INTERNATIONAL MARKETING - GROUP 08

Topic: Analyze the market segmentation of Pepsi Cola

Leader: Nguyễn Bảo Anh

Members: Lê Quỳnh Trang

Nguyễn Đức Thắng

Bùi Thị Thùy Dung

Trịnh Nhật Quang

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I. Introduction about PepsiCo

● Overview:

Name: PepsiCo Inc.

Industries served: Beverages, Foods

Geographic areas served: Worldwide

Headquarters: U.S

Current CEO: Indra K. Nooyi

Total Revenue: $63,525,000 (30/12/2017)

Cost of Revenue: $28,785,000 (30/12/2017)

Gross income: $34,740,000 (30/12/2017)

Employess: 264.000
Main products: Pepsi, Pepsi light, 7UP, Diet 7UP, Moutain Dew, Lay’s Potato
Chips…

● Origin

The drink Pepsi was first introduced as "Brad's Drink”. in New Bern, North
Carolina, United States, in 1893 by Caleb Bradham, who made it at his drugstore
where the drink was sold. It was renamed Pepsi-Cola in 1898 after the root of the
word "dyspepsia" and the kola nuts used in the recipe. The original recipe also
included sugar and vanilla. Bradham sought to create a fountain drink that was
appealing and would aid in digestion and boost energy.

● History

PepsiCo, Inc. was established through the merger of Pepsi-Cola and Frito-Lay.
Pepsi-Cola was created in the late 1890s by Caleb Bradham, a New Bern, N.C.
pharmacist. Frito-Lay, Inc. was formed by the 1961 merger of the Frito Company,
founded by Elmer Doolin in 1932, and the H. W. Lay Company, founded by Herman
W. Lay, also in 1932. Herman Lay, former chairman and CEO of Frito-Lay, was
chairman of the board of directors of the new company; Donald M. Kendall, former
president and CEO of Pepsi-Cola, was president and chief executive officer. The new
company reports sales of $510 million and has 19,000 employees. Major products of
the new companies are: Pepsi-Cola Company: Pepsi-Cola (formulated in 1898), Diet
Pepsi (1964) and Mountain Dew (introduced by Tip Corporation in 1948). Frito-Lay,
Inc.: Fritos brand corn chips (created by Elmer Doolin in 1932), Lay's brand potato
chips (created by Herman W. Lay in 1938), Cheetos brand cheese flavored snacks
(1948), Ruffles brand potato chips (1958) and Rold Gold brand pretzels (acquired
1961). In the early 1960s the company product line expanded with the creation of Diet
Pepsi and purchaseof Mountain Dew.In 1965, the Pepsi-Cola Company merged with
Frito-Lay, Inc. to become PepsiCo, Inc., thecompany it is known as at present. At the
time of its foundation, PepsiCo was incorporated in thestate of Delaware and
headquartered in Manhattan, New York. The company's headquarters wererelocated to
its still-current location of Purchase, New York in 1970,and in 1986 PepsiCo
wasreincorporated in the state of North Carolina. PepsiCo was the first company to
stamp expiration dates, starting in March 1994. In 1989 PepsiCo enters the top 25 of
the Fortune 500 ranking. In 2016 one of the world's top consumer product companies.

● Company’s Vision

“Pepsico’s responsibility is to continually improve all aspects of the world in which

we operate – environment, social, economic – creating a better tomorrow than today”

● Company’s Mission

“To be the world’s premier consumer Products Companny focused on convenient

foods and beverages”.

II. Explain how the company segment its markets

PepsiCo uses multi-segment type of positioning and accordingly, it targets

more than one customer segment at the same time with different products or service
packages. For example, Pepsi-Cola is positioned as soft drink that tastes good and has
a pleasantly refreshing impact. However, Pepsi-Cola contains a high amount of sugar
and it is not positioned for customers that are concerned about health implications of
consuming carbonated soft drinks. For this specific customer segment PepsiCo offers
Diet Pepsi, which is positioned as a soft carbonated drink that contains less among of
sugar compared to Pepsi-Cola and other soft drinks.

