Marketing Plan for Crystal Pepsi - Term Paper Example

?Table of Contents Executive Summary 2 0 Introduction 3 1 Company profile 3 2 Past Crystal Pepsi 3 3 Strategic Opportunity 3 4 Objectives 41.5 Target group 4 2.0 The product 4 2.1 Product Introduction 4 2.2 Pricing 5 3.1 Global Analysis 5 3.2 PepsiCo Analysis 6 3.2.1 Strengths 6 3.2.2 Weaknesses 6 3.2.3 Opportunities 7 3.2.4 Threats 7 3.3 Customer Experience Management 8 3.4 Ansoff Growth Model 8 3.5 Wiersema’s Customer Intimacy Model 9 4.0 Strategies 9 4.1 Exit strategy 9 4.2 Marketing Strategies 10 5.0 Resources for implementation 11 5.1 Financial resources 11 5.2 Non-financial resources 12 6.0 Monitoring and Evaluation 12 7.0 Recommendations 12 8.0 Annexes 14 9.0 Assumptions 16 Executive Summary PepsiCo was founded in 1965 following a merger between Pepsi-Cola and Frito-Lay. Its motto is ‘Something for everyone’. The company operates in over 200 countries across the globe and generates sizeable net sales annually. Crystal Pepsi was first introduced in 1992 but was withdrawn by the end of 1993 due to very low sales. However, it is possible to re-launch the product through intensive marketing activities and flavor changes. The company’s first priority is to build and manage its brand through the yet to be established Brand Charter. Above all, the company needs to increase its marketing endeavors to be able to compete effectively with the giants in the industry. The company intends to generate over $1.78 billion in net sales before the end of 2015 from Crystal Pepsi by investing about $850 million in marketing endeavors within the next three years, ending 2015. 1.0 Introduction 1.1 Company profile The mother of PepsiCo was Pepsi Cola Company, which was founded in 1898 in North Carolina. In 1965, PepsiCo was formed following a merger between Pepsi-Cola and Frito-Lay. PepsiCo motto is ‘Something for everyone’, a statement that perpetuates consumer inclusion. The company produces assorted beverages and snacks, which are sold in over 200 countries across the globe. PepsiCo generated net sales of $66.5 billion and $57.8 billion in 2011 and 2010 respectively. 1.2 Past Crystal Pepsi The introduction of Crystal Pepsi in 1992 was informed by health concerns, especially increasing levels of obesity. As a result, PepsiCo promised its customers and consumers that it will use healthy ingredients to produce products and provide health benefits in its products. Since its inception on 12th April 1992, Crystal Pepsi had been perceived as a fad because it failed to deliver its value propositions to its consumers (Susan 53). In addition, its name was controversial, especially when connected with the brand Pepsi known to many for its coke products, which are considered to contain caffeine and caramel. In fact, it tasted like coke though colorless thus confusing the consumers. As a result, its sales momentum faded in 1993 and it was thus discontinued. 1.3 Strategic Opportunity Most people are becoming health conscious, therefore, there is need to provide products that meet their needs. According to PepsiCo Chief Executive Officer (CEO) Ms. Nooyi, PepsiCo need to be refocused to accommodate emerging needs of health conscious consumers. In response to this need, the company continues to invest to grow its nutritional business from $10 billion to $30 billion in annualized sales by end of 2030. Again, PepsiCo needs to advertise more. Unlike, Coca- Cola Company whose products are featured regularly in most advertising, PepsiCo brands appear less in commercials. As a result, Coca cola and diet coke are brands that rank first and second before any Pepsi product because it spends more on advertising. If PepsiCo positions itself properly, it will gain from 14.5% growth expected to be experienced in the industry by the end of 2016 to reach annualized sales of $222.7 billion (Market-Line 22-26). 