Pepsi Sales in Pakistan Analysis

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INTRODUCTION: Beverage Industry Overview: The juice and beverage industry is one of the largest and most contributive industrial sectors in Pakistan. Currently there are about 170 units operating in Pakistan that produce water, syrups and squashes, because of which both upstream and downstream industries have grown and are flourishing. According to CBR, the beverage industry in Pakistan has grown significantly over time. Pakistan has become the 6th largest exporter of Food and Beverages in the world contributing significantly to the country’s economy.

Beverage industry in Pakistan has tremendous growth potential if it is given the proper backing. [pic] Currently, of an estimated one million metric tons of cold beverages sold in Pakistan each year, 90% represent carbonated soft drinks (i. e. , sodas, of which most of them are colas). There are two major names in the carbonated soft drink sector of the beverage industry of Pakistan i. e. PepsiCo and Coca Cola. Amrat Cola is another brand, which, although nowhere near the two market leaders, has still established something of a market share and name for itself in the northern areas of the country due its price competitiveness.

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The remaining 10% of cold beverages purchased and consumed (100,000 tons) are juices, nectars and still water. Of these, 10% (10,000 tons) represent the approximate sales of 100% pure juice. Most of the existing fruit juice factories operate in Lahore, Bahawalpur, Karachi, Hyderabad, Hattar (NWFP), Lorali, and Sargodha. As reported by SMEDA, 24 formal fruit juice and pulp processing facilities, plus a number of small informal factories are operating in Pakistan. Estimated installed capacity is approximately 400,000 metric tons per year with a growth rate of 20% to 25% based on a total fruit uice market of Rs2. 5– Rs2. 6 billion. The beverage market in Pakistan is expected to grow at between 20% – 25% per annum in the coming years. However, no clear predictions can be made because the beverage industry is one of the most fluctuating an unpredictable industrial sectors, where demand increases and decreases on a daily basis depending on several factors like season, sudden rain etc. While demand is generally expected to increase, what is not clear is which sector of the market, and product groups are likely to benefit from this growth.

If the market continues to grow as it has in the past several years, the largest growth is likely to take place in the carbonated soft drink sector where investments in sales campaigns continue to overshadow the non-carbonated soft drink market because local juice manufacturers generally do not have the resources to compete e. g. , with Coca-cola or PepsiCo. Nevertheless, given a more reliable supply of raw material and sufficient investment in advertising and marketing, opportunities exist for the juice industry to influence consumption patterns and consumer preferences towards greater consumption of pure juice and high juice content drinks.

The market for 100% pure juice (“nectar”) in Pakistan will grow only slowly over time. Not only does a 100% pure juice product cost more than the juice drink, soft drink and bottled water alternatives, but that the general populace has limited discretionary income, has limited knowledge of the nutritional differences between fruit drink (10% – 15% pure juice) and 100% pure juice; and make cold beverage purchase decisions based on the following order: price, taste and brand. Organization Overview: PepsiCo is a world leader in convenient snacks, foods and beverages with revenues of more than $43 billion and over 198,000 employees. pic] Mission Statement: “Our mission is to be the world’s premier consumer Products Company focused on convenient foods and beverages. We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity”. PepsiCo does not set up its own manufacturing plants in every single country where it operates. The actual sale and distribution of PepsiCo’s soft drinks is handled largely by a number of independent bottlers.

Haidri Beverages is one these bottlers. It buys syrup from PepsiCo, mixes it with carbonated water, and distributes it to retailers in its area. The number of retailers who sell Pepsi to the public almost exceeds counting. There are two main directions of business for Haidri Beverages, the first being export to neighboring countries like Afghanistan and the second being supply to distributors and retailers within the northern region of Pakistan. History: Haidri Beverages (Private) Limited was established in 1986 as a franchise of PepsiCo International in Pakistan.

