Hybrid everyday value pricing strategy

CASE STUDY - PEPSI - POWER POINT PRESENTATION ONLY

Guidelines:

Introduction on the company (overview), what does the company do, what product or service does it offer, and where is it located (headquarters)
Who are its main competitors (list all competitors)?
What is the market structure (e.g. pure competition, monopoly, oligopoly, etc.)?
How is it regulated?
What they got wrong analysis detailing a strategy mistake using the course concepts
What they got right analysis detailing a strategy win using the course concepts

The Presentation must be organized in the following way:

Title Slide
Concise with sections clearly defined
10-12 slide minimum (title, conclusion, reference, and question/answer)
At minimum 10 minutes in length
All slides must have speaker notes
No grammar, spelling, punctuation, or typing errors
SAMPLE -

Please review the sample PowerPoint presentation that's attached. The sample presentation is a guide and should help with understanding expectations.
ALSO ATTACHED CASE STUDY PREPARED BY YOU

PEPSICO COMPANY 2

Abstract

In the global market, the food and beverage industry has become one of the largest

businesses, contributing to about $ 8 trillion annually. Evaluating this to the global gross

domestic product means that this industry contributes to about 10% of the world's total GDP.

Multiple companies have established stable investment in this industry and hence contribute

significantly to its enormous growth. The tops and largest companies include Nestles in the first

position then followed by and not limited to PepsiCo, COca-cola, Kraft Heinz Company,

Anheuser-Busch InBev, and Danone. This article provides a case study for PepsiCo cover in

three sections as outlined below:

An introduction: This section covers a brief and precise overview of PepsiCo Company,

which identifies the products and services offered by the company, identifies its competitors, and

how the company maintains its competitiveness.

Demand analysis: This section: describes an evaluation that shows the concept of law of

demand and purchasing power. It also discusses marketing strategies such as social media

marketing, sports marketing, brand positioning, and market segmentation.

Production and cost analysis: This section outlines the production strategies that the

company implements in its operation to minimize cost and maximize profits. It also includes a

brief assessment of the fixed and variable costs involved in the PepsiCo Company.

Pricing strategy: this section outlines the various pricing strategies applied by PepsiCo

Company and how it benefits from this pricing approaches. The strategies discussed include

market-oriented pricing strategy, hybrid Everyday Value pricing strategy, value-based pricing,

life-cycle pricing, and niche pricing.

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Throughout its operations, PepsiCo has managed to dominate the global market, develop

a global brand image for both food and beverage business units, and establish a highly

diversified portfolio. The conclusion sums up the concept in the context.

Keywords: the law of demand, purchase power, fixed cost, the variable cost, market-

oriented pricing, Everyday Value pricing, market dominance, brand image

Introductions

PepsiCo, Inc was founded in 1965, and since then, the company has consistently grown

and become one of the world's most abundant food and Beverages Company in the world. In

2017 the company reported that form its current market sales, there is approximately over one

billion purchase of the food and beverage products the company offer in the global market. The

company business units are located in a different part of the world, such as North America, Latin

American, Europe Sub-Saharan Africa, Asia, North Africa, and the Middle East (Church, 2019)

Through this business unit the company offers different brands of food, snack, and beverages.

Some of these brands include and not limited to Pepsi, Mountain Dew, Cheetos, Doritos, Quaker,

Ruffles, and Lays (Wu, 2017). The companies also offer distribution services for their products

through direct store delivery, customer warehouses, and third-party distributors/vendors partners.

In the current food and beverage industry, there are new emerging issues influencing

most companies' growth and continuity. For example, health concerns have become significant

challenges for food and beverage companies such as PepsiCo, especially now that people are

becoming more aware and sensitive about their health. PepsiCo has been offering both sugary

beverages and salty snacks for a long time to its customers. Sugar and salt are some of the factors

currently identified to contribute to health issues such as obesity and diabetes. This new concern

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says...who...document with research to support
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is likely to affect PepsiCo sales negatively, and to avoid this; the company must implement new

strategies to address these issues.

