Market definition and analysis of Pepsi-Cola

Table of Contents

Executive Summary

List of figures and tables

1 Introduction
1.1 Problem definition
1.2 Aim of the Assignment
1.3 Scope of Work

2 PepsiCo and its products
2.1 Company profile
2.2 Pepsi-Cola

3 Market definition for Pepsi-Cola
3.1 Beverages in Germany
3.2 Competitors
3.3 Customers
3.4 Positioning map

4 Market analysis
4.1 Strengths and Weaknesses
4.2 Opportunities and Threats
4.3 Unique Selling Proposition (USP)

5 Conclusion

Appendix I - PEST-analysis of Pepsi-Cola

References

List of figures and tables

Figure 1: PepsiCo business units and selected products

Figure 2: Total global revenue in billion dollars (2013)

Figure 3: Market value in billion dollars of global beverage brands in (selected product types of PepsiCo and Coca-Cola Co)

Figure 4: Favorite cola-brands in Germany in 2013 (percentage of consumers in the last four weeks)

Figure 5: Potential target audience

Figure 6: Positioning map

Figure 7: SWOT-analysis

Executive Summary

PepsiCo is a global consumption goods company with a focus on beverages and “junk” food. The total revenue in 2013 underlines its global significance. Compared to Coca-Cola Company, PepsiCo is stronger in North America and around the globe, but that is a direct result of PepsiCo’s diversified portfolio. When it comes to brand value and numbers of sold cola beverages, Coca-Cola Co has a unique mar- ket share. Especially on the cola-market, both companies are the most successful competitors worldwide.

Pepsi-Cola has a very long history, but had only been a domestic product in the United States until the late 1940s. Therefore, Coca-Cola has an advantage regard- ing international distribution. In Germany, Pepsi-Cola entered the market almost 30 years after Coca-Cola. Nonetheless, Pepsi proved to be strong opponent by initiat- ing clever marketing campaigns. After the so-called “Pepsi-Challenge” in the 1970s PepsiCo could succeed temporarily in winning the consumers’ hearts. However, the German market for cola products is much more competitive behind Coca-Cola than the US-market.

Traditionally, Coca-Cola is the main producer of cola in Germany followed by local products from dicount markets. Next to the big international players, the German beverage industry is very diversified and oriented locally. Pepsi-Cola is available in nearly every German supermarket. It is also very present due to PepsiCo’s strong focus on advertising and sponsorship. But among German consumers Coca-Cola still maintains its pole position supported by a dominent brand image.

This turns out to be one of the most obvious threat to Pepsi-Cola’s market position. Addtionally, Pepsi-Cola’s image as a cheap cola drink is firmed, because of PepsiCo’s focus on distribution through discount markets. The development on the German beverage market shows the importance of sustainable packaging and ingredients. Therefore, Pepsi-Cola has to rely on its niche position in order to offer an alternative meeting consumers’ requirements in the future.

1 Introduction

1.1 Problem definition

Food and beverages are among the most valuable consumption goods in the glob- alized world. Due to the access of mass and social media nearly every citizen of developed countries at least heard about beverage brands in any kind of adver- tisement. Today, most of the main products, like Coca-Cola, Pepsi-Cola, Sprite, Red Bull etc., are sold globally. Although there are several medical studies or law restrictions aiming to limit the consumption, especially of sugared drinks, selling numbers in Germany remain constantly high.¹ Competition is still very tough be- tween global and local beverage industries. On the German market, comparative advertising again has been legalized since 2000 and allows companies to relate to competitors. Therefore, not only taste but also image and availability of products has an impact on the consumer’s behavior, which is indicated by Coca-Cola’s dom- inance on the beverage market.

1.2 Aim of the Assignment

In this assignment, a market for the product Pepsi-Cola is defined and analyzed.

The aim of this paper is to outline the performance of Pepsi-Cola on the German market from 2000 to 2013 in comparison to its main competitor Coca-Cola. In Con- sequence, the special situation of the beverage industry in Germany needs to be analyzed in order to find approaches for Pepsi-Cola to the consumer. Within the beverage industry, only the segment of cola drinks is focused, because of the strong selling position among consumed beverages in Germany.² Consequently, the customer’s needs play a strong role in the analysis. In order to meat the re- quirement of long-term planning of companies, the development of the German market including chances and risks is reflected by strategic marketing methods.

