New Target Market Strategy

PepsiCo

_______________________________________

Allison Bollmeier

Raffaella Botteri

Libby Correll

Chloe Marchesani

Bryce Williams
Agenda

I. Executive Summary

II. Company Description

III. Current target segment identification and description (Part A)

IV. Proposal for new target segment and marketing strategy (Part B)

V. Implementation Plan for Communication

VI. Financial Projections

VII. Conclusion

Executive summary

Pepsi's marketing campaign includes celebrity endorsements and many different slogans. Over

the years Pepsi's target audience has been loyal customers from all different socioeconomic and

geographical backgrounds 12-35 years of age. Our new marketing proposal for PepsiCo. includes

the same backgrounds of the current customers, but over the age of 40. We believe that attracting

these new customers will help the company expand their portfolio to a higher earning community

that is looking for healthier products, this can help generate revenues, and advertising can

continue to be done through social media.

Company description

PepsiCo. was founded in 1965 when the CEO of Pepsi-Cola, Donald Kendall, and

Frito-Lay CEO, Herman Laym joined companies to pair Frito-Lay’s packaged snacks alongside

the well-known Pepsi beverage. The company has created a world-known brand and leads in the

food and beverage companies. The company’s purpose is to eventually be the global leader in

Convenient Food and Beverages. The company has headquarters in every continent and plans to

continue expanding and growing.

Current target segment identification and description (Part A)

A study performed in 2006 stated that “Americans are spending an increasing amount of

time using “new media” like the Internet. There has been little research examining food and

beverage Websites' content and marketing practices, especially those that attract children and

adolescents.” (Weber et al., 2006). The purpose of this study was to analyze the marketing and

advertising strategies these brands used, one of them being PepsiCo. Companies such as Pepsi

can reach a wide variety of kids and adolescents through television, magazines, the internet,

music, and vehicles. PepsiCo’s targeted customer is mainly kids, teens, and a younger audience

of all backgrounds (Exhibit A). PepsiCo can reach this audience through the increased use of

interactive media and Social Media. Through the increased use of the internet and social media

in this younger age group, it is safe to say that these strategies are what will help Pepsi to keep

growing, and keep shifting into what the public and general consumers want (Exhibit B).

In July 2020, amid the COVID-19 pandemic, Grand View Research released an article

stating that the global market for the soft drinks industry is estimated to generate $994.7 billion

in revenues. By the end of 2020, projections show the industry will generate $1.4 trillion by the
year 2027, growing at a rate of roughly 5% per year.1 In Exhibit D of the appendix, we created

our own PESTEL framework for the soft drink industry. In 2016, the global soft drink industry

was dominated by the top 4 producers of the market, the top 4 beings: Coca-Cola, PepsiCo, Dr.

Pepper Snapple Group, and Cott Corporation (Exhibit E).

The nature of competition within the soft drink industry, specifically, is extremely

competitive. Consumers can easily change suppliers of soda for little to no change in price.

However, some buyers are extremely loyal to the brand they prefer. PepsiCo’s main competitor is

Coca-Cola, Pepsi, and Coke sodas being close substitutes, and the soft drink industry is

somewhat oligopolistic with Coca-Cola, PepsiCo, Dr. Pepper Snapple. PepsiCo has maintained

its competitive advantage against their competition with factors such as brand equity, large

global presence, pricing strategy, and a diverse product portfolio (Exhibit F).

PepsiCo’s current target marketing strategy consists of producing creative commercials

by utilizing celebrity endorsements as well as advertising during the Super Bowl. Celebrity

endorsers in Pepsi commercials include Michael Jackson2, Britney Spears3, and H.E.R. & Missy

Elliott4. The use of celebrity endorsements helps generate publicity and leaves the opportunity

for the public to buy PepsiCo products because their favorite celebrities are part of the brand.

However, celebrity endorsements are not overly effective as some individuals still look at

PepsiCo as an unhealthy brand of foods and beverages.

