FIVE-YEAR MARKETING PLAN

PepsiCo, Inc.

Table of Contents

1. Executive Summary

2. Company Description

3. Strategic Focus and Plan

Mission/Vision Statement

Goals

Core Competency and Sustainable Competitive Advantage

4. Situation Analysis

SWOT Analysis

Industry Analysis: Trends in Healthy Soft Drinks

Competitor Analysis

Company Analysis

Customer Analysis

5. Market-Product Focus

Marketing and Product Objectives

 Target Markets

Points of Difference

Positioning

6. Marketing Program

Product Strategy

Product Line

Unique Product Quality

Packaging

Price Strategy

Promotion Strategy

Place (Distribution) Strategy

7. Financial Data and Projections

Past Sales Revenues

Five-Year Projections

8. Organization

9. Implementation Plan

10. Evaluation and Control

 1. Executive Summary

This marketing plan provides a written analysis of the trends, consumer demands
and markets in the soft drink industry and the implementation strategy PepsiCo plans to
put into action when launching a new product line of "New Age" products. The key
success factors of this marketing plan are:

- Growing market for healthier soft drinks:

- the market for diet drinks is not new, yet has limited choices and is therefore
open for expansion of new products

- the largest segment of the U.S. population is aging (the baby boomers)
causing a rise in health concerns and adding to demand for healthier soft
drinks

- Younger generation drinks less coffee and more soft drinks with caffeine

- Unique new product:

- Introduction of a new artificial sweetener

- Tastes as good as a non-diet soft drink

- Only one calorie

- Comparable competition does not yet exist

- Exciting promotional campaign strategy:

- Sports lounges in malls with free drinks provided and sports on TV

 - Free giveaways at college and professional football and basketball games

- Free t-shirts displaying product to college students given away on central

campus locations

- Lucrative Sales forecasts:

The introduction of a new line of products including an entirely new product and
ingredient will increase sales revenue for PepsiCo. The sales revenue will in turn create
an incremental growth during the introductory phase for the new products as shown
during the projections for the next five years.

In conclusion, the promotion and launch of the new product line will help meet
the needs of customers, provide a new niche in the soft drink industry and become a
profitable venture for PepsiCo.

2. Company Description

PepsiCo, Inc. is among the most successful consumer products companies in the

world, with 1999 revenues of over $20 billion and 116,000 employees. The company
consists of: Frito-Lay Company, the largest manufacturer and distributor of snack chips;

Pepsi-Cola Company, the second largest soft drink business and Tropicana Products,

the largest marketer and producer of branded juice. PepsiCo brands are among the

best known and most respected in the world and are available in about 190 countries

and territories.

Some of PepsiCo's brand names are 100 years old, but the corporation is

relatively young. PepsiCo, Inc. was founded in 1965 through the merger of Pepsi-Cola

and Frito-Lay. Tropicana was acquired in 1998.

PepsiCo's success is the result of superior products, high standards of

performance, distinctive competitive strategies and the high integrity of their people.

Their overriding objective is to increase the value of their shareholders' investment

through integrated operating, investing and financing activities. Their strategy is to

concentrate their resources on growing their businesses, both through internal growth

and carefully selected acquisitions. Their strategy is continually fine-tuned to address

the opportunities and risks of the global marketplace. The corporation's success reflects

their continuing commitment to growth and a focus on those businesses where they can

drive their own growth and create opportunities.

3. Strategic Focus and Plan

Mission/Vision
 PepsiCo's overall mission is to increase the value of their shareholders'
investment. They do this through sales growth, cost controls and wise investment of
resources. They believe their commercial success depends upon offering quality and
value to their consumers and customers; providing products that are safe, wholesome,
economically efficient and environmentally sound; and providing a fair return to their
investors while adhering to the highest standards of integrity.

Goals
Nonfinancial Goals

• Sharply focus their financial and management resources on their core

businesses: restaurant management on restaurants, packaged goods
management on beverages and snacks.