1.3 Scope of Work

The structure of the paper contains the company profile, a market definition and a market analysis. First, the company profile is described in order to show its position in the field of beverages. After dealing with PepsiCo, its product Pepsi-Cola and the historical development is illustrated. Second, the market for Pepsi-Cola in Germany is exhibited in a positioning map. This map is a result of the definition of the role, Pepsi-Cola has on the German market compared to its competing products. The potential consumer is part of the definition, too. Third, the defined market is analyzed by applying a method to evaluate external and internal factors, which have an influence on the product.³ This method leads to a Unique Selling Proposition (USP) for Pepsi-Cola in Germany. Last, an obligatory conclusion and outlook provide a link to further marketing analysis of the product.

2 PepsiCo and its products

2.1 Company profile

Pepsi-Cola is owned and produced by PepsiCo Inc. situated in Purchase, NY in the United States. PepsiCo’s core business consists of various beverages and “junk” food, which are sold throughout the world.⁴ Most of the offered products are either a well-known brand on their own (Gatorade) or directly linked with Pepsi (e.g. Pepsi-Cola). Consequently, PepsiCo has to be defined as a global food enterprise with a very diversified portfolio of products.

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Figure 1: PepsiCo business units and selected products⁵

As exhibited in figure 1, one of PepsiCo’s business pillars is the beverage field with 48% percentage of total revenue in 2013.⁶ The portfolio partly consists of PepsiCola (cola), Tropicana (juice), Gatorade (sports drink) and other soft drinks like Mountain Dew or Mirinda. All products are sold to discounts, catering-agencies, bars etc. but not directly to the consumer.

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Figure 2: Total global revenue in billion dollars (2013)⁷

On the North American market PepsiCo’s revenue is almost one and a half times higher than the revenue Coca-Cola Co had in 2013.⁸ From a global perspective, PepsiCo’s revenue in 2013 is significantly higher, too, but it includes food products, which Coca Cola Co does not sell.⁹ Both empirical statements (figure 2) prove how important especially the US-market is for PepsiCo. Nevertheless, the business unit of PepsiCo Europe contributed 21% to the overall revenue of PepsiCo in 2013.¹⁰ Overall, the significance as a global player in the beverage and food field is under- lined.

When it comes to market value of branding Coca-Cola seems to be invincible, because of its well-known and distributed corporate branding. Referring to Forbes, PepsiCo market value of branding is only worth one third of Coca-Cola.¹¹

2.2 Pepsi-Cola

Pepsi-Cola is communicated as a company “milestone”¹², because it has the long-est tradition within the portfolio and is considered to be the most known brand of the enterprise. Quoting Pepsi’s product history, the inventor of Pepsi-Cola, Phar-macist Caleb D. Bradham, sold it first as a prescription medicine.¹³ According to Pepsi’s medical background several sources state that the product name is a short form of either Pepsin (digestive enzyme) or the disease Dyspepsia.¹⁴ Nonetheless, similar to Coca-Cola it is still a current urban legend that Cola helps to cure Diar- rhea. In addition to health matters, the quality factor of taste has to be valuated.

In the 1970s PepsiCo launched a “Pepsi Challenge”, which aimed to prove Pepsi’s more likable flavor by initiating a public blind tasting.¹⁵ Eventually, it turned out that testing people preferred Pepsi to Coca-Cola, because of the sweeter taste. Unfor- tunately, a visual testing led to Coca-Cola instead, because consumers were most likely influenced by the brand image.¹⁶ Overall, the tasting results supported Pepsi- Co’s marketing strategy to attack on Coca-Cola’s dominant position during the still ongoing “Cola-War”.¹⁷

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Figure 3: Market value in billion dollars of global beverage brands in 2014 (selected product types of PepsiCo and Coca-Cola Co)¹⁸

According to figure 2 and 3, it is obvious that branding has a strong impact on com- pany evaluation.

[...]

¹ Cf. BWC-statista (2014h).

² Cf. BWC-statista (2014f).

³ Cf. Chapter 4 including SWOT and PEST analysis.

⁴ Cf. PepsiCo (2014b).

⁵ Own graphic according to PepsiCo (2014b).

⁶ Cf. PepsiCo (2014a), p. 10.

⁷ Cf. PepsiCo (2014a), p. 10.

⁸ Cf. BWC-statista (2014g).

⁹ Cf. BWC-statista (2014c).

¹⁰ Cf. PepsiCo (2014a), p. 10.

¹¹ Cf. Forbes (2014).

¹² Cf. PepsiCo (2014b).

¹³ Cf. Stoddard (2013).

¹⁴ Cf. Schmeh (2003).

¹⁵ Cf. Yoffie, Kim (2011), p. 7.

¹⁶ Cf. Baumgarth (2013).

¹⁷ Cf. Schmeh (2003).

¹⁸ Own graphic according to BWC-statista (2014d).