Pepsico is one of the two leading soda beverages brands in the industry.

It was formed after the

merger of Pepsi and Frito lay in 1965. The brand continued to perform well even during the
economic recession. The current CEO of Pepsico is Indra Nooyi under whose leadership, the
brand has continued to expand its business and transform its product portfolio. 2017 was an year
of healthy growth for the brand when Pepsico achieved a core organic revenue growth of 2.3%
[1]. Even after the recession, the soda brands have continued to face difficulties because of the
sweeping changes globally throughout the industry. Soda industry is marked by intense
competition and the beverages brands are spending heavily on marketing as well as product
innovation in order to achieve faster growth. Pepsi has been known for creating exciting
marketing campaigns. It has 20 billion dollar brands in its portfolio. Its income from food
products has kept growing and in 2017 the brand earned 53% of its revenue from food products
and only 47% from the beverages products. US is still the largest market for Pepsi from which
Pepsi earned 58% of its revenue in 2017 [1]. However, the brand is investing in international
markets too for faster growth. It has organised its business in six reportable segments. The brand
is also investing heavily in technology for superior growth and for marketing. Marketing is one
of the primary drivers of business growth for Pepsi. The soda giant invests billions in advertising
and promotion. Its nearest competitor is Coca Cola and both brands are engaged in an intense
battle. Each one invests heavily in marketing and product innovation for growth.
Pepsi along with its consolidated subsidiaries employs 263,000 people out of which 113,000
were employed in US alone[1].

Marketing strategy of Pepsico:

Market Positioning and segmentation:

Before moving on to the details of Pepsico’s marketing strategy, take a look upon how it has
positioned its brand and products in the market. It has positioned itself as a snacks and beverages
brand that include nutritious and low calorie choices apart from normal soda products. There are
22 iconic billion dollar brands in its portfolio. Pepsi is positioned as a brand that reflects young
energy and this is also a key theme across its advertising and marketing campaigns. The
customers of Pepsi are mainly from the 13 to 35 age group. In other words you can say, it is a
brand for the millenials. Pepsi has maintained a pricing strategy that has made it an affordable
brand. Its customers are from all income segments including lower middle class to upper class.
Now, it has also released smaller options for its several soft drinks to make its products more
affordable and accessible. Its customers include the teenagers and youth with a modern and fast
moving lifestyle.

Large Investment in Marketing

Pepsico has traditionally relied heavily on marketing for driving sales and market growth. Like
Coca Cola it too spends heavily on marketing and promotion. In 2017, its marketing budget was
4.1 billion dollars and that of Coca Cola was 3.9 Billion dollars. Pepsi spent 2.4 billion dollars
solely on advertising [1]. However, the world of marketing has changed a lot with the rise of the
digital technology. A large part of Pepsi’s marketing budget goes to digital marketing and
advertising. Apart from that, a large sum is also spent on television advertising and other
traditional methods of advertising. Any leading brand is investing heavily in digital technology
for marketing and better customer experience. Since the rise of social media, brands are
connecting with their customers in real time with promotional campaigns. On the one hand,
social media has helped the brands with marketing to allow them to connect with millions of
customers globally in an instant and without any financial investment. On the other hand, it has
also made the brands more conscious regarding product quality and customer service because
any comment or news shared on social media reaches millions in a few seconds.

Product and Packaging Innovation:

Pepsi has continued to invest in product quality and packaging to stay the customers’ first choice.
However, apart from these things, it has continued to diversify its product portfolio bringing
new, healthier and more nutritious choices for its customers. Behind its excellent marketing
strategy, there is a diverse and rich product portfolio filled with a large variety of flavours and
nutritious and tasty choices. Product quality and packaging are very important elements of
Pepsi’s marketing strategy where it has continued to innovate whether in terms of product
quality, variety as well as packaging. Its reward winning design team has continued to innovate
with package design. Regularly updating the package design also helps retain customers and
attract new ones. Attractive packages can also drive sales higher and it is why Pepsi has
continued to innovate the packaging style and sizes based on consumer demand and
expectations. With time, people’s taste and choice of flavours has changed a lot. They are
looking for healthier products and product innovation helps churn demand. However, apart from
investing in product quality and design, it is equally important to invest in marketing and Pepsi
promotes its brand through both digital and traditional channels.

