Opportunity In Soft Drink Industry

PROJECT REPORT ON “Opportunity in Soft drink industry”

Submitted To: Submitted By: Ms. Anuradha tiwari kumar singh

sharad

RollNo.JKBS083296 PGDBM 2ND SEM\(MKT)

Session:-2008-10

J K BUSINESS SCHOOL, GURGAON ( HARYANA)

and value creation in

the soft drink industry Table of Contents A view fromeloitte and SAPnsumer Business 1-Acknowledgement 2-Objective 3-History of the pepsico 4-corporate profile 5-Introduction and objectives 6-Industry background and overview 7-Market trends and industry challenges 8-Soft drink industry process improvement opportunities 9-Solutions for the soft drink industry 10-Conclusion 11-Reference 12- Analysis and Interpretation 13- Questionnaire

ACKNOWLEDGEMENT I am thankful to all the persons who are involved in this project either directly or indirectly. This project came into the existence under the supreme guidance of RAJESH Sir who helped me when I needed them in case of difficulties that came into the project. He helped me solve all the problems without any hesitation. I am also very thankful to my faculty guide Ms Anuradha tiwari who gave me support to make such a project whenever I needed. If any mistakes and omissions are found in my project, kindly bring them to my attention. I am grateful even to users of this application for the encouragement.

Place: Gurgaon

Sharad kumar singh

OBJECTIVE •

To know the present scenario of pepsi in Indian market.

•

To know about the consumer’s product awareness.

•

To know the opportunity in Indian market for betterment of sales and profits.

•

To analyse the services provided by the company to retailers and customers.

INDRA NOOYI CEO OF PEPSICO

History of the pepsico PepsiCo Headquarters PepsiCo World Headquarters is located in Purchase, New York, approximately 45 minutes from New York City. The seven-building headquarters complex was designed by Edward Durrell Stone, one of America's foremost architects. The building occupies 10 acres of a 144-acre complex that includes the Donald M. Kendall Sculpture Gardens, a world- acclaimed sculpture collection in a garden setting. The collection of works is focused on major twentieth century art, and features works by masters such as Auguste Rodin, Henri Laurens, Henry Moore, Alexander Calder, Alberto Giacometti, Arnaldo Pomodoro and Claes Oldenburg. The gardens originally were designed by the world famous garden planner, Russell Page, and have been extended by François Goffinet. The grounds are open to the public, and a visitor's booth is in operation during the spring and summer.

Pepsi Cola North America, headquartered in Purchase, New York, is the refreshment beverage unit of Pepsi Company Beverages and foods, North America; a division of Pepsi Company Inc. Pepsi Company Beverages and foods North America also comprises Pepsi Company’s Tropicana, Gatorade and Quaker Foods businesses in the United States and Canada.

Pepsi Cola North America’s Carbonated Soft Drinks including Pepsi, Diet Pepsi, Pepsi twist, Mountain Dew, Mountain Dew Code Red, Sierra Mist and Mug Root Beer account for nearly One-Third of Total soft drinks sales in the United States.

Pepsi Cola North America’s Non -Carbonated Beverage portfolio includes Aquafina, which is the number one brand of bottled water in the United States. Dole single serve juice and SoBe, which offers a wide range of Soft drinks with Herbal ingredients. The Company also makes and markets North America’s best selling, ready to drink iced teas and coffees via joint ventured with Lipton and Starbucks, respectively

Pepsi Company Inc is one of the World’s largest food and beverage companies,

The Company’s principal business includes: ✔ Frito-Lay snacks. ✔ Pepsi Cola Beverages. ✔ Gatorade sports Drinks. ✔ Tropicana Juices. ✔ Quaker Foods.

Pepsi Company Inc is a diversified consumer products company with 3 Major lines of Business: 1. Beverages (Pepsi Cola):- It is Pepsi’s oldest and largest business.

Includes

drinks

like

Pepsi,

Diet

Pepsi,

Mountain Dew, Slice, Mug. 7UP etc., available in 194 countries. 2. Snack Foods: - It includes the famous Frito-Lay Brand in the United States and other International Brands (Example: Smith Crisps Ltd., in the UK) – available in 40 Countries. 3. Restaurants: - Includes leading brands like Pizza Hut, Taco Bell and KFC (Operating in 94 Countries) and some relatively lesser known ones. California Pizza Kitchen, Chevy’s Mexican Restaurants, Hot n now mainly in the U.S.

