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CASESTUDY-PepsicoMiddleEast
Topic:pepsi coType of paper:Case studyDiscipline:Business and ManagementFormat or citation style:APA pages:3Deadline:strictly one hourPaper instructions:
Step 1 – Synopsis/Executive Summary (1 mark)
• Outline the purpose of the case study • Describe the nature of the company – this is usually an overview of the company profile
• Outline the issues and findings of the case study without the specific details • Identify the key theories that will apply in analysing the case.
• Here, the audience should be able to get a clear picture of the essential contents of the study, key analysis, key findings and recommendations.
Step 2- Findings (4 marks)
Identify the problems found in the case. Each analysis of a problem should be supported by facts given in the case together with the relevant theory and course concepts. Here, it is important to search for the underlying problems for example: The business may be adopting unprofitable marketing programs this may be only a symptom of the underlying problem of inadequate processes and marketing measures within the company.
Step 3 – Discussion(4 marks)
This section is often divided into sub-sections, one for each problem.
• Summarise the major problem/s • Identify alternative solutions to this/these major problems
(there is likely to be more than one solution per problem)
• Briefly identify and outline alternative solutions and then evaluate them in terms of the
advantages and disadvantages of each one.
Step 4- Recommendations (5 marks)
• Declare which of the alternative solutions should be adopted and implemented by the
company.
• Briefly justify your choice by explaining how it is the best one to solve the major problem/s.
• This should be written and presented in a persuasive style by clearly outlining your
recommendations.
• Here, integrating a linkage between your argument and theories from the literature is
Chapter 5
PEPSICO AMEA:
The Role of Packaging in Brand Activation
$
Melodena Stephens Balakrishnan and Ian Michael
Abstract
Hossam Dabbous, Senior Marketing Director of Carbonated Soft Drinks, Middle
East & Africa (MEA) region and Asmaa Quorrich, MEA Senior Marketing
Manager, Cola & Malt were discussing the role that packaging played in the
brand activation strategy for the Pepsi brand. Packaging for PepsiCo is a focus
area for sustainability, but more importantly it could also help drive volumes,
reinforce brand image and act as an entry point in markets. While packaging and
designs take approximately two months from planning to production, labels for
PET (polyethylene terephthalate) bottles took longer and the challenges were to
determine the objective of packaging, make sure to keep it relevant to local
markets and produce the right quantities so that the special packages were
consumed in the promotion period. The lead time for these activities was normally
six months. The meeting between Hossam and Asmaa was called to understand
which stock keeping unit (SKU) PepsiCo thought they could leverage to increase
profitability and reinforce brand equity using innovative packaging designs and
concepts.
$This case was written by Dr Melodena Stephens Balakrishnan and Dr Ian Michael. It was prepared
using company information and interviews and its intention was to provide material for class discussion
through publication. The authors do not intend to illustrate either effective or ineffective handling of a
managerial situation. The author may have disguised certain names and other identifying information to
protect confidentiality.
Copyright r Balakrishnan & Michael (2013). This case is provided courtesy of AIB-MENA.
East Meets West
Actions and Insights – Middle East North Africa
Copyright r 2013 by Emerald Group Publishing Limited, UOWD Business Case Centre and AIB-MENA
All rights of reproduction in any form reserved
ISSN: 2048-7576/doi:10.1108/S2048-7576(2013)0000003005
5.1. PepsiCo: A Brief History
5.1.1. PepsiCo — The 2nd Largest Global Food and Beverage
Company
PepsiCo, a world leader in convenient snacks, foods and beverages in 2011 had
revenues of more than US$65.88 billion with operating profits of US$10.36 billion.
PepsiCo was the largest food and beverage business in North America and the
second largest in the world having 22 one-billion-dollar brands (see Exhibit 5.1). The
2011 Annual report highlighted the power of PepsiCo’s brands:
One billion times a day, in 200 countries and territories around the world,
PepsiCo provides consumers with affordable, aspirational and authentic
foods and beverages. Our consumers are refreshed, rejuvenated and
restored by PepsiCo’s beloved snack, beverage and nutrition brands. That
is the Power of PepsiCo.
