two American potato andcorn chip snack manufacturers - began working together in 1945 with a licensingagreement allowing H.W. Lay to distribute Fritos in the Southeastern United States. Thecompanies merged to become Frito-Lay, Inc. in 1961. In 1965, the Pepsi-Cola Companymerged with Frito-Lay, Inc. to become PepsiCo, Inc., the company it is known as atpresent. At the time of its foundation, PepsiCo was incorporated in the state ofDelaware and headquartered in Manhattan, New York. The companys headquarterswere relocated to its still-current location of Purchase, New York in 1970, and in 1986PepsiCo was reincorporated in the state of North Carolina.Acquisitions and divestments:Between the late-1970s and the mid-1990s, PepsiCo expanded via acquisition ofbusinesses outside of its core focus of packaged food and beverage brands; however itexited these non-core business lines largely in 1997, selling some, and spinning offothers into a new company named Tricon Global Restaurants, which later becameknown as Yum! Brands, Inc.. PepsiCo also previously owned several other brands thatit later sold, in order to allow it to return focus to its primary snack food and beveragelines, according to investment analysts reporting on the divestments in 1997. Brands 28
  36. 36. formerly (no longer) owned by PepsiCo include: Pizza Hut, Taco Bell, KFC, Hot n Now,East Side Marios, DAngelo Sandwich Shops, Chevys Fresh Mex, California PizzaKitchen, Stolichnaya (via licensed agreement), Wilson Sporting Goods and NorthAmerican Van Lines.The divestments concluding in 2007 were followed by multiple large-scale acquisitions,as PepsiCo began to extend its operations beyond soft drinks and snack foods intoother lines of foods and beverages. PepsiCo purchased the orange juice companyTropicana Products in 1998, and merged with Quaker Oats Company in 2001, addingwith it the Gatorade sports drink line and other Quaker Oats brands such as ChewyGranola Bars and Aunt Jemima, among others.In August 2009, PepsiCo made a $7 billion offer to acquire the two largest bottlers of itsproducts in North America: Pepsi Bottling Group and PepsiAmericas. In 2010 thisacquisition was completed, resulting in the formation of a new wholly owned subsidiaryof PepsiCo, Pepsi Beverages Company. Also in late 2010, the company made itslargest international acquisition when it purchased a majority stake in Wimm-Bill-DannFoods - a Russian food company which produces milk, yogurt, fruit juices and dairyproducts.Competition:The Coca-Cola Company has historically been considered PepsiCo‟s primarycompetitor in the beverage market, and in December 2005, PepsiCo surpassed TheCoca-Cola Company in market value for the first time in 112 years since bothcompanies began to compete. In 2009, the Coca-Cola Company held a higher marketshare in carbonated soft drink sales within the U.S. In the same year, PepsiComaintained a higher share of the U.S. refreshment beverage market, however, reflectingthe differences in product lines between the two companies. As a result of mergers,acquisitions and partnerships pursued by PepsiCo in the 1990s and 2000s, its businesshas shifted to include a broader product base, including foods, snacks and beverages.The majority of PepsiCos revenues no longer come from the production and sale ofcarbonated soft drinks. Beverages accounted for less than 50 percent of its total 29
  37. 37. revenue in 2009. In the same year, slightly more than 60 percent of PepsiCos beveragesales came from its primary non-carbonated brands, namely Gatorade and Tropicana.PepsiCos Frito-Lay and Quaker Oats brands hold a significant share of the U.S. snackfood market, accounting for approximately 39 percent of U.S. snack food sales in 2009.One of PepsiCos primary competitors in the snack food market overall is Kraft Foods,which in the same year held 11 percent of the U.S. snack market share.Products and brands Largest PepsiCo Brands (based on 2009 retail sales)BrandPepsiMountain DewLays potato chipsGatoradeDiet PepsiTropicana beverages7UP (outside U.S.)Doritos tortilla chipsLipton teas (PepsiCo/Unileverpartnership)Quaker foods and snacksCheetosMirindaRuffles potato chipsAquafina bottled water 30
  38. 38. Pepsi MaxTostitos tortilla chipsSierra MistFritatos corn chipsWalkers potato crispsSource: 2009 Annual Report[29] $0 $5b $10b $15b $20bPepsiCo‟s product mix as of 2009 (based on worldwide net revenue) consists of 63percent foods, and 37 percent beverages. On a worldwide basis, the company‟s currentproducts lines include several hundred brands that in 2009 were estimated to havegenerated approximately $108 billion in cumulative annual retail sales.The primary identifier of companies main brands within the food and beverage industryare those which generate annual sales exceeding $1 billion, and 19 of PepsiCos brandsmet this description as of 2009: Pepsi-Cola, Mountain Dew, Lays, Gatorade, Tropicana,7Up, Doritos, Lipton Teas, Quaker Foods, Cheetos, Mirinda, Ruffles, Aquafina, PepsiMax, Tostitos, Sierra Mist, Fritos, and Walkers.Areas of business :The structure of PepsiCos global operations has shifted multiple times in its history as aresult of international expansion, and as of 2010 it is separated into four maindivisions:[30] PepsiCo Americas Foods, PepsiCo Americas Beverages, PepsiCo Europe,and PepsiCo Asia, Middle East and Africa. As of 2009, 71 percent of the company‟s netrevenues came from North and South America, 16 percent from Europe and 13 percentfrom Asia, the Middle East and Africa.PepsiCo Americas FoodsPepsiCo Americas Foods consists of the company‟s food and snack operations in Northand South America. This operating division is further segmented into Frito-Lay NorthAmerica, Quaker Foods & Snacks, Sabritas, Gamesa and Latin America Foods. Food 31