Pepsi Cola Company was founded in 1903 when Caleb D Bradham, a Pharmacist, started to market his Beverage intention in North Carolina. Today, Pepsi Cola is the second largest soft drink producer in the world. Also it has been ranked 10th most recognized brand name in the world. INDRA NOOYI is the present Chairman of PepsiCo in U.S.A. PepsiCo Inc., was founds in 1965 through the merger of Pepsi-Cola Company and Frito-Lay. Tropicana was acquired in 1998, in 2001, Pepsi Company merged with the Quaker Oats Company. Pepsi Company’s success is the result of superior products, high standard of Performance, distinctive competitive strategies and the high level of integrity of their people. Pepsi Company had been in the Indian market during the mid-1950 but pulled out because of the lack of profitability. It returned in 1990 by negotiating a Joint venture agreement with Tata Industries, and Government owned Punjab Agro Industries, realizing the rapidly growing incomes of Indian consumers. Rajeev Bakshi is the present Chairman of PepsiCo India Holdings Pvt. Ltd. Pepsi’s decision to enter Indian market was very wise indeed. The Company today enjoys a foothold of the Indian Market and its market share surpasses its nearest rival Coca-Cola. The Indian soft drink market has been growing rapidly from a billion in 1997 to about 5 billion bottles in 2003. Another thing,

which needs not to be forgotten, is that India’s middle class is much large than China. Further more, many observers have predicted that India will eventually become an economic giant, thus growing incomes should support more sales. Initially, Pepsi Company had to accept some limitations: Limit ownership to 39.9%; place the Local “Lehar” Logo with its logo and to export 75% of its concentrate among others. But later, with liberalization of FDI, these very limitations became Pepsi Company’s strengths, being the very first to be in the Indian Market, much to the dismay of Coca-Cola. Entry of Pepsi in Indian Market Pepsi’s initial foray into the Indian Soft drink industry dates way back to1956. However, it withdrew from the country in 1961 due to bottling problems. Its second attempt into the Indian market was much better planned. On Nov 9, 1987 the Government of India’s project Approval Board (PAB) approved Pepsi Company’s (PepsiCo) second proposal to enter the country. The then Government regulations forbid the company from setting up a 100% owned subsidiary, hence it entered the market in collaboration with VOLTAS INDIA and PUNJAB AGRO. Later with the economic liberalization in the country, PepsiCo was allowed to acquire the Stakes of both of its collaborates. Since then, Pepsi has gone to become the largest selling soft drink brand in the country.

The Indian business unit has an annual sales turnover of Rs.1100 Crore. The Government of India while allowing the entry of Pepsi had put forth a series of stringent conditions like introduction of latest food processing technologies, high quota of exports, local partnership, use of Indianised brand names etc., Pepsi, whose basic intention was to consolidate its entry into the Indian market decide to cope with the demand and approached the entire issue strategically and finally succeeded in its mission.

To quote Pepsi had to operate in difficult circumstances our launch was patchy virulent anti-Pepsi lobby and competitive propaganda made it difficult , but like most big business, Pepsi foods has been keeping up its efforts to mobilize support among influential politicians. Pepsi managed to get quite a few well wishers form among influential among the Member of the Parliament and ministers friends of the project. Pepsi had

embarked on a massive campaign among politicians of the opposite parties, the first of its kind by a foreign company in India. Pepsi dispatched over 100 video cassettes to key political personality across all major political parties. The cassettes containing recordings of the company's initial operations in the

state's economic growth. Along with the cassette, recipients also received a small booklet providing detail of Pepsi's major achievements and the future plans. In building political support, Pepsi pledge equity and fairness and to be judged on the fact and merit. The entry of Pepsi into Indian market is a good example of an MNC strategically unifying its interest with the demand of the Government.

PCI operates in India as: • PepsiCo India Holdings Limited (PIHL) Manufactures and distributes the beverages to the Up Country Market.

• PepsiCo India Marketing Company Limited (PCIM) Marketing and Distribution / Sales to the local market. The beverage business is carried out through 3 channels namely: COBO (Company Owned Bottling Operation) 1. UP (minus) Western UP. 2. West Bengal. 3. Karnataka (minus) NW Karnataka. 4. Kerala +South Tamilnadu. 5. Mumbai + Rest of Maharashtra. 6. Gujarat.

FOBO (Franchisee owned Bottling Operation) 1. Jammu and Kashmir. 2. Rajasthan. 3. Haryana + Delhi. 4. Western UP 5. Goa. 6. Punjab + Himachal Pradesh.

7. Andhra Pradesh. JV (Joint Venture). 1. Bhutan.

Brands:

Segment

Products

Cola

Pepsi

Clear Lemon Flavor

7 Up, Nimbooz

Cloudy Lemon Flavor

Teem, Miranda Lime

Orange

Miranda Orange

Juice

Slice,twister

Soda

Leher soda

Corporate profile PepsiCo In India PepsiCo entered India in 1989 and has grown to become one of the country’s leading food and beverage companies. One of the largest multinational investors in the country, PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India. PepsiCo India and its partners have invested more than U.S.$1 billion since the company was established in the country. PepsiCo provides direct and indirect employment to 150,000 people including suppliers and distributors. PepsiCo India and its partners have invested more than U.S.$1 billion since the company was established in the country. PepsiCo provides direct and indirect employment to 150,000 people including suppliers and distributors. PepsiCo nourishes consumers with a range of products from treats to healthy eats, that deliver joy as well as nutrition and always, good taste. PepsiCo India’s expansive portfolio includes iconic refreshment beverages Pepsi, 7 UP, Mirinda and Mountain Dew, in addition to low calorie options such as Diet Pepsi, hydrating and nutritional beverages such as Aquafina drinking water, isotonic sports drinks - Gatorade, Tropicana100% fruit juices, and juice based drinks – Tropicana Nectars, Tropicana Twister and Slice. Local brands – Lehar Soda, Dukes Lemonade and Mangola add to the diverse range of brands. PepsiCo’s foods company, Frito-Lay, is the leader in the branded salty

