Pepsi is a leading brand in the soda industry and an arch rival of Coca Cola. It is a global company with sales in 200 countries and territories. The company was incorporated in Delaware in 1919 and reincorporated in 1986 in North Carolina. Like Coca Cola, Pepsi also has a strong global presence and a large and global distribution network. The company invests a large sum each year in marketing and has maintained its leading position in the soda industry as well as a large and global customer base. Pepsi’s growth is also a result of its focus on quality. The company has brought a large product range to the market which also includes several health friendly and low calorie or zero calorie products. In this way, Pepsi has maintained a strong competitive advantage which also reflects in its financial performance over the past several years. Its net revenue in 2018 was more than double that of its rival Coca Cola. Pepsi is also gaining market share by investing in R&D and product innovation as well as marketing.
Pepsi has built strong and sustainable competitive advantage based upon its several strengths. This is a discussion of Pepsi’s resources and capabilities that have helped the brand build sustainable competitive advantage in the soda industry.
Global presence :
Global presence of Pepsico is one of its leading sources of competitive advantage. The company sells its products across more than 200 countries and territories. Its global presence drives its heavy sales and revenue. To strengthen its presence across the world and its brand awareness, the company invests in marketing as well as product innovation. Apart from that, its distribution network throughout the globe has also played a central role in helping the brand gain a critical source of advantage. The company has organized its business mainly on a geographic basis. It has divided its business into six reportable segments that include :
Frito-Lay North America (FLNA)
Quaker Foods North America (QFNA)
North America Beverages (NAB)
Europe Sub-Saharan Africa (ESSA)
Asia, Middle East and North Africa (AMENA)
In this way, Pepsi has managed to establish strong presence across all the continents and continues to grow its brand by investing in market expansion and product innovation.
Distribution network :
The strong and stable distribution network of Pepsi plays a central role in helping the brand maintain its global presence and gain an advantage in terms of customer base, sales and revenue. Its global distribution network also acts as a core pillar of its business model. The distribution network of Pepsi includes Direct to store delivery, customer warehouses and third party distribution networks. Type of distribution channel to be used depends upon the needs of the customers, product characteristics as well as local trade practices. Pepsi with its independent bottlers and distributors operates the direct store delivery system, customer warehouses and distributor networks. The DSD system is used to distribute the products that are restocked more often. Pepsi also delivers some products to customer warehouses from its manufacturing plants. These products mostly include the ones with low turnover. In 2018, Pepsi spent total $10.8 billion on shipping and handling.
Supply chain :
Pepsi has also managed a large and global supply chain that involves thousands of suppliers from various corners of the world. Managing a large production system also requires a large supply chain that can provide all the material required to produce the beverages and snacks brands owned by Pepsi. The company has focused on creating a fast and flexible supply chain. Apart from water, which is a key ingredient required for the production of beverages, the company also depends on a large number of agricultural products for the production of snacks and beverages it sells. To manage a sustainable supply chain and for sourcing good quality raw material, the company has established a code of conduct applicable to all its suppliers. Apart from that, the company also carries out regular audits to ensure quality standards and product safety. Pepsi provides its suppliers with training and education and more resources to help them manage their business more efficiently and to sustain long term relationships with the brand. It also offers resources to farmers to help them deliver better results.
Large product range :
Pepsi has brought a large product range to the market that includes both regular and low calorie products. The leading brands in the portfolio of Pepsico include Pepsi, Mountain Dew, Lays, Gatorade, Quaker Oats, Aquafina and several more. The company has built a balanced portfolio of beverages, energy drinks, waters, food and snacks. In recent years, the company has grown its focus upon healthier products to cater to the changing needs and tastes of the people. People have grown more health conscious and need low calorie or zero products to avoid obesity. Growing product range of Pepsi has also brought the company higher success. Just like Coca Cola, Pepsi also has several billion dollar brands in its product portfolio. The company is able to cater to the taste of a large group of customers with diverse tastes and varying needs.
Marketing is also a key source of competitive advantage for brands in the soda industry. Apart from churning demand, it creates brand awareness and drives brand recall. Pepsi as well as its leading competitor Coca Cola spend a large sum each year on marketing and promotions. Both are known for their excellent marketing strategy and techniques. In 2018, the brand spent around $4.2 billion on advertising and promotions. The company uses both modern and traditional channels for marketing. Apart from digital channels, in-store promotions and outdoor channels are also some major marketing channels for Pepsico. The soda beverages industry has grown highly competitive and apart from Coca Cola, there are other local and international competitors of Pepsi as well. In such an environment, marketing helps retain demand as well as customer base and becomes an important source of competitive advantage.
Human resource management :
Excellent human resource management is also a critical source of competitive advantage in this era. Competition in the industry has grown intense. Companies want to hire only the best candidates. It is because talented employees can help a company find faster growth. Pepsi invests a lot in its employees including huge salaries and learning resources. Apart from good salaries, the brand also provides its employees other benefits to retain talented employees for longer. Other important aspects of its organizational culture include inclusion and diversity. It has created an environment that fosters learning and growth. An excellent performance management system at pepsi helps manage the performance of the employees and provide them the right opportunities of growth.
Large Customer base :
Pepsi’s large and loyal customer base is also an important source of competitive advantage for the brand. To retain its customers, the brand invests in marketing as well as customer engagement. Its products sell across more than 200 countries. Apart from a large range of products available in varying flavours and sizes, the company has included several low calorie products to cater to the needs of the health conscious customers. Marketing and product innovation have helped the brand expand its customer base continuously.
- Pepsi Annual Report 2018.