Global Market Performance of Pepsi Co - Case Study Example

Introduction Pepsi Co has successfully maintained its position globally as a food and beverages company. Much is owed to its advertising campaigns which are focused more on the content and less on the budgets of airing those advertisements in various media. It has gained the position of No. 1 competitor of Coke, which stands for kinship and a brand that nation cares for. Come year 2000 and Pepsi Co, along with BBDO, its advertising agency for decades are facing a challenge to change it advertising strategy to suit the market needs. Close rivals in CSD and non CSD segment are increasing their advertising budgets, which Pepsi Co. is reluctant to. Extreme sports and alternative sports have been over used and left with less fizz to be continued as an advertising strategy. The decision becomes even more crucial in light of decreasing sales of Pepsi and Diet Pepsi, partly due to increase in prices of 5% across market segment and partly due to the increasing awareness of the consumer base of what marketing strategies are and why brands are popular. On the other side, functional drinks market is fast picking up with brands like Redbull creating a niche for itself. The board of senior members of Pepsi Co and BBDO are brooding over the decision of selecting and producing adverts which will convey that idea of Mountain Dew standing for an Exhilarating experience without overexposing extreme sports. SWOT Before analyzing the situation in deep it is important to keep in mind what Mountain dew as a brand and as a product stands for. Following is the SWOT for Mountain Dew which will be considered while making the final decisions Strengths Mountain Dew is a product offered by Pepsi Co., a company with very strong market presence and very high brand value Brand can be identified with terms like ‘advernturous’, ‘exciting’ ,‘cool’, ‘Daring’, ‘Courageous’ due to which it has a niche in the market segment of 18 – 29 year olds Weaknesses Over emphasized the use of extreme sports in its communication strategy the use of which is fully exploited by others as well Limited branding budget for advertising and communications Opportunities Successful with segment of 18-29 year olds, but needs to create a cross over appeal among 20 – 39 year olds The teen KPIs are encouraging & an opportunity to create a better brand awareness exists It’s a product in flavored drink segment which is growing unlike the CSD cola market Threats Other companies have used the Extreme sports as a communication medium and increasing their budgets for advertising and communication Introduction of functional and non CSD drinks which today’s consumer is drifting to provide its health benefits and current ethos Other copy cat flavored drinks More stress on the managerial judgment for selecting the best communication strategy rather than relying on hard data. Though it has worked in part, this decision might or might not lead to desired results and is risky. Issues 1) Eight years of exploiting the theme of Extreme sports has left it with no juice. Other companies have started to exploit it, even those who are not in the beverages industry like GE, Mars and FedEX. Mountain due is also in need of broadening its consumer base from 18 - 29 years olds to overlap with 20 – 39 year olds. It needs a more generic appeal and hence use of extreme sports is questionable 2) Pepsi Co. since ages have believed in keeping the content right rather than flooding the media with its ads. They believe in game of content rather than volume. This means Mountain Dew has a limited budget to spend on its media communications as compared to nearest competitors who are ramping up their spends on the same. 3) When Mountain Dew was bought in 1964 by Pepsi Co. it had its own niche of ‘flavored’ soft drink. Today not only has it lost its niche, but also is facing competition from non CSD drinks like Getorage and functional highly caffeinated and sugary drinks like Redbull. It is hence crucial to take this brand to a next level by broadening the target market and increasing the overall appeal of the brand 4) Through price is not of a concern to Mountain dew, as it is very competitive with the overall beverage market, the 5% increase in the price in CSDs have lead to many consumers shying off the product. The sales have suffered in 1999 and only a strong creative communication strategy can give the top line the much needed boost. 5) Mountain Dew was a ‘rural’ drink in 1960s. It slowly grew its reach to the suburbs and cities of the mid west. Eventually taking over south east and the whole Nascar belt, it became a brand of national importance. The BDIs indicate that Mountain dew had much lower penetration as a percentage of overall population and its brand value was localized in pockets. Year 2000 was the year of a strategic decision to increase this and change its brand perception. 6) The management of Pepsi co and BBDO also have this perplexing issue to address of changing consumer ethos. ‘Retro’ is what is IN where a new breed of consumers is developing who knows what a sales message is and cannot be persuaded with marketing strategies. Analysis Looking at the key issues faced by the management team at Pepsi Co and BBDO their decision of which 3 adverts to produce out of the 5 short listed will decide the fate of Mountain Dew for year 2000. The budget is limited, and entire focus remains on selecting the one with maximum impact on the target market. The Dew Dudes have a good brand recall and one must not do away with them, but use more creatively by trying to avoid extreme sports. These ads are going to be used not only for Super Bowl but for rest of 2000, hence it has to have the generic appeal. Exhibit 5a suggest that highest consumption comes from downscale and working rural towns and farms segment and specifically from 18-34 with kids. It is hence important for the management team to consider a more generic appeal of the advertisement to a family adventurous guy. Whereas the benefit of continual targeting of the young single male shall lead to higher levels of loyalty if they become lifetime drinkers of same drink. There are few criteria’s for the ad which should be considered and questions asked Is the ad relevant to the target segment and is it empathetic? Will the ad be unique enough to maintain the interest of existing target market of 18 year olds? Will the ad be able to