snack market and all Frito Lay products are free of trans-fat and MSG. It manufactures Lay’s Potato Chips, Cheetos extruded snacks, Uncle Chipps and traditional snacks under the Kurkure and Lehar brands. The company’s high fibre breakfast cereal, Quaker Oats, and low fat and roasted snack options enhance the healthful choices available to consumers. Frito Lay’s core products, Lay’s, Kurkure, Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets. The group has built an expansive beverage and foods business. To support its operations, PepsiCo has 43 bottling plants in India, of which 15 are company owned and 28 are franchisee owned. In addition to this, PepsiCo’s Frito Lay foods division has 3 state-of-the-art plants. PepsiCo’s business is based on its sustainability vision of making tomorrow better than today. PepsiCo’s commitment to living by this vision every day is visible in its contribution to the country, consumers and farmers.

Beverages Pepsi Cola North America Pepsi Cola International Pepsi Wines and Spirits Snacks Pepsi Food International Pepsi Co Frito-Lay

Food Services Pizza Hut KFC Taco Bell PepsiCo Products in India Pepsi Miranda Orange Miranda Apple Slice- Mango 7 Up Mountain DewAquafina

Performance With Purpose Performance with Purpose articulates PepsiCo India's belief that its businesses are intrinsically connected to the communities and world that surrounds it. Performance with Purpose means delivering superior financial performance at the same time as we improve the world. To deliver on this commitment, PepsiCo India will build on the incredibly strong foundation of achievement and scale up its initiatives while focusing on the following 4 critical areas that have a business link and where we believe that we can have the most impact.

1. Introduction Soft drinks are gradually overtaking hot drinks as the biggest beverage sector in the world, with consumption rising by around 5 percent a year according to a recent report from Zenith International. But while the US remains the biggest market for now, Asia is likely to be the main driver of sales growth in the future. This paper provides insights on the market trends facing the soft drink industry. It outlines the specific challenges confronting the companies operating in this arena, such as ever-changing consumer tastes, a growing emphasis on product safety, and the increasing power

of global retailers. This paper explores opportunities for process improvement and cites specific solutions that can empower soft drink companies to meet industry challenges, both today and tomorrow, and drive profitability and growth.

2.

Industry background and overview

The business environment for the soft drink industry To understand the soft drink industry, one must first look at the beverage industry as a whole. In recent years, the beverage industry has been faced with new opportunities and challenges. Changing consumer demands and preferences require new ways of maintaining current customers and attracting new ones. Amid ever-increasing competition, beverage companies must intensely court customers, offer high-quality products, efficiently distribute them, ensure safety, and keep prices low – all while staying nimble enough to exploit new markets by launching new products. In this environment, success depends on a company’s ability to quickly capitalize on emerging opportunities. The beverage industry is extremely competitive, with private labels greatly influencing the environment. A few global “beverage giants” produce many brands, but those brands fall into self-contained categories as well. Thus, the “beverage” market is not really one market; it is a collection of markets with many different types of products, processes and requirements. The beverage market includes several different products that can be grouped into two main categories: alcoholic (beer, wine, spirits) and non-alcoholic (carbonated soft drinks, juice, water, sports drinks, etc.). Each category, and often each type, of beverage has its unique issues and needs.

Within the beverage industry, the soft drink market has been showing significant growth in most countries in the recent years, particularly in the emerging markets. While the U.S. represents the largest overall soft drink market and has the highest per capita consumption level, most markets are showing double-digit growth both in terms of volume and value. For instance, Mexico and Poland are two markets in particular that stand out. Within the soft drink sector, carbonated soft drinks (CSD) continue to dominate the market, encompassing traditional flavored beverages as well as sugar- and caffeine-free drinks, which have soared in popularity. Simultaneously, manufacturers are focusing on innovation in order to maintain growth. New product categories are emerging swiftly and many are already consolidating, as consumer demand continues to shift toward healthier products, such as bottled water, juices and juice drinks, sport drinks, ready-to-drink teas, and functional beverages. Recent trends in the food and beverage market center on product safety, quality, consumer demand, and channel complexity (including the growing influence of retailers on the supply chain). These trends have impacted the beverage industry in general and the softdrink sector in particular. In this paper, we will focus on the issues relevant for middle-market soft drink companies, defined as soft drink producers or bottlers with an annual turnover of $500 million to $2 billion USD. Nonetheless, the majority of the points raised in the paper will be applicable to all soft drink companies, regardless of size. _ Business performance improvement priorities the path to value Against the backdrop of these market challenges, how

can soft drink companies drive profitable growth and create value for their owners or shareholders? In practical terms, there are four areas on which companies in the soft drink business need to focus: -Revenue protection and enhancement – for example, as driven by product and packaging innovation, differentiated quality, improved product availability, and better management of customer relationships -Cost reduction/margin improvement – for example, through improved operational efficiency, lower labor costs, reduced waste and the capture of operational synergies from acquisitions -Improved asset utilization – for example, through reduced inventory levels of soft drinks held in cold storage and faster turnaround of re-usable transit packaging in the supply chain -Regulatory/assurance – for example, through demonstrating quality by participating in retailer assurance schemes and assisting trade customers in achieving full compliance with new traceability legislation.

