The Effects of recession on PepsiCo

The Effects of recession on PepsiCo In the recession time period you can consider to all companies in recline stage even some companies are gaining profit and their profits are also infected by the overall recession. Here I am going to do start my work on PepsiCo, its sale is infected by the competitors. Specially Coca Cola broken its sale and demand in the market. Cola Colas best strategy that they introduced some new products in the market with modern marketing techniques and its the reason that Pepsis demand fell down and people intend to buy Coca Colas products most frequently. Pepsis maximum products are not frequently available at all regions. Why marketing plan is necessary? It is necessary because, boost your business and cover different issues with respect to service , branding, and product line. Market plan use for both businesses who are already exists in the market and a new business that is going to start. Marketing planning can be contains one year tenure or sometime it takes 5 years time period. Variety of actions are included in the marketing plan so every action takes much time to cover all the issues, for example situation analysis, SWOT analysis, marketing objectives and issues, marketing strategy, action items, financial budgets and forecasts, controls etc. Marketing strategy is the base of a well written plan. In this Essay I am going to discuss on PepsiCos marketing plan specially what methods and actions can boost up PepsiCo products while its competitor Coca Cola selling products frequently in the market and its marketing technique is more powerful rather than PepsiCo. In short the main purpose of marketing plan is boost your companies sale, create a centre of attention to new customers and maintain old customers using the latest marketing trends. There are several declining products in the market. Marketing is a big factor in the promotion of any product. I have seen an example in Pakistan there one company was advertised on television before to launch their product in the market. Infact that was advertisement of milk, a blank white paper box was in the advertisement and it was showing that something is coming. After few days they played their final advertisement with the proper product name and finally they launched their product in the market. There are already running milk products like Nestle, Haleeb but this new product was Olpers tetra pack milk. In short its very difficult to launch a new product in the market if you have not advertise through any media. The first benefit of advertised product is that people demand product by itself and stockers and suppliers providing products on public demand rather than a non advertised product difficult to sale and shopkeepers and customers are not easily agree to buy that product, a lot of effort is require to sale new product in the market without advertisement. History of PepsiCo In 1883 Pepsi was introduced by Caleb Braham. Pepsis first name when it was launched Brads Drink in New Bern, North Carolina. Caleb Braham who made Pepsi at his pharmacy where the drink was sold. Later Brads Drink changed into Pepsi Cola. The digestive enzyme pepsin and kola nuts used in the recipe. Celeb Braham sought to create a fountain drink that was delicious and would aid in digestion and boost energy. Pepsi was launched after Coca Cola or coke. It was cheaper than Coca Cola when it was launched initially, at that it was popular as poor mans cola. After that Pepsi was taken a good marketing strategy that in the advertisement Pepsi employed to celebrities. First celebrity was Barney Oldfield, the pioneer for automobile racing. Sodas are most frequently used items. Mostly sodas are delicious, they stand between liquor and juice. Those who are too young to drink beer but think fruit juice is too juvenile can order sodas. Those too old and are putting their health at risk by drinking hard drinks can enjoy soft drinks and no one would think any less of them. Sodas have a mass appeal therefore people most demand it, especially in the summer season when you feel thrust often people demand cold soda for kill thrust. In 1903, Bradham moved the bottling of Pepsi-Cola from his drugstore to a rented warehouse. That year, Bradham sold 7,968 gallons of  syrup. The next year, Pepsi was sold in six-ounce bottles, and sales increased to 19,848 gallons. In 1909, automobile race pioneer  Barney Oldfield  was the first celebrity to endorse Pepsi-Cola, describing it as A bully drinkrefreshing, invigorating, a fine bracer before a race. The advertising theme Delicious and Healthful was then used over the next two decades. In 1926, Pepsi received its first logo redesign since the original design of 1905. In 1929, the logo was changed again. In 1931, at the depth of the  Great Depression, the Pepsi-Cola Company