8/14/2019 18048055 Pepsi Marketing Summer Training Report
1/92
DAYALBAGH EDUCATIONAL
INSTITUTE
AGRA
SUMMER TRAINING REPORT
ON
PARTNER RELATIONSHIP MANAGEMENT OF PEPSICO INDIAS FOBO
VARUN BEVERAGES LTD.
&
ACCEPTANCE OF SLIM DIET CANS IN THE TRANS-YAMUNA AND AGRA
MARKETS.
SUBMITTED BY C. TILAK PRAKASH
ROLL NUMBER: 077508
8/14/2019 18048055 Pepsi Marketing Summer Training Report
2/92
ACKNOWLEDGEMENT
There is always a sense of gratitude one expresses to others for the helpfuland needy service they render during all phases of life. I have completed thistraining with the help of different personalities. I wish to express mygratitude towards all of them.
It gives me immense pleasure to express my deep regards and
sincere sense of gratitude to M r. Manmohan R P aul Vice-president(marketing)for his guidance throughout the training. Thank you sir for yourable and worthy guidance. I would also like to thank Mr. Rana, Mr. PrashantSharma and Mr. Hitesh for their support which helped me throughout mytraining.
I would also like to thank my teacherProf. K Shanti S aroop forsteering my confidence and capability for giving me insight into training bygiving me exposure to the arena of competitive and real world.
Lastly I would like to thank my parents and friends for theirconstant support during the duration of my training.
Thank You One and All
C. TILAK PRAKASH
ROLL NO. 077508
BBM 5TH SEMESTER
2
8/14/2019 18048055 Pepsi Marketing Summer Training Report
3/92
TABLE OF CONTENTS
ABSTRACT12
Research Methodology........................................................................................15
Report and Analysis of Data Collection .26
CSD Industry Overview.27
CSD Industry analysis31Market Analysis and Industry Challenges......37
Industry process Improvement Opportunities46
PepsiCo International61
History..61
PepsiCo The parent Company.64
Overview PepsiCo International..66
How PepsiCo overcame Competition.68
SCAs70
PepsiCo India..74
Introduction..74
Overview Of PepsiCo India...76
PepsiCo with RKJ Group..78
Strategic Divisions.80
Marketing Overview of PepsiCo India81
Marketing environment.81
Value Delivery83
Value Chain85
4 Ps.88
Strategic Marketing.100
Factors Influencing Marketing Strategy100
3
8/14/2019 18048055 Pepsi Marketing Summer Training Report
4/92
Key Success Factors...112
SCAs.113
Communicating with Customer.115
Advertising116
Porters Five Forces.135
SWOT Analysis138
Porters Grand Strategies143
BCG Matrix145
Recommendation.147
Conclusion.153
Bibliography.............158
Appendices160
4
8/14/2019 18048055 Pepsi Marketing Summer Training Report
5/92
ABSTRACT
Title: PARTNER RELATIONSHIP MANAGEMENT
OF PEPSICO INDIAS FOBO VARUN BEVERAGES
LTD.
This study titled as above aims at exploring the strategies followed by PepsiCo India tomanage its various partners both internal as well as external since it started its operations
in India. This study will also explore what changes PepsiCo India is bringing in order to
increase its visibility and market presence to tackle the ever increasing hold of Coca Cola
on the Indian beverage market.
This study aims to explore the overall functioning and position of PepsiCo India in the
marketplace. It also aims to know customer perception regarding PepsiCo India. To know
about these facts this report will primarily focus on the partner relationship management
of PepsiCo Indias main carrying and forwarding agency Varun beverages limited.
To know the overall functioning of PepsiCo India is important in order to get an
understanding of the topic. It is also important because is will explore the sales and
distribution system of Pepsi India which is considered to be one of the strongest not only
in the country but also worldwide. This project also covers a detailed observation and
study of the VISI-PURITY campaign and the various retail initiatives specially related to
the Slim Diet Cans and their acceptance in the Trans-Yamuna and Agra markets both of
which are upmarket towns
The various observations and studies were done through route rides, direct marketing,
market visits and from the sales team of PepsiCo India.The aim of the overall training
5
8/14/2019 18048055 Pepsi Marketing Summer Training Report
6/92
was to have a complete and thorough understanding of the process of the various stages
of product movement from the bottling stage to the final consumer and the various
agencies which influence and help move these products. Also the study entails the various
push and pull strategies actually used by us suffuse the trans Yamuna Market with slim
diet cans and also studies the acceptance of the newly introduced Slim Diet Can range.
Although this study will explore the overall functioning of PepsiCo India, but in order to
be precise it will primarily concentrate on the beverage segment of PepsiCo India.
6
8/14/2019 18048055 Pepsi Marketing Summer Training Report
7/92
LITERATURE REVIEW
PepsiCo is one of the oldest, largest and most successful beverage and snack food
companies in the world. PepsiCo was founded by Caleb Bradham in 1902 in USA. Today
PepsiCo and its affiliates operate in more than 140 countries in the world and generate
revenues in excess of $ 40 Billion. In its pursuit of never ending growth and expansion,
PepsiCo entered India in 1989 in a joint venture with Punjab Government. However,
PepsiCo India very soon started its beverage operations in collaboration with the R K
Jaipuria group.
Soon after entering the beverage segment PepsiCo Established its dominance in the
market owing to its expertise in sales, marketing, operations and local collaboration.PepsiCo maintained its market dominance for many more years to come. However, this
advantage slipped and PepsiCo had to concede the market leadership to Coca Cola India.
Several actors were responsible for this development. But, the most important are;
Ad campaigns targeting regional markets.
Discontinuation of Slums in the distribution network by PepsiCo. This move by
PepsiCo adversely affected its position of a market leader because while PepsiCo
discontinued the use of Slums in its distribution network, Coke continued it and
within one year, it was able to snatch considerable market share from PepsiCo.
Acquisition of well-established and favored brands like Thums Up and Limca by
Coca Cola India. These two brands still constitute a bulk of sales for Coca Cola
India.
To explore the reasons behind these developments this study will analyze the marketing
initiatives and policies of PepsiCo India in detail with particular focus on its partner
relationship management.
7
8/14/2019 18048055 Pepsi Marketing Summer Training Report
8/92
The above-mentioned objectives can be achieved by carrying a proper and planned
research involving different types and methods. The data collected folaid the foundations
for the study and gave a platform for the analysis and findings which lead to the
fulfillment of the objectives.
The data collected for research is primary and secondary. Primary data is collected by
observation, interviews and questionnaires. While secondary data is collected from the
internet through different case studies and reports on the CSD industry. Observation
method was carried in East-Delhi to know the market position and market share of
PepsiCo products. Interviews of people from the sales department were conducted to
know the sales and distribution network and marketing policies of PepsiCo India, while
questionnaire method was used to know about the customer perception of the slim diet
can portfolio. Secondary data is used to know about the CSD industry and the Company
i.e. PepsiCo.
The data collection and analysis paves way for the recommendation ad conclusion of the
study that reveals some important findings regarding the strategy and corporate structure
and strategy of PepsiCo India.
CSD INDUSTRY OVERVIEW
8
8/14/2019 18048055 Pepsi Marketing Summer Training Report
9/92
The soda drink and bottled water industry includes more than 3,000 companies that
manufacture and distribute beverages. Only in the USA combined annual revenue is more
than $70 billion. Coca-Cola and PepsiCo hold more than 50 percent of the market,
following strong consolidation in the past decade. Only a few other companies have
annual revenue above $500 million. Most are local or regional manufacturing and
bottling operations with annual revenue under $100 million.
Competitive Landscape:
Demand for non-alcoholic beverages is driven by consumer tastes and demographics. The
profitability of individual companies depends on effective marketing. Large
manufacturers have economies of scale in production and distribution, with average
annual revenue per production worker close to $1 million. Small companies can compete
by producing new products, catering to local tastes, or selling at lower prices.
Products, Operations & Technology:
Nonalcoholic beverages include sodas (carbonated soft drinks, or CSD), bottled waters,
juices, and a large variety of mixtures. Sodas account for about 60 percent of the market.
The manufacture and distribution of most national soda brands, including Coke and
Pepsi, is a two-tiered process. The primary manufacturer produces a flavored syrup called
concentrate that is sold to local bottlers who manufacture and distribute the finished
product. In a typical bottling operation, the flavored syrup, corn syrup (sugar), and
filtered water are mixed in appropriate proportions, carbon dioxide gas is injected, and
the finished soda product is poured into bottles or cans, which are capped, labeled, and
packaged.
