PEPSICO CASE STUDY

PRESENTATION

Group Name: NEXT

GENERATION

Members:
Jeremaia Volavola – S98006250
Livai Serevi – S02000770
Michael Delanimati – S11051589
Unise Cawaru – S85010500
Presentation Outline:

 Company Overview
 Products and Services
 Marketing Mix
 Competition & Strategy
 SWOT analysis (International & Fiji)
 Problem Statement & Solutions
 Recommendations
Company Overview

 International company – offers convenient snacks, foods and

beverages
 Market >500 varieties of food & beverage products in > 200 countries
(retail sales >US$98bn)
 Growth experienced through - product development and acquisitions
 Solely a soft drink company in 1960 to being the 3rd largest food and
beverage company
 Revenues >US$39bn
 Over 185,000 employees
 Company consists of:
 PepsiCo Americas Food
 PepsiCo Americas Beverages and
 PepsiCo International
 Mission Statement “To be the world’s premium consumer products
company focused on convenience foods and beverage.”
Products and Services

 Products offered (brands)

 Markets –Geographical spread & Divisions
 Product Analysis & Information
 PepsiCo sales by Country
 Net Revenue by Division
 Beverage Product by Category
Products Offered (Brands)
 Frito Lay Brands
- snacks, potato & corn chips,
salsa and dips etc
 Pepsi-Cola brands
- carbonated drinks, water,
coffee
 Gatorade brands
– drinks for sports
professionals
 Tropicana brands
- juices
 Quaker Brands
- cereals, oatmeal bars
Markets – Geographical Spread
Markets – Geographical Spread &
Divisions

 PepsiCo products are  PepsiCo Americas

manufactured and Beverages (PAB) –
distributed by PepsiCo, its
partners and franchised includes:
bottlers.  PepsiCo Beverages Nth
America
 PepsiCo Americas  All Latin American
Food (PAF) includes: beverage businesses
 Frito-Lay Nth America
 Quaker Foods Nth America
 PepsiCo International
& all Latin America food (PI):
and snack businesses (up  UK, Europe, Asia, Middle
to Mexico) East and Africa.
Product Analysis – PepsiCo Sales by
Country

PepsiCo Sales by Country

All other countries
18%

Canada
4%

United Kingdom
6%
United States
Mexico 63%
9%

United States Mexico United Kingdom Canada All other countries

Source – Annual Report 2004

 Product Analysis – Net Revenue by
Division

Net Revenue By Disivion - 3 yr com parative Net Revenue by Division - 2007

18,000

16,000 15,798 QFNA

5%
14,000
12,959 FLNA
12,000 11,586
11,376 29%
10,844
10,322 10,230
US$m

10,000 9,565
9,146
8,000
PI
6,000 40%

4,000

2,000 1,718 1,769 1,860

-
2005 2006 2007 PBNA
26%

Frito Lay - Nth America P epsiCo Beverages - Nth Am

P epsiCo International Quaker Foods - Nth America

Source – Annual Report 2007 (p61)

 Beverage Product by Category

Category PepsiCo Product Coca-Cola Product

Soft Drinks Pepsi Coca-Cola
Diet Soft Drinks Diet Pepsi Diet Coke
Non-cola Mountain Dew Sprite
Root Beer Mug Barq’s
Ready-to-drink tea Lipton Nestea
Sports Drink Gatorade, Propel Powerade
Bottled Water Aquafina Dannon, Dasani, Evian
Orange Juice Tropicana Minute Maid
Marketing Mix-PepsiCo

 Some of PepsiCo's brand names are more

than 100-years-old, but the corporation is
relatively young.
 PepsiCo is best known for Pepsi, the world’s
second most popular soft drink after Coca-
Cola Classic.
 It is also the market leader in snack foods
and noncarbonated beverages (tea, bottles
water, chilled juices, and sports drinks).
Pricing:

 The US beverage market is mature. The

industry sales growth is largely driven by
population growth, amount of advertising
and product innovation taking place in the
industry.
 Given the mature nature of the market, both
Pepsi and Coca Cola have resorted to pricing
discrimination strategies to maximize the
value of consumer demand.
Pricing- cont’d…….

 Direct Price Discrimination –charging customers

with different prices based on their location and
purchasing power.
 E.g. - in the international operations of both Pepsi and Coca
Cola. Cola prices in Mexico, Brazil and Eastern Europe are
lower than prices in the U.S
 Domestically, direct price discrimination is based on
distribution channel segmentation.
 Restaurant fountain drinks, single drinks at gas stations and
take-home packs at supermarkets have all different prices
on a per-unit basis.
Pricing- cont’d…….

