Pepsi group assignment 20110918 final

PEPSICO Group Assignment MARKETING MANAGEMENT

PRESENTED BY: Boo Siew Yong Leong Shyh Woei Basil Dass Rosalie Wong Lee Chai Hong Jonathan Leong Marketing Management Group Assignment : PEPSI CO - Performance with Purpose

PERFORMANCE WITH PURPOSE PepsiCo believes that its performance is fundamentally connected to its agenda of purpose, which represents the commitment to give back to communities as the company grows.

INTRODUCTION : Company Profile and Values ANALYSIS : SWOT PEST BCG and 5 Forces Product Life cycle Intensive and Integrative Growth Strategies Market Segmentation 4Ps RECOMMENDATIONS Marketing Management Assignments

Pepsico Vision PepsiCo's responsibility is to continually improve all aspects of the world in which we operate - environment, social, economic - creating a better tomorrow than today."

To be the world's premier consumer products company focused on convenient foods and beverages. Seek to produce financial rewards to investors Provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. Strive for honesty, fairness and integrity PepsiCo Mission

HISTORY OF PEPSI COLA In 1893 Caleb Bradham, a young pharmacist from New Bern, North Carolina, begins experimenting with many different soft drinks. In 1898, one of Caleb's formulations, known as "Brad's Drink" a combination of carbonated water, sugar, vanilla, rare oils and cola nuts, is renamed "Pepsi-Cola". On August 28, 1898, Pepsi-Cola received its first logo.

In 1902, he applied for a trademark with the U.S. Patent Office, Washington D.C., and formed the first Pepsi-Cola Company. 1905, Pepsi-Cola's first bottling franchises were established in Charlotte and Durham, North Carolina. In 1906, Pepsi gets another logo change, the third in eight years. The modified script logo is created with the slogan, "The Original Pure Food Drink". In 1920, Pepsi theme line speaks to the consumer with "Drink Pepsi-Cola, it will satisfy you". In 1923, Pepsi-Cola Company was declared bankrupt and its assets were sold to a North Carolina concern, Craven Holding Corporation, for $30,000.

FORMATION OF PEPSI COLA CORPORATION Roy C. Megargel, a Wall Street broker, bought the Pepsi trademark, business and good will from Craven Holding Corporation for $35,000, forming the Pepsi-Cola Corporation. In 1928, after five continuous losing years, Megargel reorganized his company as the National Pepsi-Cola Company. In 1931, U.S. District Court for Eastern District Virginia declared the National Pepsi-Cola Company bankrupt, the second bankruptcy in Pepsi-Cola history.

REFORMULATION OF PEPSI COLA’S SYRUP FORMULA The Loft candy company acquired the National Pepsi-Cola Company. Charles G. Guth, president of Loft, commanded the reformulation of Pepsi-Cola syrup formula. 1934 was a landmark year for Pepsi-Cola. The drink was a hit and to attract even more sales, the company began selling its 12-ounce drink for five cents (the same cost as six ounces of competitive colas). The 12-ounce bottle debuted, where it was an instant success. The cost savings proved irresistible to Depression-worn Americans and sales skyrocket nationally. In 1941, The New York Stock Exchange traded Pepsi's stock for the first time. In 1964, Diet Pepsi, America's first national diet soft drink, debuted. Pepsi-Cola acquired Mountain Dew from the Tip Corporation in 1964.

FORMATION OF PEPSI COLA INCORPORATION In 1965, Expansion outside the soft drink industry began. Frito-Lay of Dallas, Texas, and Pepsi-Cola merged, forming PepsiCo, Inc. Pepsi Cola Company operates in beverages industry. Pepsi Cola international is well reputed multinational company which is doing its business in almost every country of the world. The company is registered in New York stock exchange U.S.A. to make a better control over the business the company has given the manufacturing rights to different companies. Now these companies are producing the products on the behalf of the company by using company’s trademark. To maintain their goodwill in the market the company has a strict policy of granting manufacturing rights. Pepsi Cola have standardized products all over the world (e.g. same in size, shape and quality). The franchises have to follow all the standards given by the company.

SETUP OF PEPSI COLA The head office is situated in New York (USA) with units operating in different regions of the world. These are called Business Units and Pakistan is in MENAPak (Middle East, North America and Pakistan). The head office of MENAPak is situated in Dubai (UAE). The local head offices for each country are situated in the respective capitals.

