Pepsi Co Marketing Plan PDF

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PepsiCo. Marketing Plan

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Table of Contents

1. Executive Summary (page 3) 2. Description of Company (page 4) 3. Strategic Plan/Focus (page 5) 4. Situation Analysis (page 7) 5. Market Focus (page 10) 6. Marketing Program (page 11) 7. Financial Projections (page 12)_ 8. Organizational Structure (page 14) 9. Implementation Plan (page 16) 10. Evaluation (page 21) 11.Appendix A: Biographies of Key Personnel (page 22)

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Part 1: Executive Summary In an era where the consumer is more educated than ever, with information more available than ever, and with options more available than ever, it is imperative that companies launch initiatives that help differentiate themselves. Initiatives can include an improved product line, giving back to the people where company operates, or improving the planet. These types of initiatives and goals seem to truly resonate with the modern consumer, particularly with consumers that are from the millennial generation. In the case of PepsiCo, the company has launched a campaign that embodies all three of the listed initiatives. The campaign is called “Performance with Purpose” and it is a 20 year campaign which began in 2006 and will end in 2025. The idea behind “Performance with Purpose” is explained within the name of the campaign. During the 20 year life of the plan, PepsiCo plans to improve overall company performance while refining its product line, focusing on improving the environment around the planet, and giving back to the people of the communities where the company operates. The campaign is modern, forward thinking, and has huge potential to resonate with the 21st century consumer. By 2025, if the plan is successful as envisioned, PepsiCo will be a company that is regarded to be health conscious, socially aware, a champion of human rights, and cognizant of the importance of maintaining a clean planet. The purpose of this report will be to provide a high level overview of PepsiCo and the “Performance with Purpose” campaign. Since the plan is already 12 years into its implementation, the report will also analyze the up to date performance of the plan thus far. The analysis of the plan will include the overall financial growth of the company (“Performance”) over the past decade as well as the status of the non-financial goals (“Purpose”) the company has set forth to be completed by 2025.

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Part 2: Company Description (Source: PepsiCo 10K Report)

PepsiCo was first introduced as "Brad's Drink"[n New Bern, North Carolina, United States, in 1893 by Caleb Bradham. PepsiCo was incorporated in Delaware in 1919 and reincorporated in North Carolina in 1986. PepsiCo is a leading global food and beverage company with a complementary portfolio of enjoyable brands, including Frito-Lay, Gatorade, PepsiCo-Cola, Quaker and Tropicana. Through our operations, authorized bottlers, contract manufacturers and other third parties, we make, market, distribute and sell a wide variety of convenient and enjoyable beverages, foods and snacks, serving customers and consumers in more than 200 countries and territories.

PepsiCo (aka Pepsi) is organized into six reportable segments (also referred to as divisions), as follows:

1. Frito-Lay North America (FLNA), which includes our branded food and snack businesses in the United States and Canada; 2. Quaker Foods North America (QFNA), which includes PepsiCo’s cereal, rice, pasta and other branded food businesses in the United States and Canada; 3. North America Beverages (NAB), which includes PepsiCo’s beverage businesses in the United States and Canada; 4. Latin America, which includes all of PepsiCo’s beverage, food and snack businesses in Latin America; 5. Europe Sub-Saharan Africa (ESSA), which includes all of PepsiCo’s beverage, food and snack businesses in Europe and Sub Saharan Africa. 6. Asia, Middle East, and North Africa, which includes all of PepsiCo’s food, and snack businesses in these respective regions.

