Pepsi Marketing Plan

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Introduction

The US soft drink market size was valued at about 101 billion U.S dollars in 2016 as compared to about 93.5 billion U.S. dollars in 2012 (FMCG Statistics, 2016). Soft drinks have been the favorite beverage for the Americans for decades. The United States is the second largest consumer of soft drinks after Argentina, with only a marginal difference in the volume consumption. The increase in the retail sales in U.S. dollars in the soft drinks industry has been greatly supported by the price increase but the volume sales have gradually decreased in the last decade. One of the biggest reasons for this shift in the soft drink industry has come from the availability of bottled water, cheaper alternatives such as tetra-packs of juice, flavored milk, the introduction of sports, energy and health drinks which imposes a great challenge to the soft drink industry. The market has also turned into a red ocean with an amazing increase in the competition in the US beverage market. One of the brands that have had a great influence of this market shift is the forerunner Pepsi brand. This report will conduct an evaluation and analysis of the marketing strategy of PepsiCo and provide recommendations to combat the declining sales and increasing competition to recapture its market.

Company Background

PepsiCo, Inc. is an American multinational food, snack, and beverage corporation headquartered in New York. It was formed in 1965 with the merger of the Pepsi-Cola Company and Frito-Lay, Inc. PepsiCo has since expanded from its namesake product Pepsi to a broader range of food and beverage brands (Wikipedia). The recipe for the soft drink Pepsi was first developed by pharmacist and industrialist Caleb D. Bradham and was named as Pepsi Cola in 1898. He created The Pepsi-Cola Company in 1902 and registered the patent for the soft drink in 1903. After filing for bankruptcy in mid of 1931, the trademark recipe was purchased by Charles Guth, who owned a syrup manufacturing business, later became the founder of the modern Pepsi-Cola. In early 60’s, Pepsi-Cola’s product line expanded with the introduction of Diet Pepsi and also the purchase of Mountain Dew. It was in early 1965 when the Pepsi-Cola company merged with Frito-Lay, Inc. and thereafter, launched many new successful marketing campaigns. In 1975, Pepsi’s most successful marketing campaign was launched in Texas, The Pepsi Challenge, which directly competed with its rival Coca-Cola Company. In the last few decades, Pepsi launched its diet, caffeine free, zero calories, sugarless and flavored Pepsi soda’s and with successful advertising and marketing campaigns and its positive brand image, it has distinguished itself from other snacks and beverage companies to become one of the leading companies in the industry. Currently, PepsiCo owns Frito Lay, Gatorade, Tropicana, Quaker Oats and its popular brands include Diet Pepsi, 7Up, Mountain Dew, Lipton Iced Tea, Mirinda, Lays/Doritos.

Current Situation

Consumers around the world are increasingly getting aware and conscious about the nutritional quality of the foods and drinks they consume. Carbonated soft drinks contain a high level of carbohydrates, sugar, carbonated water and acids, sodium, potassium that not only could be harmful to the human body if consumed on a regular basis but are one of the major reasons for obesity. This awareness has become the major problem for many companies in the soda industry to meet the healthier requirement of millennial and sustain with their traditional or old product and business models. According to data from Beverage Digest, per capita consumption of carbonated soft drinks in the U.S. fell to its lowest level in 30 years in 2016. Also, the soft drink industry as a whole is slowly reaching to a turmoil where healthier sports and energy drinks are becoming favorable over the soft drinks. These situations have brought PepsiCo in a dilemma on how to regain a stronghold on the market as well as meet customer requirement with healthier drinks.

External Analysis

PESTEL:

Porter’s Five Model on Soft drink Industry:

1. Rivalry among Existing Competitors (Very High):- Soft drink Industry is a huge market with competition and diversification from big brands like Coca-Cola, Nestle, and Kraft. The industry is predominated by these brands including Pepsi so they have the potential to bring new products to the market.

1. The threat of New Entrants (Low):- Only the above companies hold the market share and are dominating. There are some local brands but with a target local market only.

1. Bargaining Power of Buyers (Very High):- Large variety of products in the market with highly competitive prices ensures the customer to enjoy a high bargaining power. They can easily make a switch to another brand if not satisfied.

1. Bargaining Power of Suppliers (Low):- Highly dependent on the availability of raw materials but the supplier pool is large. Also, no supplier would want to lose Pepsi as their client so Pepsi has the upper hand in the bargaining powers.

1. The threat of Substitute (Very High): It takes no time in innovation and products offerings. There are already enough substitutes such as health and sports drinks, which may pose a threat of substituting the soft drink market.

Internal Analysis 

Strengths:

 Pepsi is recognized for its brand name with one of the largest brand awareness and publicity in the world. It makes it easier for the company to market its products to the target customers in the US and globally. All the products that Pepsi offers generate huge revenues and all the brands that Pepsi owns are well renowned globally. This gives the company a leverage to introduce new products, build a customer loyalty and trust and attract new untapped customer market as well. With the right product and right marketing strategy, a marketing plan shall not fail.