18048055 Pepsi Marketing Summer Training Report

8/14/2019 18048055 Pepsi Marketing Summer Training Report

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DAYALBAGH EDUCATIONAL

INSTITUTE

AGRA

SUMMER TRAINING REPORT

ON

PARTNER RELATIONSHIP MANAGEMENT OF PEPSICO INDIAS FOBO

VARUN BEVERAGES LTD.

&

ACCEPTANCE OF SLIM DIET CANS IN THE TRANS-YAMUNA AND AGRA

MARKETS.

SUBMITTED BY C. TILAK PRAKASH

ROLL NUMBER: 077508


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ACKNOWLEDGEMENT

There is always a sense of gratitude one expresses to others for the helpfuland needy service they render during all phases of life. I have completed thistraining with the help of different personalities. I wish to express mygratitude towards all of them.

It gives me immense pleasure to express my deep regards and

sincere sense of gratitude to M r. Manmohan R P aul Vice-president(marketing)for his guidance throughout the training. Thank you sir for yourable and worthy guidance. I would also like to thank Mr. Rana, Mr. PrashantSharma and Mr. Hitesh for their support which helped me throughout mytraining.

I would also like to thank my teacherProf. K Shanti S aroop forsteering my confidence and capability for giving me insight into training bygiving me exposure to the arena of competitive and real world.

Lastly I would like to thank my parents and friends for theirconstant support during the duration of my training.

Thank You One and All

C. TILAK PRAKASH

ROLL NO. 077508

BBM 5TH SEMESTER

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TABLE OF CONTENTS

ABSTRACT12

Research Methodology........................................................................................15

Report and Analysis of Data Collection .26

CSD Industry Overview.27

CSD Industry analysis31Market Analysis and Industry Challenges......37

Industry process Improvement Opportunities46

PepsiCo International61

History..61

PepsiCo The parent Company.64

Overview PepsiCo International..66

How PepsiCo overcame Competition.68

SCAs70

PepsiCo India..74

Introduction..74

Overview Of PepsiCo India...76

PepsiCo with RKJ Group..78

Strategic Divisions.80

Marketing Overview of PepsiCo India81

Marketing environment.81

Value Delivery83

Value Chain85

4 Ps.88

Strategic Marketing.100

Factors Influencing Marketing Strategy100

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Key Success Factors...112

SCAs.113

Communicating with Customer.115

Advertising116

Porters Five Forces.135

SWOT Analysis138

Porters Grand Strategies143

BCG Matrix145

Recommendation.147

Conclusion.153

Bibliography.............158

Appendices160

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ABSTRACT

Title: PARTNER RELATIONSHIP MANAGEMENT

OF PEPSICO INDIAS FOBO VARUN BEVERAGES

LTD.

This study titled as above aims at exploring the strategies followed by PepsiCo India tomanage its various partners both internal as well as external since it started its operations

in India. This study will also explore what changes PepsiCo India is bringing in order to

increase its visibility and market presence to tackle the ever increasing hold of Coca Cola

on the Indian beverage market.

This study aims to explore the overall functioning and position of PepsiCo India in the

marketplace. It also aims to know customer perception regarding PepsiCo India. To know

about these facts this report will primarily focus on the partner relationship management

of PepsiCo Indias main carrying and forwarding agency Varun beverages limited.

To know the overall functioning of PepsiCo India is important in order to get an

understanding of the topic. It is also important because is will explore the sales and

distribution system of Pepsi India which is considered to be one of the strongest not only

in the country but also worldwide. This project also covers a detailed observation and

study of the VISI-PURITY campaign and the various retail initiatives specially related to

the Slim Diet Cans and their acceptance in the Trans-Yamuna and Agra markets both of

which are upmarket towns

The various observations and studies were done through route rides, direct marketing,

market visits and from the sales team of PepsiCo India.The aim of the overall training

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was to have a complete and thorough understanding of the process of the various stages

of product movement from the bottling stage to the final consumer and the various

agencies which influence and help move these products. Also the study entails the various

push and pull strategies actually used by us suffuse the trans Yamuna Market with slim

diet cans and also studies the acceptance of the newly introduced Slim Diet Can range.

Although this study will explore the overall functioning of PepsiCo India, but in order to

be precise it will primarily concentrate on the beverage segment of PepsiCo India.

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LITERATURE REVIEW

PepsiCo is one of the oldest, largest and most successful beverage and snack food

companies in the world. PepsiCo was founded by Caleb Bradham in 1902 in USA. Today

PepsiCo and its affiliates operate in more than 140 countries in the world and generate

revenues in excess of $ 40 Billion. In its pursuit of never ending growth and expansion,

PepsiCo entered India in 1989 in a joint venture with Punjab Government. However,

PepsiCo India very soon started its beverage operations in collaboration with the R K

Jaipuria group.

Soon after entering the beverage segment PepsiCo Established its dominance in the

market owing to its expertise in sales, marketing, operations and local collaboration.PepsiCo maintained its market dominance for many more years to come. However, this

advantage slipped and PepsiCo had to concede the market leadership to Coca Cola India.

Several actors were responsible for this development. But, the most important are;

Ad campaigns targeting regional markets.

Discontinuation of Slums in the distribution network by PepsiCo. This move by

PepsiCo adversely affected its position of a market leader because while PepsiCo

discontinued the use of Slums in its distribution network, Coke continued it and

within one year, it was able to snatch considerable market share from PepsiCo.

Acquisition of well-established and favored brands like Thums Up and Limca by

Coca Cola India. These two brands still constitute a bulk of sales for Coca Cola

India.

To explore the reasons behind these developments this study will analyze the marketing

initiatives and policies of PepsiCo India in detail with particular focus on its partner

relationship management.

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The above-mentioned objectives can be achieved by carrying a proper and planned

research involving different types and methods. The data collected folaid the foundations

for the study and gave a platform for the analysis and findings which lead to the

fulfillment of the objectives.

The data collected for research is primary and secondary. Primary data is collected by

observation, interviews and questionnaires. While secondary data is collected from the

internet through different case studies and reports on the CSD industry. Observation

method was carried in East-Delhi to know the market position and market share of

PepsiCo products. Interviews of people from the sales department were conducted to

know the sales and distribution network and marketing policies of PepsiCo India, while

questionnaire method was used to know about the customer perception of the slim diet

can portfolio. Secondary data is used to know about the CSD industry and the Company

i.e. PepsiCo.

The data collection and analysis paves way for the recommendation ad conclusion of the

study that reveals some important findings regarding the strategy and corporate structure

and strategy of PepsiCo India.

CSD INDUSTRY OVERVIEW

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The soda drink and bottled water industry includes more than 3,000 companies that

manufacture and distribute beverages. Only in the USA combined annual revenue is more

than $70 billion. Coca-Cola and PepsiCo hold more than 50 percent of the market,

following strong consolidation in the past decade. Only a few other companies have

annual revenue above $500 million. Most are local or regional manufacturing and

bottling operations with annual revenue under $100 million.

Competitive Landscape:

Demand for non-alcoholic beverages is driven by consumer tastes and demographics. The

profitability of individual companies depends on effective marketing. Large

manufacturers have economies of scale in production and distribution, with average

annual revenue per production worker close to $1 million. Small companies can compete

by producing new products, catering to local tastes, or selling at lower prices.

Products, Operations & Technology:

Nonalcoholic beverages include sodas (carbonated soft drinks, or CSD), bottled waters,

juices, and a large variety of mixtures. Sodas account for about 60 percent of the market.

The manufacture and distribution of most national soda brands, including Coke and

Pepsi, is a two-tiered process. The primary manufacturer produces a flavored syrup called

concentrate that is sold to local bottlers who manufacture and distribute the finished

product. In a typical bottling operation, the flavored syrup, corn syrup (sugar), and

filtered water are mixed in appropriate proportions, carbon dioxide gas is injected, and

the finished soda product is poured into bottles or cans, which are capped, labeled, and

packaged.