1.4 Objectives 1. To sell over 407.6 million litres of Crystal Pepsi and generate about $400 million from North America, Canada, China and Middle East regions by 31st December 2013 2. To sell over 611.4 million litres of Crystal Pepsi and generate about $600 million from North America, Canada, China, Middle East, Russia and Mexico by 31st December 2014 3. To sell over 794.8 million litres of Crystal Pepsi and generate about $780 million from North America, Canada, China, Middle East , Mexico, Russia and Egypt by 31st December 2015 1.5 Target group This is definitely a more natural, healthy and nutritious product suitable for consumers who want to improve and maintain their well-being, especially those above 21 years. This group understands the devastating effects that caramel, preservatives and caffeine has because it may expose consumers to increased chances of contracting cancer. Though health conscious consumers are ultimate targets, PepsiCo does not sell directly to consumers. Therefore, it targets wholesale and food service distributors such as hotels and restaurants; groceries, mass merchandisers, convenient stores and authorized independent bottlers as well as food service distributors. Wal-Mart is it’s the key distributor, whereas in 2011, Wal- Mart sold 11% of PepsiCo products (PepsiCo1 26). The company has had product success in North America, Mexico, Middle East, Asia, Egypt, China, Brazil, India and Russia. Therefore, these are the markets under key focus. 2.0 The product 2.1 Product Introduction The product is healthier and safer for the consumers. It is fortified with key vitamins and has lower level of calories and synthetic preservatives as compared to normal colas. The product has 130 calories versus 150 calories of normal colas per twelve-ounce serving. In addition, the product comes with different flavors including citrus flavor. Therefore, Crystal Pepsi is more natural, nutritious and safer to consume, with less preservative (sodium), no caffeine and caramel. It is also fortified with key vitamins and other important minerals to promote healthy living. 2.2 Pricing Costs of beverages vary significantly in different stores due to packaging, advertising and location. However, PepsiCo and Coca-Cola product’s prices slightly vary as indicated at Amazon and other retail stores in different countries. For Example, a 12 pack of 12 ounce of Coca cola and Pepsi Coke sells at $8.00 and $8.25 respectively at Amazon.com. On the other hand, 2-litre of Coca cola and Pepsi Coke sells at $1.79 and $1.69 respectively at FreshDirect.com. The product should be priced after considering cost of production and prices of competitors. Therefore, the price per litre of Crystal Pepsi shall be $0.98. This price resonates with the prices of diet coke thus is less expensive and is likely to receive good response from the market. 3.0 Industry Analysis 3.1 Global Analysis In 2011, global carbonated soft drink market grew by 2.3% to reach a value of $194.6 billion. On the other hand, quantities of carbonated soft drinks sold grew by 2.1% in 2011 to reach a volume of 198.3 billion litres. The industry will grow by 14.5% by end of 2016 to reach of $222.7 billion (Market-Line 22-26). Supermarkets and hypermarkets distribute 50.8% of the total volume of carbonated soft drinks to consumers. There are emerging new legislations in different regions to curb use of what is considered injurious to the health of consumers and environment. For example, California State has legislated a law that requires beverage and other food companies to put a warning on their labels if their products contain substances listed by the state as linked with cancer or birth defects. The level of rivalry in the industry is very high. The top 9 competitors command 98.5% of the market with Coca Cola, PepsiCo and Dr. Pepper Snapple commanding 41.9%, 28.5% and 16.7% respectively as at end of the year 2011. The products are highly homogenous and most companies spent a lot of resources to advertise their products in the market. 3.2 PepsiCo Analysis PepsiCo Analysis is done with the aid of SWOT analysis model. 3.2.1 Strengths Pepsi was ranked 28th among the top distinctive brands globally in 2012 (Interbrand 4). Pepsi is joined in a wider recognition by other 22 PepsiCo Brands (Annex 1). According to PepsiCo1 (1), the strength of PepsiCo brands is evident in more than 200 countries across the globe. The company has the second largest market share in the United States of 28.5% after Coca-Cola, which has 41.9% market share (Beverage Digest 1). PepsiCo near dominance brand induce repetitive sales and loyalty among its customers. In fact, PepsiCo can sell its products at a premium because of its big name, which is second largest in the industry. New brand riding in Pepsi major brand is more likely to generate good sales. PepsiCo delivers its products directly to retail stores and customer warehouses from its manufacturing plants and warehouse across the globe through its sales force thus enabling the company to have maximum visibility and appeal. This distribution approach is less costly and work best for its carbonated soft drinks because they are neither fragile nor perishable. In addition, company’s sales force may deliver beverages through vending machines, third-party or independent bottlers to increase penetration to schools, business entities, stadiums and restaurants among others (PepsiCo1 25). 