  39. 39. and snack sales in North and South America combined contributed 48 percent ofPepsiCo‟s net revenue in 2009.Frito-Lay North America, the result of a merger in 1961 between the Frito Company andthe H.W. Lay Company, produces the top selling line of snack foods in the U.S. Its mainbrands in the U.S., Canada and Mexico and include Lays and Ruffles potato chips,Doritos tortilla chips, Tostitos tortilla chips and dips, Cheetos cheese flavored snacks,Fritos corn chips, Rold Gold pretzels, Sun Chips and Cracker Jack popcorn. Productsmade by this division are sold to independent distributors and retailers, and aretransported from Frito-Lays manufacturing plants to distribution centers, principally invehicles owned and operated by the company.Quaker Foods North America, created following PepsiCo‟s acquisition of the QuakerOats Company in 2001, manufactures, markets and sells Quaker Oatmeal, Rice-A-Roni, Capn Crunch and Life cereals, as well as Near East side dishes within NorthAmerica. This division also owns and produces the Aunt Jemima brand, which as of2009 was the top selling line of syrups and pancake mixes within this region.Sabritas and Gamesa are two of PepsiCo‟s food and snack business linesheadquartered in Mexico, and they were acquired by PepsiCo in 1966 and 1990,respectively. Sabritas markets Frito-Lay products in Mexico, including local brands suchas Poffets, Rancheritos, Crujitos and Sabritones. Gamesa is the largest manufacturer ofcookies in Mexico, distributing brands such as Emperador, Arcoiris and MaríasGamesa.PepsiCo‟s Latin America Foods (Spanish: Snacks América Latina) operations marketand sell primarily Quaker- and Frito-Lay-branded snack foods within Central and SouthAmerica, including Argentina, Brazil, Peru and other countries in this region.[36] SnacksAmérica Latina purchased Peruvian company Karinto S.A.C. including its productioncompany Bocaditas Nacionales (with three production facilities in Peru) from theHayashida family of Lima in 2009, adding the Karito brand to its product line, includingCuates, Fripapas, and Papi Frits. 32
  40. 40. PepsiCo Americas Beverages:This division contributed 23 percent of PepsiCo‟s net revenue as of 2009, [29] andinvolves the manufacture (and in some cases licensing), marketing and sales of bothcarbonated and non-carbonated beverages in North, Central and South America.[38] Themain brands distributed under this division include Pepsi, Mountain Dew, Gatorade,7UP (outside the U.S.), Tropicana Pure Premium orange juice, Sierra Mist, SoBeLifewater, Tropicana juice drinks, AMP Energy, Naked Juice and Izze. Aquafina, thecompany‟s bottled water brand, is also marketed and licensed through PepsiCoAmericas Beverages.PepsiCo also has formed partnerships with several beverage brands it does not own, inorder to distribute these or market them with its own brands. [1] As of 2010, itspartnerships include: Starbucks (Frappuccino, DoubleShot and Iced Coffee), Unilever‟sLipton brand (Lipton Brisk and Lipton Iced Tea), and Dole (licensed juices and drinks).PepsiCo Europe:PepsiCo began to expand its distribution in Europe in the 1980s, and in 2009 it made up16 percent of the companys global net revenue. Unlike PepsiCo‟s Americas businesssegments, both foods and beverages are manufactured and marketed under oneumbrella division in this region, known as PepsiCo Europe. The primary brands sold byPepsiCo in Europe include Pepsi-Cola beverages, Frito-Lay snacks, Tropicana juicesand Quaker food products, as well as regional brands unique to Europe such asWalkers crisps, Copella, Paw Ridge, Snack-a-Jack, Duyvis and others. PepsiCo alsodistributes the soft drink 7UP in Europe via license agreement. epsiCos Europeanpresence expanded with its acquisition of Russian juice and dairy product brand Wimm-Bill-Dann Foods in December 2010. 33
  41. 41. PepsiCo Asia, Middle East & Africa :The most recently created operating division of PepsiCo covers Asia, the Middle Eastand Africa In addition to the production and sales of several worldwide Pepsi-Cola,Quaker Foods and Frito-Lay beverage and food product lines (including Pepsi andDoritos), this segment of PepsiCo‟s business markets regional brands such as Mirinda,Kurkure and Red Rock Deli, among others. While PepsiCo owns its own manufacturingand distribution facilities in certain parts of these regions, more of this production isconducted via alternate means such as licensing (which it does with Aquafina), contractmanufacturing, joint ventures and affiliate operations. PepsiCo‟s businesses in theseregions, as of 2009, contributed 13 percent to the company‟s net revenue worldwide.Corporate governance:Headquartered in Purchase, New York, with research and development headquarters inValhalla, New York, PepsiCo‟s Chairman and CEO is Indra Nooyi.[40] The board ofdirectors is composed of eleven outside directors as of 2010, including Ray Lee Hunt,Shona L. Brown, Victor Dzau, Arthur C. Martinez, Sharon Percy Rockefeller, DanielVasella, Dina Dublon, Ian M. Cook, Alberto Ibargüen, James J. Schiro and Lloyd G.Trotter. Former top executives at PepsiCo include Steven Reinemund, Roger Enrico, D.Wayne Calloway, John Sculley, Michael H. Jordan, Donald M. Kendall, Christopher A.Sinclair and Alfred Steele.On October 1, 2006, former Chief Financial Officer and President Indra Nooyi replacedSteve Reinemund as Chief Executive Officer. Nooyi remained as the corporationspresident, and became Chairman of the Board in May 2007, later (in 2010) beingnamed #1 on Fortunes list of the "50 Most Powerful Women" and #6 on Forbes list ofthe "Worlds 100 Most Powerful Women". PepsiCo received a 100 percent rating on theCorporate Equality Indexreleased by the LGBT-advocate group Human RightsCampaign starting in 2004, the third year of the report. 34
