THE MARKETING STRATEGY CRITUQUE OF PEPSI BOTTLING GROUP
Pepsi Bottling Group, Inc.
Pepsi-Cola was founded in 1904 by Caleb Bradham, the inventor of the now popular carbonated drink. In six short years later, there were almost three hundred bottlers in three states alone. By 1923, the company went bankrupt after sugar prices skyrocketed. In 1931, Charles Guth’s Loft Candy Company bought the company. The new owners doubled the previous six ounce bottle size for the same five cent price. Profits increased drastically and the search for new bottlers to join the franchise began. Within twenty years, efficiency nearly doubled in matters of production so Pepsi began building new plants. The 1970s further increased productivity by using light weight plastic to produce bottles more efficiently. As the 1980s went on, Pepsi focused on increasing the amount of franchises it owns, which gave a total of eighty by the end of the eighties. During the twentieth century, Pepsi began expanding their company internationally; those profits brought in less than ten percent of their total. Pepsi’s different bottlers have finally merged by 1997 and separated into bottling and marketing divisions in the next year. Pepsi Bottling Group earned the right to sell, manufacture, and distribute Pepsi products internationally, specifically to Turkey. This cost one hundred million dollars. Finally in 2006, Pepsi Bottling Group became a joint manufacturer with sixteen regional bottlers and called themselves Pepsi Northwest Beverages.
Nature of Business
The Pepsi Bottling Group manufactures, distributes, and delivers its wide-variety of bottled drinks. Between Canada and the United States, seventy-five percent of the company’s sales are accounted for. After PepsiCo bought Pepsi Bottling Group, PepsiCo now owns about eighty percent of the North American bottled drink distribution centers. This transaction allows PepsiCo to be one of the biggest food and beverage companies internationally. Pepsi Bottling Group also made it possible to cut costs, increase profitability, and introduce the market with new products more quickly. In 2008, Pepsi Bottling Group expanded more rapidly than ever by purchasing JSC Lebedyansky, the number one ranked juice maker in Russia, for over a little over a billion dollars. This buyout earned Pepsi Bottling Group twenty-five percent of the international bottling business. Since its affiliated company owned the other seventy-five percent, this was a great move. One year later, Pepsi Bottling Group bought Better Beverages and Ab-Tex beverage. It now has the exclusive rights to sell its bottled beverages internationally in Canada, Spain, Greece, Russia, and Turkey as well as domestically in forty-two states plus Washington D.C. In addition to owning the Mexican Pepsi Bottler, it sells Dr Pepper for their distributer in the United States. Pepsi Bottling Group runs close to six hundred manufacturing and distribution organizations and thirty-eight thousand fleet vehicles. This is an extremely productive, profitable company.
“To be the world’s premier consumer products company focused on convenient foods and beverages. We seek to produce healthy financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity.” (Hoover’s Online)
1. The target market for juices, water, and (sometimes) soda: Mostly all people who are looking for a convenient drink.
2. The target markets for ready-to-drink coffee and energy drinks: Workers and college kids.
3. The target market for sports drinks: athletes
4. The target market for convenient foods (vending machine food): offices, hospitals, schools
5. The target markets for ready-to-eat meals/cereal: single parents, busy families, and college kids.
Product: convenience food and bottled drinks
• Bottled drinks: carbonated soft drinks, juices, teas, coffee drinks, energy drinks, and bottled waters. Some examples from each category include Pepsi, Mountain Dew, Sierra Mist, SoBe, Ocean Spray, Starbucks Double Shot, Lipton, Amp, and Aquafina.
• Foods: Chips, cheese curls, pretzels, multi-grain snacks, snack mixes, popcorn, dips, granola bars, rice snacks, cookies, nuts, crackers, cereal, maple syrup, rice dinners, and heat-and-eat side dishes. Some examples from each category include Lays, Fritos, Cheetos, Rold Gold, Quaker Granola Bars, Doritos, Munchies Snack Mix, Aunt Jemima, and Rice-A-Roni.
Price: convenience food and bottled drinks
• Bottled drinks: The range from the cheapest to the most expensive is $1.50-$6.99. This is based on current advertisements. There are many ways that drinks are sold-twenty ounce bottles, twelve packs, twenty four packs, etc. The previous range included all ways that the drinks are sold.
• Foods: Bagged Snacks-snack size: about $1; family size: about $3; Dips-about $4; Cereals-about $3-6; Rice and side dishes-about $2-5
Place: Grocery Stores, restaurants, vending machines, and concession stands nationwide. Pepsi Headquarters is located in Somers, New York.
Promotion: TV commercials, products appear on TV shows and movies, newspaper and magazine advertisements, and coupons. A specific television commercial stared Britney Spears and Halle Berry, Pepsi brands have appeared in coupons in the Valley News Dispatch and the Clipper magazine. Kings family restaurants and Taco Bell serve Pepsi products in their fountain machines.
Microenvironment and the Five Forces of Competitive Position
1. Threat of New Entrants=This would effect Pepsi’s business because consumers have more options to purchase than there already are. Examples of New Entrants include RC cola and Faygo Pop.
2. Bargaining Power of Suppliers= Pepsi is already the number two bottling company, so it can push to be number one.
3. Bargaining Power of Customers= There are many, many buyers, so this does not affect Pepsi very much.
4. Threat of Substitute Products= This produces a small amount of threat only because Pepsi is already the second most profitable bottling company in the industry, so the only thing they need to worry about is the number one, who produces a substitute product.
5. Nature of Rivalry= Coca Cola industries is the number one competitor of Pepsi
Macroenvironment and the sub-environments that affect companies
1. Economic: now that the United States is in a recession, almost the entire rest of the world is, too. Everyone now has less money so everyone is buying less of everything and only what is necessary. This is due to income reduction and unemployment rates.
