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Profile…

Pepsi is a soft drink produced and manufactured by PepsiCo. It is sold in many places such as retail stores, restaurants, schools, cinemas and from vending machines. The drink was first made in the 1890s by pharmacist Caleb Bradham in New Bern, North Carolina. The brand was trademarked on June 16, 1903. There have been many Pepsi variants produced over the years since 1898.

PepsiCo brands are available in nearly 200 countries and territories. Many of PepsiCo's brand names are over 100-years-old, but the corporation is relatively young. PepsiCo was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay. Tropicana was acquired in 1998 and PepsiCo merged with The Quaker Oats Company, including Gatorade, in 2001.

PepsiCo (symbol: PEP) shares are traded principally on the New York Stock Exchange in the United States. The company is also listed on the Amsterdam, Chicago, Swiss and Tokyo stock exchanges. PepsiCo has consistently paid cash dividends since the corporation was founded.

PepsiCo World Headquarters is located in Purchase, New York, approximately 45 minutes from New York City.

Cont…

Revenues in 2007 is more than $39 billion.

37 bottling plants in India, of which 16 are company owned and 21 are franchisee owned.

PepsiCo’s Frito Lay snack division has 3 state of the art plants.

It has more than 185,000 employees across the world.

In India, PepsiCo provides direct employment to 4,000 people and indirect employment to 60,000 people including suppliers and distributors.

CEO : Ms. Indra K Nooyi

India Headquarters : Gurgaon.

Brand Image of Pepsi

Pepsi is a brand that every youngster relates to.

But this definitely doesn’t mean that other age groups are not it’s user’s.

Thus Pepsi’s brand image is it’s hip, cool, lively and refreshing attitude.

Advertising Strategy of Pepsi

Pepsi’s target audience are mostly teens and young adults and their advertising reflects this in every possible way.

The company changes its advertising strategy and image to reflect the target's interests.

Pepsi makes sure that the advertisements reflect to the target audience’s interests and nostalgia.

The advertising strategy includes cool, hip promos to attract more of the target audience.

The advertising is mostly creative and has different elements like music and sports other than bollywood.

Pepsi.com also plays an important role in advertising and attracts target audience by giving access to options like downloads, gaming, music mixing applications etc..

Advertising History

Pepsi has continuously focused on the current teen generation.

How Pepsi has used humor, music, sex appeal in advertising.

Ad expenditures for 2001 is $ 1,800,000,000

Slogans

1939 - “Twice as Much for a Nickel” 1950 - “More Bounce to the Ounce” 1958 - “Be Sociable, Have a Pepsi” 1961 - “Now It’s Pepsi for Those Who Think Young” 1963 - “Come Alive, You’re in the Pepsi Generation” 1967 - “(Taste that beats the others cold) Pepsi Pours It On” 1969 - “You’ve Got a Lot to Live, Pepsi’s Got a Lot to Give” 1984 - “Pepsi. The Choice of a New Generation” 1985 - “New Generation” advertising continues 1992 - “Gotta Have It” 1993 - “Be Young, Have Fun, Drink Pepsi” 1997 - “Generation Next” 2000 - “Joy of Cola”

International brands….

North American brands…

Generation Y- Market Influence

Huge market – 80 million people

Spending power – 600 million annually

Many Geb Yers do household grocery shopping

90% parents say kids influence what they buy

Many work and have their own money to spend

They have proven to be brand loyal

How to reach Generation Y

Creates promotion tailored to their needs and interests.

Gen Yers like entertainment and music

They like to laugh, but not at another's expense

To attract the teen market radio and television should be used

They are internet savvy

What does Generation Y like?

Free stuffs and discounts

Contests/drawings

Music

Club cards

Team sporting events

They are into clothes and the latest styles

Teen friendly retail stores and internet site

Pepsi and Generation Y

Pepsi targets Generation Y specifically

Current campaigns use of effective techniques

By targeting 12 to 21 year olds, Pepsi is attempting to establish a loyal; pepsi drinker for life and the largest group of soft drink consumer.

Advertising campaigns

Michael Jackson

Michael received the biggest sponsorship from the company in 1993.

In 1993 Pepsi had a “Search for Michael Jackson” campaign.

Used musical and sex appeal.

Jeff Gordon

Made a commercial with Hallie Eisenberg

Sells many Pepsi collectable merchandise.

Drove the Pepsi car in races

Hallie Eisenberg

First appeared in a Pepsi commercial in 1998 at age 5

Introduced the “Joy of Cola” campaign. Starred in commercials with Faith Hill,

KISS, and Ken Griffey Jr. Her commercials used humor.

Spice Girls

Promotional single “Move over” available only through Pepsi.

Used musical and sex appeal.

As international stars they affected many countries

Type A & B celebrities

Type A celebrity = one that is well known and well liked by their target market.

Type B celebrity = one that is known by their market

Issues

Hard to differentiate product in terms of taste as product variety is very limited within cola based beverages.

Coca-cola has such a strong base of loyal customers, who identify with the cola brand.

