co mp a n y e n v i r o n me n t an a l y s i s je ssi ca ...celebrity endorsement as well as...

Company Environment Analysis Jessica Willis

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PepsiCo is a global food and beverage leader with products sold all around the world, across six

global divisions. These divisions act either independently or in conjunction with third parties

where they make, market and distribute a range of food and beverage across PepsiCo’s various

product portfolio; driving innovation, and delivering performance. PepsiCo’s long term goal is to

sustainably grow and align with the what is good for their business, taking into consideration

society as well as the planet (PepsiCo, 2017).

Acting ethically and responsibly sits at the heart of PepsiCo as they see it as not only the right

thing to do, but the right thing for their business. As of 2012, the PepsiCo Global Code of

Conduct addresses laws and implements change that impacts their business practice but also

provides their employees with guidance. PepsiCo see their code as a roadmap and compass for

doing business correctly and include principles of showing respect in the workplace, acting with

integrity in the marketplace, ensuring ethics in business activity and performing work

responsibly for shareholders.

PepsiCo have over 250,000 workers scattered around the globe, working to provide customers

with a range of choice among the food and beverage sector. Their wide portfolio of food and

beverage drives low cost, productivity enhancements and capabilities in all forms. PepsiCo have

over 22 brands across their portfolio, which each annually generate more than $1 billion in retail

sales.

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PepsiCo, alike to several organisations implement three levels of strategy, first being the

corporate level strategy where their top management direct an overall strategy for the entire

organisation. PepsiCo, as one of the largest food and beverage companies in the world hold a

mission to “provide consumers around the world with delicious, affordable, convenient and

complementary foods and beverages from wholesome breakfasts to healthy and fun daytime

snacks and beverages to evening treats” (PepsiCo, 2017). As a company PepsiCo are committed

to putting time and effort into their people, company and community where they operate in order

to position the company for long-term sustainable growth.

Sustainability and society lie at the core of their vision which all in all aims to deliver top-tier

financial performance over the long term by integrating these practices into their business

strategy. They hope to leave behind a positive imprint on society and the environment,

recognised as their business practice of, Performance with a Purpose. Performance with a

Purpose according to PepsiCo’s CEO is what they stand for above all else, and how they do

business. In the CEO's opinion, PepsiCo can not just focus on the earning cycle, so it is critically

important that they understand they play a critical role in society.

In this sense, the strategic direction of PepsiCo, focuses on transforming their existing portfolio

and offering healthier options while making their food system more sustainable, and their

communities more prosperous, in hope of making their future growth thrive. Their 2025 agenda

is to increase these efforts to improve the products they sell, protect the planet and empower

people around the world in order to contribute solutions to shared issues and challenges.

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Figure 1: Performance with a Purpose diagram (PepsiCo, 2017).

PepsiCo’s second level of strategy is their strategic business unit structure, where PepsiCo have

several divisions of brands among their company. These brands all require different directions,

strategies and marketing mixes. Here lie the companies different segmentation, targeting,

positioning (STP) strategies and marketing mix, a contribution of product, place, promotion and

people (4Ps). This strategic business unit markets a different set of offerings and brands to a

different group of consumers that are all clearly defined.

Their products and brands exist on a functional level, this being the third level of strategy.

Several of the product brand divisions within PepsiCo include, Pepsi, Mountain Dew, Gatorade,

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7Up, Doritos, Lipton, Cheetos, Quaker, Walkers, Diet Pepsi, Pepsi Max, and Diet Mountain

Dew, plus several more. These products made available to their consumers include a range of

product lines, soft drinks, energy drinks, cereal, rice snacks, side dishes, breakfast dishes, sports

nutrition and more (PepsiCo, 2016). PepsiCo offer a range of diverse products to secure

competitive advantage in the market as a generic strategy. This stems from a need to address

market pressure which comes from large competitors including the beverage Coca-Cola

Company as well as food companies Kellogg Company, Kraft Heinz Company and Nestle as

ideally, PepsiCo want to ensure long-term growth (Ferguson, 2017).

