A Marketing Research Project on Pepsi

Pepsi Cola was first made in the 1893 by pharmacist Caleb Bradham in New Bern, North Carolina. Initially Pepsi was introduced as “Brads Drink” by Bradham in 1898 and was made at Braham’s pharmacy where the drink was also sold. Later, Bradham changed its named to Pepsi Cola, due to the enzyme pepsin and kola nuts used in the recipe. In 1903 “Pepsi-Cola” was officially registered with the U.S. Patent Office. Today Pepsi Cola is manufactured by PepsiCo. PepsiCo is a world leader in convenient snacks, foods and beverages. Currently PepsiCo is the number 2 manufacturer in soft drinks behind Coca Cola, number one in snacks and number one in juices. PepsiCo has revenues of $40 billion a year with beverages contributing to less than 50% of that revenue.

Market Segmentation

Early in its history, Pepsi understood market segmentation and the importance of having consumers to advertise to that aren’t locked into a specific product yet. Pepsi realized in the 1940s that African Americans were an untapped niche market. At the time Pepsi was able to gain market share by targeting and advertising towards African Americans which they have continued to do. Today Pepsi markets its product to younger people. The idea behind marketing towards younger people is to lock them into their product throughout their life. Pepsi realizes that their beverages will continued to be bought by customers as they get older so they are trying to build a strong customer base by marketing to 14-30 year old males and females. Pepsi markets to all social backgrounds of all educational and occupational backgrounds. Pepsi customers are loyal to their products as they can easily switch to an alternative beverage and these customers are both aware and interested in the products Pepsi has to offer.

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Market Size/Characteristics

The market size of the soft drink industry has been changing. It decreased in early 2000s, and is now increasing into the 2010s. The market has shown an increase in both sports and energy drinks. Currently, the total market value of soft drinks in the United States is $60 billion. As of 2009, Pepsi-Cola had sales of $18 billion trailing only behind Coca Cola in the United States. Soft drink consumption has a market share of 46.8% within the non-alcoholic drink industry in the United States where the total market value of soft drinks over $307.2 billion globally.

Market Share

Data from Beverage Digest’s 2008 report on Carbonated Soft Drinks has shown that PepsiCo’s U.S. market share is 31 percent while rival Coca-Cola Company’s is nearly 45 percent percent. Overall, Coca-Cola outsells Pepsi in almost all areas of the world, few exceptions. Below is a graphical representation of United States soft drink market share from 2008.

pepsico.com

Brand

Product Attributes

From the Pepsi Cola website they explain how with all of the different Pepsi products available that there is something for everyone. Pepsi’s brands are very popular not only in the United States, but all over the world and are enjoyed by everyone. The product Pepsi offers from its colas are sweet, delicious, less carbonated than its rival Coca Colas. Pepsi’s Mountain Dew product is even less carbonated than its Colas and is of very sweet tasting, marketed towards the younger populations. The Gatorade products Pepsi manufacturers are global leaders in sports drinks and provide a delicious tasting beverage with a lot of electrolytes for athletes losing fluids in a hard workout or a competition. The teas and waters manufactured by Pepsi are refreshing and a tasty alternative to the carbonated beverages.

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Product Mix

The product mix of Pepsi is one which is very wide and very deep. The width of Pepsi products come from all of the different types of products Pepsi sells which include carbonated soft drinks, waters, energy drinks, teas, juices, ready to drink coffees, and sports drinks. The depth of Pepsi Cola comes from the numerous Pepsi brands in each type of product. Pepsi has big brands in each product category. Some of the large brands in each category include:

Carbonated Soft Drinks

Pepsi, Mountain Dew, Sierra Mist

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Waters

Aquafina, Sobe

Energy Drinks

Amp, No Fear

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Teas

Lipton Brisk, Iced Tea

Juice Drinks

Dole, Ocean Spray

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Dairy-Based Drinks

Sobe

Ready to Drink Coffees

Starbucks

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Sports Drinks

Gatorade, G2

Pepsi-Cola is leading selling beverage for Pepsi in North America and the world. Mountain Dew contributes greatly to Pepsi’s sales and has a large presence in the North American soft drink market. Below is a graphical representation of the Pepsi-Cola North American Product Mix.

pepsico.com

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Product Strategy

The strategy of Pepsi can be taken right from a quote off of the Pepsi website which reads: “Pepsi is constantly on the lookout for ways to ensure their consumers get the products they want, when they want them and where they want them.” From this quote one can easily recognize that it is important to Pepsi to produce good tasting products that are distributed all over and easy to purchase. Pepsi and its products can be seen everywhere and this is important to them as they have so many different products. Pepsi has products that are alternatives for each other and this allows them to have such a great presence in the soft drink market and have large percentages in the market share.

