FIVE-YEAR MARKETING PLAN

PepsiCo, Inc.

 

Table of Contents

 

1.      Executive Summary

 

2. Company Description

 

3. Strategic Focus and Plan

Mission/Vision Statement

Goals

Core Competency and Sustainable Competitive Advantage

 

4. Situation Analysis

SWOT Analysis

Industry Analysis: Trends in Healthy Soft Drinks

Competitor Analysis

Company Analysis

Customer Analysis

 

5. Market-Product Focus

Marketing and Product Objectives

Target Markets

Points of Difference

Positioning

 

6. Marketing Program

Product Strategy

Product Line

Unique Product Quality

Packaging

Price Strategy

Promotion Strategy

Place (Distribution) Strategy

 

7. Financial Data and Projections

Past Sales Revenues

Five-Year Projections

 

8. Organization

 

9. Implementation Plan

 

10. Evaluation and Control

 

 

 

 

1. Executive Summary

This marketing plan provides a written analysis of the trends, consumer demands

and markets in the soft drink industry and the implementation strategy PepsiCo plans to

put into action when launching a new product line of "New Age" products. The key

success factors of this marketing plan are:

-         Growing market for healthier soft drinks:

-         the market for diet drinks is not new, yet has limited choices and is therefore

open for expansion of new products

-         the largest segment of the U.S. population is aging (the baby boomers)

causing a rise in health concerns and adding to demand for healthier soft

drinks

-         Younger generation drinks less coffee and more soft drinks with caffeine

-         Unique new product:

-         Introduction of a new artificial sweetener

-         Tastes as good as a non-diet soft drink

-         Only one calorie

-         Comparable competition does not yet exist

-         Exciting promotional campaign strategy:

-         Sports lounges in malls with free drinks provided and sports on TV

-         Free giveaways at college and professional football and basketball games

-         Free t-shirts displaying product to college students given away on central

campus locations

-         Lucrative Sales forecasts:

The introduction of a new line of products including an entirely new product and

ingredient will increase sales revenue for PepsiCo. The sales revenue will in turn create

an incremental growth during the introductory phase for the new products as shown

during the projections for the next five years.

In conclusion, the promotion and launch of the new product line will help meet

the needs of customers, provide a new niche in the soft drink industry and become a

profitable venture for PepsiCo.

 

2. Company Description

 

PepsiCo, Inc. is among the most successful consumer products companies in the

world, with 1999 revenues of over $20 billion and 116,000 employees. The company

consists of: Frito-Lay Company, the largest manufacturer and distributor of snack chips;

Pepsi-Cola Company, the second largest soft drink business and Tropicana Products,

the largest marketer and producer of branded juice. PepsiCo brands are among the

best known and most respected in the world and are available in about 190 countries

and territories.

Some of PepsiCo's brand names are 100 years old, but the corporation is

relatively young. PepsiCo, Inc. was founded in 1965 through the merger of Pepsi-Cola

and Frito-Lay. Tropicana was acquired in 1998.

PepsiCo's success is the result of superior products, high standards of

performance, distinctive competitive strategies and the high integrity of their people.

Their overriding objective is to increase the value of their shareholders' investment

through integrated operating, investing and financing activities. Their strategy is to

concentrate their resources on growing their businesses, both through internal growth

and carefully selected acquisitions. Their strategy is continually fine-tuned to address

the opportunities and risks of the global marketplace. The corporation's success reflects

their continuing commitment to growth and a focus on those businesses where they can

drive their own growth and create opportunities.

 

3. Strategic Focus and Plan

 

Mission/Vision

PepsiCo's overall mission is to increase the value of their shareholders'

investment. They do this through sales growth, cost controls and wise investment of

resources. They believe their commercial success depends upon offering quality and

value to their consumers and customers; providing products that are safe, wholesome,

economically efficient and environmentally sound; and providing a fair return to their

investors while adhering to the highest standards of integrity.

 

Goals Nonfinancial Goals

Sharply focus their financial and management resources on their core

businesses: restaurant management on restaurants, packaged goods

management on beverages and snacks.