Additionally, the market landscape has also significantly changed, calling for new

approaches to leverage the position held by most companies in the food and beverage industry.

With this in mind, PepsiCo Company currently plans to include new approaches such as using e-

commerce platforms and mobile applications to meet new demands in the dynamically changing

to the market environment. This will enable the company to enhance competitive advantages

against competitors such as Coca-cola, Monster Beverages, Kraft Heinz, Nestle, and Mondelez

international. Zhang (2019) suggests that Coca-cola stands out to be the highest competitor for

the beverage market share in the international market. The reports that in 2018 the market share

between Coca-cola and PepsiCo Company was about 22%, and 20%, respectively, shows the

tight competition between these two companies. Nevertheless, this does not mean that other

competitors, as mentioned earlier, should be ignored. Nestle also has significant potential to

compete with PepsiCo Company in the food and beverage industry.

One of the approaches that make PepsiCo a unique competitor in this industry includes its

unique selling strategy of complementary products-beverages, snacks, and food. In most cases,

an individual would include other food products or snacks. PepsiCo Company uses this as one of

its approaches to increase customer satisfaction and attraction. The company suggests that more

than half of the customers on how to purchase beverages also include other food products in their

shopping, such as snacks. Being an internationally recognized company producing quality

beverages and food products enables PepsiCo to develop a unique brand image that leverages its

market position against other competitors in the industry. Moreover, to avoid the negative impact

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of health concerns, the company is currently focusing on introducing new and healthier products

such as fermented tea, smoothies, and KeVita probiotics.

PepsiCo Company: demand analysis

Demand analysis refers to the procedure taken by an organization to understand customer

needs for a product and services provided in a particular market. Through a demand analysis and

organization can determine its success capability for getting into a new market or achieve

expected growth in an industry (Wu, 2017). Marwala & Hurwitz (2017) suggest that according

to the law of demand, the quantity purchased decreases with an increase in price. On the other

hand, purchasing power refers to currency value that can be defined in terms of the

goods/services that an individual can buy using one unit of money.

Inflation is one of the concepts that define how purchasing power can influence demand

in a given market. For example, it is suggested that an increase/decrease in inflation leads to the

fall/rise in buying power or quality of living. This means that when inflation increases, money

loses its value, and hence in such a situation, an individual would need more money to buy some

product that was much cheaper before. The same applies to the beverage and food industries. For

example, after an increase in inflation, an organization like PepsiCo would need more money to

make the same investment that would have been less costly.

The connection here is that when the cost increases during production, an organization is

likely to increase the prices of its product and services to cover that cost. This reduces the

demand for a particular product or service provides because an increase in price reduces demand.

Fortunately, according to demand analysis for Pepsi, the concept of price changes does not

necessarily affect the demand for it. Wu (2017) suggests that PepsiCo takes advantage of its

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No...Pepsi would push the inflation cost to the consumer
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large scale production to apply the economy of scales, enabling it to price its products at a

relatively desired value that meets consumer economic potential. Additionally, the company

minimizes its production cost through an economy of scale. This allows PepsiCo to realize its

profits targets besides offering desirable prices for its product and services.

Moreover, the company also implements similar targeting approaches with modified

marketing strategies that involve customer-oriented segmentation, mass promotion, and global

positioning of the brands it offers. PepsiCo Company position it brands for food and beverage

product as a quality product that nutritious benefits and low calories. This approach has managed

to maintain demand for its products despite the current increase in health concerns associated

with salted snacks and sugary beverages. The price strategy enables the company to meets the

demand for every form of the market segment in the global market. It also positions it to use

market segmentation to meet the needs of different market segments. For example, the company

positions itself as one that produces energetic drinks love by the young generation. This

approach enables it to dominate the market for customers aged between 13-35 years. The

company also uses digital marketing such as social media (Facebook, Tweeter, YouTube, and

Instagram) and sports marketing to promote its brands.