It is, therefore, not directly owned or controlled by PepsiCo International, but is their authorized dealer in Pakistan-in the Northern region. The company is owned by Mr. Imran Khan, and has now become the largest bottling plant in Pakistan. Pepsi cola has more than 526 brands all over the world but Haidri Beverages is involved in the manufacture and bottling of the following products: Products: 1. Pepsi 2. Pepsi Max 3. Mirinda 4. 7-Up 5. Mountain Dew 6. Aquafina [pic] The first five of these are carbonated soft-drinks, while the last one is bottled mineral water. The company has four different variations for the carbonated drinks:

These are the products which are being manufactured by this unit, but Pepsi as a company has a wide range of products like Apple Fiz, Tropicana, and Lays etc. Packaging: Pepsi and its co-products are available in variety of packages targeted to different segment. The packaging is design to cater all the facilities and comfort to its consumers and customers. Pepsi also keep introducing new and stylish packages which makes it a favorite brand of Pakistan. The packages available for the drinks are in Regular Bottle, 250 ml Glass Disposable Bottle, 300 ml Tin and Buddy Pack, 500 ml Pet Bottle, 1 liter, 1. 5 liter, 1. 5 and 2. 25 liter pet bottles. This wide range of packages attracts consumers and all are favorable among consumers. A new product by the name of “Tropicana” is going to be launched very soon in the fruit juice category as a competitor of Coca-Cola’s “Minute Maid” juice. Competition: Pepsi is a market leader in Pakistan and it competes with Coke in Pakistani market and also worldwide but the facts that make Pepsi a market leader in Pakistan is that they are totally focused on consumers, however they also use trade based strategy but main focus is to target consumers which make the lead easy for them.

It also changes time to time; the change is in slogan, logo, punch line and packaging. This time to time change make them more popular in Pakistani market, as people here are attracted by different new styles of Pepsi and different new packages also. Target Market: However Pepsi is recognized as a family drink and it is for all age groups, but the main focus is on the youth and youngsters as they utilize more than aged ones. Pepsi has a strategy to target new generation people and youngsters because they will give them long year business as compared to the people above 40 years of age.

Pepsi also throw different campaigns to target new generation consumers by changing their slogan, packaging and also punch lines. Strategy into Action: The strategy used by Pepsi is of 100% availability which means to deliver its products to all the retailers available, they use Intensive Distribution Strategy. The strategy is to make Pepsi and its co-brands available to every retailer where people have access. When a customer wants to drink something then it should be Pepsi. The Intensive Strategy used by Pepsi is beneficial in a way that it is available to every retailer which increases the sales day by day.

Hierarchy of Sales Department (Haidri Bev): [pic] “Hierarchy of Sales Department” Hierarchy of the organization is mentioned as above. All the managers and representatives are very active and efficient in their work and they are eager to fulfill their job descriptions. DEMAND FORECASTING: Demand forecasts form the basis of all supply chain planning at Haidri Beverages. Forecasts of future demand are essential for making accurate supply chain decisions. Examples of such decisions include how much of the product to manufacture, how much to inventory and how much to order.

Ease of Forecasting at Haidri Beverages: Forecasting is not easy in the beverage industry because there can be very serious fluctuations and variations in demand due to weather changes, which can never be predicted beforehand or controlled. Therefore, accurate forecasting is difficult, and there is margin for error, but nevertheless, forecasting is still an essential part of supply chain planning at Haidri Beverages. Methods of Forecasting: At Haidri Beverages, two main forecasting methods are used: 1. Time-Series or Quantitative Method:

Historical demand information can be effectively used to forecast future demand. Since demand patterns in the beverage industry are expected to change every two years, Haidri Beverages takes into account just previous two years historical data to forecast its demand. On this basis, a demand forecast for the next year is made. 2. Qualitative Method: Haidri Beverages’ top management forms an expert panel, comprising of the Chief Operating Officer, General Manager Marketing, DMs (Department Managers), experts and VMs.

Using the quantitative data obtained as a base, the experts use their own opinion to determine any change that need to be adjusted in this quantitative data, and a final demand forecast is made. A yearly demand plan is forecasted in this way which is broken down into quarterly, monthly, weekly and daily plans according to variation in each time span as expected. Although these are the two main methods used, a third method is also used: 3. Causal Method: The causal method identifies different causes which can change demand in the coming year and adjusts for them accordingly.

This includes planned promotions by PepsiCo International in the coming year. Haidri Beverages plans in demand forecast in collaboration with PepsiCo international, and keeps in mind that during the months when promotional campaigns are planned, demand will be high, and this point is incorporated into their forecast. Export orders: For the case of export orders, no forecasting is done as the export orders are taken by the Company one year in advance. Collaborative Forecasting: Pepsi decides on the timing of various promotions based on the demand forecast over the coming quarter.