entered bankruptcy in large part due to financial losses incurred by speculating on wildly fluctuating sugar prices as a result of  World War I. Assets were sold and Roy C. Megargel bought the Pepsi trademark. Eight years later, the company went bankrupt again. Pepsis assets were then purchased by  Charles Guth, the President of Loft Inc. Loft was a candy manufacturer with retail stores that contained soda fountains. He sought to replace  Coca-Cola  at his stores fountains after Coke refused to give him a discount on syrup. Guth then had Lofts chemists reformulate the Pepsi-Cola syrup formula. On three separate occasions between 1922 and 1933, the Coca-Cola Company was offered the opportunity to purchase the Pepsi-Cola company and it declined on each occasion. In 1965, Pepsi employed another marketing strategy which was company expansion. They merged with Frito-Lay, the most popular snack brand in the world. PepsiCo was formed. Pepsi took care of the beverages while Frito-lay manned the snacks. In 1966, PepsiCo settled into the Eastern European and Japanese markets. They also introduced new products; Diet Pepsi and Mountain Dew. Here below I am showing the most popular brands that are available at different location of the world. Pepsis Most popular products and brands: (Something for everyone) Question 1: Produce a Marketing Plan Write a marketing plan for the declining product you have analyzed using an appropriate framework. Situation Analysis Company Analysis Company gaining profit day by day. It is the second most demanded soda drink company in the whole world. Pepsi launched some new products in the market and increased its sale and annual profit. Problem is there, people are not fully aware about new products and new products are not present in all locations therefore there is need to provide new products on all locations. Especially in Asian countries like Pakistan and India all products of PepsiCo are not available. Company Goal: Ensure high levels of associate engagement and satisfaction compared with other Fortune 500 companies. Foster diversity and inclusion by developing a workforce that reflects local communities. Encourage our associates to lead healthier lives by offering workplace wellness programs globally. Ensure a safe workplace by continuing to reduce lost time injury rates, while striving to improve other occupational health and safety metrics through best practices. Support ethical and legal compliance through annual training in our code of conduct, which outlines PepsiCos unwavering commitment to its human rights policy, including treating every associate with dignity and respect. Pepsi Culture: We have a fundamental belief that people hold the key to PepsiCos success. We are known as an academy company, a place where people grow and business leaders develop. Strengths: Pepsi has a broader product line and outstanding reputation. Merger of Quaker Oats produced synergy across the board. Record revenues and increasing market share. Lack of capital constraints (availability of large free cash flow). Great brands, strong distribution, innovative capabilities. Number one maker of snacks, such as corn chips and potato chips. PepsiCo sells three products through the same distribution channel.   For example, combining the production capabilities of Pepsi, Gatorade and Tropicana is a big opportunity to reduce costs, improve efficiency and smooth out the impact of seasonal fluctuations in demand for particular product. Weaknesses: Pepsi hard to inspire vision and direction for large global company. Not all PepsiCo products bear the company name. PepsiCo is far away from leader Coca-cola in the international market demand is highly elastic. Customer Analysis: Pepsi covered a huge market, proximately more than 80 million people are involved in buying their products. Pepsi spending power is proximately $600 million annually. 90 percent parents say kids influence what they buy. Many work and have their own money to spend. They have proven to be brand loyal. Mostly 12 to 21 years people are in target market. How to reach Generation Y ? Creates promotions tailored to youngster needs and interests. Gen Yers like entertainment and music. They like to laugh, but not at anothers expense. To attract the teen market radio and television should be used. They are internet savvy. What does generation Y like? Free stuff and discounts. Contests and Drawings. Club cards. Music. Team sporting events. They are into clothes and the latest styles. Teen friendly retail stores and internet site. Pepsi and Generation Y: Pepsi targets generation Y specifically. Current campaigns use effective techniques. By targeting 12 to 21 years olds, Pepsi is attempting to establish loyal Pepsi drinker for life and the largest group of soft drink consumers. Past Advertising Campaigns: Michael