2. Social and cultural: This has little effect on Pepsi-everyone still loves the drink no matter what their age or social class is.
3. Competitive: Coca Cola is Pepsi’s top competitor.
4. Legal: Pepsi must abide by the (Food and Drug Administration) FDA regulations.
5. Political: Pepsi is minimally affected by politics. Possibly, the government may set financial limits on the company.
6. Technological: The idea of “going green” affects Pepsi. Also, the limits on carbon emissions that are set on companies cost Pepsi more money for more efficient or “green” equipment. More money spent on capital=less profits made on selling goods.
SWOT Analysis coming soon
LCVP Analysis coming soon
Insights provided by SWOT and LCVP
• From the SWOT and LCVP analyses, two major things can be concluded.
• First of all, Pepsi is hurting from the recession and declining economy. Although there are still sales and profits, there is no comparison to the amounts of money it used to bring in before the recession. Prices of products rose because of the rising price of gas and products used in manufacturing. Because of this, expansion is limited in both the United States and foreign countries.
• The second thing that can be concluded from the analyses is that the health food campaigns are making such an impact on consumers that sales are declining. Many Pepsi products are not healthy, so people are more reluctant than ever to buy them now. Some products are selling such as bottled water and bottles juice drinks, but these sales are not making the same profits as the less healthy drinks. Some other small things can be concluded from the analyses, too. These include less international sales and popularity is high.
• Overall, the most important thing that emerged from these analyses is how much the health food industry is hurting Pepsi.
• Wide range of/many different target markets
• Numerous amounts of brands
• Various types of products in so many different categories
• Competitive prices
• Products sold in many different establishments
• National and international sales
• Excellent advertisement
• Number two seller of bottled beverages
• Growing company
• Popular brand name; easily recognized
• Has partners and alliances
• Up-selling products in connection with health good craze
• New entrants into the bottled beverage and convenient food market
• Top competitor is number one seller of bottles beverages
• Must abide by FDA regulations
• Carbon emissions limits
• Most sales are domestic, although product is sold internationally
• Soft drink sales are low because of health food promotion
• Rising resource prices
Pepsi has a very effective marketing strategy. To show this, each part of the marketing strategy will be listed with the reason why it is effective:
Mission Statement: Pepsi’s mission statement is firm and to the point. It stresses the company’s focus as well as the importance of their customers as well as their employees and business partners. This proves Pepsi runs a strong company and is confident in it.
Target Markets: Pepsi has five different target markets. Many companies do not have this many. Since Pepsi has such an impressive amount of target markets, they have the opportunity to sell their products to so many different people.
Marketing Mix: There are so many different products and brands that Pepsi sells for competitive prices. They promote sales of their products in countless different places that the product is bound to sell no matter what.
Marketing Environment: There are negative things involved towards Pepsi in this part of the marketing strategy; however the positive things overpower the negative ones indefinitely.
SWOT Analysis: Pepsi’s SWOT analysis has eight strengths and opportunities and six weaknesses and threats. This shows that Pepsi is well-run and productive.
LCVP Analysis: This part of the marketing strategy sums up the SWOT analysis.
As listed above, there are many things that make Pepsi’s marketing strategy so effective. Although, there are things that could be improved to make Pepsi’s marketing strategy much better. These will be listed below:
Marketing Environment: The macroenvironment is not in Pepsi’s favor. An example of this is the fact that most of the world is suffering in a recession which causes people to have less money to spend on some of the things they enjoy. Also, Coca-Cola is Pepsi’s top competitor, which is a huge downfall for the sales of Pepsi’s products. Finally, the technological aspect of the marketing environment has room for improvement. There are limits on carbon monoxide emissions due to the “going green” phase the country is going through.
SWOT Analysis: The weaknesses displayed in the SWOT analysis prove that Pepsi needs to focus a little more on international sales and healthier beverage and convenient food items. Also, this again mentions the recession.
LCVP Analysis: The weaknesses and threats linked together create problems. These problems need to be fixed in order for Pepsi to improve their company.
Recommendations for Pepsi
I feel that Pepsi does a great job with everything involved in running a multi-million dollar business. The way they promote their products is excellent as well as how the corporation is international is very effective. There are a few things that I can recommend to Pepsi:
• First of all, since most of the world is currently suffering from recession, Pepsi should strive to find cost-cutting solutions to keep both prices low and profits high. This would greatly help move Pepsi in the direction of becoming the number one selling of bottled beverages and convenient foods. That fact addresses another problem of Coca-Cola being Pepsi’s number one competitor-the top seller of bottled beverages. Pepsi should create strong advertisement campaigns and slogans to further promote the success of their products.
• While “going green” is a very beneficial movement in this economy, it is making Pepsi work harder to keep efficiency and effectiveness at its best. I would recommend to Pepsi that their company needs to find a way to keep their carbon emissions in check with federal regulations and purchase “green” equipment. Since many “green” machines are also more efficient than others, Pepsi will probably end up getting more out of their money in the long run even if it means laying out a little extra cash now.
• The weaknesses and threats sections of the SWOT analysis show things that Pepsi needs to improve on. I recommend that Pepsi tries to focus on international sales. Also, they should try hard to find alternatives to sugary, calorie packed drinks because so many people are watching what they eat due to the health food craze. This does not mean eliminate or reduce their ever popular carbonated drinks and packaged snacks; it merely means that creating new products that are healthier will help rise profits in this “healthy” day and age.
• Finally, resource prices are rising, causing production costs to rise as well. Pepsi must find alternatives to rising resource prices so that they can keep profits high.