• Ruthlessly prioritize to be sure they employ their greatest sustaining efforts on

the biggest opportunities within their core businesses. In beverages, for example,
the lions share of their investment dollars and management attention will go to
high-potential markets where no company dominates like China, India and
Russia and to markets where they lead or are a strong number two.

• Build their success upon their key functional strengths:

1. day-to-day management of operationally intensive businesses;
2. manufacturing, selling and distribution infrastructure development; and
3. marketing and new product R&D.

Financial Goals

• To obtain a real growth in earnings per share of 15% per year over time.
• To obtain a return on equity of at least 40%.
Core Competency and Sustainable Competitive
Advantage

In terms of core competency, PepsiCo seeks to achieve a unique ability to:

(1) provide a distinctive, high-quality one-calorie soft drink and to provide a high-
quality citrus soft drink using Pepsi Company’s distinct ingredients to appeal
and to excite contemporary tastes for these products and

(2) deliver these soft drinks to the customer using effective manufacturing and
distribution systems that maintain PepsiCo’s quality standards.

To translate these core competencies into a sustainable competitive advantage,

Pepsi Co. will work closely with key suppliers and distributors to build the relationships
and alliances necessary to satisfy the high taste standards of our customers.
 4. Situation Analysis

This situation analysis starts with a snapshot of the current environment in which
PepsiCo finds itself by providing a brief SWOT (strengths, weaknesses, opportunities,
and threats) analysis. After this overview, the analysis goes into greater detail with
regards to industry, competitors, company, and consumers.

SWOT Analysis

The following table shows the internal and external factors affecting the market

opportunities for PepsiCo. This SWOT analysis also shows PepsiCo's internal

strengths such as their experienced management team, a competitive product line, a

global marketing realm, and the continuous efforts by their research and development to

research trends in the industry and to be creative in exploiting those trends. Some

possible opportunities noted in the SWOT analysis are the growing markets for

specialized ethnic foods and healthier food products. Another opportunity is that the

income of consumers is high enabling them to be less price sensitive, and convenience

is becoming evermore important not only to the United States but to many countries

around the world.

 Although PepsiCo has many strengths, a few weaknesses lie in the fact that the
company is so large and could possibly lose focus or have internal conflict problems. A
few of the threats PepsiCo must stay aware of are the ease of replicability of its product
line, the almost pure competition in pricing for its products, and the quickness of
technological advances causing existing products to be no longer the most advanced.

Internal Factors Strengths Weaknesses

Management Experienced, broad base of Large size may lead to
interests and knowledge conflicting interests
Product Line Unique, tastes good, New one calorie products have
competitive price, and no existing customer base,
convenient generic brands can make
similar drinks - cheaper
Marketing Diverse, and global May lose focus, may not be
awareness segmented enough
Personnel International, diverse Possible conflicts due to so
positions many people, possible trouble
staying focused
Finance High sales revenue, high sale High expenses, may have
growth, large capital base trouble balancing cash-flows of
such a large operation
Manufacturing Low costs and liabilities due Lose control and quality
to outsourcing of bottling standards
Research & Continuous efforts to May concentrate too much on
Development research trends an reinforce existing products,
creativity intrapreneuralship may not be
welcomed
External Opportunities Threats
Factors
Consumer/Soci Huge market in the healthy More expensive products than
al products and growing market Coke, such a high price may
for specialized foods for limit lower income families
ethnic groups from buying a Pepsi product
Competitive Distinctive name, product and Not entirely patentable,
packaging in with regards to constant replicability by
its markets competitors
Technological Internet promotion such as Computer breakdowns, viruses
banner ads and keywords can and hackers can reduce
increase their sales, and efficiency, and must constantly
more computerized update products or other
manufacturing and ordering competitors will be more
processes can increase their advanced
efficiency
Economic Consumer income is high, Very elastic demand, almost
more tend to eat out, pure competition
convenience is important to
U.S.
Legal/Regulato High U.S. Food & Drug
ry Administration standards
eliminate overnight
competitors