Ruthlessly prioritize to be sure they employ their greatest sustaining efforts on

the biggest opportunities within their core businesses. In beverages, for example,

the lions share of their investment dollars and management attention will go to

high-potential markets where no company dominates like China, India and

Russia and to markets where they lead or are a strong number two.

Build their success upon their key functional strengths:

1. day-to-day management of operationally intensive businesses;

2. manufacturing, selling and distribution infrastructure development; and

3. marketing and new product R&D.

 

Financial Goals

To obtain a real growth in earnings per share of 15% per year over time.

To obtain a return on equity of at least 40%.

 

 

Core Competency and Sustainable Competitive Advantage

 

In terms of core competency, PepsiCo seeks to achieve a unique ability to:

(1)   provide a distinctive, high-quality one-calorie soft drink and to provide a high-

quality citrus soft drink using Pepsi Company’s distinct ingredients to appeal

and to excite contemporary tastes for these products and

(2)   deliver these soft drinks to the customer using effective manufacturing and

distribution systems that maintain PepsiCo’s quality standards.

 

To translate these core competencies into a sustainable competitive advantage,

Pepsi Co. will work closely with key suppliers and distributors to build the relationships

and alliances necessary to satisfy the high taste standards of our customers.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4. Situation Analysis

This situation analysis starts with a snapshot of the current environment in which

PepsiCo finds itself by providing a brief SWOT (strengths, weaknesses, opportunities,

and threats) analysis. After this overview, the analysis goes into greater detail with

regards to industry, competitors, company, and consumers.

 

SWOT Analysis

The following table shows the internal and external factors affecting the market

opportunities for PepsiCo. This SWOT analysis also shows PepsiCo's internal

strengths such as their experienced management team, a competitive product line, a

global marketing realm, and the continuous efforts by their research and development to

research trends in the industry and to be creative in exploiting those trends. Some

possible opportunities noted in the SWOT analysis are the growing markets for

specialized ethnic foods and healthier food products. Another opportunity is that the

income of consumers is high enabling them to be less price sensitive, and convenience

is becoming evermore important not only to the United States but to many countries

around the world.

Although PepsiCo has many strengths, a few weaknesses lie in the fact that the

company is so large and could possibly lose focus or have internal conflict problems. A

few of the threats PepsiCo must stay aware of are the ease of replicability of its product

line, the almost pure competition in pricing for its products, and the quickness of

technological advances causing existing products to be no longer the most advanced.

 

 

 

Internal Factors Strengths Weaknesses Management Experienced, broad base of

interests and knowledge Large size may lead to conflicting interests

Product Line Unique, tastes good, competitive price, and convenient

New one calorie products have no existing customer base, generic brands can make similar drinks - cheaper

Marketing Diverse, and global awareness

May lose focus, may not be segmented enough

Personnel International, diverse positions

Possible conflicts due to so many people, possible trouble staying focused

Finance High sales revenue, high sale growth, large capital base

High expenses, may have trouble balancing cash-flows of such a large operation

Manufacturing Low costs and liabilities due to outsourcing of bottling

Lose control and quality standards

Research & Development

Continuous efforts to research trends an reinforce creativity

May concentrate too much on existing products, intrapreneuralship may not be welcomed

External Factors

Opportunities Threats

Consumer/Social

Huge market in the healthy products and growing market for specialized foods for ethnic groups

More expensive products than Coke, such a high price may limit lower income families from buying a Pepsi product

Competitive Distinctive name, product and packaging in with regards to its markets

Not entirely patentable, constant replicability by competitors

Technological Internet promotion such as banner ads and keywords can increase their sales, and more computerized manufacturing and ordering processes can increase their efficiency

Computer breakdowns, viruses and hackers can reduce efficiency, and must constantly update products or other competitors will be more advanced

Economic Consumer income is high, more tend to eat out, convenience is important to U.S.