The two-tiered structure is most efficient for national companies with large volume,

because the manufacturing process is simple and because water, the main ingredient of

sodas, is expensive to ship and is available locally. Smaller companies combine the syrup

production and bottling operations in one plant. For soft drink bottlers, the major raw

materials, aside from the flavored syrup, are corn syrup and containers -- glass bottles,

aluminum cans, or plastic bottles made from polyethylene terephthalate (PET).

Bottlers frequently operate sizable distribution systems, including warehouses and fleets

of specialized delivery trucks. Production and distribution volume is usually measured in

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cases of 192 ounces, although actual cases of 12-ounce cans now contain 288 ounces.

Coca-Cola produces more than 4 billion cases of soft drinks per year; PepsiCo, over 3

billion. In addition to producing canned and bottled soft drinks, large manufacturers sell

sweetened syrups to restaurants and other retailers that produce the finished product at

the point of sale by mixing the syrup with carbonated water to produce fountain products.

About 35 percent of Coca-Cola's US product is in the form of fountain sales and 60

percent in bottled sales.

The manufacturing process for most non-soda beverages is usually more complicated

than the mix-carbonate-and-bottle soda process and therefore isn't usually handled by

local bottlers. In most cases, non-soda products are bottled by the manufacturer and

distributed through the same types of channels--wholesalers, distributors, brokers--used

by food manufacturers, although bottlers may also participate. Bottled waters, a rapidly

growing category of beverage, are either bottled at specific springs or made locally from

filtered tap water.

Manufacturers and bottlers typically operate under contracts, called Bottler Agreements,

that specify the territory within which the bottler has an exclusive right to make, sell, and

distribute the manufacturer's brand in bottles or cans. Fountain products are often sold

separately through wholesalers, under Distributor Agreements. Bottle and fountain

territories may overlap and bottlers may also be fountain distributors. Coca-Cola sells

products through about 80 local bottlers and 500 fountain wholesalers.

Bottler Agreements usually require that container and packaging materials be bought

from suppliers that are approved by the manufacturer, and that the bottlers not handle

competing products. Agreements also specify the price that the bottler must pay for

concentrate. The manufacturer has no control over the prices the bottler charges

customers, and usually isn't obligated to spend money for marketing or promotions in the

bottler's territory. Often, however, the manufacturer will provide marketing and

promotion support. In one year, for example, Coca-Cola provided about $600 million inmarketing support to Coca-Cola Enterprises, its largest bottler. Many Coke and Pepsi

bottlers hold perpetual contracts that can be terminated only for breach of contract.

The industry depends on technology for developing new products in the labs

and packaging product at the plants. Most bottling plants are highly automated with a

combination of mechanical automation and computerized robotics.

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Sales & Marketing:

Beverage manufacturers, bottlers, and wholesalers sell products through a variety of

channels, such as food and convenience stores, restaurants, vending machines, mass

merchandisers, and institutions, including schools and colleges. Soda bottlers typically

own local vending machines. The marketing approach to each of these channels is quite

different and often includes promotional spending. Large manufacturers may also sell

directly to national accounts and usually advertise on national or regional TV and in print.

Manufacturers typically produce a line of brands and often test and introduce new

products into the market through their existing distribution channels.

Target Segment Youth:

The child/youth market is of crucial importance to drinks manufacturers as under-19s

constitute 20-30% of the population in western countries, making them a substantial and

lucrative consumer base. With many life-long consumption habits formed during youth,

gaining high penetration in the children's and teenagers' market is of key importance tomanufacturers with long-term ambitions and growth targets.

Targeting Soft Drinks to Youths enables companies to:

Assess the size of the soft drinks opportunity by age group

Understand children's values and motivations and their impact on the soft drinks

market

Develop incumbent market position through enhanced targeting and promotion

Assess trends in new product development in the children's market over the

course of the past 2 years

Combine business to business executive opinion and local field research

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In order to survive in this environment, companies must consider the market trends that

will likely shape the industry over the next few years. This will help soft drink companies

to understand the challenges they will encounter and to turn them into opportunities for

process improvement, enhanced flexibility and, ultimately, greater profitability.

Market trends for the soft drink industry can be summarized by six fundamental themes:

Changing consumer beverage preferences, featuring a shift toward health-oriented

wellness drinks

Growing friction between bottlers and manufacturers in the distribution system

Continually increasing retailer strength

Fierce competition

Complex distribution system composed of multiple sales channels

Beverage safety concerns and more-stringent regulations

Consumers turn to wellness and healthy drinks

In much of the developed world, a significant portion of the population is overweight or

obese. This includes two-thirds of Americans and an increasing number of Europeans.

Consequently, many people have started to actively manage their weight and change their

lifestyles, a shift that is reflected in their choices in the beverage aisles:

Demand has increased for beverages that are perceived to be healthy

Energy drink consumption has also climbed, due to the increasingly active

lifestyles of teenagers

This trend towards healthier drinks has created a number of new categories, and changed

the consumption trends of the beverage industry as a whole. While previously dominated

by carbonated soft drinks, the industry is now more evenly balanced between carbonates,

and product categories with a healthier image, such as bottled water, energy drinks and

juice:

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While carbonates are still the largest soft drink segment, bottled water is catching up fast,

with an average of 58 liters consumed annually per capita. Among individual countries,

Italy ranks number one in bottled water consumption, with the average Italian drinking

177 liters per year. Overall, bottled water represents the fastest growing soft drink

segment, expanding at 9 percent annually. This growth is being partially driven by

increasing awareness of the health benefits of proper hydration.

The industry has responded to consumers desire for healthier beverages by creating new

categories, such as energy drinks, and by diversifying within existing ones. For example,

the leading carbonated soft drink companies have recently introduced products with 50%

less sugar that fall mid-way between regular and diet classifications. Similarly, a South

African juice company has recently released a fruit-based drink that contains a full

complement of vitamins and nutrients.

Beverage companies and bottlers are conflicting:

In the soft drink markets of Europe and the US, beverage companies use bottlers to

package and distribute products. This structure often causes conflicts of interest between

manufacturers and bottlers. Nevertheless, the supply chain must consistently deliver

value to the market in order for the segment to prosper. Despite any dissonance, the

concept of one face to the customer must be maintained.

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Many factors are contributing to the friction between bottlers and beverage companies:

Beverage companies often profit from increased concentrate sales at the expense

of bottlers margins

Beverage companies have historically had higher returns and lower capital

requirements

Bottlers have historically had lower returns and higher capital requirements for

building and maintaining production and distribution networks

Bottlers continue to consolidate in an attempt to offset margin pressure through

cost reduction. Specifically, size helps them to:

Spread fixed costs over greater volume

Make larger investments in automated production lines

Contain the costs of acquiring new customers

Increase customer loyalty

Declining prices have further reduced bottlers margins

Soft drink manufacturers continue to develop new products and packaging, which

increases operational complexity and, therefore, expenses for bottlers.More new soft drinks have been introduced in the last two years by the top beverage

companies than were introduced in the entire decade of the 1990s. Examples include:

Coke with Lemon, Vanilla Coke, Dr. Pepper Red Fusion, Pepsi Blue, DnL, Fanta Berry,

SoBe Mr.Green, Sierra Mist, and Mountain Dew Code Red.

While manufacturers view these new products as a way to build a portfolio of options to

hedge against product successes or failures, bottlers see them as a burden since they often

require additional capital expenditures.

Retailers power continuously increases:

With Big Bazaar , Vishal and other discount stores leading the charge, Indias dominant

retailers are demanding better service and shorter order-to-delivery cycles from soft drink

companies. This is dramatically reshaping the industry, forcing soft drink companies to

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become more efficient, while taking pricing power out of their hands. The dual need for

improved supply chain agility and cost efficiency is challenging suppliers to reevaluate

the ways in which they plan and manage their supply chains, as they constantly search for

approaches that will help them achieve the rock-bottom prices and operational excellence

now expected in the industry.