Industry Analysis: Trends in Healthy Soft Drinks

Within the soft drink industry, a major trend to capitalize on is healthier soft drinks. The
market for healthy soft drinks is huge and growing among American and international consumers
alike. Along with a large market, many opportunities have arisen due to recent technological
advances. New research has brought to Pepsi a lower calorie sweetener than aspartame allowing
for an even healthier diet drink. Also technology on the Internet has revolutionized the
promotional process. By using banner ads and keyword ads, Pepsi Co. can reach a higher number
of audiences and yet and the same time have more specific and targeted segments. A final factor
that is providing an ideal situation to introduce a new product is that consumers are tending to eat
out more often due to the fact that economically, income is high. This will help to increase our
sales of fountain beverages to restaurants. All of these positive industry factors combined create
an exemplary context in which to launch new healthy soft drink products.

Competitor Analysis

The soft drink market represents $4,798,000,000 in annual sales. The products fall into
four main groups: colas, lemon-lime-flavored drinks, diet drinks, and other drinks.
Type PepsiCo Products Competing Products
Cola Pepsi Cocacola

Generic
Lemon-lime Mountain Dew Sprite

Sierra Mist Fresca

Slice 7-Up

Generic
Diet Diet Pepsi Diet Coke

Pepsi ONE Diet Caffeine Free

Coke
Diet Caffeine Free Pepsi
Diet Dr. Pepper
Diet Mt. Dew
Diet Sprite

Diet 7-Up

Tab

Generic
Other Mr. Pibb Dr. Pepper

Mug Rootbeer A&W Rootbeer

Wild Cherry Pepsi Barque's Rootbeer

Crush

Cherry Coke

Sunkist

Generic

PepsiCo's current retail prices range depending on the convenience of the

location in which they are located and depending on the size of the soft drink container.
On average, a 12 ounce can is between $.25 - $.99, a 20 ounce plastic bottle is
between $.50 and $1.29, and a 2 liter plastic bottle is between $.50 and $1.95.

The major disadvantages regarding the competitive structure of the market lies in
the fact that there are so many other competitors and options such as water, coffee and
juice to compete for the same consumer.

Company Analysis
Currently PepsiCo competes in the soft drink segment of the global beverage
market. While PepsiCo's soft drinks can obviously compete as a stand-alone product, it
can also complement any snack or meal

At present PepsiCo, Inc. operates with over 116,000 talented and innovative
employees. The steadily increasing business with minority and women-owned firms
has improved their company's supplier base. It has also helped to strengthen the
suppliers' firms as well as the minority community infrastructure with regard to such
benefits as employment, training, role modeling, buying from other minority and women-
owned businesses, and supporting community organizations. PepsiCo's culture is
informal and entrepreneurial. Their people are empowered to make the decisions
necessary to grow the business. They seek to achieve outstanding results through
innovation, long tern partnerships, and an open work environment that respects the
individual and promotes personal and professional growth.

Our strategy is to concentrate our resources on growing our businesses, both

through internal growth and carefully selected acquisitions. Our strategy is continually
fine-tuned to address the opportunities and risks of the global marketplace. The
corporation's success reflects our continuing commitment to growth and a focus on
those businesses where we can drive our own growth and create opportunities.
Customer Analysis
PepsiCo has an extremely large customer base due to the wide spread
popularity of soft drinks. It is therefore necessary to segment the market and look at
particular trends in the soft drink market. There are two key trends in the soft drink
market, which are the growing demand for healthier soft drinks and the mostly untapped
market of targeting ethnic groups with specific products regarding their interests.

Information
How to grow this
segment
Who is the main target
market
How to market these
products
Factors leading to the
rise of this trend
Trend
Healthier Drinks Ethnic Marketed Drinks
Need to attract men Target the each specific
and a younger market with products and
audience without advertising designed
excluding females around their wants (ex.
Research has shown that
African Americans in
general prefer lighter
colored soft drinks such
as Mellow Yellow (99%)
and Slice (73%))
The younger African Americans (who
generation is the prime represent 1 of 7 soft drink
target for healthier soft customers) and Hispanic
drinks, a key reason for Americans (who's
this is that many population is growing and
younger consumers do consists of one of the
not drink coffee but largest growing markets)
prefer drinks such as
Pepsi or Mountain Dew
to give them a boost
Show how they benefit Keep the advertising
the customer, give full relevant, but don't try to
nutritional information hard
Less consumption of Marketing research has
alcohol: 4 out of 10 shown that not all
 people do not drink American's prefer the
alcoholic beverages, same soft drinks, the
even drinkers do not population growth of
drink all the time (ex. minorities in America has
Designated drivers, created a growth in their
pregnant women, those related market size
who cut down for
health reasons)