Very elastic demand, almost pure competition

Legal/Regulatory

High U.S. Food & Drug Administration standards eliminate overnight competitors

 

 

 

Industry Analysis: Trends in Healthy Soft Drinks

Within the soft drink industry, a major trend to capitalize on is healthier soft drinks. The

market for healthy soft drinks is huge and growing among American and international consumers

alike. Along with a large market, many opportunities have arisen due to recent technological

advances. New research has brought to Pepsi a lower calorie sweetener than aspartame allowing

for an even healthier diet drink. Also technology on the Internet has revolutionized the

promotional process. By using banner ads and keyword ads, Pepsi Co. can reach a higher number

of audiences and yet and the same time have more specific and targeted segments. A final factor

that is providing an ideal situation to introduce a new product is that consumers are tending to eat

out more often due to the fact that economically, income is high. This will help to increase our

sales of fountain beverages to restaurants. All of these positive industry factors combined create

an exemplary context in which to launch new healthy soft drink products.

 

Competitor Analysis

The soft drink market represents $4,798,000,000 in annual sales. The products fall into four main groups: colas, lemon-lime-flavored drinks, diet drinks, and other drinks.

Type PepsiCo Products Competing Products Cola Pepsi Cocacola

Generic Lemon-lime Mountain Dew

Sierra Mist

Slice

Sprite

Fresca

7-Up

Generic Diet Diet Pepsi

Pepsi ONE

Diet Caffeine Free Pepsi

Diet Mt. Dew

Diet Coke

Diet Caffeine Free Coke

Diet Dr. Pepper

Diet Sprite

Diet 7-Up

Tab

Generic Other Mr. Pibb

Mug Rootbeer

Wild Cherry Pepsi

Dr. Pepper

A&W Rootbeer

Barque's Rootbeer

Crush

Cherry Coke

Sunkist

Generic

 

PepsiCo's current retail prices range depending on the convenience of the

location in which they are located and depending on the size of the soft drink container.

On average, a 12 ounce can is between $.25 - $.99, a 20 ounce plastic bottle is

between $.50 and $1.29, and a 2 liter plastic bottle is between $.50 and $1.95.

The major disadvantages regarding the competitive structure of the market lies in

the fact that there are so many other competitors and options such as water, coffee and

juice to compete for the same consumer.

 

Company Analysis Currently PepsiCo competes in the soft drink segment of the global beverage

market. While PepsiCo's soft drinks can obviously compete as a stand-alone product, it

can also complement any snack or meal

At present PepsiCo, Inc. operates with over 116,000 talented and innovative

employees. The steadily increasing business with minority and women-owned firms

has improved their company's supplier base. It has also helped to strengthen the

suppliers' firms as well as the minority community infrastructure with regard to such

benefits as employment, training, role modeling, buying from other minority and women-

owned businesses, and supporting community organizations. PepsiCo's culture is

informal and entrepreneurial. Their people are empowered to make the decisions

necessary to grow the business. They seek to achieve outstanding results through

innovation, long tern partnerships, and an open work environment that respects the

individual and promotes personal and professional growth.

Our strategy is to concentrate our resources on growing our businesses, both

through internal growth and carefully selected acquisitions. Our strategy is continually

fine-tuned to address the opportunities and risks of the global marketplace. The

corporation's success reflects our continuing commitment to growth and a focus on

those businesses where we can drive our own growth and create opportunities.

 

 

 

Customer Analysis PepsiCo has an extremely large customer base due to the wide spread

popularity of soft drinks. It is therefore necessary to segment the market and look at

particular trends in the soft drink market. There are two key trends in the soft drink

market, which are the growing demand for healthier soft drinks and the mostly untapped

market of targeting ethnic groups with specific products regarding their interests.

