Critical Analysis of Marketing Strategy of Pepsi Cola

Product Variety

Pepsi Cola is produced by a pharmacist, Calleb Bradham in 1898. There are many varieties of Pepsi Cola only sold in specific countries. In the consumer market of Malaysia, Pepsi Cola is sold with many varieties which are Pepsi Regular, Pepsi Black, Pepsi Black Ginger, Pepsi Black Vanilla, Pepsi Light currently (Figure 1). Pepsi Black edition serves with bolder taste and zero calorie content (Figure 2). It is approved with healthier choice logo by Malaysia in the sugar free category. Pepsi Light is a no-calorie carbonated cola soft drink and it is free from sugar.

Branding

In 1893, it is called as Brad’s Drink, the name created from Called Bradham. After 5 years, he changed the name to Pepsi. The reasons behind it was to let customers know that it was more than just a refreshment, but in his mind, a “healthy” cola that aided digestion. The word “Pepsi” comes from the word “dyspepsia”, which means indigestion (Dunn 2018). In 1989 to 1940, they are using the logo filled with red colour and the words written out and a long swirly line connecting the P of ‘Pepsi’ with the ‘C’ of Cola. Then, in 1940 the company changed its Pepsi logo. The circle in the design indicates the slogan of Bradham’s original group which is Original Pure Food Drink. The colours of red with white indicates the Second World War. In 1943, Pepsi incorporated the bottle cap to its logo, with the logo tagline ‘Bigger Drink, Better Taste’. In 1991, there was a crucial modify when the company decided that the Pepsi and the circle that had contained it were no longer meant for each other and make them separate. Last, the design in 2008 until today, with the circle resuming its superiority, scrambled up on top of the word, the swirly line sloping upward and also taking on a far more wave-like pattern or a smiley. The design of this logo was finished by the Arnell group, costs one million dollars (Gordon 2017).

Labelling

PepsiCo is providing an easy understanding information on the pack of Pepsi Cola to help the customers to choose what are the needs they want especially. They provide the details about nutrition such as amount of energy, protein, carbohydrate, total sugars, total fat, saturated fat and sodium per 100g/ml or per serving. Besides that, they do provide our products will include information on energy such as calories, kilocalories or kilojoules per 100g/ml or per serving on front-of-pack labeling in all countries. Furthermore, they also provide the percentage of the official Guideline Daily Amounts, Daily Values or equivalents for energy, total fat, saturated fat, sodium or salt and total sugars on either the front, side or back of the pack in countries where such values are available (PepsiCo 2014). For instance, in 240 ml of serving size, the amount per serving of calories per bottle contained 250 kcal, the total fat contained 0g, the sodium contained 50mg, the potassium contained 78mg, the total carbohydrates contained 69g,the total sugars contained 69g and protein contained 0g (Figure 3).

Style and Design

The edition of “Pepsi Generations” which purposes to celebrate the brand’s rich history in pop culture for 120 years have reached Malaysia in 2018. It will be having 4 design editions which are 1940s, 1950s, 1960s and 1980s (Figure 4). The featuring of Pepsi Generation with the 1940s design is exclusively available at Petronas from 1st until 30th of September 2018 (Figure 5). The 1950s design is offering for sale at petrol station (Tan 2018) (Figure 6). In 2016, PepsiCo’s emoji bottles have been launched in Malaysia which is ‘Say it with Pepsi’ campaign (Figure 7). Its price selling is only at RM0.99 per 390ml bottle. One thing that stands out from Malaysia version of the ‘Say it with Pepsi’ campaign is PepsiCo has finally strike back at Coca-Cola (Tan 2016). In 2018, they design a Chinese New Year edition for the can of Pepsi and it is only sold in Malaysia during Chinese New Year festival (Figure 8).