5. Market-Product Focus

This section describes the three year marketing and product objectives for
PepsiCo and the target markets, points of difference, and positioning of its lines of soft
drinks.

Marketing and Product Objectives

PepsiCo's marketing intent is to take advantage of its brand potential while building a
base from which revenues can be generated. These are detailed in the three focus
areas below:

· current markets - expand brand and flavor, increase customer awareness through
promotion, coupons and in store displays

· new markets - healthier soft drink market and target ethnic groups

· new products - one calorie soft drinks (Pepsi ONE) lighter colored soft drinks (Sierra
Mist). Initially these products will be introduced on college campuses as test markets
then will be distributed nationally within 2 months and distributed globally within 2
years.

Target Markets
 For PepsiCo every individual in the United States with a middle class status can be
considered a potential consumer. Though, in order to target specific markets, PepsiCo divides
the target market into the following market segments:

Consumers under the age of 18: This is when PepsiCo is marketing to a younger
generation. These potential customers still live at home with parents. They rely heavily on
parents to purchase the product for them. In this segment, PepsiCo is trying to capture brand
awareness.

Consumers between the ages of 18 to 24: PepsiCo is still marketing to a younger

generation, but these customers are either in college, moving away from home, and/or starting
new jobs. In this segment, Pepsi Co. is trying to capture brand awareness and loyalty.

Consumers between the ages of 25 to 34: PepsiCo is marketing to customers who are
established in their job market and who are starting families. In this segment, loyalty has already
been established.

Consumers between the ages of 35 to 49: PepsiCo is marketing to customers who are an
established market, one in which brand loyalty has already been sustained. These customers are
loyal customers and are routine Pepsi drinkers.

Consumers age 50 and up: Again, this is a market in which customers are established,
and brand loyalty has been sustained. These customers are loyal customers, and only drink Pepsi
products.

Points of Difference

The points of difference - or attributes that make PepsiCo's new products Pepsi ONE and
Sierra Mist unique among its competitors are:

Pepsi ONE Sierra Mist

One calorie - healthier Caffeine-Free
than other diet drinks
Unique taste - tastes like Fresher, cleaner, less
regular Pepsi syrupy sweet taste
 No use of aspartame - Less harsh tasting than
no taste of the artificial any other lemon-lime
sweetener product

Positioning
Previously customers concentrating on health had to settle for a less appealing
taste to uphold their diet. Now the new one calorie drink that Pepsi offers (Pepsi ONE)
brings a great taste but is healthier than other diet drinks because it is only one calorie.
The name Pepsi ONE also helps to give the product positioning because the consumers
can immediately relate the name to the benefits of the product - one-calorie. Finally, the
color of the product package helps position the product. Regular colas are usually a
bold color, while diet colas are often white and diet caffeine free colas are usually gold.
Pepsi One is in a silver can which tells consumers that the product is still a diet drink,
but a different diet drink.

Sierra Mist, a new lemon-lime flavored soda, has no caffeine and has been
described by consumers as fresher, cleaner and less syrupy sweet than other sodas
like it. Sierra Mist is to be positioned as a new age soda with marketing, packaging and
advertising concentrating on its refreshing taste.

