Summarized Strategic Analytical Overview of PepsiCo Southern African Beverage Division.

By Faraaz Gani BAccSc (Wits) Cima Dip MA

Title and Content Layout

• Informal Sector Basic Analysis > Pro’s and Con’s > Recommendations > Conclusion

• Formal Sector basic Analysis > Pro’s and Con’s > Recommendations > Conclusion

Informal Sector Basic Analysis. Micro analytical Overview of the Zinniaville Business Area in the city of Rustenburg in the North West Province, South Africa.

PepsiCo SA Beverage Division Informal Sector Disadvantages:

• Imported Pepsico Beverage Brands are more widely distributed and available than its locally made counterparts (Pioneer Foods vs Dubai Refreshments Co. and Saudi Industrial Projects Co.)

• The new branding of Pepsi logo and colour scheme is not extended to existing brand display units. See images below.

• Pepsico SA Beverage Division does not have a clear distribution channel servicing the informal sector.

• No Pepsico SA Beverage Mini-Depo’s or service centers available for independent shop owners to obtain pepsico fridges and other marketing media.

• Pepsico SA Beverage has a limited range which does not include prominent international Pepsico brands such as Aquafina, Amp Energy, Brisk Iced Tea and Gatorade.

• Pepsico SA does not provide an experiential link to consumers in the informal sector. Example includes its Rival Coca Cola providing disadvantaged communities with clean drinking water.

Cannibalization of

locally made Pepsico

Products

Brand consistency

issues.

Weak distribution of

locally made

products.

Lack of operational

and marketing

support .

Lack of international

Pepsico product

portfolio presence.

Lack of local

community

involvement.

Cannibalization of locally made PepsiCo Beverages by its own Imported counterpart:

Locally Manufactured PepsiCo product by Pioneer Foods

Imported PepsiCo Beverage Product manufactured by Dubai Refreshment Co. And Saudi Industrial Projects Co.

Brand consistency issues

Pepsi Display fridge at independent retailer in Rustenburg.

Beverage Display fridge according to new Pepsi Image.

Lack of international PepsiCo Beverage product range.

PepsiCo beverage ranges available through PepsiCo SA Beverage Division:

PepsiCo beverage ranges available in the informal sector through indirect channels:

PepsiCo SA Beverage Division Informal Sector Indirect Advantages:

• Independent Entrepreneurs present keen interest and willingness to stock PepsiCo Beverages which benefits PepsiCo SA’s brand equity indirectly to a limited extent.

• Shop keepers initiate their own PepsiCo Beverage Branding which indirectly adds some brand equity to PepsiCo SA.

• Imported PepsiCo Beverages can be easily found at wholesalers and retailers which adds Market penetration and market development indirectly to PepsiCo SA.

• Retailers use their own fridges to store the PepsiCo Beverages in, eliminating the cost to PepsiCo SA

• Many for the International PepsiCo Beverage Brands not available through PepsiCo SA are available such as Aquafina, Amp Energy, Gatorade, Shani etc

• Local Entrepreneurs actively lobby for the benefits of PepsiCo Beverage products through local Schools, charity events and weddings.

Great Sentiment from

Shop Vendors who want

to Stock Pepsico

Products.

Internal Branding carried

out by Shop keepers.

Efficient indirect

distribution channels

from independent

entrepreneurs of Pepsico

Products

Operational marketing

support carried out by

independent

Entrepreneurs.

International Pepsico

product portfolio

imported by independent

Entrepreneurs.

Local community

involvement through

Independent

Entrepreneurs.

Great Sentiment from Shop Vendors who want to Stock PepsiCo Products.

Large Consignment of PepsiCo imported Beverage Products:

Internal Branding carried out by Shop keepers.

Recommendations Strategic Plans to address disadvantages and build on existing advantages in the informal Sector.

Macro and Micro Strategic Plans for the informal sector:

Macro Strategy for the informal Sector: Legitimize or limit the effect of the Indirect Distribution

Channels by absorbing additional international PepsiCo Products into PepsiCo SA’s Beverage Division Product Portfolio.

Working closely with Dubai Refreshment Co. (DRC) or SIPCO in a new joint venture specially for the informal sector. This new venture could also be expanded later on as the strategy for the formal sector.

Eliminating Pioneer Foods as the current bottler and operating a finished goods distribution facility consisting only of imported PepsiCo beverage products.

This will address the inter product cannibalization of products and price differential as Transfer policy pricing policy can be worked out with DRC/SIPCO and forex fluctuations hedged to stabilize operational costs.