In terms of product placement, PepsiCo distribute products to the market through

direct-store-delivery, customer warehouse and distributor networks on a global scale. Their

places for distribution are most commonly retailers, as consumers can purchase PepsiCo

products from supermarkets, gas stations, convenience stores and grocers. Their pricing varies as

the company offer several brands and products. These prices are determined based on market

pricing in which they implement their own prices based on competition. They compete against

Coca-Cola products, but can afford to offer low prices as they cater for low operation costs

(Ferguson, 2017).

This leads onto the promotion of their company which they use to attract and gain customer

attention. They implement a range of communication tools to reach their target audience across

several forms of media, both traditional and non-traditional including advertising, sales

promotion, direct marketing and public relations (Young, 2017). Their marketing tactics include

celebrity endorsement as well as sponsorship and promotion like sports events, including the

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Super Bowl. For this years Super Bowl, Pepsi ran promotional offers that gave attendees

incentive to purchase Pepsi products as they could in return receive a PepsiCo coupon booklet.

Regarding PepsiCo’s Boston Consulting Group (BCG) matrix they have a range of products that

fit into the stars, question marks, and cash cows category and fortunately for them, no dogs.

Evident in their Annual Reports for 2015 and 2016, these products include the following, present

in Figure 2.

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Figure 2: BCG Matrix for PepsiCo

Quaker Foods North America (QFNA) are PepsiCo’s question mark as they operate in high sales

growth and have low market share. QFNA specialise in making and marketing cereals, rice,

pasta and other products. Products include Quaker oatmeal, Cap'n Crunch cereal, Quaker granola

bars, Quaker oat squares, plus more. Their share revenue evident in Figure 3 shows that they

only made 4.08% of the entire net revenue of PepsiCo (PepsiCo, 2016). As QFNA also have a

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low market share, they should focus on horizontal integration to increase market share and shift

them into the segment of stars.

PepsiCo has several star segments as expected, being of the world’s largest beverage and food

organisations. One of them is their North American Beverages (NAB) star which operates with

high sales growth as well as high market share. NAB specifically accounts for their drink brands,

Pepsi, Mountain Dew, Gatorade, and Tropicana. NAB generated 33% of PepsiCo’s total

revenue, a total of 21 billion with a market share of over 10%. The way stars of this sort can

improve is through market development and product development.

Cash cows are a market segment that operate in low and slow industry sales growth rate and

have high market share. Frito-Lay North America (FLNA) are included in PepsiCo’s cash cow

category as there has been relevant growth in the revenue of FLNA compared to previous years

although they have limited industry sales growth. Shown in Figure 3, in 2014 FLNA had a

revenue of 21.8% of net revenue and in 2016 this had risen to 24.7%, a significant increase.

FLNA deals in snacks like Lay’s potato chips, Doritos tortilla chips, Cheeto cheese snacks, Frito

corn chips plus more. FLNA are important to the success and growth of PepsiCo as they

continue to generate sufficient revenue for the company now and in the long term.

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Figure 3: Net revenue for PepsiCo in 2016 (PepsiCo, 2016)

As PepsiCo’s organisation is so large and diverse compromising 22 brands, their segmentation,

targeting and positioning (STP) decisions coincide with their marketing mix. Segmentation

involves dividing a population into groups dependent on characteristics, and targeting implies

different groups being targeted as a result segmenting (Dudovskiy, 2016). Lastly, positioning

consists of PepsiCo selecting the marketing mixes best suited to their range of target segments.

PepsiCo practice that of multi-segment positioning as they target more than one customer

segment at a time with their such varied range of products and brands. In this sense there is not

one clear STP as their customer segment is dependent on nutritional value, pricing, packaging.

Pepsi-Cola is positioned as a soft drink that is enjoyable to drink and tastes good, this appeals to

a segment who prefer taste and enjoyment of a drink versus worrying about the potential health

implications and sugar levels it may carry (Dudovskiy, 2016). It is marketed as a brand that is

‘Fun for You’ as according to PepsiCo (2017) sometimes the best thing you can do is give your

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cravings exactly what they want, sharing that products like Pepsi is a product that your taste buds

will appreciate.

This positioning of Pepsi-Cola differs to that of PepsiCo’s Gatorade products which are

positioned for those who do care about health implications and consumption of soft drinks and

carbonated beverages. For Gatorade's specific customer segment they are positioned as a

non-carbonated energy drink with a lot less sugar than Pepsi-Cola and are marketed as a product

that is ‘Good for You’ with PepsiCo (2017) placing emphasis on taking nutritious beverages into

consideration and placing them in line with global dietary requirements.