  42. 42. HeadquartersPepsiCo headquartersThe PepsiCo headquarters are located in Purchase, Harrison, New York. It was one ofthe last architectural works by Edward Durell Stone. It consists of seven three storybuildings. Each building is connected to its neighbor through a corner. The propertyincludes a sculpture garden with 45 sculptures. Works include those of AlexanderCalder, Henry Moore, and Auguste Rodin. Westchester Magazine stated "The buildings‟square blocks rise from the ground into low, inverted ziggurats, with each of the threefloors having strips of dark windows; patterned pre-cast concrete panels add texture tothe exterior surfaces." In 2010 the magazine ranked the building as one of the ten mostbeautiful buildings in Westchester County.At one time PepsiCo had its headquarters in 500 Park Avenue in Midtown Manhattan,New York City. In 1956 Pepsico paid $2 million for the original building. PepsiCo builtthe new 500 Park Avenue in 1960. In 1966 Mayor of New York City John Lindsaystarted a private campaign to convince PepsiCo to remain in New York City. In 1967PepsiCo announced that it was moving to 112 acres (45 ha) of the Blind Brook PoloClub in Westchester County. After PepsiCo left the Manhattan building, it becameknown as the Olivetti Building. 35
  43. 43. Charitable activities:Headquarters of Pepsi-Cola Venezuela (ES)PepsiCo has maintained a philanthropic program since 1962 called the PepsiCoFoundation, in which it primarily funds “nutrition and activity, safe water and waterusage efficiencies, and education,” according to the foundation‟s website. In 2009,$27.9 million was contributed through this foundation, including grants to the UnitedWay and YMCA, among others.In 2009, PepsiCo launched an initiative which the company calls the Pepsi RefreshProject, in which individuals submit and vote on charitable and nonprofit collaborations.The main recipients of grants as part of the refresh project are community organizationswith a local focus and nonprofit organizations, such as a high school in Michigan which -as a result of being selected - received $250,000 in 2010 towards construction of afitness room for high school students. Following the Gulf of Mexico oil spill whichoccurred in the spring of 2010, PepsiCo donated $1.3 million to grant winners indetermined by popular vote. As of October, 2010, the company had provided acumulative total of $11.7 million in funding, spread across 287 ideas of participantprojects from 203 cities in North America. In late 2010, the refresh project was reportedto be expanding to include countries outside of North America in 2011. 36
  44. 44. Sustainability practices:According to its 2009 annual report, PepsiCo states that it is “committed to deliveringsustainable growth by investing in a healthier future for people and our planet”, which ithas defined in its mission statement since 2006 as “Performance with Purpose”.According to news and magazine coverage on the subject in 2010, the objective of thisinitiative is to increase the number and variety of In PepsiCo‟s CEO Indra Nooyi made atrip to India to address water usage practices in the country, prompting prior critic SunitaNarain, director of the Centre for Science & Environment (CSE), to note that PepsiCo"seem(s) to be doing something serious about water now." According to the company‟s2009 corporate citizenship report, as well as media reports at the time, the company (in2009) replenished nearly six billion liters of water within India, exceeding the aggregatewater intake of approximately five billion liters by PepsiCo‟s India manufacturingfacilities.Water usage concerns have arisen at times in other countries in which PepsiCooperates. In the U.S., water shortages in certain regions resulted in increased scrutinyon the company‟s production facilities, which were cited in media reports as beingamong the largest water users in cities facing drought - such as Atlanta, Georgia.[67][68]In response, the company formed partnerships with non-profit organizations such as theEarth Institute and Water.org, and in 2009 began cleaning new Gatorade bottles withpurified air instead of rinsing with water, among other water conservation practices.[69] Inthe United Kingdom, also in response to regional drought conditions, PepsiCo snacksbrand Walkers reduced water usage at its largest potato chip facility by 45 percentbetween the years 2001 and 2008. In doing so, the factory employed machinery whichcaptured the water naturally contained in potatoes, and used that water to largely offsetthe need to bring in outside water to the factory.As a result of water reduction practices and efficiency improvements, PepsiCo in 2009saved more than more than 12 billion liters of water worldwide, compared to its 2006water usage. Environmental advocacy organizations including the Natural ResourcesDefense Council and individual critics such as Rocky Anderson (mayor of Salt Lake 37
  45. 45. City, Utah) voiced concerns in 2009, noting that the company could conserve additionalwater by refraining from the production of discretionary products such as Aquafina.[73]The company maintained its positioning of bottled water as “healthy and convenient”,while also beginning to partially offset environmental impacts of such products throughalternate means, including packaging weight reduction. Packaging and recycling:Environmental advocates have raised concern over the environmental impactssurrounding the disposal of PepsiCo‟s bottled beverage products in particular, as bottlerecycling rates for the company‟s products in 2009 averaged 34 percent within the U.S.The company has employed efforts to minimize these environmental impacts viapackaging developments combined with recycling initiatives. In 2010, PepsiCoannounced a goal to create partnerships that prompt an increase the beveragecontainer recycling rate in the U.S. to 50 percent by 2018.One strategy enacted to reach this goal has been the placement of interactive recyclingkiosks called “Dream Machines” in supermarkets, convenience stores and gas stations,with the intent of increasing access to recycling receptacles. The use of resin tomanufacture its plastic bottles has resulted in reduced packaging weight, which in turnreduces the volume of fossil fuels required to transport certain PepsiCo products. Theweight of Aquafina bottles was reduced nearly 40 percent, to 15 grams, with apackaging redesign in 2009. Also in that year, PepsiCo brand Naked Juice beganproduction and distribution of the first 100 percent post-consumer recycled plastic bottle.Energy usage and carbon footprint:PepsiCo, along with other manufacturers in its industry, has drawn criticism fromenvironmental advocacy groups for the production and distribution of plastic productpackaging, which consumed an additional 1.5 billion gallons of petrochemicals in 2008.These critics have also expressed apprehension over the production volume of plasticpackaging, which results in the emission of carbon dioxide. Beginning largely in 2006,PepsiCo began development of more efficient means of producing and distributing its 38
