Introduction Brand History Pepsi is a hundred-year-old brand loved by over 200 million people worldwide. The largest single selling soft drink brand in India, Pepsi is ubiquitous on just about every social occasion. •
Youngistaan loves it. 200 million people worldwide love it. But what has made Pepsi the single largest selling soft drink brand in India is actually a formula concocted a century ago in a faraway continent.
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1886, the US. Caleb Bradman, a man with a plan formulated a blockbuster of a digestive drink and decided to call it Brad’s drink. The potion was to become Pepsi Cola in 1898, and eventually, Pepsi in 1903.
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Since its inception, Pepsi has always been at the forefront of the beverage industry and has come up with revolutionary concepts such as Diet Pepsi, 2l bottles, recyclable plastic cola bottles and the enviable My Can.
Brand Advantage •
Pepsi has become a friend to youth and youth culture. Over generations, youngsters have grown up with Pepsi and have shared an emotional connect with it unlike with any other cola brand. Be it parties, hangouts with friends, or just another day at home, a d ay is never complete without the fizz of Pepsi!
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Pepsi, cricket and Bollywood have been joined at the hip since the cola’s entry into India. Shah Rukh Khan, Sachin Tendulkar, Saif Ali Khan, Amitabh Bachchan, Kareena Kapoor, Priyanka Chopra, Virender Sehwag, M.S. Dhoni, John Abraham, Ranbir Kapoor and Deepika Padukone are some of the celebrities who have endorsed Pepsi.
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The Pepsi My Can is undoubtedly the most popular cola pack of all time. It is not just a pack but a definitive style.
QUICK BRAND FACTS •
Flagship brand of PepsiCo.
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100 year old brand loved by over 200 million people worldwide.
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An iconic youth brand in India.
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The single largest selling soft drink brand in India.
Brand PepsiCo India’s expansive portfolio includes iconic refreshment beverages Pepsi, 7UP, Nimbooz, Mirinda, Slice and Mountain Dew, in addition to low-calorie options such as Diet Pepsi, hydrating and nutritional beverages such as Aquafina drinking water, isotonic sports drink Gatorade and fruit juices such as Tropicana and Tropicana Twister.
How the demands for the product behave? -The demand aspects, including consumers’ behavior
Law of demand: Law of demand states that the amount demanded of a commodity and its price are inversely related, other things remaining constant. That is, if the income of the consumer, prices of the related goods, and tastes and preferences of the consumer remain unchanged, the consumer’s demand for the good will move opposite to the movement in the price of the good.
Pepsi has a very large amount of competition in the market, where it has been very competitive to survive and be in top 5. Due to heavy competition when the price of the product raises and that result in the decrease in demand and vise versa and this is how it applies to the law of demand.
Factors Affecting Demand of pepsi Even though the focus in economics is on the relationship between the price of a product and ho w much consumers are willing and able to buy, these are the important factors that affect the demand for pepsi These factors include:
Price of the Product
There is an inverse (negative) relationship between the price of a product and the amount of that product consumers are willing and able to buy. Consumers want to buy more of a product at a low price and less of a pro duct at a high price.
The Consumer's Income
The effect that income has on the amount of a product that consumers are willing and able to buy depends on the type of good we're talking about. For most goods, there is a positive (direct) relationship between a consumer's income and the amount of the good that one is willing and able to buy. In other words, for these with reference to Pepsi when income rises the demand for the product will increase; when income falls, the demand for the product will decrease and it is also called normal good .
The Price of Related Goods
Some goods are considered to be substitutes for one another: you don't consume both of them together, but instead choose to consume one or the other. When we talk about Coke and Pepsi are substitutes. If the price of Coke increases, this may make Pepsi relatively more attractive. The Law of Demand tells us that fewer people will buy Coke; some of these people may decide to switch to Pepsi instead, therefore increasing the amount of Pepsi that people are willing and able to buy.
The Tastes and Preferences of Consumers
This is a less tangible item that still can have a big impact on demand. There are all kinds of things that can change one's tastes or preferences that cause people to want to buy more or less of a product.