The two-tiered structure is most efficient for national companies with large volume,
because the manufacturing process is simple and because water, the main ingredient of
sodas, is expensive to ship and is available locally. Smaller companies combine the syrup
production and bottling operations in one plant. For soft drink bottlers, the major raw
materials, aside from the flavored syrup, are corn syrup and containers -- glass bottles,
aluminum cans, or plastic bottles made from polyethylene terephthalate (PET).
Bottlers frequently operate sizable distribution systems, including warehouses and fleets
of specialized delivery trucks. Production and distribution volume is usually measured in
9
8/14/2019 18048055 Pepsi Marketing Summer Training Report
10/92
cases of 192 ounces, although actual cases of 12-ounce cans now contain 288 ounces.
Coca-Cola produces more than 4 billion cases of soft drinks per year; PepsiCo, over 3
billion. In addition to producing canned and bottled soft drinks, large manufacturers sell
sweetened syrups to restaurants and other retailers that produce the finished product at
the point of sale by mixing the syrup with carbonated water to produce fountain products.
About 35 percent of Coca-Cola's US product is in the form of fountain sales and 60
percent in bottled sales.
The manufacturing process for most non-soda beverages is usually more complicated
than the mix-carbonate-and-bottle soda process and therefore isn't usually handled by
local bottlers. In most cases, non-soda products are bottled by the manufacturer and
distributed through the same types of channels--wholesalers, distributors, brokers--used
by food manufacturers, although bottlers may also participate. Bottled waters, a rapidly
growing category of beverage, are either bottled at specific springs or made locally from
filtered tap water.
Manufacturers and bottlers typically operate under contracts, called Bottler Agreements,
that specify the territory within which the bottler has an exclusive right to make, sell, and
distribute the manufacturer's brand in bottles or cans. Fountain products are often sold
separately through wholesalers, under Distributor Agreements. Bottle and fountain
territories may overlap and bottlers may also be fountain distributors. Coca-Cola sells
products through about 80 local bottlers and 500 fountain wholesalers.
Bottler Agreements usually require that container and packaging materials be bought
from suppliers that are approved by the manufacturer, and that the bottlers not handle
competing products. Agreements also specify the price that the bottler must pay for
concentrate. The manufacturer has no control over the prices the bottler charges
customers, and usually isn't obligated to spend money for marketing or promotions in the
bottler's territory. Often, however, the manufacturer will provide marketing and
promotion support. In one year, for example, Coca-Cola provided about $600 million inmarketing support to Coca-Cola Enterprises, its largest bottler. Many Coke and Pepsi
bottlers hold perpetual contracts that can be terminated only for breach of contract.
The industry depends on technology for developing new products in the labs
and packaging product at the plants. Most bottling plants are highly automated with a
combination of mechanical automation and computerized robotics.
10
8/14/2019 18048055 Pepsi Marketing Summer Training Report
11/92
Sales & Marketing:
Beverage manufacturers, bottlers, and wholesalers sell products through a variety of
channels, such as food and convenience stores, restaurants, vending machines, mass
merchandisers, and institutions, including schools and colleges. Soda bottlers typically
own local vending machines. The marketing approach to each of these channels is quite
different and often includes promotional spending. Large manufacturers may also sell
directly to national accounts and usually advertise on national or regional TV and in print.
Manufacturers typically produce a line of brands and often test and introduce new
products into the market through their existing distribution channels.
Target Segment Youth:
The child/youth market is of crucial importance to drinks manufacturers as under-19s
constitute 20-30% of the population in western countries, making them a substantial and
lucrative consumer base. With many life-long consumption habits formed during youth,
gaining high penetration in the children's and teenagers' market is of key importance tomanufacturers with long-term ambitions and growth targets.
Targeting Soft Drinks to Youths enables companies to:
Assess the size of the soft drinks opportunity by age group
Understand children's values and motivations and their impact on the soft drinks
market
Develop incumbent market position through enhanced targeting and promotion
Assess trends in new product development in the children's market over the
course of the past 2 years
Combine business to business executive opinion and local field research
Analysis and Industry Challenges:11
8/14/2019 18048055 Pepsi Marketing Summer Training Report
12/92
In order to survive in this environment, companies must consider the market trends that
will likely shape the industry over the next few years. This will help soft drink companies
to understand the challenges they will encounter and to turn them into opportunities for
process improvement, enhanced flexibility and, ultimately, greater profitability.
Market trends for the soft drink industry can be summarized by six fundamental themes:
Changing consumer beverage preferences, featuring a shift toward health-oriented
wellness drinks
Growing friction between bottlers and manufacturers in the distribution system
Continually increasing retailer strength
Fierce competition
Complex distribution system composed of multiple sales channels
Beverage safety concerns and more-stringent regulations
Consumers turn to wellness and healthy drinks
In much of the developed world, a significant portion of the population is overweight or
obese. This includes two-thirds of Americans and an increasing number of Europeans.
Consequently, many people have started to actively manage their weight and change their
lifestyles, a shift that is reflected in their choices in the beverage aisles:
Demand has increased for beverages that are perceived to be healthy
Energy drink consumption has also climbed, due to the increasingly active
lifestyles of teenagers
This trend towards healthier drinks has created a number of new categories, and changed
the consumption trends of the beverage industry as a whole. While previously dominated
by carbonated soft drinks, the industry is now more evenly balanced between carbonates,
and product categories with a healthier image, such as bottled water, energy drinks and
juice:
12
8/14/2019 18048055 Pepsi Marketing Summer Training Report
13/92
While carbonates are still the largest soft drink segment, bottled water is catching up fast,
with an average of 58 liters consumed annually per capita. Among individual countries,
Italy ranks number one in bottled water consumption, with the average Italian drinking
177 liters per year. Overall, bottled water represents the fastest growing soft drink
segment, expanding at 9 percent annually. This growth is being partially driven by
increasing awareness of the health benefits of proper hydration.
The industry has responded to consumers desire for healthier beverages by creating new
categories, such as energy drinks, and by diversifying within existing ones. For example,
the leading carbonated soft drink companies have recently introduced products with 50%
less sugar that fall mid-way between regular and diet classifications. Similarly, a South
African juice company has recently released a fruit-based drink that contains a full
complement of vitamins and nutrients.
Beverage companies and bottlers are conflicting:
In the soft drink markets of Europe and the US, beverage companies use bottlers to
package and distribute products. This structure often causes conflicts of interest between
manufacturers and bottlers. Nevertheless, the supply chain must consistently deliver
value to the market in order for the segment to prosper. Despite any dissonance, the
concept of one face to the customer must be maintained.
13
8/14/2019 18048055 Pepsi Marketing Summer Training Report
14/92
Many factors are contributing to the friction between bottlers and beverage companies:
Beverage companies often profit from increased concentrate sales at the expense
of bottlers margins
Beverage companies have historically had higher returns and lower capital
requirements
Bottlers have historically had lower returns and higher capital requirements for
building and maintaining production and distribution networks
Bottlers continue to consolidate in an attempt to offset margin pressure through
cost reduction. Specifically, size helps them to:
Spread fixed costs over greater volume
Make larger investments in automated production lines
Contain the costs of acquiring new customers
Increase customer loyalty
Declining prices have further reduced bottlers margins
Soft drink manufacturers continue to develop new products and packaging, which
increases operational complexity and, therefore, expenses for bottlers.More new soft drinks have been introduced in the last two years by the top beverage
companies than were introduced in the entire decade of the 1990s. Examples include:
Coke with Lemon, Vanilla Coke, Dr. Pepper Red Fusion, Pepsi Blue, DnL, Fanta Berry,
SoBe Mr.Green, Sierra Mist, and Mountain Dew Code Red.
While manufacturers view these new products as a way to build a portfolio of options to
hedge against product successes or failures, bottlers see them as a burden since they often
require additional capital expenditures.
Retailers power continuously increases:
With Big Bazaar , Vishal and other discount stores leading the charge, Indias dominant
retailers are demanding better service and shorter order-to-delivery cycles from soft drink
companies. This is dramatically reshaping the industry, forcing soft drink companies to
14
8/14/2019 18048055 Pepsi Marketing Summer Training Report
15/92
become more efficient, while taking pricing power out of their hands. The dual need for
improved supply chain agility and cost efficiency is challenging suppliers to reevaluate
the ways in which they plan and manage their supply chains, as they constantly search for
approaches that will help them achieve the rock-bottom prices and operational excellence
now expected in the industry.
Furthermore, the growth of private-label products is encouraging manufacturers to take a
number of steps to compete more effectively. Increasingly, they are turning to innovation
and new product introduction as a means to achieve real differentiation as well as growth.
Branded manufacturers are also looking to get closer to the consumer, with many of the
larger ones piloting direct-to-consumer marketing approaches. They are also trying to
better understand the in-store consumer experience by monitoring the execution of in-
store activities.
