Brand Analysis: Pepsi and The Soft Drink Industry

Course: MKTG 300: Principles of Marketing, Honors 
Written: April 24, 2014 
Published: September 18, 2017
© All Rights Reserved

Brand Analysis Report:
Pepsi and The Soft-Drink Industry



This report outlines the market analysis of the Soft Drink industry, brand analysis of Pepsi, and three comprehensive recommendations. Upon research, I realized that Pepsi is one out of twenty-two brands owned by the parent company, PepsiCo. For zero confusion, this main premise of paper analyzes Pepsi and references PepsiCo when necessary.

The market analysis describes the following key components: size, profit and growth. It then does an environmental scan of the industry, outlining trends and challenges based upon the five environmental forces: social, economic, technological, competitive, and regulatory. In brief, the market analysis also touches on political challenge(s) impacting the industry.

In relation to the brand analysis of Pepsi, the paper discusses the following: segmenting, targeting, positioning, segmentation approaches, marketing strategies, pricing strategies, target markets, distribution channels, and the marketing mix. Following this, the paper highlights the tactics and elements of PepsiCo's communications mix: advertising, public relations, and sales promotion. The last section of the brand analysis includes a SWOT analysis. Based upon this information, the paper discusses the pros and cons of the following recommendations in order to improve Pepsi’s competitive position:

  1. Increase awareness of the current soda lines, Pepsi Max and Pepsi Next, in an effort to respond to consumer concerns about healthier drink alternatives
  2. Strengthen social media and online presence to improve competitive position, market products, and build unwavering consumer loyalty
  3. Expand use of eco-friendly, sustainable packaging materials for soda cans and bottles


    Size, Profit and Growth

    In order to conduct a comprehensive environmental scan of the Soft Drink industry, it’s pertinent to highlight size, profit, and growth. As a whole, the industry generated revenues of 20.4 billion and profited 855.2 million in 2013 (IBIS, 2014) (See Exhibit A). As we can see, industry profitability is relatively low. This is partly due to high production costs. As a result, the industry experiences low profit margins. Another implication is modest growth and the exit of smaller producers from the industry. According to IBIS, smaller producers were forced to exit because they were unable to increase product prices (2014).                                                                                                                          

    Environmental Scan: 5 Forces

    Social Forces

    Changing attitudes and values towards healthier options is impacting consumer buying patterns and trends within the industry. More specifically, “U.S. soda-industry volume has fallen nine straight years as consumers have shifted to water and other beverages amid concerns over obesity and worries about artificial sweeteners (Wall Street Journal, 2014). As a result, the demand for low-calorie, low-sugar, and preservative free soft drinks is increasing (Change Lab Solutions, pg. 11).

    Economic Forces: Macroeconomic and Consumer Income

    Within the soft drink industry, high input costs stem from aluminum, PET plastic, corn, and sugar (Wiki Invest, 2014). The prices of these raw materials fluctuate. In turn, this fluctuates the demand for soda. A report by Change Lab Solutions, outlines the macroeconomic factors that affect demand:

    "A number of factors determine demand for soft drinks, the first determinant is price, as the demand for soft drinks is relatively price-elastic. This means that as the price of soft drinks increases, the demand decreases to a greater degree, relative to the price change. Demand for soft drinks is also relatively income-elastic, meaning that as consumers’ incomes decrease, the demand for soft drinks decreases to a greater degree, relative to the income change, and vice versa (2012)."


    So, we can gather that consumer spending on soda is affected by income levels. When consumers have more income, they purchase more soda.

    Technological Forces

    Social network communication between soda companies and consumers is thriving. A prime technological change in the industry is social media marketing. According to a report by Mintel Oxygen, social media has acted as a dynamic and measurable tool for brands in the industry: “The internet, and in particular social media, has proved to be a powerful tool for brands to generate and measure buzz and the result is a wealth of online consumer conversations (Mintel Oxygen, 2013). In addition, the industry has experienced technological advances that improve automatic stacking and the environment:

    “One of the technological advancements implemented with regards to packaging is hybrid palletizing, which uses a robotic interface to adjust a machine's specifications to produce several kinds of pallets, or those that have reduced energy and air consumption...Additionally, many major companies are transitioning to use biodegradable plastic bottles” (IBIS, 2014).