Furthermore, the growth of private-label products is encouraging manufacturers to take a

number of steps to compete more effectively. Increasingly, they are turning to innovation

and new product introduction as a means to achieve real differentiation as well as growth.

Branded manufacturers are also looking to get closer to the consumer, with many of the

larger ones piloting direct-to-consumer marketing approaches. They are also trying to

better understand the in-store consumer experience by monitoring the execution of in-

store activities.

Nevertheless, many suppliers are losing brand equity. In recent years, a couple of factors

have been fueling the growing competition between manufacturers and

retailers:

Retailers are using their power to set higher standards for marketing and operational

excellence, including escalating demands for improved service quality and shorter order-to-delivery cycles from manufacturers and distributors.

Because of their direct relationships with consumers, retailers have a deeper knowledge

of consumer behavior.

Competition is becoming more and more difficult:

In the beverage manufacturing industry, competition is

growing due to the following factors:Constant demand for new niche products related to consumer preferences for healthier

and more diversified offerings

Industry consolidation, which has significantly raised the bar for the scale needed to

compete

The growth of private-label products.

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These competitive pressures have led to:

SKU proliferation - number of SKUs in a typical beverage company has doubled

from 1991 to 2001

A plethora of new product failures:

Only 20% are effective

Only 10% generate significant revenue

Most fail within the first two years

Further consolidation and rationalization to capture cost savings by improving

operations and eliminating redundancy:

Industry leaders are acquiring small, high growth companies

Mid-market players are vertically integrating

Declining soft drink prices:

Profitability can only be improved through greater efficiency in the supply chain

or through more-effective trade promotions, which usually require considerable

expenditures.

Sales channels are very complex

The macro environment in which soft drink manufacturers operate has several

unique characteristics:

Market to consumers/sell to retailers through wholesalers

Must have the ability to communicate directly with retailers

Multiple distribution channels

Seasonal demands

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CHANNELS OF BEVERAGE INDUSTRY

The beverage industry is a multi-channel industry.

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Therefore, soft drink companies have several types of customers with diverse

characteristics:

Modern Trade/Large Chain Retailers

Greater power in negotiating purchases of concentrations and merges

Direct access to the consumer and a tendency to protect this relationship from

manufacturer intrusion

Request contributions and discounts from brand companies

Small Individual Retailers

Huge number of small point sales

Sometimes buy products directly through cash and carry or modern trade

Indirect Channel (wholesalers)Medium-sized organizations as a consequence of aggregation through consortia and

merging

Playing a fundamental role in beverage distribution

Possess critical information regarding individual points of sale in terms of volume,

assortment, presence of competitors beverages, etc.

Due to the complexity of the marketplace, the entire logistical chain must be able to

sustain brands, products and services coherently within the various channels, taking into

account differing points of sale and diverse customer needs. Additionally, each beverage

manufacturer must provide customers with an extensive set of packaging options,

including:

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Tracking product in various package sizes

Special labeling requirements for customers

International/domestic packaging

Tracing / recall capabilities.

Statutory regulation is increasing.

Governments around the world are concerned about food safety and quality. Periodically,

safety failures make big news in the global press. Amid this growing concern, regulators

are cracking down on sanitation and a variety of other food-safety requirements.

Each soft drink company must take these industry challenges into consideration, as wellas its own strengths and market position, when looking for ways to drive innovation,

accelerate growth and increase margins.

Industry Process Improvement Opportunities

Improve customer relationships with Direct Store Delivery:

Branded beverage manufacturers are attempting to get closer to the consumer, with many

larger manufacturers piloting direct-to-consumer marketing approaches. These include

active monitoring of in-store activity and, in some markets, a significant move back to

direct store delivery (DSD).

Direct Store Delivery is a business process used in the beverage industry to sell and

distribute goods directly to the customers point-of-sale. With DSD, the soft drink

company gets in direct contact with retailers, restaurants and pubs and other outlets where

consumers can obtain the product.Manufacturers can use DSD to:

Make beverage goods available to stores and customers quickly

Optimize process settlement in sales and distribution through complete coverage

of the supply chain

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Improve customer retention and build customer relationships through personal

service

Realize additional sales opportunities

Obtain first-hand information about the market

Better position brands against competitors

Ensure product quality up to the point of sale

Best in class DSD companies couple the process of direct delivery with a cultural change

in how they view their employees and how their delivery personnel operate:

They are not just drivers but they have sales skills, communication skills and a global

view of the companys offerings, commercial priorities, and initiatives. Direct StoreDelivery is characterized by variable orders and deliveries. Consequently, the process

should involve more than just bringing goods to the point of sale. It should eventually

encompass taking additional orders, picking up empties, collecting money, and more.

Best in class DSD operations typically include many value added activities, such as:

Merchandising activities - Enables the company to leverage frequent delivery visits

to the point of sale. These activities include tracking merchandising of other entities

(suppliers, wholesalers, etc.); reporting on in-store merchandising activities; carrying out

competitive intelligence (competitive products, product mixes, prices, displays, etc.); and

monitoring store/account execution. May also include some preventive maintenance.

Additional sales opportunities - Allows a company to sell goods off the truck

without any preceding order. The mix of products on the truck is dependent on what is

most likely to be sold on a certain trip. Support provided by handheld devices enables

drivers to skip back-end paperwork and to close the process through printed invoices.

Enhance relationship with indirect partners - Indirect sales are the process of

selling to an end customer through a third party and tracking that sale as such. Due to the

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complexity of the beverage supply chain, conflicts of interest frequently arise between

beverage manufacturers and beverage distributors:

Soft drink manufacturers profit from increased sales at the expense of distributors

margins

Soft drink distributors profit from positive local pricing environments, which, if

exploited, reduce volume sales

Soft drink distributors continue to consolidate in an attempt to offset margin

pressure through cost reduction

Despite these conflicting interests, it is crucial that beverage manufacturers and beverage

distributors maintain one face to the customer. These companies jointly market and sell

the product in the marketplace, and close co-operation yields benefits for both parties.

The indirect relationship is a partnership that must be nurtured by both the supplier and

the distributor. The stakes are high for everyone. For the manufacturer, a poor

relationship with a distributor may cause it to give a competitor greater share of mind

in the local marketplace. For the distributor, a negative relationship with a supplier means

constant threats of contract termination and reduced marketing dollars spent in the local

market.

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A strong manufacturer/distributor relationship is also important because consumers are

becoming more difficult to capture and classify. It is not only about sales; it is also about

information. But how can strategic information flow freely between partners? Although

sharing is implied in the word partnership, the reality is that companies are still

uncomfortable about exchanging strategic information. Nevertheless, it is critical for

companies to share information regarding sales volume and market intelligence on both

the microscopic and macroscopic levels.

The importance of the distributors role in the indirect channel for beverage distribution

suggests that it would be beneficial to establish a common understanding between

distributors and manufacturers regarding:

Coding (products, channels, customers)

Technology

Data interpretation

Marketing and sales actions.

In some cases, distributors are small- to medium-sized companies that only dedicate a

few people full-time to operational activities. As a result of this structure, they are rarely

open to implementing a truly collaborative environment. Recently, however, mergers

between distributing companies, and acquisitions of distributing companies by

manufacturers, have significantly modified many operating and ownership structures.

Consequently, a few well-structured and managed distributors have emerged that possess

a better understanding of the value of collaboration. These distributors have been at the

forefront of facilitating partnership initiatives.

Increase sales force effectiveness through incentives management

In the beverage industry, the critical path to a companys success is the effectiveness of

its sales force. No matter how efficiently the company runs its manufacturing processes,

or how well it markets its products, a beverage company cannot succeed without an

effective sales force that ensures product placement on the store shelves.

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A beverage manufacturers sales force typically comprises 17%-25% of the companys

cost basis. Beverage distributors have an even higher percentage of their tot al costs

allocated to their sales forces. Yet, how can beverage companies get the most out of their

investments and ensure that their sales forces are operating optimally?

