Market Behavior of PEPSICO :

They are a consumer products company operating in highly competitive markets and rely on
continued demand for their products. To generate revenues and profits, they must sell products
that appeal to their customers and to consumers. Any significant changes in consumer
preferences or any inability on their part to anticipate or react to such changes could result in
reduced demand for their products and erosion of their competitive and financial position. Their
success depends on their ability to respond to consumer trends, including concerns of consumers
regarding health and wellness, obesity, product attributes and ingredients, and to expand into
adjacent categories. For example, if they are unable to grow their core salty snack brands while
expanding into adjacent categories like crackers, bread bites and baked snacks, their growth rate
may be adversely affected. In addition, changes in product category consumption or consumer
demographics could result in reduced demand for their products.
Consumer preferences may shift due to a variety of factors, including the aging of the general
population, changes in social trends, changes in travel, vacation or leisure activity patterns,
weather, seasonal consumption cycles, negative publicity resulting from regulatory action or
litigation against companies in industry, a downturn in economic conditions or taxes specifically
targeting the consumption of products. Any of these changes may reduce consumers
willingness to purchase products. Any damage to their reputation could have an adverse effect
on their business, financial condition and results of operations., Changes in the legal and
regulatory environment could limit their business activities, increase their operating costs, reduce
demand for their products or result in litigation., Unfavorable economic conditions in the
countries in which they operate may have an adverse impact on their business results or financial
condition and Our financial performance could suffer if we they unable to compete effectively.

Their continued success is also dependent on their product innovation, including maintaining a
robust pipeline of new products and improving the quality of existing products, and the
effectiveness of their advertising campaigns, marketing programs and product packaging.
Although they devote significant resources to meet this goal, including the development of their
Global Nutrition Group, there can be no assurance as to their continued ability to develop and
launch successful new products or variants of existing products, to grow their nutrition business
or to effectively execute advertising campaigns and marketing programs. In addition, both the
launch and ongoing success of new products and advertising campaigns are inherently uncertain,
especially as to their appeal to consumers. Their failure to successfully launch new products
could decrease demand for their existing products by negatively affecting consumer perception
of existing brands, as well as result in inventory write-offs and other costs.
Before coming to the final consumer behavior when it comes to buying PepsiCo products , we
might recall the 4 A's approach of the Indian rural market.The Indian rural market might seem
appealing with its 70 lakhs potential consumer, but it also comes with its bag of challenge like a
lower income per capita, daily wage earner, bad roads, power issues, inaccessibility to habitual
marketing channel etc.
Availability: Availability of product is the first challenge in order to cover the70 lakhs people
spread 627,000 villages. Due to the bad state of the roads, the distance from central hubs,
marketer might make some sacrifice by reaching only villages containing more than 5, 000
people. For instance, Coca-Cola supplies depot which acts as hub, which twice a week ensure
full loads of smaller distributors in adjoining zones.
Affordability: The second challenge to overcome is the affordability of the product. With a
daily wage and low income, products need to be affordable for the rural consumer.
Acceptability: The product should suit the rural market to be accepted by customers. Due to the
lack of electricity therefore refrigerators, a thermos box can be of greater for seasonal outlet to
provide cold Pepsi.
Awareness: Due the lack of proper marketing process, brand awareness is another difficulty.
Even though people in rural areas haves the same like as urban consumer, they express it
differently since they are not properly exposed to all brands as urban consumer. Organization
must overcome this like Philips did it by using radio advertising and wall writing to increase its
growth in rural areas.

The beauty of the PepsiCo portfolio is that they truly do offer something for everybody. They
compete in three growing global categories: snacks, beverages, and nutrition. These categories
are highly complementary to one another, and they're extremely well-positioned with iconic
brands in each. One of the reasons Employees are proud to work at PepsiCo is that they 've been
able to perform while they transform. As they've continued to drive great innovation and
marketing campaigns behind their largest trademarks like Pepsi, Tropicana, Lay's, Quaker, and
Gatorade, they've also migrated their portfolio towards attractive, high-growth spaces such as
dairy, hummus, and baked grains. Brands like Sabra, Stacy's, and Muller Quaker yogurt are all
delivering great new products that further strengthen their position in these growing categories.