Digital Marketing Campaigns and Big Data:

Digital strategy is a very important part of its marketing campaigns. Effectiveness of Pepsi’s
digital campaigns is also an important determinant of its sales and profits. Popularity of these
digital campaigns affects its level of sales and profits directly. Some of its digital campaigns
have enjoyed immense popularity like the ‘Bring Home Happiness’ campaign containing a 20
minutes long video [1]. This video grew so popular that people watched it more than one billion
times. It leveraged the power of social media to run the campaign. The brand is using digital
technology in other aspects of business too but in the area of marketing, the role of digital
technology and that of social media is especially very important. Since a very large number of
customers are now found online and can be reached through social media and other digital
channels, digital marketing has become the central focus of Pepsi in terms of marketing. Apart
from promoting its brands separately, Pepsi also uses digital marketing for creating higher
loyalty and higher customer engagement. Its another promotional campaign titled ‘Made for
This’ targeting the millennial generation and featuring High school athletes was also highly
popular. The campaign that featured young athletes underscored that Gatorade was made to fuel
young athletes and their passion [1]. Marketing and media environment are changing rapidly
which have made it mandatory for the brand to use new channels for advertising and promotions.
Pepsi is also leveraging Big Data to create real time marketing messages that help it market its
brands more effectively. The brand also uses consumer research for the purpose of designing
marketing strategies that help it grow its reach and effectiveness.

Sports Marketing and sponsorships:

Apart from these promotional campaigns, the brand has also relied heavily on sponsorships and
partnerships to grow brand awareness as well as for building customer loyalty. 2017 marked its
second year of partnership with UEFA champions’ league. Through this partnership, it has
continued to promote some of its biggest global brands including Lays, Gatorade and Pepsi
across more than 100 markets [2]. ‘Sports marketing’ is a key part of the brand’s marketing
strategy. The relationship between Pepsi and Sports is old. It has struck partnerships with several
sports bodies globally to promote its brand in most important markets. In 2015, it announced a
new marketing partnership with National Basketball Association. This partnership will also
allow for the promotion of Pepsi products through the WNBA, NBA Development League and
USA Basketball [2]. Pepsi owned Gatorade already had a partnership with NBA. The new
partnership will promote its Mountain Dew through signage and other branding efforts during
the NBA events. Pepsi has entered similar partnerships in cricket too for the promotion of its
brand and products. In 2016, it entered a partnership with the Board of Control for Cricket in
India. Pepsi has used this partnership to promote its Gatorade sports drink on the field [3].
‘Sports Marketing’ is known to generate highly favourable results for the soda brands and the
competition between Coca Cola and Pepsi is intense on the sports field too. The design team of
Pepsi focuses on creating meaningful experiences for the customers and consumers during major
global events like Super Bowl LI to Milan Design Week to the UEFA Champions League Final.

Pepsi Social Media Marketing:

Marketing is not complete in the 21st century without social media. Facebook to Twitter and
YouTube and even Instagram, all of these are the most favourite stops of the leading brands.
Both Coca Cola and Pepsi have maintained an impressive social media presence that works to
drive user engagement high and create higher level of customer loyalty. Most of the video
campaigns run by Pepsi have become so successful because it could leverage the power of social
media channels. One of its campaigns in Greater China garnered more than a billion views. Its
other campaigns on social media have also been liked by people. Video campaigns can be run
through YouTube as well as Facebook and Twitter. Moreover, the Facebook and Twitter
accounts can be used to keep fans and followers updated. Let’s have a look over how Pepsi has
connected with its fans and followers through social media.

Facebook strategy :

Facebook is the primary social media channel that brands and marketers utilise for marketing and
promotions. On Facebook, Pepsi has more than 37 million followers. However, it also has
separate accounts for separate products. Mountain Dew has more than 8.5 million followers and
Pepsi Max also more than 1 million [4]. One can easily judge the popularity of the brand by its
number of fans. It promotes its products as well as sponsorships and events, all through its
Facebook accounts. It is not only about the social media campaigns but it also promotes its TV
ads and other promotional events on Facebook.

Twitter strategy:

Twitter is also a very important stop for the soda beverages brand where Pepsi has several
different accounts for the different countries like Pepsi India and Pepsi Cambodia. Pepsi’s main
Twitter account has more than 3.1 million followers. Like Facebook, Pepsi also promotes its
brand and products through Twitter. Apart from photos and videos of products and campaigns, it
also uses Twitter to share picture and video advertisements on Twitter. Just like Facebook,
videos of promotional events are also shared on Twitter which helps it reach its millions of
followers. However, the content is not the same across all the Twitter accounts since the
accounts differ from country to country.