The following table illustrates PepsiCo segmentation, targeting and

positioning:

Type of Segmentation PepsiCo target segment

segmentation criteria
Geographic Region Domestic/international
Density Urban/rural
Demographic Age 15-45
Gender Males & Females
Life-cycle stage Bachelor Stage young, single people not
living at home
Newly Married Couples young, no children
Full Nest I youngest child under six
Full Nest II youngest child six or over
 Income Average, above average and high earners
Occupation Students, employees, professionals
Behavioral Degree of loyalty ‘Hard core loyals’ and ‘Soft core loyals’
Benefits sought Refreshment, enjoying good taste,
satisfaction of a habit, spending time
Personality Easygoing/determined/ambitious

User status Regular users

Psychographic Social class Working class, middle class and upper class
Lifestyle Aspirer, Succeeder, Explorer

It is important to specify that PepsiCo portfolio comprises 22 brands including

Pepsi-Cola, Lay’s, Mountain Dew, Gatorade, Tropicana and others. and the Table 2
above specifies PepsiCo target customer segment in general by focusing on the
common characteristics of positioning of brands within PepsiCo portfolio. There are
some differences among brands within PepsiCo portfolio in terms of their nutritional
value, pricing, packaging etc. and these differences impact the position of each
individual brand.

III. Explain how the company segment international markets:

● Market Segmentation USED BY PEPSI AT INTERNATIONAL LEVEL

For the last 40 years, Pepsi has positioned itself as the "leading edge" soft drink
and called its consumers the "Pepsi Generation". Pepsi-Cola marketing campaigns are
heavily targeted towards the young consumers. For example, Pepsi-Cola North
America has introduced Pepsi Blue, a blue-colored, berry-flavored extension of its
trademark Pepsi this summer. Teens with the highest propensity to switch brands were
targeted by the Pepsi Blue Crew, which engaged in a summer-long program
interacting with teens. This new product wave reflects the strategy shift for these
companies. During the past six to eight years, there has been strong growth in the non-
carbonated beverage market. 
Pepsi-Cola is an established brand at the mature stage of its product life
cycle. Sales of beverages target younger and younger people, with schools and
universities being one highly competitive marketplace for Pepsi exclusive marketing
agreements. To this extent, creative marketing has been the focus of Pepsi's business
strategy. Huge advertisement contracts, like the "The Choice of a New Generation"
commercials with Britney Spears and packaging changes indicate that Pepsi is using
market awareness to create competitive advantage. Thus, as emphasized previously,
competitive advantage is stronger in a segment than in broader market.
 ● Distinctive Competencies
As was pointed out in our internal analysis, the Pepsi brand and its
differentiation from other brands (i.e. Coke) through effective marketing has been
central to its business strategy. The originality and creativity of its marketing matched
with a desire to be a strong competitor in every market place made Pepsi's business
strategy very successful. This is reflected in the marketing costs reported in the 2001
Annual Report. Selling, general, administrative, advertising, promotional programs
and other marketing activities costs were $1.7 billion in 2001 and 2000 and $1.6
billion in 1999 compared to Research and development costs of $206 million in 2001,
$207 million in 2000 and $187 million in 1999. 
Insightful human resources management have also helped PepsiCo to gain
competitive advantage in foreign markets. European and Japanese managers are better
trained than Americans to deal with cross-cultural relationships. PepsiCo have
realized the need for global understanding and experience among their managers. To
this extent, they have instituted screening, selection and training programs geared to
identify young managers, early in their careers, for global operations. 

● Customer Group
Many examples emerge as we analyse the customer group that Frito-Lay are
targeting. For instance, in line with the PepsiCo strategy of market segmentation is the
launch of a line of snacks targeted specifically at Hispanics, currently the fastest
growing ethnic group in the United States. This product lineup offers distinctive
flavors and textures that are both appealing and familiar to Hispanic consumers. Frito-
Lay conducted extensive consumer testing in four key markets (Miami, New York,
Los Angeles, Houston) to determine the snack flavors and textures with the strongest
appeal among Hispanics. The complete line of products will be distributed in key
urban markets including several Southwest cities. Perhaps this should also be done for
the beverage sector. Their emergence into the developing markets is hindered by the
dislike for the Pepsi-cola taste, particularly in Asia.