Properly managed commission programs allow beverage companies to effectively

motivate their sales forces to increase or maintain volume by brand or package. A

commission could be a rebate, discount, or other payment to a third party or in-house

employee. In order to actively manage sales behavior, it should be paid when the internal

or external sales representative meets a pre-established benchmark for a tracked metric.

The commission could take the form of either a cash payment or an item.

While commissions are usually paid based on sales volume, best-in-class companies take

a more holistic view of commission metrics. Some other important measures include:

Account revenue growth

Profit results

Number of new accounts

Customer service metrics

Account retention.

Manage safety requirements through tracking and traceability

As recent history has shown, the ability to track inventory accurately and to perform a

timely and cost-effective product recall is critical in the beverage industry. Inventory

items need to be tracked, monitored, and controlled in different ways and at very detailed

levels. In each individual plant or warehouse, each resource requires a different level of

control/analysis.

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Food safety legislation, such as EU Directive 178, impacts the whole process flow.

Traceability is a goal that must be achieved over the entire value chain, requiring a batch

control system that is able to track and document all related characteristics.

At the batch level, it is now possible to assign different product attributes when searching

for the product including:

Manufacturing Expiration Dates

Shelf Life Dates

Classifying production lots into batches allows companies to identify specific inventory

and automatically record its history, including the history of the raw materials (and their

associated batch numbers) used in its production. In other words, it allows full recall of

the materials that have been involved in the overall manufacturing process. These

improvements reduce the companys exposure to litigation and regulatory fines.

In addition, track and trace improvements help companies to maintain high quality

standards, which is often a selling point that differentiates one brand from another and

that can command a price premium with the consumer. Recording and tracking that

quality is critical. In the final analysis, soft drink companies must strive for the highest

quality standards they can achieve ones that are superior to those of their competitors.

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Optimize the extended supply chain

In a business environment characterized by strong competition, changing consumer

preferences, a complex distribution channel, and conflicting relationships between soft

drink manufacturers and distributors, the beverage supply chain is under significant

pressure. Moreover, the worlds dominant grocery retailers (with Wal-Mart paving the

way) continue to demand increasingly better service quality and shorter order to delivery

cycles from manufacturers. This confluence of factors is forcing manufacturers to

become more efficient, while taking pricing power out of their hands. The need for both

improved supply chain agility and cost-efficiency is challenging suppliers to re-assess

how they plan and manage their supply chains.

The logistic chain must be able to sustain brands, products and services cohesively, while

taking into account different channels, customers, points of sale and customer needs.

Accordingly, companies should consider taking the following steps to improve their

supply chains:

Ensure product availability on-shelf On-shelf availability is becoming a

critical issue for both manufacturers and retailers. A system that avoids out-of-

stocks improves consumer value, builds brand and store loyalty, increases sales

and most importantly boosts category profitability. The traditional practice of

filling out-of-stocks with other products is no longer sufficient particularly from

the manufacturers point of view. If consumers cannot find the brand they want,

their loyalty to that brand suffers. A 2002 GMA study found that out-of-stocks

jeopardize $6 billion in retail sales every year. Less conservative estimates put

this figure as high as $20 billion.

Flexible ordering; flexible delivering Most retailers are demanding

increased flexibility in order lead-times and delivery methods, putting additional

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pressures on the supply chains of manufacturers and distributors. To withstand

these pressures, companies need to streamline product movement through

programs such as store-specific shipments. They must also meet the strategies of

progressive retailers, which require flow-through distribution and cross-docking.

Accurately forecast demand Properly forecasted demand drives two of

the primary metrics used to measure the efficiency of a beverage companys

supply chain: customer service and inventory. Accurate forecasts are essential to

achieving improved customer service and lower inventory levels. Even with

recent success in developing and maintaining efficient supply chain processes,

forecasting inaccuracy remains a significant industry problem. According to the

2003 GMA Logistics Study, more than one-third of all forecasts are inaccurate at

the national level. This figure jumps to almost one out of every two at the regional

(distribution-center) level. Meanwhile, at the store level, differences in store

formats and sizes hamper the forecasting process, and few have the tools to

accurately manage the sheer volume of data generated by forecasting.

Furthermore, many manufacturers do not have the technology to properly support

their planning and forecasting efforts. Many manufacturers are still forecasting

sales in months, although their plants run on weekly plans. That means they have

to squeeze weekly totals out of monthly boxes. Implement a fully integrated empties management process

Empties management is the process of managing returnable containers, including

kegs, CO2 tanks, bottles and crates(an essential part of direct store delivery). A

successful empties management system gives the manufacturer a detailed picture

of the entire empties lifecycle, including the location and status of a companys

assets. This process:

Lowers costs by controlling high-value empties assets

Increases control by managing empties at customer locations

Decreases manufacturing issues by tracking empties.

Reduce time-to-market for new products

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An efficient new product development system is essential in the beverage industry. New

products need to be brought to market quickly in order to capitalize on changing

consumer preferences and competitive threats. However, new products must be

developed tactically, and the products potential must be understood and analyzed before

it hits the market. Currently, success rates for new products are astonishingly low

dropping from 75% to 25% in the last decade according to AMR and most fail within

the first two years after introduction.

The companies that are best able to execute the whole product development cycle will

clearly have an advantage. This requires reducing time-to-market as well as making

effective use of scarce internal resources and improving collaboration with partners. In

addition, great attention must be paid to aligning the related marketing initiatives (e.g.

advertising, sales promotions, etc.) with the new product introductions.

Innovation is one of the primary growth drivers for beverage companies, and it can

involve changes to the product itself or to the products packaging:

Product innovation Focuses on providing new tastes and flavors to

demanding consumers.

Packaging innovation - Emphasizes developing differentiated packagingaccording to the consumption situation. Often, beverage manufacturers use

packaging innovation to increase product shelf life.

To ensure new product success, beverage companies must oversee the integration,

consolidation and reuse of knowledge from all involved parties (including beverage

manufacturers and bottlers), from R & D through production, and down to sales,

marketing, and financials.

By emphasizing greater collaboration and implementing Web-based workflow, beverage

companies can reduce lead-time from concept to shelf by 25 - 40% and, at the same time,

better integrate safety controls into the development process.

Increase customer retention through effective trade promotions:

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In an environment characterized by strong retailers and discriminating consumers,

beverage companies must utilize processes and tools to protect their market shares. To do

this, they must make a favorable impact at the point of sale through promotional activity.

Trade promotions have become a necessary and expensive cost of doing business. With a

sizable percentage of volume being driven through a smaller base of retailers, the

competition for shelf space has never been higher. If a beverage company fails to execute

a trade promotion at Wal-Mart, a competitor will. Furthermore, as trade promotions have

proliferated over the past few years, they have also become more targeted. In response,

beverage companies must create promotions for specific demographics, channels, and

retailers, which make the sales process more costly and complex.

Trade promotions vary widely in terms of method, approach, and structure. Many local

promotions are run ad-hoc with marginal capital investments by field sales associates,

while others require significant investment and involve pre-scheduling in co-operation

with national chains.

Two of the most commonly used trade promotions in the beverage industry are coupons

and rebates. Coupon and rebate management are critical to enhancing relationshipsbetween the beverage manufacturer and wholesalers, customers and, in the case of

coupons, consumers.

Coupon programs, which are in essence trade promotions addressed to the final

consumer, are mainly executed via discounts at large retailers. The coupon, a certificate

with a stated value, can be applied immediately or reserved for the next purchase. A

properly executed coupon program enables beverage companies to pass savings directly

to the end consumer.

On the other hand, rebate programs are trade promotions addressed to the retailer.

Therefore, contractual terms and conditions between the manufacturer and the retailer

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must be monitored and executed. Rebates are often part of special trade promotions, and

management of the rebates typically follows one of the following flows:

Figure - Rebate management in direct sales

Figure- Rebate management in Indirect Sales

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Improve margins by optimizing the telesales channel

For a large number of companies in the beverage industry, telephone sales is the primary

method of order taking and customer interaction. An effective telesales process can

increase revenues and complement other sales processes, such as DSD and field assets

management. This is accomplished by integrating the phone sales function with the

companys other operations.

