Research Paper on Pepsi International
Research
Paper on Pepsi International
Abstract
The paper focuses on the analysis of Pepsi International as one of the leading companies of the world operating in beverage and snack industry. At first the overview of the company’s background and development is made revealing the transformation of the company from the small drinks producer into the world giant. After that the products of the products of the companies are discussed. The analysis of the market strategy proves the fact that the position of the company is steadily progressing and its strategic development is quit perspective. On analyzing the pricing strategy, product and market mix, it is possible to conclude that Pepsi International will remain among the leaders of beverage and snack industry.
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Introduction
Nowadays, companies operating in the food and drinks industry are struggling for the new markets and implementing new strategies and products targeting at the expansion of their share in the markets worldwide. In this respect, it should be said that Pepsi International is one of the largest companies operating in the drinks and food market. In the course of its development the company has achieved really great results and in the current situation it is considered to be one of the most successful companies operating in this segment of the market. The experience of Pepsi International is very important and its analysis can reveal the major reasons which helped the company to gain the large share of the soft cola drinks market and play a significant role in food market.
At the same time, Pepsi International is a typical representative of modern multinational companies which operate worldwide and are represented in many countries of the world. Its products are recognizable in different parts of the world and its brand image constitutes a considerable part of the market value of the company. It is really important to analyze the development and current position of Pepsi International in the market since it helps better understand major trends in the modern business and reveal the effective way of the development of business in the conditions of the globalization of economy.
In order to properly assess the current position of the company in the market it is necessary to carefully analyze its background and development, discuss its major products and market strategies used by the company, and, naturally, it is necessary to focus on the strategic ways of the development of Pepsi International in order to make an objective conclusion about its further perspectives.
Company overview
Background and profile of the company
Basically, Pepsi International is considered to be one of the largest beverage and snack company. Originally, it was an American company and so it remains today but, at the present moment, it is hardly possible to speak about Pepsi as a company focusing on some national market. In stark contrast, Pepsi International has already overcome national borders and mainly targets at the expansion in international markets which are extremely perspective for the further development and growth of the company. It is worthy of mention that the company possesses several brands and Pepsi is just a common brand name which incorporates a number of other popular brands, which though may be not so popular worldwide as Pepsi does. To put it more precisely, at present days, Pepsi International incorporates such brands as Mountain Dew, Quaker Oats, Gatorade, Frito-Lay, SoBe, and Tropicana.
In such a way, nowadays, Pepsi is a large company that unites several popular brands, operates worldwide, and targets at the further expansion in international markets, though its headquarter historically remains in the US, in Purchase, New York1. The popularity and current achievements of the company may be viewed as a result of its hard work throughout its history. It is worthy of mention that Pepsi internationally may be viewed as an old company having a great experience in the field of beverage and not so long but not less successful experience in fast food production. Initially, the company was founded in 1898 but its way to the national and world recognition was not an easy one.
The company witnessed its first successes at the beginning of the 20th century, but the early years of the 20th century may be named the period of formation of the company and acquisition of the essential experience that helped Pepsi became a well-known and popular brand. Initially, the company specialised on the production of soft cola drink Pepsi cola, which was initially bottled in a drugstore of its inventor Caleb Bradham, and gradually evolved in a dynamically growing company. However, the first successes of the company were not very impressive and Pepsi almost collapsed during the Great Depression. The company gained its popularity only in 1934 with the introduction of a 12-ounce bottle. Since that period the company had been growing steadily acquiring the recognition of customer and increasing the popularity of its major product.
During the World War II and in a post-war period, the company focused on the new niche market attempting to gain popularity among African Americans. Such a change in the policy of the company needed the shift in its promotional and advertising campaign since before this period the advertising of its product were racially biased or, what was more often, the company simply ignored African American population. Nevertheless, African Americans represented a considerable part of the potential consumers of Pepsi’s products. This is why the company made this strategic shift in order to attract a larger amount of African Americans to the product of the company. The benefits from this decision of the company’s management were obvious since the share of African American consumers grew rapidly and they became desirable target consumers for the company’s product.