● Corporate-level Strategy
Corporate strategy is concerned with an organization's basic direction for the
future: its purpose, its ambition, its resources and how it interacts with the world in
which it operates. This concept refers to the resources of an organization in relation to
its external environment, the prime purpose being the value added to what supplies are
brought into the organization and then distributed among the stakeholders. The
principal concern of corporate strategy is identifying the business areas in which a
company should participate in order to maximize its long-run profitability.
Interestingly, Coca-Cola at one time pursued a diversification strategy. Coca-
Cola once owned Columbia Pictures and a wine-producing business. However, Coca-
Cola came to the conclusion that diversification dissipated rather than created value,
and, in recent years it divested its diverse business and refocused on a single
operation. They have done this because there are clear advantages to concentrating on
just one business area. 
 However, for Pepsi the story is a quite different. PepsiCo has adopted a policy
of diversification by structuring itself into three major divisions: beverages, snack
food and restaurants. Although in separate markets, the three operate in the same
industry, namely leisure food. It seems that PepsiCo have chosen this approach in
order to allow for an overlap between the value chain of its divisions. This is
advantageous in that it can be used to bring down costs or even increase customer
loyalty across product line.
Focus on the leisure-food markets means that PepsiCo is in a position to take
advantage of similar activities across business units. Take food production, all
restaurants have to produce food from raw materials, as do the snack producers;
businesses within PepsiCo's portfolio are in a position to create a competitive
advantage by realizing greater economies of scale and cross utilization of
technologies. Consequently, when two or more business units share resources such as
manufacturing facilities, distribution channels, advertising campaigns and R & D
costs, each business unit has to invest less in the shared function. Moreover, there are
opportunities for competence leveraging through brand names and shared finance.

● PepsiCo Bottling Group Strategy

PBG became an independent, publicly traded company in March 1999. PepsiCo
retains an equity interest in PBG of about 40 percent.
As an independent entity, PBG benefits from a much sharper definition of its role
and is able to execute its business strategy more effectively on a local market level.
PepsiCo's can focus on what it does best now, which is developing its powerful brands
and the world-class marketing programs. PBG's focus is on superior sales execution,
customer service, merchandising and operating excellence.
PepsiCo provides new product development, advertising, marketing, sales and
promotional support to PBG and other Pepsi bottlers. The company manufactures and
sells soft drink concentrate syrup to PBG and other Pepsi-Cola bottlers. Afterwards,
PDG produce the final product by combining the concentrate syrup with other
ingredients to manufacture and package the beverages.
In fact, The Pepsi Bottling Group Sales Team works on the front line of a fiercely
competitive global battle, dealing with the most important people in their business -
the customers. The team works with customers, new and existing, to grow the highly
profitable beverage business armed with one of the most powerful trademarks in the
world. Their sales approach focuses on fact-based selling and expert advice - offering
"total beverage solutions," not just successful day-to-day transactions. PBG Sales
provides a demanding, fast-paced environment in an intensely competitive industry,
where growth equals opportunity. 
Moreover, in terms of sales, the executives consolidated the Quaker and Tropicana
warehouse sales forces. The new organization is capable of calling directly on the
headquarters of virtually all of their major customers-including club stores,
supermarkets, and convenience store chains. These factors combined not only save
time, space and manpower, but also enables the companies to benefit from the
relationships already established, connections and arrangements that each one
formerly had with certain retailers. In fact, the merger met all cost-saving expectations
for it raised cost-cutting goals to $400 million annually, from $230 million. 
Is their current structure flexible enough to enable them to compete in the emerging
markets? They have a structure based on a Global Product-Group Structure, with
slight variations. PepsiCo still doesn't market all its products internationally and thus
only needs sub-divisions for Frito-Lay and Pepsi-Cola/beverages. This is a definite
weakness in Pepsi-Cola. Pepsi-Cola needs to take a strong lead in the international
market and it needs to have an international structure that facilitates this.
Currently, Pepsi-Cola is marketed in North America through its North American
division. Internationally, Pepsi-Cola is marketed through PepsiCo Beverages
International - along with all other beverages that PepsiCo has acquired. What is
needed for Pepsi-Cola to emerge as the popular beverage in the emerging markets is
separate subdivisions that concentrate on specific areas, traditions and trends.
At present, Pepsi-Cola is being marketed through PepsiCo Beverages International
with the help of leading local marketing firms in certain countries that they wish to
exploit. PepsiCo has realised that it needs very specific strategies based on the local
area. It would be ridiculous to assume that the American marketing of a young, hip
Pepsi would come across well in the new markets of the Czech Republic, Hungary,
Poland, Slovakia and Russia. Here the use of local marketing firms is paramount to
implementing a successful strategy to "fit" the lifestyles and traditions of those
countries.
IV. Discuss the effective segmentation of PepsiCo:
- Target customers: Pepsi-Cola's mission has been for young people since their
inception.
- The age is always burning with passion and enthusiasm. Target audience
Pepsi has favored the product with its ingredients (from taste to the way
marketing mode) needed to go deep into this consumer class, with sweet sweetness
and gas.
- Pepsi-Cola gives the consumer a new feeling - the taste is felt to the top.
The nose is like burning fire - respond to the psychological experience of most of the
world’s young by the taste of difference from other beverage products on the market.
- Benefits Pepsi Cola brings to the users: The first benefit Pepsi Cola brings:
+ Consumers are quenching their thirst, especially on hot summer days. In
addition, Pepsi Cola also brought strange stimulation on the tongue and an
unforgettable, this feeling.
+ It is very active to the nervous system, creating a sense of excitement and
excitement for consumers.
+ Pepsi-Cola helps young people to express themselves.