3.2.2 Weaknesses PepsiCo’s largest single distributor is Wal-Mart; therefore, performance of PepsiCo brands is influenced by Wal-Mart’s business strategy. Wal-Mart distributes 11% of PepsiCo products (PepsiCo1 26). Wal-Mart emphasizes private-label sales approach because of its ability to generate higher profit margins as compared with national brands, a policy that is not too friendly for PepsiCo brands. PepsiCo failed to sustain Pepsi Crystal in the Market because it was perceived as a fad in the mind of consumers. Therefore, it requires a lot of resources and willpower to rebuild the crystal brand. Pepsi has a bad habit of ruffling its managers in its different brands and departments, which has hurt company’s sales. This is because no managers stay long enough to build knowledge or improve the product. Shuffling of managers may have contributed to the 2.5% decline in its overall sales, with a 4% decline in soda sales in 2011 (Russell). 3.2.3 Opportunities PepsiCo plans to invest $1 billion and $0.5 billion in China and India respectively. This enables the company to reach greater number of customers in different regions. Additional major investment in Brazil and Mexico is also in the pipeline. PepsiCo has hired famous nutritionists to help improve quality of its products by developing recipe that resonates to customers’ needs and wants. Thus, it would enable the company to continue with product development and improvement in response to the market needs. 3.2.4 Threats Government initiatives towards protection of health and environment have a negative potential to PepsiCo. New labeling requirements intended to warn consumers of certain substances in the products impact negatively to company’s sales. This legislation has been enacted in the State of California, where companies whose products contain substances linked with cancer and birth defects are required to warn consumers on the labels of their products. As a result, both PepsiCo and Coca Cola have changed their recipe, especially they way caramel coloring used in sodas are made to avoid putting cancer warning on their labels. Just like other global giant companies operating worldwide, PepsiCo has suffered a number of image crisis in the past. In the past, syringes were found inside cans of PepsiCo products; a situation that caused contamination and tampering that reduced demand and brand equity. Coca-Cola Company is PepsiCo’s primary rival. Others include; Dr. Pepper Snapple, Cott Corp., National Beverage, Monster Beverage Co, Red Bull, Rockstar and Big Red. Intense competition may influence PepsiCo bottom-line precipitated by increased costs in advertising and sales promotions. Sicher (1) revealed that in 2011, PepsiCo lost 0.8% of its market share to its rivals. Some consumers are becoming more health conscious and tend to avoid carbonated drinks. As a result, they tend to avoid products with high sodium, sugar, preservatives and caffeine, substances that are present in most carbonated drinks. Russia, the Middle East and Egypt are countries with unstable political conditions or civil unrest. Such conditions hamper operations and performance of company’s products. 3.3 Customer Experience Management Carbonated Soft Drink industry is fiercely competitive. However, PepsiCo is determined to make the brand stand out by improving and enhancing customer experience. The company would make the brand to taste good and convenient to carry. Based on past experience, the customers expect safe products with tasty flavor. Customer experience is defined by good products, product brochures, interactive websites and media advertising. Borrowing ideas from customer experience management, PepsiCo intends to differentiate this brand in the minds of customers by displaying higher levels of integrity, reliability and convenience. PepsiCo intends also to produce safe and nutritious products as well as sell it at a price that customers will not feel exploited. The company is more interested in evoking nice feelings of customers whenever they see or hear about the product. The company seeks to bond with the customer and exceed their expectations. 