 

  Trend Information Healthier Drinks Ethnic Marketed Drinks How to grow this segment

Need to attract men and a younger audience without excluding females

Target the each specific market with products and advertising designed around their wants (ex. Research has shown that African Americans in general prefer lighter colored soft drinks such as Mellow Yellow (99%) and Slice (73%))

Who is the main target market

The younger generation is the prime target for healthier soft drinks, a key reason for this is that many younger consumers do not drink coffee but prefer drinks such as Pepsi or Mountain Dew to give them a boost

African Americans (who represent 1 of 7 soft drink customers) and Hispanic Americans (who's population is growing and consists of one of the largest growing markets)

How to market these products

Show how they benefit the customer, give full nutritional information

Keep the advertising relevant, but don't try to hard

Factors leading to the rise of this trend

Less consumption of alcohol: 4 out of 10 people do not drink alcoholic beverages, even drinkers do not

Marketing research has shown that not all American's prefer the same soft drinks, the population growth of

drink all the time (ex. Designated drivers, pregnant women, those who cut down for health reasons)

minorities in America has created a growth in their related market size

 

 

 

5. Market-Product Focus

This section describes the three year marketing and product objectives for

PepsiCo and the target markets, points of difference, and positioning of its lines of soft

drinks.

 

Marketing and Product Objectives PepsiCo's marketing intent is to take advantage of its brand potential while building a

base from which revenues can be generated. These are detailed in the three focus

areas below:

·        current markets - expand brand and flavor, increase customer awareness through promotion, coupons and in store displays

·        new markets - healthier soft drink market and target ethnic groups

·        new products - one calorie soft drinks (Pepsi ONE) lighter colored soft drinks (Sierra Mist). Initially these products will be introduced on college campuses as test markets then will be distributed nationally within 2 months and distributed globally within 2 years.

 

Target Markets

For PepsiCo every individual in the United States with a middle class status can be

considered a potential consumer. Though, in order to target specific markets, PepsiCo divides

the target market into the following market segments:

Consumers under the age of 18: This is when PepsiCo is marketing to a younger

generation. These potential customers still live at home with parents. They rely heavily on

parents to purchase the product for them. In this segment, PepsiCo is trying to capture brand

awareness.

Consumers between the ages of 18 to 24: PepsiCo is still marketing to a younger

generation, but these customers are either in college, moving away from home, and/or starting

new jobs. In this segment, Pepsi Co. is trying to capture brand awareness and loyalty.

Consumers between the ages of 25 to 34: PepsiCo is marketing to customers who are

established in their job market and who are starting families. In this segment, loyalty has already

been established.

Consumers between the ages of 35 to 49: PepsiCo is marketing to customers who are an

established market, one in which brand loyalty has already been sustained. These customers are

loyal customers and are routine Pepsi drinkers.

Consumers age 50 and up: Again, this is a market in which customers are established,

and brand loyalty has been sustained. These customers are loyal customers, and only drink Pepsi

products.

 

Points of Difference

The points of difference - or attributes that make PepsiCo's new products Pepsi ONE and Sierra Mist unique among its competitors are:

Pepsi ONE Sierra Mist One calorie - healthier than other diet drinks

Caffeine-Free

Unique taste - tastes like regular Pepsi

Fresher, cleaner, less syrupy sweet taste

No use of aspartame - no taste of the artificial sweetener

Less harsh tasting than any other lemon-lime product

 

Positioning

Previously customers concentrating on health had to settle for a less appealing

taste to uphold their diet. Now the new one calorie drink that Pepsi offers (Pepsi ONE)

brings a great taste but is healthier than other diet drinks because it is only one calorie.

The name Pepsi ONE also helps to give the product positioning because the consumers

can immediately relate the name to the benefits of the product - one-calorie. Finally, the

color of the product package helps position the product. Regular colas are usually a

bold color, while diet colas are often white and diet caffeine free colas are usually gold.

Pepsi One is in a silver can which tells consumers that the product is still a diet drink,

but a different diet drink.

Sierra Mist, a new lemon-lime flavored soda, has no caffeine and has been

described by consumers as fresher, cleaner and less syrupy sweet than other sodas

like it. Sierra Mist is to be positioned as a new age soda with marketing, packaging and

advertising concentrating on its refreshing taste.