    Competitive Forces: Main Competitor, Form of Competition, Internal and External Levels

    From a brand level, Pepsi’s main competitor is Coca-Cola. From the parent company perspective (PepsiCo), “the problem has been compounded by losing market share to Coca-Cola” (Wall Street Journal, 2014). On a global level, “the Coca-Cola Company is number one in global soft drinks...PepsiCo only challenges Coca-Cola in North America and Eastern Europe.” (Euromonitor, 2011). At the same time, out of all the money spent on soda in the U.S. in 2013, 10.8% was spent on Pepsi and 13.5% was spent on Coca-Cola (Euromonitor, 2014). In addition, we can see that from 2008-2013, Pepsi’s brand share has been slightly lower than Coca-Cola’s (See Exhibits B and C).

    Exhibit C: Table Showing Brand Share in Exact Figures, Source: Euromonitor (2014)

    The competitive space of the soft-drink industry is highly competitive. On a scale from low to high, IBIS rated the competition level of the soft drink industry as high (IBIS, 2014). The industry favors monopolistic competition because it’s known for “many sellers [to] compete with substitutable products within a price range” (Marketing, 2013). Quite naturally, Coea-Cola and Pepsi can be classified as substitute products.

    Competition stems from both internal and external parties. On an internal level, “Soda producers compete based on a number of factors including price levels, range of products offered, product innovation and marketing (IBIS, 2014). From an external level, competition between producers of ready-to-drink (RTD) beverages has emerged. Bottled water, juice, tea, and energy drinks, and sparkling fruit drinks are just a few of examples of RTD beverages that are growing within the industry.  

    Regulatory Forces

    From a regulatory perspective, “over the five years to 2019, the industry will face a difficult operating environment, as government campaigns promoting healthier habits cause consumers to purchase less soda” (IBIS, 2014). It's important to note that this perspective bridges social and regulatory forces. This relates to regulatory forces because the government is in control of how campaigns are promoted. In this way, one implication of these campaigns may affect soda regulation and distribution


    Within the industry, there are not many political issues. But nonetheless, some states will have state and city bans on soda (IBIS, 2014). This relates to politics because the decision on whether to ban or not to ban soda at state and city levels must be approved or denied by political figures.

    Consumer Behavior

    As mentioned earlier, consumer behavior within the Soft Drink industry has shifted to more health-conscious drinks. This is an industry wide trend. So in turn, the shift of new preferences impacts the consumer purchase decision process. As Exhibit A showed, per capita soft drink consumption and revenues has decreased.


    Segmentation: Strategy, Geographic, Demographic, Psychographic, and Geographic

    Pepsi Brands are divided into three sections: Pepsi Max (low-calorie), Diet Pepsi, and Pepsi Next (60% less sugar) (Pepsi, 2014). In this way, Pepsi soda takes the segmentation strategy of one product and multiple market segments (See Exhibit D). However, it’s important to note that the parent company, PepsiCo uses the multiple products and multiple markets strategy because PepsiCo owns 22 brands that sell multiple products: snacks, juices, water, and oatmeal.  

    The analysis of this paper discusses the geographic region of the U.S. But nonetheless, Pepsi geographically segments markets domestically and internationally. Therefore, Pepsi appeal to both domestic and international markets.

    Pepsi primarily segments on the basis of demographics and psychographics. Pepsi segments by the demographic sub-group variable of age when they choose to influence younger audiences. The following sub-group variables don’t apply to Pepsi’s segmentation: household size, marital status, income, education, occupation, and income.

    Pepsi uses psychographic segmentation when they appeal to the pop culture aspect of society. This will be discussed in more detail in the communications mix section. But nonetheless, appealing to pop culture relates to the following segmentation variables: personality and values. Pepsi Max, appeals to the psychographic segmentation variable needs since Pepsi Max is for consumers who consider health a need.

    Targeting: Target Markets

    Pepsi’s target market is 18-35 year olds (US News, 2012). Pepsi’s new outreach through unconventional forms of marketing, like social media, is an effort to strengthen the brand loyalty of the youth target market. There is no definitive preference between males vs. female target markets. Pepsi embraces both.

