Planning Project of PepsiCo in the United Kingdom - Assignment Example

Strategic Marketing Management: A Marketing Research and Planning Project of PepsiCo in the United Kingdom Contents 1: Introduction 1 2: Corporate Objectives 2 3: Market Overview 3 4: Marketing Audit: Internal and External 4 Marketing Mix 4 Product 4 Price 4 Place 5 Promotion 5 SWOT Analysis 6 Strengths 6 Opportunities 6 Weaknesses 6 Threats 6 PEST Analysis 6 Political 6 Economic 6 Social 7 Technological 7 Porter’s 5 Forces Analyses 7 5: Assumptions 9 9 6: Marketing Objectives and Strategies for new or modified product 10 Modified Marketing Mix for Pepsi NEXT 10 7: Identification of Alternative Plans 10 8: Promotional Programme 11 9: Measurement, Review and Control 12 Conclusion 12 10: Appendices 13 Appendix 1: Growth Potentials for British Soft Drinks Industry 13 Appendix 2: Pledge and Challenges of PepsiCo. UK & Ireland 13 Appendix 3: UK Government’s Consumer Spending survey 2007, the main market categories 14 Appendix 4: The UK's Top 10 Soft Drinks Manufacturers by take-home sales value in 2009 15 Source: [Adb11] 15 Reference List 15 1: Introduction The soft drink industry has manifested sustained growth since the first time carbonated soft drinks emerged in the market. Deemed to be in its maturity stage, organizations in the soft drink industry have instituted various innovative strategies to revitalize performance and capture much needed market shares that would continue to support and sustain present and future operations. Two of the most famous and profitable leaders of the soft drinks industry globally are Coca Cola and Pepsi. In this regard, the current study aims to carry out a Marketing Research and Planning Project covering a period of twelve months for a major company that is active in the United Kingdom (UK). To achieve this purpose, the chosen company is PepsiCo. Inc. which manufactures and markets diverse brands. For the specific product, Pepsi Max The origin of Pepsi Cola was traced from the talent of Caleb Bradham, a New Bern, North Carolina pharmacist more than 120 years ago. Together with Coca-Cola, these two soft drinks manufacturer have revolutionized the beverage industry through their concoction of carbonated soft drinks (CDS),defined by Canadean (2010) as beverages that include sweetened, non-alcoholic drinks containing carbon dioxide (par. 1). The British Soft Drinks Association (BSDA) (2010) more comprehensively defined carbonates as “ready to drink including draught dispense; home dispense; regular including sparkling juice; low calorie and zero calorie; cola; lemon including lemonade; lemon-lime; mixers including tonic and bitter drinks; orange; shandy; others including other carbonated fruit flavours, energy drinks, sparkling flavoured water, health drinks and herbal drinks” [Bri10]. In the UK, PepsiCo. started operations in 1953 and the Pepsi Max brand was first marketed in 1993 [Pep11]. 2: Corporate Objectives As clearly indicated in the official website of PepsiCo UK, “at PepsiCo, we believe we should be known not just for the financial results we generate but also for the imprint we leave on society as a whole”[Pep111]. To achieve this purpose, the organization designed and implemented strategies that focus on healthier products, protecting the environment, and providing holistic support for personal and professional growth for their people. As such, PepsiCo UK aims to transform their core business into providing products with potential health benefits and ensure that they would be catalysts of change in UK’s food and beverage industry [Pep111]. Accordingly, the future thrusts of the organization is to lead in the promotion of healthy products by producing and delivering balanced amounts of fruit, vegetables, wholegrain, fibre, and other positive nutrients and food groups[Pep111]. In a nutshell, the corporate objectives are aimed to be achieved through the following strategies, to wit: “ Deliver a new wave of reformulation and innovation - move to next-generation technology  Redirect our marketing expertise and power behind healthier products - help shift the market, not just respond to it  Fund community programmes that tackle real public health challenges - for example, tackling child hunger  Influence health policy positively  Use feedback from stakeholders, including the scientific community, and consumer input - to drive our strategy and decision-making  Make further acquisitions and mergers of healthier brands - to complement our Quaker, Tropicana, V Water and Copella brand” [Pep111]. 