Promotion decisions are then incorporated into an updated demand forecast. Forecasting is done in collaboration with Pepsi Co International. Their planned promotions, planned price discounts, planned advertising and marketing efforts are taken into consideration. Demand is usually increased when special promotional campaigns are launched, so while doing forecasting this factor is kept in mind, along many other important factors, by the experts. The updated forecast is essential for the company to plan their capacity and production decisions.

Haidri Beverages, operating without an updated forecast based on the promotion is unlikely to have sufficient supply available, thus hurting the supply chain profits. Distributors: There are two different types of distributors: 1. Base Market Distributors 2. Outstation Distributors The Base Markets Distributors include distributors in the Islamabad and Rawalpindi region, while Outstation Distributors include distributors in the northern regions of the country, outside Islamabad and Rawalpindi; these areas are also supplied by Haidri Beverages. The total no. of distributors in this region amount to about 70-80. Selection of distributors:

Selection of distributors is a critical step, because the majority of supply to the retailers is handled by the distributors. Efficient and well-placed distributors are essential for ensuring product availability, which is the main target of the company. For this purpose, applicant distributors must: 1. Have 20-25 vehicles (depends upon area supplied) 2. Have 20,000 cases of empty bottles 3. Deposit Rs. 1,000,000 as security TRANSPORTATION NETWORK: Transport network design and distribution are very important factors for Haidri Beverages because their area of coverage is very large-from Attock up till the Northern areas.

Only through designing an effective transport network that ensures product availability to customers at all times and at the same time minimize cost, can Haidri beverages cover all this area successfully and maximize their profits at the same time. Modes of Transportation: Haidri Beverages uses intermodal transport network, involving the following three modes: 1. Trucks 2. Water 3. Air 1. Trucks: This is the main mode of transportation used by Haidri beverages and almost 95% transport is carried out using this mode.

Raw material from most suppliers is brought using trucks; finished products are transported to distributors and then retailers using trucks as well. Haidri beverages have its own fleet of small and large trucks and vehicles for carrying goods and raw material, while the distributors also use their own vehicles as well. 2. Water: This made forms only a very small part of the total transport network. It is used for shipping of empty cans from Dubai to Port Qasim in Karachi, from where it is brought by land to the plant in Rawalpindi. 3. Air: It is again a very small part of the entire transport network.

This mode is used to fly in concentrate form New York to Lahore, from where it is transported by land to a storage facility in Hattar and collected from there by Haidri Beverages’ own trucks. Transport Network Design: The transport network used by Haidri beverages to transfer goods to customers is a tailored network that involves the use of different transport modes depending upon the destination to where goods are transferred. These modes are discussed separately below: 1. Shipment via central DC with inventory storage: This is the main mode used for transporting goods to consumers in far off locations i. . the outstation regions. Goods are transferred to the distribution center (distributors) in each outstation area in bulk, and are stored here. Then smaller trucks carry these products to the local retailers as per demand in smaller vehicles and smaller lots using milk runs, because demand at each retail outlet is small. This method is cost effective because it saves on high transport cost that would have been involved in transporting to each retailer directly from the supplier, and also prevents stock outs because inventory is maintained closer to the retail outlets.

This method is also used for transporting goods to areas within Islamabad Rawalpindi, with a distribution center in each major location. There are about 20-30 of these within the Islamabad-Rawalpindi region. [pic] 2. Direct Shipment to Key Accounts: This method is used for transporting products to key account holders who are considered to be high priority customers. Goods are transported directly to these locations from the Haidri beverages in their own trucks. Key accounts include Marriot, PIA, Pizza Hut, and KFC etc. [pic] 3. Direct Shipment to Retailers:

This method is used for transporting post mix cylinders to retailers within the Islamabad-Rawalpindi region for fountain drink dispensers. Since the order size for each retailer is very small, this shipment is made in milk runs. [pic] Factors Influencing Distribution Network Design: 1. Response Time: Response time for order fulfillment is kept at a minimum at PepsiCo. ’s Rawalpindi franchise. Orders are taken daily and supplied the very next day. Response time needs to be minimum in order to ensure that customers have products available whenever they need them. 2. Product Variety:

PepsiCo’s product variety in Pakistan has already been discussed. It includes several different products catering to different tastes, including several flavors of carbonated soft drinks, bottled water and a soon to be launched fruit juice line. 3. Product Availability: Product availability is the top priority for PepsiCo’s operations in Pakistan. Orders are met within a time frame of one day, and an adequate safety inventory is always maintained to meet orders. 4. Customer Experience: Distributors have the facility to place orders either via telephone, email or fax.