Place

Address of Headquarters

The headquarters of PepsiCo are located in Harrison, New York City, United States (Wikipedia 2019). PepsiCo created operating division that covers Asia, including Malaysia (Wikipedia 2019). The main office of PepsiCo in Malaysia is located in Bandar Sunway, Subang Jaya (JobStreet n.d.). Yeo Hiap Seng Berhad (Yeo’s) announced on 2nd July 2016 that it had lost the exclusive bottling agreements with PepsiCo, ending a link that began in year 1975 (Leong 2016). After that, Malaysian beverage and dairy manufacturer Etika Beverages, formerly known as Permanis, start to be PepsiCo's new appointed exclusive bottling partner serving Malaysian and Singapore markets (Leong 2016). Starting from 1st November 2016 Pepsi carbonated soft drinks are bottled and distributed from across the causeway Singapore (Figure 9).

Type of Ownership

Etika Group of Companies is the beverage and dairy manufacturer holds an exclusive PepsiCo franchise for Malaysia (Permanis n.d.). The consolidation strengthens Etika’s position in the Malaysian beverage industry as the company will be the only fully integrated Halal beverage company to offer all 12 categories of beverages. Etika Group has exclusive rights to manufacture, distribute and marketing PepsiCo brands such as Pepsi carbonated soft drinks in Malaysia (Ruby 2016). Etika Group is the main producer and distributor of Pepsi soft drinks. These rights along with sales offices and warehouses worldwide and a broad distribution network will also now come under Etika’s wing (Ruby 2016). More recently PepsiCo has awarded Etika its franchise for Singapore to commence from November, 1st 2016 (Figure 9).

Location and Retail Strategy

Pepsi carbonated soft drink are easily find and reach by all the people in Malaysia. Etika Group pays major attention on the distribution channels to make sure that their Pepsi carbonated soft drinks are available at the right places. The distribution strategy in Pepsi marketing mix is focuses through distributor relationships and the broad network of retailers, restaurants, vending machines spread all over Malaysia. Pepsi soft drinks are available nationwide across retailers, such as 7-Eleven convenience stores, Tesco supermarkets, Giant hypermarkets. Convenience stores usually place all kinds of beverages in refrigerators, included Pepsi (Figure 10). Supermarkets and hypermarkets usually sell Pepsi with cartons, bottles and cans. Bottles and cans of Pepsi are arranged in the refrigerator, meanwhile cartons of Pepsi are located at shelf space in beverages categories which place with all kinds of beverages (Figure 11&12). Furthermore, Pepsi carbonated soft drinks can also be found in vending machines (Figure 13). PepsiCo’s places for distributing its products are mostly non-online retailers (Young 2017). Extensive distribution network and easy availability of Pepsi soft drinks has helped it kill regional competition present in different countries and regions.

Marketing System and Distribution Channel

Etika Group of Companies uses a vertical marketing system and acts as a unified organisation. The vertical marketing system integrates stages of production and distribution under single ownership (Touhey 2015). In Malaysia, Etika Group act as full merchant wholesalers in a contractual channel. They provide manufactures, distribution and selling services to PepsiCo (Etika n.d.). Also, they implement PepsiCo’s sales and merchandising plans for the soft drinks that they bottle and distribute (Bailey n.d.). PepsiCo’s products reach the market through the three types of distribution channels: direct store delivery (DSD), third-party distributor networks, and customer warehouse. PepsiCo chooses the relevant distribution channel depends on product characteristics, customer needs, and local trade practices. Under the DSD system, PepsiCo delivers products directly to retail stores. Of the three channels, DSD enables PepsiCo to merchandise with maximum visibility and appeal. DSD is especially well-suited for products that are restocked often and are sensitive to promotions and marketing (Bailey n.d.). Next, PepsiCo also distributes Pepsi through third-party distributors. Etika Company distributes beverage products to restaurants, businesses, schools, and stadiums through third-party food service and vending distributors and operators (Bailey n.d.). In addition, some of the Pepsi soft drinks are delivered from the manufacturing plants and warehouse to customer warehouse. The customer warehouse system is a less expensive distribution channel (Bailey n.d.).