convey the key brand values which Mountain Dew stands for? Will it convey the message to the youth who enjoy excitement as can be found in extreme sports? They are daring, confident, and full of energy. They are risk takers at heart. At the same time the new target is the average family guy who also is quiet athletic and free spirited. Mountain Dew has maintained its product life cycle by constant change in its marketing strategy and successfully wooing the young and active target market. It routinely modifies its packaging and labeling keeping in mind the consumer. They are moving fast to have the mind share and wallet share of similar target market. Exhibits 6a -6d indicate that Surge is particularly targeting the young blood, enthusiastic teenagers, and aggressive and fun-loving males. It also shows that if mountain dew drifts it marketing strategy for an average adventurous family guy it will be placed in direct competition with Sprite and 7UP as they have a similar psychographic imagery. A new breed of aware consumer is slowly drifting towards alternatives like non CSD or functional drinks. They pose an indirect competition just as Pepsi and coke themselves. These categories and other direct competitors are increasing their media spend on television which is going to make things difficult for Mountain Dew. As per exhibit 2 the estimated spend by Dr. Peppers and Sprite $106.8 Mn and $87.7 Mn as compared to a modest $55.9 Mn of Mountain Dew. The overall budget of pepsi is 30% less than that of coke. Exhibit 1 suggest that the drop in sales and share of Pepsi is steeper than coke in 1999, share of Mountain Dew, Dr Pepper and Sprite have increased at the same time. It is important that the sales lost by Pepsi and Diet Pepsi should not fall in hands of Dr. Pepper and Sprite but come to mountain dew in overall benefit of the company. One can observe two trends in beverages market. One is the loyal group to the age old cola, the other one is a more experimental young group who likes the flavor and is health conscious at the same time. Currently Mountain dew is marketed to consumers within the age range of 16-18 years of age known as Bulls Eye. But the target segment mountain dew wants to venture into by looking at Exhibit 5a is the ones who still live at home with parents, relying heavily on parents to purchase the product for them. These are the key consumers for mountain dew because they are ready to venture out into the world of excitement, fun and adventure. Pricing is not of any concern while deciding the marketing plans for year 2000. Introduction of 20 ounce single serve bottle has better margins and competivively priced at $.99. Consumers are ready to spend 10 cents more for a flavored drink they like. It uses the same distribution channel and hence cost factor is also of not a major concern. Brand development from the 1960s till the 1990s has been thoroughly described. It is important to see that how Mountain dew has grown from a rural brand to growing to North, north east and east of USA and becoming a brand of national importance for Pepsi Co. The brand has grown from its ‘hello sunshine’ campaign to the ‘cool county’ and finally to becoming an extreme sports and grunge brand. Now it is in the hands of the Management team to decide in which direction it should go for an overall good of Pepsi Co. Alternatives One alternative for Pepsi co. is to run the advertisement in super bowl and for rest of 2000. Super bowl gives the much needed attention of demographically wide audience, takes the brand away from being only a extreme sports brand and gives a chance to Pepsi Co. to celebrate Mountain Dew as the No. 3 brand nationally. However the negative aspect of this is that the advertisement has to have a very simple brief, easily understood and huge production budget to stand out in front of other competitors. Second alternative for Mountain Dew is not to take part in Super bowl and allow Pepsi to rule. The ads can be such that it is directed towards a specific segment, which is not available in super bowl. By opting out, it will avoid spending huge production budgets and not take the risk of spending too much trying to win the mind share of consumer in super bowl. By opting out of super bowl it can decide to continue with similar strategy of using extreme sports but tweak a little in order to target a larger range of male and female age group. Recommendation Participate in super bowl by selecting a creative ad in congruence to current culture, market research, budget and super bowl audience taste. User Imagery is high for mountain dew consumers and hence an ad with some intense experience is a good pick. Also the ad should be innovative and away from standard extreme sport for the audience to be able to relate to the new fresh positioning. Top 3 ads selected are Cheetah – High on Empathy (African, wild, extreme bicycling sport), impact and communication. ‘Cheetah’ has that sports streak in continuation to existing brand strategy and super bowl being a sports event it should work. This will also help continuation of ‘Do the Dew’ campaign and indicate that drinking Mountain Dew is an exhilarating experience. Use of punch lines like ‘find the teen in you’ will address the age group of 25 – 39 which Pepsi Co intends to target. Mock Opera – High on Empathy (the song selection), impact but low on communication ‘Mock opera’ has a catchy tune; consumer is able to identify with the commercial and the ad does not use an extreme sport which is overused anyways. This can help address the threat from non CSD and functional drinks depending on how the ad is executed. Show Stopper – High on Empathy (Choreography), impact but low on communication Super bowl has a variety of audience and the ad should not offend anyone. It has to have a universal appeal. ‘Show Stopper’ has the much needed extravagant production to compete with other high profile ads in super bowl. The issues listed above do not get solved by selecting the best advertisement to be aired in super bowl and thereafter. Mountain Dew will also need to consider a brand extension increasing its reach from only extreme sports. Diet Mountain Dew might need more focus and some brain storming. The brand image of mountain dew will gradually change to something similar to 7UP or Sprite once it starts to cater to a wider market, which means it will have to work ever harder as it’s a more generic market. Read More