6. Marketing Program

Product Strategy

Product Line
 PepsiCo's newest marketing program is for New Age soft drinks. This will initially
include two flavors:

· Sierra Mist - a lemon lime flavored soft drink with a fresher, cleaner, less syrupy
sweet and less harsh taste that competing lemon lime soft drinks

· Pepsi One - a one calorie cola flavored soft drink with the same taste of regular
Pepsi but only one calorie

Unique Product Quality

Pepsi ONE is the refreshing new soda for people who want it all -- great cola
taste with only one calorie. This exciting new product was launched nationwide in the
fall of 1998 earning significant consumer and media attentions for its revolutionary new
product formulation; the newly approved sweetener, Sunnett (Acesulfame potassium or
Ace-K) and aspartame. The new sweetener allows for this soda to have only one
calorie per serving. This product also has significantly less carbohydrates and sodium
than most other sodas.

Sierra Mist is the new caffeine free soda with the great lemon-lime flavor that
people love. This product was released in October of 2000 nation wide and hopes to be
worldwide by the end of the year. Other than the caffeine free aspect of this soda, it has
most of the same ingredients as any other regular product.

Packaging
Providing their consumers with easy-to-use, convenient and innovative
containers are one of their top priorities. Package introductions they've made over the
years include the industry's first two-liter bottle; The Cube, an easy-to-store 24-pack; Big
Slam, the wide-mouth one-liter bottle; and their three-liter bottle, designed to provide
consumers with extra value. Pepsi Co. was the first company to respond to consumer
preference with lightweight, recyclable, plastic bottles. These bottles are made of
polyethylene terephthalate or "PET plastic," which is a form of polyester used to make
strong, lightweight, shatter-resistant bottles. PET plastics are recyclable into products
including new containers, fiberfill for sleeping bags and coats, fabric, carpets, auto
parts, film and more.

Sierra Mist

Peps
i ONE
Silver Green
New logo New logo
Says one-calorie Says new on the
label

Price Strategy

Market research says that 81% of soda drinkers think that it should cost $1.00 for a
single 12oz serving of soda. Pepsi is priced slightly higher than its main competitor
Coca-Cola but is till in line with the majority of the industry's prices. Pricing mainly
depends on the location where the soft drink is purchased, as shown in the following
table:

Location Convenienc Vending Fountain Warehouse Super

Purchased e Store or Machine drink or or club Market or
Gas Station Restaurant Store Retail Store
12 oz. $0.69 $0.50 - $0.30 - $0.30 $0.50
Serving $0.80 $0.90
(depending
on
convenience
of location)
Promotion Strategy

¨ Test Markets - large public colleges (ex. Virginia Tech)

¨ Free Samples - handed out at basketball or football games, pep rallies, or on central
campus areas (ex. Drill field)

¨ Coupons - on the product or tied to another product (ex. Buy a pack of Fritos get a
free 12 oz. Pepsi One)

¨ In-Store Displays - Signs, banners etc.

¨ Entertainment - Games with free T-shirts, Pepsi points under the cap etc.

¨ Sponsorship - sports teams/clubs/events

Sierra Mist is broadly targeted to teens and adults, with an 18 to 29 year-old

demographic bull's-eye. Aggressive introductory marketing support includes massive
sampling efforts and outdoors-oriented point-of purchase materials asking consumers to
"experience the height of refreshment." Samples of this latest brand to join the Pepsi
portfolio are available at football games and supermarkets across the US and Pepsi
intends to spend $50 million on marketing this product.

When Pepsi ONE first came out it was targeted towards the younger, healthier
crowd. This unique one calorie drink was marketed as a healthier cola with the same
great taste as regular Pepsi. In this beginning this product was marketed in much the
same fashion as Sierra Mist is currently being distributed.

Place (Distribution) Strategy

 Pepsi ONE and Sierra Mist are distributed through PepsiCo distribution centers.
The distributor delivers it to the grocery retailers, vending companies, restaurants, and
warehouse/club stores.

The distribution segments can be broken down into the following:

· Convenience Stores and Gas Stations: 12% of the market

· Vending Companies: 11% of the market

· Restaurants: 20% of the market

· Warehouse/Club Stores: 6% of the market

· Super Markets and Retail Stores: 51% of the market.

