Introduction
Pepsi Co. is one of the biggest non-alcoholic drinks manufacturers in the world, selling its products to its consumers globally. To continually retain its market leadership position in the UK and continuously grow its market share, Pepsi has recognized that it should continually come up with innovative products that will allow the company to meet its objectives.
UK consumers would greatly benefit from a Pepsi product that encourages healthy living, hence the introduction of Pepsi vitamin water under the brand name “Pepsi VITAMAX”.
Pepsi is well known for its R&D initiatives, while management expects a positive response from the market once the Pepsi VITAMAX is introduced. Vitamin water can be made in the same procedure as bottled water, using the same equipment, while adding electrolytes, natural flavors, artificial flavors, sweeteners, minerals and more importantly, vitamins. VITAMAX will contain lower calories than other soft drinks, which means that the product will be attractive for athletes and health conscious consumers.
This strategic marketing plan stipulates the need for the proposed product, marketing efforts that will be carried out within the first year of production as well as the various control measures that will make sure that the product becomes successful (Wheelen & Hunger 2002, 43).
Advertising efforts will go towards educating the general public on the importance of healthy drinking habits, and he reasons as to why the need Pepsi VITAMAX. With the given success of bottled water in the UK, vitamin water is certain to be the next phenomenon.
Pepsi will employ technology that will lead to cost and time savings in the production processes as well as distribution channels. Quality and tasteful products will always differentiate PepsiCo from its main rivals. The company expects to achieve sales of £5 million within the first year after introduction into the market.
Corporate Objectives
PepsiCo’s mission is to build and manage a wide range of brands that will increase the company’s market share and cement its position as the leading soft drink manufacturer in the world. The goal of the Pepsi vitamax project, as established by the company, will be to ensure customer satisfaction by promoting healthy drinking habits (Steiner 1997, p. 185). In the long term, Pepsi intends to extend the vitamax brand so as provide for different consumer preferences, and build on the growth of the vitamax brand.
Market Overview
According to the 2010 UK soft drinks report, published by the British Soft Drinks Association (2010, p. 5), the value of the of the UK non alcoholic drinks industry was worth an estimated £13.224 billion in 2009. This represents a 2.2 per cent increase in value from the previous year, while industry analysts are upbeat on the growth of the industry.
The UK economy is improving from the effects of the 2007/2008 recession. While unemployment levels in the UK still remain significantly high, with the government seeking to cut spending and jobs in the public sector in order to tackle its budget deficit, households are not expected to greatly affected by this since the economy is gradually improving.
Hypermarkets, supermarkets and discounters remain the biggest retail outlet for non alcoholic drinks in the UK, accounting for 51 per cent of all sales in the sector. These retailers are strong revenue sources for Pepsi; thereby a favorable partnership with these retailers will boost sales for VITAMAX. Competition in the UK is significantly high, with companies battling for leadership in the beverage market. the industry continues to grow on an annual basis, meaning that Pepsi can capitalize on the revitalized concept of healthy eating by marketing drinks that have nutritional value to the consumers.
Marketing Audit
Marketing Mix
A penetration marketing policy will take effect in the first year of the product launch in order to gain ground fast in the market. A flexible pricing policy will also be adopted in a move that will aim on attracting retailers to purchase and promote Pepsi vitamax in their stores. Prices will range from £0.9 to £1.5 for a 500ml bottle, depending on location within the UK and other factors such as transportation costs.
The product design will be a vital feature in attracting customers and creating interest. As required by UK regulatory laws, the bottles will exhibit details of the ingredients used to make vitamax. Pepsi will also strive to make vitamax available in cans during the first year depending success factors for vitamax, whereby the cans themselves will be available at a cheaper price.
Strategic partnerships with major retailers will make sure that Pepsi vitamax is widely available and accessible throughout the UK. a favored transportation channel will be used so as to reduce transportation costs to retailers across the country.