    But nonetheless, men (52.6%) prefer Pepsi over women (47.4%) (Simmons OneView, 2014). After the age of 35, preference for Pepsi tends to decrease. But 18-35 is the most robust, according to the data (Simmons OneView, 2014). From 18-24 years old, we see that 25.9% drink Pepsi and 42.3% say they drink Coke. From 25-34 year olds, 21.5% say they drink Pepsi, and 20.9% say they drink Coke.

    Theses statistics explain why Pepsi is appealing to younger audiences because the figures are larger for 18-24 year olds in comparison to 25-34 year olds. (See Exhibit E).


    Pepsi’s current “Live For Now” slogan is a prime example of how Pepsi positions the brand. The slogan is a clever strategy to anchor the perception that drinking Pepsi embraces a robust, fulfilled, and adventurous lifestyle. At the same time, positioning the brand in this way causes consumers to see Pepsi as a preference product within consumer product classifications. Here, the consumer would say ‘I want Pepsi instead of Coke,’ so the brand choice would be evident.

    This “Live For Now” slogan could also be in an attempt to form product repositioning. In this sense, Pepsi is changing how consumers view their products relative to their competitor, Coca-Cola. Coca Cola’s current slogans are “Open happiness” and “Live Positively” (Coca-Cola, 2014). It’s obvious that Coca-Cola is appealing to the self-actualization class, from Maslow’s Hierarchy of Needs. Whereas, Pepsi appeals to same class, but “Live For Now” is more forward-thinking and ambitious (See Exhibit F).

    Marketing Strategies

    One strength of Pepsi Marketing strategies is partnerships with celebrities (See Exhibit G). In 2001, Pepsi paid Britney Spears a reported $50 million dollars (The Guardian, 2001). In 2012, Pepsi paid Nicki Minaj a reported $6.5 million dollars (Forbes, 2012). And in 2013, Pepsi endorsed Beyoncé for a total of $50 million (Forbes, 2012) (See Exhibit H). Pepsi formed a partnership with Beyoncé, a brand ambassador for the company (Variety, 2013) (See Exhibit H). This strategy proves to be successful because celebrities influence millions of consumers. In turn, this has the potential to cause consumer preference to lean towards Pepsi instead of Pepsi’s competitors.

    Pepsi has also partnered with the 86th Academy Awards and “is introducing a 60-second TV spot featuring the 1996 Best Supporting Actor Oscar winner Cuba Gooding Jr. The TV spot... showcases Pepsi’s mini can and parallels the storyline that celebrates some of the top mini moments of cinema” (Mintel Oxygen, 2014). Here, we can see that Pepsi is expanding marketing communication channels with the help of live TV. The use of Pepsi cans also acts as product placement.

    Communications Mix: Advertising, Public Relations, Sales Promotion, and Direct Marketing

    Pepsi utilizes the majority of the elements and tactics of the communications mix. Advertising and sales promotion are more important to the nature of Pepsi in comparison to direct marketing and public relations. On the whole, PepsiCo increased its advertising spending on Pepsi and other soft drink brands by $500 million to $600 million (Mintel Oxygen, 2013).

    In addition to traditional forms of advertising and marketing, Pepsi has a strong social media presence, although it could be improved (See Exhibit I). Take for example, in 2010 when Pepsi chose to market through social media instead of television commercials during the 2010 Super Bowl:

    “PepsiCo announced that for the first time in 23 years, it would not be advertising during the super Bowl via television commercials; instead, it said it would be spending $20 million on a social media campaign in an effort to better connect with the youth market” (Change Lab Solutions, pg.65, 2012).


    Social Media Platforms



    Who Wins?


    2.53 million followers

    2.41 million followers



    31.8 million likes

    81.6 million likes



    186.4 million views

    708,731 subscribers

    291.1 million views

    253,574 subscribers

    Pepsi: subscribers

    Coke: video views



    143, 710 followers


    Laura Hobart, Pepsi’s chief marketing officer in 2010 of Pepsi-Cola North America Beverages added her perspective about marketing through social media during the Super Bowl as well:  

    "This is such a fundamental change from anything we've done in the past… It’s a big shift. We explored different launch plans, and the Super Bowl just wasn't the right venue, because we're really trying to spark a full-year movement from the ground up” (Time, 2010).


