Pepsi Business Growth and Marketing Strategies

Business Growth and Marketing Strategies of Pepsi

Introduction

Pepsico is one of the two leading soda beverages brands in the industry. It was formed after the merger of Pepsi and Frito lay in 1965. The brand continued to perform well even during the economic recession. The current CEO of Pepsico is Indra Nooyi under whose leadership, the brand has continued to expand its business and transform its product portfolio. 2017 was an year of healthy growth for the brand when Pepsico achieved a core organic revenue growth of 2.3% [1]. Even after the recession, the soda brands have continued to face difficulties because of the sweeping changes globally throughout the industry.  Soda industry is marked by intense competition and the beverages brands are spending heavily on marketing as well as product innovation in order to achieve faster growth. Pepsi has been known for creating exciting marketing campaigns. It has 20 billion dollar brands in its portfolio. Its income from food products has kept growing and in 2017 the brand earned 53% of its revenue from food products and only 47% from the beverages products. US is still the largest market for Pepsi from which Pepsi earned 58% of its revenue in 2017 [1]. However, the brand is investing in international markets too for faster growth. It has organised its business in six reportable segments. The brand is also investing heavily in technology for superior growth and for marketing. Marketing is one of the primary drivers of business growth for Pepsi. The soda giant invests billions in advertising and promotion. Its nearest competitor is Coca Cola and both brands are engaged in an intense battle. Each one invests heavily in marketing and product innovation for growth.
Pepsi along with its consolidated subsidiaries employs 263,000 people out of which 113,000 were employed in US alone[1].

 

Marketing strategy of Pepsico:

 

Market Positioning and segmentation:

Before moving on to the details of Pepsico’s marketing strategy, take a look upon how it has positioned its brand and products in the market. It has positioned itself as a snacks and beverages brand that include nutritious and low calorie choices apart from normal soda products. There are 22 iconic  billion dollar brands in its portfolio. Pepsi is positioned as a brand that reflects young energy and this is also a key theme across its advertising and marketing campaigns. The customers of Pepsi are mainly from the 13 to 35 age group. In other words you can say, it is a brand for the millenials.  Pepsi has maintained a pricing strategy that has made it an affordable brand. Its customers are from all income segments including lower middle class to upper class. Now, it has also released smaller options for its several soft drinks to make its products more affordable and accessible. Its customers include the teenagers and youth with a modern and fast moving lifestyle.

Large Investment in Marketing

Pepsico has traditionally relied heavily on marketing for driving sales and market growth. Like Coca Cola it too spends heavily on marketing and promotion. In 2017, its marketing budget was 4.1 billion dollars and that of Coca Cola was 3.9 Billion dollars.  Pepsi spent 2.4 billion dollars solely on advertising [1]. However, the world of marketing has changed a lot with the rise of the digital technology. A large part of Pepsi’s marketing budget goes to digital marketing and advertising. Apart from that, a large sum is also spent on television advertising and other traditional methods of advertising. Any leading brand is investing heavily in digital technology for marketing and better customer experience.  Since the rise of social media, brands are connecting with their customers in real time with promotional campaigns. On the one hand, social media has helped the brands with marketing to allow them to connect with millions of customers globally in an instant and without any financial investment. On the other hand, it has also made the brands more conscious regarding product quality and customer service because any comment or news shared on social media reaches millions in a few seconds.

 

Product and Packaging Innovation:

Pepsi has continued to invest in product quality and packaging to stay the customers’ first choice. However, apart from these things, it has continued to diversify its product portfolio bringing new, healthier and more nutritious choices for its customers. Behind its excellent marketing strategy, there is a diverse and rich product portfolio filled with a large variety of flavours and nutritious and tasty choices. Product quality and packaging are very important elements of Pepsi’s marketing strategy where it has continued to innovate whether in terms of product quality, variety as well as packaging. Its reward winning design team has continued to innovate with package design. Regularly updating the package design also helps retain customers and attract new ones. Attractive packages can also drive sales higher and it is why Pepsi has continued to innovate the packaging style and sizes based on consumer demand and expectations. With time, people’s taste and choice of flavours has changed a lot. They are looking for healthier products and product innovation helps churn demand. However, apart from investing in product quality and design, it is equally important to invest in marketing and Pepsi promotes its brand through both digital and traditional channels.