 Indirect Price Discrimination – Quantity

discounts along with price coupons used
 Brand name - the most effective indirect
price discrimination tool.
Distribution Models
Restaurants
 Various distribution models V&FS

– Direct Store Delivery

(DSD),
– Broker Warehouse
Distribution (BWD)
– and Vending & Food
Service (V&FS) system PepsiCo

 Advanced logistics systems

to manage its distribution Retailers Distributors
systems effectively, (DSD) (BWD)
Distribution Models – cont’d………

 Use of the most modern technology:

– PepsiCo and its bottlers were able to improve their
distribution and logistics management operations
significantly.
 Further improve the market penetration of its
products globally,
– PepsiCo launched two new distribution methods in the initial
years of the new millennium. These were the chilled DSD
system and the hybrid system.
Distribution Channels

 various distribution channels –

– supermarkets/retail stores, fountain/restaurant,
convenience stores, vending machines and
others for distributing beverages and snack foods.
 PepsiCo's distribution system- aimed at
making available all or most of the products
in its portfolio within a reachable distance to
their consumers.
Advertising & Promotions:

 Sports& Celebrity
 Packaging
– in cans and bottles-young consumers
(Generation Y)
 Televisions Ads
 Contributions to Charity
Customer Services:
– In all of its business dealings with suppliers, customers and
competitors, PepsiCo will:
� Compete vigorously and with integrity.
� Treat all customers and suppliers honestly, fairly and
objectively.
� Avoid any unfair or deceptive practice and always
present our services and products in an honest and
forthright manner.
� Never comment on a competitors product without a good basis
or need for such statements.
� Make clear to all suppliers that we expect them to compete
fairly and vigorously for our business, and endorse the principles in
our Code of Conducts
.
Competition – Beverage & Snacks
Food Industry

RANK COMPANIES MARKET SHARE RANK COMPANIES MARKET

SHARE % CHANGE SHARE

1 Coca-Cola 43.1 -0.9

1 PepsiCo Frito Lay 15%

2 PepsiCO Inco. 31.7 -0.1

3 Cadbury 14.5% +0.2 2 Kraft Food 12%

Schweppes

4 Cott Corp 5.5 +0.8

3 Hershey 6%
5 National 2.4 flat
Beverage
Corporation

(Source:Adapted from Beverage Digest Press Release, March 4, 2005)

Competition..

 Three major
sustainable advantages
give PepsiCo a
competitive edge as
they operate in the
global marketplace.
Competitive Strategy

 Diversification
– the chief reason for their outstanding
performance. Though started as a beverage
company, Pepsi now held No.1 position in snack
food business with its Frito-Lay division and
ranked No.3 in overall food & beverage industry.
Competitive Strategy

 Securing alliance deals with other big

corporations (Merger-like strategy)
– For example, Pepsi has closed an alliance with
Warner Brothers International Theaters and with
Major League Baseball.
Competitive Strategy

 Lowering their prices;

– it is clear that Pepsi has made several right choices. Able to
acquire market share through lower pricing compared to
Coke
 Before it entered the international market, it first
familiarized its customers with its product thoroughly
in its home base.
– By the time Pepsi was ready to enter the international
market, it had a good grasp of what its target audience
really is.
Competitive Strategy

 Mostof Pepsi’s strategies were designed to

compete with Coke.

Coke came first, and it is still the leading soft

drink brand. But Pepsi is keeping up with
Coca Cola.
SWOT ANALYSIS- International

STRENGTHS
 Outstanding Reputation.
 Broader Product line-creates synergy across the
board.
 Large free cash flow- New Acquisition
 Great brands, strong distribution, innovative
capabilities
 Global market leader in snack foods & non-
carbonated beverages.
CONT’….

 PepsiCo sells three products through the

same distribution channel.
 Huge Advertising Budget.
 Strong Marketing Intelligence.
WEAKNESSES:
 Difficult to inspire Vision and Direction for Large Global
Company.
 Non Uniform Company name for some PepsiCo products.
 PepsiCo Lags leader Coca-cola in the international market -
Highly Elastic Demand.
 Big Health Issues for Pepsi Drink - Fat and Sugar.
 Falling Behind in International Markets, namely Russia,
Venezuela, and South America.
 Health Issue in the Indian market with water - contained
pesticides.
OPPORTUNITIES

 Expanding Food Division in the international market.

 Investment into more non carbonated products in the US
market and regional.
 Innovative Customized products technology
 Concentration on healthy alternative products as per the
customers needs.
THREATS

 Bottled Water Market Faces Competition.

 Comply with International & Domestic Standards.
 Environmental concern PET Bottles
 Continuously increases in the price of crude oil and raw
materials- affects the cost of finished products
 Terrorism-Anti-American Advocates
Presence in the Pacific (FIJI)

 Pepsi drinks is distributed

byTapoos Fiji Limited
 Carbonated drinks are
bottled in Lautoka Plant-
(Eddie Hin Ltd)
 Products are handled by
distributors in the Pacific
Islands.
 Fast Food outlets-KFC&
Pizza Hut
SWOT ANALYSIS (PACIFIC MARKET)

STRENGTHS: WEAKNESSES:
-2nd in the market(30%) -lack popularity in the local
-competitive pricing (carbonated community
drinks) -more emphasis on the
-distributed by reputable distributors rather than the
organization-Tappoos products
OPPORTUNITIES: THREATS:
-potential to expand-expanding -Regulations on Imported
the Lautoka plant goods.
-to increase market share in the - Strong influential of Coca-
region.
Cola into the community
Problem Statement & Solutions-(Pacific)

“Lack of Representations in the Region”

Solutions:
 More aggressive marketing strategy
 Stronger involvement in community activities
 More cultured oriented advertisement
Recommendations:

“Stronger involvement in community

activities”
 Offer sponsorship:
– Educational (Primary-Tertiary level)
– Sports (eg: Pepsi Games instead of Coca-Cola
games-target market (tertiary students-future
income earners
– Village projects
Thank You

Questions ?
???

or a can of
Pepsi?