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Figure 4: SWOT Analysis of PepsiCo

Strengths Weaknesses

1. Comprehensive product portfolio with

more than 100 brands serving in the

food and beverage industry

2. Strong brand image, identity and

reputation

3. High international recognition

4. High customer loyalty

1. High level of dependence on domestic

market in the USA

2. Lack of image and reputation with

2017 Pepsi ad issue

3. No presence outside food and

beverage industry

4. Brand perceived as unhealthy

Opportunities Threats

1. Broaden their product base

2. Produce more health conscious

products

3. Further international expansion

4. Further collaboration and acquiring of

and with other brands

1. Decline in soft and carbonated drinks

2. Intense competition

3. Low growth rates

4. Consumers changing dietary needs

and wants

PepsiCo have a comprehensive portfolio as the second largest food and beverage company in the

world. They sell more than 100 different brands in which 22 independently generate more than

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$1 billion annually (PepsiCo, 2016). PepsiCo’s brand portfolio is highly diverse and no

competition has as many high earning brands as PepsiCo does Jurevicius (2017). They have a

variety of products which keeps their customers satisfied as they offer nearly every type of

beverage or snack.

Their brand recognition and reputation is strong as they own and market very recognised brands

throughout the world, as mentioned previously. Through this they enjoy high levels of customer

loyalty, evident in volume of sales. This stems from high quality of products and effective

marketing. Selling their products in more than 200 countries leads to consumers being aware of

their company all over the world. This owning and selling of popular brands helps PepsiCo cross

sell and introduce new products into the market with ease (Young, 2017).

They have several opportunities presented to them including potential broadening of their

existing product base locally and internationally. They are currently doing so, and have over the

years acquired Starbucks, Gatorade, Lipton-Tea and TrueNorth Nut Snacks; but these are all US

dependent markets which they wish to move away from. These ongoing initiatives implemented

will help them enter new markets and adjust to their ever changing current ones which will lead

to international expansion in potential Russian, United Kingdom and Chinese markets.

Currently as an international company they suffer from a number of weaknesses including their

lack of international growth as 70% of all revenue; over half of the companies profits are

generated within the US region, both North and South America (Young, 2017). This leaves

PepsiCo increasingly vulnerable, which may result in significant impact if economic conditions

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in the US were ever to drastically change. They urgently must maximise potential revenues

outside the Americas and are evidently making small steps forward by investing in China and

India. Also, they fail to effectively market many of their health products to health-conscious

consumers which is significantly important as consumers dietary needs and wants are

continuously changing.

One of the largest threats for PepsiCo is their aggressive competition, in one case the Coca-Cola

Company who are the first largest beverage company in the world. These companies compete

based on brand recognition, loyalty, taste, price, value, quality, advertising, marketing,

promotional activity, plus a lot more. For PepsiCo to remain competitive against this company

they need to implement effective promotion of existing products and effective introduction of

new products as well as effective advertising campaigns and product packaging (PepsiCo, 2016).

The increase in a ‘healthy lifestyle’ trend is also a concern and threat for PepsiCo as they are

seen as an unhealthy company because of their sugar, salt and fat content (Young, 2017).

Although they are making changes in their products and have several products with reduced or

no sugar content, they need to market this effectively in order to create a clear message among

consumers.

One major and very current event that has sparked controversy among consumers and impacted

business across many sectors of PepsiCo, is their latest Pepsi-soda commercial attempting to use

protest imagery to sell their soda. Starring model and TV reality show star, Kendall Jenner the ad

first aired April 5, 2017 but shortly after it was released, the commercial was removed from mass

media channels; predominantly from sources online as social groups came forward expressing

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their concerns, joining in on movements to get the video removed as they fed PepsiCo heavy

backlash.

Figure 5: Recent PepsiCo ad trivialising ‘Black Lives Matter’ campaigns

It was widely mocked and criticised for trivialising protests of social justice causes and imitation

of recent anti-police violence protests, seen in Figure 5 as critics say the image of Jenner handing

the officer a Pepsi particularly evoked a photo of a ‘Black Lives Matter’ protester. (Choi, 2017).