YouTube Strategy:

Apart from Facebook and Twitter, Pepsi also uses its YouTube account to promote its brand and
products through attractive videos. It has uploaded more than 140 videos to its ‘YouTube’
account including advertisement and educational videos promoting its brand and products. It has
more than 8,00,000 followers on the video sharing social media channel. YouTube is the most
attractive social media platform for sharing videos and several of its videos have been watched
more than 4 million times which shows how YouTube can expand a brand’s reach without any
major investment [4].

Instagram Strategy:

Since Pepsi uses both pictures and promotional videos to promote its brand and products. It
shares a very large number of pictures for promotions, many of which are same as its
advertisements. These posts are liked and shared by its followers. On Instagram, it has more than
a million followers. However, Pepsi shares both videos and pictures on Instagram since the
social media channel has both the features.

Apart from these digital channels and social media, Pepsi also uses traditional mediums of
promotion like print and Television. In this way, it uses a large mix of traditional and innovative
channels for the promotion of its brands and products. It does not just increase its reach but has
helped maintain a large and loyal customer base globally.

Major Investments in CSR and Sustainability:

For global brands like Pepsi whose portfolio includes several respectable names, it is critical to
maintain a good image and reputation. Any form of damage to reputation or brand image due to
any reason or loss of consumer confidence can cause a fall in demand for Pepsi’s products. To
retain its popularity and strong image, Pepsi invests in CSR and sustainability. It launched its
ambitious Performance with Purpose Agenda 2025 which focuses on several things including
sustainability. Agenda 2025 has three important focus areas that include people, products and
planet. As a part of this agenda, Pepsi has achieved some key milestones that include –

Assisting 6 million women and girls through investments in communities throughout the world.
replenishment of 2.7 billion litres of water locally in high risk watersheds.
Provided 11 million people with safe water access since 2006.
Associates completed 1 million hours of training in 2017.
To cut down on fuel emissions and fuel costs Pepsi placed one of the largest orders for Tesla’s
new electric semi trucks for its distribution network.
Provided 260 million servings of nutritious foods and beverages to the underserved communities
and customers. [1]

– Pepsi Business Growth Strategy –

Pepsi’s soft drinks are popular because of their diverse flavors. Its snacks and beverages are
popular in more than 200 countries. Apart from developing new ingredients, flavors and
products, the brand has continued to invest in reformulation to improve the quality of existing
products. While the brand is quite popular and sells in more than 200 countries, it is facing
intense competition from Coca Cola. Moreover, consumers’ tastes and expectations have kept
changing which also require change in business strategy for remaining competitive and for
continuous growth. This makes it essential for brands to continuously track consumer demand
and accordingly adjust its strategic course for business performance. Pepsi has continued to
innovate its marketing and business growth strategy over time so as to retain its popularity and
increase demand.

Product Innovation for Market Growth:

This decade has seen some major changes in consumers’ preferences. Consumers want more
healthy and nutritious beverages that suit their health. It is because a very large segment of the
world population has grown highly health conscious. In order to respond to the changing
preference of the consumers, the brand has released a large range of health friendly products that
contain less sugar or have high nutritional value. However, its commitment to health and
excellence has served the brand well in 2017, when it again delivered strong operating
performance. The brand added several health friendly and nutritious products to its customers. It
expanded its selection of low and zero calorie beverages as well as Aqua Minerale water + juice
along with new flavours of Kevita Master Brew Kambocha. Apart from them, the brand
introduced Tropicana Probiotics [1]. Its Pepsi zero sugar or Pepsi max also continued to gain
throughout the world. The brand made similar innovations to its products in the food segment as
well. In the food category, the brand introduced Three Minutos which is an affordable whole
grain oat based food product meant to deliver daily nutrition to the Latin American consumers.
In US and UK, it introduced Veggie Crisps, Hummus Crisps and Sweet Potato Crisps. It also
added a new product Simply Cheddar to its Simply brand. It has divided its products into three
categories based on the level of nutrition called Fun for You, Good for You and Better for You.
Apart from them, the brand also invests in reformulation of the existing products and flavors to
suit the customers’ choice. This has also helped Pepsi unlock new opportunities for growth and
grow its popularity cross the health conscious consumer segment. Pepsi also utilised retail and
food service partnerships for competitive advantage. It sold more than 40,000 Hello Goodness
vending machines, coolers and racks across US. Since US is the most important market for Pepsi
and these machines offer more nutritious snacks and beverages, they will help the brand expand
its presence across US faster and deeper.