The Consumer's Expectations
It doesn't just matter what is currently going on - one's expectations for the future can also affect how much of a product one is willing and able to buy.
The Number of Consumers in the Market
As more or fewer consumers enter the market this has a direct effect on the amount of a product that consumers are willing and able to buy.
How the supplier/suppliers behave? -The supply aspects – producers’ behavior Law of supply: There is direct relationship between the price of a commodity and its quantity offered fore sale over a specified period of time. When the price of a goods rises, other things remaining the same, its quantity which is offered for sale increases as and price falls, the amount available for sale decreases. This relationship between price and the quantities which suppliers are prepared to offer for sale is called the law of supply
Factors effecting supply: The supply of a commodity is the amount of commodity a producer is willing to put in the market at a given time at a given price. The factors affecting supply are1. Price of the commodity- More the price of the commodity, more the supply and less the price of the commodity, less the supply.
2. Price of factors of p roduction (e.g. land, labour) - More prices of factors of production results in less profit for the producer, therefore reduced supply.
3. Price of related goods - If a producer sees more profit in another good, and if the producer is easily able to switch, it will start making the other good, thereby reducing the supply for the good in question. 4. Technology- Better technology allows for more efficient use of factors of produ ctions 5. Environmental: Weather/Natural Disasters 6. Subsidies: If government decides to subsidize a good, there will be more profit for producer. (Opposite of Tax)
7. Indirect Taxes: If the government increases the taxes that it takes from producers, there will be reduced profit therefore less supply.
Elasticities of demand and supply – Does the product more demand elastic/supply elastic? Explain the reasons. Also explain about its cross-price elasticity and income elasticity. Elastic Product The demand curve is a negative slope, and if there is a large decrease in the quantity demanded with a small increase in price, the demand curve looks flatter, or more horizontal. This flatter curve means that the good or service in question is elastic.
pepsi is more elastic in nature as a product, as it has many substitutes available in the market and change in any element of the product cetrus peribus, the demand for the product would change as it has highly elastic product.
Demand elastic
Pepsi is more demand elastic as it is a consumer driven product, where the demand and consumption of the product depend on the market and according to the increase and decrease in demand the product is catered to the market. Two major factors which determine the demand elasticity of a product are availability of substitute goods and amount spent on commercial advertising. Although it can be argued that substitutes exist for the three dominant soft drink manufacturers.
Cross price elasticity: It measures the responsiveness of the demand for a good to a change in the price of another good. It is measured as the percentage change in demand for the first good that occurs in response to a percentage change in price of the second good.
Taken a real situation of Pepsi and coke the cross-price elasticity of demand for Coke and Pepsi is 0.6 and and presently 1000 units of Pepsi are consumed,we can find out how many units of Pepsi will be consumed if the price of Coke increases by 10% using the Cross Price Elasticity of demand
X=pepsi y=coke
€xy = % ∆Qx / % ∆Qy = (∆Qx/∆Py) * (Py/Qx) = (∆Qx/Qx)* (∆Py/Py) Given, ∆Py/Py = 10% = 0.1 Elasticity =0.6 Therefore, (∆Qx/Qx)* 0.1 = 0.6 ∆Qx = 0.06*1000 = 60 [ Q(x) = 1000 ( initial quantity of Pepsi consumed) ] Also, ∆Qx = Qx2-Qx1 = 60 Then, Qx2 = 60 + 1000 = 1060
The quantity of Pepsi that will be consumed if the price of coke increase by 10%.
Market structure: Monopolistic competition: Pepsi has a very monopolistic competition as in soft drink industry there are larger number of firms and many of them have small proportion of the market share and pepsi is one of them and the differentiation between the products are very less when compared to the competitors products. Where pepsi covers about 4.5% of market share in the beverage industry and has very high competition with its competitors. Pepsi is very sensitive to average market price of its product. Product Differentiation – pepsi has a product that is slightly different from the products of competing firms. It’s a Close substitute but no perfect substitutes An attempt to increase price will normally results in a lower volume sold • •
Competition on Quality, Price, Marketing • Quality is design, reliability, service provided to buyer and ease of access to product Price – downward sloping demand curve •
Pricing and marketing strategies:
