Case Study: PepsiCo’s International Marketing Strategy

Pepsi was created by chemist named Caleb Bradham. He was inspired to experiment with various products and ingredients to create a suitable summer drink that became highly sought after way back in the summer of 1898. It was this summer inspiration that later evolved into what we now know as Pepsi Cola. The company was launched officially in the year 1902. The beginning of Pepsi Cola was in the back room of his pharmacy, but recognizing its potential, Caleb soon started bottling the product so that people all over can enjoy it. As the years passed, Caleb started franchising the bottling of the drink to different people in different locations. Soon Pepsi Cola was being sold in 24 states across the United States. When World War I broke out, the company went bankrupt and Caleb had to sell the trademark to a stock broker from North Carolina. But he too could not revive the business. It was the candy manufacturer, Charles G. Guth, who bought it from the previous owner and revived it into the global brand it is today. Its marketing plan started even when the company was in the hands of Caleb and grew with the company. It was during World War II that the company adopted the red white and blue emblem to depict patriotic America. The color code still exists today though the emblem has evolved many times.

PepsiCo's International Marketing Strategy

It was after 65 years after the sale of its first cola that PepsiCo started its diversification into other foods and beverages. Now the company not only sells Pepsi, its main brand, but also other items like Quaker Oats, Aquafina, Tropicana, Mountain Dew and Lays. It also had alliance with companies like Starbucks and Lipton to come out with special coffee and tea.

PepsiCo’s Marketing and Promotional Strategy

The current marketing strategy adopted by PepsiCo Inc. is definitely one that caters to its global standing. Since Pepsi came out at a time when Coke or Coca Cola already had a head start in the market, its market strategy and business plan began with differentiation – an attempt to establish its product as one that is unique in taste and quality. This approach was successful to a great extend and Pepsi was able to establish itself in the US markets. Later the plan shifted to comparative marketing and later to diversification.

Pepsi’s promotional campaigns had a lot to do with its success. Pepsi’s market environment always presented it with a challenge in the form of Coke which had already created a niche for itself.

In the 1940s to create a niche among the African American, Pepsi created a scholarship program that awarded 17 African American high school seniors full time scholarships. During the same time the ad campaigns of Pepsi featured top people from the African American community and they called it “Leader in their field” campaign. This campaign was quite a breakthrough and really made an impact. It opened up a whole new market segment for the company.

In the 1960s, Pepsi’s campaign was aimed at teenagers and young adults – beach bursting of youngsters having fun and drinking Pepsi was quite a common theme and popular too. It showed that Pepsi was the drink for partying and hanging out with friends, something the American youth could easily identify with. The “Pepsi Generation” theme became highly popular and the drink started creating a niche for itself among the young of the country. At first it was called “think young” campaign. This later evolved into “come alive” in the year 1965. This is when the term “Pepsi generation” was first introduced to the people.

In the 1970s Pepsi came out something called the “Pepsi Challenge”. This campaign was aimed at proving Pepsi as a better tasting drink than its rival Coke and involved blind tasting of the two products to choose the better one. Even though this helped improve the market share of PepsiCo, Coke still led the market.

Pop icons like Michael Jackson and Lionel Ritchie and youth sensation like Michael J Fox became part of the Pepsi campaigns in the 1980s where by Pepsi began to beat Coke and come out the winner. They had a huge fan following and when they were seen endorsing the brand, the impact was instantaneous. Pepsi also exploited famous movies of the time like Star Wars to improve their brand image and create interest among the people. However, Pepsi chose to replace the “Pepsi Generation” campaign with “Gotta Have It” in the beginning of the 1990s. This turned out to be an erroneous move and Coke again started to gain market share.

Pepsi and the Cola Wars

The cola wars began somewhere in the mid 1950s. The main players in the war were Pepsi and Coca Cola. The two companies had been in rivalry ever since Pepsi came out with its first cola. But the rivalry reached its zenith in the 1980s and 1990s. The main point was neither company had a cost advantage. Hence promotion was the main way of competing. In the 80s Pepsi started coming out with campaigns that undermined Coke. For example, a Pepsi ad came out which showed a group of retirement home people dancing to rock ‘n roll when they get the wrong delivery of a Pepsi crate instead of Coca Cola. It also used celebrity advertising vigorously. This gave Pepsi a lead in the market, though short lived. In the 1990s Coca Cola was beating Pepsi by huge margins again. The war was quite cut throat with Coca Cola doing everything possible to outrun Pepsi. This included stealing Pepsi’s bottlers, hoarding of Pepsi bottles and creating ads that hinted at ridiculing the Pepsi brand. In many countries Coca Cola were forcing retailers and bottlers to boycott the Pepsi brand. Upon learning about this Pepsi filed several anti-competitive cases out if which they won around 70. Yet, at one stage of the war Pepsi’s market value fell to less than half of Coca Cola’s market value. Coca Cola was and is still leading in when it comes to market share of its cola brand. The only way Pepsi could fight back was through diversification. It started spreading its wings to include sports beverages, varied versions of the Pepsi drink and non-carbonated beverages in its portfolio. It started considering itself as a “complete” beverage company. The diversification further happened to include snacks and food items like potato chips and oats. Diversification really helped Pepsi to improve its falling stand in the market not only in the local markets of America and Europe, but also in its international markets where Coke is leading the show.