Nevertheless, many suppliers are losing brand equity. In recent years, a couple of factors
have been fueling the growing competition between manufacturers and
retailers:
Retailers are using their power to set higher standards for marketing and operational
excellence, including escalating demands for improved service quality and shorter order-to-delivery cycles from manufacturers and distributors.
Because of their direct relationships with consumers, retailers have a deeper knowledge
of consumer behavior.
Competition is becoming more and more difficult:
In the beverage manufacturing industry, competition is
growing due to the following factors:Constant demand for new niche products related to consumer preferences for healthier
and more diversified offerings
Industry consolidation, which has significantly raised the bar for the scale needed to
compete
The growth of private-label products.
15
8/14/2019 18048055 Pepsi Marketing Summer Training Report
16/92
These competitive pressures have led to:
SKU proliferation - number of SKUs in a typical beverage company has doubled
from 1991 to 2001
A plethora of new product failures:
Only 20% are effective
Only 10% generate significant revenue
Most fail within the first two years
Further consolidation and rationalization to capture cost savings by improving
operations and eliminating redundancy:
Industry leaders are acquiring small, high growth companies
Mid-market players are vertically integrating
Declining soft drink prices:
Profitability can only be improved through greater efficiency in the supply chain
or through more-effective trade promotions, which usually require considerable
expenditures.
Sales channels are very complex
The macro environment in which soft drink manufacturers operate has several
unique characteristics:
Market to consumers/sell to retailers through wholesalers
Must have the ability to communicate directly with retailers
Multiple distribution channels
Seasonal demands
16
8/14/2019 18048055 Pepsi Marketing Summer Training Report
17/92
CHANNELS OF BEVERAGE INDUSTRY
The beverage industry is a multi-channel industry.
17
8/14/2019 18048055 Pepsi Marketing Summer Training Report
18/92
Therefore, soft drink companies have several types of customers with diverse
characteristics:
Modern Trade/Large Chain Retailers
Greater power in negotiating purchases of concentrations and merges
Direct access to the consumer and a tendency to protect this relationship from
manufacturer intrusion
Request contributions and discounts from brand companies
Small Individual Retailers
Huge number of small point sales
Sometimes buy products directly through cash and carry or modern trade
Indirect Channel (wholesalers)Medium-sized organizations as a consequence of aggregation through consortia and
merging
Playing a fundamental role in beverage distribution
Possess critical information regarding individual points of sale in terms of volume,
assortment, presence of competitors beverages, etc.
Due to the complexity of the marketplace, the entire logistical chain must be able to
sustain brands, products and services coherently within the various channels, taking into
account differing points of sale and diverse customer needs. Additionally, each beverage
manufacturer must provide customers with an extensive set of packaging options,
including:
18
8/14/2019 18048055 Pepsi Marketing Summer Training Report
19/92
Tracking product in various package sizes
Special labeling requirements for customers
International/domestic packaging
Tracing / recall capabilities.
Statutory regulation is increasing.
Governments around the world are concerned about food safety and quality. Periodically,
safety failures make big news in the global press. Amid this growing concern, regulators
are cracking down on sanitation and a variety of other food-safety requirements.
Each soft drink company must take these industry challenges into consideration, as wellas its own strengths and market position, when looking for ways to drive innovation,
accelerate growth and increase margins.
Industry Process Improvement Opportunities
Improve customer relationships with Direct Store Delivery:
Branded beverage manufacturers are attempting to get closer to the consumer, with many
larger manufacturers piloting direct-to-consumer marketing approaches. These include
active monitoring of in-store activity and, in some markets, a significant move back to
direct store delivery (DSD).
Direct Store Delivery is a business process used in the beverage industry to sell and
distribute goods directly to the customers point-of-sale. With DSD, the soft drink
company gets in direct contact with retailers, restaurants and pubs and other outlets where
consumers can obtain the product.Manufacturers can use DSD to:
Make beverage goods available to stores and customers quickly
Optimize process settlement in sales and distribution through complete coverage
of the supply chain
19
8/14/2019 18048055 Pepsi Marketing Summer Training Report
20/92
Improve customer retention and build customer relationships through personal
service
Realize additional sales opportunities
Obtain first-hand information about the market
Better position brands against competitors
Ensure product quality up to the point of sale
Best in class DSD companies couple the process of direct delivery with a cultural change
in how they view their employees and how their delivery personnel operate:
They are not just drivers but they have sales skills, communication skills and a global
view of the companys offerings, commercial priorities, and initiatives. Direct StoreDelivery is characterized by variable orders and deliveries. Consequently, the process
should involve more than just bringing goods to the point of sale. It should eventually
encompass taking additional orders, picking up empties, collecting money, and more.
Best in class DSD operations typically include many value added activities, such as:
Merchandising activities - Enables the company to leverage frequent delivery visits
to the point of sale. These activities include tracking merchandising of other entities
(suppliers, wholesalers, etc.); reporting on in-store merchandising activities; carrying out
competitive intelligence (competitive products, product mixes, prices, displays, etc.); and
monitoring store/account execution. May also include some preventive maintenance.
Additional sales opportunities - Allows a company to sell goods off the truck
without any preceding order. The mix of products on the truck is dependent on what is
most likely to be sold on a certain trip. Support provided by handheld devices enables
drivers to skip back-end paperwork and to close the process through printed invoices.
Enhance relationship with indirect partners - Indirect sales are the process of
selling to an end customer through a third party and tracking that sale as such. Due to the
20
8/14/2019 18048055 Pepsi Marketing Summer Training Report
21/92
complexity of the beverage supply chain, conflicts of interest frequently arise between
beverage manufacturers and beverage distributors:
Soft drink manufacturers profit from increased sales at the expense of distributors
margins
Soft drink distributors profit from positive local pricing environments, which, if
exploited, reduce volume sales
Soft drink distributors continue to consolidate in an attempt to offset margin
pressure through cost reduction
Despite these conflicting interests, it is crucial that beverage manufacturers and beverage
distributors maintain one face to the customer. These companies jointly market and sell
the product in the marketplace, and close co-operation yields benefits for both parties.
The indirect relationship is a partnership that must be nurtured by both the supplier and
the distributor. The stakes are high for everyone. For the manufacturer, a poor
relationship with a distributor may cause it to give a competitor greater share of mind
in the local marketplace. For the distributor, a negative relationship with a supplier means
constant threats of contract termination and reduced marketing dollars spent in the local
market.
21
8/14/2019 18048055 Pepsi Marketing Summer Training Report
22/92
A strong manufacturer/distributor relationship is also important because consumers are
becoming more difficult to capture and classify. It is not only about sales; it is also about
information. But how can strategic information flow freely between partners? Although
sharing is implied in the word partnership, the reality is that companies are still
uncomfortable about exchanging strategic information. Nevertheless, it is critical for
companies to share information regarding sales volume and market intelligence on both
the microscopic and macroscopic levels.
The importance of the distributors role in the indirect channel for beverage distribution
suggests that it would be beneficial to establish a common understanding between
distributors and manufacturers regarding:
Coding (products, channels, customers)
Technology
Data interpretation
Marketing and sales actions.
In some cases, distributors are small- to medium-sized companies that only dedicate a
few people full-time to operational activities. As a result of this structure, they are rarely
open to implementing a truly collaborative environment. Recently, however, mergers
between distributing companies, and acquisitions of distributing companies by
manufacturers, have significantly modified many operating and ownership structures.
Consequently, a few well-structured and managed distributors have emerged that possess
a better understanding of the value of collaboration. These distributors have been at the
forefront of facilitating partnership initiatives.
Increase sales force effectiveness through incentives management
In the beverage industry, the critical path to a companys success is the effectiveness of
its sales force. No matter how efficiently the company runs its manufacturing processes,
or how well it markets its products, a beverage company cannot succeed without an
effective sales force that ensures product placement on the store shelves.
22
8/14/2019 18048055 Pepsi Marketing Summer Training Report
23/92
A beverage manufacturers sales force typically comprises 17%-25% of the companys
cost basis. Beverage distributors have an even higher percentage of their tot al costs
allocated to their sales forces. Yet, how can beverage companies get the most out of their
investments and ensure that their sales forces are operating optimally?
Properly managed commission programs allow beverage companies to effectively
motivate their sales forces to increase or maintain volume by brand or package. A
commission could be a rebate, discount, or other payment to a third party or in-house
employee. In order to actively manage sales behavior, it should be paid when the internal
or external sales representative meets a pre-established benchmark for a tracked metric.
The commission could take the form of either a cash payment or an item.
While commissions are usually paid based on sales volume, best-in-class companies take
a more holistic view of commission metrics. Some other important measures include:
Account revenue growth
Profit results
Number of new accounts
Customer service metrics
Account retention.