  46. 46. products using less energy, while also placing a focus on emissions reduction. In acomparison of 2009 energy usage with recorded usage in 2006, the company‟s per-unituse of energy was reduced by 16 percent in its beverage plants and 7 percent in snackplants.In 2009, Tropicana (owned by PepsiCo) was the first brand in the U.S. to determine thecarbon footprint of its orange juice product, as certified by the Carbon Trust, an outsideauditor of carbon emissions. Also in 2009, PepsiCo began the test deployment of so-called “green vending machines,” which reduce energy usage by 15 percent incomparison to average models in use. It developed these machines in coordination withGreenpeace, which described the initiative as “transforming the industry in a way that isgoing to be more climate-friendly to a great degree.”Product diversityFrom its founding in 1965 until the early 1990s, the majority of PepsiCo‟s product lineconsisted of carbonated soft drinks and convenience snacks. PepsiCo broadened itsproduct line substantially throughout the 1990s and 2000s with the acquisition anddevelopment of what its CEO deemed as “good-for-you” products, including QuakerOats, Naked Juice and Tropicana orange juice. Sales of such healthier-orientedPepsiCo brands totaled $10 billion in 2009, representing 18 percent of the company‟stotal revenue in that year. This movement into a broader, healthier product range hasbeen moderately well received by nutrition advocates; though commentators in this fieldhave also suggested that PepsiCo market its healthier items as aggressively as less-healthy core productsIn response to shifting consumer preferences and in part due to increasinggovernmental regulation, PepsiCo in 2010 indicated its intention to grow this segment ofits business, forecasting that sales of fruit, vegetable, whole grain and fiber-basedproducts will amount to $30 billion by 2020. To meet this intended target, the companyhas said that it plans to acquire additional health-oriented brands while also makingchanges to the composition of existing products that it sells. 39
  47. 47. Ingredient changes:Public health advocates have suggested that there may be a link between the ingredientmakeup of PepsiCo‟s core snack and carbonated soft drink products and rising rates ofhealth conditions such as obesity and diabetes. The company aligns with personalresponsibility advocates, who assert that food and beverages with higher proportions ofsugar or salt content are fit for consumption in moderation by individuals who alsoexercise on a regular basis.Changes to the composition of its products with nutrition in mind have involved reducingfat content, moving away from trans-fats, and producing products in calorie-specificserving sizes to discourage overconsumption, among other changes. One of the earlieringredient changes involved sugar and caloric reduction, with the introduction of DietPepsi in 1964 and Pepsi Max in 1993 - both of which are variants of their full-caloriecounterpart, Pepsi. More recent changes have consisted of saturated fat reduction,which Frito-Lay reduced by 50% in Lays and Ruffles potato chips in the U.S. between2006 and 2009.[95] Also in 2009, PepsiCo‟s Tropicana brand introduced a new variationof orange juice (Trop50) sweetened in part by the plant Stevia, which reduced caloriesby half.[95] Since 2007, the company also made available lower-calorie variants ofGatorade, which it calls “G2”.Distribution to children:As public perception placed additional scrutiny on the marketing and distribution ofcarbonated soft drinks to children, PepsiCo announced in 2010 that by 2012, it willremove beverages with higher sugar content from primary and secondary schoolsworldwide. It also, under voluntary guidelines adopted in 2006, replaced “full-calorie”beverages in U.S. schools with “lower-calorie” alternatives, leading to a 95 percentreduction in the 2009 sales of full-calorie variants in these schools in comparison to thesales recorded in 2004. In 2008, in accordance with guidelines adopted by theInternational Council of Beverages Associations, PepsiCo eliminated the advertising 40
  48. 48. and marketing of products that do not meet its nutrition standards, to children under theage of 12.In 2010, First Lady Michelle Obama initiated a campaign to end childhood obesity(entitled Lets Move!), in which she sought to encourage healthier food options in publicschools, improved food nutrition labeling and increased physical activity for children. Inresponse to this initiative, PepsiCo, along with food manufacturers Campbell Soup,Coca-Cola, General Mills and others in an alliance referred to as the "Healthy WeightCommitment Foundation", announced in 2010 that the companies will collectively cutone trillion calories from their products sold by the end of 2012 and 1.5 trillion caloriesPerformance with PurposeAt PepsiCo, were committed to achieving business and financial success while leavinga positive imprint on society - delivering what we call Performance with Purpose.Our approach to superior financial performance is straightforward - drive shareholdervalue. By addressing social and environmental issues, we also deliver on our purposeagenda, which consists of human, environmental, and talent sustainability. 41