3. Market trends and industry challenges In order to survive in this environment, companies must consider the market trends that will likely shape the industry over the next few years. This will help soft drink companies to understand the challenges they will encounter and to turn them into opportunities for process improvement, enhanced flexibility and, ultimately, greater profitability. Market trends for the soft drink industry can be

summarized by six fundamental themes: 1-Changing consumer beverage preferences, featuring a shift toward health-oriented wellness drinks 2-Growing friction between bottlers and manufacturers in the distribution system 3-Continually increasing retailer strength 4-Fierce competition 5-Complex distribution system composed of multiple sales channels 6-Beverage safety concerns and more-stringent regulations Consumers turn to wellness and healthy drinks In much of the developed world, a significant portion of the population is overweight or obese. This includes two-thirds of Americans and an increasing number of Europeans. Consequently, many people have started to actively manage their weight and change their lifestyles, a shift that is reflected in their choices in the beverage aisles: -Demand has increased for beverages that are perceived to be healthy -Energy drink consumption has also climbed, due to the increasingly active lifestyles of teenagers. This trend towards healthier drinks has created a number of new categories, and changed the consumption trends of the beverage industry as a whole. While previously dominated by carbonated soft drinks, the industry is now more evenly balanced between carbonates, and product categories with a healthier image, such as bottled water, energy drinks and juice;

While carbonates are still the largest soft drink segment, bottled water is catching up fast, with an average of 58 liters consumed annually per capita. Among

individual countries, Italy ranks number one in bottled water consumption, with the average Italian drinking 177 liters per year. Overall, bottled water represents the fastest growing soft drink segment, expanding at 9 percent annually. This growth is being partially driven by increasing awareness of the health benefits of proper hydration. The industry has responded to consumers’ desire for healthier beverages by creating new categories, such as energy drinks, and by diversifying within existing ones. For example, the leading carbonated soft drink companies have recently introduced products with 50% less sugar that fall mid-way between regular and diet classifications. Similarly, a South African juice company has recently released a fruit-based drink that contains a full complement of vitamins and nutrients.

Beverage companies and bottlers are conflicting In the soft drink markets of Europe and the US, beverage companies use bottlers to package and distribute products. This structure often causes conflicts of interest between manufacturers and bottlers. Nevertheless, the supply chain must consistently deliver value to the market in order for the segment to prosper. Despite any dissonance, the concept of “one face to the customer” must be maintained. Many factors are contributing to the friction between bottlers and beverage companies: Beverage companies often profit from increased concentrate sales at the expense of bottlers’ margins. -Beverage companies have historically had higher returns and lower capital requirements

-Bottlers have historically had lower returns and higher capital requirements for building and maintaining production and distribution networks -Bottlers continue to consolidate in an attempt to offset margin pressure through cost reduction. Specifically, size helps them to: -Spread fixed costs over greater volume -Make larger investments in automated production lines -Contain the costs of acquiring new customers -Increase customer loyalty -Declining prices have further reduced bottlers’Margins

-Soft drink manufacturers continue to develop new products and packaging, which increases operational complexity and, therefore, expenses for bottlers. -More new soft drinks have been introduced in the last two years by the top beverage companies than were introduced in the entire decade of the 1990s. Examples include: Coke with Lemon, Vanilla Coke, Dr. Pepper Red Fusion, Pepsi Blue, DnL, Fanta Berry, SoBe Mr.Green, Sierra Mist, and Mountain Dew Code Red. -While manufacturers view these new products as a way to build a portfolio of options to hedge against product successes or failures, bottlers see them as a burden since they often require additional capital expenditures. Retailers’ power continuously increases

With Wal-Mart leading the charge, the world’s dominant retailers are demanding better service and shorter order-to-delivery cycles from soft drink companies. This is dramatically reshaping the industry, forcing soft drink companies to become more efficient, while taking pricing power out of their hands. The dual need for improved supply chain agility and costefficiency is challenging suppliers to reevaluate the ways in which they plan and manage their supply chains, as they constantly search for approaches that will help them achieve the rock-bottom prices and operational excellence now expected in the industry. Furthermore, the growth of private-label products is encouraging manufacturers to take a number of steps to compete more effectively. Increasingly, they are turning to innovation and new product introduction as a means to achieve real differentiation as well as growth. Branded manufacturers are also looking to get closer to the consumer, with many of the larger ones piloting direct-to-consumer marketing approaches. They are also trying to better understand the in-store consumer experience by monitoring the execution of in-store activities. Nevertheless, many suppliers are losing brand equity. In recent years, a couple of factors have been fueling the growing competition between manufacturers and retailers: -Retailers are using their power to set higher standards for marketing and operational excellence, including escalating demands for improved service quality and shorter order-to-delivery cycles from manufacturers and distributors. Many of these demands, such as RFID, not only squeeze margins but also require significant capital investments. -Because of their direct relationships with consumers, retailers have a deeper knowledge of consumer behavior. Competition is becoming more and more