PepsiCo Company: Production and cost analysis

There are different production strategies and techniques that different organizations use

to meet their final output objective. For PepsiCo Company, Lean and Six Sigma principles have

the primary production strategy to sufficiently manage its operations. Radjou, Prabhu & Ahuja

(2012) suggest that through the six sigma principle and lean manufacturing tools, the company

identifies the possibility of the defect and eliminates any factor that can cause those defects. This

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allows the company to reduces waste and hence contribution to minimizing unnecessary cost

during production. Overall Equipment Effectiveness (OEE), an integral part of the lean

manufacturing strategy, allows PepsiCo to sufficiently evaluate its production efficiency by

analyzing the rate of production and quality of product/service. Moreover, the company also uses

process/capital design in its production processes to maximize its productivity-cost ratio. For

instance, PepsiCo Company manages to achieve quality production and operational efficiency

through process efficiency and overall capacity utilization.

The PepsiCo Bottling facilities, the company, reduce costs involved while using raw

materials by reducing wastes and minimizing material use per container. Additionally, the

bottles' manufacturing process is also designed to minimize inter-production activities such as

handling, shipping, storage, and sterilization. This allows the company to farther reduce cost

without compromising the quality of its product and services.

Other implementation in PepsiCo production that enhanced cost reduction includes

integrating research/development of output, improving layout structures, conserving energy, and

using a strategic location for its premises. Ahmed (n.d) explains that research and development

in PepsiCo production activities help the company understand market trends and changes in

customer preferences. This gives the company a directive strategy that promotes proper

innovation and deciding about production. The company uses layout design and strategies such

as total quality management and production line assembly to increase efficiency and

productivity.

The cost involved in the PepsiCo company includes variable costs such as cost of sales

and fixed cost such as general/administrative cost. Ahmed (n.d) suggests that about 84% of the

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company's total revenues in 2018 were used to cater to these expenses. Most of the company's

variable costs are incurred through sales, marketing, promotion, and advertising projects carried

out to promote the brand. The fixed cost incurred in the company is due to administrative

activities insurance bills, rental charges for leasing premises, taxation charges, and interest

payments. The company aims to use the strategies mentioned in the production analysis to

minimize both fixed and variable costs involved in its operations.

PepsiCo Company: analysis for the pricing strategy

PepsiCo uses varying strategies to pricing its multiple categories of product varieties and

brands. Therefore before the company can implement a pricing strategy, it first considers the

product line involved and the market mix element crucial for that particular product line.

Nevertheless, both market-oriented pricing and the hybrid everyday value pricing strategy have

been the company's main approaches. Through a market-oriented pricing strategy, PepsiCo

manages to enhance its competitiveness in the global market. Rahmani, Emamisaleh & Yadegari

(2015) includes that through this strategy, the company offers identifies the best prices that meet

the market condition and match the prices offered by substitute firm with substitute products.

These strategies allow the company to adjust its pricing according to dynamic changes in the

global market.

On the other hand, PepsiCo applies a Hybrid Everyday value pricing strategy to ensure

price consistency throughout its daily sales. Rahmani, Emamisaleh & Yadegari (2015) suggest

that the Hybrid Everyday value pricing strategy is an approach that helps the company to close

the gap involved in a regular day and holiday days. For example, instead of providing discounted

sales only on holidays, PepsiCo uses it daily to offer more benefits to its customers.

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PEPSICO COMPANY 9

Other pricing strategies include value-based pricing, live cycle pricing cand niche

pricing. There are different products and services that PepsiCo that hare highly valued by

customers due to high-quality perception. Some of these products include Pepsi and diet Pepsi.

The company takes advantage of this highly perceived value to prices this produces at a high

price and hence getting an opportunity to generate more profitability. While using a life-cycle

pricing strategy, the company prices its products based on the four stages of every product it

produces. The first stage of the product life cycle is development stages, and it refers to the

introduction period of a product in the market. Most customers are usually not aware of the

product, and due to this, sales are likely to below. To promote sales, most firms implement low

prices to create customer traction.