 

 

 

6. Marketing Program

Product Strategy  

Product Line

PepsiCo's newest marketing program is for New Age soft drinks. This will initially

include two flavors:

·        Sierra Mist - a lemon lime flavored soft drink with a fresher, cleaner, less syrupy

sweet and less harsh taste that competing lemon lime soft drinks

·        Pepsi One - a one calorie cola flavored soft drink with the same taste of regular

Pepsi but only one calorie

 

Unique Product Quality

Pepsi ONE is the refreshing new soda for people who want it all -- great cola

taste with only one calorie. This exciting new product was launched nationwide in the

fall of 1998 earning significant consumer and media attentions for its revolutionary new

product formulation; the newly approved sweetener, Sunnett (Acesulfame potassium or

Ace-K) and aspartame. The new sweetener allows for this soda to have only one

calorie per serving. This product also has significantly less carbohydrates and sodium

than most other sodas.

Sierra Mist is the new caffeine free soda with the great lemon-lime flavor that

people love. This product was released in October of 2000 nation wide and hopes to be

worldwide by the end of the year. Other than the caffeine free aspect of this soda, it has

most of the same ingredients as any other regular product.

 

Packaging

Providing their consumers with easy-to-use, convenient and innovative

containers are one of their top priorities. Package introductions they've made over the

years include the industry's first two-liter bottle; The Cube, an easy-to-store 24-pack; Big

Slam, the wide-mouth one-liter bottle; and their three-liter bottle, designed to provide

consumers with extra value. Pepsi Co. was the first company to respond to consumer

preference with lightweight, recyclable, plastic bottles. These bottles are made of

polyethylene terephthalate or "PET plastic," which is a form of polyester used to make

strong, lightweight, shatter-resistant bottles. PET plastics are recyclable into products

including new containers, fiberfill for sleeping bags and coats, fabric, carpets, auto

parts, film and more.

Pepsi ONE

Sierra Mist

Silver Green New logo New logo Says one-calorie Says new on the

label

 

Price Strategy

Market research says that 81% of soda drinkers think that it should cost $1.00 for a

single 12oz serving of soda. Pepsi is priced slightly higher than its main competitor

Coca-Cola but is till in line with the majority of the industry's prices. Pricing mainly

depends on the location where the soft drink is purchased, as shown in the following

table:

 

Location Purchased

Convenience Store or

Gas Station

Vending Machine

Fountain drink or

Restaurant

Warehouse or club Store

Super Market or

Retail Store 12 oz.

Serving $0.69 $0.50 -

$0.80 (depending

on convenience of location)

$0.30 - $0.90

$0.30 $0.50

 

 

Promotion Strategy

¨      Test Markets - large public colleges (ex. Virginia Tech)

¨      Free Samples - handed out at basketball or football games, pep rallies, or on central campus areas (ex. Drill field)

¨      Coupons - on the product or tied to another product (ex. Buy a pack of Fritos get a free 12 oz. Pepsi One)

¨      In-Store Displays - Signs, banners etc.

¨      Entertainment - Games with free T-shirts, Pepsi points under the cap etc.

¨      Sponsorship - sports teams/clubs/events

 

Sierra Mist is broadly targeted to teens and adults, with an 18 to 29 year-old

demographic bull's-eye. Aggressive introductory marketing support includes massive

sampling efforts and outdoors-oriented point-of purchase materials asking consumers to

"experience the height of refreshment." Samples of this latest brand to join the Pepsi

portfolio are available at football games and supermarkets across the US and Pepsi

intends to spend $50 million on marketing this product.

When Pepsi ONE first came out it was targeted towards the younger, healthier

crowd. This unique one calorie drink was marketed as a healthier cola with the same

great taste as regular Pepsi. In this beginning this product was marketed in much the

same fashion as Sierra Mist is currently being distributed.

 

Place (Distribution) Strategy

Pepsi ONE and Sierra Mist are distributed through PepsiCo distribution centers.

The distributor delivers it to the grocery retailers, vending companies, restaurants, and

warehouse/club stores.

The distribution segments can be broken down into the following:

·        Convenience Stores and Gas Stations: 12% of the market

·        Vending Companies: 11% of the market

·        Restaurants: 20% of the market

·        Warehouse/Club Stores: 6% of the market

·        Super Markets and Retail Stores: 51% of the market.