Promotions will be conducted via mass and social media, utilizing the power of the internet in a cost effective manner (Brown 2006, p. 116). Seasonal discounts could be used to boost sales in certain periods of the year, for instance during the summer or in the festive season. Advertising will inform the public on the benefits of drinking vitamax (Kotler 2003, p. 89), while complying with UK Advertising Standards Authority regulations.
SWOT
Strengths: Pepsi already has a strong brand name, resultant from its spirit of innovative products. The company is also known for its youthful marketing campaigns, whereby most consumers like the brand for its sporty feel. Pepsi can thereby use its strong brand name in marketing the new product in the UK, whereby a strong positive response is expected from consumers and retailers of the proposed VITAMAX brand.
Pepsi has a strong distribution network in the UK, given its strong ties with hypermarkets and supermarkets. Pepsi can reap from the benefits of economies of scale by manufacturing the VITAMAX brand using the same machinery that is used to produce other Pepsi products, thereby encouraging mass production (Baumol and Blinder 2007, p. 142).
Weaknesses: Pepsi may have an over dependent on the US market, whereby the American market accounts for most of its revenues. This may render the company vulnerable to harsh economic conditions in the US, and miss out on opportunities in major markets such as Asia and Europe.
Large US customers such as Wal-Mart are able to negotiate for lower prices and therefore restrict the profitability of the PepsiCo due to their strong bargaining power (Kotler 1999, p. 47). Pepsi intends to correct this by increasing investments in other major markets such as the UK and market its products in a manner that is directed towards UK consumers.
Opportunities: the key opportunities that emerge include bottled water growth, broadening the product base and adjusting products to the changing lifestyles of consumers, especially in the UK. Changing preferences, such as healthy living, present an opportunity for PepsiCo to market more consumer-oriented products. With sales of carbonated drinks expected to decline in forthcoming years, PepsiCo can increase investments in flavored water and vitamin water so as to fill in the gap in the market as a result of lower carbonated drink sales. Pepsi can also benefit from the success of recent products in the UK, such as Pepsi Max, thereby providing a favorable opportunity for a brand extension program in the form of VITAMAX.
Threats: competition from other non alcoholic drink manufactures such as Coca Cola remains a threat, meaning that sales targets will be difficult to achieve. Pepsi intends to market its products aggressively in the market, though such marketing efforts will be limited in part due to the regulatory environment in the UK. The UK Advertising Standards Authority sets measures on advertising standards, therefore it would be unlikely for the authority to grant Pepsi permission to brand VITAMAX as nutritious if the product contains
Fluctuating oil prices are likely to affect the production costs (Sinkovics and Ghauri 2009, p. 145) of plastic bottles, and distribution of products to the various retail outlets in the United Kingdom. An unfavorable effect arising from the introduction of VITAMAX is brand cannibalization, where it is feared that the sales of the VITAMAX brand will reduce the sales of other Pepsi drinks, such as those in the carbonated and energy drinks division. Should this happen, then it will result into slow growth in overall Pepsi sales in the UK.
PEST
The political environment in the UK is regarded as rather stable, with the government been known for its tough stance on consumer protection. Companies are required to publish correct information regarding its products, while advertisements are subject to various checks such as the content of such promotional information. Advertising content should therefore be in compliance with UK’s Advertising Standards Authority recommendations.
The UK is still in the middle of an economic recovery, with the government relying on the private sector to lead in economic growth. Consumption in most sectors of the economy is increasing, as evidenced in market reports such as the publication by the British Soft Drinks Association. Fluctuations in oil prices are likely to affect production costs of the plastic bottles, and transportation costs of the products to the various retail outlets.
The social scene in the UK has seen gain in popularity of the norm of healthy eating habits, whereby consumers now take count of the number of calories they consume with each intake of a particular product.