3.4 Ansoff Growth Model Existing Products New Products Existing markets New markets Market penetration Market penetration is a growth strategy, which involves selling existing products in existing markets. It is less risky strategy the business entity understands the market pretty well. Market penetration can take the form of selling more products into the current market, driving out competitors or increasing customer usage. It can also be combinations of all depend on the circumstances. Market development is a market growth strategy that seeks to sell existing products to new markets. It involves entering new regions, improving product dimensions or packaging, developing new distribution channels or developing alternative pricing policies to attract different or new customers. Product development growth model involves introducing new product into the market. There is need for developing new competencies to enable the company to produce new appealing and differentiated products in this strategy. The strategy also emphasizes on research and development and appreciates customer feedback. This strategy fits PepsiCo’s Crystal Pepsi. Already the company has hired popular nutritionist for the purpose of developing new products. Diversification is another market growth strategy of growing new products in new markets. It is risky because it involves moving to markets unknown or with little experience. PepsiCo intends to use this strategy after 2015, when the company would have a clear idea of what to expect 3.5 Wiersema’s Customer Intimacy Model This model proposes five key principles of customer intimacy. The principles include; commitment to intimacy, tailoring and delivering the best fitting solutions, picking your partners, Molding and Shaping Your Culture and examining strengths to start your journey to intimacy. In the company’s case the company would wish to apply the two principles as follows; First, it shall commit itself to customer’s intimacy by meeting customer needs. It has engaged services of popular nutritionists to develop best product form the consumers. Second, the PepsiCo seek to tailor and deliver best fitting solutions by cooperating with distributors. It would help them through advertising and purchasing cooling and vending machines for them. It will also produce coupons, brochures, and other relevant promotion materials. 4.0 Strategies 4.1 Exit strategy Kate (271) stated that a company may abandon the production and sale of a particular product due to unavoidable circumstances, which include but not limited to changing customer trends, political strife, increasing cost of production or company bankruptcy. In the light of the above statement, PepsiCo may be forced to abandon production and sale of Crystal Pepsi if the product fails to achieve its objectives as at 31st December 2012. This will lead to total abandonment and initialization of another different product altogether. 4.2 Marketing Strategies The first strategy is to develop new flavors and products. There is need for new flavor and product innovations as well as robust and effective management of new flavor pipelines. In addition, PepsiCo need to improve existing flavors and tastes to capture aspirations of consumers. The second strategy for the company is to advertise more aggressively. Beverage industry is highly competitive and PepsiCo faces stiff competition from Coca-Cola Co. Other primary competitors are Dr. Pepper Snapple, Cott Corp., National Beverage, Monster Beverage Co, Red Bull, Rockstar and Big Red. Therefore, to retain its market share and wrestle a slice from its competitors, PepsiCo should apply offensive marketing strategies for reasons of protecting its customer base as well as acquiring new customers in high margin segment areas and increasing purchase frequencies from its consumers. However, the company shall use mild offensive marketing strategy referred to as enveloping strategy. In this strategy, PepsiCo shall introduce a new range of flavors and tastes similar to this brand and each flavor is designed to liberate some market share from the nine top competitors (Roger 38-71). This is likely to weaken and demoralize competitors. However, fierce retaliation is expected from Coca-Cola Company as usual. Nonetheless, PepsiCo with its new brand would be able to expand its market niche to its environs and encroach to competitors markets. This approach is suitable for China, Canada and Egypt markets because they are loosely segmented and lack a dominant competitor. PepsiCo would invest hundreds of dollars in