When correctly executed, inbound and outbound telesales functionality enables

companies to manage effectively and efficiently all contacts related to sales and customer

services. In addition, it helps build client relationships, sell new business, and expand and

retain the current customer base.

Well-implemented telesales functionality also enables business processes to be integrated

and standardized. This effectively closes the loop, creating a consistent experience for

customers within a multi-channel environment.

Some of the key benefits that a company can gain through telesales include:

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Revenue Enhancement

Improved sales effectiveness by consolidating the customer relationship

Better up-selling

Improved cross-selling

Increased customer retention

Expanded customer base

Enhanced competitiveness via services that match or surpass those of competitors

Margin Improvement

Reduced costs for order processing

Accelerated sales process

Lower sales costs in comparison to field sales

Increased flexibility and speed to market

Differentiated service levels according to customer relevance and need.

Implementing closed-loop processes between the telesales operations and other

departments can provide agents with a comprehensive view of all customer interactions

across the enterprise in real time. In order to optimize the telesales channel, agents must

have tools to manage the entire sales process, from generating leads, planning calls, and

prioritizing sales opportunities and activities, to managing contacts and placing orders

quickly.

Business performance improvement priorities the path to value

Against the backdrop of these market challenges, how can soft drink companies drive

profitable growth and create value for their owners or shareholders?

In practical terms, there are four areas on which companies in the soft drink business

need to focus:

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Revenue protection and enhancement for example, as driven by product and

packaging innovation, differentiated quality, improved product availability, and

better management of customer relationships

Cost reduction/margin improvement for example, through improved operational

efficiency, lower labor costs, reduced waste and the capture of operational

synergies from acquisitions

Improved asset utilization for example, through reduced inventory levels of soft

drinks held in cold storage and faster turnaround of re-usable transit packaging in

the supply chain

Regulatory/assurance for example, through demonstrating quality by

participating in retailer assurance schemes and assisting trade customers inachieving full compliance with new traceability legislatiON

PEPSICO INTERNATIONAL

HISTORY OF PEPSICO

1893--Caleb Bradham, a young pharmacist from New Bern, North Carolina, begins

experimenting with many different soft drink concoctions; patrons and friends sample

them at his drugstore soda fountain.

1898--One of Caleb's formulations, known as "Brad's Drink," a combination of

carbonated water, sugar, vanilla, rare oils and cola nuts, is renamed "Pepsi-Cola" on

August 28, 1898. Pepsi-Cola receives its frist logo.

1902-- Bradham applies for a trademark with the U.S. Patent Office, Washington D.C.,

and forms the first Pepsi-Cola Company.

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1905--Pepsi-Cola's first bottling franchises are established in Charlotte and Durham,

North Carolina. Pepsi receives its new logo, its first change since 1898.

1934--A landmark year for Pepsi-Cola. The drink is a hit and to attract even more sales,

the company begins selling its 12-ounce drink for five cents (the same cost as six ounces

of competitive colas).

Caleb Bradham, the founder of Pepsi-Cola and "Brad's Drink," dies at 66 (May 27th,

1867-February 19th, 1934).

1941--The New York Stock Exchange trades Pepsi's stock for the first time.

In support of the war effort, Pepsi's bottle crown colors change to red, white, and blue.

1960--Young adults become the target consumers and Pepsi's advertising keeps pace

with "Now it's Pepsi, for those who think young."

1963-- Pepsi-Cola continues to lead the soft drink industry in packaging innovations,

when the 12-ounce bottle gives way to the 16-ounce size.

Twelve-ounce Pepsi cans are first introduced to the military to transport soft drinks all

over the world.

1965--Expansion outside the soft drink industry begins. Frito-Lay of Dallas, Texas, and

Pepsi-Cola merge, forming PepsiCo, Inc.

Military 12-ounce cans are such a success that full-scale commercial distribution begins.

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1970--Pepsi introduces the industry's first two-liter bottles. Pepsi is also the first

company to respond to consumer preference with light-weigh, recyclable, plastic bottles.

1984--Pepsi advertising takes a dramatic turn as Pepsi becomes "the choice of a New

Generation."

1985--After responding to years of decline, Coke loses to Pepsi in preference tests byreformulating. However, the new formula is met with widespread consumer rejection,

forcing the re-introduction of the original formulation as "Coca-Cola Classic."

The cola war takes "one giant sip for mankind," when a Pepsi "space can" is successfully

tested aboard the space shuttle.

1991-- Pepsi introduces the first beverage bottles containing recycled polyethylene

terephthalate (or PET) into the marketplace. The development marks the first time

recycled plastic is used in direct contact with food in packaging.

1992-- Pepsi-Cola and Lipton Tea Partnership is formed. Pepsi will destribute single

serve Lipton Original and Lipton Brisk products.

1994-- Pepsi Foods International and Pepsi-Cola International merge, creating thePepsiCo Foods and Beverages Company.

1997-- PepsiCo. announces that it will spin off its restaurant division to form Tricon

Global Restaurants, Inc. Including Pizza Hut, Taco Bell, & KFC, it will be the largest

restaurant company in the world in units and second-largest in sales.

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1998-- Pepsi celebrates its 100th anniversary.

PEPSICO THE PARENT COMPANYPepsiCo, Inc. is one of the world's largest food and beverage companies. The company's

principal businesses include:

Frito-Lay snacks

Pepsi-Cola beverages

Gatorade sports drinks

Tropicana juices

Quaker Foods

PepsiCo, Inc. was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay.

Tropicana was acquired in 1998. In 2001, PepsiCo merged with the Quaker Oats

Company, creating the worlds fifth-largest food and beverage company, with 15 brands

each generating more than $1 billion in annual retail sales. PepsiCos success is the result

of superior products, high standards of performance, distinctive competitive strategies

and the high level of integrity of our people.

Pepsi-Cola North America, headquartered in Purchase, N.Y., is the refreshment beverage

unit of PepsiCo Beverages and Foods North America, a division of PepsiCo, Inc. PepsiCo

Beverages and Foods North America also comprises PepsiCo's Tropicana, Gatorade and

Quaker Foods businesses in the United States and Canada.

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Pepsi-Cola North America's carbonated soft drinks, including: Pepsi, Diet Pepsi, Pepsi

Twist, Mountain Dew, Mountain Dew Code Red, Sierra Mist, and Mug Root Beer

account for nearly one-third of total soft drink sales in the United States.

Pepsi-Cola North America's non-carbonated beverage portfolio includes Aquafina, whichis the number one brand of bottled water in the United States, Dole single-serve juices

and SoBe, which offers a wide range of drinks with herbal ingredients. The company also

makes and markets North America's best-selling, ready-to-drink iced teas and coffees via

joint ventures with Lipton and Starbucks, respectively.

OVERVIEW PEPSICO

The PepsiCo challenge (to keep up with archrival The Coca-Cola Company) never ends

for the world's #2 carbonated soft-drink maker. The company's soft drinks include Pepsi,Mountain Dew, and Slice. It owns Frito-Lay, the world's #1 maker of snacks such as corn

chips (Doritos, Fritos) and potato chips (Lay's, Ruffles). Cola is not the company's only

beverage: PepsiCo sells Tropicana orange juice brands, Gatorade sports drink, and

Aquafina water. PepsiCo also sells Dole juices (licensed) and Lipton ready-to-drink tea

(licensed from Unilever). Its Quaker Foods division offers breakfast cereals (Life), pasta

(Pasta Roni), rice (Rice-A-Roni), and side dishes (Near East). Wal-Mart is PepsiCo's

largest customer, accounts for 9% of sales.

PepsiCo may be vying for more Pepsi-drinking people but its hefty snacks and juice sales

help to quench the company's thirst for bottom-line growth. Frito-Lay's salty snacks rule

the US market; the snack division accounts for about one-third of company sales.