In 1965, the company merged with Frito Lay and became known as Pepsi Co. This was the period when the company considerably enlarged its share market and started to increase the diversity of products offered to customers. Since 1960s the acquisition of new brands or mergers with other companies operating in drinks and food industry was the strategic direction of the development of the company. As a result, by 1997, the company acquired Kentucky Fried Chicken, Pizza Hut and Taco Bell. However in 1998, these brands were spun off into Tricon Global Restaurants, now known as Yum! Brands Inc. Among the recent acquisition of the company, it is possible to name Tropicana in 1998 and Quaker Oats in 20012.
Nowadays, the position of the company is probably stronger than ever before. Its major competitor, Coca Cola, gradually loses its positions and Pepsi has already out beaten its major rival having almost three times as many employees and larger revenues. This means that, at the present moment, the company is in a better position compared to its major competitor that provides ample opportunities for the further growth and market expansion that, in a combination, with diversification of the production and enlargement of the number of products offered to customers strengthen the brand and increases its popularity considerably. At the same time, the company tends to increase the customers’ loyalty to the brand and develops advertising campaign targeting at the increasing the number of its consumers.
On the other hand, at the present moment the company faces a serious problem of safety of its products since many specialists3 argue the soft cola drinks and food produced by Pepsi may produce a negative impact on human health. In the course of time, new technologies, especially in chemical industry, were implemented in the process of food and drinks production. Moreover, drinks and food became an object of mass production and in a combination with new technologies it resulted in the development of companies struggling for their share of the market of the food and drinks industry, in which Pepsi is one of the major players.
In fact, many specialists underline the fact that, nowadays, artificial elements, which are used in drinks and food production, substitute natural elements. In the result, consumers are not informed about what they eat and the taste of food is deceptive because it can vary depending on chemical components used. Moreover, Pepsi as well as other companies involved in the drinks and food production are not willing to reveal their commercial and technological secrets and the information about the process of food production and its ingredients is a kind of taboo. Thus, consumers lack information about drinks and food that leads to their deception.
Furthermore, since there is little information about food ingredients, neither consumers nor specialists can really define the extent to which the drinks and food produced by Pepsi is dangerous for human health. It is extremely disturbing because drinks and food industry is a dynamically growing industry and Pepsi is only a leader but not the only company operating in this niche of the market.
Obviously, the problem the effect of Pepsi products as well as products of its competitors cannot remain unsolved. It is extremely important to find some solution that could help people to be better informed about the ingredients of the fast food they regularly consume and whether it is safe for their health or not. However, this is where another problem, rises.
At first glance, the solution seems to be quite obvious – Pepsi should simply provide consumers and specialists with detailed information concerning the process and ingredients used in the production. Naturally, it would probably solve the problem. In such a situation, consumers could know what they ate and they could make a free and conscious choice whether to drink or not the soft drinks and food offered by Pepsi to its customers. Unfortunately, nowadays they are deprived of such a possibility, since artificial elements substituted natural ingredients and it is practically impossible to find the difference between natural drink and food and one consisting of artificial ingredients. Moreover, consumers are simply deceived. Otherwise, they would probably react in a different way. Probably they would change their diet if Pepsi’s product tasted differently, or if they really knew what they ate. It is obvious that artificial elements may be dangerous for their health.
For instance, it is not a secret that cola drinks in a combination with fast foot cause obesity that is getting to be epidemic in the US. Obviously, this situation is evidence of the negative consequences of the lack of information about these products, its processing and ingredients.
On the other hand, it is only one of negative consequences, while the negative effects may be much more serious. For instance, the wide use of artificial ingredients, including chemical elements, may have a number of side-effects, which may be disastrous for the health of some individuals. To put it more precisely, some elements may provoke allergy that may deteriorate individual’s health or even death of some individuals. Unfortunately, it is practically impossible to predict such consequences of Pepsi products’ consumption because of the lack of information about the ingredients they consist of and this refer not only to cola drinks but other products of the company as well.
Thus, it is obvious that the lack of information about ingredients of drinks and food and the use of artificial elements in its production may have disastrous consequences but the problem is aggravated by the fact that it also makes the proper treatment of health problems caused by drinks and food practically impossible. It is not a secret that it is necessary to find the cause of illness to cure patients efficiently. This problem significantly undermines the image of the company but, in actuality, the effects of company’s products on customers health remain an under-researched question. This is why the company can still benefit from its popularity worldwide and a huge number of loyal customers who prefer its product and remain loyal to Pepsi’s brand.
