A SWOT Analysis of Pepsico
go to Pepsi SWOT Analysis 2018
Year 2015 proved to be a challenging one for Pepsico (NYSE: PEP) just like most of its rivals. The reason was the state of the global economy and the strong dollar. The fall in demand in the countries that were previously in a state of boom led to a loss of sales for the beverages giant. Since the global economic slowdown, the dollar has grown stronger shrinking Pepsi’s profits. From $66.7 Billion in 2014, Pepsi’s global net revenue fell to $ 63.1 billion in 2015. The growing health trends are another reason that its sales slowed down in US. The customers are cutting down on drinks with sugar and the entire soda industry has born the brunt. Pepsi also made some changes to its formula of Diet Pepsi and Sierra Mist. However, despite it all Pepsi has managed to retain its rank on the Fortune 500 list at the 44th number.
CEO: Indra Nooyi
Number of employees: 263,000
Headquartered at Purchase, NewYork.
|$ millions||% change|
|Total Stockholder Equity ($M)||$11,923|
|Market Value — as of March 31, 2016 ($M)||$149,753|
Source : Fortune 500 list
- Well known brand (brand image)
- Broad product portfolio
- Extensive Global Presence
- high popularity of brands and customer loyalty
- excellent marketing and advertising strategy
Pepsi is among the two leading brands in the carbonated beverages category. The brand is present globally and enjoys a very high level of brand recognition. For years, it has remained the favorite of consumers throughout the world. Apart from it, the brand’s product portfolio is quite large with a single competitor having the ability to match it. Its product portfolio can be challenged only by Coca Cola. The 22 brands in its product portfolio of food and beverages brands generate more than $1 billion each in annual retail sales.
Its complementary food and beverages portfolio enables the brand to drive its costs low as well as provide the customers with several choices. Pepsi is a global brand present throughout the world in several countries. Moreover, the popularity of the Pepsi products is very high and it enjoys high customer loyalty in several parts of the world. Its unique marketing and advertising strategies are another key strength of the brand. If Pepsi spends heavily on advertising and marketing then it is to keep its customers engaged. The brand tries to keep millions of its customers throughout the world engaged with its unique marketing and advertising campaigns.
- Popularity relatively low among the health conscious consumers.
- low penetration in countries other than US (heavy dependence on US market)
- Image damage due to continued lawsuits
The popularity of the Pepsi products among the health conscious consumers is relatively low. Apart from limited healthy options, the brand has not marketed to the health conscious consumers with heavy focus either. The dependence of Pepsi on the US market is also very high. The level of its penetration in US is higher as compared to the other nations. While a few other markets are its strongholds, mainly US has remained its biggest source of revenue. It is also a reason that declining sales in US became a major worry for Pepsi. Continued lawsuits have also tainted its image and some of these lawsuits are still continuing. Some of them like the one related to the use of carcinogenic products in its drinks is also a major source of worry for the brand. Not just this, these laws can cause a loss of image as well as financial losses both for the company.
- Increasing the number of health products in its portfolio
- Overall increasing the size of portfolio
- Increased penetration in European and Asian nations
- Diversification and partnership with other brands
While Pepsi has seen its business decline in the year 2015, the brand has still some great opportunities that it can use to increase its revenue generating opportunities. In this regard, the first thing Pepsi could easily do is to add new products to its portfolio. Pepsi is an established brand and adding new products could not just generate revenue and profits, it could also be a means of penetrating the global market deeper. Simultaneously, the brand should shift its focus towards healthier products.
Pepsi has a shiny portfolio, but if it wants to compete effectively with Coca Cola the best thing is to widen the net for the customers. While US has generally proved the Golden Goose for Pepsi, it needs to reduce its dependence on the US market. In this regard focus has to be on increased popularity and loyalty in the Asian and European markets. It might also try new marketing strategies to better its hold on the markets other than US. Another key source of revenue for the brand can be partnership with the other brands. Pepsi can partner other brands to increase its brand recognition in several parts of the world for mutual benefit. Diversification can also be a good idea for Pepsi and it could start from related products.
- continued lawsuits
- increased competition
- condition of global economy
- strong dollar
- water scarcity
The lawsuits continuing against Pepsi can do some major damage to Pepsi’s image. While its hold on the foreign markets has generally been weak, the lawsuits have weakened its image. Now, the most important question before Pepsi is how to protect its image from continued assaults. Another important threat is the heavy competition. The soda industry has been reeling under pressure since the global recession. The heavy competition in the industry is adding to the pressure. Global recession has left the industry in a very poor condition and it will need to pull harder to emerge from this recess. The dollar has strengthened since the recession eating into the profits of Pepsico. Next, is the water scarcity globally that can be a major pain not just for Pepsi but also for its competitors in Soda industry.
Pepsi must deal with some of its threats at a priority level. Particularly, it needs to overcome the threat posed by the continued lawsuits. It must do things that improve its image and not rock it harder. While a stronger dollar is a major threat, the situation of the global economy is not under Pepsi’s control. Still, this threat can be expected to subside over time. However, healthier products and a broader product line are still very important and can prove profitable for Pepsi. It should also focus on saving water and environmental resources. That will improve Pepsi’s image and also help at long term water management. Water is one of the major costs and investment that goes into the making of its beverages. Pepsi should make it a primary focus area.
[‘SWOT’ is an acronym for Strengths, weaknesses, opportunities and threats. It is a powerful strategic management tool that can help to know one’s important strengths and weaknesses and to exploit the opportunities. It can also help counter the threats. Strengths and weaknesses are internal factors and opportunities and threats external. So basically, SWOT is a tool designed to help you reduce your weaknesses and counter the threats. This can improve the business’ chances of success. Companies conduct a SWOT before they embark on a new strategy or before they make an important business move like investing in a new project.]