    In this way, Pepsi feels that social media can ignite movements. Ever since 2010, Pepsi has continued to use social media to connect and engage consumers.  It’s no denying the fact that utilizing social media to advertise and market efficiently is one of Pepsi’s strengths. For this reason, Pepsi was “selected by U.S. News as one of America's Most Connected Companies for its ambitious social media strategy” (US News, 2012). An article by David Hatch from US News describes Pepsi’s most recent social media strategy at best:

    “Pepsi's April 30 launch of a digital dashboard featur[es] lots of sugary references to pop culture, which the company hopes will resonate with its core audience of 18- to 35-year-olds. The content, found at, is part of the beverage giant's new "Live for Now" marketing campaign. The refreshed site highlights user-generated messages from Facebook and Twitter that include the #LiveForNow hashtag, plus tweets from music artists Nicki Minaj, Katy Perry, and Joe Jonas (2012).”


    This new marketing campaign partners with celebrities, appeals to Pepsi’s target markets, and helps to position the brand. An extension to this dashboard is Pepsi Pulse, a place where anyone with a niche for pop culture would be satisfied. Pepsi fans receive tweets from celebrities in real time and tweet about their “Live For Now” experiences. The Pepsi Pulse experience can be seen live on Pepsi’s website homepage. One can also see pictures of Pepsi fans showcasing Pepsi pride (See Exhibit J).

    Marketing Mix


    As mentioned earlier, one key product issue is healthier drink options. Due to this issue, industry profitability declined in 2013. But nonetheless, it’s fair to say that Pepsi is leveraging this issue with its promotion of Pepsi Max, its zero-calorie soda. The product is branded in the form of three distinct colors: red, white, and blue.  The need that Pepsi satisfies for consumers is twofold: thirst and brand preference.

    Place (Distribution)

    In order to receive a comprehensive framework of Pepsi’s distribution channels, I will reference the parent companyPepsiCo. According to PepsiCo’s 2013 Annual report, PepsiCo’s products “are brought to market through direct-store-delivery (DSD), customer warehouse and distributor networks” (2013 PepsiCo Annual Report, pg. 5). On a more specific basis, DSD and customer warehouses present numerous benefits:

    “DSD enables us to merchandise with maximum visibility and appeal. DSD is especially well-suited to products that are restocked often and respond to in-store promotion and merchandising. Some of our products are delivered from our manufacturing plants and warehouses to customer warehouses and retail stores. These less costly systems generally work best for products that are less fragile and perishable, have lower turnover, and are less likely to be impulse purchases” (2011 PepsiCo Annual Report).

    On a more general level, consumers can find Pepsi soda at restaurants, vending machines, grocery stores, supermarkets, gas stations, and convenience stores.


    One pricing strategy that Pepsi has utilized during holidays is what they call “hybrid everyday value.” So, Pepsi will “narrow the gap” between holiday pricing and other days, making discounts less drastic. The strategy is tailored to U.S. consumers. It aims to prevent them from purchasing soda in bulk during the holidays, where 12oz, 12 can packages costs $2.50-3.00, and then avoiding purchasing soda until much longer time periods (Chicago Tribune, 2013). The low pricing of $2.50 would be an example of a penetration strategy, rather than a skimming strategy. For Pepsi, the “hybrid everyday value” pricing strategy falls somewhere in the middle of the two. Furthermore, it’s important to note that there’s barely any price differentiation between Pepsi, and it’s major competitor Coke.


    As stated earlier, Pepsi’s promotion is global. Social media, the internet, and digital technology enable the brand to promote both domestically and internationally. In addition to the internet, Pepsi also features celebrities in their Television advertisements.

    SWOT Analysis

    • Social media as a dominant marketing strategy
    • Major player in the industry
    • Strong and sophisticated distribution channels and methodology
    • Lower market share relative to Coke
    • Lower social media followers than Coke
    • Increase awareness of current soda products to meet rising consumer preferences and trends for healthy drinks
    • Improve social media marketing strategies
    • Strengthen consumer preference and loyalty
    • Rising raw material costs
    • Falling demand for sugary drinks


    Pepsi has explored multiple ways to connect and engage with consumers through social media, all while positioning the brand. As discussed earlier, Pepsi’s #LiveForNow campaign is interactive and forward-thinking. One example of this is the collage of pictures from Pepsi fans that are featured on the homepage of If one takes a quick glance at Coke’s website, it is stagnant and less interactive. Pepsi can be seen as a preference product because some consumers naturally prefer Pepsi over Coke. Pepsi’s supply-chain and distribution channels are sophisticated and have proven to be beneficial for the company (See Exhibit K).