Nevertheless, nowadays it is obvious that these problems may undermine the position of Pepsi in the market, especially abroad where the local companies operating in the same industry attempt to protect their interests. In this respect, it is worthy of mention the recent problems the company has faced in India since some elements which may be dangerous for human health have been found in the products of Pepsi International. Naturally, such scandals do not increase the popularity of the brand that means that the company should also pay a lot of attention to the quality of its products and not only to the struggle with its competitors and expansion in the new markets.
Products
Speaking about products of Pepsi International, it should be said that on the current stage of the development the company basically focuses on the production of soft cola drinks and snacks. However, it is necessary to underline that the production of soft cola drinks is the major direction of the development of the company and the fact that the company actually lost Kentucky Fried Chicken and other popular fast food brands my be viewed as a sign of the unchangeable strategy of the company’s development.
In such a way, the analysis of the company products should be primarily focused on the analysis of its drinks. In this respect, it should be said that at the moment there exist a variety of drinks which differ in different aspects. For instance, nowadays, Diet Pepsi is one of the most popular variations of the drink. The popularity of Diet Pepsi is determined by the fact that contains no sugar and zero calories. This is extremely important, especially nowadays, when people are concerned about their health and the products they consume regularly. Basically, the popularity of Diet Pepsi may be also explained by the fact that the cult of slimness is dominating in the modern society. As a result, people readily consume products which do not contribute or, at least, are supposed not to the increase of their weight. This is quite natural, taking into consideration the fact of the traditional sedentary lifestyle of many people, especially in well-developed countries such as the US, or countries of the EU, which are the major markets consuming products of Pepsi International.
In this respect, it is possible to view Diet Pepsi as a response of the company to the growing apprehension of customers in relation to the safety of products of Pepsi since the numerous researches dedicated to the problem of nutrition indicated to the potential threats of the regular and unlimited consumption of traditional drinks produced by Pepsi and other companies, as well as the danger of fast food4. Such researches apparently forces the company to change products it offers to customers and Pepsi is constantly in search of new, better products.
Also, it is possible to mention a number of other low calories drinks similar to Diet Pepsi which proves the assumption that the creation of new type of ‘healthy’ drinks is one of the strategic goals of the company. Among these low calories drinks may be named Pepsi Max, Pepsi One, Caffeine Free Pepsi and Caffeine Free Diet Pepsi. It is worthy of mention that in Japan, there is Pepsi Nex which is considered to be the equivalent of Pepsi Max. Such a diversity of drinks also indicates at the fact that the company attempts to enlarge the segments of the market where the company wants to be presented by a particular type of drinks.
Nevertheless, its traditional drinks also remain quite popular. For instance, it is possible to refer to the various drinks which have many different fruit flavours, among which may be named the traditional Wild Cherry Pepsi which was introduced in 1988 and more recent drinks which have been introduced recently. Among the latter, it is possible to name Diet Wild Pepsi Cherry, introduced in 2005, Pepsi Lime, 2005, and Pepsi Jazz diet cola with three different flavours, including Strawberries and Cream, 2006, Black Cherry French Vanilla, and the most recent Caramel Cream, introduced in 20075.
At the same time, it should be said that there are some products created for specific markets and which are extremely popular in certain regions. For instance, Pepsi Nex has been already mentioned above and it is extremely popular in Japan. Also, it is possible to name Pepsi Twist that has been successfully marketed in Brazil and gained great popularity in that country. Pepsi Samba was quite successful in Australia. On the other hand, the introduction of new products for some specific markets is not always successful, for instance, Pepsi A-ha actually failed being introduced in India as Pepsi with flavour of lemon.
In fact, it is possible to underline that Pepsi does not avoid experiments in its production. In stark contrast, modern products of Pepsi differ dramatically from the original Pepsi drinks to the extent that it is only the brand name that unites these products but not some particular taste. At the same time, it should be said that the company tends to experiments in search of successful products and, if some drinks are not very successful, its production may be stopped. In this respect, it is worthy of mention Crystal Pepsi, a clear cola free of caffeine, sodium and preservatives, which was introduced in 1992 and phased out the following year. Similarly, the blue-coloured berry cola Pepsi Blue was introduced in 2002 but without great success and in 2004 its production was stopped6. Furthermore, the company also introduced coffee-flavored variations of drink. For instance, in 2005 Pepsi Cappuccino was released in Romania and Bulgaria.