Manage safety requirements through tracking and traceability
As recent history has shown, the ability to track inventory accurately and to perform a
timely and cost-effective product recall is critical in the beverage industry. Inventory
items need to be tracked, monitored, and controlled in different ways and at very detailed
levels. In each individual plant or warehouse, each resource requires a different level of
control/analysis.
23
8/14/2019 18048055 Pepsi Marketing Summer Training Report
24/92
Food safety legislation, such as EU Directive 178, impacts the whole process flow.
Traceability is a goal that must be achieved over the entire value chain, requiring a batch
control system that is able to track and document all related characteristics.
At the batch level, it is now possible to assign different product attributes when searching
for the product including:
Manufacturing Expiration Dates
Shelf Life Dates
Classifying production lots into batches allows companies to identify specific inventory
and automatically record its history, including the history of the raw materials (and their
associated batch numbers) used in its production. In other words, it allows full recall of
the materials that have been involved in the overall manufacturing process. These
improvements reduce the companys exposure to litigation and regulatory fines.
In addition, track and trace improvements help companies to maintain high quality
standards, which is often a selling point that differentiates one brand from another and
that can command a price premium with the consumer. Recording and tracking that
quality is critical. In the final analysis, soft drink companies must strive for the highest
quality standards they can achieve ones that are superior to those of their competitors.
24
8/14/2019 18048055 Pepsi Marketing Summer Training Report
25/92
Optimize the extended supply chain
In a business environment characterized by strong competition, changing consumer
preferences, a complex distribution channel, and conflicting relationships between soft
drink manufacturers and distributors, the beverage supply chain is under significant
pressure. Moreover, the worlds dominant grocery retailers (with Wal-Mart paving the
way) continue to demand increasingly better service quality and shorter order to delivery
cycles from manufacturers. This confluence of factors is forcing manufacturers to
become more efficient, while taking pricing power out of their hands. The need for both
improved supply chain agility and cost-efficiency is challenging suppliers to re-assess
how they plan and manage their supply chains.
The logistic chain must be able to sustain brands, products and services cohesively, while
taking into account different channels, customers, points of sale and customer needs.
Accordingly, companies should consider taking the following steps to improve their
supply chains:
Ensure product availability on-shelf On-shelf availability is becoming a
critical issue for both manufacturers and retailers. A system that avoids out-of-
stocks improves consumer value, builds brand and store loyalty, increases sales
and most importantly boosts category profitability. The traditional practice of
filling out-of-stocks with other products is no longer sufficient particularly from
the manufacturers point of view. If consumers cannot find the brand they want,
their loyalty to that brand suffers. A 2002 GMA study found that out-of-stocks
jeopardize $6 billion in retail sales every year. Less conservative estimates put
this figure as high as $20 billion.
Flexible ordering; flexible delivering Most retailers are demanding
increased flexibility in order lead-times and delivery methods, putting additional
25
8/14/2019 18048055 Pepsi Marketing Summer Training Report
26/92
pressures on the supply chains of manufacturers and distributors. To withstand
these pressures, companies need to streamline product movement through
programs such as store-specific shipments. They must also meet the strategies of
progressive retailers, which require flow-through distribution and cross-docking.
Accurately forecast demand Properly forecasted demand drives two of
the primary metrics used to measure the efficiency of a beverage companys
supply chain: customer service and inventory. Accurate forecasts are essential to
achieving improved customer service and lower inventory levels. Even with
recent success in developing and maintaining efficient supply chain processes,
forecasting inaccuracy remains a significant industry problem. According to the
2003 GMA Logistics Study, more than one-third of all forecasts are inaccurate at
the national level. This figure jumps to almost one out of every two at the regional
(distribution-center) level. Meanwhile, at the store level, differences in store
formats and sizes hamper the forecasting process, and few have the tools to
accurately manage the sheer volume of data generated by forecasting.
Furthermore, many manufacturers do not have the technology to properly support
their planning and forecasting efforts. Many manufacturers are still forecasting
sales in months, although their plants run on weekly plans. That means they have
to squeeze weekly totals out of monthly boxes. Implement a fully integrated empties management process
Empties management is the process of managing returnable containers, including
kegs, CO2 tanks, bottles and crates(an essential part of direct store delivery). A
successful empties management system gives the manufacturer a detailed picture
of the entire empties lifecycle, including the location and status of a companys
assets. This process:
Lowers costs by controlling high-value empties assets
Increases control by managing empties at customer locations
Decreases manufacturing issues by tracking empties.
Reduce time-to-market for new products
26
8/14/2019 18048055 Pepsi Marketing Summer Training Report
27/92
An efficient new product development system is essential in the beverage industry. New
products need to be brought to market quickly in order to capitalize on changing
consumer preferences and competitive threats. However, new products must be
developed tactically, and the products potential must be understood and analyzed before
it hits the market. Currently, success rates for new products are astonishingly low
dropping from 75% to 25% in the last decade according to AMR and most fail within
the first two years after introduction.
The companies that are best able to execute the whole product development cycle will
clearly have an advantage. This requires reducing time-to-market as well as making
effective use of scarce internal resources and improving collaboration with partners. In
addition, great attention must be paid to aligning the related marketing initiatives (e.g.
advertising, sales promotions, etc.) with the new product introductions.
Innovation is one of the primary growth drivers for beverage companies, and it can
involve changes to the product itself or to the products packaging:
Product innovation Focuses on providing new tastes and flavors to
demanding consumers.
Packaging innovation - Emphasizes developing differentiated packagingaccording to the consumption situation. Often, beverage manufacturers use
packaging innovation to increase product shelf life.
To ensure new product success, beverage companies must oversee the integration,
consolidation and reuse of knowledge from all involved parties (including beverage
manufacturers and bottlers), from R & D through production, and down to sales,
marketing, and financials.
By emphasizing greater collaboration and implementing Web-based workflow, beverage
companies can reduce lead-time from concept to shelf by 25 - 40% and, at the same time,
better integrate safety controls into the development process.
Increase customer retention through effective trade promotions:
27
8/14/2019 18048055 Pepsi Marketing Summer Training Report
28/92
In an environment characterized by strong retailers and discriminating consumers,
beverage companies must utilize processes and tools to protect their market shares. To do
this, they must make a favorable impact at the point of sale through promotional activity.
Trade promotions have become a necessary and expensive cost of doing business. With a
sizable percentage of volume being driven through a smaller base of retailers, the
competition for shelf space has never been higher. If a beverage company fails to execute
a trade promotion at Wal-Mart, a competitor will. Furthermore, as trade promotions have
proliferated over the past few years, they have also become more targeted. In response,
beverage companies must create promotions for specific demographics, channels, and
retailers, which make the sales process more costly and complex.
Trade promotions vary widely in terms of method, approach, and structure. Many local
promotions are run ad-hoc with marginal capital investments by field sales associates,
while others require significant investment and involve pre-scheduling in co-operation
with national chains.
Two of the most commonly used trade promotions in the beverage industry are coupons
and rebates. Coupon and rebate management are critical to enhancing relationshipsbetween the beverage manufacturer and wholesalers, customers and, in the case of
coupons, consumers.
Coupon programs, which are in essence trade promotions addressed to the final
consumer, are mainly executed via discounts at large retailers. The coupon, a certificate
with a stated value, can be applied immediately or reserved for the next purchase. A
properly executed coupon program enables beverage companies to pass savings directly
to the end consumer.
On the other hand, rebate programs are trade promotions addressed to the retailer.
Therefore, contractual terms and conditions between the manufacturer and the retailer
28
8/14/2019 18048055 Pepsi Marketing Summer Training Report
29/92
must be monitored and executed. Rebates are often part of special trade promotions, and
management of the rebates typically follows one of the following flows:
Figure - Rebate management in direct sales
Figure- Rebate management in Indirect Sales
29
8/14/2019 18048055 Pepsi Marketing Summer Training Report
30/92
Improve margins by optimizing the telesales channel
For a large number of companies in the beverage industry, telephone sales is the primary
method of order taking and customer interaction. An effective telesales process can
increase revenues and complement other sales processes, such as DSD and field assets
management. This is accomplished by integrating the phone sales function with the
companys other operations.
When correctly executed, inbound and outbound telesales functionality enables
companies to manage effectively and efficiently all contacts related to sales and customer
services. In addition, it helps build client relationships, sell new business, and expand and
retain the current customer base.
Well-implemented telesales functionality also enables business processes to be integrated
and standardized. This effectively closes the loop, creating a consistent experience for
customers within a multi-channel environment.