3: Market Overview A report published by the British Soft Drinks Association (BSDA) (2010) revealed remarkable growths in 2009: “soft drinks registered an impressive 1.7% growth in volume and 2.2% gain in value to stand at 14140 million litres and £13.224 billion respectively”[Bri10]. The future forecasts provided by the BSDA (2010) reveal increasing growth potentials until 2014 with an average growth rate of 1.18% over the projected six year period, as summarized in Appendix 1. The Euromonitor International (2010), on the other hand, expounded on PepsiCo.’s improved global share of 9.9 in 2009 to 10.1% in 2010 due to an acquisition-led strategy. Nasdaq’s (2011) review of PepsiCo. disclosed its corporate aim to push healthier products in emerging markets would be instrumental in the organization’s improved market share. As revealed: “The company is now making a greater push into healthy food options, which could expand Gatorade, Tropicana, and Quaker food operations, which account for a combined 31% of our price estimate. New distribution of healthy food products in China and a low-calorie fruit puree set to test U.S. markets could spark market share gains for the company. A new Gatorade product line expected for Spring 2011 could also advance the company's market penetration”[Nas11] 4: Marketing Audit: Internal and External Marketing Mix Product PepsiCo. UK manufactures diverse food products and beverages. The company’s brand of beverages include V Water, Gatorade, 7Up, Copella, Pepsi Max, and Tropicana. Scott’s Porage Oats and Quaker Oats are famous for its cereal products; while their snack foods include Planet Lunch, Red Sky, Doritos and UK’s favorite crisps brand, Walkers [Pep112]. The company’s report on “Tranforming our business” [Pep10] clearly illustrate the brand retail sales as of 2008: As shown, Walkers is the most saleable, generating sales of £469 million, followed by Tropicana at £269 million and Pepsi Max at £102 million in 2008. Price Prices of PepsiCo.’s products are always competitively structured and applied in the market. The shelf prices of Walkers range from £1.16 to £1.41 for a 100 gram Crinkles; while that of Pringles, range from £1.02 to £1.08 per 100 gram pack. On the other hand, Pepsi Max is priced at £1.79 for 100 ml bottle, while Coke prices its 100 ml bottle at £1.78[myS11]. Further, their official website disclosed that “we do not create any price differential between regular Pepsi and the no-sugar/ low-calorie variants. The recommended retail prices for Sunbites and Walkers Baked are also set at an affordable level for those on lower incomes. 55% of frequent Pepsi Max/Diet Pepsi buyers (over 1.3 million people) are from social class DE, and Walkers Baked is purchased by over 1.3 million DE consumers every month”[Pep114] Place PepsiCo. products are marketed and distributed through major supermarkets and retail outlets all over UK. The Marketing Teacher Ltd. (2011) revealed that included in the company’s place strategies is “acquiring Russia’s leading Juice Company, Lebedyansky, and V Water located in the United Kingdom” [Mar11]. Its official website indicates that the company employs approximately 5,500 people across 13 locations within the UK[Pep113]. Promotion PepsiCo. UK has adopted responsible advertising and promotional campaign of its products, especially the crisps, snacks and CSDs [Pep114]. Since the current thrust for marketing strategies are geared towards healthy products, PepsiCo. has therefore adopted the following policies with regard to advertising to children: Source: [Pep114]. SWOT Analysis Strengths Has exemplified expertise and core competence in the beverage industry offering a wide range of beverages and food products Opportunities Changing thrust to delivering fruit, vegetables, wholegrain and fibre by 2020[Pep10]. Has continued to design innovative strategies through focusing on health products that address the changing demands and needs of the customers. Continuing to employ acquisition led strategies that aim to broaden its product base [Mar111]. Has existed for more than a century through implementation of effective strategies using the marketing mi Employing strategies of reformulation and innovation to capture increasing market share of more discriminating preferences of consumers[Pep115]. Weaknesses Currently produces and markets products deemed to be hazardous to health, such as CSDs and snacks. Threats . Eventual decline in sales for CSDs due to shifting of thrusts to healthier products and beverages. Product recall such as that of Pepsi Raw variant weakens the product image [Ban101]. . Increased competition from organizations that belong to the beverage industry and other food products The challenges posted in their official website summarize the amount of effort and strategies that need to be addressed in their objective of pledging towards healthier products in the near future (See Appendix 2). PEST Analysis Political The soft drinks industry was reported to be worried about the imposition of a ‘fat tax’ as value added tax would be required on its products [Rus10]. The result of the imposition would be additional expenses on organizations manufacturing soft drinks and would thereby lessen potential profits. Economic The BSDA company news reveal that the rate of growth for fruit juices and health drinks manifested increasing trends despite the recession. As disclosed, “although the rate of growth fell sharply in 2008 and remained low in 2009, reflecting the impact of the recession, it remained positive. However, the increase is partly attributable to rising prices, as supplies have passed on the increased costs of commodities such as juice and packaging. In volume terms, the market has been declining, as the `credit crunch' and the recession caused consumers to abandon non-essential purchases or to trade down to cheaper soft drinks” [Brt11]. Social The research report conducted by Hyatt Consulting (2009) on the UK food and drink market revealed that “UK Government figures report that unemployment is now increasing (6.1% in the three months to November 2008, an annual increase of 0.9%). Job losses among large employers have a significant local effect on spending, but employment levels in the UK are still historically high” [Hya09]. This, together with obesity issues, would significantly affect spending for CSDs and snacks produced by PepsiCo. As indicated in Appendix 3, consumers spend about 10% of the total food market in the UK. Technological PepsiCo. UK has just invested on a new technological equipment that aimed to increase the sales of their crisps. According to Jon Kyle, Impulse Sales Director, PepsiCo UK and Ireland, “by making a significant investment in new clip strip technology along with our dedicated field sales team who are calling on hundreds of stores we aim to help independent retailers unlock the full sales potential of Walkers Prawn Cocktail and drive their crisp sales” [Pep117]. Porter’s 5 Forces Analyses 5: Assumptions (Source: CanMuseaum.com 2011) The PepsiCo. UK has clearly identified its thrust to push products that are healthier through their Gatorade, Tropicana, and Quaker food operations. However, to revitalize and modify their flagship and core product, the CSD that has been famous for more than a century, Pepsi Max was proposed to be reinvented to develop into Pepsi Next. The PRNewswire revealed that “Pepsi NEXT was created for consumers who seek the rich taste of full-calorie cola but have decreased their consumption in order to reduce the sugar in their diet. While sugar-reduction is a priority for this segment, they have not adopted the flavor profile of a zero calorie cola. Pepsi NEXT delivers in the sweet-spot for these consumers with its real cola flavor and 60 percent less sugar” [PRN11]. 6: Marketing Objectives and Strategies for new or modified product The marketing objectives and strategies for the modified product are consistent with PepsiCo. UK’s commitment to provide Performance with Purpose that focuses on products that are healthier and environmental friendly. The organization has forged an agreement with the government towards promoting the Government's Public Health Responsibility Deal [Pep118]. By reducing salt, removal of transfats, and sugar reduction from PepsiCo.’s products, the organization extends its commitment to its marketing objectives: “PepsiCo's promise to provide a wide range of foods and beverages for local tastes; to find innovative ways to minimize our impact on the environment, including by conserving energy and water usage, and reducing packaging volume; to provide a great workplace for our associates; and to respect, support, and invest in the local communities where we operate” [PRN11]. Modified Marketing Mix for Pepsi NEXT Product: Pepsi Next focuses on bringing together the refreshing cola taste with as much as 60% of sugar reduced. Price: The modified product is offered in 20oz. available for $1.39; 2 liter bottles available for $1.39; and 12 oz 12 pack available for $3.49. Place: All Pepsi NEXT products would be distributed in all traditional retail and wholesale outlets where all other Pepsi products are channeled. Promotions: The modified product is earmarked to be advertised in diverse media: print, television, radio, internet to increase product awareness, recall and entice consumer purchase. 7: Identification of Alternative Plans The product, Pepsi NEXT, was initially targeted for test marketing in two states in the United States: Iowa and Wisconsin. This is the appropriate time to design alternative plans to test the product in the UK, as well. With product features, packaging and formula used being standardized globally, the product to be marketed in UK would contain the same packaging as that earmarked for Iowa and Wisconsin. Since the pilot testing was to be initiated in July of 2011, the test marketing for the UK could begin in September 2011 and end in August of 2012, for a period of 12 months, with the following proposed time frame. The product would be launched, monitored, improved and extensively marketed within 12 months from the start of the initial product entry in the market, as shown below: Product launching………………………. 6 months Address potential barriers………………. 2 month (within the product launching) Improvements in marketing mix……….. 3 month (within the product launching) Enhanced marketing……………………. 6 months after the product launching Barriers that are determined should be immediately addressed. Any of the following barriers are possible during the product launching (1) deviation from financial budget, (2) level of demand of the product or service in the market, (3) managerial and human resource skills, and (4) increasing competition. These barriers should be evaluated and appropriate action must be made through identification of resources and enhancing the strengths of the organization. As customers begin to purchase the product, the quality control department must keep track of the feedback on customer satisfaction or any negative comments to enable them to make the necessary improvements. The promotional mix should also be adjusted, as needed. More local advertisements must be disseminated on the introductory stage to increase awareness and to market the product’s competitive advantage. 