  49. 49. Guiding Principles:We uphold our commitment with six guiding principles.We must always strive to: 1. Care for our customers, our consumers and the world we live in. We are driven by the intense, competitive spirit of the marketplace, but we direct this spirit toward solutions that benefit both our company and our constituents. Our success depends on a thorough understanding of our customers, consumers and communities. To foster this spirit of generosity, we go the extra mile to show we care. 2. Sell only products we can be proud of. The true test of our standards is our own ability to consume and personally endorse the products we sell. Without reservation. Our confidence helps ensure the quality of our products, from the moment we purchase ingredients to the moment it reaches the consumers hand. 3. Speak with truth and candor. We tell the whole story, not just whats convenient to our individual goals. In addition to being clear, honest and accurate, we are responsible for ensuring our communications are understood. 4. Balance short term and long term. In every decision, we weigh both short-term and long-term risks and benefits. Maintaining this balance helps sustain our growth and ensures our ideas and solutions are relevant both now and in the future. 5. Win with diversity and inclusion. We embrace people with diverse backgrounds, traits and ways of thinking. Our diversity brings new perspectives into the workplace and encourages innovation, as well as the ability to identify new market opportunities. 42
  50. 50. 6. Respect others and succeed together. Our mutual success depends on mutual respect, inside and outside the company. It requires people who are capable of working together as part of a team or informal collaboration. While our company is built on individual excellence, we also recognize the importance and value of teamwork in turning our goals into accomplishments. 43
  51. 51. About PepsiCo IndiaPepsiCo entered India in 1989 and has grown to become the country‟s largest sellingfood and Beverage Company. One of the largest multinational investors in the country,PepsiCo has established a business which aims to serve the long term dynamic needsof consumers in India.PepsiCo nourishes consumers with a range of products from treats to healthy eats thatdeliver joy as well as nutrition and always, good taste. PepsiCo India‟s expansiveportfolio includes iconic refreshment beverages Pepsi, 7 UP, Mirinda and MountainDew, in addition to low calorie options such as Diet Pepsi, hydrating and nutritionalbeverages such as Aquafina drinking water, isotonic sports drinks - Gatorade,Tropicana 100% fruit juices, and juice based drinks – Tropicana Nectars, TropicanaTwister and Slice, non-carbonated beverage and a new innovation Nimbooz by 7Up.Local brands – Lehar Evervess Soda, Dukes Lemonade and Mangola add to thediverse range of brands.PepsiCo‟s foods company, Frito-Lay, is the leader in the branded salty snack marketand all Frito Lay products are free of trans-fat and MSG. It manufactures Lay‟s PotatoChips, Cheetos extruded snacks, Uncle Chipps and traditional snacks under theKurkure and Lehar brands and the recently launched „Aliva‟ savoury crackers. Thecompany‟s high fibre breakfast cereal, Quaker Oats, and low fat and roasted snackoptions enhance the healthful choices available to consumers. Frito Lay‟s coreproducts, Lay‟s, Kurkure, Uncle Chipps and Cheetos are cooked in Rice Bran Oil tosignificantly reduce saturated fats and all of its products contain voluntary nutritionallabeling on their packets.The group has built an expansive beverage and foods business. To support itsoperations, PepsiCo has 36 bottling plants in India, of which 13 are company ownedand 23 are franchisee owned. In addition to this, PepsiCo‟s Frito Lay foods division has3 state-of-the-art plants. PepsiCo‟s business is based on its sustainability vision ofmaking tomorrow better than today. PepsiCo‟s commitment to living by this vision everyday is visible in its contribution to the country, consumers and farmers. 44
  52. 52. .PepsiCo India and its partners have invested more than USD1 billion since thecompany was established in the country.EmploymentPepsiCo India provides direct and indirect employment to 150,000 people includingsuppliers and distributors 45
  53. 53. Brand FactsPepsiCo nourishes consumers with a range of products from tasty treats to healthy eatsthat deliver enjoyment, nutrition, convenience as well as affordabilityBeveragesPepsiCo India‟s expansive portfolio includes iconic refreshment beverages Pepsi, 7 UP,Nimbooz, Mirinda and Mountain Dew, in addition to low calorie options such as DietPepsi, hydrating and nutritional beverages such as Aquafina drinking water, isotonicsports drinks - Gatorade, Tropicana100% fruit juices, and juice based drinks –Tropicana Nectars, Tropicana Twister and Slice. Local brands – Lehar Evervess Soda,Dukes Lemonade and Mangola add to the diverse range of brands. 46
  54. 54. FoodsPepsiCo‟s food division, Frito-Lay, is the leader in the branded salty snack market andall Frito Lay products are free of trans-fat and MSG. It manufactures Lay‟s Potato Chips,Cheetos extruded snacks, Uncle Chipps and traditional snacks under the Kurkure andLehar brands. The company‟s high fibre breakfast cereal, Quaker Oats, and low fat androasted snack options enhance the healthful choices available to consumers. Frito Lay‟score products, Lay‟s, Kurkure, Uncle Chipps and Cheetos are cooked in Rice Bran Oilto significantly reduce saturated fats and all of its products contain voluntary nutritionallabeling on their packets. 47
  55. 55. Celebrity endorsement of Pepsi:Celebrities have been paid to advertise for Pepsi products.United StatesNASCAR driver Jeff Gordon who runs a Pepsi paint scheme at TalladegaSuperspeedway and Auto Club Speedway. Joan Crawford was married to PepsiCopresident Alfred Steele from 1955 to 1959 (his death), and was advertising executiveand board of directors member from 1959 to 1973.During the 1960s, Joanie Sommers sang two popular commercial songs ("Its Pepsi, forthose who think young" and "Now you see it, now you dont, oh, Diet Pepsi") for Pepsi-Cola that were run in commercials and for which she came to be often referred to as"The Pepsi Girl".During 1984, Michael Jackson signed a large contract with Pepsi that has sinceproduced many commercials and world tours through 1993.During the 1989 Grammy Awards telecast, Pepsi and Puerto Rican singer Chayannewas featured in the first advertising spot in Spanish language to be broadcast onnational television without dubbing or subtitles.In the early 1990s, Ray Charles was the star of a Diet Pepsi campaign called "You Gotthe Right One, Baby," which was also known as "Uh-huh."In 2001, Britney Spears became a spokesperson for Pepsi. Spears contract concludedwith an advertisement with Pink and Beyonce. The ad was made featuring the cover ofthe song "We Will Rock You" by Queen.In 2005, Christina Aguilera was signed to promote the popular drink (she was previouslypromoting Coca-Cola in 2000). The campaign featuring Aguilera was released in 2006,but not in the United States. Some commercials featured singer Elissa, and some with 48