PepsiCo — the company was positioning itself for sustainable growth. ‘Perform-
ance with purpose, our commitment to do right for the business by doing right for the
people and the planet’ had been its business strategy and vision, a way of conducting
business on a day-to-day basis (see Exhibit 5.2: Company Philosophy). By 2011,
PepsiCo had approximately 50% of its revenue coming from outside USA, of this,
34% came from developing and emerging markets proving PepsiCo’s ability to
innovate for local tastes and cultures. Performance with Purpose (PwP) was a central
theme that PepsiCo had been advocating since 2006. The 2006 sustainability report
focused on Human Sustainability (how they worked to nourish people with their
products); Environmental Sustainability (how they worked to replenish the
environment) and Talent Sustainability (how they worked to cherish people). By
the beginning of 2010, the company had a list of 47 goals and commitments like
working on reducing the sugar content in its drinks and working on pilot plan to
introduce a 100% recyclable bottle.
PepsiCo traced its history way back to over 100 years when Caleb Bradham, a
pharmacist from North Carolina, USA first formulated Pepsi-Cola and founded the
Pepsi-Cola Company in 1898. PepsiCo was formed in 1965 through the merger of
the Pepsi-Cola Company and Frito-Lay. The H.W. Lay Company (the potato chip
company) was founded by Herman W. Lay in 1932 and in 1961, merged with the
Frito Company, which was founded by Elmer Doolin, to form Frito-Lay. PepsiCo
also acquired beverage companies. In 1998, Tropicana, founded by Anthony Rossi
(who pioneered a pasteurization process for orange juice) became part of PepsiCo. In
2001 PepsiCo acquired The Quaker Oats Company (which dated back to 1901) and
hence also acquired Gatorade, which was created in 1965 and had become part of the
Quaker Oats Company in 1983.
By 2011, beverages contributed 52% to the total revenues of PepsiCo and were
worth US$34 billion. Despite recession, the volume grew by 5% in 2011. The Pepsi
138 Melodena Stephens Balakrishnan and Ian Michael
brand, was a leading consumer global brand and was the only product the company
sold in its first 65 years of existence. It continued to be a major part of the product
portfolio of beverage brands of the company which included carbonated soft drinks
(CSD), juices and juice drinks, ready-to-drink teas and coffee drinks, isotonic sports
drinks, bottled water and enhanced waters. Some major umbrella brands in the
Exhibit 5.1: PepsiCo Mega Brands.
Source: PepsiCo 2011 Annual Report, p. 11.
139
beverage category of the company were: Pepsi, Sierra Mist, 7-up (outside USA),
Slice, Tropicana, Ocean Spray (licensing agreement), Fiesta, Mirinda, Mountain
Dew, No Fear, Seattle’s Best Coffee, Tazo, SoBe, Aquafina, Starbucks (in
partnership) and Lipton (in partnership).
The marketing focus of the company for 2012 was brand building. In 2011, the
Pepsi brand was ranked in the top 25 global brands according to the Interbrand
ranking.1 In 2012, PepsiCo planned to increase their advertising and marketing
spend from US$500 million to US$600 million with a strong emphasis on the
North American market. For the beverage products, the company’s focus was on
the developed market, while building on promising gains in emerging and
developing markets, especially looking at core brands like Pepsi, Mountain Dew,
Sierra Mist, 7Up, Miranda and Lipton. PepsiCo strongly felt that their key to
success was the ability to change with the times and build for the future. As part
of this philosophy the company believed that they not only saw opportunities, they
created them.
Exhibit 5.2: Company Philosophy.
Source: PepsiCo Website: http://www.pepsico.com/Company.html.
Accessed on 13 August, 2012.
1Chapman, M. (2011). Interbrand’s top 100 global brands 2011: Coca-Cola still top but Apple gaining fast.
Marketing. Retrieved from http://www.marketingmagazine.co.uk/news/1096967/Interbrands-top-100-
global-brands-2011-Coca-Cola-top-Apple-gaining-fast/
140 Melodena Stephens Balakrishnan and Ian Michael
5.1.2. PepsiCo Asia, Middle East & Africa (AMEA)
AMEA (Asia Middle East and Africa) is one of the four major divisions of the
PepsiCo family with its headquarters in Dubai, UAE (United Arab Emirates). The
other divisions are PepsiCo Americas Beverages, PepsiCo Americas Foods and
PepsiCo Europe. The company entered the Middle East & Africa (MEA) market in
1945 when it opened its first bottling plant in the Middle East. By 2010–2011,
AMEA contributed 11% to PepsiCo’s net revenues and 8% to the company’s
operating profits (see Exhibit 5.3). In the Middle East, PepsiCo had a presence
across 29 countries with 70 manufacturing facilities, of these, 15 were company
owned food and beverage manufacturing plants and 55 were franchisee owned
bottling plants.