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Part 3: Strategic Plan and Focus Mission The mission of this PepsiCo is “to provide consumers around the world with delicious, affordable, convenient and complementary foods and beverages from wholesome breakfasts to healthy and fun daytime snacks and beverages to evening treats” (PepsiCo.com). The company aims to do this while also deliver “performance with purpose” (PepsiCo.com), meaning that the business model is built to be sustainable and deliver top tier financial performance. Goals Per the PepsiCo website, PepsiCo has a vision of numerous product related non-financial goals that it hopes to achieve by 2025. These goals include the following: 1. Reducing added sugars a. By 2025 the company aims to have 2/3 of PepsiCo’s global beverage portfolio volume has 100 or fewer calories from added sugars per 12 oz. serving. 2. Reducing sodium a. By 2025 the company hopes that 3/4 of the global foods portfolio will not exceed 1.3 milligrams of sodium per calorie. 3. Reducing saturated fat a. By 2025 3/4 of the global foods portfolio will not exceed 1.1 grams of saturated fat per 100 calories. In addition to the non-financial goals, PepsiCo aims to achieve the following financial goals in the coming year: 1. Continue to grow the company at the current pace. The company is projected to grow at a median rate of 1.36% per year (CNN Money). 2. Maintain quarterly and annual sales growth, the company is projected to grow 1.86% annually (CNN Money) 5

3. Maintain an EPS of $1.49 for Q4 and aim to achieve an EPS of $5.66 annually (CNN Money). Core Competency and Sustainable Competitive Advantage The main advantage PepsiCo has over most of its competitors is its presence as the second largest player in the global food and beverage industry. Most of the marketing strategy for PepsiCo is based on the need to address market pressure from its largest competitor, Coca Cola, Inc. Based on an article written by Edward Ferguson for the Panmore Institute, it can be determined that PepsiCo has two generic strategies that can be used to secure a sustainable competitive advantage. The strategies are cost leadership and broad differentiation. PepsiCo uses cost leadership as its primary generic competitive strategy. This generic strategy focuses on cost minimization as a way to improve PepsiCo’s financial performance and overall competitiveness. For example, to compete against Coca-Cola products, PepsiCo offers low prices based on low operating costs. As for broad differentiation, PepsiCo uses this strategy to attract customers by offering unique features from its products. One such example of this is Frito Lay potato chips. The potato chips are marketed as having a reduced saturated fat content which enables them to be advertised as a healthier alternative to standard potato chips; hence creating broad differentiation.

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Part 4: Situation Analysis SWOT Analysis Figure 1: SWOT Analysis for PepsiCo Co. Internal Factors Strengths Management Experienced management team highly qualified Offerings Affordable products, fits most consumer bases Marketing Strong ad campaigns, focus on selling an "inclusive product". Personnel

Finance

PepsiCo employs 267,000 people as of 2017--large workforce. The company has a recognizable brand, can be utilized to attract talented workers Company has performed at a stable pace for last five fiscal year ends. Revenues and net income have been recorded at the same level for five years

External Factors Consumer/Social

Competitive

Technological

Opportunities Soft drinks and snacks are still a staple in most countries around the world. In social gatherings both products are routinely served. The soft drink market is largely dominated by PepsiCo and Coca Cola. The opportunities largely lie in taking market share from Coke. However there are opportunities for expansion in areas such as Africa where market presence is still low. Social media has made it easier for companies to promote their products, PepsiCo is no different. The company can utilize new platforms to push its product.

Weaknesses Extensive amount of executives, may lead to lack of continuity Health wise, many of the products are not considered quality Marketing strategy is generic, may get stale High turnover probable. Many positions are easily replaceable.

Company may have plateaued in terms of growth. Expansion or new vision may be needed to grow revenues and profits.

Threats Health conscious consumers are moving away from soft drinks and high sodium snacks.

Healthier alternatives, changing market dynamics can create competition from other beverage and food companies. For example companies providing a beverage or snack product with health benefits have opportunities to steal market share from companies such as PepsiCo. Bloggers, or individuals with large social media followers can voice their opinion about PepsiCo's product in a negative way to massive followings.

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Economic

Improving economic conditions As financial health improves, consumers have will lead consumers to spend the luxury to spend more to purchase healthy more per capita, the result is an alternatives to soft drinks. opportunity for PepsiCo to sell more product The core strength of PepsiCo has been the longevity of the company and the expertise of the

leadership team. The current CEO, Ramon Laguarta has been with the company for 22 years holding multiple roles within corporate strategy prior to becoming CEO. The prior CEO, Indra Nooyi, is still with PepsiCo as a chairman and is the architect of the current campaign called “Performance with Purpose”. Under the leadership of Laguarta and Nooyi, PepsiCo has grown into a band that is found in 200 countries around the world and generated about $63 billion in revenue in 2017. As for weaknesses of PepsiCo internally, one can point to a few items. The most notable would appear to be the lengthy list of executives listed on the PepsiCo website. The extensiveness of decision makers at the top level of the company may create some disruption if a true chain of command is not followed, however this does not appear to be the case yet for PepsiCo. For opportunities and threats in the modern era the most important arena would seem to be technology and social trends. The social media market is able to capture both by giving average consumers a platform to voice their opinions and give reviews on various products. Due to this dilemma it can be determined that technology can be considered both an opportunity and a threat for PepsiCo as it is a great avenue to pursue advertising, however it can also be detrimental to business if an individual with a large following happens to dislike the product line. Industry Analysis (Source: Boston Business Journal) Based on an article written in the Boston Business Journal by John Nicolopoulos in January of 2018, it can be determined that the food and beverage industry is going through several trends. These trends include changing customer preferences, food safety and food sustainability, e-commerce, and

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technology. These four topics take center stage in the industry in 2018, their impact will shape the industry in the coming decade. Changes in customer preferences is primarily driven by the millennial generation. The forefront of the changes include an emphasis on bold and exotic flavors, snacking, and being cognizant of health and wellness. In addition to this there is a growing market in on-the-go convenient easy to make bowlbased meals featuring kale, quinoa, and similar foods. Staying on top of the shifting lifestyles and preferences will be essential for food and beverage companies moving forward. Food safety and food sustainability has become vitally important in the industry in recent years as consumer confidence in the safety of the US food supply has been lagging. Per the Food Information Council Foundation’s Food and Health Survey only 61% of Americans in 2017 are confident in the safety of their food and beverages. This is down from 66% in 2016. In addition to this consumers in 2018 also want to know that their producers are green, charitable with their excess product, control water consumption, use alternative energy, and reduce wasteful packaging. E-commerce is has become an attractive method of selling product in the industry. Sales on direct-to-consumer sites and third party e-commerce platforms account for almost 36% of specialty food and beverage sales. Demand for online delivery and subscription food services continue to grow as American consumers show their preference for doorstep delivery. Technology has enabled customers to research products before purchasing unlike any other time in history. Customers routinely use smartphones to research and analyze the nutrition content of their food and beverage products before proceeding to purchase. In addition to this customers also research how the product was developed, read reviews, and potential hazards of consumption.

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Competitor Analysis (Source: CNN Money) The main competitor to PepsiCo in the food and beverage industry in terms of a similar product, size, and target consumer base is Coca Cola, Inc (Coke). Per CNN Money as of February 2018 Coke currently captures about 17.8% market share while PepsiCo captures about 8.4%. In terms of market capitalization Coke currently boasts a market cap of $209 billion while PepsiCo has a market cap of $159 billion. Despite these figures, PepsiCo actually has much higher revenues ($64 billion to Coke’s $33 billion—Yahoo Finance) and maintains a higher profit margin (7.8% to Coke’s 4.23%--Yahoo Finance). This is primarily due to the diversification of the business by PepsiCo as the company owns Frito Lay and Yum! Brands (parent company of Taco Bell, Pizza Hut, Wingstreet etc.). Customer Analysis (Source: Marketing91.com) Customer Characteristics – According to available information, we see that demographically PepsiCo products are enjoyed by consumers representing a broad range of socioeconomic backgrounds. Pespi products are purchased chiefly by consumers who have no college education and whose income is less than $20,000 per year. The household buying PepsiCo-Cola also tend to buy other PepsiCo products, mainly Mountain Dew and these purchases will take place at the majority of Gas Stations and Convenience Markets. The majority of these purchase take place in the afternoon and evening hours of the day among those under 24 years of age and those 45 to 64 years of age. Part 5: Market Focus (Source: PepsiCo Website) This section describes PepsiCo’s “Performance with Purpose” campaign which will run through 2025, the campaign has been in progress since 2006. The campaign outlines several of PepsiCo’s marketing and product improvement initiatives.