Some of the key benefits that a company can gain through telesales include:
30
8/14/2019 18048055 Pepsi Marketing Summer Training Report
31/92
Revenue Enhancement
Improved sales effectiveness by consolidating the customer relationship
Better up-selling
Improved cross-selling
Increased customer retention
Expanded customer base
Enhanced competitiveness via services that match or surpass those of competitors
Margin Improvement
Reduced costs for order processing
Accelerated sales process
Lower sales costs in comparison to field sales
Increased flexibility and speed to market
Differentiated service levels according to customer relevance and need.
Implementing closed-loop processes between the telesales operations and other
departments can provide agents with a comprehensive view of all customer interactions
across the enterprise in real time. In order to optimize the telesales channel, agents must
have tools to manage the entire sales process, from generating leads, planning calls, and
prioritizing sales opportunities and activities, to managing contacts and placing orders
quickly.
Business performance improvement priorities the path to value
Against the backdrop of these market challenges, how can soft drink companies drive
profitable growth and create value for their owners or shareholders?
In practical terms, there are four areas on which companies in the soft drink business
need to focus:
31
8/14/2019 18048055 Pepsi Marketing Summer Training Report
32/92
Revenue protection and enhancement for example, as driven by product and
packaging innovation, differentiated quality, improved product availability, and
better management of customer relationships
Cost reduction/margin improvement for example, through improved operational
efficiency, lower labor costs, reduced waste and the capture of operational
synergies from acquisitions
Improved asset utilization for example, through reduced inventory levels of soft
drinks held in cold storage and faster turnaround of re-usable transit packaging in
the supply chain
Regulatory/assurance for example, through demonstrating quality by
participating in retailer assurance schemes and assisting trade customers inachieving full compliance with new traceability legislatiON
PEPSICO INTERNATIONAL
HISTORY OF PEPSICO
1893--Caleb Bradham, a young pharmacist from New Bern, North Carolina, begins
experimenting with many different soft drink concoctions; patrons and friends sample
them at his drugstore soda fountain.
1898--One of Caleb's formulations, known as "Brad's Drink," a combination of
carbonated water, sugar, vanilla, rare oils and cola nuts, is renamed "Pepsi-Cola" on
August 28, 1898. Pepsi-Cola receives its frist logo.
1902-- Bradham applies for a trademark with the U.S. Patent Office, Washington D.C.,
and forms the first Pepsi-Cola Company.
32
8/14/2019 18048055 Pepsi Marketing Summer Training Report
33/92
1905--Pepsi-Cola's first bottling franchises are established in Charlotte and Durham,
North Carolina. Pepsi receives its new logo, its first change since 1898.
1934--A landmark year for Pepsi-Cola. The drink is a hit and to attract even more sales,
the company begins selling its 12-ounce drink for five cents (the same cost as six ounces
of competitive colas).
Caleb Bradham, the founder of Pepsi-Cola and "Brad's Drink," dies at 66 (May 27th,
1867-February 19th, 1934).
1941--The New York Stock Exchange trades Pepsi's stock for the first time.
In support of the war effort, Pepsi's bottle crown colors change to red, white, and blue.
1960--Young adults become the target consumers and Pepsi's advertising keeps pace
with "Now it's Pepsi, for those who think young."
1963-- Pepsi-Cola continues to lead the soft drink industry in packaging innovations,
when the 12-ounce bottle gives way to the 16-ounce size.
Twelve-ounce Pepsi cans are first introduced to the military to transport soft drinks all
over the world.
1965--Expansion outside the soft drink industry begins. Frito-Lay of Dallas, Texas, and
Pepsi-Cola merge, forming PepsiCo, Inc.
Military 12-ounce cans are such a success that full-scale commercial distribution begins.
33
8/14/2019 18048055 Pepsi Marketing Summer Training Report
34/92
1970--Pepsi introduces the industry's first two-liter bottles. Pepsi is also the first
company to respond to consumer preference with light-weigh, recyclable, plastic bottles.
1984--Pepsi advertising takes a dramatic turn as Pepsi becomes "the choice of a New
Generation."
1985--After responding to years of decline, Coke loses to Pepsi in preference tests byreformulating. However, the new formula is met with widespread consumer rejection,
forcing the re-introduction of the original formulation as "Coca-Cola Classic."
The cola war takes "one giant sip for mankind," when a Pepsi "space can" is successfully
tested aboard the space shuttle.
1991-- Pepsi introduces the first beverage bottles containing recycled polyethylene
terephthalate (or PET) into the marketplace. The development marks the first time
recycled plastic is used in direct contact with food in packaging.
1992-- Pepsi-Cola and Lipton Tea Partnership is formed. Pepsi will destribute single
serve Lipton Original and Lipton Brisk products.
1994-- Pepsi Foods International and Pepsi-Cola International merge, creating thePepsiCo Foods and Beverages Company.
1997-- PepsiCo. announces that it will spin off its restaurant division to form Tricon
Global Restaurants, Inc. Including Pizza Hut, Taco Bell, & KFC, it will be the largest
restaurant company in the world in units and second-largest in sales.
34
8/14/2019 18048055 Pepsi Marketing Summer Training Report
35/92
1998-- Pepsi celebrates its 100th anniversary.
PEPSICO THE PARENT COMPANYPepsiCo, Inc. is one of the world's largest food and beverage companies. The company's
principal businesses include:
Frito-Lay snacks
Pepsi-Cola beverages
Gatorade sports drinks
Tropicana juices
Quaker Foods
PepsiCo, Inc. was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay.
Tropicana was acquired in 1998. In 2001, PepsiCo merged with the Quaker Oats
Company, creating the worlds fifth-largest food and beverage company, with 15 brands
each generating more than $1 billion in annual retail sales. PepsiCos success is the result
of superior products, high standards of performance, distinctive competitive strategies
and the high level of integrity of our people.
Pepsi-Cola North America, headquartered in Purchase, N.Y., is the refreshment beverage
unit of PepsiCo Beverages and Foods North America, a division of PepsiCo, Inc. PepsiCo
Beverages and Foods North America also comprises PepsiCo's Tropicana, Gatorade and
Quaker Foods businesses in the United States and Canada.
35
8/14/2019 18048055 Pepsi Marketing Summer Training Report
36/92
Pepsi-Cola North America's carbonated soft drinks, including: Pepsi, Diet Pepsi, Pepsi
Twist, Mountain Dew, Mountain Dew Code Red, Sierra Mist, and Mug Root Beer
account for nearly one-third of total soft drink sales in the United States.
Pepsi-Cola North America's non-carbonated beverage portfolio includes Aquafina, whichis the number one brand of bottled water in the United States, Dole single-serve juices
and SoBe, which offers a wide range of drinks with herbal ingredients. The company also
makes and markets North America's best-selling, ready-to-drink iced teas and coffees via
joint ventures with Lipton and Starbucks, respectively.
OVERVIEW PEPSICO
The PepsiCo challenge (to keep up with archrival The Coca-Cola Company) never ends
for the world's #2 carbonated soft-drink maker. The company's soft drinks include Pepsi,Mountain Dew, and Slice. It owns Frito-Lay, the world's #1 maker of snacks such as corn
chips (Doritos, Fritos) and potato chips (Lay's, Ruffles). Cola is not the company's only
beverage: PepsiCo sells Tropicana orange juice brands, Gatorade sports drink, and
Aquafina water. PepsiCo also sells Dole juices (licensed) and Lipton ready-to-drink tea
(licensed from Unilever). Its Quaker Foods division offers breakfast cereals (Life), pasta
(Pasta Roni), rice (Rice-A-Roni), and side dishes (Near East). Wal-Mart is PepsiCo's
largest customer, accounts for 9% of sales.
PepsiCo may be vying for more Pepsi-drinking people but its hefty snacks and juice sales
help to quench the company's thirst for bottom-line growth. Frito-Lay's salty snacks rule
the US market; the snack division accounts for about one-third of company sales.
The company announced a major restructuring in 2007, splitting its two business units
(Pepsi-Cola North America and PepsiCo International) into three: one for US food, a
second for US drinks, and a third for food and drinks abroad. CEO Indra Nooyi said that
due to the company's healthy growth in recent years, PepsiCo is approaching a size that
can be better managed as three units rather than two.
The split looks like this: PepsiCo Americas Foods includes Frito-Lay North America,
Quaker, and the Latin American food and snack businesses; PepsiCo Americas Beverages
36
8/14/2019 18048055 Pepsi Marketing Summer Training Report
37/92
includes North American beverage sales, including Gatorade and Tropicana; and PepsiCo
International includes business in the UK, the rest of Europe, Asia, the Middle East, and
Africa.