Jackson received the biggest sponsorship from a company in 1983. In 1993 Pepsi had a search for Michael Jackson campaign. Used musical and sex appeal. Jeff Gordon made a commercial with Hallie Eisenberg. Sells many Pepsi collectable merchandise. Drove the Pepsi car in races. Hallie Eisenberg First appeared in a Pepsi commercial in 1998 at stage 5. Introduced the Joy of Cola campaign. Starred in commercials with Faith Hill, Kiss, and Ken Griffey Jr. Her commercials used humour. Spice Girls Promotional single Move Over available only through Pepsi. Used musical and sex appeal. As international stars they affected many countries. Britany Spears February 6, 2001 Britny signed a contract with Pepsi (between $40 and $100 million). The campaign includes: 2 television commercials. Billboards. Magazines. Point of purchase. Pepsi holds a co-sponsorship of her upcoming worldwide tour. Wyclef Jean and Pepsi: A more targeted market within Gen Y: inner city urban trendsetters (12 to 21 years old). The Campaign includes: 2 TV commercials featuring Wyclef. (1st commercial premiered April 16th, 2001). Print ads. Radio promotions. Sports and fashion tie.ins. Sampling. Pepsi is Wyclefs sponsor for his 2001 tour. Pepsi challenge. Type A and Type B Celebrities: Type A celebrity = one that is well known and well liked by their target market. Example ( Britney Spears and Michael Jackson) Type B Celebrity = one that is known by their target market. Example: Bob Dole and Hallie Eisenburg Music: Music is part of brand equity. Ongoing theme and easily associated with current generation of 12 to 21 year olds. Humor: Use of humorous celebrities. Put music celebrities into situation not normally seen. Sex appeal: Sex appeal is not only an attention getter with the current generation, but is also becoming more socially acceptable in the advertising directed toward them. Competitor Analysis: Market Position Coca Cola is number one cola product in all over the world. Coca Colas marketing strategy is most powerful and effective. Maximum market coverage has been done by Coca Cola. Its the result that its annual sale and profit is more than PepsiCo. Strengths Coca-Cola has strong brand recognition across the globe. The company has a leading brand value and a strong brand portfolio. Business-Week and Interbrand, a branding consultancy, recognize. Coca-Cola as one of the leading brands in their top 100 global brands ranking in 2006.The Business Week-Interbrand valued Coca-Cola at $67,000 million in 2006. Coca-Cola ranks well ahead of its close competitor Pepsi which has a ranking of 22 having a brand value of $12,690 million Furthermore, Coca-Cola owns a large portfolio of product brands. The company owns four of the top five soft drink brands in the world: Coca-Cola, Diet Coke, Sprite and Fanta. Strong brands allow the company to introduce brand extensions such as Vanilla Coke, Cherry Coke and Coke with Lemon. Over the years, the company has made large investments in brand promotions. Consequently, Coca-cola is one of the best recognized global brands. The companys strong brand value facilitates customer recall and allows Coca-Cola to pene trate new markets and consolidate existing ones. Weakness Negative publicity: The company received negative publicity in India during September 2006.The company was accused by the Center for Science and Environment (CSE) of selling products containing pesticide residues. Coca-Cola products sold in and around the Indian national capital region contained a hazardous pesticide residue. These pesticides included chemicals which could cause cancers, damage the nervous and reproductive systems and reduce bone mineral density. Such negative publicity could adversely impact the companys brand image and the demand for Coca-Cola products. This could also have an adverse impact on the companys growth prospects in the international markets. Sluggish performance in North America Coca-Colas performance in North America was far from robust. North America is Coca-Colascore market generating about 30% of total revenues during fiscal 2006. Therefore, a strong performance in North America is important for the company. North America the sale of unit cases did not record any growth. Unit case retail volume in North America decreased 1% primarily due to weak sparkling beverage trends in the second half of 2006 and decline in the warehouse-delivered water and juice businesses. Moreover, the company also expects performance in North America to be weak during 2007. Sluggish performance in North America could impact the companys future growth prospects and prevent Coca-Cola from recording a more robust top-line growth. Decline in cash from operating activities The companys cash flow from operating activities declined during fiscal 2006. Cash flows from operating activities decreased 7% in 2006 compared