Nevertheless, the company has a well-established brand that is well known globally, and

this wide pool for loyal customers allows the company to use high prices even for its new

products (Vergeer et al. 2020). When a product is at the growth stage, the company implements

competitive pricing, which competes against an emerging competitor or substitute products. The

company implements more competitive pricing strategies during the maturity stage to ensure that

it can milk the best profit. Eventually, when the product gets to decline step, the company

implements low prices for the product as a strategy to maintain sales and attract some new

customers how may be trying the product for the first time at this stage. The Mountain Dew has

been one of the popular product enable PepsiCo Company to use niche pricing strategy. For a

long time, this drink has been recognized as one of the gamers' caffeine boosted beverages. The

brand of the drink as a gamer beverage allows the company to charge more and still attract a

significant percentage of athletes as loyal customers.

What PepsiCo Company has got “right."

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Throughout PepsiCo's investment, development, and growth in the beverage and food

industry, it reveals various capabilities that make it exceptional. For example, currently, the

company has managed to be more the first five largest beverage and food-producing companies

in the world (Animashaun, 2017). The company also has over 100 brands of beverages and food

products that have established global recognition and reputation. The company’s brand is ranked

among the top thirty brands ($18.8 billion brand value) with the high value. It has a unique

business strategy in the food and beverage industry. For example, it is the best company to

produce both food/snack and beverage products, from which each business unit has attained

global popularity. For example, foods and snacks such as Frito Lays, Doritos, and Cheetos have

global sales, while beverage products such as Pepsi, Tropicana, and Gatorade meet the same

quality (Animashaun, 2017).

Conclusion

PepsiCo is a stable global competing company and produces both food and beverage

products. One of the factors influencing the companies operation includes demand, cost, price,

and operational capabilities. Other factors that determine the influences include inflation in

which an increase in inflation reduces the value of money, making it costly to invest or buy a

product/receive services. The price of the commodity is high when demand decreases. PepsiCo

uses different marketing strategies, such as global positioning and customer-oriented marketing;

PepsiCo's pricing strategies include market-oriented pricing, hybrid everyday value pricing, life-

cycle pricing, niche pricing, and value-based pricing.

References

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Ahmed, A. M. Efficiency and profitability analysis in the food and beverage sector–an

application on PepsiCo.

Animashaun, O. S. (2017). An investigation of project management at PepsiCo Company

(Doctoral dissertation, Тернопільський національний технічний університет ім. Івана

Пулюя).

Church, A. H. (2019). Building an Integrated Architecture for Leadership Assessment and

Development at PepsiCo. In Evidence-Based Initiatives for Organizational Change and

Development (pp. 492-505). IGI Global.

Marwala, T., & Hurwitz, E. (2017). Supply and Demand. In Artificial Intelligence and Economic

Theory: Skynet in the market (pp. 15-25). Springer, Cham.

Radjou, N., Prabhu, J., & Ahuja, S. (2012). Jugaad Innovation: Think frugal, be flexible,

generate breakthrough growth. John Wiley & Sons.

Rahmani, K., Emamisaleh, K., & Yadegari, R. (2015). Quality function deployment and new

product development with a focus on marketing mix 4P model. Asian Journal of

Research in Marketing, 4(2), 98-108.

Vergeer, L., Vanderlee, L., Ahmed, M., Franco-Arellano, B., Mulligan, C., Dickinson, K., &

L’Abbé, M. R. (2020). A comparison of the nutritional quality of products offered by the

top packaged food and beverage companies in Canada. BMC Public Health, 20, 1-14.

Wu, M. B. (2017). Investment Thesis for PepsiCo, Inc.(NYSE: PEP).

Zhang, Z. (2019). Risk Analysis of Two Leader Drink Company: PepsiCo and Coca-Cola. Asian

Business Research, 4(3), 42.