Digital Marketing Campaigns and Big Data:

Digital strategy is a very important part of its marketing campaigns. Effectiveness of Pepsi’s digital campaigns is also an important determinant of its sales and profits. Popularity of these digital campaigns affects its level of sales and profits directly. Some of its digital campaigns have enjoyed immense popularity like the ‘Bring Home Happiness’ campaign containing a 20 minutes long video [1]. This video grew so popular that people watched it more than one billion times. It leveraged the power of social media to run the campaign.  The brand is using digital technology in other aspects of business too but in the area of marketing, the role of digital technology and that of social media is especially very important. Since a very large number of customers are now found online and can be reached through social media and other digital channels, digital marketing has become the central focus of Pepsi in terms of marketing. Apart from promoting its brands separately, Pepsi also uses digital marketing for creating higher loyalty and higher customer engagement. Its another promotional campaign titled ‘Made for This’ targeting the millennial generation and featuring High school athletes was also highly popular. The campaign that featured young athletes underscored that Gatorade was made to fuel young athletes and their passion [1]. Marketing and media environment are changing rapidly which have made it mandatory for the brand to use new channels for advertising and promotions. Pepsi is also leveraging Big Data to create real time marketing messages that help it market its brands more effectively. The brand also uses consumer research for the purpose of designing marketing strategies that help it grow its reach and effectiveness.

Sports Marketing and sponsorships:

Apart from these promotional campaigns, the brand has also relied heavily on sponsorships and partnerships to grow brand awareness as well as for building customer loyalty. 2017 marked its second year of partnership with UEFA champions’ league. Through this partnership, it has continued to promote some of its biggest global brands including Lays, Gatorade and Pepsi across more than 100 markets [2].  ‘Sports marketing’ is a key part of the brand’s marketing strategy. The relationship between Pepsi and Sports is old. It has struck partnerships with several sports bodies globally to promote its brand in most important markets. In 2015, it announced a new marketing partnership with National Basketball Association. This partnership will also allow for the promotion of Pepsi products through the WNBA, NBA Development League and USA Basketball [2].   Pepsi owned Gatorade already had a partnership with NBA. The new partnership will promote its Mountain Dew through signage and other branding efforts during the NBA events. Pepsi has entered similar partnerships in cricket too for the promotion of its brand and products.  In 2016, it entered a partnership with the Board of Control for Cricket in India. Pepsi has used this partnership to promote its Gatorade sports drink on the field [3]. ‘Sports Marketing’ is known to generate highly favourable results for the soda brands and the competition between Coca Cola and Pepsi is intense on the sports field too. The design team of Pepsi focuses on creating meaningful experiences for the customers and consumers during major global events like Super Bowl LI to Milan Design Week to the UEFA Champions League Final.

Pepsi Social Media Marketing:

Marketing is not complete in the 21^st century without social media. Facebook to Twitter and YouTube and even Instagram, all of these are the most favourite stops of the leading brands. Both Coca Cola and Pepsi have maintained an impressive social media presence that works to drive user engagement high and create higher level of customer loyalty. Most of the video campaigns run by Pepsi have become so successful because it could leverage the power of social media channels. One of its campaigns in Greater China garnered more than a billion views. Its other campaigns on social media have also been liked by people. Video campaigns can be run through YouTube as well as Facebook and Twitter. Moreover, the Facebook and Twitter accounts can be used to keep fans and followers updated. Let’s have a look over how Pepsi has connected with its fans and followers through social media.

Facebook strategy :

Facebook is the primary social media channel that brands and marketers utilise for marketing and promotions.  On Facebook, Pepsi has more than 37 million followers. However, it also has separate accounts for separate products. Mountain Dew has more than 8.5 million followers and Pepsi Max also more than 1 million [4]. One can easily judge the popularity of the brand by its number of fans. It promotes its products as well as sponsorships and events, all through its Facebook accounts. It is not only about the social media campaigns but it also promotes its TV ads and other promotional events on Facebook.

Twitter strategy:

Twitter is also a very important stop for the soda beverages brand where Pepsi has several different accounts for the different countries like Pepsi India and Pepsi Cambodia. Pepsi’s main Twitter account has more than 3.1 million followers. Like Facebook, Pepsi also promotes its brand and products through Twitter. Apart from photos and videos of products and campaigns, it also uses Twitter to share picture and video advertisements on Twitter. Just like Facebook, videos of promotional events are also shared on Twitter which helps it reach its millions of followers. However, the content is not the same across all the Twitter accounts since the accounts differ from country to country.