V. Explain how the company identify attractive market segments and choose a
market-targeting strategy. Which strategy (undifferentiated, differentiated,
concentrated and micromarketing targeting strategies) is the best for the
company?
Choosing which target markets to pursue in the company strategic plan can be
challenging. To identify attractive market segments and choose a market-targeting
strategy, PEPSICO used the following checklist :
● Competitors: PEPSICO look at their competitor analysis. They considered their
advantages and disadvantages over their competitors. They knew if the
competition getting better or worse at meeting the needs of customers in this
segment?
● Company resources: PEPSICO may have the right strengths to compete in
this segment and fixed weaknesses that need to be improved.
● Segment size: The sales potential of the segment, in terms of number of units
of your product that can be sold or number of customers served, is important in
making a segment attractive. Size is relative. What may be too small to one
company may be huge to another.
● Segment growth rate: PEPSICO ideally created a market strategy that allows
them to serve a market for a good length of time, recouping marketing
expenses and any product or service modifications.
● Segment profitability: PEPSICO knew whether focusing on a customer group
is feasible. A segment’s profitability is important in making a segment
attractive.
● Segment accessibility: An attractive segment requires that you can reach this
group through clear communication channels.
● Segment differentiation: Uniqueness is a characteristic of an attractive
segment. Segment differentiation tends to be obvious.
Diferentiated target marketing is the best for Pepsi because the firm aims to develop
and market unique products for different customer segments.

VI. Explain how the company combine its understanding of the market with its
internal capabilities.
The company used the SWOT Matrix.

PepsiCo’s Strengths (Internal Strategic Factors)

PepsiCo’s continued global growth and prominence reflects the company’s
strengths. This aspect of the SWOT analysis framework outlines internal strategic
factors that enable firms to fulfill their business goals. The following are the most
significant strengths of PepsiCo:

1. Strong brand image

2. Broad product mix
3. Extensive global production network
4. Extensive global distribution network
As a successful global company, PepsiCo has one of the strongest brands in the
market. This strength enables the firm to attract consumers to its new products. In
addition, the broad product mix represents PepsiCo’s increasing ability to reach
various markets and segments, such as through Frito-Lay products, Quaker products,
and Pepsi products. PepsiCo’s extensive global production and distribution networks
are strengths that support the company’s international growth and expansion
strategies. In this aspect of the SWOT analysis, PepsiCo’s strengths are sufficient to
support its global growth strategy.