In the AMEA market, PepsiCo the company manufactured and marketed
leading snack food brands such as Lay’s, Kurkure, Chipsy, Doritos, Smith’s,
Cheetos, Red Rock Deli and Ruffles. They also marketed nutritional brands like
Quaker brands which included cereals and snacks. Within the beverages,
beverage concentrates, fountain syrups and finished goods, their brands included
famous names like Pepsi, Mirinda, 7Up, Mountain Dew and the ready-to-drink
Lipton Tea (a joint venture agreement with Unilever). The manufacture and
selling of these brands were done through Company Owned Business Operations
(COBO) or Franchise Owned Business Operations (FOBO) who sourced the
concentrate from PepsiCo. The company’s water brand called Aquafina was also
licensed to some of the company’s authorized bottlers. In this context it should
be stated here that the MEA market was considered a subdivision of the AMEA
sector.
Exhibit 5.3: AMEA Divisional Contribution to PepsiCo (2010–2011).
Source: PepsiCo 2011 Annual Report, p. 7.
PEPSICO AMEA: The Role of Packaging in Brand Activation 141
5.1.3. Pepsi Brand: The Role of Packaging
Insights into consumer behaviour of PepsiCo products in the United States had
found that 50% of the time when a customer bought a salty snack they also bought
refreshments. Hence if this behaviour was also exhibited in the MEA markets, there
was tremendous scope for potential growth of PepsiCo products. The role packaging
played in the soda industry was multifaceted. It was used to: (1) protect, reinforce
and add to brand equity, (2) drive consumption and contribute to revenues and
profits, (3) protect the product contents and (4) reflect the country requirements in
terms of legality, culture, national events and pricing.
The packaging for Pepsi was of four types (1) aluminium cans, (2) PET bottles,
(3) Returnable Glass and (4) Non-Returnable Glass. Aluminium cans and Non-
Returnable Glass bottles were typically used for single consumer, single usage
occasions. Aluminium was a commodity product, but over the last few years the
price of this metal had increased considerably because of demand like most other
commodities. As a metal, aluminium was 100% recyclable. PET bottles were meant
for multiserve, not one single consumption occasion and hence the profit per product
was much smaller than aluminium cans as the volume of liquid served in a PET
bottles was larger. As an organization, PepsiCo had committed to rethink the way
they grew, sourced, created, packaged and delivered their products to minimize their
impact on the environment.
Pepsi in the Middle East unlike most other markets continued to be a market
leader. Pepsi had always been positioned as a younger, trendier and a more relevant
brand for the new generation. To keep this position they had to keep on innovating.
So as a brand, Pepsi kept re-energizing their brand (see Exhibit 5.4 for Pepsi Brand
Evolution). In the Middle East market, Pepsi had been an established brand and was
a ‘Defender’ brand unlike other markets where it was perceived as the ‘Challenger’
brand, and this meant that they (Pepsi) were not necessarily viewed as a young brand
in MEA. Consumers in MEA felt that it was a way of life ‘I grew up drinking it and it
is the drink of my life’.
There were some unique challenges in some difficult markets that Pepsi was in. An
example would be Iraq where three to four brands had similar logos to the Pepsi
logo. PepsiCo created a unique packaging for the Iraq market using an emblem that
sent an ‘authenticity message of pure Pepsi’ (see Exhibit 5.5). To reinforce this
message, advertising commercials focused on communicating the difference between
an authentic Pepsi and other similar brands in the marketplace through the
packaging of its can. Pepsi further engaged the consumers through their websites
which were mentioned on their cans: Pepsiarabia.com; Pepsiarabia-facebook and
Pepsiarabiatv.com.