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Marketing Objective The aim of the “Performance with Purpose” campaign by 2025 is to emphasize that PepsiCo is a company that plans to achieve high business performance while being socially aware and helping improve the planet. The campaign can be viewed as an attempt for PepsiCo to gradually rebrand itself as a company that people globally can align themselves with moving forward. The campaign focuses on three subjects that PepsiCo believes it can improve upon, they are as follows: 1. Products--PepsiCo plans on improving their existing products by doing the following: a. Reducing added sugars b. Reduce saturated fat c. Reduce sodium d. Increase positive nutrition 2. Planet—PepsiCo plans on improving the planet with the following initiatives: a. Positive water impact b. Lower carbon emissions c. Source sustainably d. Achieve zero waste to landfill e. Halve waste food f.

Recyclable packaging

3. People—PepsiCo aims to improve well being for people with the following goals: a. Advance respect for human rights b. Support diversity and working caregivers c. Spur prosperity

Part 6: Marketing Program (Source: PepsiCo Website) As outlined in the prior section, the marketing campaign “Performance with “Purpose” will be used to progress three initiatives of PepsiCo related to product, planet and people. The goal of the campaign is to emphasize that the PepsiCo brand stands for top notch performance while contributing 11

to the welfare of society. This section will elaborate on the success of the initiatives between 2006 2018. Product PepsiCo’s initiative to reduce sugars, saturated fats, and sodium have been a success thus far. As of 2018 the company has reported that 27.5% of annual revenues comes from products containing one or more ingredients delivering positive nutrition. These ingredients are grains, fruits or vegetables. In addition to this PepsiCo’s 55% of global foods portfolio contains less than 1.3 milligrams of sodium. 66% of PepsiCo’s global foods portfolio volume contains less than 1.1 grams of saturated fat. Planet PepsiCo has provided access to safe water since the implementation of the campaign in 2006. Since this time frame the company has provided safe water access to 16 million people globally. In addition to this the company has made 7% progress towards its goal to reduce greenhouse emissions. Also, PepsiCo has emphasized on reducing waste over all segments of the company. Since the launch of the campaign 95% of all direct waste has diverted away from landfill through reuse, recycling or wasteto energy. People PepsiCo aims to sustain a world class workforce by empowering all associates, and a core value of the empowerment has been an emphasis on diversity. The company reaches out and contributes to various human rights groups and aligns itself with the UN’s initiatives of “Gender Equality” and “Decent Work and Economic Growth”. In addition to this, since 2015, 6.4 million women and girls have benefited in communities around the world where PepsiCo has operated. Also, as of 2017, PepsiCo’s management staff is 39% women.

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Strategy The strategy the “Performance with Purpose” campaign is undertaking is very clear and coherent. The company is displaying with the examples provided that it wants people to align with the PepsiCo brand knowing the company is socially aware and taking steps to improve the planet and the communities in which it operates. This is a great method of promotion and can pay growth dividends in the long run. Based on the growth of the company between 2006-present, one can make a strong argument that the campaign has been very successful thus far. If one is using stock price as a metric, the company’s share price in 2006 in the beginning of the campaign was around $60 a share. As of market close on December 17, 2018, the per share price of PepsiCo is $112, nearly double what it was twelve years ago. Part 7: Financial Projections (Source: MarketScreener.com) Figure 2.1: Income Statement Projection for PepsiCo

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Figure 2.2: Income Statement Projections

Analysts are forecasting growing revenues, EBITDA, and net income for the next three fiscal year ends for PepsiCo. This project is based on the optimism generated by the steps taken by the company to grow the business and improve the business model. This includes the “Performance with Purpose” plan, based off of these projections from MarketScreener.com, the analysts are bullish on PepsiCo. Part 8: Organizational Structure (Source: Panmore Institute) Per the Panmore Institute, PepsiCo’s organizational structure enables control over the expansive reach of the company around the world, taking into consideration significant differences in market conditions. As of 2018, PepsiCo has the following three characteristics within the organizational structure: 1. Market divisions 14

2. Functional corporate groups/offices 3. Global Hierarchy Market Divisions The market divisions are based on two main variables, business line and geography. Currently PepsiCo breaks down its divisions into six segmen...