Product Life Cycle

Product life cycle is the stages a product goes through from its introduction, to growth, its maturity, and then its decline. The Pepsi Company, although it has a lot of mature product in its colas and other soft drinks, it still has some growth. A lot of the growth of Pepsi is due to the newly popular energy drinks which it produces and the sports drinks. The new products Pepsi is producing each year give me reason to believe it is not quite at maturity, but is at the top of the grown stage in its product life cycle. This diagram helps illustrate where Pepsi currently is in its life cycle.

Product Development and Innovation

The Pepsi Company website writes, “The Pepsi Company continues to innovate, creating new products, new flavors and new packages in varying shapes and sizes to meet the growing demand for convenience and healthier choices.” The way Pepsi develops products and innovates is by offering new different tasting beverages. Pepsi has come out with numerous different soft drinks, and has added many other products to their product mix. Other types of beverages including energy drinks, juices, and sports drinks are ways in which Pepsi has been innovative and the different flavors it comes out with ever year’s shows the development of Pepsi.

Pepsi’s latest innovation is adding three new products which are considered to be a “throwback” to the 1960s and 1970s. Pepsi Natural, Pepsi Throwback, and Mountain Dew Throwback will all be sold with these older logos and are all sweetened with natural sugar. These recipes date back to the 1960s and 197s and will be able to be purchased this month.

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Pricing

The United States carbonated soft drink market is a mature market where the industry sales growth is largely driven by population growth and advertising. Product innovation is also taking place in the industry and is an important aspect of pricing in the market. Since there is a mature nature of the market both Pepsi and Coca Cola have resorted to price discrimination strategies to maximize the value of consumer demand. Price discrimination means that there will be different prices for the product in the different regions it is being sold. Pepsi, Coke or other soft drinks have similar prices and the price will vary slightly from place to place and depending on which packaging it is sold in.

Distribution

On February 26, 2010 the Pepsi Beverages Company (PBC) was formed when PepsiCo bought both of its largest distributors in the world. The Pepsi Beverages Company is made up of the Pepsi Bottling Group which world’s largest bottler of Pepsi-Cola beverages. The Pepsi Bottling Group’s sales of Pepsi-Cola beverages accounted for more than one-half of the Pepsi-Cola beverages sold in North America. Pepsi Beverages Company is also made up of the former PepsiAmericas Company which was world’s second-largest bottler of Pepsi-Cola beverages and had19 bottling plants in the United States and had a presence in 16 other countries. PepsiCo and Pepsi-Cola now has much control over its bottling companies and the distribution of Pepsi Cola products. Pepsi products are distributed to stores all over, from small grocery marts to larger bulk warehouse stores, and through fountain drinks.

Packaging

In the United States Pepsi products are sold in plastic bottles and cans as well as dispensed through a fountain. The cans are packaged in 6 packs, 12 packs and cases of 24, 36 and 360. Pepsi also has bottles come in 1, 1.5, 2, and 3 liters. Energy drinks first sold in eight-ounce cans in the United States, but now are sold in similarly sized cans to the other soft drinks. The Pepsi packaging has been simple, containing a blue color, differing itself from the Coca Cola red. Pepsi’s packaging has not changed much until it’s new look in 2009 which it changed its logo and packaging in an attempt to distinguish itself and promote itself from the other colas as a cultural leader.

Advertising Strategy

Recently, cutting back on television

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Shifting to social media

Website, Twitter, Facebook

2010: First time in 23 years without Superbowl Ad

Younger generation

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Pop stars

Movie stars

Promotion

Pepsi Challenge: Pepsi vs. Coke

Pepsi Stuff: merchandise purchased with Pepsi Points

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Pepsi Refresh Project

Pepsi brand is dedicating $20 million dollars a year

Donations to local organizations

Causes proposed by the public in health, arts and culture, the environment and education

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Competitive Products

Coca-Cola and Pepsi are the two most popular and widely recognized beverage brands in the world

Pepsi-Cola and Coca-Cola Classic are the predominant carbonated cola beverages

Coca-Cola is the original

Pepsi tastes sweeter than Coca-Cola

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Coca-Cola has more carbonation than Pepsi depending on what region you are in

Said that depending on where each one was made the amount of carbonation in them will be different, proving that neither Coca-Cola nor Pepsi have more carbonation than one another

Both drinks are no longer seen as a beverage but mainly as a brand

Both companies commit to sponsoring festivals and charitable projects in third world countries

Marketing Approach

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Both Coca-Cola and Pepsi market as part of a life-style

Pepsi tries to reach out to the younger generation by appealing to pop culture

Pepsi’s Website: flashy pages containing social media links

Coca-Cola’s website: less flashy and uses a classical appeal, promoting history of beverage

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