1
https://www.grandviewresearch.com/industry-analysis/carbonated-beverages-market
2
https://www.youtube.com/watch?v=po0jY4WvCIc
3
https://www.youtube.com/watch?v=5fugLhNbwoY
4
https://www.youtube.com/watch?v=Ozb_fJB_z6o
Proposal for new target segment and marketing strategy (Part B)

We propose PepsiCo should begin to target an older audience of both men and women,

ages 40 and up. It is in PepsiCo’s best interest to target these adults because they have a larger

disposable income. Another reason PepsiCo should target an older market is that from the

extensive research my team has conducted, close competitors aren’t as focused on the adult

audience at this moment. Targeting the adult audience can increase PepsiCo’s competitive

advantage as this is considered an untouched market.

There have been instances of PepsiCo trying to reach an older demographic, but have

failed. Back in 2008, PepsiCo launched Pepsi Raw intending to create a more “premium,

natural” drink to convey a healthier message to adults who were interested in leading a healthier

lifestyle.5 However, PepsiCo had to work hard to persuade their audience as to why they should

drink Pepsi Raw because at this time people were more health-conscious and chose other

supplements such as Tropicana or sparkling water instead.

Poor marketing also contributed to Pepsi Raw’s failure. Pepsi Raw initially launched in

the United Kingdom and it did well in bars and clubs but when it was launched in the grocery

stores, many did not understand the purpose of the drink. Ian Moore, who was interviewed by

FoodManufacture.co.uk, said, “When I first saw all the advertising in Paddington Station, I

remember thinking that it was not immediately obvious what the proposition was. Is it organic,

low calorie, or even an energy drink?”6 Pepsi Raw was discontinued in 2011 and was back to

square one on trying to increase their demographics.

Targeting an adult audience will also allow PepsiCo to possibly expand their portfolio to

healthier products because there is a higher demand for natural products (Exhibit G). PepsiCo

5
https://www.campaignlive.co.uk/article/pepsis-premium-brand-raw-plays-adult-audience/769107
6
https://www.foodmanufacture.co.uk/Article/2010/09/07/Pepsi-RAW-Where-did-it-all-go-wrong
products are generally classified as an unhealthy alternative. In recent years, the general public

has shifted to healthy alternatives – products with low sodium, less sugar, and fewer

preservatives. In a 2019 Statistica survey U.S adults aged 18-80 were asked “Are you trying to

limit/avoid sugars in your diet?” 13% responded they are avoiding sugar, 67% responded they

are trying to limit their sugar intake, and 20% responded they are using sugar.7

Implementation Plan for Communication

As previously stated, PepsiCo’s strategy for target marketing of younger generations has

been successful. Our team believes that a similar approach could work targeting older

generations, however, using celebrity endorsements by celebrities popular among this age

bracket. Ideas include Aerosmith, The Rolling Stones, and even Micheal Jordan. Furthermore,

airing commercials with the aforementioned popular groups during events like the Superbowl,

where many from this demographic will be watching, would help communicate PepsiCo’s

message. This, combined with the healthier, lower-calorie products that have not yet been

marketed would separate the image issues that PepsiCo has with their sugary drinks we found in

Exhibit D. This would get their message into the public eye.

Another potential source of communication is social media. Instagram, Twitter, and

Youtube all house opportunities for PepsiCo to communicate to customers online. Particularly on

Facebook, however, PepsiCo has the potential to access the 79% of 30-49-year-olds and 68% of

50-64-year-olds using Facebook16. Facebook is an effective way to communicate with

customers and entice them to buy their products in-store. By consistently posting videos,

pictures, and other posts encouraging users to engage, PepsiCo can build their following even

7
https://www.statista.com/statistics/790989/consumers-avoiding-limiting-sugar/
more. Videos/commercials that mirror the image they would use on television along with

pictures of the same characters from those commercials cultivate the message PepsiCo wants to

communicate.