difficult In the beverage manufacturing industry, competition is growing due to the following factors: -Constant demand for new niche products related to consumer preferences for healthier and morediversified offerings -Industry consolidation, which has significantly raised the bar for the “scale needed to compete” -The growth of private-label products. These competitive pressures have led to: -SKU proliferation - number of SKUs in a typical beverage company has doubled from 1991 to 2001 A plethora of new product failures: -Only 20% are effective -Only 10% generate significant revenue -Most fail within the first two years

-Further consolidation and rationalization to capture cost savings by improving operations and eliminating redundancy: -Industry leaders are acquiring small, highgrowth Companies -Mid-market players are vertically integrating -Declining soft drink prices: -Profitability can only be improved through greater efficiency in the supply chain or through more-effective trade promotions, which usually require considerable expenditures. Sales channels are very complex The macro environment in which soft drink manufacturers operate has several unique characteristics: -Market to consumers/sell to retailers through

wholesalers -Must have the ability to communicate directly with retailers -Multiple distribution channels -Seasonal demands

product

manufacturi nng

product

Wholesale

Reta il

product

consumer Sell to retail

Market to consumer

The beverage industry is a multi-channel industry. Therefore, soft drink companies have several types of customers with diverse characteristics: -Modern Trade/Large Chain Retailers -Greater power in negotiating purchases of concentrations and merges -Direct access to the consumer and a -tendency to protect this relationship from -manufacturer intrusion -Request contributions and discounts from brand companies -Small Individual Retailers -Huge number of small point sales -Sometimes buy products directly through -cash and carry or modern trade -Indirect Channel (wholesalers) -Medium-sized organizations as a consequence of aggregation through consortia and merging -Playing a fundamental role in beverage distribution -Possess critical information regarding

individual points of sale in terms of volume, assortment, presence of competitor’s beverages, etc. Due to the complexity of the marketplace, the entire logistical chain must be able to sustain brands, products and services coherently within the various channels, taking into account differing points of sale and diverse customer needs. Additionally, each beverage manufacturer must provide customers with an extensive set of packaging options, including: -Tracking product in various package sizes -Special labeling requirements for customers -International/domestic packaging - Tracing/recall capabilities.

Statutory regulation is increasing Governments around the world are concerned about food safety and quality. Periodically, safety failures make big news in the global press. Amid this growing concern, regulators are cracking down on sanitation and a variety of other food-safety requirements. While food safety is the major focus in Europe, the emphasis in the US is more on bio-terrorism and food security. However, the provisions in the 2005 traceability legislation in the US, which stemmed from the Bioterrorism Act of 2002, and those in the EU Directive 178, Articles 18 and 19, are very similar. The U.S. Food and Drug Administration (FDA) is proposing the registration and tracking of almost all domestic and imported food articles, but some are concerned that the complexity of the rules will overwhelm both the food industry and the FDA. Each soft drink company must take these industry challenges into consideration, as well as its own strengths and market position, when looking for ways

to drive innovation, accelerate growth and increase margins. The next section outlines where some of the most promising opportunities for accomplishing these objectives can be found.

4. Soft drink industry process improvement opportunities Improve customer relationships with Direct Store Delivery Branded beverage manufacturers are attempting to get closer to the consumer, with many larger manufacturers piloting direct-to-consumer marketing approaches. These include active monitoring of in-store activity and, in some markets, a significant move back to direct store delivery (DSD). Direct Store Delivery is a business process used in the beverage industry to sell and distribute goods directly to the customer’s point-of-sale. With DSD, the soft drink company gets in direct contact with retailers, restaurants and pubs and other outlets where consumers can obtain the product. Manufacturers can use DSD to: -Make beverage goods available to stores and customers quickly -Optimize process settlement in sales and distribution through complete coverage of the supply chain -Improve customer retention and build customer relationships through personal service -Realize additional sales opportunities -Obtain first-hand information about the market -Better position brands against competitors Ensure product quality up to the point of sale Best in class DSD companies couple the process of direct delivery with a cultural change in how they view their employees and how their delivery personnel operate: They are not just drivers but they have sales skills, communication skills and a global view of the company’s offerings, commercial priorities, and initiatives.

Direct Store Delivery is characterized by variable orders and deliveries. Consequently, the process should involve more than just bringing goods to the point of sale. It should eventually encompass taking additional orders, picking up empties, collecting money, and more. Bestinclass DSD operations typically include many valueadded activities, such as: -Merchandising activities - Enables the company to leverage frequent delivery visits to the point of sale. These activities include tracking merchandising of other entities (suppliers, wholesalers, etc.); reporting on in-store merchandising activities; carrying out competitive intelligence (competitive products, product mixes, prices, displays, etc.); and monitoring store/account execution. May also include some preventive maintenance. -Additional sales opportunities - Allows a company to sell goods “off the truck” without any preceding order. The mix of products on the truck is dependent on what is most likely to be sold on a certain trip. Support provided by handheld devices enables drivers to skip back-end paperwork and to close the process through printed invoices.