Consumer tastes are changing, away from carbonated drinks towards functional soft drinks. (Mintel, et al. 2009)

Competitive Aids

SWOT Analysis Porters strategies for competitive environment

SWOT analysis

Strength: Pepsi has a broader product line and outstanding reputation. Merger of Quaker Oats produced synergy across the board. Record revenues and increasing market share. Lack of capital constraints (availability of large cash flow). Great brands, strong distribution, innovative capabilities. Number of maker of snacks, such as corn chips and potato chips. PepsiCo sells three products through the same distribution channel.

Weakness: Pepsi hard to inspire vision and direction for large global company. Not all PepsiCo products bears the company name. PepsiCo is far away from leader Coca-cola in the international market –

demand is highly elastic.

Cont…

Opportunity: Food division should expand internationally. Noncarbonated drinks are the fastest-growing part of the industry. There are increasing trend towards healthy foods. Focus on most important customer trend – “Convenience”

Threats: F&B industry is mature. Pepsi is blamed for pesticide residues in their products in one of their

promising emerging market e.g. in India. PepsiCo now competes with Cadbury Schweppes, Coca-cola, and Kraft

foods (because of their broader product line) which are well-run and financially sound competitors.

Size of company will demand a varied marketing program; Social, cultural, economic, political and governmental constraints.

Porter’s 5 Force Model

Porter’s 5 forces model

The five forces model of Porter is and outside-in business unit strategy tool that is used to make an analysis of the attractiveness (value…) of an industry structure

Allows the development of a competitive strategy Suggests 5 main forces may be decisive in helping shape the outcome:

Suppliers

New entrants

Substitutes

Buyers

Industrial competitors

Cont…

Threats of new entrants

New entrants bring increased capacity to the industry and are often backed by substantial resources.

New entrants can be deterred by “barriers to entry”

Threat of new entrant

The main barriers are……. Economies of scale Patents Product differentiation Capital requirements (financial & specialist equipment) Skills Reaction/strategic decisions of incumbents (ex-all undercut new entrant) Government policy (ex-de-regulation)

The bargaining power of suppliers

Supplier exert power in the industry by threatening to raise prices or reduce quality.

Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases.

The bargaining power of suppliers

Suppliers are likely to be powerful if:

Supplier industry is dominated by a new firms.

Suppliers products have few substitutes.

Buyer is not an important input to buyers product.

Suppliers products have high switching cost.

The bargaining power of buyers

Buyers compete with the supplying industry by:

Bargaining down prices

Forcing higher quality

Playing firms off of one another

The threat of substitute products

Products with similar function limit the prices firms can charge

Keys to evaluate substitute products: Products with improving price/performance tradeoffs relative to present

industry products

The threat of substitute products…..Questions?

How many substitute products/services have appeared in your industry in the last 5 years?

What are they? How different are they? Were they introduced by your organization or others? Which organization in your industry does the most Research and

Development? What happens to price, profits and market share when substitutes are

introduced?

Rivalry among existing competitors

Intensive rivalry often plays out in the following ways: Price competition Advertising battles Increasing consumer warranties and service New product roll-outs Price competition often leaves the entire industry worse off

Porter’s 5 model – PepsiCo

Traditional competition: Prices of Coca Cola, local brands Market share Promotional actions of competition

New entrants: New “look-alike” manufacturers

Substitute products: Fashionable new drinks, milk drinks, coffee, beer, water, smoothies…

Porter’s 5 model – PepsiCo

Suppliers: Price and availability of ingredients on world market. Quality, speed, safety, traceability, flexibility of supply chain.

Buyers/consumers: High as a result of intense competition both among branded and unbranded

products. Combined purchase power of shops, bars, supermarkets

Pepsi’s Successes and Failures in Brazil and Germany

PesiCo has been operating in Brazil since 1953 “Pepsi’s heavy new investment in Brazil, which actually started early this

year, is funneled through a joint venture with Baesa, a bottler based in Buenos Aires that operates in Argentina, Chile, Costa Rica and Puerto Rico.”

PepsiCo in Germany made a smarter move by acquiring Punica, Germany’s premiere juice provider.

PepsiCo is one of the world’s largest manufacturer, seller and distributor of beverages

Pepsi has very limited brands in Germany. Their struggles in Germany include Coca-cola and a rash of suicidal

commercials for Pepsi Max that depicts a single lonely calorie committing suicide.

Marketing Products and Services

Taste testing

Television, Billboard and Print Media

Interactive/Web-based marketing

Recommendations

Adopting a Cost-Leadership Stratergy

New Product Development

Cost-Leadership Strategy

Advertising and innovative promotion.

Optimal outsourcing for production and vertical integration.

Improving production efficiencies through Kaizen.

New Product Development

Produce a range of ‘healthy’ alternatives under the brand name ‘Pepsi Fresh’.

Our suggestion would be a range of Vitamin enrinched waters under the name ‘Pepsi Fresh’

Conclusion

It can be seen then that differences do exist between Coca-Cola and Pepsi Cola.

This can be seen in the marketing variables which are the basis for segmentation such as age and geographic variables.

In a competitive market, both companies must identify and target different market segments in order to remain at the cutting edge.

Differences between the companies are evident with respect to product, pricing, place and promotion.

Coca-cola relies heavily on value: quality is more than something we see or taste. (http://www.coca-cola.com).

Pepsi, on the other hand, relies on its success resulting from superior products and high standards of performance (http://www.pepsico.com).