Pepsi Goes International – Its Global Marketing Plans

In the 1940’s itself PepsiCo started branching out into the international arena. At first it was into Latin America, the Middle East and the Philippines. Here too Coke had the early bird advantage. Yet the product soon gained popularity. With the Arab countries boycotting Coke, Pepsi enjoyed a monopoly for many years in the Middle East. In the 1950’s Pepsi went to Europe and this included Russia, with whom there existed a Cold War by USA. Though there were initial difficulties, getting into Russia was a major breakthrough which the company exploited. The company posted pictures of the then leaders of the United States and Russia sipping the drink. Its arch rival, Coca Cola, was able to enter the Russian markets only after more than 25 years after Pepsi’s entry.

In many of the countries that Pepsi ventured into comparative advertising was prohibited and in many countries it was not an accepted concept. For example, Pepsi tried its “Pepsi challenge” promotional gimmick in Japan. However, the country and its people were not aware of comparative advertising and as such the campaign did more harm than good. Hence in Japan they had to break their tradition of running with the global campaign and come up with a campaign that the Japanese would identify with and was more Japanese. The “Pepsiman” was a superhero like figure that was devised by a Japanese person for the Japanese market. The commercial was an instant hit and helped improve Pepsi’s share in the Japanese market by as much as 14%. From Japan Pepsi learned a valuable lesson – the same ad will not have the same effect everywhere. When it comes to cross national advertising, there is always the inherent risk of alienating the people.

With the Indian markets, Pepsi had the first mover advantage over Coke. It had coined its own special slogan for the Indian market too that became quite popular with the crowd. Yet Coke re-entry into India was a great threat to the company. Coke signing on youth icon and Indian star Hrithik Roshan to do their campaign was an even bigger threat. However, Pepsi reverted to the old ploy of showing down the competition. They featured the king of Indian movies, Shah Rukh Khan and a Hrithik look alike. This comparative ad was effective and brought Pepsi back into the spot light.

In the USA and European markets Pepsi still uses promotional campaigns that aim to break the colour barriers with stars like Britney Spears, Beyonce and Haley Berry appearing in its ads. The brand and its products are highly popular in these areas. In the international arena, Pepsi has been able to create a niche through its vigorous advertisement and event sponsorship. In fact more than 45% of the total revenue of the company comes from its market outside the USA. However the company has experience many setbacks due to its many blunders have cost it valuable market share.

Marketing Blunders

One of the major blunders that Pepsi did in its marketing runs is the literal translations of some of its slogans into other languages. For example PepsiCo’s slogan “Come Alive with the Pepsi Generation” when translated into Taiwanese meant “Pepsi will bring your ancestors back from the dead” and caused great damage for its image. It was the perfect example of the wrong market message. Similarly, the goodwill of the company suffered a heavy blow when its bottle cap campaign (number inside the cap and a few winning numbers win fabulous prizes) in Chile ended in wreckage of the company. This was caused by a wrong fax being sent and the wrong number being announced on TV. Almost a similar incident repeated in the Philippines as well a few months later when, due to a computer glitch, instead of one winner several winners were announced for the bottle cap sweepstakes. Instead of learning from a blunder in one country, it was repeated in another, causing further harm to its brand image.

A more recent marketing blunder happened in the United States of America itself. In 2010, Pepsi decided not to spend big bucks for sponsoring the Super Bowl. The Super Bowl is a sporting event in the States that is watched by almost all Americans and hence its wide reach is indisputable. Instead, it decided to do social marketing through its internet based “Refresh” campaign. Though the effort was commendable it was a major blunder. Instead of using the Super Bowl to further give lime light to the Refresh campaign, it completely missed the opportunity paving way for others to make use of the spot.

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