PepsiCo’s Weaknesses (Internal Strategic Factors)

PepsiCo suffers from a number of weaknesses that act as barriers to international
growth. The internal strategic factors that limit organizational development are
considered in this aspect of the SWOT analysis framework. The following are
PepsiCo’s main weaknesses:

1. Low penetration outside the Americas.

2. Limited business portfolio.
3. Weak marketing to health-conscious consumers.

PepsiCo derives about 70% of its revenues from markets in North America and South
America. This weakness indicates that the company has not yet maximized potential
revenues outside the Americas. In addition, PepsiCo operates primarily in the food
and beverage industry. This is a weakness because it maximizes the company’s
vulnerability to risks in the food-and-beverage market. Also, PepsiCo fails to
effectively market many of its products to health-conscious consumers. This aspect of
the SWOT analysis highlights weaknesses that PepsiCo must address through changes
in its growth strategy.

Opportunities for PepsiCo (External Strategic Factors)

PepsiCo has opportunities for continued global growth. In this aspect of the SWOT
analysis framework, external strategic factors that provide options for business
improvement are identified. PepsiCo’s opportunities are as follows:

1. Business diversification.
2. Market penetration in developing countries.
3. Global alliances with complementary businesses.
PepsiCo has the opportunity to diversify its businesses, such as by acquiring a
complementary firm that is not in the food and beverage industry. Another
opportunity is for PepsiCo to increase its penetration in developing countries to
generate more revenues from markets outside the Americas. In addition, PepsiCo can
create alliances with complementary business to increase its market presence. Based
on this aspect of the SWOT analysis, PepsiCo has significant opportunities to
strengthen its business resilience.

Threats Facing PepsiCo (External Strategic Factors)

The food and beverage industry experiences a variety of threats. External strategic
factors that could reduce business performance are considered in this aspect of the
SWOT analysis framework. In PepsiCo’s case, the following are the most significant
threats:

1. Aggressive competition.
2. Healthy lifestyles trend.
3. Environmentalism.
Aggressive competition is a major threat against the company. The influence of the
Coca-Cola Company is especially significant against PepsiCo. In addition, the healthy
lifestyles trend is a threat against PepsiCo’s products, many of which are seen as
unhealthful because of their sugar, salt, or fat content. Also, environmentalism
threatens the company in how consumers negatively respond to product waste and
lifecycle issues. This aspect of the SWOT analysis indicates that PepsiCo must reform
its strategies to overcome the threats to business.

Strengths Weaknesses
Internal 1. Strong brand image 1. Low penetration outside
2. Broad product mix the Americas
3. Extensive global 2. Limited business portfolio
External production network 3. Weak marketing to health-
4. Extensive global conscious consumers
distribution network

Opportunities (SO) (WO)

1. Business 1. Strong advertising 1. Using more brand/
diversification increases the youth product diversification in
2. Market penetration preferences for beverages. division wise it can
in developing 2. By taking an advantage of minimize the expenditure on
countries diversification we should adv and will increase the
3. Global alliances have to more diversified in product portfolio.
with complementary term of brand image. 2. Expand more business &
businesses introduce more non cola
products and should increase
the productivity.
 Threats (ST) (WT)
1. Aggressive 1. Brand image is the 1. Should revolve the health
competition strongest way to remove or issues as compare to less
2. Healthy lifestyles hide health issues. market share, invest in
trend 2. Strong financial position health department and
3. Environmentalism & own distribution channel resolve the issue.
network. 2. Should decrease the huge
Compete to the competitors expenditure on advertising &
easily by taking advantage invest in carbonated drinks
of strong financial position. to increase the demand of
carbonated drinks.

VII. Discuss how the company differentiate and position its product for
maximum competitive advantage in the marketplace.

1. Market Positioning
PepsiCo plans to further create positions that will give products the
greatest advantage in their target markets. Pepsi has been positioned based on
the process of positioning by direct comparison and have positioned their
products to benefit their target market.

● Positioning strategies of Pepsi:

To find points of differentiation, Pepsi have followed some strategies
which have differentiated themselves from others. Usually marketers try to
differentiate along the line of following things:
- Product Differentiation.
- Channel Differentiation.
- Image Differentiation.
Pepsi have differentiate themselves in the field of product Differentiation, channel
differentiation and image differentiation. The unique characteristic of their product
and their brand image has differentiate themselves from the other beverages in market.