YouTube Strategy:

Apart from Facebook and Twitter, Pepsi also uses its YouTube account to promote its brand and products through attractive videos.  It has uploaded more than 140 videos to its ‘YouTube’ account including advertisement and educational videos promoting its brand and products.  It has more than 8,00,000 followers on the video sharing social media channel. YouTube is the most attractive social media platform for sharing videos and several of its videos have been watched more than 4 million times which shows how YouTube can expand a brand’s reach without any major investment [4].

Instagram Strategy:

Since Pepsi uses both pictures and promotional videos to promote its brand and products. It shares a very large number of pictures for promotions, many of which are same as its advertisements. These posts are liked and shared by its followers. On Instagram, it has more than a million followers.   However, Pepsi shares both videos and pictures on Instagram since the social media channel has both the features.

Apart from these digital channels and social media, Pepsi also uses traditional mediums of promotion like print and Television. In this way, it uses a large mix of traditional and innovative channels for the promotion of its brands and products. It does not just increase its reach but has helped maintain a large and loyal customer base globally.

 

Major Investments in CSR and Sustainability:

For global brands like Pepsi whose portfolio includes several respectable names, it is critical to maintain a good image and reputation. Any form of damage to reputation or brand image due to any reason or loss of consumer confidence can cause a fall in demand for Pepsi’s products. To retain its popularity and strong image, Pepsi invests in CSR and sustainability. It launched its ambitious Performance with Purpose Agenda 2025 which focuses on several things including sustainability. Agenda 2025 has three important focus areas that include people, products and planet. As a part of this agenda, Pepsi has achieved some key milestones that include –

• Assisting 6 million women and girls through investments in communities throughout the world.
• replenishment of 2.7 billion litres of water locally in high risk watersheds.
• Provided 11 million people with safe water access since 2006.
• Associates completed 1 million hours of training in 2017.
• To cut  down on fuel emissions and fuel costs Pepsi placed one of the largest orders for Tesla’s new electric semi trucks for its distribution network.
• Provided 260 million servings of nutritious foods and beverages to the underserved communities and customers. [1]

                 

– Pepsi Business Growth Strategy –

Pepsi’s soft drinks are popular because of their diverse flavors. Its snacks and beverages are popular in more than 200 countries.  Apart from developing new ingredients, flavors and products, the brand has continued to invest in reformulation to improve the quality of existing products. While the brand is quite popular and sells in more than 200 countries, it is facing intense competition from Coca Cola. Moreover, consumers’ tastes and expectations have kept changing which also require change in business strategy for remaining competitive and for continuous growth.   This makes it essential for brands to continuously track consumer demand and accordingly adjust its strategic course for business performance. Pepsi has continued to innovate its marketing and business growth strategy over time so as to retain its popularity and increase demand.

Product Innovation for Market Growth:

This decade has seen some major changes in consumers’ preferences. Consumers want more healthy and nutritious beverages that suit their health. It is because a very large segment of the world  population has grown highly health conscious. In order to respond to the changing preference of the consumers, the brand has released a large range of health friendly products that contain less sugar or have high nutritional value.  However, its commitment to health and excellence has served the brand well in 2017, when it again delivered strong operating performance. The brand added several health friendly and nutritious products to its customers. It expanded its selection of low and zero calorie beverages as well as Aqua Minerale water + juice along with new flavours of Kevita Master Brew Kambocha. Apart from them, the brand introduced Tropicana Probiotics [1].  Its Pepsi zero sugar or Pepsi max also continued to gain throughout the world. The brand made similar innovations to its products in the food segment as well. In the food category, the brand introduced Three Minutos which is an affordable whole grain oat based food product meant to deliver daily nutrition to the Latin American consumers. In US and UK, it introduced Veggie Crisps, Hummus Crisps and Sweet Potato Crisps. It also added a new product Simply Cheddar to its Simply brand. It has divided its products into three categories based on the level of nutrition called Fun for You, Good for You and Better for You. Apart from them, the brand also invests in reformulation of the existing products and flavors to suit the customers’ choice.  This has also helped Pepsi unlock new opportunities for growth and grow its popularity cross the health conscious consumer segment. Pepsi also utilised retail and food service partnerships for competitive advantage. It sold more than 40,000 Hello Goodness vending machines, coolers and racks across US. Since US is the most important market for Pepsi and these machines offer more nutritious snacks and beverages, they will help the brand expand its presence across US faster and deeper.