Enhance relationship with indirect partners Indirect sales is the process of selling to an end customer through a third party and tracking that sale as such. Due to the complexity of the beverage supply chain, conflicts of interest frequently arise between beverage manufacturers and beverage distributors:

anufacturer

direct sales

distributer

indirect sales

store

-Soft drink manufacturers profit from increased sales at the expense of distributors’ margins -Soft drink distributors profit from positive local pricing environments, which, if exploited, reduce volume sales -Soft drink distributors continue to consolidate in an attempt to offset margin pressure through cost reduction Despite these conflicting interests, it is crucial that beverage manufacturers and beverage distributors maintain “one face to the customer.” These companies jointly market and sell the product in the marketplace, and close co-operation yields benefits for both parties. The indirect relationship is a partnership that must be nurtured by both the supplier and the distributor. The stakes are high for everyone. For the manufacturer, a poor relationship with a distributor may cause it to give a competitor “greater share of mind” in the local marketplace. For the distributor, a negative relationship with a supplier means constant threats of contract termination and reduced marketing dollars spent in the local market. A strong manufacturer/distributor relationship is also important because consumers are becoming more difficult to capture and classify. It is not only about sales; it is also about information. But how can strategic information flow freely between partners? Although sharing is implied in the word partnership, the reality is that companies are still uncomfortable about exchanging strategic information. Nevertheless, it is critical for companies to share information regarding

sales volume and market intelligence on both the microscopic and macroscopic levels. The importance of the distributor’s role in the indirect channel for beverage distribution suggests that it would be beneficial to establish a common understanding between distributors and manufacturers regarding: -Coding (products, channels, customers) -Technology -Data interpretation -Marketing and sales actions. In some cases, distributors are small- to medium-sized companies that only dedicate a few people full-time to operational activities. As a result of this structure, they are rarely open to implementing a truly “collaborative” environment. Recently, however, mergers between distributing companies, and acquisitions of distributing companies by manufacturers, have significantly modified many operating and ownership structures. Consequently, a few well-structured and managed distributors have emerged that possess a better understanding of the value of collaboration. These distributors have been at the forefront of facilitatingpartnership initiatives.

Increase sales force effectiveness through incentives management In the beverage industry, the critical path to a company’s success is the effectiveness of its sales force. No matter how efficiently the company runs its manufacturing processes, or how well it markets its products, a beverage company cannot succeed without an effective sales force that ensures product placement on the store shelves. A beverage manufacturer’s sales force typically comprises 17%-25% of the company’s cost basis.

Beverage distributors have an even higher percentage of their total costs allocated to their sales forces. Yet, how can beverage companies get the most out of their investments and ensure that their sales forces are operating optimally? Properly managed commission programs allow beverage companies to effectively motivate their sales forces to increase or maintain volume by brand or package. A commission could be a rebate, discount, or other payment to a third party or in-house employee. In order to actively manage sales behavior, it should be paid when the internal or external sales representative meets a pre-established benchmark for a tracked metric. The commission could take the form of either a cash payment or an item. While commissions are usually paid based on sales volume, best-in-class companies take a more holistic view of commission metrics. Some other important measures include: -Account revenue growth -Profit results -Number of new accounts -Customer service metrics -Account retention. Manage safety requirements through tracking and traceability As recent history has shown, the ability to track inventory accurately – and to perform a timely and cost-effective product recall – is critical in the beverage industry. Inventory items need to be tracked, monitored, and controlled in different ways and at very detailed levels. In each individual plant or warehouse, each resource requires a different level of control/analysis. Food safety legislation, such as EU Directive 178, impacts the whole process flow. Traceability is a goal that must

be achieved over the entire value chain, requiring a batch control system that is able to track and document all related characteristics. Activity Type of Questions Track and inquire on How many kilos of syrup do inventoryby characteristics I have?

Record inventory activities

“How many different batches

(receipts, shipments,

of diet soda do I have in my

adjustments, etc.)

inventory?”

Recall products “What batches will I have to recall from the retailer?”

Inventorytraceability information

“What went into a specific batch?”