Number of Intermediaries

PepsiCo follows an intensive distribution strategy. Intensive distribution is when a business ignores market segmentation and decides to supply their product to every market available. The idea of intensive distribution is that your product can be found anywhere where a person shops, so that the product will be available for as many customers as possible. PepsiCo has plan that places their soft drinks product in many different locations for distribution (Gkekas 2012). Pepsi carbonated soft drinks are a kind of convenience product, the purpose of this type of strategy is to make sure the products available in anytime anywhere. The ideal market exposure for Pepsi soft drinks is to distribute the product through as many places as possible (Chlachma 2016).

Price

Competition-Based Pricing

Competition-based pricing is one of PepsiCo's pricing strategies. Before PepsiCo entered the market, Coca-Cola was the only non-alcoholic drink industry in the market and conducting the price of cola beverages. It formed the competition between Pepsi and Coca-Cola after Pepsi entered the market (Abhijeet Pratap 2018). Their competition is fierce, especially in terms of pricing. The reasonable price given by PepsiCo allows middle-class families and even low-income families can afford to buy their products..The price of Pepsi shows a flexible attitude compared with the price of Coca Cola. For example, a bottle of 500 ml Pepsi is RM2.21, and a bottle of 500ml Coca-Cola is RM2.43 (Figure 14). In this regard, PepsiCo is slightly better at a small gap of RM0.22. Sometimes, the lower price is available to attract customers to buy its products (UKEssay 2017). PepsiCo believes that the strategy can bring greater benefits to the company and brings maximum satisfaction to its customers. For instance, Pepsico annual revenue for 2017 was 63.53 billion dollars, 1.16% increase from 2016. Then, Pepsico annual revenue for 2018 was 64.66 billion dollars, 1.78% increase from 2017 (Figure 15).

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Product Form Pricing

Product form pricing is a pricing strategy that is implemented by PepsiCo. The major purpose of PepsiCo's pricing strategy is to improve customer fidelity by keeping the average price of the product, without the impression of inferior quality products. Even, PepsiCo serves a larger customer base without affecting the company's profits. PepsiCo has designed products of different bottle sizes according to the needs of consumers such as Pepsi has 320ml, 500ml and 1.5L bottle sizes (Figure 16). The larger the bottle size that the consumer buys, the lower the price (Heartofcodes 2018). For example, a bottle of 320ml Pepsi is priced at RM1.65, a bottle of 500ml Pepsi is priced at RM2.21, and a bottle of 1.5L Pepsi is priced at RM1.69 (Figure 17).

Discounts and Allowances

Discounts and allowances are a pricing strategy which is implemented by PepsiCo. The main promotional discount offered by PepsiCo is a seasonal discount (Bhasin 2019). PepsiCo will carry out this program through specific festivals, and the promotional discounts offered at specific festivals will be cheaper than usual, more attracting customers to purchase its products in large quantities. For example, major supermarkets will make promotion discounts during Chinese New Year. Price of Tesco of 24 bottles of 320ml Pepsi is RM20.88 and the original price is RM32.20. (Figure 18&19).

Odd/Even Pricing

The pricing strategy used by PepsiCo is odd/even pricing in psychological pricing. Psychological pricing is setting the price to a bit lower than rounding because they believe that customers will not raise these prices and then consider the price to be lower than the actual price (Bragg 2018). Based on this belief, consumers think that they have saved a lot of money. For example, the original price of 24 bottles of 500ml Pepsi is RM54.00, and the current discount price is RM47.59, saving a total of RM6.41 (Figure 20).