Brand equity could be activated through different platforms and one such
platform was product packaging. Packaging as an equity builder drove brand health
and enhanced key performance indicators (KPIs) balancing the focus on volumes
and profit. The other platform that PepsiCo used to enhance its brand equity was
sponsorship of music and sporting events. In 2012 Pepsi, sponsored the Arab Idol
programme and designed its cans to reflect this sponsorship. It allowed engagement
142 Melodena Stephens Balakrishnan and Ian Michael
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PEPSICO AMEA: The Role of Packaging in Brand Activation 143
with the target audience as consumers could download an application via a QR
code on the pack that allows them to view exclusive content on the Arab Idol
programme and get a chance to win tickets for the live finale. This was a seasonal
packaging design that was available on shelf during the entire period Arab Idol
was running on TV (see Exhibit 5.6). Research indicated that the youth or the
so-called mobile generation found that sponsorship of music and sports events
helped extend the consumer experience,2 increase brand awareness, reinforce favour-
able brand image, support brand positioning and effectively reach opinion leaders
and innovators.3
In today’s marketplace it was noticed that packaging could be designed for special
occasions. During the 2010 Football Season, Pepsi came out with a special can with
an embossed football on it. This 2010 packaging was a 500 ml can and not the
standard 355 ml can that was available in the Kingdom of Saudi Arabia (KSA).
While the can was sold for a premium, the profits collected were used to sponsor a
notable corporate social responsibility (CSR) programme whereby Pepsi built several
football pitches all around KSA. The can design was also a very good equity driver
for brand Pepsi during the football season (see Exhibit 5.7). Pepsi also released a
special can for the 2012 Football Season with the football players’ profiles on the can
(see Exhibit 5.8).
Exhibit 5.5: Iraq Authenticity Seal on Pepsi Can.
2Frederick, H., & Patil, S. (2010). The dynamics of brand equity, co-branding and sponsorship in
professional sports. International Journal of Sport Management and Marketing, 7(1), 44–57.
3Fan, Y., & Pfitzenmaier, N. (2002). Event sponsorship in China. Corporate Communications: An
International Journal, 7(2), 110–116.
144 Melodena Stephens Balakrishnan and Ian Michael
Exhibit 5.6: Pepsi Arab Idol 355 ml Can (UAE).
Exhibit 5.7: Football 500ml Can (KSA).
PEPSICO AMEA: The Role of Packaging in Brand Activation 145
Seasonal festivals like the holy month of Ramadan were an occasion for Pepsi to
express their affinity with the local market, embracing the culture and respecting
tradition. Every year, for the month of Ramadan which lasted for 30 days, Pepsi
introduced a can designed for the occasion (see Exhibit 5.9). In the UAE, for the
nation’s 40th year National Day celebrations, the company released a commem-
orative can that included designs from the seven Emirates (states) of the nation (see
Exhibit 5.10).
Packaging had the ability to drive consumption. Keeping this in mind, PepsiCo
had different can sizes to suit various consumer needs in different countries across
MEA. In some countries the standard can size was 250 ml — this was meant to bring
value as it was cheaper than the other regular sizes like the 300 or 350 ml size. In
countries like KSA and UAE the company introduced cans sizes of 355 ml. Pepsi’s
smaller can size of 250 ml looked sleek and slim, and being more affordable was able
to penetrate price sensitive markets like Egypt (see Exhibit 5.11). Accordingly, what
consumers lost in terms of volume of liquid, they gained in terms of price and
convenience.
Another factor affecting packaging size and material was the consumer
consumption behaviour. For example, if most consumers in a country consumed
CSD on the go outside their homes, Pepsi was able to sell a mix of cans and bottles.
In such countries where consumption of CSD was mostly at home, consumption was
skewed towards the PET bottles. In countries where consumers tended to drink on
Exhibit 5.8: Pepsi Football 2012.
146 Melodena Stephens Balakrishnan and Ian Michael
their own, they preferred cans or non-returnable bottles (NRB) which were made of
glass. In countries such as Algeria, Egypt, Ethiopia, Iraq, Ivory Coast, Jordan,
Lebanon, Libya, Morocco, Namibia, Nigeria, Pakistan, Kingdom of Saudi Arabia,
Sudan, Bahrain and Kuwait, returnable glass bottles were cheaper than cans and
Exhibit 5.10: UAE 40th Year National Day Celebration.
Exhibit 5.9: 2012 Ramadan Special Packaging Design.
PEPSICO AMEA: The Role of Packaging in Brand Activation 147
hence there was a resistance from the customer to embrace single serve aluminium
cans. In terms of income and consumption, low-income countries preferred value
packs and larger 1.5 litre bottles over the 1 litre PET bottles. PET bottles did well for
large families like the GCC. Pepsi needed to balance the promotions: for example
offer 0.5 litre free while selling a 2 litre PET bottle with the image conscious con-
sumer. It was important for the company to plan this product mix, based on a
country’s economic variable and the consumption patterns in terms of where and
how the consumer choose to consume the product.