to 2005. Net cash provided by operating activities reached $5,957 million in 2006, from $6,423 million in 2005. Coca-Colas cash flows from operating activities in 2006 also decreased compared with 2005 as a result of a contribution of approximately $216 million to a tax-qualified trust to fund retiree medical benefits. The decrease was also the result of certain marketing accruals recorded in 2005. PEST Introduction PEST Analysis is more useful when any company want to expand its business at new place or want to enter in the new countries. Main purpose is that get adjustment and business feasibility on new place. PEST analysis is a tactic that classifies effects of environment as political, economic, social, and technological features. Study of the PEST analysis method and examples related to this technique is beneficial for the development of any organization. Often the factors of legal and environment are included to modify the term to PESTLE analysis. PEST analysis ensures that the organization functioning is in accordance with the dominant influential change forces that may affect the environment of business. With getting example of Pepsi expend its business with introducing some new products in the market. So every product needs to get PEST analysis before to launch in the market. Why? Because of these factors; Political, Economic, social, technology. In the Political they need to watch that is there sustainable government in the country. What rules and regulations government announced for business industries. What policies government announced for the control of business. Government direction regarding marketing ethics and for the point of view of consumer protection. Government economic policies. How much government has influence on religion and culture. what involvement government has in trade agreements. What laws govt announced for employment and any industry. In the Economic there are several economic factors that need to be consider with respect to your business. Because these factors may be the cause of failure of any product of industry. Like Inflation, rate of interest, Per capita income, Gross domestic product, rate of exchange, economic progress trend, Economic progress trend, rate of exchange, production level, Consumer confidence and its affect on aggregate demand. So these factors directly hit on the progress of any product and it has directly relation with any business or any kind of product that is going to launch in the market. With respect to Pepsi, Pepsi has many talented and expert brains for using these kind of tools. Social factors plays a vital role in the running of any business. So there is need to be examined these factors with carefully. Social:  The social factors influence the business at various levels, and need to be carefully examined. These factors are:  · Leading religion.  · Attitude towards foreign goods and services.  · Influence of language on use of products in the markets.  · Time available with the consumers for leisure.  · Role of women and men in the society.  · Opinion of people on green issues.  · Demographics of the population.  · Lifestyle, education, health, fashion trends, earning capacity Technology:  Technology is commonly identified as an essential element of the organization since it is a useful tool for the attainment of market advantage. Technology can be used, and this is affected by government support. Technological advancement can produce new industries, and also provides valuable input to service and manufacturing industries. The following are important features in this regard: Does technology permit the manufacture of products at economical rates, without compromising quality? Do the technologies present original products, like mobile telephone,  internet banking, the purchase of books through internet, etc. Modern communication channels, like  Customer Relationship Management, banners, etc PEST Analysis of Pepsi The PEST analysis method has been successfully applied by  Pepsi, which has obtained economic advantage in its industry. The PEST analysis method and examples specific to Pepsi are seen in the following factors: Political: The manufacture, delivery, and use of numerous Pepsi products are subject to many federal regulations, like the Food, Drug and Cosmetic Act. The business is also governed by government and foreign rules. The international business is subjected to the political stability. Economic: The products of Pepsi are influenced by the raw material yield being used in the soft drinks, juices, etc.  