Pepsi Cola beverage business was founded at turn of the century by Caleb Bradham, a New Bern druggist who formulated Pepsi Cola. Pepsi Cola Company now produces and markets nearly 200 refreshment beverages to retail, restaurants and food service customers in more then 190 countries and territories around the world and generates revenue of over 18 billion dollars.
Although Pepsi holdings over the years have become diverse in such fields as the snack industry and restaurants industry this portfolio will discuss its core business and its highly successful business of beverages.
The soft drink industry customer base is probably the widest and deepest base in a world that is flooded with some many categories. According to Beverage Digest, the customer base for soft drinks is a whopping 95% of regular users in the United States. This represents a large field of potential customers for Pepsi Cola. Yet although Pepsi could just use the majority fallacy to market there product, Pepsi prefers to segment itself as the beverage choice of the New Generation, Generation Next, or just as the ‘Pepsi Generation’. These terms adopted in Pepsi’s advertising campaigns are referring to the markets that marketers refer to as Generation X. The Generation X consumer is profiled to be between the ages of 18 to 29. They have high expectations in life and are very mobile and active. They adopt a lifestyle of living for today and not worrying about long-term goals. Those Pepsi’s main emphasis on this segment they also have a focus on the 12 to 18 year old market. Pepsi believes if they can get this market to adopt their product then they could establish a loyal customer for life.
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Pepsi Cola is situated in an industry that is dominated by two competitors, Coca-Cola and of course themselves. Although Pepsi and Coke basically go after all consumers who purchase soft drink beverages Coca-Cola targets its products at the head of household. This is evident in many of the ad campaigns such as ‘Always Coca – Cola’, which refers to the traditional beverage heritage of its product. They also reinforce this in the name ‘Coca-Cola Classic which is inferring to the older consumer. This name reflects an image of value, reliability, and old time values. PepsiCola throughout its 100 years of existence has developed much strength. One of the strengths that have developed pepsi into such a large corporation is a strong franchise system. The strong franchise system was the backbone of success along with a great entrepreneur spirit. Pepsi’s franchise system and distributors is credited for bring Pepsi from a 7,968 gallons of soda sold in 1903 to nearly 5 billion gallons in the year of 1997.
Pepsi also has the luxury to spend 225 million dollars in advertising a year. This enormous ad budget allows Pepsi to reinforce their products with reminder advertising and promotions. This large budget also allows Pepsi to introduce new products and very quickly make the consumer become aware of their new products. Pepsi also has had the good fortune of making very wise investments. Some of the best investments have been in their acquiring several large fast food restaurants. They have also made wise investments in snack food companies like Frito Lay, which at present time is the largest snack company in the world. Probably, high on the list of strengths is Pepsi’s beverage line up.
Pepsi has four soft drinks in the top ten beverages in the world. These brands are Pepsi, Mountain Dew, Diet Pepsi, and Caffeine Free Diet Pepsi. Pepsi also has die and tea in the United States, Lipton Tea. Some other strong brands. All Sport, Slice, Tropicana, Starbucks, Aquafina and a agreement with Ocean Spray juices. Pepsi Cola any company has weaknesses. Ironically, the one strength that has been credited for most of its success in Past has now become a weakness for Pepsi. This former
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Strength is the franchise system, the franchise system in Pepsi Corporate view has become a liability. Pepsi in today’s market must be able to act as one instead of several separate units. The franchise system has become a hurdle to Pepsi because many of these franchises have become very strong and will not be dictated by PepsiCo on how to handle their operations. Some of these franchises are unwilling to support certain Pepsi products and at times produce their own private label products that are in direct competition with Pepsi products. Secondly the franchisees are not willing to make capital expenditures to keep up with Coca-Cola who is a firm believer in reinvesting into their infrastructure. Another weakness that Pepsi is inferior is in the fountain soft drink division.
This has always been a problem for Pepsi because of their ownership in fast food restaurants. Coca Cola has for years been in the top locations for fountain beverages because they simply tell the account Pepsi is their competition because of their ownership in Taco Bell, Pizza Hut, KFC, and many others. As mentioned earlier Pepsi has tried to elevate this problem by spinning off their interest in fast food restaurants but at present time are still guilty by association to many of the large fountain accounts. The franchise system has also effected fountain sales due to the fact franchisees are not willing to buy) expensive fountain equipment mainly because the margin is so low and could take years to recoup investment. Pepsi also has a weakness in the international beverage market.
Pepsi customers buy nearly five billion gallons of soft drinks per year. Pepsi customers buy their products because of taste, price, packaging, promotional factors and of a wide variety of brands. Pepsi customers also buy their products due to the high accessibility of Pepsi brands. Pepsi products are distributed to many outlets. For example, supermarkets where Pepsi buys large shelf area and display areas so the customer can find them easier, Convenience stores, gas stations, restaurants, movie theatres and almost and other conceivable spot. Pepsi has a competitive advantage over Coke because of the image it portrays. Pepsi promotes itself as the choice of the ‘New Generation’. Pepsi gets this advantage by implementing such large marketing projects like ‘Project Globe’.
This marketing plan, which Pepsi spent 637 million dollars over five years, is to introduce the new rich deep blue colouring of its packaging. The rich deep blue colouring represents eternal youthfulness and openness. Marketing plans like this made Pepsi one of the coolest brands recognized among teens in the top five and the only beverage product in this category. Another competitive advantage that Pepsi has is in their product is Mountain Dew.
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Pepsi must be concerned of changing taste of the consumer and be able to respond to that need immediately or there is a risk of losing market share.