Pepsi SWOT Analysis

Pepsi SWOT Analysis 2018

 

#Introduction:

Pepsi is one of the leading snacks and beverages brands with 22 iconic billion dollar brands in its product portfolio.  The brand is innovating its marketing and product strategy for faster growth. Competition in the soda industry has grown intense and therefore every brand has to invest a lot in marketing as well as product innovation to remain popular and competitive.  Apart from investing in marketing and R&D, Pepsi has also focused on transforming its product portfolio by adding more nutritious and healthy choices. Today, Pepsi and its products are popular in more than 200 countries. Its investment in digital has started paying off and the fantastic financial results of 2017 were a result of the efforts it made over the past five years. Pepsi is also focused on CSR and sustainability to maintain a great image and good reputation. This is a SWOT analysis analyzing the strengths, weaknesses, opportunities and threats before Pepsi.

 

#Strengths:

• Strong brand image:

A strong brand image is one of the biggest strengths of Pepsico. The brand is famous all over the world and its products are popular in more than 200 countries.  Currently, Pepsi has only one major rival in the world, Coca Cola. However, its strong image and reputation have helped it manage the competitive pressure very well. Moreover, the brand invests a lot in marketing as well as reputation management. Apart from advertising and marketing, it also invests in CSR and sustainability to retain its popularity and trust.

• Strong financial performance –

Strong financial performance is also a key strength of Pepsi. In 2017, its net organic revenue grew by more than 2%. This performance was based on the last five years of efforts and investments it made into marketing, digitization and other areas.   Its net revenue grew to $63.5 billion dollars. It was a growth of around 725 million dollars over the previous year. High level of net revenue and income allows the brand to spend more on marketing as well as Research and Development.

• • Global presence supported by a strong supply chain and distribution network – Another major strength of Pepsi is its well managed global supply chain and distribution network. In 2017, it further extended its foodservice partnerships that allowed it to extend its distribution and market share. The brand brings its products to the market mainly through direct store delivery, customer warehouses and distributor networks. Depending upon the customer needs as well as local trade practices and product characteristics, the company decides which distributor network to use. It has a large list of suppliers that are spread throughout the world in various countries which allows it to source raw materials efficiently as well as at low prices.
  • Strong marketing capabilities – Strong marketing capabilities of the brand are also one of its major strengths. Pepsi invests a very large sum in marketing. In 2017, it spent more than 4 billion dollars on marketing out of which 2.4 billion dollars were spent solely on advertising. It has spent a lot on improving its digital capabilities over the last 4 years. Its digital campaigns have been very successful in the recent years. The ‘Bring Home Happiness’ campaign launched in Greater China was highly successful and garnered more than 1 billion views for its 20 minute long video. Similar, digital and other marketing campaigns run by the brand have also been highly successful.
  • Large and varied product portfolio – Another key strength of the brand is its large and varied product portfolio. The brand has 22 billion dollar brands in its product portfolio each of which fetches more than a billion dollar per year in revenue. During the recent years, the brand has innovated its product portfolio a lot adding more of nutritious and healthy products in both snacks and beverages categories. It is continuously investing in making its production and supply chain more agile as well as research and development to make its supply chain more sustainable as well as products healthier.

 

#Weaknesses –

• Overdependence on the US market: Despite everything the brand still depends on the US market for a major part of its revenue. In 2017, Pepsi earned more than 58% of its revenue from US and only 42% from outside US. To reduce its dependence on the US market, it would need to release more suitable products into the local markets internationally and particularly Asia. However, the brand has also felt the bite from a stronger dollar.
• Reduced Net revenue in Middle East :

The brand’s net revenue in the Middle East has fallen in the year 2017. The fall was due to weakening Egyptian currency. Fluctuations in the international currency exchange rates have a negative effect on the revenue of Pepsi from time to time.

 

#Opportunities:

• Technological innovation down the distribution network: The brand has a lot of opportunities that can help it grow its brand and businesses. Technological innovation and digitization offer the brand growth opportunities in several areas from supply chain management to production as well as marketing and distribution network. Both digitization and IoT offer major opportunities of growth and can help its distribution network expand and become more efficient. Investing in R&D as well as digital innovation offers easier opportunities of growth and market expansion for Pepsi.
• CSR and water recycling: Investing in CSR and water recycling is also an opportunity that the brand can very well exploit for market and business growth. While it has already invested a lot in these two areas, there is opportunity for more. Investing in CSR specifically is very important for the purpose of image and reputation management. It is because in past, Pepsi has faced severe protest over being a cause of water crisis in several regions.
• Partnerships with related businesses: The brand can also find faster growth through partnerships with related businesses. It entered into a partnership with Starbucks some years ago to sell ready coffee beverages. It can enter similar partnerships with other fast food and beverages brands to increase its sales as well as revenue.
• Growth through acquisitions: The brand can also find faster growth through acquisitions and by acquiring smaller and related brands.

#Threats:

• • Legal and regulatory threats: Legal and regulatory threats pose a major risk to big businesses like Pepsi. Compliance risks can sometimes result in major fines and lead to losses. It is why big bands like Pepsi focus especially on compliance and have compliance teams that take care of legal and regulatory risks. Noncompliance can cause losses that can run into billions.
  • Competitive pressures: Competitive pressures also pose major risks to the brand and its business. Coca Cola is its biggest competitor and the two brands remain engaged in very tight battle which keeps raging and getting intenser. Both brands invest heavily in marketing and if any of Pepsi’s new products flops, then it can lead to losses as well as increased competitive pressure.
  • Stronger dollar and fluctuation in foreign currency exchange rates: A stronger dollar and fluctuation in the foreign currency exchange rates causes losses for Pepsi. For past few years, the US dollar has kept growing stronger internationally leading to reduced revenue from Pepsi’s international business.

#Conclusion:

Pepsi is a strong global soda beverages brand. In the recent years, it has expanded its product portfolio to include more of healthier products in both snacks and beverages category. Apart from that investment in marketing and digitization have also started paying off and the brand’s revenues have kept increasing. Its higher net organic revenue in 2017 was a result of its investment and efforts made in these areas over the past five years. However, a stronger dollar, compliance pressures and competitive pressure pose major risks to the brands. To grow farther the brand can strike new partnerships as well as acquire smaller related businesses.  Investing in supply chain innovation and expanding the distribution network can also help the brand grow faster.

Sources:

Pepsi Annual Report 2017