R&D and Packaging Innovation:

Business growth in a highly competitive industry like the soda industry depends on several factors and it is why brands have to invest in research and development to find faster business and market growth. In 2015, 2016 and 2017, Pepsi invested $754, $760 and $737 millions in Research and development [1]. However, this investment excludes the cost of consumer research. Consumer research is an essential part of the brand’s growth strategy where it studies the consumers’ expectations and preferences.  Product innovation becomes essential because of continuously evolving tastes of the consumers and there are other factors too that necessitate continuous changes across the product spectrum. The brand is engaged in a very wide variety of research and development activities globally with the purpose of matching consumer demand as well as finding sustainable growth. These activities include:

• Developing new products and ingredients as well as flavours and products.
• Reformulating existing products to improve their quality and appeal.
• Improving and modernizing manufacturing processes for cost reduction.
• Improving product quality as well as safety and integrity.
• Developing or making improvements to dispensing equipment and packaging technology.
• Developing or making improvements to package design and portion sizes.
• Identifying opportunities to grow, transform and broaden its product portfolio.
• Development of products with better nutrition profiles that reduce added sugars, sodium or saturated fat using sweetener alternatives or flavour modifiers.
• Offering more products with higher nutritional value whole grains, fruits and vegetables, dairy, protein and hydration.
• Investing in capabilities that support global e-commerce and sustainability efforts [1]

Pepsi invests in R&D for continuous product innovation and for finding faster growth. Continuous product and process innovation helps at reducing costs as well as improving product quality and catering to customer demand better. Its R&D centers are located throughout the world from US and UK to Brazil, China, India and Ireland. In terms of packaging too the brand is focusing on developing sustainable packaging material. It teamed up with leading universities as well as governments and innovators in 2017 to develop biodegradable film resins that help it meet its sustainable packaging needs. All these things are essential for business growth from reducing production costs to increasing the efficiency of business processes.

Digital technology and e-commerce for business expansion:

Pepsi is a global brand. However, to achieve superior growth and remain competitive, it is also investing in digital technology and e-commerce that does not just improve its reach but also helps the brand create better customer experiences. It is already using big data to understand customer demand and consumption patterns based on which it can serve better products as well as marketing campaigns. Digital innovation is one of the megatrends that has affected Pepsi’s business growth globally. Value chain automation as well as internet enabled services, big data and social media are all affecting how Pepsi connects with its consumers and finds business growth. The brand has invested in digital technology down the supply chain to find greater agility and efficiency which has led to higher productivity. Digitalization has helped Pepsi respond faster and better to the customer demand. Growing e-commerce in US and China was one of the primary factors driving business growth in 2017 in these markets. Its e-commerce is already supported with big data and predictive analytics that are used to create real time marketing messages. Big Data is also helping understand and cater to customer demand for food products in North America. Higher level of digitalization in North America led to higher RoI on advertising and marketing. In the coming years, the brand may increase its focus on digitization which is going to be the primary differentiator for Pepsi. It has already won several rewards for its excellence in e-commerce. Pepsi is using IoT capabilities to know when plant equipment will need maintenance as well as how to reduce energy consumption [1]. This mix of e-commerce, digitization and data analytics has enabled Pepsi to improve the consumer experience which can be the driver of business growth in the long and the short term.

Conclusion:

21st century is marked by intense competition and in this era you cannot do without continuously experimenting and innovating. Pepsi is continuously working to make its value proposition more attractive. In this regard, on the one hand, it has worked to make its product choices more suitable for the demands of the new generation which is more health conscious. Simultaneously, it has improved the packaging and portion sizes of its products like making smaller 250 ml plastic bottle sizes of various drinks available to the customers that suit both their pockets and choices. Its growth strategy is based on attractive pricing, attractive packaging and an attractive product strategy that includes healthy and nutritious products. The brand is also  innovating its supply chain to reduce production costs and working to keep its environmental impact minimized. The results from investment in Digital innovation were obvious in 2017, when it delivered organic revenue growth of 2.3%. The results of 2017 built on the investment the brand had made in all these areas during the previous five years. It has set ambitious plans for the future which it has named Agenda 2025 [1]. However, Pepsi and Coca Cola are engaged in a very tight battle and both are quite aggressive about their marketing and business growth strategies.