PepsiCo has a beautifully architected portfolio of food and beverage brands that's on trend and
offers the range of options our consumers and customers are looking for.There's no doubt that
consumers are spending more of their lives online, which makes digital a more important part of
the marketing mix than ever before. It's important to find innovative ways to connect with
consumers as they research and make decisions about products (what we call the pre-shop). It's
equally important to find innovative ways to sustain that engagement through to the point of
purchase and consumption. This trend is only going to intensify, making it imperative for
consumer goods companies and agencies to be able to meet consumers where they are versus
where they used to be.

It starts with having great new products. This is an area in which PepsiCo has excelled. Seven
PepsiCo products that launched in 2013 (four in beverages, three in food) are on pace to achieve
$100 million each in annual retail sales in the U.S. And they are very excited about their
innovation pipeline moving forward.

A big reason why theyve had such successful innovation is the quality of their consumer
insights. Because they have a diverse portfolio of complementary food and beverage brands,
they're able to gain unique insights into consumer trends and behaviors. They have analyzed the
drivers of literally millions of consumption occasions and used this data to better understand how
consumers make decisions about what to buy. This allows them to be highly focused in all of
their innovation so that they invest against the biggest opportunities. It also allows them to
deliver unique insights to their retail customers, which they're able to jointly leverage to develop
customized solutions that drive sales.

They pull it all together with great marketing and consumer engagement programs. The Doritos
"Crash the Super Bowl" program is a great example. Now in its eighth year, it has been one of
the most successful examples of a brand empowering consumers to create great new advertising
executed digitally. They've also turned to crowdsourcing for new product development, first with
a groundbreaking program for Mountain Dew several years ago that asked consumers to create
the next Dew flavor, which is an idea that they quickly "lifted and shifted" to their snacks
portfolio with the launch of their "Do Us a Flavor" program that has now run in almost 20
markets globally.

Market Risks :

They are exposed to market risks arising from adverse changes in:
commodity prices, affecting the cost of our raw materials and energy;
foreign exchange rates; and
interest rates.

In the normal course of business, they manage these risks through a variety of strategies,
including productivity initiatives, global purchasing programs and hedging strategies. Ongoing
productivity initiatives involve the identification and effective implementation of meaningful
cost-saving opportunities or efficiencies. Their global purchasing programs include fixed-price
purchase orders and pricing agreements. Their hedging strategies include the use of derivatives.
Certain derivatives are designated as either cash flow or fair value hedges and qualify for hedge
accounting treatment, while others do not qualify and are marked to market through earnings.
Cash flows from derivatives used to manage commodity, foreign exchange or interest risks are
classified as operating activities. They do not use derivative instruments for trading or
speculative purposes. They perform assessments of their counterparty credit risk regularly,
including a review of credit ratings, credit default swap rates and potential non-performance of
the counterparty. Based on their most recent assessment of counterparty credit risk, they
consider this risk to be low. In addition, they enter into derivative contracts with a variety of
financial institutions that they believe are creditworthy in order to reduce their concentration of
credit risk and generally settle with these financial institutions on a net basis.
In June 2014, PepsiCo opened a global innovation center in Mexico, which will focus on baked
goods. In September 2014, PepsiCo opened its first innovation facility in the Middle East region,
which will develop new products and flavors that are tailored to local taste preferences.PepsiCos
strong hold on the US snack market provides it an advantage over pure-play beverage companies
like Coca-Cola (KO), Dr Pepper Snapple Group (DPS), and Monster Beverage (MNST). The
Consumer Staples Select Sector SPDR Fund (XLP) has 19.8% holdings in beverages.Over the
past few years, growth in PepsiCos snack food business has offset the declining carbonated soft
drink volumes in developed markets. As discussed in a previous part of this series, the strong
performance of the companys Frito-Lay Americas snack division offset weakness in several
markets.