With a saturated soft-drink market, the company continues to try new iterations: In 2007
the company introduced its first vitamin-enhanced water, called Aquafina Alive. It signed
a licensing agreement with Ben & Jerry's in 2006 for the sale of Ben & Jerry's milkshakes
in the US, as well as a deal with Starbucks for the distribution of the coffee purveyor's
Ethos water brand. Hot on the heels of Coke's introduction of Blak, in 2006 Pepsi
launched a coffee-flavored cola, named, Pepsi Max Cino, in the UK.
Venturing further into the non-cola category, PepsiCo acquired sparkling juice companies
IZZE and Naked Juice in 2006. It also began selling Fuelosophy, a smoothie drink, at
organic grocery store chain Whole Foods, and struck a deal to develop products with
juice maker Ocean Spray Cranberries.
Bowing to the public's growing concern about childhood obesity, in 2006 Pepsi, along
with Coca-Cola, Cadbury Schweppes, and the American Beverage Association agreed to
sell only water, unsweetened juice, and low-fat milk to public elementary and middleschools in the US. As for high schools, the agreement calls for no sugary sodas to be sold
and one-half of the offered drinks to be water, diet sodas, lemonade, or iced tea. The
agreement was facilitated by former president Bill Clinton.
CEO Steve Reinemund stepped down as CEO in 2006 in order to spend more time with
his family. His replacement was Indra Nooyi, the company's president and CFO. Indian-
born Nooyi, the 11th female CEO of a FORTUNE 500 company, has been instrumental in
strategic decisions at the company, such as the acquisition of Tropicana and merger with
Quaker Oats.
Shortly after her appointment, Nooyi restructured the top level of power at the company.
She appointed John Compton, previously head of the Quaker-Tropicana-Gatorade unit, to
the newly created position of CEO for PepsiCo North America, reporting directly to her.
37
8/14/2019 18048055 Pepsi Marketing Summer Training Report
38/92
HOW PEPSICO OVERCAME COMPETITION
How PepsiCo outgunned Coke:
Losing the cola wars was the best thing that ever happened to Pepsi while Coke was
celebrating, PEPSI took over a much larger market.
Pepsi beat Coke in December for the first time in their 108-year rivalry, surpassing its
nemesis in market capitalization. The great irony of Pepsi's rise is this: It has never sold
more soda than Coke, even today.
"Pepsi's been on fire," notes Robert van Brugge, beverage analyst with Sanford
55Bernstein. Over the past five years its stock has risen more than a third, while Coke's
has sunk 30 percent.
Even ten years ago, it was easy to write offPepsiCo (Research) as the loser in the cola
wars against Coke(Research): the proof was everywhere. The company's profits trailed
those of its rival in Atlanta by 47 percent. Its value in the stock market was less than half
of Coca-Cola's. Coke's CEO at the time, Roberto Goizueta, was so sure of his company's
dominance that he practically dismissed Pepsi, telling FORTUNE, "As they've become
less relevant, I don't need to look at them very much anymore."
PepsiCo turned its cola Waterloo into an opportunity to retrench, regroup, and ultimately
outflank its old foe. Losing the cola wars, it turns out, was the best thing that ever
happened to Pepsi. It prompted Pepsi's leaders to look outside the confines of their battle
with Coke.
A decade ago, Coke offered investors a compelling story: a recession-resistant product
inexpensive enough that consumers would buy it in good times and bad, but valued
enough that they would willingly pay an extra nickel or so above what no-name brands
charged.
What Coke investors didn't envision was that an emerging preference for other softbeverages --water, sports drinks -- would fracture demand. Nor did they see that the
business strengths that once applied to cola would take hold across a broadened soft drink
and snack-food market -- a market that Pepsi, and not Coke, dominated.
38
http://money.cnn.com/quote/quote.html?symb=PEPhttp://cnnfn.investor.reuters.com/Reports.aspx?ticker=PEPhttp://money.cnn.com/quote/quote.html?symb=KOhttp://money.cnn.com/quote/quote.html?symb=KOhttp://cnnfn.investor.reuters.com/Reports.aspx?ticker=KOhttp://money.cnn.com/quote/quote.html?symb=PEPhttp://money.cnn.com/quote/quote.html?symb=PEPhttp://cnnfn.investor.reuters.com/Reports.aspx?ticker=PEPhttp://cnnfn.investor.reuters.com/Reports.aspx?ticker=PEPhttp://cnnfn.investor.reuters.com/Reports.aspx?ticker=PEPhttp://money.cnn.com/quote/quote.html?symb=KOhttp://money.cnn.com/quote/quote.html?symb=KOhttp://money.cnn.com/quote/quote.html?symb=KOhttp://cnnfn.investor.reuters.com/Reports.aspx?ticker=KOhttp://cnnfn.investor.reuters.com/Reports.aspx?ticker=KOhttp://cnnfn.investor.reuters.com/Reports.aspx?ticker=KOhttp://money.cnn.com/quote/quote.html?symb=PEP8/14/2019 18048055 Pepsi Marketing Summer Training Report
39/92
"They were the first to recognize that the consumer was moving to noncarbonated
products, and they innovated aggressively," observes Gary Hemphill of Beverage
Marketing.
PepsiCo embraced bottled water and sports drinks much earlier than its rival. Pepsi's
Aquafina is the No. 1 water brand, with Coke's Dasani trailing; in sports drinks, Pepsi's
Gatorade owns 80 percent of the market while Coke's Powerade has 15 percent.
Throughout the past five years under CEO Steve Reinemund, the company has deftly
moved with every shift in consumer tastes. "He's thinking about what the products should
look like in the future," says Victor Dzau, a director of PepsiCo.
39
8/14/2019 18048055 Pepsi Marketing Summer Training Report
40/92
Sustainable competitive advantage
Three major sustainable competitive advantages give PepsiCo a competitive edge as it
operates in the global marketplace:
Big muscular brands;
Proven ability to innovate and create differentiated products; and
Powerful go to market systems.
Cost and Quality.
Timing and know how.
Strongholds.
Deep pockets.
40
8/14/2019 18048055 Pepsi Marketing Summer Training Report
41/92
Coke: 1886; Pepsi: 1893.
1933: Pepsi struggling to stave off bankruptcy. Dropped price of its 10c, 12 oz. bottle to5c, making it a better value. Ad jingle twice as much for a nickel better known in the
US than the Star Spangled Banner.
41
Strategic Competitive Advantage
Profits from a
sustained
competitive
advantage
Time
Launch
Exploitation
Counterattack
Profits from a
series of
actions
Time
Exploitation
Launch
Counterattack
Firm has already moved to advantage 2
Traditional View
Hypercompetition
Strategic Competitive Advantage
Profits from a
sustained
competitive
advantage
Time
Launch
Exploitation
Counterattack
Profits from a
series of
actions
Time
Exploitation
Launch
Counterattack
Firm has already moved to advantage 2
Traditional View
Hypercompetition
Pepsi Coke
Price
/Ounce
Price/
Ounce
Pepsi
Coke
Perceived Quality Perceived Quality
Pepsi Coke
Price
/Ounce
Price/
Ounce
Pepsi
Coke
Perceived Quality Perceived Quality
8/14/2019 18048055 Pepsi Marketing Summer Training Report
42/92
Pepsi keeps price advantage through 60s and 70s, when Pepsi charged its bottlers 20%
less for its concentrate.
With rising ingredient costs, Pepsi could no longer offer twice as much for the same
price. So, it raised price to Cokes level giving it a war chest to fuel an aggressive ad
campaign. Battle shifted from Price to Quality, with Pepsi targeting the youth.
What followed was the Pepsi Challenge & Real Thing Coke ads
Perceived quality caught up. Deeper pocketed and lower cost Coke initiated a price war
in selective markets where Pepsi was weak in the 70s. Pepsi responded with its discountsand by the end of the 80s, 50% of food store sales were on discount
Other companies moved into the lower left quadrant of the market. But the two major
players forced price down to ultimate value.
To break price spiral, Coke launched New Coke to keep Coke loyals and induce
switching among Pepsi buyers. But this move from Coke was rejected by the market.
Attempts to move to next arena via niches in caffeine and sugar substitutes were adopted.