Technological: Pepsi already has a strong presence in the UK, which is a developed country. Europe is widely known for its efficiency in building machinery; therefore equipment will be sourced from the local market, while other parts can be imported from Germany and France, which have a close proximity to the UK. As such, transportation costs are not likely to influence the purchasing decision of vital equipment.
Assumptions
Assuming that competitors will not be quick to react following the introduction of Pepsi vitamax, then increase in product awareness is expected to be reflected by a corresponding increase in sales.
The high sales figures during the first year of product launch are as a result of ever gaining popularity of bottled water while the Pepsi vitamin water product is expected to match the expectations of the rising health conscious consumers in the market. The slow rise in sales in subsequent years is as a result of expected competitor action in the industry (Tanaka 2004, p. 94). A key assumption is that the UK will continue with economic recovery in the forthcoming years.
Marketing Objectives and Strategies
The main marketing objective of introducing the Pepsi VITAMAX is to stay in line with the overall company policy of continually developing new products for the benefit of consumers, increase sales and market share for the company and continue to build on PepsiCo’s brand name as the favored non alcoholic drink producer in the world. Pepsi intends for VITAMAX to follow on the recent success of Pepsi Max, achieve £5 million target and continually grow in sales by an average of 3 per cent in subsequent years while ensuring healthy profit margins for the company (Heding et al. 2009, p. 34). Increase in sales could lead to increase in the UK market share, whereby the industry grew by 2.2 per cent in value.
The sales targets are achievable, given the strong Pepsi brand name, while the company is also able to produce enough units to meet the market demand. Profit margins will be ensured by the mass production concept, where the company will benefit from economies of scale.
Another objective of equal importance dwells on increasing consumer satisfaction which will highly improve the product repurchase rate. Customer satisfaction data can be obtained via feedback from consumers in the company’s online portal, and social networking sites such as Facebook and tweeter.
The driving factors for the achievement of the above objectives come from the production of a quality product, and distribution at a reasonable price. Retailers such as hypermarkets, supermarkets and discount stores are an important factor to consider since most have these retailers have a broad base of loyal customers.
Partnership agreements with these retailers will ensure that both parties; retailers and PepsiCo achieve their individual objectives. Another strategy deals with the awareness program which will aim to reassure to consumers that Pepsi vitamax is indeed a healthy product, not to be confused with energy drinks that contain high amounts of sugar and cholesterol.
Identification of Alternative Plans
An alternative plan would be to create the vitamin water position by extending another popular Pepsi brand. While this is a viable option, it might confuse consumers in the market (Kottler and Keller 2006, p. 134), for example extending an energy drink brand with the vitamin water may not get the desired effects since some consumers may mistake the vitamin water for an energy drink. The chosen independent brand division, the vitamin water division under the Pepsi vitamax brand, will make it easier for the company to expand the product in the future.
Promotional Program
The design and conception of VITAMAX will likely steer the product during its launch in 2011 and in subsequent years. The management team and the sales and marketing department will work hand in hand to ensure that positive and unique qualities of VITAMAX are portrayed in the market, appealing directly to potential customers (Wheelen and Hunger 2002, p. 238).
A strong public relations initiative will create a strong foundation for campaign activities that set to create a strong foot hold for the company on entrance into the industry. The company could hire consultants who would advice on the placement of advertisements in online, television as well as print media.
The first three months of the year will be dedicated towards creating awareness for the product, with advertisements targeting sporting channels and health channels and magazines. As always, Pepsi will provide details of its products via its online portal, (www.pepsiproductfacts.com).
Packaging and advertising materials will also display relevant and vital information that consumers can use in their purchasing decisions. Following progress reports from the awareness program, Pepsi will enter into partnerships will local retail outlets in a move that will make the product more available nationwide, allowing retailers’ greater flexibility in the setting of their own prices so that they can achieve their own objectives, increase sales or even reward their customers.
Pepsi will tone down on promotional spending after the first three months of introduction into the market whereby the VITAMAX brand will be subsequently promoted together with other Pepsi brands in the market. The company could focus on how VITAMAX complements other Pepsi products so as to boost of sales of other products.