The company announced a major restructuring in 2007, splitting its two business units

(Pepsi-Cola North America and PepsiCo International) into three: one for US food, a

second for US drinks, and a third for food and drinks abroad. CEO Indra Nooyi said that

due to the company's healthy growth in recent years, PepsiCo is approaching a size that

can be better managed as three units rather than two.

The split looks like this: PepsiCo Americas Foods includes Frito-Lay North America,

Quaker, and the Latin American food and snack businesses; PepsiCo Americas Beverages

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includes North American beverage sales, including Gatorade and Tropicana; and PepsiCo

International includes business in the UK, the rest of Europe, Asia, the Middle East, and

Africa.

With a saturated soft-drink market, the company continues to try new iterations: In 2007

the company introduced its first vitamin-enhanced water, called Aquafina Alive. It signed

a licensing agreement with Ben & Jerry's in 2006 for the sale of Ben & Jerry's milkshakes

in the US, as well as a deal with Starbucks for the distribution of the coffee purveyor's

Ethos water brand. Hot on the heels of Coke's introduction of Blak, in 2006 Pepsi

launched a coffee-flavored cola, named, Pepsi Max Cino, in the UK.

Venturing further into the non-cola category, PepsiCo acquired sparkling juice companies

IZZE and Naked Juice in 2006. It also began selling Fuelosophy, a smoothie drink, at

organic grocery store chain Whole Foods, and struck a deal to develop products with

juice maker Ocean Spray Cranberries.

Bowing to the public's growing concern about childhood obesity, in 2006 Pepsi, along

with Coca-Cola, Cadbury Schweppes, and the American Beverage Association agreed to

sell only water, unsweetened juice, and low-fat milk to public elementary and middleschools in the US. As for high schools, the agreement calls for no sugary sodas to be sold

and one-half of the offered drinks to be water, diet sodas, lemonade, or iced tea. The

agreement was facilitated by former president Bill Clinton.

CEO Steve Reinemund stepped down as CEO in 2006 in order to spend more time with

his family. His replacement was Indra Nooyi, the company's president and CFO. Indian-

born Nooyi, the 11th female CEO of a FORTUNE 500 company, has been instrumental in

strategic decisions at the company, such as the acquisition of Tropicana and merger with

Quaker Oats.

Shortly after her appointment, Nooyi restructured the top level of power at the company.

She appointed John Compton, previously head of the Quaker-Tropicana-Gatorade unit, to

the newly created position of CEO for PepsiCo North America, reporting directly to her.

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HOW PEPSICO OVERCAME COMPETITION

How PepsiCo outgunned Coke:

Losing the cola wars was the best thing that ever happened to Pepsi while Coke was

celebrating, PEPSI took over a much larger market.

Pepsi beat Coke in December for the first time in their 108-year rivalry, surpassing its

nemesis in market capitalization. The great irony of Pepsi's rise is this: It has never sold

more soda than Coke, even today.

"Pepsi's been on fire," notes Robert van Brugge, beverage analyst with Sanford

55Bernstein. Over the past five years its stock has risen more than a third, while Coke's

has sunk 30 percent.

Even ten years ago, it was easy to write offPepsiCo (Research) as the loser in the cola

wars against Coke(Research): the proof was everywhere. The company's profits trailed

those of its rival in Atlanta by 47 percent. Its value in the stock market was less than half

of Coca-Cola's. Coke's CEO at the time, Roberto Goizueta, was so sure of his company's

dominance that he practically dismissed Pepsi, telling FORTUNE, "As they've become

less relevant, I don't need to look at them very much anymore."

PepsiCo turned its cola Waterloo into an opportunity to retrench, regroup, and ultimately

outflank its old foe. Losing the cola wars, it turns out, was the best thing that ever

happened to Pepsi. It prompted Pepsi's leaders to look outside the confines of their battle

with Coke.

A decade ago, Coke offered investors a compelling story: a recession-resistant product

inexpensive enough that consumers would buy it in good times and bad, but valued

enough that they would willingly pay an extra nickel or so above what no-name brands

charged.

What Coke investors didn't envision was that an emerging preference for other softbeverages --water, sports drinks -- would fracture demand. Nor did they see that the

business strengths that once applied to cola would take hold across a broadened soft drink

and snack-food market -- a market that Pepsi, and not Coke, dominated.

38
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"They were the first to recognize that the consumer was moving to noncarbonated

products, and they innovated aggressively," observes Gary Hemphill of Beverage

Marketing.

PepsiCo embraced bottled water and sports drinks much earlier than its rival. Pepsi's

Aquafina is the No. 1 water brand, with Coke's Dasani trailing; in sports drinks, Pepsi's

Gatorade owns 80 percent of the market while Coke's Powerade has 15 percent.

Throughout the past five years under CEO Steve Reinemund, the company has deftly

moved with every shift in consumer tastes. "He's thinking about what the products should

look like in the future," says Victor Dzau, a director of PepsiCo.

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Sustainable competitive advantage

Three major sustainable competitive advantages give PepsiCo a competitive edge as it

operates in the global marketplace:

Big muscular brands;

Proven ability to innovate and create differentiated products; and

Powerful go to market systems.

Cost and Quality.

Timing and know how.

Strongholds.

Deep pockets.

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Coke: 1886; Pepsi: 1893.

1933: Pepsi struggling to stave off bankruptcy. Dropped price of its 10c, 12 oz. bottle to5c, making it a better value. Ad jingle twice as much for a nickel better known in the

US than the Star Spangled Banner.

41

Strategic Competitive Advantage

Profits from a

sustained

competitive

advantage

Time

Launch

Exploitation

Counterattack

Profits from a

series of

actions

Time

Exploitation

Launch

Counterattack

Firm has already moved to advantage 2

Traditional View

Hypercompetition

Strategic Competitive Advantage

Profits from a

sustained

competitive

advantage

Time

Launch

Exploitation

Counterattack

Profits from a

series of

actions

Time

Exploitation

Launch

Counterattack

Firm has already moved to advantage 2

Traditional View

Hypercompetition

Pepsi Coke

Price

/Ounce

Price/

Ounce

Pepsi

Coke

Perceived Quality Perceived Quality

Pepsi Coke

Price

/Ounce

Price/

Ounce

Pepsi

Coke



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Pepsi keeps price advantage through 60s and 70s, when Pepsi charged its bottlers 20%

less for its concentrate.

With rising ingredient costs, Pepsi could no longer offer twice as much for the same

price. So, it raised price to Cokes level giving it a war chest to fuel an aggressive ad

campaign. Battle shifted from Price to Quality, with Pepsi targeting the youth.

What followed was the Pepsi Challenge & Real Thing Coke ads

Perceived quality caught up. Deeper pocketed and lower cost Coke initiated a price war

in selective markets where Pepsi was weak in the 70s. Pepsi responded with its discountsand by the end of the 80s, 50% of food store sales were on discount

Other companies moved into the lower left quadrant of the market. But the two major

players forced price down to ultimate value.

To break price spiral, Coke launched New Coke to keep Coke loyals and induce

switching among Pepsi buyers. But this move from Coke was rejected by the market.

Attempts to move to next arena via niches in caffeine and sugar substitutes were adopted.

42

Pepsi Coke

Price/Oun

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Price/Ounc

eFirst move:

PepsiChallenge


Youth & MiddleClass Segments 2nd move:

Cokes Ad war

Pepsi Coke

Price/Oun

ce

Price/Ounc

eFirst move:

PepsiChallenge


Youth & MiddleClass Segments 2nd move:

Cokes Ad war


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Price/Ou

nce

Price/Oun

ce


GenericsRC Cola

Coke &Pepsi

PriceSpiral NewCokeActual

Classic Coke& Pepsi

NewCokeIntendedP

rice/Ou

nce

Price/Oun

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GenericsRC Cola

Coke &Pepsi

PriceSpiral NewCokeActual

Classic Coke& Pepsi

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PEPSICO INDIA

Introduction:

PepsiCo entered India in 1989 and in the span of a little more than a decade it became the

country's largest selling soft drinks company. The Company has invested heavily in India

making it one of the largest multinational investors. The group has built an expansive

beverage, snack food and exports business and to support the operations are the group's

43 bottling plants in India, of which 15 are company owned and 28 are franchisee owned.