They have the ease of placing orders a day in advance, and their orders are also met with as soon as possible. 5. Order Visibility: Order visibility is not a significant factor because orders are placed and filled within a span of one day. No great emphasis is laid on improving order visibility and orders cannot easily be traced once they are placed. Force Field Analysis: Force field analysis is done to judge the Driving and Restraining forces due to the change, as forever change there are some favorable forces and some restraining forces and in case of Pepsi some are:

Driving Forces: • Constant change in packaging, slogans, bottles etc… • Defined target market • Brand recognition • Market leader • Strong distribution network Restraining Forces: • Seasonal effects • Law and order situation • Terrorism • Changing trend towards fruit juices SWOT Analysis: ? Strengths: Pepsi have different strengths which includes Developed Brand image, Current Market leader of Pakistan, Strong Distribution Channel, Biggest Product Line, Sales Force and Marketing according to the current need which helps to achieve market position every time. Weakness: Weaknesses of Pepsi cola are very few which include the import of raw material, Inflation which makes sale low to some extent because production cost cannot be cut down due to increased rates of supplied raw materials. ? Opportunities: Certain opportunities are Market Expansion as day by day market is expanding which is a positive point to increase sale, Up to Date and attractive Packaging, Changed Shape and packaging of bottles, Huge Variety of products. ? Threats:

Current Law and order situation of the country affects sales badly as due to the incidents, markets are empty and when there is no client in the market so who will buy the product? Closing of markets and universities makes sales low. Power shortage also affects the cost of production. Development and Advancement: Mostly development and advancement in Pepsi co is dependent on advertising. Pepsi in this regard is fully aware about what to do and when to do. That’s why they keep on changing their logo, punch lines, slogans and jingles etc.

Normally the advertising campaign includes sports and music, the reason behind this is that Pepsi most popular slogan was “Pepsi, The Choice of a New Generation” and new generation people likes sports related activities and music. By this strategy they cater intentions and they also create awareness that Pepsi is a new generation drink. They target new generation for long time business. Pepsi Co is aware about the market situation and the critical factors which can affect their performance. Just for the sake of interest of its users/customers, Pepsi Co keeps on changing their outlook.

We can see the development in that; The Pepsi slogans through the years ? •1909-1939: Delicious and Healthful ? •1939-1950: Twice As Much For A Nickel Too ? •1950-1963: The Light Refreshment ? •1953-1961: Be Sociable ? •1961-1963: Now It’s Pepsi For Those Who Think Young ? •1963-1967: Come Alive! You’re In The Pepsi Generation ? •1967-1969: Taste That Beats The Others Cold ? •1969-1973: You’ve Got A Lot To Live, Pepsi’s Got A Lot To Give ? •1973-1975: Join The Pepsi People Feelin’ Free ? •1975-1978: Have A Pepsi Day ? •1978-1981: Catch That Pepsi Spirit •1981-1982: Pepsi’s Got Your Taste For Life! ? •1983-1983: Pepsi Now! ? •1984-1992: Pepsi, The Choice Of A New Generation ? 1993-1997: Generation Next ? 1998-2004: Ask for More ? 2004-now: Dil maange more… And the change in logos can be seen in the picture on the next page; [pic] Pepsi Co is also very conscious about its brand name and image that’s why they don’t compromise on anything; Pepsi Co sued the Indian movie which used the punch line of Pepsi Cola which comes under the trade mark of Pepsi Cola International. Areas for Improvement: The plant has a lot of excess capacity in off-peak season. This should be utilized and converted into additional revenue for the company. • The consumption trend is gradually shifting from carbonated drinks towards fruit juices; keeping this in view Haidri beverages should try to come up with a product in the fruit juice category as well. • Import of raw material is quite costly for Haidri beverages. Imports should be given up in favor of local production. • The Rawalpindi and Islamabad markets are already almost saturated, and it will be hard to increase the number of customers here.

Hence Haidri beverages should look towards even more out-station areas as potential markets. • Inflation has caused an increase in production costs, reducing profit margins. Methods should be searched for in order to minimize production costs. • Haidri beverages is currently working with distributers, their brand is strong enough to capture market itself. They should slowly remove middle men from their distribution network. ———————– Shipment via Distribution Centre Direct Shipment to Key Accounts Retailer Retailer Retailer Retailer Retailer Retailer Haidri Beverages Direct Shipment

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