Answered At the batch level, it is now possible to assign different product attributes when searching for the product including: -Manufacturing Expiration Dates -Shelf Life Dates Classifying production lots into batches allows

companies to identify specific inventory and automatically record its history, including the history of the raw materials (and their associated batch numbers) used in its production. In other words, it allows full recall of the materials that have been involved in the overall manufacturing process. These improvements reduce the company’s exposure to litigation and regulatory fines. In addition, track and trace improvements help companies to maintain high quality standards, which is often a selling point that differentiates one brand from another and that can command a price premium with the consumer. Recording and tracking that quality is critical. In the final analysis, soft drink companies must strive for the highest quality standards they can achieve – ones that are superior to those of their competitors. Optimize the extended supply chain In a business environment characterized by strong competition, changing consumer preferences, a complex distribution channel, and conflicting relationships between soft drink manufacturers and distributors, the beverage supply chain is under significant pressure. Moreover, the world’s dominant grocery retailers (with Wal-Mart paving the way) continue to demand increasingly better service quality and shorter ordertodelivery cycles from manufacturers. This confluence of factors is forcing manufacturers to become more efficient, while taking pricing power out of their hands. The need for both improved supply chain agility and cost-efficiency is challenging suppliers to re-assess how they plan and manage their supply chains. The logistic chain must be able to sustain brands, products and services cohesively, while taking into account different channels, customers, points of sale and customer needs. Accordingly, companies should consider taking the following steps to improve their supply chains:

Ensure product availability on-shelf – On-shelf availability is becoming a critical issue for both manufacturers and retailers. A system that avoids out-of-stocks improves consumer value, builds brand and store loyalty, increases sales and – most importantly – boosts category profitability. The traditional practice of filling out-of-stocks with other products is no longer sufficient – particularly from the manufacturer’s point of view. If consumers cannot find the brand they want, their loyalty to that brand suffers. A 2002 GMA study found that out-of-stocks jeopardize $6 billion in retail sales every year. Less conservative estimates put this figure as high as $20 billion. Flexible ordering; flexible delivering – Most retailers are demanding increased flexibility in order lead-times and delivery methods, putting additional pressures on the supply chains of manufacturers and distributors. To withstand these pressures, companies need to streamline product movement through programs such as store-specific shipments. They must also meet the strategies of progressive retailers, which require flow-through distribution and cross-docking. Accurately forecast demand – Properly forecasted demand drives two of the primary metrics used to measure the efficiency of a beverage company’s supply chain: customer service and inventory. Accurate forecasts are essential to achieving improved customer service and lower inventory levels. Even with recent success in developing and maintaining efficient supply chain processes, forecasting inaccuracy remains a significant industry problem. According to the 2003 GMA Logistics Study, more than one-third of all forecasts are inaccurate at the national level. This figure jumps to almost one out of every two at the regional (distribution-center) level. Meanwhile, at the store level, differences in store formats and sizes

hamper the forecasting process, and few have the tools to accurately manage the sheer volume of data generated by forecasting. Furthermore, many manufacturers do not have the technology to properly support their planning and forecasting efforts. Many manufacturers are still forecasting sales in months, although their plants run on weekly plans. That means they have to squeeze weekly totals out of monthly boxes. Implement a fully integrated empties management process – Empties management is the process of managing returnable containers, including kegs, CO2 tanks, bottles and crates (an essential part of direct store delivery). A successful empties management system gives the manufacturer a detailed picture of the entire empties lifecycle, including the location and status of a company’s assets. This process: -Lowers costs by controlling high-value empties assets -Increases control by managing empties at customer locations -Decreases manufacturing issues by tracking empties. Reduce time-to-market for new products An efficient new product development system is essential in the beverage industry. New products need to be brought to market quickly in order to capitalize on changing consumer preferences and competitive threats. However, new products must be developed tactically, and the product’s potential must be understood and analyzed before it hits the market. Currently, success rates for new products are astonishingly low – dropping from 75% to 25% in the last decade according to AMR – and most fail within the first two years after introduction. The companies that are best able to execute the

whole product development cycle will clearly have an advantage. This requires reducing time-to-market as well as making effective use of scarce internal resources and improving collaboration with partners. In addition, great attention must be paid to aligning the related marketing initiatives (e.g. advertising, sales promotions, etc.) with the new product introductions. Innovation is one of the primary growth drivers for beverage companies, and it can involve changes to the product itself or to the product’s packaging: Product innovation – Focuses on providing new tastes and flavors to demanding consumers. Packaging innovation -– Emphasizes developing differentiated packaging according to the consumption situation. Often, beverage manufacturers use packaging innovation to increase product shelf life. To ensure new product success, beverage companies must oversee the integration, consolidation and reuse of knowledge from all involved parties (including beverage manufacturers and bottlers), from R & D through production, and down to sales, marketing, and financials. By emphasizing greater collaboration and implementing Web-based workflow, beverage companies can reduce lead-time from concept to shelf by 25 - 40% and, at the same time, better integrate safety controls into the development process.

Increase customer retention through effective trade promotions In an environment characterized by strong retailers and discriminating consumers, beverage companies must utilize processes and tools to protect their market shares. To do this, they must make a favorable impact at the point of sale through promotional activity.