Finally, it is necessary to point out that Pepsi International has already got a very important experience in fast food production and the company continues the production of snack products which though are not so popular and widely spread as drinks produced by the company. Nevertheless, these products are also worthy of attention since potentially they may be viewed as complementary products that may be consumed with Pepsi drinks. On the other hand, these products open the alternative way of the development of the company in the fast food industry since Pepsi possesses a recognizable brand that makes the introduction of new products, even if they differ from traditional products of the company, i.e. drinks, easier compared to its smaller competitors which lack the brand popularity.
Marketing strategy
Historically, Pepsi International tended to the expansion of the markets using various strategies. At the same time, the company never stopped in its development and always attempted to increase its presence in the market and enlarge the segments of the market where its product could be sold targeting at different types of customers. What can be said about the marketing strategy of Pepsi is the fact that this strategy or, strategies, proved to be really effective since the company is extremely popular and its position in the international markets seems to be unarguable.
First of all, it should be said that one of the major strategies of the company within the last forty years was the acquisition of or merger with other companies which business could be more or less successful but which brands were respectable and known to the mass audience. The realization of this strategy has started since 1960s when the company merged with Frito Lay. In such a way the company increased its potential and improved its position in the market. The acquisitions that followed later contributed to the considerable growth of the company transforming it not only in a major producer of soft cola drinks but also an important player in the fast food market. In this respect, it is worthy of reminding that the company possessed until 1997 such companies as Kentucky Fried Chicken, Pizza Hut, and Taco Bell which were the large chains of fast food restaurants. Even at the present days, the company still possesses such companies as Tropicana and Quaker Oats which are quite important to the further development of the company since they preserve the opportunities for Pepsi International to increase its presence in the fast food industry.
Nevertheless, the production of cola drinks always remained the prior strategy of the development of the company. In this respect, it should be said that the company tends to the diversification of the production offering a wide range of customers. In such a way, the company probably attempts to increase its presence in different segments of the market since the various products it offers to its customers are targeted at the particular part of the company’s clients. What is meant here is the fact that Diet Pepsi, for instance, is apparently destined to the customers that are concerned about their health and weight, drinks with various fruit flavors may also find its own niche in the market as well as coffee-flavored Pepsi. This means that the company attempts to meet the needs of a particular customer to the extent that, ideally, it is supposed that each customer would be able to find Pepsi drink he likes the most or, to put it more precisely, the drink that would meet his tastes.
Furthermore, the strategy to introduce a particular product for different countries is also worthy of a detailed discussion. It should be said that the creation of a unique drink for a particular country is really important and even essential since, at the present moment, the company operates worldwide. Naturally, different countries have different food culture and traditions and, therefore, they have different tastes and preferences not only in food but in drinks as well. As a result, it is practically impossible to offer some universal drink that will be equally popular in all countries of the world. Moreover, it is evident that the production of the only product is economically unreasonable since customers prefer the diversity of drinks they can choose from.
In fact, it is even possible to estimate that without the diversity of types of drinks Pepsi produces the company would hardly be able to large a larger share of the world market and outgrow its major competitor, Coca Cola. At the same time, the creation of the unique product or drink for a particular country opens larger opportunities to gain the larger share of this market. Obviously, before the introduction of the new products in some market, the company naturally conducts a market research analyzing not only the current situation and trends in the market, but also preferences and tastes of the local customers7. As a result, the specialists working at the company can create the product that will perfectly meet the tastes and preferences of the local customers. In such a way, the success of Pepsi’s product is practically guaranteed, though it does not always work as it was in the case of the introduction of Pepsi A-ha in India.
Also, it should be said that one of the main reasons for the commercial success of the company in the course of its development was the expansion in the international markets. In fact, this strategy is still relevant and is one of the dominant in the development of the company since it fully corresponds to the current challenges and demands of the global economy. This is why Pepsi International evolved from a national producer into a multinational company operating worldwide.
Pricing strategy
The pricing strategy of Pepsi International is another important factor that contributed to the general success in the international market. It is necessary to underline that the company has managed to adapt to the changing conditions that it has faced in the market in the course of its development and nowadays this strategy still proves to be effective. To put it more precisely, the company always attempted to adapt the price to the buying power of the customers, depending on the country where the company operated. What is meant here the company did not attempt to ignore the peculiarities of national markets and, instead, it targeted at making its products available to the mass customers. This means that traditionally Pepsi products were positioned as products that are sold at low prices and that are available to an ordinary customer.
