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MARKETING MANGEMENT
Part A Scope..4 Pepsi in India background.4 The Pepsi brand in India A SWOT analysis.5 Product Mix.6 Points of Difference, Points of Parity and Brand Recall..8 Market positioning and Segmentation.9 Distribution Channels12 Pricing Strategies & Brand Loyalty; the Indian Consumer and Price13 Creating Shared Value the Pepsi way.14 Pepsis Promotional & Marketing Strategy.14 Part B Current Image of Pepsi.18 Current Market Share18 Revised Market Segmentation19 Introduce Pepsi X as a direct rival to Thums up in rural India..19 Introduction of Pepsi Masala20 Replacement of Diet Pepsi with Pepsi Max in Urban India.22 Summary.24 Appendix A.............................................................................................................................27 Academic References.2
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Executive Summary
The soft drinks market in the advanced economies like the US is saturated or in some cases declining sales (Reuters). Given a fast growth rate of the Indian GDP, and consequently, higher levels of income distribution in the population, Pepsi is increasingly turning to emerging economies like India to sustain its global growth (Wikinvest). The Indian packaged food market is huge with the packaged tea and biscuit segments on top. Although soft drinks constitute the third largest segment, compared to other developing countries the market penetration is still very low. This indicates a further potential for rapid growth. It is a telling point that the average per capita consumption of soft drinks in the US is 700 bottles per capita / year, while in India it is only 10 bottles a year; the rural areas with an estimated 700 million people accounting for only 4 bottles per capita / year. According to a report by Euromonitor International, soft drinks in India have been estimated to have a market of 3.108 million US $. Soft drink volume sales are expected to rise by 8.6% per year. The sales of bottled water are also expected to rise rapidly in the next five years with an annual growth rate of 16.5%. Growing health awareness and increasing demand for hygienic products will fuel the dynamic growth of juices by an annual rate of almost 22%. Penetration in rural markets will also contribute to sales increase in soft drinks.
(Euromonitor International 2011).
India is a unique market for Pepsi in that, it is one of the few markets, where Pepsi outsells Coke, however 2 of Coca Colas products hold the top 3 spots in terms of market share, so Pepsi does have an opportunity to increase its market share. Its biggest competitor is a home grown brand called Thums Up which had been acquired by Coca-Cola when it entered India in 2003. Pepsi which has true to its global image always been seen as a young, trendy brand, however after a spurt of creative marketing in the late 90s, early 2000s which boosted the Pepsi brand immeasurably, it has for some time been using generic global marketing campaigns which have not struck a chord with the young in India, and neither has it attempted to tap into the family, feel good segment which has been Coca-Colas consistent strategy. Pepsi has a lot of inherent brand equity in the Indian market, which while has been dented by the Pesticide controversy in 2003 & 2006 has still not hampered its growth in the India. If Pepsi can capitalise on this and build on it, it can create a legion of loyal customers which can sustain the revenues potentially lost in other saturated markets. We have in our report attempted to completely understand Pepsis current brand image, positioning, and the inherent equity in the brand, and compared it with Coca-Colas, and then in part B suggested a way forward for Pepsi encompassing all the above elements.
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PART A
Scope
We have explored in depth the background, current status and future potential of the Pepsi Cola (and its variants, Diet Pepsi, Pepsi Max) in the Indian market. We have not considered in our study the wide bouquet of products that PepsiCo offers to the Indian customers.
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SWOT ANALYSIS
Some of the key points to be noted which have caused Pepsi as a brand to lose market share to Thums Up & Sprite, and also not expand into the untapped rural markets are, (1) It has over time lacked creativity in its ad-campaigns, and its campaigns have been a copy of the global marketing campaigns, whereas Coke has been able to ensure high brand recall with its clever use of slogans that use Hinglish like Thanda Matlab Coca Cola Thanda literally means cold, but it is also used as a word for refreshments, so this clever play on words has aided in its recall amongst the Indian consumers (2) In 2003 & 2009, there were outcries from both Legislators, and the consumers on the levels of Pesticides found in Cola products, and the effects of these controversies still linger on in public memory (3) The biggest competitor Pepsi faces today is not from other soft drink manufacturers, but the low priced, easy to store / sell local products like Lime juice, and thin butter milk (called Lassi) - these suit the Indian palette and also the weather conditions, and are easily made by small household firms, and sold in small dispensers at a substantially lower cost when compared to bottles of Cola.
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We have projected Pepsis current product offerings alongside its main competitor Coke, and analysed in which segments they currently belong to. It is clearly evident that Pepsi lacks a product of the stature of Thums Up which is the main cash cow for Coke Despite having been taken off the shelves after Coca-Cola purchased its parent company, and not having any Branding / Ad campaign for nearly 4-5 years, and also being available only in a limited number of geographies (Thums Up is available only in 9 states in India of 28 states) it outsells every other Cola brand in the market. If Coca-Cola decides to launch it in more states, it could easily move into the Stars quadrant, and could pose a major threat to Pepsi sales. The future of the diet Pepsi is uncertain, as it has thus far proven to be an unviable productDiet Colas market share is roughly between 2%-3% of the overall Soft drinks market, and has not seen any sustained growth in this segment. The diet categories of colas contribute to less than one percent of the total soft drink consumption in India. Further, 'Diet' is seen as a very metro (top 10 cities in India) phenomenon. (Bhattacharyya and Joshi).
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The biggest problem facing Pepsi (and also a big area of opportunity) is that it does not have any product that has a clearly established POD, and its taste in comparison to Coke is seen as similar, whereas its main competitor Thums Up is seen as having a rather unique taste, that suits the Indian palette, and hence has a clearly established POD over Pepsi, and its important to Pepsi to develop a competing brand that has a unique and Indian flavour.