PepsiCo stays committed to providing its consumers with top quality beverages. Its

diverse portfolio of brands include the flagship cola brand - Pepsi; Diet Pepsi; 7Up;Mirinda; Mountain Dew; Slice fruit drink; Tropicana brand 100% fruit juices in various

flavours; Aquafina packaged drinking water; Gatorade plus local brands Lehar Evervess

Soda, Dukes Lemonade and Mangola.

PepsiCo is also a dominant player in the snack food segment in India. PepsiCo's snack

food company Frito-Lay is the leader in the branded potato chip market. It manufactures

Lay's Potato Chips; Cheetos extruded snacks, Uncle Chips; traditional namkeen snacks

under the Kurkure and Lehar brands; and Quaker Oats.

PepsiCo is one of the largest MNC exporters in India and its export business consist of

three categories - agri business, commodities and Pepsi system sales. PepsiCo has made

significant investments with the Punjab Agriculture University to develop a

comprehensive agro-technology program that has helped thousands of farmers across

India improve the yield of their farms and the quality of their agricultural products.

PepsiCo has leveraged its knowledge in contract farming to develop seaweed cultivation

in Tamil Nadu and has partnered with the Government of Punjab to help farmers of the

state through the utilization of developed technology for citrus farming.

As part of its sustainable development initiatives, PepsiCo India has been a committed

leader in the promotion of rain water harvesting, water conservation recycling and the

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reduction of effluent discharge. PepsiCo has also established zero waste centers and PET

recycling supply chains and assisted victims of natural disasters. PepsiCo stays dedicated

in its endeavor to develop community outreach programs by supporting rural water

supply schemes, administering medical camps in villages, providing computers to rural

schools and creating opportunities for women in rural areas through vocational training as

an alternate means of livelihood.

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OVERVIEW OF PEPSICO INDIA :

PepsiCo Mission

"To be the world's premier consumer products company focused on convenience foods

and beverages. We seek to produce healthy financial rewards to investors as we provide

opportunities for growth and enrichment to our employees, our business partners and the

communities in which we operate. And in everything we do, we strive for honesty,

fairness and integrity."

PepsiCo in India

PepsiCo entered India in 1989 and has grown to become one of the countrys leading

food and beverage companies. One of the largest multinational investors in the country,

PepsiCo has established a business which aims to serve the long term dynamic needs of

consumers in India.

PepsiCo India and its partners have invested more than U.S.$700 million since the

company was established in the country. PepsiCo provides direct employment to 4,000

people and indirect employment to 60,000 people including suppliers and distributors.

PepsiCo nourishes consumers with a range of products from treats to healthy eats, that

deliver joy as well as nutrition and always, good taste. PepsiCo Indias expansive

portfolio includes iconic refreshment beverages Pepsi, 7 UP, Mirinda and Mountain Dew,

in addition to low calorie options such as Diet Pepsi, hydrating and nutritional beverages

such as Aquafina drinking water, isotonic sports drinks - Gatorade, Tropicana100% fruit

juices, and juice based drinks Tropicana Nectars, Tropicana Twister and Slice. Local

brands Lehar Evervess Soda, Dukes Lemonade and Mangola add to the diverse range

of brands.

PepsiCos foods company, Frito-Lay, is the leader in the branded salty snack market and

all Frito Lay products are free of trans-fat and MSG. It manufactures Lays Potato Chips,

Cheetos extruded snacks, Uncle Chipps and traditional snacks under the Kurkure and

Lehar brands. The companys high fibre breakfast cereal, Quaker Oats, and low fat and

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roasted snack options enhance the healthful choices available to consumers. Frito Lays

core products, Lays, Kurkure, Uncle Chipps and Cheetos are cooked in Rice Bran Oil to

significantly reduce saturated fats and all of its products contain voluntary nutritional

labeling on their packets.

The group has built an expansive beverage and foods business. To support its operations,

PepsiCo has 43 bottling plants in India, of which 15 are company owned and 28 are

franchisee owned. In addition to this, PepsiCos Frito Lay foods division has 3 state-of-

the-art plants. PepsiCos business is based on its sustainability vision of making

tomorrow better than today. PepsiCos commitment to living by this vision every day is

visible in its contribution to the country, consumers and farmers.

Performance With Purpose

Performance with Purpose articulates PepsiCo India's belief that its businesses are

intrinsically connected to the communities and world that surrounds it. Performance with

Purpose means delivering superior financial performance at the same time as we improve

the world.

To deliver on this commitment, PepsiCo India will build on the incredibly strong

foundation of achievement and scale up its initiatives while focusing on the following 4

critical areas that have a business link and where we believe that we can have the most

impact.

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PEPSICO INDIA WITH RKJ GROUP:

Vision

Being the best in everything we touch and handle.

Mission

Continuously excel to achieve and maintain leadership position in the chosen businesses;

and delight all stakeholders by making economic value additions in all corporate

functions.

It can be said with absolute certainty that the RKJ Group has carved out a special nichefor itself. Our services touch different aspects of commercial and civilian domains like

those ofBottling, Food Chain and Education. Headed by Mr. R. K. Jaipuria, the group

as on today can lay claim to expertise and leadership in the fields of education, food and

beverages.

The business of the company was started in 1991 with a tie-up with Pepsi Foods Limited

to manufacture and market Pepsi brand of beverages in geographically pre-defined

territories in which brand and technical support was provided by the Principals viz., Pepsi

Foods Limited. The manufacturing facilities were restricted at Agra Plant only.

Varun Beverages Ltd. is the flagship company of the group.The group also became the

first franchisee for Yum Restaurants International [formerly PepsiCo Restaurants (India)

Private Limited] in India. It has exclusive franchise rights for Northern & Eastern India.

It has total 46 Pizza Hut Restaurants & 1 KFC Restaurant under its company.

The group added another feather to its cap when the prestigious PepsiCo International

Bottler of the Year award was presented to Mr. R. K. Jaipuria for the year 1998 at a

glittering award ceremony at PepsiCos centennial year celebrations at Hawaii, USA. The

award was presented by Mr. Donald M. Kendall, founder of PepsiCo Inc. in the presence

of Mr. George Bush, the 41st President of USA, Mr. Roger A. Enrico, Chairman of the

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Board & C.E.O., PepsiCo Inc. and Mr. Craig Weatherup, President of Pepsi Cola

Company.

Strategic Divisions:

PepsiCo India consists of different divisions that include Beverage division, Snack food

division and the Restaurant division (Yum Restaurants India Pvt. Ltd.). These divisions

work as separate SBUs and have their separate management.

PepsiCo India divided its beverage division into different operating divisions. The heads

of these divisions report directly to the CEO. The heads of these divisions are in charge of

their respective areas and are accountable for the proper functioning of all the regions.

The FOBOs also report to the regional heads apart from the COBOs.

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MARKETING OVERVIEW OF PEPSICO INDIA

Marketing Environment:

Marketing environment is the overall environment in which a Company operates. This

consists of the Task Environment and the Broad Environment.

Task Environment

Task Environment includes the immediate players involved in producing, distributing and

promoting the offering. The main players are the company, suppliers, distributors, dealers

and the target customers. Suppliers include the material and service suppliers such as

marketing research agencies, advertising agencies, banking and insurance companies,

transportation companies, and telecommunications companies. The dealers and

distributors include agents, brokers, manufacturer representatives and others who

facilitate finding and selling to customers.

The suppliers for PepsiCo India include the bottle suppliers for the soft drinks. These

include the Pet bottles and the Glass bottles. One of the most vital products required in

the operation is Refrigerator. PepsiCo does not manufacture the refrigerators, instead they

are supplied by different vendors who get time bound contracts from the company.

The distributors and dealers are part of the sales and distribution network. This will be

explained later under the section of Place, in the 4 Ps segment.

