Fundamentals of Supply Chain Management

Distribution network

Submitted by:

Maha Rasheed

Registration #:

(L1F17BBAM0171)

Submitted to:

Prof. Sarfraz Rashid

Section:

(B)

Submission Date:

23rd June; 2020

 PepsiCo Distribution Network

Introduction:

As soft drinks are the fast consuming commodities so their sales are expected to be depend on
the distribution channels. Pepsi is one the leading beverage company in the world. Pepsi’s
distribution channel strategies are related to several factors, including places, margins, brand
strategies etc. As, for Pepsi its distribution network plays an important role in relation to long
term business strategy. The distribution strategies of Pepsi contain several aspects such as,
traditional retailing distribution, online channel and franchised partner.

Distribution network explanation:

 Pepsi has established a hierarchical distribution system, including wholesaler, retailer

and finally to the consumers like its key competitor Coca-Cola.
 Wholesalers play the role of ware house and retailer management. There are only one
or two wholesalers in a region to ensure the interests of them and motivate the wholesaler
to support Pepsi with more resources. 
 Under the wholesalers, various retailers are distributing Pepsi. These retailers include
supermarket, convenience store, vending machine, etc.
 The distributers also include grocery stores and drug stores, almost every place where
people might pass by to buy a bottle of Pepsi. 
  In some large regions, there are first level retailer and second level retailer to further
segment the retailer markets. In order to increase the sales in retailers, Pepsi
communicates with the retailers to place the marketing information and guide the
category distribution directly. Consumers are able to obtain the promotion information
from these channels.
 Vending machine is another widely seen distributing channel. In particular, vending
machine is considered as a self-service technology channel. The sales performance of
vending machine depends on where the machine is placed. As compared to traditional
 channels, the company does not need to manage the retailer and margin. In public areas,
such as schools, stadium, or subway, vending machines are widely distributed.
 The franchised partner is an important distribution strategy. One of the classical
cooperative partners for Pepsi is Yum! Group. In the members of Yum! Group, KFC and
Pizza Hut, Pepsi soft drinks are supplied exclusively. Apart from considerable sales
generated from this channel, the partnership allows the restaurant to enjoy a lower price
when purchasing Pepsi drinks, while also allows Pepsi to apply marketing information in
the restaurant. 
 Like all its competitors PepsiCo has developed its online channel where people buy
drinks online, especially using mobile phones. The advantage of online channel is that the
company is able to manage the price and promotion strategies directly on the online
channel, regardless of the margin space for wholesaler and retailers
Distribution Network Model of PepsiCo:

Pepsi Cola

(2 plants)

  Bottling and distribution Bottling and distribution

plants plants

(Company owned) (Franchised)

Retail Food Retail Food

Vending Vending
stores service stores service

Consumer