 

In order to produce sales to increase, we plan to mass distribute Pepsi ONE and

Sierra Mist to the Virginia Tech campus. Here we will place the soft drinks in vending

machines, campus-dining halls, education facilities, and at various athletic events. We

strongly believe that this will create brand awareness and customer loyalty with the age

group of 18 to 24.

 

 

 

7. Financial Data and Projections

 

Past Sales Revenues  

Historically, PepsiCo, Inc. has a fairly steady amount of annual sales revenue.

Sales dropped dramatically from 1995 to 1996 due to an introduction of a new product

by a competitor. The trend in sales revenue appears in Figure 4.

 

Figure 4.

 

Five-Year Projections

Five-year financial projections for PepsiCo Inc. appear below:

     Projections

    Actual Year1 Year2 Year3 Year4 Year5 Financial Elements

Units 1999 2000 2001 2002 2003 2004

Net Sales $1,000,000 20,367 21,689.02 22,884.36 24,257.42 25,712.87 27,255.64

Gross Profit

$1,000,000 11,986 12,465.44 12,964.06 13,482.62 14021.92 14,582.80

Operating Profit(Loss)

$1,000,000 2,883 2894.53 2906.11 2917.73 2929.41 2941.12

 

These projections reflect the continuing growth of PepsiCo Inc. and its products.

 

 

 

 

8. Organization

Roger A. EnricoChairman of the Board and CEO

 

Roger A. Enrico

Chairman of the Board and CEO

Margaret D. MoorePersonnel

Indra K. Nooyi

Chief Financial OfficerGary H. Rodkin

North American Region

President and CEOPeter M. Thompson

International

President and CEOSteven S. Reinemund

Chief Operating OfficerAlbert P. Carey

Sales & Retailer Strategies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9. Implementation Plan

 

PepsiCo will be introducing its two new age soft drinks through a rolling process

beginning with initial test markets in the United States. In the test markets, the tastes of

several demographic segments and target market will be carefully analyzed and

evaluated. If necessary based on these evaluations, promotional strategies might need

to be modified before national distribution. After test markets, PepsiCo will distribute the

products nationally. Next Pepsi will enter the international markets in order of highest

soft drink consumption. National distribution will occur after two months of successful

test markets, and worldwide distribution will be completed with in two years or the

product launch.

 

 

 

 

 

Location Sierra Mist Pepsi ONE US:

initial test markets:

Austin, TX

Roanoke, VA

Cleveland, OH

St. Paul, MN

Chicago, IL

Pittsburgh, PA

 

 

November 1, 2000

November 8, 2000

November 15, 2000

November 22, 2000

November 29, 2000

December 6, 2000

 

 

June 5, 1999

June 12, 1999

June 19, 1999

June 26, 1999

July 3, 1999

July 10, 1999

San Diego, CA

Tallahassee, FA

National distribution

December 13, 2000

December 20, 2000

January 1, 2001

July 17, 1999

July 24, 1999

August 18, 1999 Mexico March 15, 2001 November 14, 1999 Canada May 4, 2001 January 3, 2000 Spain July 31, 2001 March 19, 2000 UK September 17, 2001 June 21, 2000 Argentina November 1, 2001 September 9, 2000 Saudi Arabia January 28, 2002 December 12, 2000 Brazil March 7, 2002 February 17, 2001 Philippines April 30, 2002 April 11, 2001 Thailand July 1, 2002 June 27, 2001 China August 8, 2002 August 7, 2001 India September 30, 2002 October 13, 2001 World-wide distribution October 19, 2002 December 1, 2001

 

 

10. Evaluation and Control

 

Monthly sales targets have been set for PepsiCo for each global economy.

Actual Pepsi ONE and Sierra Mist sales will be compared with these targets and tactical

marketing programs modified to reflect the unique sets of factors in each global market.

The speed of the program will increase, or decrease, depending on PepsiCo’s

performance in the successive global markets that Pepsi ONE and Sierra Mist enter.

Similarly, as described above in the implementation plan, PepsiCo may elect to respond

to variation in global and regional tastes by changing ingredients and/or the image of

Pepsi ONE or Sierra Mist (depending on the area). This variation will increase

production cost, but it will also increase customer satisfaction, as well as sales.