Financial Projections

Over half of Americans are older than 38 years old (Tanzi, 2019). This new target market

presents a substantial percentage of Americans that current advertising is not targeted towards,

which means a vast number of potential buyers. This target market holds a large percentage of

total disposable income in the United States - Baby Boomers (~56-74)8 hold about 70%, as well

as 50% of total dollars spent on consumer product goods (Buxton). This data shows that the 40+

demographic presents a profitable target market. By breaking into this market, PepsiCo would

easily see a profit, keeping product prices the same.

PepsiCo typically spends $2.3-3 billion on advertising/marketing yearly.9. Budgeting for

this new target strategy would include costs for a commercial during the Super Bowl. Budgets

for these commercials tend to be large – in 2018 PepsiCo spent $10.2 million on their Super

Bowl commercial10. Based on that, we recommend a budget of $10 million for the commercial.

Funds would also be budgeted for the Facebook marketing channel. Data on Pepsi’s current

Facebook advertising spending is unavailable, but Coca-Cola spends between $20-25 million on

average on Facebook advertising11. This is not an uncommon figure for huge companies such as

Pepsi. Thus, a budget of $15 million would be suggested for Facebook advertising. This makes

the total budget for this marketing plan $25 million. This budget is offset by reducing current
8
https://www.kasasa.com/articles/generations/gen-x-gen-y-gen-z
9
https://www.statista.com/statistics/286547/pepsico-advertising-spending-worldwide/#:~:text=According%20to%20f
inancial%20reporting%2C%20PepsiCo,promotion%20of%20its%20products%20annually.
10
https://www.espn.com/nfl/story/_/id/28548288/the-most-expensive-super-bowl-commercials-all
11
https://www.businessinsider.com/top-advertisers-on-facebook-2013-11
marketing strategies targeted towards a younger demographic and gradual reduction once stable

in the market.

About 54% of Americans over the age of 50 consume soda regularly 12. This is a total of

about 60,257,00013 consumers based on the most current available population data. Increasing

the market share of this demographic by just 0.1% would generate 60,257 new consumers, and at

an average price of $3.6914 (Pepsi Prices), and an assumed average purchasing rate of 17 per

consumer15, targeting this older demographic could bring in over $3,779,920 in revenue in one

year. Three-year projections put this number at over $11,339,760 (Exhibit H). This number is

understated, considering it is for the 50+ demographic (instead of 40+) meaning the true increase

in revenues would be even greater, but this creates an estimate.

Conclusion

In conclusion, PepsiCo has found a very successful marketing strategy. By using celebrity

endorsements of those popular among the demographic they serve (12-35-year-olds), they sell

their cola products in stores, restaurants, and other food vendors. However, after researching

PepsiCo, where they thrive, and where they fall short, our team believes that PepsiCo has a

tremendous opportunity. If PepsiCo were to take a similar strategy of target marketing with those

above their current demographic and use celebrities popular among them, along with developing

healthier, natural products that people are looking for, PepsiCo could greatly expand.

12
https://news.gallup.com/poll/163997/regular-soda-popular-young-
data found is sectioned ages 30-49, so for a clearer and more understated rather than inflated view of this newer
demographic, ages 50+ are used
13
https://www.jchs.harvard.edu/sites/default/files/jchs-housing_americas_older_adults_2014-ch2_0.pdf [34% of
U.S. population above the age of 50]
https://www.census.gov/quickfacts/fact/table/US/PST045219
14
all variations of PepsiCo beverage products
15
Based on a purchase every 3 weeks; in reality this number could likely be higher but underestimated to avoid
overaggeration - actual data unavailable.
 References

1. https://www.pepsico.com/about/about-the-company

2. Bouckley, Elaine Watson and Ben. “Pepsi RAW: Where Did It All Go Wrong?”

Foodmanufacture.co.uk, William Reed Business Media Ltd., 7 Sept. 2010,

www.foodmanufacture.co.uk/Article/2010/09/07/Pepsi-RAW-Where-did-it-all-go-wrong

3. Buxton. (n.d.). The 3 Most Important Demographics for Retailers.

https://www.buxtonco.com/blog/the-3-most-important-demographics-for-retailers

4. Carbonated Beverages Market Size & Share Report, 2027,

www.grandviewresearch.com/industry-analysis/carbonated-beverages-market.