Micro Strategy for the informal Sector Address the financial and managerial constraints of the formal

distribution problem by using distribution partners (as ABI does for Coca Cola Products) to get PepsiCo SA products to retailers.

Make use of Mini-Depo’s by launching independent or franchise short-term contracts with local entrepreneurs and wholesalers before committing large capital to a formal brick and mortar centre.

Allow the mini-depo’s to handle product distribution, fridge maintenance and inspection of retail outlets as well as facilitate marketing of products under liberal conditions.

Macro Strategy illustration: Micro Strategy illustration:

(videos removed due to size constraints)

Strategic Option 1

Strategic Option 2

Strategic Option 3

Distribution Centre consisting solely of Imported PepsiCo Beverage Products. New Joint Venture with Dubai Refreshments Co./Saudi Industrial Projects Co. Jeddah. OR New Joint Venture with DIS VB Contract packagers Sittard Holland.

Restructure current Joint-venture agreement with Pioneer Foods. Negotiate for price to reflect the import price equivalent. AND Commission the production of more PepsiCo International Beverage brands e.g. Aquafina etc

Manage Beverage Production in-house. Commission a self owned PepsiCo SA beverage production facility and High-Bay Warehouse with Krones AG. OR Negotiate Joint Venture with Department of Trade and Industry for production facility.

Macro Strategic Options to facilitate recommended actions.

Conclusion: Most favourable Option: Subject to individual discretion, further feasibility analysis and financial modelling etc, Option 1 would seem the most favourable given the issues identified earlier on. Currently PepsiCo SA beverage division does not reap any of the financial rewards of the PepsiCo products that are currently in circulation in the informal sector. The brand equity and exposure it indirectly enjoys may mitigate against actively launching the proposed strategic plan. PepsiCo International in a global sense benefits from such indirect brand exposure.

Any perceived taste variations can be assessed with blind tastes with sample groups and may form part of pre-feasibility tests.

High-bay Warehouse

National Distribution Centre

Taking the Pepsi Brand to the masses.

Formal Sector Basic Analytical Overview. Micro analytical Observations.

PepsiCo SA Beverage Division Formal Sector Disadvantages and Advantages:

Disadvantages: The most notable disadvantage is that, the formal

sector has a limited range

This range Excludes prominent international Pepsico brands such as Aquafina, Amp Energy, Brisk Iced Tea and Gatorade. The above products are in sectors which have and which still show exceptional growth in the South African market.

PepsiCo SA does not aggressively market its products at national level even though in the formal sector, it enjoys national distribution.

Advantages: PepsiCo SA Beverage Division is well established in

the formal sector. Most notably with many national retail chain stores and fuel station forecourt distributors.

Has a long established relationships with Current Contract packagers.

Recommendations: Negotiate new agreements with current contract bottlers to produce additional PepsiCo International Brands.

Aggressively market these ‘NEW’ brands at National Level or Regional Level.

Restructure contracts with national chain store companies to provide more incentive to actively market the PepsiCo beverage range in stores, either through revised Retail Rebate structure or other means.

Strategic Options to facilitate recommendations:

Overall PepsiCo brand Extension Marketing campaign. The entire range of ‘NEW’ international PepsiCo

brands can be launched simultaneously on one platform which would also act as a proxy to rejuvenate interest in the current PepsiCo SA range.

An illustration of the all-in-one platform could be to use a theatrical promotion campaign similar to Nestle North America’s recent launch of its Resource Electrolyte Enhanced Bottled Water.

Urban Shopping Malls could be the ideal places to showcase such a theatrical display which would possibly do wonders for PepsiCo SA. The Aquafina brand can be seamlessly adapted to an exact campaign just like resource water.

Nestle Resource Electrolyte Campaign Case Study:

Conclusion:

There is ample potential for PepsiCo SA to further enhance its position in the formal sector and possibly even dominate this sector behind its main rival (Coca Cola) in the formal retail sector.

By simply launching/re-launching a wider product portfolio, PepsiCo SA does not necessarily need to ‘Innovate’ to dominate.

Thus PepsiCo SA should be able to implement such a strategy without much apprehension.

End of Presentation/report.

Thank you for viewing. Author’s Disclaimer: The intention of this presentation/report was to project my ideas, thoughts and experiences as an Academic and Entrepreneur within the Non-Alcoholic Fast Moving Beverage sector. I have intentionally negated to include any excessive use of Business Jargon, Business Technical Theory, including Strategic management and development models/frameworks etc. I have tried to keep this presentation very jovial and practical for the end user.

By Faraaz Gani BAccSc (Wits) Cima Adv Dip MA