A Market Report On Pepsico Marketing Essay

Published Date: 23 Mar 2015

Created in 1965 in North Carolina, PepsiCo is an American beverage and food multinational corporation headquartered in New York, United States that includes 22 brands. PepsiCo has a wide range of product from beverage to snacks including Aquafina, Lays, Pepsi, Miranda, 7Up, Cheetos, Chipsy, and Doritos etc.

PepsiCo entered Indian market in 1989, grown rapidly to become one of the fastest and largest beverage and food businesses in India. This rapid growth is partly due to he withdraw of Coca-Cola of the Indian market in 1993.

MISSION, VISION & PHILOSOPHY

PepsiCo's mission is to be the world's premier consumer products company of FMCGs regarding beverages and convenient foods. By achieving this goal, PepsiCo aims also to produce pecuniary remunerations to investors by integrity, fairness and honesty.

Vision

According to PepsiCo, beget a better tomorrow by ameliorating every side of their business whether it may be economic, social or environmental. It will be achieved by environmental stewardship programs, actions and dedication to benefit society and make PepsiCo a sustainable company.

Philosophy

Every decision or business plan is solely based on the image of the socially and ecologically responsible company PepsiCo is aiming to be.

MARKET DESCRIPTION

A century ago, the world would have never expected that the syrup that cured the stomach disorders would quench the thirst of millions of people in the form of aerated beverages. The soft drinks, which we normally consume in our daily life today, were initially developed, as syrup for cure of stomach disorder problems. The syrup was inadvertently mixed with carbonated water rather than plain water. The syrup was later known as cola.

The Indian soft drinks market became a hot battle field when in 1993 Coca Cola came once again to India through venture with Parle and acquired Parle Brands which gave it access to the latter 53 odd bottling franchisers and competition grew with Pepsi holding its strong grip in Indian soft drink market. Perhaps nothing matters with the cola war, as far as the companies are providing the Indian consumers the taste for their price and the market becoming more competitive.

The global market consists of two major players; PEPSI and COCO-COLA. Both have universal brand names. They are available in almost 200 countries Pepsi products are served in more than 160 countries with more than 773 million serving every day. With the emerging middleclass and higher purchasing power, the expenditure on soft drinks is bound to increase considerably; this is possible only through intense marketing, which has led to cut-throat competition and the famous Cola wars

Approximated nutritional information (for 100ml)

Pepsi

Diet Pepsi

Energy

Kcal

44

Kcal

Proteins

grams

0

Grams

Fat

grams

0

Grams

Carbohydrate

Grams

11

Grams

Sugars(total)

Grams

11

Grams

Ingredients

Carbonated water, Natural color (150d), Acidity regulators (338), Sugar (10.6%)

Carbonated water, Preservative (211), Acidity regulators (330,331, 338), Sweeteners(950,951)

No fruits, No Artificial flavorings, No added preservative

Contains Caffeine

No fruits, No Artificial flavorings, No added sugar

Contains Caffeine and artificial sweeteners

Not recommended for children, not for Phenylketonurics

Market Description

Pepsi customers are mostly Teenagers and Young Adults between the ages of 14 to 30. It also targets at Schools, Colleges, Universities, Homes, Restaurants, Hotels, and Stores

As we know that PepsiCo provides varieties of beverages such as carbonated soft drinks, sport drinks, dairy-based drinks, energy drinks, fruit flavored beverages, ready-to-drink coffees, ready-to-drink tea, mineral water and frozen beverage. These products are marketed under brand as Pepsi, Mountain Dew, Gatorade, Lipton, Starbucks, Tropicana, and so on. With these products, PepsiCo aims to attract different groups of consumers. There are two levels in which Pepsi segments its market:

Demographic

Concentrated

Demographic

In focusing on the Pepsi-Cola beverage product, PepsiCo has retained a long history of concentrating on youth as its main target market - "Generation Next!" It has spent billions of dollars in trying to woo the young and nearly young, implying that Coca-Cola is for the older generation. The reason why Pepsi-Cola has fiercely targeted this market is because it is thelargest amongst its users. Market segment profiles have shown that the majority of carbonatedbeverage drinkers are youth and middle age people. Also, Pepsi continually targets the college market in which they spend huge amounts of money to compete with Coca Cola in acquiring contracts with universities (ie: CSUF, KFC, ) to have sold representation of their product distribution.Pepsi's use this behaviorist segmentation has been a key to the company's success

Concentrated Marketing

Despite the large customer base in the Soft Drink industry, Pepsi prefers to segment itself asthe beverage choice of the "New Generation", Generation Next, or just as the "PepsiGeneration". These terms adopted in Pepsi's advertising campaigns are what marketers refer toas Generation X, which are profiled to be between the ages of 18 to 29. In addition, Pepsishifted its focus to the growing American teenage market in the 1990s by forming exclusive contracts with American schools and developing advertising campaigns such as "The NextGeneration" and the "Joy of Pepsi", featuring Britney Spears. Pepsi believes that if they can get this market to adopt their product, they could establish a loyal customer in a long run.

Geographic

Country

India

Cities

All major cities

Density

Urban and suburban

Demographic

Age

14 -30

Gender

Male and female

Family life cycle

Young, Single, Married

Income

Strivers, Aspirers, Global Indians

Religion

Hindu, Muslim, Catholic, Parsi, Protestant, etc…

Psychographic

Social class

Working class, middle class+

Lifestyle

Achievers, strivers

Behavioral

Benefits

Convenience, quality

User rates

Occasional, light user, medium user

Competitive review

The market of cola soft drink is largely dominated by 2 leaders. Although some local manufacturers subsist and are trying to make their way in the market.

Coca-Cola: Coca-Cola is the first and mostly the unique competitor of Pepsi in the Indian market with their Coca-Cola soft drink. As PepsiCo, Coca-Cola provides many variations of their main products like diet coke, Coca-Cola Zero.

SWOT Analysis

Strengths

A very large portfolio of product

World's second soft drinks seller

Innovative products

Good global presence in Asia

Considerable number of variants

Efficient distribution channel and availability

Present in consumers mind with celebrities support and regular advertisement

Diverse product line

Weakness

Market is saturated by carbonates drinks

Coca-Cola aggressive promotions campaigns

Dependence on US markets: Despite international presence, 52 % of Pepsi's revenues is from US market

Threats

Currently, the threat of new viable competitors in the carbonated soft drink industry is not very substantial. The threat of substitutes, however, is a very real threat. The soft drink industry is very strong, but consumers are not necessarily married to it. Possible substitutes that continuously put pressure on both Pepsi and Coke include tea, coffee, juices, milk, and hot chocolate

Rivalry between Coca-Cola and PepsiCo results in a slow moving industry, moreover the constantly changing demand might drive consumers towards other soft drinks

Counterfeits products

Profit margins is thin

Intense competitions, Coca-Cola aims to invest $5 billion dollar by 2020

Regular employees strike

Health and obesity are concerns growing slowing in consumers mind who might frown upon some products

PEST Analysis

PEST analysis aims to methodically classify effects of environment as political, economic, social, and technological on an organization. Any organization can benefits from a PEST analysis to evaluate its growth

A study of the PEST analysis method and examples related to this technique is beneficial for the growth of any organization

Political

PepsiCo manufacturing and distribution processed are subject to various Indian laws by the Food, Drug and Cosmetic Act, the Occupational Safety and Health Act. Either by State or Central government

PepsiCo different businesses are subject to Indian State or Central government stability

The change of political direction might loosen or new rules and regulations

Indian government is strict regarding water pollution norms, a key ingredient into Pepsi products

Economical

Raw materials cost are increasing from harvest to collection are increasing due economic downturn

Fuel prices fluctuations impact any organization financial expectancy

Social

As non-alcoholic beverage maker, PepsiCo has to remain in line with different Indian sub-cultures and religion restrictions.