  56. 56. Aguilera by herself. PepsiCo said in a recent interview that Christina Aguilera has thatdare for more approach. Aretha Franklin was also a spokesperson in 1998. And also in1999 Janet Jackson signed on to the original "Ask For More" campaign which featureda song of the same name written and sung by Jackson.In 2008, PepsiCo launched the "Cool Tones" campaign. It involved Mariah Carey, MaryJ Blige and The All American Rejects writing and performing ringtones that can beobtained by purchasing a Pepsi bottle. Carey also recorded a commercial for thecampaign in which she performs one of her original ringtones.Europe and the United KingdomFor the 1988 and 1989 seasons, Pepsi was the title sponsor of Suzukis effort inmotorcycle road racings premier class, Grand Prix 500cc. The Pepsi livery was a newaddition to grand prix motorcycling, and a change from tobacco sponsors.During 1988-9, Suzuki also produced a number of road going replicas of the GP bikes,emblazoned with the same Pepsi signage as the works bikes. Due to the liverysassociation with one of Suzukis riders, the Texan, Kevin Schwantz, riders today are stillproducing their own replicas as tribute.[citation needed]Since 2001, Sakis Rouvas has been a spokesperson in the Greek and Balkancampaign under contract with the headquarters of United Kingdom, being the onlyGreek artist to have ever been proposed to represent the brand.[1]Latin AmericaIn Latin America, Colombian artists Shakira, and Juanes; Dominican Sammy Sosa, andPuerto Rican Daddy Yankee have promoted the soft drink. Spanish-speaking JaciVelasquez did some commercials. In 2007 RBD promoted the drink in their homecountry of Mexico. 49
  57. 57. AsiaAs for Asia, celebrity and singers Show Luo, Leslie Cheung, Jay Chou, Aaron Kwok,Jolin Tsai, Rain, Louis Koo, Nicholas Tse, F4, Faye Wong, and Kelly Chan haveappeared in several different advertisements.In Pakistan, Pepsi sponsors the Pakistan cricket team and many Pakistani celebritiesand personalities have been spokespersons for the brand includding, Junaid Jamshed,Shoaib Akhtar, Bob Woolmer, Younus Khan, Kamran Akmal, Adnan Sami, ReemaKhan, Call, and Vital Signs.In India, Pepsi first used Aamir Khan, model turned actress Mahima Chaudhary andmodel and ex-Miss World Aishwariya Rai to promote its product. Later it used AmitabhBachchan, Shahrukh Khan, Kajol, Rani Mukherjee, Saif Ali Khan, Fardeen Khan,Akshay Kumar, Shahid Kapur (before he entered the movie world), Preity Zinta, JohnAbraham, Priyanka Chopra, and Kareena Kapoor as well as the national cricket team.AustraliaIn Australia, the trend has been to use local Australian celebrities to promote Pepsiincluding Kylie Minogue, Jennifer Hawkins (Miss Universe 2004), Holly Valance, HarryKewell, Sonny Bill Williams, Delta Goodrem, Mark Philippoussis and several others. 50
  58. 58. LITERATURE REVIEW Celebrity EndorsementErdogan (1999) in his article describe that Use of celebrities as part of marketingcommunications strategy is a fairly common practice for major firms in supportingcorporate or brand imagery. Firms invest significant monies in juxtaposing brands andorganizations with endorser qualities such as attractiveness, likeability, andtrustworthiness. They trust that these qualities operate in a transferable way, and, willgenerate desirable campaign outcomes. But, at times, celebrity qualities may beinappropriate, irrelevant, and undesirable. Thus, a major question is: how cancompanies select and retain the right celebrity among many competing alternatives,and, simultaneously manage this resource, while avoiding potential pitfalls? This paperseeks to explore variables, which may be considered in any celebrity selection processby drawing together strands from various literatures.Athletes and sporting products:In 1995, U.S. companies paid more than one billion dollars to 2000 athletes forendorsement deals (Lane, 1996). This means that approximately ten percent of theexpenditure on corporate sponsorships is spent on this specific promotion strategy. Thecombination of basketball superstar Michael "Air" Jordan and Nike has become thesports business euphemism for "a perfect fit" (Amis, Pant & Slack, 1997). By early 1993,one in three pairs of athletic shoes sold in the United States were made by Nike, with"Air Jordan" shoes and apparel contributing more than US$ 200 million a year in salesto the Nike empire (Katz, 1994). Sport specific products and non-sport specific productsAccording to Veltri and Long (1998), athletes will usually pursue two types ofendorsements: "sport specific products" and "non-sport specific products". Sport specificproducts are defined as articles necessary for the athlete to play his or her sport (shoes,racquets, clothing, etc.). Non-sport specific products include all other products orservices not related to the sport itself (cars, cosmetics, etc.). According to OMahony 51