research and product development of the new brand. It has also dedicated about $ 800 million for the next three years to operate different markets simultaneously and is on the verge of decentralizing its organizational structures. Third, the company needs to build a strong brand in Crystal Pepsi. The essence of a strong brand is a great product, which requires support from creative and effective marketing. This will be made possible by encouraging nutritionists to develop better, safe and healthy Crystal Pepsi. This product needs to be packaged extremely well. Therefore, PepsiCo intends to create a brand charter whose objective is to describe the meaning of Crystal Pepsis as a brand. Through the brand charter, the company expects to invoke customer confidence in the product and boost PepsiCo standing in relation to its major competitors, especially Coca Cola and Dr. Pepper Snapple. The brand charter is also responsible for gathering and analyzing customer feedback and tracking competitors’ development (Jean-Noel 71). Furthermore, they would monitor industry trends and market conditions. The charter then transmits critical information to research and product development unit for further action. Finally, Gary and Grew (211- 215) states that the charter has the responsibility of ensuring that brand message is consistent throughout all forms of marketing and that marketing responsibilities are delegated appropriately to ensure that all critical details towards marketing and selling the products are given the attention they deserve. The strong brand would then be communicated through Interactive and fun websites linked with social media such as Face Book, You Tube and Twitter to increase audience base. To build a strong brand that will exist in the mind of the customer, the company would reinforce company’s color scheme, logo, slogans and typeface that shall be obvious in all its promotional materials. Fourth, the company would undertake promotional activities to increase its sales. PepsiCo will offer volume rebates and pay product placement fees to encourage its distributors to sell more and make more profits. The company shall also offer consumer incentives such as Crystal Pepsi coupons and price discounts to product consumers. Finally, the company will continue to sponsor major sporting events and advertise its products in different media. 5.0 Resources for implementation 5.1 Financial resources PepsiCo requires substantial financial resources to implement its activities to be able to generate substantial sales for its crystal Pepsi product. These finances are for promotion activities, employing additional staff and equipping distribution channels. The total required investment for the three years is about $800 million. In the first year, the company requires about $350 million (Annex 3). In the following years, PepsiCo requires about $250 million (Annex 3) and $200 million (Annex 3) respectively for second and third year respectively. 5.2 Non-financial resources There is need for additional 20 marketing executives to ensure that the product is marketed and sold effectively. In addition, there is need to create a brand charter to manage the brand and marketing activities of the company. 6.0 Monitoring and Evaluation All the activities of PepsiCo shall be monitored very closely and every important detailed captured and analyzed by relevant persons in the company. The members of brand charter are responsible for undertaking monitoring and evaluation of all marketing endeavors and shall report findings and recommendations to the chief executive officer on quarterly basis. The submission date for the reports to the chief executive Officer should be at the end of each evaluation period indicated in the evaluation framework. Evaluation Framework Start Date End date Key items Responsible Personnel First evaluation 1st April, 2013 20th April, 2013 Sales objectives Budgets Brand Charter members Second evaluation 1st July, 2013 20th July, 2013 Sales objectives Budgets Third evaluation 1st October, 2013 20th October, 2013 Sales objectives Budgets Fourth evaluation 1st January, 2014 20th January, 2014 Sales objectives Budgets 7.0 Recommendations 1. It is important for PepsiCo to create a brand Charter to manage all company brands and other marketing activities appropriately. 2. PepsiCo needs to increase its marketing activities. This is because Coca- Cola products are featured more than PepsiCo products in most advertising. In fact, Coca cola and diet coke are brands that rank first and second before any Pepsi product. 