All distribution is affected by the cost of fuel. Operations in international markets involve the study of unpredictable changes in foreign exchange rate. The economic impacts of such movements are serious because these affect the growth. Pepsi is also subjected to availability of energy, supply of money, business cycles, etc. Social: Lifestyle has great influence on the use of Pepsi products, and their advertisements are designed accordingly. Introduction of Pepsi products in the international market requires an in depth study of the local social structure. Technology: Pepsi is influenced by the modern manufacturing techniques applicable to their business divisions of soft drinks, juices, and snack food. Pepsi has to focus on the latest distribution techniques, and other technological advances in their industry References PEST analysis. Guide on How to Write University Essays and Dissertations. http://university-essays.tripod.com/pest_pestel_pestle_lepest_analysis.html (accessed December 24, 2010). PEST Analysis. Marketing Teacher. http://marketingteacher.com/lesson-store/lesson-pest.html (accessed December 24, 2010). PEST Analysis. Net MBA Business Knowledge Center. http://www.netmba.com/strategy/pest/ (accessed December 24, 2010). Swot Analysis Of Pepsi Co. Strength Pepsi has a broader product line and outstanding reputation. Merger of Quaker Oats produced synergy across the board. Record revenues and increasing market share. Lack of capital constraints (availability of large free cash flow). Great brands, strong distribution, innovative capabilities   Number one maker of snacks, such as corn chips and potato chips PepsiCo sells three products through the same distribution channel.   For example, combining the production capabilities of Pepsi, Gatorade and Tropicana is a big opportunity to reduce costs, improve efficiency and smooth out the impact of seasonal fluctuations in demand for particular product. Weakness Pepsi hard to inspire vision and direction for large global company. Not all PepsiCo products bear the company name. PepsiCo is far away from leader Coca-cola in the international market demand is highly elastic. Opportunity Food division should expand internationally. Noncarbonated drinks are the fastest-growing part of the industry There are increasing trend toward healthy foods   Focus on most important customer trend Convenience. Threats FB industry is mature. Pepsi is blamed for pesticide residues in their products in one of their most promising emerging market e.g in India. Over 50 percent of the companys sales come from Frito-Lay; this is a threat if the market takes a downturn. PepsiCo now competes with Cadbury Schweppes, Coca-Cola, and Kraft foods (because of broader product line) which are well-run and financially sound competitors.   Size of company will demand a varied marketing program; Social, cultural, economic, political and governmental constrains. Strategies The purpose of the strategy is to increase the EPS by 15% per annum and increase PepsiCos stock price. There are two ways to increase the EPS, first is to increase the income and second to decrease the amount of stocks outstanding. To increase the income, there are Bases for Consumer Market Segmentation There are number of variables involved in  consumer market segmentation, alone and in combination. These variables are: à ¢Ã¢â€š ¬Ã‚ ¢ Geographic variables à ¢Ã¢â€š ¬Ã‚ ¢ Demographic variables à ¢Ã¢â€š ¬Ã‚ ¢ Psychographic variables à ¢Ã¢â€š ¬Ã‚ ¢ Behavioral variables Geographic Segmentation In geographical segmentation, market is divided into different geographical units like: Regions (by country, nation, state, neighborhood) à ¢Ã¢â€š ¬Ã‚ ¢ Population Density (Urban, suburban, rural) à ¢Ã¢â€š ¬Ã‚ ¢ City size (Size of area, population size and growth rate) à ¢Ã¢â€š ¬Ã‚ ¢ Climate (Regions having similar climate pattern) à ¢Ã¢â€š ¬Ã‚ ¢ Regions (by country, nation, state, neighborhood) à ¢Ã¢â€š ¬Ã‚ ¢ Population Density (Urban, suburban, rural) à ¢Ã¢â€š ¬Ã‚ ¢ City size (Size of area, population size and growth rate) à ¢Ã¢â€š ¬Ã‚ ¢ Climate (Regions having similar climate pattern) A company, either serving a few or all geographic segments, needs to put attention on variability of geographic needs and wants. After segmenting consumer market on geographic bases, companies localize their marketing efforts (product, advertising, promotion and sales efforts). Demographic Segmentation In demographic segmentation, market is divided into small segments based on demographic variables like: à ¢Ã¢â€š ¬Ã‚ ¢ Age à ¢Ã¢â€š ¬Ã‚ ¢ Gender à ¢Ã¢â€š ¬Ã‚ ¢ Income à ¢Ã¢â€š ¬Ã‚ ¢ Occupation à ¢Ã¢â€š ¬Ã‚ ¢ Education à ¢Ã¢â€š ¬Ã‚ ¢ Social Class à ¢Ã¢â€š ¬Ã‚ ¢ Generation à ¢Ã¢â€š ¬Ã‚ ¢ Family size à ¢Ã¢â€š ¬Ã‚ ¢ Family life cycle à ¢Ã¢â€š ¬Ã‚ ¢ Home Ownership à ¢Ã¢â€š ¬Ã‚ ¢ Religion à ¢Ã¢â€š ¬Ã‚ ¢ Ethnic group/Race à ¢Ã¢â€š ¬Ã‚ ¢ Nationality Demographic factors are most important factors for segmenting the customers groups. Consumer needs, wants, usage rate these all depend upon demographic variables. So, considering demographic factors, while defining marketing strategy, is crucial. Psychographic Segmentation In