Other social critics said the protesters in the advert held signs that were comically innocuous

with insincere messages saying, ‘Join the Conversation’ and heart and peace signs (Choi, 2017).

In the ad, it shows the famous star leaving her modeling shoot and joining in with a group of

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protestors marching. She then hands an unarmed police officer a can of Pepsi prompting him to

smile while the marchers in response to this action, cheer and hug (Baysinger & Malone, 2017).

Dr. Boyce Watkins, a social commentator and author, had called that ad "arguably the most

racist commercial in history" (Baysinger & Malone, 2017) but Pepsi had described the advert as

showcasing "multiple lives, stories and emotional connections that show passion, joy, unbound

and uninhibited moments. No matter the occasion, big or small, these are the moments that make

us feel alive" (Choi, 2017). With a purpose of trying to project a global message of unity, peace

and understanding. Having clearly missed the mark, they have since come forward saying “We

apologise, we did not intend to make light of any serious issue. We are removing the content and

halting any further rollout” (Baysinger & Malone, 2017).

Although facing serious backlash and boycotting; economically there was no immediate impact

as Wall Street appeared unfazed by the flap, with PepsiCo trading marginally higher at $112.17

(Baysinger & Malone, 2017). Rather, there seemed to be several other climatic macro

environment implications including, social, cultural and legal impacts stemming from the major

event.

One of those major changes to the business environment was that because of the advert, PepsiCo

have come across culturally insensitive and inappropriate. Pepsi’s portrayal of Muslim woman

was as tone deaf as the entire ad, shares Kuruvilla (2017). The ad used images of muslim woman

without sharing issues that have actually caused these women to protest, and failed to mention

any issues that have troubled American Muslims in the last few months (Kuruvilla, 2017).

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Rather, PepsiCo used the Muslim woman in a headscarf to sell soda to the masses. These

portrayed images are problematic as Pepsi have turned Muslim women's’ bodies into props and

objects which shares a stereotype that these women are subjugated (Kuruvilla, 2017).

Organisations need to be super careful when presenting a campaign, as it is expected to be in line

with specific norms otherwise it can severely insult the target demographic affected and hinder

the campaign which has been beyond the case for PepsiCo. This social force puts PepsiCo in hot

water, as they will evidently lose a lot of business to people in this specific demographic as well

as people concerned by this demographic who share values, ideas and attitudes with members of

this grouping. They will not just lose business to those purchasing the products through a retailer,

but also potential sponsors and stakeholders who put a lot of money into the business. This could

affect them immediately, as well as in the long term.

Consequently, PepsiCo have gone against all they hold close to them as a business as they share

long term goals of sustainably growing, aligning with what is good for their business and taking

into consideration society which throughout this large event, was not evident. They also claim to

hold ethics and codes of conduct which address that they act with integrity in the marketplace

and practice ethics in business activity, as well as performing work responsibility for the benefit

of shareholders, but again through the launch of the problematic campaign, was not considered.

Another recent event that has occurred and lead to economic issues within PepsiCo is the

1.5-cent-per-ounce tax on soda and soft drinks in Philadelphia, in the US. The company are

pulling all 2-litre bottles and 12-packs from the shelves across several retailers in the

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Philadelphia region. This tax doesn’t just include that of soft drinks like Pepsi, Mountain Dew

and Mirinda but all sweetened and diet drinks made by PepsiCo including Lipton Iced Tea,

Gatorade and Starbucks ready made drinks (Shen, 2017).

The reason they are pulling larger sizes of their drinks off the shelves is because the tax would

amount to an additional $1.44 on a six pack of soda cans alone, let alone a 12 pack. A 2 litre

bottle of soda that would sell for 99 cents would be hit with a tax of $1.36 which is more than the

product itself (MyNorthWest.Com, 2017).

This issue has accounted for several implications both directly and indirectly for PepsiCo. Sales

have slumped because of the tax which has caused PepsiCo to lay off between 80 to 100 workers

at three supplier plants across the Philadelphia city (Terruso, 2017). With the introduction of the

tax, PepsiCo have watched a decrease in sales by 40% (Terruso, 2017) and as the company

employs around 400 people, the reduction of staff was necessary.