Promotion

Direct Marketing Tools

Direct marketing tool had implemented by PepsiCo through agreements to provide products to organizations at wholesale prices. One of the direct marketing tools that have been used by PepsiCo is website. Towards launching their product, Pepsi worked with Etika (Etika n.d.) (Admin 2018). The purpose to create website is to show the detail information of the product, marketing campaigns and conduct business online (Chirkova 2011). Through the website, customers can find the contact number, email address and location of PepsiCo, for them to ask their questions and also feedback. Next, PepsiCo create their own social profile like Facebook, Instagram, Google, Youtube and Twitter (PepsiCo Malaysia 2018). Nowadays people are using social media frequently, this is why PepsiCo can use this benefit to promote their product (Customer Service Numbers n.d.).

Advertising

Advertising is a way to promote Pepsi beverage. By the Star newspaper, customers can know that Pepsi has offered a new flavour in April 2018 which is Pepsi Black Ginger (Figure 21). Therefore, many people have been attracted by this product because it produced boler taste with no calories soft drink which healthy to having it (The Star 2019). Furthermore, GrabAds with online-to-offline. There are four types of GrabAds, which are car wraps, in-car branding, in-car retail and in-car tablets (Grab n.d.). In August 2018, Grab announced the launch of GrabAds, PepsiCo used this opportunity to promote their products (Digital News Asia 2018). In addition, PepsiCo used billboard advertising by the roadside (Figure 22). They bought billboard advertising from Big Tree and placed at the LRT station, LRT KLCC station as one of the examples (Figure 23). It can survive in the long term and it does not higher cost than electronic media (UKEssay 2016). Pepsi advertisement also displays in the cinema, such as TGV cinema and GSC cinema. It is because the cinema ads processed are more awareness and boosting your brand recall.

Sale Promotion

The promotion strategy that used by PepsiCo is sale promotion. Through the Etika Sdn.Bhd., PepsiCo had the chance to cooperate with TGV Cinema, which selling their product in the cinema. Consumers can enjoy Pepsi Black alongside with the TGV Cinema’s combo set or ala-carte (Lynd 2018). PepsiCo also worked with PizzaHut and KFC. In PizzaHut, there is only RM16.50 to get a set, which included 1 personal pizza, 1 cream of mushroom soup, and 1 Pepsi Black (320ml) (Figure 24); In KFC, Pepsi drink is included in their combo set like Bucket B Combo RM46.50 and Bucket C Combo RM69.90 comes with 6 pieces of nuggets, 1 whipped potato (L) and 1 Pepsi (1.5L) (Figure 25). Next, in May 2018, they organized a sampling event at Deen Maju Nasi Kandar in Jalan Gurdwara, Penang. The customers only pay RM1 to get a can of Pepsi. In the event, there were a lot of customers have good response for Pepsi Black beverage (Tan 2018). In otherwise, PepsiCo worked with Shell Select for a “Futuristic Monobike” contest in April 2018. Throughout the month, consumers can head to the nearest Shell Select store and buy two bottles of Pepsi Black PET 400ml in a single receipt, answer a simple question and send it to the number provided via WhatsApp, together with a clear photo of the receipt as proof of purchase. Prizes up for grabs include the Pepsi Monobike for two grand-prize winners, Macbook Air 128GB for five first-prize winners and iPhone 8 64GB for five second-prize winners. Cash vouchers worth RM100 will be given away to 100 consolation winners (The Star 2018). Another sales promotion is product bundle pricing. If customers buy Pepsi in bulk, they will get a bigger discount (Abhijeet Pratap 2018). For example, a bottle of 320ml Pepsi is priced at RM1.65, 4 bottles of 320ml Pepsi is priced at RM5.85, and 24 bottles of 320ml Pepsi is priced at RM32.20 (Figure 26). This means that if the consumer buys more Pepsi, the price will be cheaper.

Public Relation

Lastly, public relation is also the promotion strategy that implemented by PepsiCo. For example, in Ramadan 2016, PepsiCo Malaysia would donate RM 0.10 for each 1.5L PET bottle of Pepsi, Revive, Mountain Dew, Mirinda and 7UP for the “Liter of Light” (PepsiCo Malaysia 2016). The project purposes to eliminate the 1% of energy poverty in Malaysia (Tan 2016).

