was found in 1965 through the merger of Pepsi Co and Frito-Lay, the world’s largest manufacturer and distributor of snack chips. In 1998, it acquired Tropicana, the world’s largest marketer and producer of branded juices. In addition to the main body of 3 companies, the Pepsi-Cola Incorporation also owns four well-known fast food restaurants in the world; they are Pizza Hut, Taco Bell, KFC, and Burger King. Furthermore, with its 4 fast food restaurants, PepsiCo Inc. owns 24,000 restaurants, more than McDonald’s 14,000. Based on PepsiCo Inc.’s annual report in year 2000, PepsiCo Inc. has total net sales of 20.438 billion US dollars and they are worth 44 billion dollars in stock value right now.
There are several reasons why the world’s second largest soft-drink company, the PepsiCo Inc., is very successful in the world and almost exceed the current market leader in soft drink industry, Coca-Cola. These reasons are taste, investment, management policy, and marketing strategy. In this report, we will put our main focus on marketing strategies and more details analysis, such as 4Ps (product, price, place, promotion), SWOT analysis (strength, weakness, opportunity, threaten), Marketing Environment (economic, technological, cultural, social, and competitor), advertising, and target market, etc.
First element of 4Ps is product. With more and more customers’ unique needs, besides its regular Pepsi, it adds regular caffeine-free Pepsi, Diet Pepsi, Diet Caffeine-free Pepsi, Wild Cherry Pepsi, and Diet Wild Cherry Pepsi into its product lines. Its Diet Pepsi is even the first of its kind in Cola market.
For the price, based on the laws of demand and supply, price plays a very important role in customers’ initial purchase. In addition, psychologically speaking, customers’ have such mentality to judge a product’s quality by its price. Therefore, Pepsi has to determine its price very carefully. If the products are wrongly priced, either damage to its reputation on quality or lost of sale due to high price will be resulted. However, Pepsi seems to do fine at the moment. Based on their corporate pricing policy, providing quality products at lowest possible price has always been one of their main concerns. For example, in some parts of the country, a 2-liter bottle of Pepsi costs 99 cents a decade ago and still does today.
As for the place, it has to get the right target market and has to be available when customers need. Pepsi has done a great work on the place, because their channels of distribution certainly provide their products at any market in the American very successfully.
Last and the most important element of 4 Ps is promotion. It is so important because how they promote their products will affect how successful their message will be delivered to their target audiences. In 1963, they created a new product policy that is called “The Pepsi of new generation”. They focus on customer’s needs and wants. Also, they try to make people memorize their product. Lots of soft drink customers do not have so-called royalty toward certain brand. Such issue was well noted by PepsiCo Inc. and decides to change customers’ buying habit. During that time, “The Pepsi of new generation” is a very successful campaign until 1988. After that, they have changed the marketing scheme to “The Choice of a New Generation” and still using the same process today. Right now, Pepsi has a special campaign called “The Pepsi Challenge” that gets a lot of attention from people and offers a good opportunity for Pepsi to earn more profit. In 1974, this promotion also works very well in Kansas. Advertisement is another promotion; they usually focus on the teenager. From Electric Youth to Generation next, Pepsi has had its finger on the youth pulse of every decade. In their advertisings and target markets, they always use idols to catch teenagers’ attention. For example, in 1984 to 1999, they use Michael Jackson and Ray Charles etc. to be Pepsi’s spokespersons. In 2001, they have signed a 100-million-dollars contract with Britney Spears to be Pepsi’s next spokesperson.
The SWOT analysis is another important concept in the marketing. The strength of the Pepsi is his strong, well-recognized brands. Pepsi-Cola owns many of the world’s best-loved consumers brands, especially in North America. According to annual report, the percentage of the total sales volume is 45% in North America’s market.
For many years, Coca-Cola still has a great position in the American. As a result, if Pepsi-Cola wants to replace the number one position that is a very hard task, and also a big weakness for Pepsi-Cola. Even though PepsiCo has better total sales than Coca Cola (20.4 billion vs. 16.2 billion), however, the market value of the whole company is just about half of Coca Cola (44 billion vs. 93 billion). The main reason is that PepsiCo has its foot into fast food market. Furthermore, the profit margin they make is not even one third of current market leader in fast food industry-McDonald (4% vs. 15%).
Pepsi-Cola has launched a campaign called “The Pepsi Challenge” that gives Pepsi-Cola a good opportunity, because they might get more customers to accept the products and gain the sales revenue for Pepsi-Cola.
Because there are a lot of competitors in the soft-drink industry, these competitors often introduce new tastes from time to time and customers have the tendency of trying new tastes while PepsiCo Inc has limited product lines in soft drink despite the fact that they have already have juices, root bear, ice teas, etc. Needless to say, this is a very big threaten to the Pepsi-Cola.
The economic environment can affect Pepsi-Cola very significantly. If we have bad economic situation, people will watch their own packet more carefully and, in turn, the sales revenue is the first thing to suffer. Although such impact might not be very severe to PepsiCo because Cola can be seen as a daily necessity in American, yet, they still have to keep close watch.
The 270 million people in America consume about 28 million cases of Pepsi Cola annually. In American culture, and its social environment, Pepsi-Cola doesn’t need to have a significant change since Pepsi-Cola is a very traditional favor. As a result, Pepsi-Cola Company should focus on two main things- get people’s attention and create the “Need”.
Our technology environment is growing very fast and so does Pepsi-Cola in its technology to operate their products. Pepsi Company always builds their products at highest quality and catches up with the new technology. Pepsi can always be people’s favorite; because Pepsi Company always adapts whatever new technology is available in the market today.
In competitor environment, we know that Pepsi-Cola Company face three main competitors: Coca-Cola, Quaker Oats, and Cadbury Schweppes. As stated by the President of Pepsi “in the Cola War, there is never a winner. It is not important whether you win or lose; the more important is that to have fun in the Cola War”.
Although my information might not be sufficient, there are still many different types of information customers could research by themselves. Consumers can also compare information about different or competing companies more easily because information is literally at their fingertips. Consumers don't have to deal directly with or influenced by sales people to make their decision of purchases. Companies can also stay in touch with their customers and suppliers by creating web pages and setting up Internet addresses to receive e-mail from customers worldwide.
Basic Marketing: A Global-Managerial Approach, 13th edition Irwin McGraw-Hill, 1999
Gornstein, Leslie. "On-line Marketers Targeting Kids." San Diego Union-Tribune, July 2, 1996, Page 4.
Pepsi Co. Incorporation Annual Report 1997-1999