5. Carbonated Beverages Market Size & Share Report, 2027,

www.grandviewresearch.com/industry-analysis/carbonated-beverages-market.

6. Cui, G., & Choudhury, P. (2002). Marketplace diversity and cost-effective marketing

strategies. Journal of Consumer Marketing, 19(1), 54-73.

https://doi.org/10.1108/07363760210414952

7. GiraldiMedia. “Michael Jackson Pepsi Generation.” YouTube, YouTube, 26 June 2009,

www.youtube.com/watch?v=po0jY4WvCIc.

8. Hafiz, R. (2015). Rethinking Brand Identity to Become an Iconic Brand - A Study on

Pepsi. Asian Business Review, 5(3), 97-102. https://doi.org/10.18034/abr.v5i3.60

9. Pepsi Prices. (n.d.). Hangoverprices.com. Retrieved November 30, 2020 from

https://www.hangoverprices.com/pepsi-prices/

10. Pepsi | Zero Sugar | SuperBowl Commercials 2020 - YouTube.

www.youtube.com/watch?v=Ozb_fJB_z6o
11. Simms, Jane. “Pepsi's Premium Brand Raw Plays to Adult Audience.” Campaign,

CampaignUK, 9 Oct. 2013,

www.campaignlive.co.uk/article/pepsis-premium-brand-raw-plays-adult-audience/76910

12. Tanzi, A., & S. H. (2019, June 20). Half of Americans Are Now Over the Age of 38.

Bloomberg.

https://www.bloomberg.com/news/articles/2019-06-20/half-of-americans-are-now-ov

er-the-age-of-38-census-data-show

13. ThisIsTheMusic201x. “Britney Spears - ‘Joy of Pepsi’ Commercial.” YouTube, YouTube,

28 June 2010, https://www.youtube.com/watch?v=5fugLhNbwoY

14. Weber, K., Story, M., & Harnack, L. (2006, September). Internet Food Marketing

Strategies Aimed at Children and Adolescents: A Content Analysis of Food and Beverage

Brand Web Sites. Journal of the American Dietetic Association, 106(9), 1463-1466.

https://www.sciencedirect.com/science/article/pii/S0002822306013915?casa_token=Sb92

-CqZ3BoAAAAA:KideezHDntknoH0wrEInFExYDCyJqA5aSPtWRdRMQ0eMWANIlj

QGM85M-3lcv_eYvOz_lEIq

15. Wunsch, Nils-Gerrit. “U.S. Consumers Avoiding or Limiting Sugar Intake 2019.”

Statista, 25 Nov. 2020,

www.statista.com/statistics/790989/consumers-avoiding-limiting-sugar/

16. Chen, J. (2020, August 21). Social media demographics to inform your brand's strategy in

2020. Retrieved December 02, 2020, from

https://sproutsocial.com/insights/new-social-media-demographics/
 Appendix

Exhibit A

Exhibit B

Exhibit C

Source:
https://www.pepsico.com/docs/album/annual-reports/pepsico-inc-2019-annual-report.pdf?sfvrsn
=ea470b5_2
Exhibit D

Exhibit E

Source: https://www.fool.com/investing/general/2014/08/25/soft-drinks-investing-essentials.aspx
Exhibit F

Source for strengths -- market dominance:

https://www.investopedia.com/ask/answers/060415/how-much-global-beverage-industry-controll
ed-coca-cola-and-pepsi.asp#:~:text=Market%20Share%20and%20Market%20Cap,market%20ca
p%20of%20%24185.8%20billion
Exhibit G

Exhibit H