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. Performance with Purpose

We understand that companies succeed when society succeeds, and what’s good for the world is good for business. Performance with Purpose ensures that this powerful idea is woven into everything we do at PepsiCo. But equally important, it is proving to be a driver of financial performance for their shareholders today and into the future. We continue to strike the balance between the short term and the long term through investments in acquisitions, research and development and emerging markets. Summary of Operations Year 2010 2009 Total net revenue $57,838 $43,232 34% 33% Core division operating profit(b) $10,626 $ 8,647 23% 23% Core total operating profit(c) $ 9,773 $ 7,856 24% Core earnings per share attributable to PepsiCo(d) $ 4.13 $ 3.71 12% 12%

SWOT MEN- Strength It has a very strong Top management people with fully experienced as their leadership- Strong corporate strategies Has full capacity to train the young and their work force to be well equipped Relationship with the local community is an added advantage , as they look into the development for their people as stated in their mission Human Sustainability – promise to encourage people to live a healthier life

SWOT MONEY - Strength Net revenue grew 33% , 57.9 billion on year 2010 Core division operating profit rose 23% Operating cash flow up 23% Annual dividend was raised 7% 8 billion was returned to share holder through share holder repurchases and dividend Core EPS grew 12% on a constant currency basis

Invest more in research and development for more affordable and nutritional products Reduction the use of water by recycling purification system, reuse 75% of water used in production Incorporate use 10% of polyethylene (rPET) in soft drink containers. Acquired many popular brand name product. Offered extensive variety of product lines. Different flavours were created tailor to the country they are sold in. Towards product reformulation – reduce salt, eliminate trans fat which diminish calories SWOT MATERIAL- Strength

2 nd in the world as leading distributor of carbonated drink Has the lead of more than 200 countries with a work force of more than 294000 workers Has established its brand also by social service for example the Haiti issue , India , Africa The largest player in the macro snack category Strong marketing strategies ex using famous celebrity eg Tiger Wood SWOT MARKET-Strength

Supply chain inefficiencies that affect retailers were solved too slow paced Market share was low in the soft drink industry and continued to decline Expansion to new areas was slow Lower sales of non carbonated beverages outside of North America SWOT - Weakness

The acquisition of anchor bottlers in N America and Europe, enable them to drive growth , dynamic future ,more integrated supply chain. With the use of more healthy supplements and health concern , Pepsico can look into more supplement food (Shaklee ). With the use of recycle water , Pepsico can start planning its operations in African the contigent SWOT - Opportunities

Demand for products was high as they were well recognized Consumers are leaning towards healthier foods Expand further into the international market, the opportunity for growth in developed countries is greater as per capita for consumption in the snacking industry. Consistent growth Further research in innovations to make better-for-you snacks, and to produce sweeteners that would lower the calories content in drinks SWOT - Opportunities

Declining interest in some products such as the carbonated beverages as the public is towards healthier choices New products constantly released that compete directly with Pepsi product Many of these products offer same benefit but lower price Constant competition with Coca cola and other brands pose a threat to their sales and market share SWOT - Threat

PepsiCo PEST Political PepsiCo trying to get into underdeveloped market They have to considered on government taxation policy, environmental law regulations for both side. Economic PepsiCo rely on trucks for transportation Fuel price fluctuation is one of the important aspect Economic crisis will also to labor supply and consumers’ purchasing power

PepsiCo PEST Social Population on young consumers Changes in life style Social trend and demand People want to be healthy Technology Awareness on new machine launching Advance technology automation, will effect production efficiency R & D facilities

PepsiCo Porter 5-forces Threat of new entrance Low PepsiCo is well established and have Pepsi Bottling Group have brand equity, loyal customers Need huge investment for: R&D facilities, high tech machinery Must have: Lots of market experience in the same industry. Good distribution channel

PepsiCo Porter 5-forces Threat of Substitude Not a great deal for PepsiCo Consumers preference is the taste more than the cost Not many carbonated drink having the same taste as Pepsi-Colar other than Coca-Colar Loyal customrs Bargaining Power of Buyers Not so significant eventhought low switching cost Monetary cost is not the issue Consumers preference is the taste Convenience of the vending machine

PepsiCo Porter 5-forces Bargaining Power of Supplier Low Many raw material supplier like fruit and other ingredients PepsiCo partnership with farmers & community group, ensuring quality supply For Bottling and metal can, they make use 40% share of PBG. Only problem may rely on bad harvesting season due to climate change. Another aspect is on fuel oil crisis.

PepsiCo Porter 5-forces Competitive Rivalry Within An Industry Moderate to Strong Pepsi is not no.1 in Beverage market. Pepsi still need to compete with Coca-cola. Pepsi is new in Food market. Pepsi need to compete to big players like Nestle and Craf.