42
Pepsi Coke
Price/Oun
ce
Price/Ounc
eFirst move:
PepsiChallenge
Perceived Quality Perceived Quality
Youth & MiddleClass Segments 2nd move:
Cokes Ad war
Pepsi Coke
Price/Oun
ce
Price/Ounc
eFirst move:
PepsiChallenge
Perceived Quality Perceived Quality
Youth & MiddleClass Segments 2nd move:
Cokes Ad war
8/14/2019 18048055 Pepsi Marketing Summer Training Report
43/92
43
Price/Ou
nce
Price/Oun
ce
Perceived Quality Perceived Quality
GenericsRC Cola
Coke &Pepsi
PriceSpiral NewCokeActual
Classic Coke& Pepsi
NewCokeIntendedP
rice/Ou
nce
Price/Oun
ce
Perceived Quality Perceived Quality
GenericsRC Cola
Coke &Pepsi
PriceSpiral NewCokeActual
Classic Coke& Pepsi
NewCokeIntended
8/14/2019 18048055 Pepsi Marketing Summer Training Report
44/92
PEPSICO INDIA
Introduction:
PepsiCo entered India in 1989 and in the span of a little more than a decade it became the
country's largest selling soft drinks company. The Company has invested heavily in India
making it one of the largest multinational investors. The group has built an expansive
beverage, snack food and exports business and to support the operations are the group's
43 bottling plants in India, of which 15 are company owned and 28 are franchisee owned.
PepsiCo stays committed to providing its consumers with top quality beverages. Its
diverse portfolio of brands include the flagship cola brand - Pepsi; Diet Pepsi; 7Up;Mirinda; Mountain Dew; Slice fruit drink; Tropicana brand 100% fruit juices in various
flavours; Aquafina packaged drinking water; Gatorade plus local brands Lehar Evervess
Soda, Dukes Lemonade and Mangola.
PepsiCo is also a dominant player in the snack food segment in India. PepsiCo's snack
food company Frito-Lay is the leader in the branded potato chip market. It manufactures
Lay's Potato Chips; Cheetos extruded snacks, Uncle Chips; traditional namkeen snacks
under the Kurkure and Lehar brands; and Quaker Oats.
PepsiCo is one of the largest MNC exporters in India and its export business consist of
three categories - agri business, commodities and Pepsi system sales. PepsiCo has made
significant investments with the Punjab Agriculture University to develop a
comprehensive agro-technology program that has helped thousands of farmers across
India improve the yield of their farms and the quality of their agricultural products.
PepsiCo has leveraged its knowledge in contract farming to develop seaweed cultivation
in Tamil Nadu and has partnered with the Government of Punjab to help farmers of the
state through the utilization of developed technology for citrus farming.
As part of its sustainable development initiatives, PepsiCo India has been a committed
leader in the promotion of rain water harvesting, water conservation recycling and the
44
8/14/2019 18048055 Pepsi Marketing Summer Training Report
45/92
reduction of effluent discharge. PepsiCo has also established zero waste centers and PET
recycling supply chains and assisted victims of natural disasters. PepsiCo stays dedicated
in its endeavor to develop community outreach programs by supporting rural water
supply schemes, administering medical camps in villages, providing computers to rural
schools and creating opportunities for women in rural areas through vocational training as
an alternate means of livelihood.
45
8/14/2019 18048055 Pepsi Marketing Summer Training Report
46/92
OVERVIEW OF PEPSICO INDIA :
PepsiCo Mission
"To be the world's premier consumer products company focused on convenience 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."
PepsiCo in India
PepsiCo entered India in 1989 and has grown to become one of the countrys leading
food and beverage companies. One of the largest multinational investors in the country,
PepsiCo has established a business which aims to serve the long term dynamic needs of
consumers in India.
PepsiCo India and its partners have invested more than U.S.$700 million since the
company was established in the country. PepsiCo provides direct employment to 4,000
people and indirect employment to 60,000 people including suppliers and distributors.
PepsiCo nourishes consumers with a range of products from treats to healthy eats, that
deliver joy as well as nutrition and always, good taste. PepsiCo Indias expansive
portfolio includes iconic refreshment beverages Pepsi, 7 UP, Mirinda and Mountain Dew,
in addition to low calorie options such as Diet Pepsi, hydrating and nutritional beverages
such as Aquafina drinking water, isotonic sports drinks - Gatorade, Tropicana100% fruit
juices, and juice based drinks Tropicana Nectars, Tropicana Twister and Slice. Local
brands Lehar Evervess Soda, Dukes Lemonade and Mangola add to the diverse range
of brands.
PepsiCos foods company, Frito-Lay, is the leader in the branded salty snack market and
all Frito Lay products are free of trans-fat and MSG. It manufactures Lays Potato Chips,
Cheetos extruded snacks, Uncle Chipps and traditional snacks under the Kurkure and
Lehar brands. The companys high fibre breakfast cereal, Quaker Oats, and low fat and
46
8/14/2019 18048055 Pepsi Marketing Summer Training Report
47/92
roasted snack options enhance the healthful choices available to consumers. Frito Lays
core products, Lays, Kurkure, Uncle Chipps and Cheetos are cooked in Rice Bran Oil to
significantly reduce saturated fats and all of its products contain voluntary nutritional
labeling on their packets.
The group has built an expansive beverage and foods business. To support its operations,
PepsiCo has 43 bottling plants in India, of which 15 are company owned and 28 are
franchisee owned. In addition to this, PepsiCos Frito Lay foods division has 3 state-of-
the-art plants. PepsiCos business is based on its sustainability vision of making
tomorrow better than today. PepsiCos commitment to living by this vision every day is
visible in its contribution to the country, consumers and farmers.
Performance With Purpose
Performance with Purpose articulates PepsiCo India's belief that its businesses are
intrinsically connected to the communities and world that surrounds it. Performance with
Purpose means delivering superior financial performance at the same time as we improve
the world.
To deliver on this commitment, PepsiCo India will build on the incredibly strong
foundation of achievement and scale up its initiatives while focusing on the following 4
critical areas that have a business link and where we believe that we can have the most
impact.
47
8/14/2019 18048055 Pepsi Marketing Summer Training Report
48/92
PEPSICO INDIA WITH RKJ GROUP:
Vision
Being the best in everything we touch and handle.
Mission
Continuously excel to achieve and maintain leadership position in the chosen businesses;
and delight all stakeholders by making economic value additions in all corporate
functions.
It can be said with absolute certainty that the RKJ Group has carved out a special nichefor itself. Our services touch different aspects of commercial and civilian domains like
those ofBottling, Food Chain and Education. Headed by Mr. R. K. Jaipuria, the group
as on today can lay claim to expertise and leadership in the fields of education, food and
beverages.
The business of the company was started in 1991 with a tie-up with Pepsi Foods Limited
to manufacture and market Pepsi brand of beverages in geographically pre-defined
territories in which brand and technical support was provided by the Principals viz., Pepsi
Foods Limited. The manufacturing facilities were restricted at Agra Plant only.
Varun Beverages Ltd. is the flagship company of the group.The group also became the
first franchisee for Yum Restaurants International [formerly PepsiCo Restaurants (India)
Private Limited] in India. It has exclusive franchise rights for Northern & Eastern India.
It has total 46 Pizza Hut Restaurants & 1 KFC Restaurant under its company.
The group added another feather to its cap when the prestigious PepsiCo International
Bottler of the Year award was presented to Mr. R. K. Jaipuria for the year 1998 at a
glittering award ceremony at PepsiCos centennial year celebrations at Hawaii, USA. The
award was presented by Mr. Donald M. Kendall, founder of PepsiCo Inc. in the presence
of Mr. George Bush, the 41st President of USA, Mr. Roger A. Enrico, Chairman of the
48
8/14/2019 18048055 Pepsi Marketing Summer Training Report
49/92
Board & C.E.O., PepsiCo Inc. and Mr. Craig Weatherup, President of Pepsi Cola
Company.
Strategic Divisions:
PepsiCo India consists of different divisions that include Beverage division, Snack food
division and the Restaurant division (Yum Restaurants India Pvt. Ltd.). These divisions
work as separate SBUs and have their separate management.
PepsiCo India divided its beverage division into different operating divisions. The heads
of these divisions report directly to the CEO. The heads of these divisions are in charge of
their respective areas and are accountable for the proper functioning of all the regions.
The FOBOs also report to the regional heads apart from the COBOs.
49
8/14/2019 18048055 Pepsi Marketing Summer Training Report
50/92
MARKETING OVERVIEW OF PEPSICO INDIA
Marketing Environment:
Marketing environment is the overall environment in which a Company operates. This
consists of the Task Environment and the Broad Environment.
Task Environment
Task Environment includes the immediate players involved in producing, distributing and
promoting the offering. The main players are the company, suppliers, distributors, dealers
and the target customers. Suppliers include the material and service suppliers such as
marketing research agencies, advertising agencies, banking and insurance companies,
transportation companies, and telecommunications companies. The dealers and
distributors include agents, brokers, manufacturer representatives and others who
facilitate finding and selling to customers.
The suppliers for PepsiCo India include the bottle suppliers for the soft drinks. These
include the Pet bottles and the Glass bottles. One of the most vital products required in
the operation is Refrigerator. PepsiCo does not manufacture the refrigerators, instead they
are supplied by different vendors who get time bound contracts from the company.