In order to produce sales to increase, we plan to mass distribute Pepsi ONE and
Sierra Mist to the Virginia Tech campus. Here we will place the soft drinks in vending
machines, campus-dining halls, education facilities, and at various athletic events. We
strongly believe that this will create brand awareness and customer loyalty with the age
group of 18 to 24.

7. Financial Data and Projections

Past Sales Revenues

 Historically, PepsiCo, Inc. has a fairly steady amount of annual sales revenue.
Sales dropped dramatically from 1995 to 1996 due to an introduction of a new product
by a competitor. The trend in sales revenue appears in Figure 4.

Figure 4.

Five-Year Projections

Five-year financial projections for PepsiCo Inc. appear below:

Projections
Actual Year1 Year2 Year3 Year4 Year5
Financial Units 1999 2000 2001 2002 2003 2004
Elements
Net Sales $1,000,00 20,36 21,689.0 22,884.3 24,257.4 25,712.8 27,255.64
0 7 2 6 2 7
Gross $1,000,00 11,98 12,465.4 12,964.0 13,482.6 14021.92 14,582.80
Profit 0 6 4 6 2
Operating $1,000,00 2,883 2894.53 2906.11 2917.73 2929.41 2941.12
Profit(Loss 0
)
These projections reflect the continuing growth of PepsiCo Inc. and its products.

8. Organization

Roger A. Enrico

Chairman of the Board and CEO

Roger A. Enrico

Chairman of the Board and CEO

Margaret D. Moore

Personnel
Indra K. Nooyi

Chief Financial Officer

Gary H. Rodkin

North American Region

President and CEO

Peter M. Thompson

International

President and CEO

Steven S. Reinemund

Chief Operating Officer

Albert P. Carey

Sales & Retailer Strategies

9. Implementation Plan
 PepsiCo will be introducing its two new age soft drinks through a rolling process
beginning with initial test markets in the United States. In the test markets, the tastes of
several demographic segments and target market will be carefully analyzed and
evaluated. If necessary based on these evaluations, promotional strategies might need
to be modified before national distribution. After test markets, PepsiCo will distribute the
products nationally. Next Pepsi will enter the international markets in order of highest
soft drink consumption. National distribution will occur after two months of successful
test markets, and worldwide distribution will be completed with in two years or the
product launch.

Location Sierra Mist Pepsi ONE

US:

initial test markets:

Austin, TX November 1, 2000 June 5, 1999

Roanoke, VA November 8, 2000 June 12, 1999

Cleveland, OH November 15, 2000 June 19, 1999

St. Paul, MN November 22, 2000 June 26, 1999

Chicago, IL November 29, 2000 July 3, 1999

Pittsburgh, PA December 6, 2000 July 10, 1999

San Diego, CA December 13, 2000 July 17, 1999

Tallahassee, FA December 20, 2000 July 24, 1999

National distribution January 1, 2001 August 18, 1999

Mexico March 15, 2001 November 14, 1999
Canada May 4, 2001 January 3, 2000
Spain July 31, 2001 March 19, 2000
UK September 17, 2001 June 21, 2000
Argentina November 1, 2001 September 9, 2000
Saudi Arabia January 28, 2002 December 12, 2000
Brazil March 7, 2002 February 17, 2001
Philippines April 30, 2002 April 11, 2001
Thailand July 1, 2002 June 27, 2001
China August 8, 2002 August 7, 2001
India September 30, 2002 October 13, 2001
World-wide distribution October 19, 2002 December 1, 2001

10. Evaluation and Control

Monthly sales targets have been set for PepsiCo for each global economy.
Actual Pepsi ONE and Sierra Mist sales will be compared with these targets and tactical
marketing programs modified to reflect the unique sets of factors in each global market.
The speed of the program will increase, or decrease, depending on PepsiCo’s
performance in the successive global markets that Pepsi ONE and Sierra Mist enter.
Similarly, as described above in the implementation plan, PepsiCo may elect to respond
to variation in global and regional tastes by changing ingredients and/or the image of
Pepsi ONE or Sierra Mist (depending on the area). This variation will increase
production cost, but it will also increase customer satisfaction, as well as sales.