Boston Consulting Group Matrix Product Life Cycle Intro Growth Maturity Decline Sales Time 1 2 3 4

1. Intro Good For You – where all the food & beverage are good for health (oats, fruit juices, nuts, yogurt) 2. Growth Better For You – where all the foods & beverages are low fat, less salt & low calories (Pepsi Diet, Isotonic Drink 3. Maturity Fun For You – where all the core foods & beverage of Pepsi Co 4. Decline Fun For You

Growth Strategy – Integrative Growth Horizontal Downstream: 1. vending Machine Upstream Pepsi Co Backward Integration Vertical (Growth opportunities) b) Horizontal (Merger & acquisition) Forward Integration Bottling Plantation Partnership with Starbucks & KFC Foods

Growth Strategic – Intensive Growth

Product Development Pepsi was develop a new product like natural fruits juice and partnership with Starbuck and Unilever Lipton to produce coffee and tea. Isotonic Drink and Mineral water

Market Penetration Sell Pepsi in current market. Introduce more A & P in existing market. Ie. Jay chou in China market. David Beckham in International market. Introduce more local favour in the local market.

Market Development Pepsi had expand their business according to different area and separate into Pepsi America, Pepsi Euro, Pepsi Asia, Pepsi Middle East and Pepsi Africa

Diversification Pepsi had change from traditional beverage industry into food industry Example: Whole Gain Fiber Based Product Vegetable

Market Segmentation Geographic Segmentation Demographic Segmentation Psychographic Segmentation Behavioral Segmentation

Geographic Segmentation Urban areas Product based : on different living culture Taste and preference : ie. herbal tea for China

Demographic Segmentation Age : 5 – 45 Gender : Male / female Family size : 1 and above Income: $500 and above Cycle : hotels, restaurants, cinema, college, schools and stalls ( young people presence ).

Psychographic Segmentation Lifestyle : believers, achievers, fulfilled, new generation Social class : lower to Middle class. Social trend : Health conscious : Diet Pepsi : conscious society, where one would drink Diet Pepsi to stay slim. Isotonic / Sport drink : Gatorade ( Sponsor Nicol David / David Beckham) Tropicana series of drinks : for orange drinker.

Behavioral Segmentation Loyalty: Strong and associate with brand icon. Occasions / functions: Birthday celebration, Sports, Regular occasions, wedding. Benefits : taste, quality

Product Mix Width Of the Product Mix Depth of the Product Lines Beverages Foods Carbonated Orange Mineral Water snack nutrition Pepsi Tropicana Aquafina Lay’s Potato chips Quaker Oats 7-up Cheetos Mountain Dew Aliva

PRODUCTS Mix ( foods & beverages ) Beverages mix: Carbonated categories: Fun for you portfolio ( Pepsi Cola, Diet Pepsi ) Non-carbonated Better-for-you and Food-for-you portfolio ( Tropicana series )

Carbonated Drinks Categories Pepsi Diet Pepsi Caffeine Free Diet Pepsi Diet Pepsi Max Jazz Diet Pepsi Diet Pepsi Lime Diet Pepsi Vanilla Pepsi Wild Cherry Diet Pepsi Wild Cherry Pepsi ONE Mountain Dew Diet Mountain Dew Mirinda Slice Aquafina Aquafina Alive Aquafina FlavorSplash Aquafina Sparkling

Non-carbonated Drinks Category Tropicana Pure Premium juices Tropicana Twister juice drinks Tropicana Smoothies Tropicana Pure Tropics juices Dole juices (License) Tropicana 100 juices Naked Juice

PRODUCTS Mix Foods mix: Snack foods Nutrition food

Products of Frito Lay Lay's potato chips Baked Tostitos tortilla chips Doritos Nacho Cheese Flat Earth

Products of Quaker Quaker Oats(In 2006)

Products of Frito PepsiCo’s snack food company, is the leader in the branded salty snack market. It manufactures : Lay’s Potato Chips Cheetos extruded snacks Uncle Chipps Aliva- Tasty Crackers and traditional namkeen snacks under the Kurkure and Lehar brands

PepsiCo Pursues : Low Price Strategy Penentration Pricing ( ref : By Emily Fredrix, AP Food Industry Writer Manufacturing.Net - October 08, 2009 )

Chief Financial Officer Richard Goodman said PepsiCo has been offering more promotions at the end of each month, when consumers' budgets become more constrained. For instance, bags of chips may be promoted at two for $5 early in the month but fall to $2 each by the end of the month. "We want to be able to make sure that at the beginning of the month or at the end of the month, they're buying our products,"

PLACING DECISIONS CHANNEL MANAGEMENT & LOGISTICS Service the right pack size at the right price, in the right place at the right time.