  59. 59. and Meenaghan (1997/98), consumers response to endorsement messages is linked torelatedness, which means that the more the athlete is related with the product, the moreeffective the endorsement is. This largely emphasizes the importance of elite-levelathletes as endorsers for athletic shoe companies (producing sport specific products),which are unquestionably the largest spenders on endorsements.On the other hand, when an athlete has an endorsement-deal with a producer of non-sport specific products it is crucial that there is an appropriate "image match" betweenthe athlete or the sport in which hes involved and the brand. For example, for acompany such as Mercedes it would be appropriate to sponsor a golf player, because ofthe shared perceptual characteristics (Milne & McDonald, 1999).Many of todays top professional athletes have signed sport specific endorsementcontracts with sport apparel companies (Tedeschi, 1995). Beside Michael Jordan, otherexamples of high profile celebrity endorsers include Tiger Woods, Andre Agassi, PeteSampras and Renaldo for Nike, Shaquille ONeal for Reebok, Earvin "Magic" Johnsonfor Converse, Donovan Bailey for Adidas and Lindford Christie and Merlene Ottey forPuma. In Europe the most eminent cases are situated in soccer: del Pierro, Zidane,Beckham and Kluivert as the showpieces of Adidas and Alan Shearer as the holder of amulti-million contract with Umbro.Some international sport celebrities have their own signature line of products,specifically designed to their individual characteristics and preferences. Again, the "AirJordan" brand of Nike, characterized by the magic number 23 and the image of adunking basketball player instead of the Swoosh symbol, can be considered to be thebest example. Through a careful promotional campaign, Nike made its "Air Jordan"range of athletic footwear the biggest selling athletic shoe of all time (Amis et al., 1997).Other signature products include the idiosyncratic golden spikes of Johnson, Renaldo‟sR9 Mercurial soccer boots and the diverse apparel and footwear lines inspired by thepersonalities of Sampras, Agassi and Woods.Endorsement as a marketing strategy : 52
  60. 60. Endorsement objectivesAccording to Segers (1992), the majority of Belgian companies are considering sportsponsorship and athlete endorsements in particular, as a marketing tool to boostcommunication with existing and potential consumers. The use of celebrities as amarketing strategy contributes to brand name recognition and creates a positiveassociation with the endorsed product (McCarville & Copeland, 1994; McCracken,1989; Segers, 1992). In general, endorsements may serve both awareness and imagefunctions as a contribution to brand equity. The value for the sponsorship dollar isincreased as the sponsorship is used as an identity-enhancing vehicle as well as aname-awareness tool (Milne & McDonald, 1999).Most of the endorsement objectives can be categorized according to the generalclassification scheme of Sandler and Shane (1993). These researchers identified threebroad categories of sponsorship objectives for business: broad corporate objectives(image based), marketing objectives (brand promotion, sales increase) and mediaobjectives (cost effectiveness, reaching target markets). A more recent trend identifiedby Thwaites, Aguilar-Manjarrez and Kidd (1998) views sponsorship as an effectivemechanism for developing image and awareness through its use as a focus forcommunity involvement, particularly in support of grassroots initiatives. Consequently,this new category, community based objectives, should be added to the framework ofSandler and Shani (1993).Celebrities as Spokespersons:Companies frequently use spokespersons to deliver their advertising message andconvince consumers of their brands. A widely used and very popular type ofspokesperson is the celebrity endorser (Tom et al., 1992). According to Agrawal andKamakura (1995) celebrities make the advertisements believable and enhance themessage in the minds of the consumers. Furthermore, celebrities increase awarenessof a company‟s advertising, creating a positive feeling towards the brand. Thus using acelebrity in a company‟s advertising is likely to have a positive impact on theconsumers‟ brand perception and purchase decision. One of the main reason behind 53
  61. 61. the popularization of celebrity used in advertisements is the company‟s belief that themessage when delivered by well-know personality will achieve a high degree ofattention and recall (Hainan, 1991). This only happens when there is an appropriateconnection between the celebrity and the product endorsed or when the celebrity‟srepresents of some aspect of product endorsed.Early researches have shown that about 20 percent of all television commercial usecelebrity as their endorsers and increasing competition for seeking consumers‟attention has encouraged marketers to use attention- creating media stars to assist inproduct marketing (Erdogan, 1999). Marketers believe that using popular celebrity caneffect consumers feeling and their purchase intention and also believe celebrity toinfluence consumers‟ persuasion of the product according to the image of it (Belch &Belch, 2001). Use of celebrity as endorsers may have a significant positive impact.Another very prominent drawback of celebrity endorsements is the „Vampire Effect‟ orthe celebrity overshadowing the brand (Kulkarni and Gaulkar, 2005). This happenswhen the audience forgets the brand advertised and concentrates more on the celebrityendorsing the brand. As Cooper (1984) states in his study, “the product, not thecelebrity, must be the star” Similarly another problem is celebrity greed andoverexposure, when a celebrity becomes an endorser for many diverse products(Erdogan, 1999).Tripp et al. (1994) and Redenbach (2005) both investigated and suggested that whenas many as four products are endorsed, celebrity credibility and likeability, as well asattitude towards the ad, may be taken carelessly.In conclusion the good match with product and celebrity can make the advertising morebelievable, can improve the brand recognition, create a positive attitude towards thebrand name and create a distinct personality for the brand (Agrawal & Kamakura 1997).Alperstein 1991says that “Traditional celebrity endorsements are as well established asthe concept of celebrity itself.”(Anonymous, 2007).Celebrities influence on consumersappears to be larger than ever before. When used effectively celebrity endorsers have 54
