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.
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 noncarbonated 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 reentry 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.