PepsiCo’s bottles and cans were often packed in multipacks, for example 24 pack
for cans, 12 pack for both cans and bottles, 8 pack for bottles (and cans being
introduced in 2012) and 6 pack for cans and bottles (see Exhibit 5.12). The sale and
consumption of multipacks was a function of the market consumption patterns. For
example, in KSA 50% of the sales were in cans which was a very unusual
consumption pattern compared to the rest of MEA as people drank from cans on the
go and at home. In KSA there was a low preference for the 12 pack as they found it
too bulky and too expensive. In response, Pepsi introduced and marketed to them a
more affordable and a less bulky multipack consisting of 6 or 8 cans. Packaging
could also differ based on the type of retail channel, for example in airports,
restaurants and cafes, a special 300 ml can was served instead of the 350 or 355 ml
product. In the airplanes, can sizes were 150 ml. Also various countries had different
Exhibit 5.11: 250 ml Pepsi Aluminium Can
(Relative Size to 355 ml).
148 Melodena Stephens Balakrishnan and Ian Michael
rules and restrictions based on size, language, labelling and price. All such
information was displayed on the side panel so this made the product immobile
across national borders. The normal shelf life of a Pepsi can was nine months, while
Diet Pepsi had a shelf life of six months.
5.2. Future Opportunities
Pepsi needed to look at consumption patterns to discover future opportunities in the
different markets across the region. For example research in Egypt showed Pepsi
tended to be consumed outside home and often during lunch time. In KSA the
consumption took place mostly at home, at the same time during lunch hours. In
KSA when people consumed Pepsi beverages during the workday they wanted the
product conveniently placed in the shopping outlets. Pepsi was trying to get data on
consumers regarding what package they preferred and why, which type of pack
suited them, did they consume CSD during their meals and which meals, did they
drink alone and why? In short, they wanted to address the 6Ws and 1H — Where,
What, When, Why, Which, Who and How. At a macro worldwide level 70% of sales
Exhibit 5.12: Secondary Packaging.
PEPSICO AMEA: The Role of Packaging in Brand Activation 149
of PepsiCo products were cans and the profit margins were dependent on the
commodity price of aluminium. In the MEA region, sales increased by 40% in
summer peaking from April to August (depending on the country).
How does Pepsi increase penetration in MEA? What consumer insights can they
use to redesign packaging to help brand activation, increase sales and reach brand
KPIs? Packaging for beverages were constantly innovating, bottles of aluminium
shaped like the original glass bottle, slimmer cans, reusable packaging, interactive
packaging, collector items, multipacks and various packaging material were just
some of the elements Pepsi could play around with.
150 Melodena Stephens Balakrishnan and Ian Michael
Possible Questions
This case is recommended to Masters Student’s studying consumer behaviour,
products strategy, brand activation and international business. Practitioners in the
food industry, design and advertising industry may also find this case interesting.
Policy makers looking at mobility of products across borders may also consider this
case interesting.
Question 1
What is the role of packaging in brand and product strategy?
Question 2
Discuss how consumer insights increase in market penetration, building brand
equity, contribute to sustainability and increase the organization’s bottom line?
Question 3
Debate the usefulness of music and sports brand platforms. How does Pepsi differ
from its nearest competitor in activating these platforms and how does packaging
play a role?
Question 4
Global value chains are becoming more important to the function of marketing.
What role does packaging have in this and what are opportunities that Pepsi can
make use of ?
Question 5
Does packaging help in dealing with counterfeits for a brand like PepsiCo? Discuss.
Question 6
Is it possible for a brand like Pepsi to create an engagement and loyalty strategy
using packaging? Discuss.
Question 7
How can Pepsi design an effective recycling programme in AMEA markets?
Question 8
What are some strategies a Defender can use versus a Challenger — relate to Pepsi
brands for your marketplace.
Question 9
What is the relationship with packaging and branding in the product strategy?
Question 10
What is the frequency of innovation required for an FMCG product like Pepsi?
PEPSICO AMEA: The Role of Packaging in Brand Activation 151
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PEPSICO AMEA: The Role of Packaging in Brand Activation
PepsiCo: A Brief History
PepsiCo – The 2nd Largest Global Food and Beverage Company
PepsiCo Asia, Middle East & Africa (AMEA)
Pepsi Brand: The Role of Packaging
Future Opportunities