Psychographic Segmentation, segments are defined on the basis of social class, lifestyle and personality characteristics. Psychographic variables include: à ¢Ã¢â€š ¬Ã‚ ¢ Interests à ¢Ã¢â€š ¬Ã‚ ¢ Opinions à ¢Ã¢â€š ¬Ã‚ ¢ Personality à ¢Ã¢â€š ¬Ã‚ ¢ Self Image à ¢Ã¢â€š ¬Ã‚ ¢ Activities à ¢Ã¢â€š ¬Ã‚ ¢ Values à ¢Ã¢â€š ¬Ã‚ ¢ Attitudes A segment having demographically grouped consumers may have different psychographic characteristics. Behavioral Segmentation In this segmentation market is divided into segments based on consumer knowledge, attitude, use or response to product. Behavioral variables include: à ¢Ã¢â€š ¬Ã‚ ¢ Usage Rate à ¢Ã¢â€š ¬Ã‚ ¢ Product benefits à ¢Ã¢â€š ¬Ã‚ ¢ Brand Loyalty à ¢Ã¢â€š ¬Ã‚ ¢ Price Consciousness à ¢Ã¢â€š ¬Ã‚ ¢ Occasions (holidays like mothers day, New Year and Eid) à ¢Ã¢â€š ¬Ã‚ ¢ User Status (First Time, Regular or Potential) Behavioral segmentation is considered most favorable segmentation tool as it uses those variables that are closely related to the product itself. Bases for Business Market Segmentation Business market can be segmented on the bases consumer market variables but because of many inherent differences like à ¢Ã¢â€š ¬Ã‚ ¢ Businesses are few but purchase in bulk à ¢Ã¢â€š ¬Ã‚ ¢ Evaluate in depth à ¢Ã¢â€š ¬Ã‚ ¢ Joint decisions are made Business market might be segmented on the bases of following variables: à ¢Ã¢â€š ¬Ã‚ ¢ Company Size: what company sizes should we serve? à ¢Ã¢â€š ¬Ã‚ ¢ Industry: Which industry to serve? à ¢Ã¢â€š ¬Ã‚ ¢ Purchasing approaches: Purchasing-function organization, Nature of existing relationships, purchase policies and criteria. à ¢Ã¢â€š ¬Ã‚ ¢ Situational factors: seasonal trend, urgency: should serve companies needing quick order deliver, Order: focus on large orders or small. à ¢Ã¢â€š ¬Ã‚ ¢ Geographic: Regional industrial growth rate, Customer concentration, and international macroeconomic factors Marketing Mix Price, Place, Product and Promotion Remember that you are working with an existing company that has set objectives and missions. You will need to align your product to the companys objectives. Please be sure to include a sample of advertising (using a medium or media of your choice) which supports your plan. Sponsoring to different charity shows, arranging different musical concerts sponsor by Pepsi, awarding shows like best performance awards to different actors sponsor by Pepsi. It gives good impact on the peoples mind. I often seen that some cricket matches or sports sponsored by the Pepsi. Lot of ways which you can boost your product and give challenge to your competitor. In short I would like to give preference to advertise by media, because media is now everywhere, TV channels, Radios, Newspapers, Magazines and much more. YouTube is big bank and now few advertisement are on YouTube. Pepsi needs to introduce some of its new products and their advertisement on YouTube. Last night I listen some famous songs on YouTube and before to start song an advertisement of company was there, like Cashforphones.co.uk advertisement was on YouTube. Everyone is not visiting Pepsis website and everyone is not fully aware with the Pepsis products. Therefore there is need to give awareness to people during their activities, like during watching TV or sitting on internet, means we need to find the things in which people most frequently come and use and there we need to give advertisement of products. After get awareness of products people will automatically demand on selling points that we need Pepsis products. Retailers, wholesalers and everyone (supply chain) will maintain that new products at their locations because of public demand of that product. Conclusion The Pepsi-Cola drink was invented in 1898 and grew basically by following the Coca-Cola marketing, product, and distribution strategies. Like Coca-Cola it advertised as heavily as finances permitted, and was distributed through soda fountains and franchised bottlers. Assessing Pepsis marketing strategies; It is clear that Pepsi has made several right choices. With the existence of Coke, Pepsi took advantage of their late entry into the market by lowering their prices. 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. In conclusion, Pepsis marketing strategies, from past to present included: enhancing their distribution system, knowing the environment of the foreign market and finding the things their target buyers had in common, adding new innovations and products while improving the old products, imaginative advertising, use of advanced technology, assertive promotions , trendy, socially-aware campaigns, alliances with major corporations and expansion into other industries such as restaurants. Even Pepsis response. So, n effect , Coca- Colas massive fame has also rubbed off on its rival. It even isolated these two beverage companies from other soft drink brands.