8: Promotional Programme Marketing strategy planning is ultimately vital to ensure profitability and future long-term growth and survival. According to McCarthy, “good marketing strategy planning provides the guidelines for all of a company’s activities and it consists of only two distinct but interrelated jobs: (1) selecting a target market; and (2) developing the most appropriate marketing mix for the target market” (McCarthy, 1975, 69). Since the product, price, and place strategies have already been determined, the promotional programme needs to be detailed over the projected 12-month period. As initially proffered, the modified product is earmarked to be advertised in diverse media: print, television, radio, internet to increase product awareness, recall and entice consumer purchase. Promotional efforts would use point of shelf display in strategic locations in wholesale and retail outlets, in supermarkets, convenience stores in the UK. PepsiCo. has been known to actively promote new products through television advertisements, national radio, newspapers and magazines, as well as through its official website. Further, the during product launching, PepsiCo. could promote the product through giving free Pepsi NEXT cans in supermarkets, subways, universities and commercial districts to promote product awareness. The objective of the promotional campaign is to enhance consumer awareness on the modified product, particularly featuring its 60% less sugar without altering its ability to provide refreshing taste. 9: Measurement, Review and Control The success of any endeavor, particularly a marketing research and planning project, lies in the ability of management to monitor and address deviations from the actual plan. Financial considerations, including budget, must be audited in terms of the need to adjust according to requirements of the market. The competitors’ reaction to the new product must likewise be assessed and appropriate action must be applied. Any technical problems regarding any of the marketing mix elements should be immediately addressed. Any influencing factor affecting the marketing mix should be identified, evaluated, and acted upon, as needed. Part of the monitoring and review is the determination of changes in consumer preferences, purchase and repeat purchase decisions that would impact the company’s market share and the way competition responds to the product introduction. Conclusion The marketing research and planning project for the modified Pepsi Next was presented in two phases: the company’s thrust to reinvent healthier beverages and products to sustain continued growth; and the proposed plan of actually introducing Pepsi Next in the market. Through providing an overview of the internal resources and external factors that impinge on the organization, appropriate strategies were designed to ensure that identified objectives are attained. 10: Appendices Appendix 1: Growth Potentials for British Soft Drinks Industry Source: [Bri10] Appendix 2: Pledge and Challenges of PepsiCo. UK & Ireland Source: [Pep116] Appendix 3: UK Government’s Consumer Spending survey 2007, the main market categories Product Category £m 2006 CHFm (approx) % of Total Fruit and vegetables 15,463 26,070 21.8 Meat and bacon 14,178 23,903 20.0 Bread and cereals 10,310 17,382 14.6 Milk, cheese and eggs 8,441 14,231 11.9 Sugar and sweet products 7,243 12,211 10.2 Soft drinks (inc mineral water) 7,129 12,019 10.1 Fish 2,987 5,035 4.2 Tea, coffee and cocoa 1,983 3,343 2.8 Other food 1,672 2,818 2.4 Oils and fats 1,403 2,365 2.0 Total Food (home consumption) 70,809 119,377 100.0 Wine, cider and perry 14,557 24,542 35.0 Beer 19,128 32,249 46.0 Spirits 7,876 13,278 19.0 Total Wine, Beer and Spirits 41,561 70,069 100.0 Appendix 4: The UK's Top 10 Soft Drinks Manufacturers by take-home sales value in 2009 Coca-Cola Enterprises Red Bull Britvic Soft Drinks AG Barr GlaxoSmithKline Innocent Drinks Danone Gerber Foods Tropicana UK (PepsiCo) Nestle Waters The UK's Top 10 Soft Drinks by take-home sales value in 2009 Coca-Cola Red Bull Lucozade (GlaxoSmithKline) Ribena (Glaxo SmithKline) Robinsons (Britvic) Schweppes (Coca-Cola) Pepsi (Britvic) Actimel (Danone) Tropicana (PepsiCo)  Volvic (Danone) Source: [Adb11] Reference List Bri10: , (British Soft Drinks Association (BSDA) 2010, 9), Pep11: , (PepsiCo UK & Ireland 2011), Pep111: , (PepsiCo UK & Ireland 2011), Pep111: , (PepsiCo UK & Ireland 2011), Bri10: , (British Soft Drinks Association (BSDA) 2010, 5), Nas11: , (Nasdaq 2011), Pep112: , (PepsiCo. UK & Ireland 2011), Pep10: , (PepsiCo UK & Ireland 2010), myS11: , (mySupermarket 2011), Pep114: , (PepsiCo UK & Ireland 2011, par. 10), Mar11: , (Marketing Teacher Ltd. 2011, par. 5), Pep113: , (PepsiCo UK & Ireland 2011), Pep114: , (PepsiCo UK & Ireland 2011), Pep10: , (PepsiCo UK & Ireland 2010), Mar111: , (Marketing Teacher Ltd. 2011), Pep115: , (PepsiCo. UK & Ireland 2011), Ban101: , (Banham 2010), Rus10: , (Russell 2010), Brt11: , (Brtish Soft Drinks Association (BSDA) 2011), Hya09: , (Hyatt Consulting 2009, 8), Pep117: , (PepsiCo. UK & Ireland 2011), Dat10: , (Datamonitor 2010), PRN11: , (PRNewswire 2011, par. 2), Pep118: , (PepsiCo. UK & Ireland 2011), PRN11: , (PRNewswire 2011, par. 4), Bri10: , (British Soft Drinks Association (BSDA) 2010, 18), Pep116: , (PepsiCo. UK & Ireland 2011), Adb11: , (Adbrands.net 2011), Read More