It should be said that the price of Pepsi’s products could vary as well as it can do today. In this respect, it is possible to refer to the history of the company when it had faced a profound crisis in the period of the Great Depression. In the result of the general economic crisis the price of the company’s products turned to be too high for many customers that threatened to the future of the company. In such a situation, Pepsi made a very important step to improve its position in the market, namely, the company changed 6-ounce bottles by 12-ounce bottles. In such a way, the company increased the size of the bottle but the price did not rise proportionally to the size, but instead provided a customer with an opportunity to save money buying a larger bottle paying less money for 12-ounce bottles than he would pay for two 6-ounce bottles. By the way, the company uses this pricing strategy nowadays quite effectively, though, it should be said that, at the present days, the company rather tends to bottle its drinks in smaller bottles reducing their size even to 4 ounce.
However, it is still possible to find the traditional 12-ounce bottles as well. In such a way, the company attempts to vary the price and the size of the product stimulating customers to buy more at lower prices, or in contrast to buy less amount of its products paying more but due to the little size of the bottles, for instance, the price seems to be quite low and customers readily buy such products.
Furthermore, in the current situation, the company attempts to reduce the price of its product by means of the localization of the production. This means that the company, which is operating worldwide, while entering a new market, uses the existing companies and its plants to produce Pepsi drinks or snacks. At the same time, the company also builds new plants if it is economically profitable and the benefits really outweigh the costs of such investments. As a result, the company saves costs due to such localization of production in different countries due to the lower cost of transportation and the absence of fiscal barriers on the way of its products in the local market. Otherwise, the company should export its products from some country or countries worldwide that would increase the costs of transportation and forced the company to increase the price of the products, while fiscal barriers that still exist may increase the price of the product even more.
Product and marketing mix
Naturally, Pepsi needs an effective system of distribution to sell its products effectively in the international market. It is necessary to underline that Pepsi International is a multinational company that implies that its network should work effectively worldwide and, at the same time, it needs the development of some standards of work and common system of distribution.
Basically, the existing networks of the company has already proved their effectiveness since its products are sold worldwide and the sales rates steadily grow, though the level of growth may vary depending on the country. It is obvious that different countries where Pepsi operates have different level of economic development and the growth of sales naturally depends on the general economic situation in the country. In this respect, it should be said that the markets of the developing countries may be viewed as quite perspectives since they grow faster than markets of developed countries. Though in the latter, Pepsi has a larger network and, therefore, has larger opportunities to distribute its products faster and more effectively than in developing countries where its networks are not so well-developed, while the local infrastructure is often far from perfect that also deteriorates the effective distribution of the products of the company.
At the same time, it is worthy of mention that the company often needs to enter new markets that implies the necessity of building up a new network. Obviously, the development of a totally new network is quite costly. This is why the company often uses the potential of the existing network closely cooperating with the companies operating in the local market which has sufficient experience and a widely spread networks. In this respect, it should be said that the acquisitions and mergers of Pepsi turned to be quite helpful in the increasing of the effectiveness of the distribution of its products and sales rates.
Also, it should be said that the company amply uses the chains of large supermarkets in order to distribute its products faster and more effectively but, it is worthy of mention that small retailers are also widely used by Pepsi for the same purposes.
Conclusion and summary
Thus, taking into account all above mentioned, it is possible to conclude that Pepsi is the leading beverage and snack company that operates worldwide. Starting as a small company bottling its drinks in a drugstore, the company evolved in the world giant producing a variety of cola drinks which differ dramatically. It is necessary to underline that the company always used effective strategies of the market development and production. To put it more precisely, the company always focused on the needs of customer and was able to change the production in accordance with customers’ needs and preferences. What is meant here is the ability of the company to change the packaging of the product, creation of new products and increasing the number of products offered to specific customers. It should be said that the Pepsi International turned to be able to successfully enter international markets due to its ability to adapt to the needs of the particular market to the extent that it could even create the unique product for the market. At the same time, the company’s strategic goal was the expansion, including the use of acquisition and mergers.
As a result, nowadays the company occupies the leading position in the world market and is considered to be quite perspective in the development of its fast food production while in the production of cola drinks Pepsi is practically unbeatable leader. This is why it is possible to speak about great perspectives of the company in the future since it has an essential basis having the worldwide network while its brand is one of the most recognizable brands in the world.
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