R&D and Packaging Innovation:

Business growth in a highly competitive industry like the soda industry depends on several
factors and it is why brands have to invest in research and development to find faster business
and market growth. In 2015, 2016 and 2017, Pepsi invested $754, $760 and $737 millions in
Research and development [1]. However, this investment excludes the cost of consumer
research. Consumer research is an essential part of the brand’s growth strategy where it studies
the consumers’ expectations and preferences. Product innovation becomes essential because of
continuously evolving tastes of the consumers and there are other factors too that necessitate
continuous changes across the product spectrum. The brand is engaged in a very wide variety of
research and development activities globally with the purpose of matching consumer demand as
well as finding sustainable growth. These activities include:

Developing new products and ingredients as well as flavours and products.

Reformulating existing products to improve their quality and appeal.
Improving and modernizing manufacturing processes for cost reduction.
Improving product quality as well as safety and integrity.
Developing or making improvements to dispensing equipment and packaging technology.
Developing or making improvements to package design and portion sizes.
Identifying opportunities to grow, transform and broaden its product portfolio.
Development of products with better nutrition profiles that reduce added sugars, sodium or
saturated fat using sweetener alternatives or flavour modifiers.
Offering more products with higher nutritional value whole grains, fruits and vegetables, dairy,
protein and hydration.
Investing in capabilities that support global e-commerce and sustainability efforts [1]
Pepsi invests in R&D for continuous product innovation and for finding faster growth.
Continuous product and process innovation helps at reducing costs as well as improving product
quality and catering to customer demand better. Its R&D centers are located throughout the
world from US and UK to Brazil, China, India and Ireland. In terms of packaging too the brand
is focusing on developing sustainable packaging material. It teamed up with leading universities
as well as governments and innovators in 2017 to develop biodegradable film resins that help it
meet its sustainable packaging needs. All these things are essential for business growth from
reducing production costs to increasing the efficiency of business processes.
Digital technology and e-commerce for business expansion:

Pepsi is a global brand. However, to achieve superior growth and remain competitive, it is also
investing in digital technology and e-commerce that does not just improve its reach but also
helps the brand create better customer experiences. It is already using big data to understand
customer demand and consumption patterns based on which it can serve better products as well
as marketing campaigns. Digital innovation is one of the megatrends that has affected Pepsi’s
business growth globally. Value chain automation as well as internet enabled services, big data
and social media are all affecting how Pepsi connects with its consumers and finds business
growth. The brand has invested in digital technology down the supply chain to find greater
agility and efficiency which has led to higher productivity. Digitalization has helped Pepsi
respond faster and better to the customer demand. Growing e-commerce in US and China was
one of the primary factors driving business growth in 2017 in these markets. Its e-commerce is
already supported with big data and predictive analytics that are used to create real time
marketing messages. Big Data is also helping understand and cater to customer demand for food
products in North America. Higher level of digitalization in North America led to higher RoI on
advertising and marketing. In the coming years, the brand may increase its focus on digitization
which is going to be the primary differentiator for Pepsi. It has already won several rewards for
its excellence in e-commerce. Pepsi is using IoT capabilities to know when plant equipment will
need maintenance as well as how to reduce energy consumption [1]. This mix of e-commerce,
digitization and data analytics has enabled Pepsi to improve the consumer experience which can
be the driver of business growth in the long and the short term.

Conclusion:

21st century is marked by intense competition and in this era you cannot do without continuously
experimenting and innovating. Pepsi is continuously working to make its value proposition more
attractive. In this regard, on the one hand, it has worked to make its product choices more
suitable for the demands of the new generation which is more health conscious. Simultaneously,
it has improved the packaging and portion sizes of its products like making smaller 250 ml
plastic bottle sizes of various drinks available to the customers that suit both their pockets and
choices. Its growth strategy is based on attractive pricing, attractive packaging and an attractive
product strategy that includes healthy and nutritious products. The brand is also innovating its
supply chain to reduce production costs and working to keep its environmental impact
minimized. The results from investment in Digital innovation were obvious in 2017, when it
delivered organic revenue growth of 2.3%. The results of 2017 built on the investment the brand
had made in all these areas during the previous five years. It has set ambitious plans for the
future which it has named Agenda 2025 [1]. However, Pepsi and Coca Cola are engaged in a
very tight battle and both are quite aggressive about their marketing and business growth
strategies.