The target customer for PepsiCo is primarily the youth. But, because of increasing

competition from Coke PepsiCo has expanded its target customer base which now

includes people who are prospects for beverages beyond the CSD category. PepsiCo hasstarted targeting this segment by offering products in the Non- CSD category, these

include fruit based non-carbonated drinks, juice based drinks, energy drinks, sports

drinks, snack food (from the snack food division i.e. Frito Lay).

Broad Environment:

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This contains forces that can have a major impact on the players in the task environment.

This includes six components: demographic environment, economic environment,

physical environment, technological environment, political legal environment, and

socio cultural environment. Companies need to pay close attention to the trends and

developments in these environments and make timely adjustments to their marketing

strategies in order survive and succeed in the market. This will be explained in detail in

the strategic marketing segment.

Value Delivery Process:

The value delivery process consists of the value creation and delivery sequence. This is

done in three phases. The first phase, choosing the value, represents the homework done

by the marketing department before the product exists. Marketing is required to segment

the market, select the appropriate the target market, and develop the offerings value

proposition. This is known as Segmentation, Targeting and Positioning and is the essence

of strategic marketing.

Once the business unit has chosen the value, the second phase is providing the value.

Marketers need to determine specific product features, prices and distribution.

The task in the third phase is communicating the value by utilizing the sales force, sales

promotion, advertising, and other communication tools to announce and promote the

product. Each of these value phases has different cost implications.

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CustomerSegmentation

MarketSelection /

Focus

ValuePositioning

Choose the Value (Strategic Marketing)Provide the Value (Tactical Marketing)ProductDevelopmen

t

ServiceDevelopmen

t

PricingSourcing /Making

Distribution/ Servicing

Communicate the Value (Tactical Marketing)Sales ForceSalesPromotionAdvertising

Fig. 2 Value Creation and Delivery Sequence

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OperationsMargin

Suppor

tActiviti

es

Generic Value Chain:

The generic value chain is

a tool to identify ways to

create value for the customer. This model proposes that every firm is a synthesis of

activities performed to design, produce market, deliver and support its product. In order

to be more precise only the primary activities in the value chain of PepsiCo India are

analyzed.

Primary Activities:

Inbound Logistics This involves bringing and procuring raw materials for the

business. For the carbonated drinks industry only two raw materials are required, they are

water and the concentrated salt that is used to produce the final product. For this purpose

water is extracted from the ground and the concentrated salt is provided by PepsiCo India

to all the plants in the country.

Operations Operations primarily includes all the bottling plants. Currently there are

32 bottling planting in India that operate for PepsiCo. Of the 32 plants, 15 are owned by

PepsiCo and the rest 17 are (FOBO), owned by R K Jaipuria Group.

Outbound Logistics The Outbound logistics of Pepsi can be divided into three

stages. First the finished product from the bottling plants is sent to the depot or the

territorial office, from where it is sent to the C & F centers and the Distributor Points

according to their demand. From the C & F centers and Distributor Points the product is

sent out for sale in the market to the retailers.

Marketing and Sales The sales and distribution network of Pepsi is very strong

and comprises of different layers and a dedicated sales force. This is one of the important

factors for the success of Pepsi. To keep the company abreast with competition and to

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Primary Activities


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provide support to its channel partners and to increase the sales, PepsiCo puts lot of effort

in its marketing activities. This includes maintaining excellent relations with its channel

partners, making huge investments in Advertising, signing of Megastars as its brand

ambassadors, sponsoring various events, launching promotional for any launch or re

launch of a product.

Service In this industry after sales service is generally not required. The only

exception being leak or burst bottles. In that case, the shopkeeper gets replacement for

plastic bottles from the salesmen instantly, while the replacement for glass bottles is

provided between 25th and 30th of every month. They are required to collect all the

damaged glass bottles and give to the respective salesperson who gives them the

replacement within the next few days after getting it approved from the CE or ADC.

Marketing Mix / 4 Ps:

Marketing Mix has been defined as the set of marketing tools that a firm uses to pursue

its marketing objectives. These tools are classified into four broad groups, namely,

Product, Price, Place and Promotion.

Marketing mix decisions should be made to influence trade channels as well as final

consumers. A firm can alter any of the four Ps accordingly, including changes in the

product and distribution channel as well.

The four Ps represent the sellers view of the marketing tools available for influencing

buyers. Whereas, from a buyers point of view, each marketing tool is designed to deliver

a customer specific benefits according to his or her requirements.

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Product

Prod. VarietyQualityDesign

FeaturesBrand NamePackaging

SizesServices

WarrantiesReturns

Fig. 3 Four Ps

Product:Pepsi offers different variety of products ranging from carbonated to Non

Carbonated Soft Drinks. These include

Pepsi Cola

Mirinda ( Lemon and Orange )

7 Up

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Marketing Variables: The Four P Components of the Marketing Mix

Product

Prod. VarietyQualityDesignFeaturesBrand NamePackagingSizesServicesWarrantiesReturns

Price

List Price

DiscountsAllowancesPayment periodCredit Payments

Place

ChannelsCoverageAssortmentsLocationsInventoryTransport

Promotion

Sales Promotion

AdvertisingSales ForcePubic RelationsDirect Marketing


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Dew

Slice

Tropicana

Aquafina (Mineral Water)

These Products come in different size 200 ml, 300 ml, 600 ml, 1200 ml, 2 lt. there are

nearly 42 SKUs which are monitored and regulated on daily basis.

Product Quality:

This is one of the most important aspects that any Co. needs to address. Specially in the

case of Pepsi this is even more important because of the controversies and claims

regarding the CSE report on Pesticides in Pepsi. Therefore pepsi has to maintain stringent

quality norms and standards and norms. Pepsi does that by following one quality standard

worldwide and according to the official website of pepsi, the Co. maintains that :

At every level of Pepsi-Cola Company, we take great care to ensure that the highest

standards are met in everything we do. In our products, packaging, marketing and

advertising, we strive for excellence because our consumers expect and deserve nothing

less. We promise to work toward continuous improvement in all areas of our

organization.

At every step of our manufacturing and bottling process, strict quality controls are

followed to ensure that Pepsi-Cola products meet the same high standards of quality thatconsumers have come to expect and value from us. We also follow strict quality control

procedures during the manufacturing and filling of our packages. Each bottle and can

undergoes a thorough inspection and testing process. Containers are then rinsed and

quickly filled through a high-speed, state-of-the-art process that helps prevent any foreign

material from entering the product. Additional quality control measures help to ensure the

integrity of Pepsi-Cola products throughout the distribution process, from warehouse to

store shelf.

Brand Name:

This is the most important thing any Co. in this Business needs to do if it wants to remain

and succeed in the Business. Pepsi has successfully done that for so many years. Pepsi

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has targeted the youth and has invested heavily in advertising and building a brand image

(by launching several campaigns and roping in mega stars such as Shahrukh, Sachin,

ganguly, Dravid etc.) that attracts to the youth and this is one of the main reason for the

success of Pepsi.

Packaging and Size : The products are available in packaging and sizes. This is done

to facilitate the use according to the requirements of the Customer. Different packaging

also affects the usage pattern of the product in various markets. e. g. sale of 2 lt. bottles is

high in areas in which middle and high income group customers stay. But the sale of 200

and 300 ml bottles is high in areas where people in the lower income group bracket stay.

The sale of 600 ml bottles is high in areas where students etc. stay. Different packaging is

also provided for different products like Tetra Packs, Pet Bottles and Glass Bottles (in

200 and 300 ml).

Services, Warranties, Returns : There are no warranties and services (post sales)

provided for these products but there is provision of returns in case there is any problem

with the product, e.g. leak or burst bottle, half filled bottle etc. The pet or plastic bottles

are returned the same day and a replacement is provided for the same but in the case of

glass bottles the retailer has to collect all the burst bottles and return it to the salesman

around 25th of every month to get a replacement.

Price:List Price: The Price of each product is fi

18048055 Pepsi Marketing Summer Training Report

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