As well as PepsiCo directly having to lay off staff, several restaurants, supermarkets and

convenience store owners are affected as they will be forced to pass on these additional costs to

customers and therefore will have to cut several jobs themselves (MyNorthWest.Com, 2017). It

will cost these suppliers and distributors an extra two cents per ounce, which is way too high.

Impacting PepsiCo all in all as they will lose a lot of business in these areas of operation.

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References

Baysinger, T., & Malone, S. (2017, April 6). Pepsi pulls Kendall Jenner ad after social media

backlash. Yahoo Finance. Retrieved from,

https://finance.yahoo.com/news/pepsi-draws-outrage-ad-depicting-kendall-jenner-protest-

152636669--finance.html

Choi, C. (2017, April 5). Pepsi Pulls Widely Mocked Ad Featuring Kendall Jenner. NBC New

York. Retrieved from,

http://www.nbcnewyork.com/entertainment/entertainment-news/Pepsi-Pulls-Widely-Moc

ked-Jenner-Protest-Ad--418376773.html

Dudovskiy, J (2016). PepsiCo Segmentation, Targeting and Positioning. Retrieved from,

http://research-methodology.net/pepsico-segmentation-targeting-and-positioning-2/

Ferguson, E. (2017). PepsiCo’s Generic and Intensive Growth Strategies. Retrieved from

http://panmore.com/pepsico-generic-strategy-intensive-growth-strategies

Jackson, S. E., Joshi, A., & Erhardt, N. L. (2003). Recent research on team and organizational

diversity: SWOT analysis and implications. Journal of Management, 29(6), 801-830.

Kuruvilla, C. (2017, April 5). Pepsi’s Portrayal Of A Muslim Woman Was As Tone-Deaf As

The Rest Of The Ad. The Huffington Post. Retrieved from,

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http://www.huffingtonpost.com/entry/pepsi-ad-kendall-jenner-muslim-woman_us_58e50875e4b0d0b7e166e184

http://www.nbcnewyork.com/entertainment/entertainment-news/Pepsi-Pulls-Widely-Mocked-Jenner-Protest-Ad--418376773.html


https://finance.yahoo.com/news/pepsi-draws-outrage-ad-depicting-kendall-jenner-protest-152636669--finance.html








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http://www.huffingtonpost.com/entry/pepsi-ad-kendall-jenner-muslim-woman_us_58e50

875e4b0d0b7e166e184

MyNorthWest.com. (2017, April 5). Concerned business owners urge Seattle mayor to rethink

soda tax. MyNorthWest.com. Retreived from,

http://mynorthwest.com/592886/business-owners-seattle-soda-tax/

PepsiCo (2015) Annual Report. Retrieved from

https://www.pepsico.com/docs/album/annual-reports/pepsico-2015-annual-report_final_s

57dqszgmy22ggn.pdf?sfvrsn=0

PepsiCo (2016) Annual Report. Retrieved from

http://www.pepsico.com/docs/album/annual-reports/pepsico-inc-2016-annual-report.pdf

PepsiCo (2017). Official Website. Retrieved from http://www.pepsico.com

Shen, L. (2017, March 23). PepsiCo Is Killing 12-Packs and 2-Liters in Philadelphia Because of

a New Soda Tax. Fortune. Retrieved from,

http://fortune.com/2017/03/22/pepsi-soda-tax-philadelphia/

Terruso, J. (2017, March 1). Pepsi to lay off 80 to 100, blames soda tax. Philly. Retrieved from,

http://www.philly.com/philly/news/politics/Pepsi-announces-80-100-layoffs-blames-soda

-tax.html

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http://www.philly.com/philly/news/politics/Pepsi-announces-80-100-layoffs-blames-soda-tax.html


https://www.pepsico.com/docs/album/annual-reports/pepsico-2015-annual-report_final_s57dqszgmy22ggn.pdf?sfvrsn=0


http://www.pepsico.com/










http://www.pepsico.com/



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Young, J (2017). PepsiCo SWOT Analysis & Recommendations. Retrieved from,

http://panmore.com/pepsico-swot-analysis-recommendations

Young, J. (2017) PepsiCo’s Marketing Mix (4Ps) Analysis. Retrieved from,

http://panmore.com/pepsico-marketing-mix-4ps-analysis

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