3. There is need for new flavor innovations as well as robust and effective management of new flavor pipelines. PepsiCo need to improve existing flavors and tastes to capture aspirations of consumers. These were sentiments echoed by Mr. Novak. 4. There is need to improve product packaging by creating a unique and cool bottle design to capture enhances attention from the market and differentiates it from competitors and normal PepsiCo packaging. 5. The research team led by hired famous nutritionists need to improve Crystal Pepsi by fortifying it with vitamins and other important minerals. 6. The company should invest more in sponsoring sporting events. When PepsiCo pulled out of the Super Bowl Sponsorship in 2010, its sales dropped 6%, which was more than overall soda decline of 4%. 8.0 Annexes Annex 1: PepsiCo. Top 22 Brands generating over 1billion each annually Pepsi coke Fritos Mountain Dew Cheetos Doritos Tropicana Beverage Gatorade 7UP Brisk PepsiCo Sierra Mist Mirinda Lipton Ready- To-Drink Teas Diet Pepsi Walker Diet Mountain Dew Pepsi Max Ruffles Starbucks ready –To-Drink Beverage Aquafina Tostitos Quaker Foods and Snacks Lays Source: (PepsiCo1 9). Annex 2: The top ten Carbonated Soft Drink (CSD) Companies 2011 Company CSD share Share+/- Vol +/- Coca-Cola Co. 41.9 -0.1 -1.0% PepsiCo 28.5 -0.8 -3.9% Dr. Pepper Snapple 16.7 flat -0.7% Cott Corp. 5.2 +0.4 +5.7% National Beverage 2.8 flat +0.1% Monster Beverage Co 1.2 +0.2 +14.9% Red Bull 1.0 +0.2 17.0% Rockstar 0.6 +0.1 28.0% Big Red 0.6 +0.1 5.4 % Other 1.5 -0.1 n/a Source: Sicher (1) Annex 3: Marketing Cost in the first year of 2013. Marketing Activity 2013 2014 2015 Amount in USD Amount in USD Amount in USD Marketing staff salaries 2,600,000 2,800,000 3,000,000 Market Research Fees 500,000 500,000 500,000 PR campaign support 4,000,000 2,500,000 2,000,000 Brochures, posters & banners 4,000,000 2,000,000 1,500,000 Online advertising 4,000,000 2,500,000 2,000,000 Website Redesign 200,000 200,000 200,000 Website traffic reporting tool 150,000 150,000 150,000 Webinars 250,000 250,000 250,000 Direct/ Email marketing 250,000 250,000 250,000 Events 24,000,000 20,000,000 15,000,000 Brand Charter 7,000,000 7,000,000 7,000,000 Sales demonstrations 40,000,000 25,000,000 20,000,000 Sales and customer videos 4,000,000 4,000,000 4,000,000 Display suites 15,000,000 15,000,000 15,000,000 Marketing Travel 250,000 250,000 250,000 Coupons 25,000,000 20,000,000 15,000,000 Price discounts 29,000,000 29,000,000 18,000,000 Product placement fees 15,000,000 15,000,000 15,000,000 Volume rebates 18,000,000 18,000,000 18,000,000 Media and advertising 100,000,000 80,000,000 60,000,000 Vending equipments 25,000,000 1,000,000 500,000 cooler equipments 30,000,000 1,500,000 1,000,000 Communications 1,250,000 1,250,000 1,250,000 Total 349,450,000 248,150,000 199,850,000 9.0 Assumptions The average selling price of a carbonated soft drink is $0.98, computed by dividing $194.6 billion generated by the industry by 198.3 billion litres sold in 2011. Therefore, to generate $400 million, the company needs to sell 407.6 million litres of Crystal Pepsi. To generate $600 million, the company needs to sell 611.4 million litres of Crystal Pepsi. To generate $780 million, the company needs to sell 794.8 million litres of Crystal Pepsi. Work Cited Best, Roger. Market-Based Management: Strategies for Growing Customer Value and Profitability. 6th ed. New Jersey: Prentice Hall, 2012. Print. Gillespie, Kate, Jean-Pierre Jeannet, and Hennessey David. Global Marketing. 3rd ed. New York: Cengage Learning, 2010. Print. Gunelius, Susan. Building Brand Value the Playboy Way. New York, NY: Palgrave Macmillan, 2009. Print. Interbrand. Interbrand Releases the 2nd Annual Best Global Green Brands Report. London: Interbrand, 2012. Print. Kapferer, Jean-Noel. The New Strategic Brand Management: Creating and Sustaining Brand Equity Long Term. 4th ed. London: Kogan Page Publishers, 2008. Print. Lilien, Gary, and Rajdeep Grewa. Handbook of Business-to-Business Marketing. London: Edward Elgar Publishing, 2012. Print. Market-line. Carbonated Soft Drinks: Global Industry Guide United States. New York, NY: Market-line, 2012. Print. Russell, Mallory. How Pepsi Went From Coke's Greatest Rival To An Also-Ran In The Cola Wars, 12 May, 2012. Web. 28 Oct. 2012. . Sicher, John. Ed. “Special Issue: U.S. Beverage Results for 2011”, Beverage-Digest 61. 6 (2012): Web. 28 Oct. 2012. . Read More