    Pepsi’s market share is lower than Coke’s as mentioned earlier. But nonetheless, Pepsi brands generate more revenue than Coca-Cola (Yahoo Finance, 2013). It wouldn’t hurt Pepsi if they increased their market share. At the same time, Pepsi can strengthen their social media presence. They already have a strong groundwork in place, as well as platforms to promote. However, the begging question is: Why are Pepsi’s followers lower than Coke’s even though Pepsi’s strategies are more innovative? The recommendations section will explore this more in-depth and provide reasoning outlining how Pepsi can rectify this current weakness.


    Because consumer preferences are changing towards healthier drink options and industry revenue for sugary drinks has declined, Pepsi can strengthen the awareness of the soda lines Pepsi Max (zero-calorie soda) and Pepsi Next (60% less sugar soda). Repositioning these brands, all while increasing the awareness of them would be a safer alternative in comparison to expanding the selection of healthier drinks. Pepsi’s social media presence falls behind it’s major competitor’s (Coke) slightly. Therefore, there is room for improvement. All in all, if Pepsi maximizes these opportunities, one positive implication is increased consumer loyalty.


    Of equal importance, the Market Analysis section of the report explained how raw material costs are rising and demand for sugary drinks is decreasing. As a result, these are two primary threats. But nonetheless, the SWOT opportunities coupled with the following three recommendations would help to offset these threats and improve Pepsi’s competitive position.


    After conducting a comprehensive analysis of the market and brand, I've formed the following three recommendations in an effort to improve Pepsi's competitive position:

    1. Increase awareness of the current soda lines, Pepsi Max and Pepsi Next, in an effort to respond to consumer concerns about healthier drink alternatives
    2. Strengthen social media and online presence to help improve competitive position, market products, and build unwavering consumer loyalty
    3. Expand use eco-friendly, sustainable packaging materials for soda cans, bottles, and packaging

    1st Recommendation: Increase awareness of the current soda lines, Pepsi Max and Pepsi Next

    The market and SWOT analysis leads me to say that it would be advantageous for Pepsi to increase awareness of Pepsi Max and Pepsi Next. This is an opportunity for Pepsi in an effort to respond to consumer preferences that are leaning towards healthy drinks. At the same time, implementing this recommendation strives to improve Pepsi’s competitive position. The oxymoron with soda is that most people don’t view soda as healthy. This justifies why Pepsi should continue to offer regular Pepsi and healthier Pepsi, tapping on both consumer preferences. Awareness of Pepsi Max and Pepsi Next could be strengthened if Pepsi endorses it by partnering with famous athletes and teams. Pepsi Max could be positioned as: ‘Maximizing your health to its fullest potential.’ Pepsi Next could be positioned as: ‘Taking your health (or your thirst) to the next level.’

    1st Recommendation: The Pros and Cons



    • Higher consumer demand for Pepsi Max and Pepsi Next
    • Increased market share position
    • Increased revenue*
    • Low consumer response to Pepsi Max and Pepsi Next
    • Cannibalization: Pepsi Max and Pepsi Next dominate over regular Pepsi


    Exhibit L: Pros and Cons for the 1st Recommendation

    *The Market Analysis indicated that revenues for sugary drinks have declined (IBIS). Then, it is very possible that Pepsi’s revenue could increase if they offer healthy drinks.

    1st Recommendation: Justifying Actions with Logic

    If Pepsi chooses to ignore the shift to healthier drink options, Pepsi may loose the following: consumer demand, preference, brand loyalty, and sales. In this way, it is justifiable to respond to consumer needs and wants. At the same time, from the environmental scan in the Market Analysis section, we know that the government is increasing regulation on soda in different states because many deem soda as unhealthy. In response to this regulation, it would be advantageous for Pepsi to increase healthier options. It's also important for Pepsi to anchor the fact that they are responding to consumer preferences. In this way, Pepsi needs to market Pepsi Max and Pepsi Next effectively. The second recommendation ties into how Pepsi could do just that.  

