A Marketing Research Project on Pepsi

Pepsi Cola was first made in the 1893 by pharmacist Caleb Bradham in New Bern, North
Carolina. Initially Pepsi was introduced as “Brads Drink” by Bradham in 1898 and was made
at Braham’s pharmacy where the drink was also sold. Later, Bradham changed its named to
Pepsi Cola, due to the enzyme pepsin and kola nuts used in the recipe. In 1903 “Pepsi-Cola”
was officially registered with the U.S. Patent Office. Today Pepsi Cola is manufactured by
PepsiCo. PepsiCo is a world leader in convenient snacks, foods and beverages. Currently
PepsiCo is the number 2 manufacturer in soft drinks behind Coca Cola, number one in snacks
and number one in juices. PepsiCo has revenues of $40 billion a year with beverages
contributing to less than 50% of that revenue.

Market Segmentation
Early in its history, Pepsi understood market segmentation and the importance of having
consumers to advertise to that aren’t locked into a specific product yet. Pepsi realized in the
1940s that African Americans were an untapped niche market. At the time Pepsi was able to
gain market share by targeting and advertising towards African Americans which they have
continued to do. Today Pepsi markets its product to younger people. The idea behind marketing
towards younger people is to lock them into their product throughout their life. Pepsi realizes
that their beverages will continued to be bought by customers as they get older so they are
trying to build a strong customer base by marketing to 14-30 year old males and females. Pepsi
markets to all social backgrounds of all educational and occupational backgrounds. Pepsi
customers are loyal to their products as they can easily switch to an alternative beverage and
these customers are both aware and interested in the products Pepsi has to offer.

Market Size/Characteristics
The market size of the soft drink industry has been changing. It decreased in early 2000s, and
is now increasing into the 2010s. The market has shown an increase in both sports and energy
drinks. Currently, the total market value of soft drinks in the United States is $60 billion. As of
2009, Pepsi-Cola had sales of $18 billion trailing only behind Coca Cola in the United States.
Soft drink consumption has a market share of 46.8% within the non-alcoholic drink industry in
the United States where the total market value of soft drinks over $307.2 billion globally.
Market Share
Data from Beverage Digest’s 2008 report on Carbonated Soft Drinks has shown that PepsiCo’s
U.S. market share is 31 percent while rival Coca-Cola Company’s is nearly 45 percent percent.
Overall, Coca-Cola outsells Pepsi in almost all areas of the world, few exceptions. Below is a
graphical representation of United States soft drink market share from 2008.

Product Attributes
From the Pepsi Cola website they explain how with all of the different Pepsi products available
that there is something for everyone. Pepsi’s brands are very popular not only in the United
States, but all over the world and are enjoyed by everyone. The product Pepsi offers from its
colas are sweet, delicious, less carbonated than its rival Coca Colas. Pepsi’s Mountain Dew
product is even less carbonated than its Colas and is of very sweet tasting, marketed towards
the younger populations. The Gatorade products Pepsi manufacturers are global leaders in
sports drinks and provide a delicious tasting beverage with a lot of electrolytes for athletes
losing fluids in a hard workout or a competition.

Product Mix
The product mix of Pepsi is one which is very wide and very deep. The width of Pepsi products
come from all of the different types of products Pepsi sells which include carbonated soft
drinks, waters, energy drinks, teas, juices, ready to drink coffees, and sports drinks. The depth
of Pepsi Cola comes from the numerous Pepsi brands in each type of product. Pepsi has big
brands in each product category. Some of the large brands in each category include:

Carbonated Soft Drinks

Pepsi, Mountain Dew, Sierra Mist

Waters

Aquafina, Sobe

Energy Drinks

Amp, No Fear

Teas
Lipton Brisk, Iced Tea

Juice Drinks

Dole, Ocean Spray

Dairy-Based Drinks

Sobe

Ready to Drink Coffees

Starbucks

Sports Drinks

Product Strategy
The strategy of Pepsi can be taken right from a quote off of the Pepsi website which reads:
“Pepsi is constantly on the lookout for ways to ensure their consumers get the products they
want, when they want them and where they want them.” From this quote one can easily
recognize that it is important to Pepsi to produce good tasting products that are distributed all
over and easy to purchase. Pepsi and its products can be seen everywhere and this is important
to them as they have so many different products. Pepsi has products that are alternatives for
each other and this allows them to have such a great presence in the soft drink market and have
large percentages in the market share.