PepsiCo has been recognized as Partner of the year by USEPA (United State Environmental Protection Agency)

Advertisement has to consider social environment since Indian market is a mix of lot of sub-cultures and different religions

PepsiCo has to clearly define it targeted consumers to differentiate them from Coca-Cola drinker like in the US market where Coca-Cola drinkers differentiate themselves very clearly from Pepsi drinkers.

PepsiCo faced some serious issued in the Indian market like the massive recall due to contaminated water accusation

Technological

Social media brought a new wing to marketing department which shall not be undermined.

PepsiCo has to pay attention to technological improvement which might improves supply chain management or production processes.

Even though a PEST analysis might give relevant information about the current environment, organizations should also consider its limitations. Some of them are listed here:

External factors assessed during the analysis are dynamic, thus they are subject to change at a very fast pace.

The simple presentation of the analysis could stain of the pertinence of the data collected

Assumptions made on data collected could be unfounded due to biased interpretation.

PEST analysis focuses only on external factors, thus undermining the importance of internal factors. It is insufficient to build a strong strategic plan, it should be accompanied with SWOT analysis for instance.

CONSUMER BEHAVIOR

Before coming to the final consumer behavior when it comes to buying Pepsi, we might recall the 4 A's approach of the Indian rural market.

The Indian rural market might seem appealing with its 70 lakhs potential consumer, but it also comes with its bag of challenge like a lower income per capita, daily wage earner, bad roads, power issues, inaccessibility to habitual marketing channel etc.

Availability: Availability of product is the first challenge in order to cover the70 lakhs people spread 627,000 villages. Due to the bad state of the roads, the distance from central hubs, marketer might make some sacrifice by reaching only villages containing more than 5, 000 people. For instance, Coca-Cola supplies depot which acts as hub, which twice a week ensure full loads of smaller distributors in adjoining zones.

Affordability: The second challenge to overcome is the affordability of the product. With a daily wage and low income, products need to be affordable for the rural consumer.

Acceptability: The product should suit the rural market to be accepted by customers. Due to the lack of electricity therefore refrigerators, a thermos box can be of greater for seasonal outlet to provide cold Pepsi.

Awareness: Due the lack of proper marketing process, brand awareness is another difficulty. Even though people in rural areas haves the same like as urban consumer, they express it differently since they are not properly exposed to all brands as urban consumer. Organization must overcome this like Philips did it by using radio advertising and wall writing to increase its growth in rural areas.

MARKETING CHANNELS

The marketing channels can be defined as a group of interdependent organizations that work to make a service or a product easily available for consumption or use by final consumer or business. The choice of distribution channel is a very important decision because the chosen chain affects marketing decision considerably thus the availability of the products to the consumers.

It is a long term choice that impact on the structure of the expenses of the company also.

In the process of choosing a channel of distribution, an organization has to take into consideration the kind of product they want to make available on the market.

Channel of distribution can be divided into 4 type of channels distribution:

Channel 1: Manufacturer .......Consumers

Channel 2: Manufacturer…….Retailer.............Consumers

Channel 3: Manufacturer…….Wholesaler……Retailer…....Consumer

Channel 4: Manufacturer….....Wholesaler……Distributer……Retailer…….Consumer

As a convenience product, Pepsi need to be easily available to the consumers which will be ensured by interdependent organization. That is why PepsiCo use an indirect channel of distribution. As seen in the next figure, PepsiCo as most FMCGs companies use an intensive distribution which go through 3 level channel of distribution.

Figure PepsiCo Distribution channel

PepsiCo adopted a model which DSD (Direct Store Distribution) is direct distribution in the store. In this society to supply its products directly to the retailers who help them to save the margin, they give to the wholesalers and he also assures the quick availability of the product the retailer.

Based on the experience, PepsiCo had developed models different from Distribution to offer the products and services to customers in the store of more direct delivery; they adopted another system as BWD (warehouse of distribution BROKER).