    2nd Recommendation: Strengthen social media and online presence

    The brand analysis section along with Exhibit I, leads me to recommend that Pepsi would benefit from strengthening its current social media presence in an effort to improve market share and competitive position. An article from Times that discussed Pepsi highlighted that: “These days, viral marketing seems like a smart strategy” (Times, 2012). Social media is viral marketing. And if products are marketed effectively, this could influence consumer demand and Pepsi’s profits positively.

    Today, we are in the information age. Consumers want to feel like they know the brand on a personal level. People love to see day to day experiences and behind the scenes perspectives from brands. We can see that Pepsi and Coke are neck and neck with social media presence from Exhibit I. The next logical question would be: ‘How can Pepsi strengthen its social media presence in ways that it isn’t already?’ On a deeper analysis, here are some ways that I have realized have proven to be beneficial in today’s time:

    • More people from the company representing the brand on social media i.e. Twitter accounts from the CMO, CEO, and other departments
    • Videos and pictures showing consumers a behind-the-scenes look at what happens in Pepsi offices, facilities, and warehouses
    • Sharing graphics and videos from social media accounts and encouraging followers to share and retweet them

    2nd Recommendation: The Pros and Cons



    • Tailored reach to target market
    • Possible target market expansion
    • Stronger consumer loyalty
    • Innovative ways to market Pepsi soda products, including Pepsi Max and Pepsi Next
    • Increased variable costs
    • Stagnant consumer preferences

    Exhibit M: Pros and Cons for the 2nd Recommendation

    2nd Recommendation: Justifying Actions with Logic

    While some may say this is overexposing the brand, it’s important to note that Pepsi can control what pictures, images, and content they present to consumers. The benefits outweigh the costs when it comes to engaging and connecting with customers, all while positioning the brand.

    3rd Recommendation: Expand Use of Eco-Friendly and Bio-Degradable Material for Soda Cans and Bottles, all while Marketing the Benefits

    Of equal importance to the previous recommendations, Pepsi's competitive position would benefit from using eco-friendly and bio-degradable materials for soda cans, bottles and packaging. In this way, Pepsi should also expand its use of recyclable material for the production of cans and bottles. The technological advances discussed in the market analysis section further justify how sustainable packaging would be beneficial.

    3rd Recommendation: The Pros and Cons



    • Decreased fixed costs in the long run
    • Improvement towards environmental sustainability efforts
    • Enhanced consumer loyalty
    • Diversified marketing advantages*
    • Difficulty to implement
    • Unforeseen complexities


    Exhibit N: Pros and Cons for the 3rd Recommendation

    *In relation to the last “pro,” I reference diversified marketing strategies. If Pepsi increases their use of eco-friendly and bio-degradable materials, they can market this as a benefit to consumers. At the same time, this relates to green marketing.

    3rd Recommendation: Justifying Actions with Logic

    Conventional wisdom supports the understanding that overtime, biodegradable and eco-friendly materials can be cost-effective. But to present a fair analysis, it's fair to say that the costs to perfect the integration of bio-degradable and eco-friendly materials into cans and bottles may be higher in the beginning. A 2011 article, unveiled that Pepsi has created the first eco-friendly bottle, which is “the world's first bottle of a common type of plastic called PET made entirely of plant-based materials” (Fox News, 2011). So, this should be reassuring when considering the cons to this recommendation. Considering industry trends, sooner rather than later would be a prime to roll-out and perfect the plastic bottle. In addition, Pepsi would need to market the benefits of these eco-friendly bottles to consumers.


    Still, one logical question that one may ask in reference to market share and competitive position may be: 'Why is Pepsi's market share less than Coca-Cola's? One logical answer could be that Coke was founded 13 years before Pepsi and had a time advantage. Still, the competitive position and market share of both brands has alternated between Pepsi and Coke throughout the years. As a whole, I can confidently conclude that the previous recommendations act in Pepsi's favor in terms of overall competitive position, marketing advantages, profitability, consumer demand, and market share.







    Very clutch!!!!!


    Should send this to Pepsi. They could learn a lot right now.

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