Direct Distribution Delivery of post mix cylinders & handling of key accounts: The key accounts are different wholesalers, restaurants and hotels like Pizza Hut, KFC, Metro which serve as a place for key sale. These are known as national key accounts and are very important in terms of competition. Export Parties

Indirect Distribution Through Base market distributors Through Outstation distributors

PROMOTION Advertising Strategy of Pepsi Pepsi’s target audience : 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.

PRODUCT POSITIONING Pepsi prefers to position itself as the beverage choice of the “New Generation”, “Generation Next”, or just as the “Pepsi Generation”. Pepsi’s advertising campaigns are referring to the markets that marketers refer to as Generation X .

Celebrity Endorsers Pepsi and its associated beverages have had various celebrity endorsers and continue to use them. Tina Turner Britney Spear Michael Jackson Spice Girls Jeniffer Lopez

Slogans :- 1939: "Twice as Much for a Nickel" 1950: "More Bounce to the Ounce" 1950: "Any Weather is Pepsi Weather" 1957: "The Light Refreshment" 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, and Pepsi's Got a Lot to Give" 1975: "Have a Pepsi Day" 1977: "Join the Pepsi People (Feeling Free)" 1980: "Catch That Pepsi Spirit" David Lucas composer 1981: "Pepsi's got your taste for life" 1983: "Pepsi Now! Take the Challenge!" 1984: "The Choice of a New Generation" 1986: "We've Got The Taste" (Commercial with Tina Turner ) 1990: "You got the right one Baby UH HUH" 1991: "Gotta Have It"/"Chill Out" 1992: "Be Young, Have Fun, Drink Pepsi" 1995: "Nothing Else is a Pepsi" 1996: "Pepsi:There's nothing official about it" (During the Wills World Cup(Cricket) held in India/Pakistan/Srilanka) 1997: "GeneratioNext"." With The Spice Girls " 1998: "Yeh Dil Mange More"(In Hindi meaning "My heart wants more") 1999: "Ask for More"/"The Joy of Pepsi-Cola" (Commercial with Britney Spears /Commercial with Mary J. Blige ) 2003: "It's the Cola"/"Dare for More" 2005: "Wild Thing"/"Ask For More" (With Jennifer Lopez ) 2006: "Why You Doggin' Me"/"Taste the one that's forever young" Commercial featuring Mary J. Blige 2007: "More Happy"/"Taste the one that's forever young" (Michael Alexander)

Publicity Pepsi-Cola’s “Save the Pepsi Generation’s Planet: a PR Strategy to Reinforce the Environmental Support System TACTICS The tactics will highlight the goal of Save the Pepsi Generation’s Planet campaign which is to redefine, reinforce, and rebuild Pepsi-Cola’s commitment in caring the environment. Media :TV, Internet, Radio, Events, Sponsorship

Youngistan Campaign “ Yeh hai Youngistaan Meri Jaan “

Recommendations: - Products decisions : add in Soya drink and Ice cream to increase their product portfolio and sales revenue Product Decision :Produce a range of Healthy, i.e. Sugar free or diet Alternatives of different brands. Promotion their products through Effecting Marketing and Advertising strategies. Improving production efficiencies through optimal outsourcing of production and integration

Recommendations: - 5. Market Positioning : The company should modify its advertising strategy and educate the customers about its age-old existence and enhance its brand image. This will appeal to the target customers of middle and older age groups apart from the younger generation in which PEPSI has a good hold. 6. Placing Strategy: Rural market being a very potential segment needs very quick and prompt efforts to be taken to capture this high volume market. 7. Pricing : Soft drink is still considered a treat virtually a luxury, so it possible company should cut down its price especially of cans. 8. PR: A company may create favorable impression among the youth if they sponsors small events like college festivals, university programs, school functions, fashion shows, quiz programs etc.

CONCLUSION As a result, market segmentation is important to companies so that firms can easily enter the market and have a potential growth. If PepsiCo does not target young population in the beginning, it is hard to occupy the market and compete with its competitor which is Coca-cola. Pepsi can continue hire popular celebrities to advertise their products in different market such as David Beckham attracts sport enthusiast and Jay Chou attracts youths where this really can boom the sales. Moreover, Pepsi can come out with as many new innovative products as they can depend on countries’ cultures. With this target, Pepsi can enter many countries’ market to gain more profits.

Pepsi group assignment 20110918 final

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Pepsi group assignment 20110918 final