Recommendations

There are many things that PepsiCo have to improve for the future. First and foremost, Pepsi should organize charity as much as possible like American Beverage Foundation. American Beverage Foundation’s mission is to make a large contribution to the health of local communities by providing grants to support charitable programs at community organizations. For example, they sponsor their healthy beverage to the programs or physical activities and they also organized their own charity event like Boys And Girls Club (American Beverage Foundation n.d.). Thus, PepsiCo should organize more charity event to promote their products and to build up their image. In addition, PepsiCo should emphasize on corporate social responsibility (CSR). For instance, provide free drinks for public like Milo. In Merdeka Day on 31 August 2017, there were about 35 Milo vans giving out free drinks in 35 different locations and selected Petronas station (Tara Thiagarajan 2017). Otherwise, they should make more donations to orphanages or low-income families like ‘Liter of Light’, which the project that PepsiCo organized before (Figure 27). As a result, CSR is important for PepsiCo to engage more customers and attract more shareholders to invest.

In addition, the recommendation that I would like to make to PepsiCo is that they should pay more effort on creating products that can be considered healthy alternatives to their customers. It is because people nowadays are looking for ways to eat better and stay healthy. PepsiCo can go about this by creating a new brands that provide healthy beverages such as vitamin water. Vitamin Water is very popular among young people these days. Therefore, it would be good when people get another healthier options to purchase. Next, PepsiCo can also make their existing products more healthy. PepsiCo can reformulating their existing drinks or introduce less sugar, low calorie drinks and more natural drinks (Geller 2016). When people see that Pepsi is more involved with the epidemic of obesity, more people will be loyal to Pepsi. Overall, this focus will give PepsiCo an edge in an environment where unhealthy snacks and beverages are starting to become less and less profitable every day.

Furthermore, PepsiCo has been working to improve product packaging into biodegradable, compostable, recyclable plastic bottles in recent years (PepsiCo n.d). However, traditional packaging design cannot provide consumers with quality visual enjoyment (Figure 28). However, competitor Coca-Cola's design packaging is more diverse, innovative and creative. The Coca-Cola Company will launch a limited-edition copyright based on current trends. For example, after the 2018 FIFA World Cup boom (Tan 2018), Coca-Cola launched a series of products (Figure 29). On the occasion of the 60th anniversary of Malaysia's independence (Bates 2017), Coca-Cola launched a packaging design with a Malaysia unique style (Figure 30). Pepsi is clearly at a disadvantage in packaging design, so Pepsi should learn from Coca-Cola how to improve the packaging design of its products. For example, after the Avengers 4: Endgame (Figure 31), PepsiCo should use the film's craze to launch a limited edition of Avengers series’ packaging design, so those consumers who like the Avengers’s movie is attracted to buy and collect this series of product.

Last but not least, everybody knows that the greatest rival of Pepsi is Coca-cola. Both of these companies has spent a large investment on promotion and marketing. In 2017, the marketing budget of Pepsi was 4.1 billion dollars and Coca Cola was 3.9 Billion dollars. From the research, Pepsi has spent 2.4 billion dollars on advertising merely (Abhijeet Pratap 2018). Nowadays, the marketing strategy has changed a lot when the digital technology era has come. Therefore, the company can use the strength of social media such as Facebook, YouTube, Twitter and Instagram to promote Pepsi in a convenient way. It also can earn some revenues from the views of YouTube video therefore it can be a money to do further promotion videos. Not only that, nowadays artists has the influence power on social media account. The company can invite some famous artists to take a selfie with the Pepsi then upload to Instagram to attract their followers to buy the products and then they will follow the artists to do so. Therefore, the product will be a trendy on the social media and gain more purchasers. Before, they invite the famous artist such as Jay Chou become spokesperson for Asia area (Figure 32). Recently, the K-pop culture is becoming more influencing day by day. Pepsi can use it as an advantage to promote their product which is inviting the famous K-pop artist to shoot a commercial video.