A product augmentation approach may also take shape as a result, whereby consumers of Pepsi snack foods may get a discounted or free Pepsi VITAMAX bottle with every pound purchase, a level that will be determined by management and its retail partners. All these steps could take place in the five months following the first three months of introduction.
In the last four months of the year of the product launch, PepsiCo may decide to revitalize the Pepsi VITAMAX product by introducing several flavors into the market, all under the VITAMAX brand name. VITAMAX orange for example would contain vitamin C, Calcium and electrolytes, VITAMAX passion would contain vitamin E and Choline, VITAMAX cherry would have mixed vitamins and antioxidants.
Other product variations will be determined following further market research and performance of the initial Pepsi VITAMAX during the first two thirds of the year of product launch. Endorsement deals are likely to be conducted by Pepsi ambassadors in the UK, most notably athletes and other celebrities.
Measurement, Review and Control
Prior to the introduction of the Pepsi vitamax brand into the market, the company will seek legal consulting as to the legal framework of the UK beverage industry. Feasibility studies conducted beforehand will seek to determine milestones that the company is to achieve with the Pepsi vitamax brand. The use of milestones will be of most importance (Johnson, Scholes & Whittington, p. 115), whereby Pepsi will establish short-term targets that should be in line with the company’s overall objectives.
Follow up on the milestones is to be conducted on a monthly basis so as to make sure that promotional activities deliver the intended results (Kourdi 2009, p. 59), while maintain promotional costs. Key performance indicators such as sales reports and industry data will guide management on the selection of appropriate strategies.
Feedback from customer satisfaction data will be used to gauge the impact of Pepsi vitamax in the market (Case 2008, p. 201), while expense analysis reports will determine whether marketing efforts have been successful by comparing such data with sales figures in the periods of incremental spending. Budgetary controls will illustrate the performance of Pepsi vitamax against expected results (Trott 2008, p. 55).
Reference List
Baumol, W. J. & Blinder, A. S., 2007. Economics: Principles and Policy. New York, NY: Cengage Learning.
Brown, B. C., 2006. How to use the Internet to advertise, promote and market your business or Web site– with little or no money. New York, NY: Atlantic Publishing Company.
Case, J., 2008. Competition: The Birth of a New Science. New York, NY: Farrar, Straus and Giroux.
Heding, T., Knudtzen, C. F. and Bjerre, M., 2009. Brand management: research, theory and practice. New York, NY: Taylor & Francis.
Johnson, G., Scholes, K. & Whittington, R., 2008. Exploring corporate strategy: texts and cases. 8th edn. Boston, MA: Pearson Education Limited.
Kotler, P., & Keller, K., 2006. Marketing Management, 13th edn. New York, NY: Prentice Hall.
Kotler, P., 1999. Principles of marketing, 2nd edn. New York, NY: Prentice Hall.
Kotler, P., 2003. Marketing Insights from A to Z: 80 concepts every manager needs to know. New Jersey, NJ: John Wiley & Sons Inc.
Kourdi, J., 2009. Business Strategy: A Guide to Effective Decision Making, 2nd edn. New York, NY: Economist books.
Sinkovics, R. & Ghauri N.P., 2009. New Challenges to International Marketing. London: Emerald Group Publishing.
Steiner, G., 1997. Strategic planning: what every manager must know. New York, NY: Simon and Schuster.
Tanaka, G., 2004. Digital deflation: the productivity revolution and how it will ignite the economy. New York, NY: McGraw-Hill Professional.
The British soft drinks association, 2010. The 2010 UK soft drinks report. London: British soft drinks association.
Trott. P., 2008. Innovation Management and New Product Development, 4th edn. London: Pearson.
Wheelen, T. & Hunger, D.J., 2002. Strategic management and business policy. New Jersey, NJ: Prentice Hall.