2. Product Differentiation:
Product Differentiation comes into play for sure in the case of Pepsi.
When looking at Pepsi, people think of soda.

3. Channel Differentition:
 Coke and Pepsi distribute their drinks through independent bottlers.
These firms make the ingredients for the drinks and then ship them to the local
bottlers, who pretty much finalize the product. After this is done, this bottlers
has the right to distribute whatever brand it wants to a specific region. On the
other hand, a brand such as Canady Dry does something much different.
Canady Dry packages its product in several locations and then ships them to
wholesale grocer who distribute them to the local grocery stores and outlets.
This is a great examples as to why Canady Dry is strong within local grocery
stores, but why they are not present in vending machines like Pepsi is.

4. Image Differentiate:
Creating a strong and distinctive image requires creativity and hard
work. Symbols, signs, logos and colors are used to create strong-company or
brand recognition and image differentiation.

● Positioning statement of Pepsi:

As we discuss earlier that “Pepsi positions itself on points of differences
as well as points of parity. Pepsi’s POD is their forward thinking attitude.
According to that Pepsi’s positioning statement is:
“To new generations, those who want the best taste in drinks, Pepsi is a
cold drink which gave the best taste, low fat in a reasonable spending”.
a. Choose a product and choose a market: Lay’s Potato Chips in China market.
b. Global, Foreign and National Products? Why do you say so?
Purchase, New York – March 26, 2014 – Lay’s – the world’s #1 snack brand -
announced today a major global integrated marketing campaign and new multi-
dimensional promotional partnership featuring record breaking football superstar, Leo
Messi. The campaign celebrates the simple pleasure of globally enjoyed Lay’s potato
chips and extends across three executions: master brand communication, Lay’s Deep
Ridged snacks and an additional commercial featuring two of PepsiCo’s flagship
brands, Pepsi and Lay’s. Lay’s Potato Chips appear in many developed market around
the world and it really becomes one of the most famous snacks for users.
c. Positioning Map of chosen market and product?

Images Quality Price Customer Order Time

services

PepsiCo 5 5 4 3 4
 Sweet Zone 4 4 4 2 4

Panpan 4 3 3 2 3

The table portrays points of 3 brands: PepsiCo, Sweet Zone, Panpan in 5 segments:
Images, Quality, Price, Customer services, Order Time.
d. The important of positioning criteria to chosen market?
Positioning is creating an item and brand picture in the personalities of purchasing's
Chinese. It can additionally incorporate enhancing a client’s observation about the
experience they will have on the off chance that they decide to buy your item or
administration. The business can emphatically impact the view of its picked client
base through vital limited time exercises and via deliberately characterizing Pepsico
promoting blend.
The greatest contrast is as far as the range and circulation Lays has. It has, as of now
unstoppable, piece of the pie of 40%. It is accessible all around at whatever time, with
special cases obviously. It presents new flavors which just Lay's Potato Chips has
possessed the capacity to do as such. It has well known brand diplomats and
supporters cricket occasions. It has fights, challenges and prizes, which some other
potato chip brand doesn’t. The sum that goes into publicizing is undisclosed however
it goes without saying that it run into millions.
e. The company’s decision on positioning map?
In the this positioning map in China, Pepsi Cola decide to team up with
Lays for snack flavor. Cola chicken is a common recipe in China, with
chicken wings tossed into a wok and caramelized in soy sauce, spices
and cola. In potato-chip form, the flavor is vaguely similar to barbecue
with a sugary aftertaste. If there's any hint of Pepsi, it's fleeting and lacks
fizz.

Richard Lee, PepsiCo's chief marketing officer in China, said the idea
came from a brainstorming session involving teams from marketing and
R&D, as well as Pepsi ad agency BBDO, Shanghai. Lay's launches a
new flavor every year, and this time the goal was fusion.

The product's name is a sophisticated word play. String Pepsi's and Lay's Chinese
brand names together, and you get a double meaning: "Anything can be happy" as
well as "Pepsi can become Lay's."
Lay's overall brand message in China is about enjoying the small things in life, a
theme that resonates in a market where people can be dogged about earning more
money and getting ahead.