Product Life Cycle

Product life cycle is the stages a product goes through from its introduction, to growth, its
maturity, and then its decline. The Pepsi Company, although it has a lot of mature product in
its colas and other soft drinks, it still has some growth. A lot of the growth of Pepsi is due to
the newly popular energy drinks which it produces and the sports drinks. The new products
Pepsi is producing each year give me reason to believe it is not quite at maturity, but is at the
top of the grown stage in its product life cycle. This diagram helps illustrate where Pepsi
currently is in its life cycle.
Product Development and Innovation
The Pepsi Company website writes, “The Pepsi Company continues to innovate, creating new
products, new flavors and new packages in varying shapes and sizes to meet the growing
demand for convenience and healthier choices.” The way Pepsi develops products and
innovates is by offering new different tasting beverages. Pepsi has come out with numerous
different soft drinks, and has added many other products to their product mix. Other types of
beverages including energy drinks, juices, and sports drinks are ways in which Pepsi has been
innovative and the different flavors it comes out with ever year’s shows the development of
Pepsi.

Pepsi’s latest innovation is adding three new products which are considered to be a
“throwback” to the 1960s and 1970s. Pepsi Natural, Pepsi Throwback, and Mountain Dew
Throwback will all be sold with these older logos and are all sweetened with natural sugar.
These recipes date back to the 1960s and 197s and will be able to be purchased this month.

Pricing
The United States carbonated soft drink market is a mature market where the industry sales
growth is largely driven by population growth and advertising. Product innovation is also
taking place in the industry and is an important aspect of pricing in the market. Since there is
a mature nature of the market both Pepsi and Coca Cola have resorted to price discrimination
strategies to maximize the value of consumer demand. Price discrimination means that there
will be different prices for the product in the different regions it is being sold. Pepsi, Coke or
other soft drinks have similar prices and the price will vary slightly from place to place and
depending on which packaging it is sold in.

Distribution
On February 26, 2010 the Pepsi Beverages Company (PBC) was formed when PepsiCo bought
both of its largest distributors in the world. The Pepsi Beverages Company is made up of the
Pepsi Bottling Group which world’s largest bottler of Pepsi-Cola beverages. The Pepsi Bottling
Group’s sales of Pepsi-Cola beverages accounted for more than one-half of the Pepsi-Cola
beverages sold in North America. Pepsi Beverages Company is also made up of the former
PepsiAmericas Company which was world’s second-largest bottler of Pepsi-Cola beverages
and had19 bottling plants in the United States and had a presence in 16 other countries. PepsiCo
and Pepsi-Cola now has much control over its bottling companies and the distribution of Pepsi
Cola products. Pepsi products are distributed to stores all over, from small grocery marts to
larger bulk warehouse stores, and through fountain drinks.

Packaging
In the United States Pepsi products are sold in plastic bottles and cans as well as dispensed
through a fountain. The cans are packaged in 6 packs, 12 packs and cases of 24, 36 and 360.
Pepsi also has bottles come in 1, 1.5, 2, and 3 liters. Energy drinks first sold in eight-ounce
cans in the United States, but now are sold in similarly sized cans to the other soft drinks. The
Pepsi packaging has been simple, containing a blue color, differing itself from the Coca Cola
red. Pepsi’s packaging has not changed much until it’s new look in 2009 which it changed its
logo and packaging in an attempt to distinguish itself and promote itself from the other colas
as a cultural leader.

Advertising Strategy
Recently, cutting back on television

Shifting to social media

Website, Twitter, Facebook

2010: First time in 23 years without Superbowl Ad

Younger generation

Pop stars

Movie stars

Promotion
Pepsi Challenge: Pepsi vs. Coke

Pepsi Stuff: merchandise purchased with Pepsi Points

Pepsi Refresh Project

Pepsi brand is dedicating $20 million dollars a year

Donations to local organizations

Causes proposed by the public in health, arts and culture, the environment and education

Media partners for the project include: AOL, Face book, Hulu and MTV