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As can be seen, while Pepsi does have a strong brand recall, it does not have any brand that is in the Top of Mind segment- and having a brand that is top of the mind would aid in increasing its market share substantially. A brand is a long-term vision. Major brands hold certain significance within the product category, not just a specific dominating position. Pepsi if is posed with the question What would the market lack if Pepsi did not exist? would have a rather uncertain answer, as they have not managed to create a unique impact in the Indian context, and this needs to be a key area of focus
Segmentation: Finding the most revealing way to segment a market is more an art than a
science, any useful segmentation scheme will be based around the needs of customers and should be effective in revealing new business opportunities Peter Doyle, Value based marketing. Segmenting the market involves breaking down a large diverse market into a number of smaller sub markets. Identifying groups of customers with similar tastes and requirements will help in serving them efficiently but insufficient size of group will also cause the product or service to be supplied inefficiently. (David Jobber, 2007
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Pepsis branding strategy has been further elaborated below in the brand value chain. Brand Equity of Pepsi is evaluated and measured using the Customer Based Brand Equity Pyramid and Brand Awareness framework; Young, Urban, Trendy, Rebellious are some of the traits Pepsi has acquired in India. This has been achieved by sending a consistent message in their advertising campaign over a decade.
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Pepsi has invested a lot in its branding efforts and in building brand salience, and this is shown in the diagram below
Pepsi's branding efforts have gone beyond the traditional advertising formats, and encompasses the entire spectrum of the environment - this has resulted in a greater / increasing level of brand awareness and resonance.
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PART B
Current Image of Pepsi
The current image of Pepsi is that of a youthful brand that targets the trendy, fun loving, exciting and sporty customers in India. Though this image of Pepsi has made it a well recognized brand in the youth segment of India who are the highest consumers of soft drinks, it does not appeal as a family based drink - something coke has successfully managed. The current marketing strategy of Pepsi though effective lacks some poise. For instance the strategy makers have not taken advantage of latest trends of marketing such as guerrilla and viral marketing which are both cost effective as well as effective in spreading awareness among the customers. It is indeed an issue of concern for Pepsi that the most recent successful campaign was the "Youngistan" campaign back in 2003. Furthermore, the presence of Pepsi in the digital media such as in social media is very negligible. Though there are evidences of a lot of investments towards the propagation of the brand through these channels, the benefits are yet to be reaped. Diet Pepsi has not been able to make any headway in the Indian market with sales stagnating at approx 4% of the total Pepsi sales volumes Pepsi Max was introduced only on the internet and delivered based on the orders that were received online. The culture of purchasing online is very much dormant in the Indian population. Hence the efforts to promote Pepsi Max through the digital channels have not yielded expected results.
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drinks etc) available in the rural markets. (3) The usage of 150 ml plastic water packets is highly prevalent in rural India. Pepsi could enter this market which is yet to be explored by any of the other beverage brands. This would give Pepsi the first mover advantage in this category. This would also enable easier portability and storage, and help open up the previously untapped rural markets.
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The addition of spices like "Jal Jeera" into Pepsi can aid in improving the image of Pepsi as a more 'hygiene friendly' product. This could be taken advantage of and the message can be spread in the urban health conscious society too. With the rapid industrialization of the country, there is a lot of migration of youth between North and South India for jobs. This migration and mingling of culture could be taken advantage of by Pepsi to promote the usage of Masala Pepsi in the southern states where the culture as such is non-existent. Cleverly planned advertisements can help in creating and promoting this culture in a big way.
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The proposed marketing strategy for Pepsi can be summarised by the above BCG matrix. This involves in the facing out of Diet Pepsi, which is currently the weakest of the Pepsi brands and substituting it with Pepsi Max which has a higher potential for success. Two new variants of Pepsi, namely the Pepsi X and Pepsi Masala are introduced. Due to the overwhelming sales of Thums Up and the underlying demand for a similar flavour, Pepsi
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should look to create a star with the Pepsi X variant. If the Pepsi X variant is successful on a pan India scale, it would cannibalize the sales of the base cola variant of Pepsi. Though this would mean a drop in sales, efforts can be taken by Pepsi to make the brand to function as a cash cow and reap the financial benefits from it. The per capita consumption of beverages in India is significantly lower than that of economically similar/ poorer countries. Hence Pepsi must take efforts to create a culture of consuming beverages and cash into the untapped market. Though the use of Pepsi with Masala is prevalent in North India which indicates an untapped market for Pepsi, the success of the brand in the other parts of India is still unknown and hugely depends on the degree of promotional efforts taken by Pepsi to create the culture.
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Appendix A Testing times; the Pesticide controversy & its impact on the soft drinks market in India
In 2003, the Center for Science and Environment (CSE) published a report indicating presence of pesticides which greatly exceed European & Global standards. This report indicted both PepsiCo and Coca Cola Companies. The pressure of both the Indian media & the Indian public forced the Indian parliament to set up a parliamentary probe to examine the issue further. In an unprecedented move, both Coca-Cola and Pepsi Co responded to these allegations by holding joint press conferences, and by issuing joint press ads and managed to ride the storm out. The issue erupted once again in 2006 when the CSE released another report indicting Pepsi Co and Coca Cola. Pepsi and Coca-Cola were banned in educational institutions, several states have still banned the sale of colas in educational institutions. There were also widely covered public protests in which crates of Cola bottles were smashed publicly (Neeraj Vedwan). Over time this controversy also died down, however this issue is now deep suited into the Indian consumers psyche, and Pepsi needs to take a lot of efforts to ensure that this issue is put to rest and move forward. This Pepsi Co is doing by creating shared value, and ensuring that it is visible.
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References
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