  62. 62. the potential of serving a valuable role in enhancing a brand‟s competitive position anddeveloping brand equity. Till 1998.Schikel (1985) highlights the subtle yet intenseimpact of celebrities on everyday thinking and living. Defined as „intimacy at a distance‟,it is seen that individuals have a tendency to form illusions of an interpersonalrelationship with celebrities.Horton &Wohl 1956 describe that A person who enjoys public recognition from a largeshare of a certain group of people and uses this recognition on behalf of a consumergood by appearing with it in advertisements is known as a celebrity. McCraken 1989says that They are usually known to the public for their accomplishments in areas otherthan the product endorsed by them. Friedman &Friedman 1979 says that This standstrue for classic forms of celebrities such as actors like Shah Rukh Khan, models likeMilan Somen, Sports athletes like Sachin Tendullkar and entertainers like MaliakaAroraKhan but also for less obvious groups such as businessmen like the Ambani‟s orpoliticians like Rahul GandhiSchlecht 2003 say that In India especially, it is not difficult to find motives for theincreasing use if celebrities in advertisements as Indians have always been in awe ofthe stars of the celluloid world. Unlike the foreign counterparts they have alwaysconsecrated them and placed a halo behind their heads implying that their celebritiescould do no wrong. (Anonymous, 2001). Indeed, some people are seen to admire,imitate, and become besotted with their favorite celebrities,Celebrities as a form of Aspirational Reference GroupFrom a theoretical perspective, celebrities are considered to be effective endorsers asbecause of the presence of their symbolic desirable reference group alliance. Solomanand Assael, 1987Assael 1984 suggests that the effectiveness of the celebrityendorsement is present because of its ability to tap into the consumer‟s symbolic unionwith its aspirational reference groupMenon describe that Reference groups among consumers are viewed as being acritical source of brand meanings as it helps them to evaluate their believe about theworld particularly with others who share the same beliefs or are similar on relevant 55
  63. 63. dimensions. Consumers form associations between reference groups and the brandsthey use and transfer this meaning from brand to self and one 14Today celebrity endorsement is being seen more and more as an integral part in anintegrated marketing communication strategy. Hamish and Pringle (2004) suggest 3macro factors present in the market today that in principal justifies the validity ofcelebrity endorsement as a promotional strategy. The first factors the increasingopportunity for interactivity between brands and their consumers. Second is the “era ofconsent” situation present today where consumers have more control over themessages they receive. And lastly is the increasing media fragmentation andcommercial communication clutter.Temperley and Tangen, 2006 Pappas (1999) examined the value of star power in anendorsement and pointed towards how a well-designed advertising helped celebritiesconvert their star power into brand equityCelebrities are deemed to be referents by consumers, which refers to imaginary oractual individuals envisioned to have significant bearing on the consumer‟s evaluations,aspirations and behaviour. The power of the celebrities lies in these influences that theyexert on consumers, even though they themselves are physically and socially distantfrom an average consumerChoi & Rifon, 2007 said that Consumers have a tendency to form an attachment to anyobject that reinforces one‟s self identity or desired image, renders feelings ofconnectedness to a group or to any object that elicit nostalgia, and perhaps the mostvivid example of this form of attachment maybe found in the consumers preoccupationwith the celebrities. (O‟Mahony and Meenaghan, 1998). 56
  64. 64. Pros of celebrity endorsementAcademic researchers have conducted sufficient empirical research to express thebenefits of product endorsement, in addition to the intuitive arguments that rationalizethis practice.Till and Shimp, 1998 says that It is observed that the presence of arenowned persona helps in solving the problem of over communication that is becomingmore and more prevalent these daysKulkarni & Gaulankar, 2005) says that The increased consumer power overprogrammed advertisement has made advertising has made advertising morechallenging. To ease this threat and to help create and maintain consumer attention toadvertisements celebrity endorsement strategy is seen to be advantageous. Celebritieshave the potential of helping the advertisements stand out from the surrounding clutter,guiding towards a improved communicative ability by cutting through excess noise in acommunication process( Sherman 1985). Also one probable solution in the face oftarnished company image is the hiring of a celebrity to restore it. Celebrity Endorsementassists in the image polishing of the company‟s imageErdogan, 1999 in his theory says that A stream of studies identifies the attributes suchtrustworthiness, similarity, likableness, expertise that cause a celebrity to stand as apersuasive source which in turn creates a sense of certainty.(Mustafa 2005). It is shownby research and experience that consumers are highly ready to spend and morecomfortable , when products that relate to their desired image is endorsed bycelebrities. (Internet World 2001) as it helps them to take more notice of celebrityendorsements and improve their level of product recall.Bowman 2002 says that Another reason for the use of celebrity endorsement isbecause it has a strong impact on the learning style and memory which is critical tomarketing communication success. This is because most consumers are not in apurchasing situation when they come into contact with the brand message.Schultz & Barnes, 1995 Marketers make use of celebrity endorsements as they lead tobetter information storage in the minds of the consumers which can be readily retrievedwhen the purchasing situation dose arise 57