The distributors and dealers are part of the sales and distribution network. This will be
explained later under the section of Place, in the 4 Ps segment.
The target customer for PepsiCo is primarily the youth. But, because of increasing
competition from Coke PepsiCo has expanded its target customer base which now
includes people who are prospects for beverages beyond the CSD category. PepsiCo hasstarted targeting this segment by offering products in the Non- CSD category, these
include fruit based non-carbonated drinks, juice based drinks, energy drinks, sports
drinks, snack food (from the snack food division i.e. Frito Lay).
Broad Environment:
50
8/14/2019 18048055 Pepsi Marketing Summer Training Report
51/92
This contains forces that can have a major impact on the players in the task environment.
This includes six components: demographic environment, economic environment,
physical environment, technological environment, political legal environment, and
socio cultural environment. Companies need to pay close attention to the trends and
developments in these environments and make timely adjustments to their marketing
strategies in order survive and succeed in the market. This will be explained in detail in
the strategic marketing segment.
Value Delivery Process:
The value delivery process consists of the value creation and delivery sequence. This is
done in three phases. The first phase, choosing the value, represents the homework done
by the marketing department before the product exists. Marketing is required to segment
the market, select the appropriate the target market, and develop the offerings value
proposition. This is known as Segmentation, Targeting and Positioning and is the essence
of strategic marketing.
Once the business unit has chosen the value, the second phase is providing the value.
Marketers need to determine specific product features, prices and distribution.
The task in the third phase is communicating the value by utilizing the sales force, sales
promotion, advertising, and other communication tools to announce and promote the
product. Each of these value phases has different cost implications.
51
8/14/2019 18048055 Pepsi Marketing Summer Training Report
52/92
CustomerSegmentation
MarketSelection /
Focus
ValuePositioning
Choose the Value (Strategic Marketing)Provide the Value (Tactical Marketing)ProductDevelopmen
t
ServiceDevelopmen
t
PricingSourcing /Making
Distribution/ Servicing
Communicate the Value (Tactical Marketing)Sales ForceSalesPromotionAdvertising
Fig. 2 Value Creation and Delivery Sequence
52
8/14/2019 18048055 Pepsi Marketing Summer Training Report
53/92
OperationsMargin
Suppor
tActiviti
es
Generic Value Chain:
The generic value chain is
a tool to identify ways to
create value for the customer. This model proposes that every firm is a synthesis of
activities performed to design, produce market, deliver and support its product. In order
to be more precise only the primary activities in the value chain of PepsiCo India are
analyzed.
Primary Activities:
Inbound Logistics This involves bringing and procuring raw materials for the
business. For the carbonated drinks industry only two raw materials are required, they are
water and the concentrated salt that is used to produce the final product. For this purpose
water is extracted from the ground and the concentrated salt is provided by PepsiCo India
to all the plants in the country.
Operations Operations primarily includes all the bottling plants. Currently there are
32 bottling planting in India that operate for PepsiCo. Of the 32 plants, 15 are owned by
PepsiCo and the rest 17 are (FOBO), owned by R K Jaipuria Group.
Outbound Logistics The Outbound logistics of Pepsi can be divided into three
stages. First the finished product from the bottling plants is sent to the depot or the
territorial office, from where it is sent to the C & F centers and the Distributor Points
according to their demand. From the C & F centers and Distributor Points the product is
sent out for sale in the market to the retailers.
Marketing and Sales The sales and distribution network of Pepsi is very strong
and comprises of different layers and a dedicated sales force. This is one of the important
factors for the success of Pepsi. To keep the company abreast with competition and to
53
Primary Activities
8/14/2019 18048055 Pepsi Marketing Summer Training Report
54/92
provide support to its channel partners and to increase the sales, PepsiCo puts lot of effort
in its marketing activities. This includes maintaining excellent relations with its channel
partners, making huge investments in Advertising, signing of Megastars as its brand
ambassadors, sponsoring various events, launching promotional for any launch or re
launch of a product.
Service In this industry after sales service is generally not required. The only
exception being leak or burst bottles. In that case, the shopkeeper gets replacement for
plastic bottles from the salesmen instantly, while the replacement for glass bottles is
provided between 25th and 30th of every month. They are required to collect all the
damaged glass bottles and give to the respective salesperson who gives them the
replacement within the next few days after getting it approved from the CE or ADC.
Marketing Mix / 4 Ps:
Marketing Mix has been defined as the set of marketing tools that a firm uses to pursue
its marketing objectives. These tools are classified into four broad groups, namely,
Product, Price, Place and Promotion.
Marketing mix decisions should be made to influence trade channels as well as final
consumers. A firm can alter any of the four Ps accordingly, including changes in the
product and distribution channel as well.
The four Ps represent the sellers view of the marketing tools available for influencing
buyers. Whereas, from a buyers point of view, each marketing tool is designed to deliver
a customer specific benefits according to his or her requirements.
54
8/14/2019 18048055 Pepsi Marketing Summer Training Report
55/92
Product
Prod. VarietyQualityDesign
FeaturesBrand NamePackaging
SizesServices
WarrantiesReturns
Fig. 3 Four Ps
Product:Pepsi offers different variety of products ranging from carbonated to Non
Carbonated Soft Drinks. These include
Pepsi Cola
Mirinda ( Lemon and Orange )
7 Up
55
Marketing Variables: The Four P Components of the Marketing Mix
Product
Prod. VarietyQualityDesignFeaturesBrand NamePackagingSizesServicesWarrantiesReturns
Price
List Price
DiscountsAllowancesPayment periodCredit Payments
Place
ChannelsCoverageAssortmentsLocationsInventoryTransport
Promotion
Sales Promotion
AdvertisingSales ForcePubic RelationsDirect Marketing
8/14/2019 18048055 Pepsi Marketing Summer Training Report
56/92
Dew
Slice
Tropicana
Aquafina (Mineral Water)
These Products come in different size 200 ml, 300 ml, 600 ml, 1200 ml, 2 lt. there are
nearly 42 SKUs which are monitored and regulated on daily basis.
Product Quality:
This is one of the most important aspects that any Co. needs to address. Specially in the
case of Pepsi this is even more important because of the controversies and claims
regarding the CSE report on Pesticides in Pepsi. Therefore pepsi has to maintain stringent
quality norms and standards and norms. Pepsi does that by following one quality standard
worldwide and according to the official website of pepsi, the Co. maintains that :
At every level of Pepsi-Cola Company, we take great care to ensure that the highest
standards are met in everything we do. In our products, packaging, marketing and
advertising, we strive for excellence because our consumers expect and deserve nothing
less. We promise to work toward continuous improvement in all areas of our
organization.
At every step of our manufacturing and bottling process, strict quality controls are
followed to ensure that Pepsi-Cola products meet the same high standards of quality thatconsumers have come to expect and value from us. We also follow strict quality control
procedures during the manufacturing and filling of our packages. Each bottle and can
undergoes a thorough inspection and testing process. Containers are then rinsed and
quickly filled through a high-speed, state-of-the-art process that helps prevent any foreign
material from entering the product. Additional quality control measures help to ensure the
integrity of Pepsi-Cola products throughout the distribution process, from warehouse to
store shelf.
Brand Name:
This is the most important thing any Co. in this Business needs to do if it wants to remain
and succeed in the Business. Pepsi has successfully done that for so many years. Pepsi
56
8/14/2019 18048055 Pepsi Marketing Summer Training Report
57/92
has targeted the youth and has invested heavily in advertising and building a brand image
(by launching several campaigns and roping in mega stars such as Shahrukh, Sachin,
ganguly, Dravid etc.) that attracts to the youth and this is one of the main reason for the
success of Pepsi.
Packaging and Size : The products are available in packaging and sizes. This is done
to facilitate the use according to the requirements of the Customer. Different packaging
also affects the usage pattern of the product in various markets. e. g. sale of 2 lt. bottles is
high in areas in which middle and high income group customers stay. But the sale of 200
and 300 ml bottles is high in areas where people in the lower income group bracket stay.
The sale of 600 ml bottles is high in areas where students etc. stay. Different packaging is
also provided for different products like Tetra Packs, Pet Bottles and Glass Bottles (in
200 and 300 ml).
Services, Warranties, Returns : There are no warranties and services (post sales)
provided for these products but there is provision of returns in case there is any problem
with the product, e.g. leak or burst bottle, half filled bottle etc. The pet or plastic bottles
are returned the same day and a replacement is provided for the same but in the case of
glass bottles the retailer has to collect all the burst bottles and return it to the salesman
around 25th of every month to get a replacement.
Price:List Price: The Price of each product is fi