Trade promotions have become a necessary and expensive cost of doing business. With a sizable percentage of volume being driven through a smaller base of retailers, the competition for shelf space has never been higher. If a beverage company fails to execute a trade promotion at Wal-Mart, a competitor will. Furthermore, as trade promotions have proliferated over the past few years, they have also become more targeted. In response, beverage companies must create promotions for specific demographics, channels, and retailers, which make the sales process more costly and complex. Trade promotions vary widely in terms of method, approach, and structure. Many local promotions are run ad-hoc with marginal capital investments by field sales associates, while others require significant investment and involve pre-scheduling in co-operation with national chains. Two of the most commonly used trade promotions in the beverage industry are coupons and rebates. Coupon and rebate management are critical to enhancing relationships between the beverage manufacturer and wholesalers, customers and, in the case of coupons, consumers. Coupon programs, which are in essence trade promotions addressed to the final consumer, are mainly executed via discounts at large retailers. The coupon, a certificate with a stated value, can be applied immediately or reserved for the next purchase. A properly executed coupon program enables beverage companies to pass savings directly to the end consumer. On the other hand, rebate programs are trade promotions addressed to the retailer. Therefore, contractual terms and conditions between the manufacturer and the retailer must be monitored and executed. Rebates are often part of special trade promotions, and management of the rebates typically follows one of the following flows:

Bevrage manufactur er

Direct rebate agreement

custom er Figure N - Rebate management in direct sales

order

distributor

deliv ery Billin g

Report sales

Beverage manufacturer customer Indirect rebate ageement

Figure M- Rebate management in Indirect Sales

Improve margins by optimizing the telesales channel For a large number of companies in the beverage industry, telephone sales is the primary method of order taking and customer interaction. An effective telesales process can increase revenues and complement other sales processes, such as DSD and field assets management. This is accomplished by integrating the phone sales function with the company’s other operations. When correctly executed, inbound and outbound telesales functionality enables companies to manage effectively and efficiently all contacts related to sales and customer services. In addition, it helps build client relationships, sell new business, and expand and retain the current customer base. Well-implemented telesales functionality also enables business processes to be integrated and standardized. This effectively “closes the loop,” creating a consistent experience for customers within a multi-channel environment.���� Some of the key benefits that a company can gain through telesales include: -Revenue Enhancement -Improved sales effectiveness by consolidating the customer relationship -Better up-selling -Improved cross-selling -Increased customer retention -Expanded customer base -Enhanced competitiveness via services that match or surpass those of competitors

-Margin Improvement -Reduced costs for order processing -Accelerated sales process -Lower sales costs in comparison to field sales -Increased flexibility and speed to market -Differentiated service levels according to customer relevance and need. Implementing closed-loop processes between the telesales operations and other departments can provide agents with a comprehensive view of all customer interactions across the enterprise – in real time. In order to optimize the telesales channel, agents must have tools to manage the entire sales process, from generating leads, planning calls, and prioritizing sales opportunities and activities, to managing contacts and placing orders quickly. 5. Solutions for the soft drink industry In order to respond effectively to changing market trends and challenges, soft drink companies must support their improvement efforts with industry-specific solutions. These solutions should have the following characteristics and provide the following capabilities: Basic processes Pre-configured processes with clearly defined implementation scope – A streamlined implementation strategy is necessary to minimize disruptions to the business while maximizing enterprisewide adoption. When a world-class solution tailored to the specific needs of the soft drink industry is coupled with a rapid implementation approach, it can deliver immediate business value, generating a high overall return on investment and a low total cost of ownership. Manage financials including cost management – An effective solution must provide an integrated finance system capable of handling cost management, meeting internal and external reporting requirements, providing

real-time data access, and drilling-down to greater levels of detail. Manage procurement process – Necessary capabilities for efficient procurement include supporting vendor price comparisons and flexible pricing processes for the actual value of the raw ingredients. It should also support quotation handling, contract management, and batch handling. Meet customer expectations for managing Their Orders – An effective solution should be able to effectively manage the entire process for handling customers’ orders, encompassing variable pricing, delivery, invoicing and payment. It should support beverage companies in shortening order cycle times, making on-time and in-full deliveries, and providing optimal payment methods for customers. Optimize planning and manufacturing to suit specific business requirements – Solutions in this arena should support a multi-step manufacturing process. This includes the ability to perform automatic batch determination based on expiration date during production-order processing. Provide efficiencies in integrated inventory management – Integrated inventory management capabilities are crucial. The system should be able to automatically update all stock figures after material movements have been posted. These figures should be accessible in real-time for decision support. Manage product safety – As food safety requirements become more advanced across the beverage industry, track and trace capabilities are a prerequisite. An effective solution should have the functionality to find a defective batch that has already been delivered to a customer. Beverage-specific processes

Plan deliveries – Effective solutions feature powerful tools that businesses can use to efficiently load, dispatch, and track any number of deliveries. An emphasis should be placed on eliminating redundant trips and matching the appropriate vehicles and drivers to customers for each delivery. By extending route management into the order management system, companies could reap potential cost savings of 25% to 50%. Monitor route business – Beverage companies must be able to account for every item delivered, and take quick action to resolve item discrepancies. Best-in-class solutions provide powerful check-in and check-out functions that record all deliveries and returned goods. They should also provide tools to monitor quickly and accurately the entire transportation operation, or that of a transportation supplier, from loading and delivery to accounting and settlement of returned goods. The system as a whole should ensure complete loads, on-time deliveries, solid inventory control, and seamless invoicing. Keep track of empties – Best-of-breed beverage industry solutions paint a detailed picture of the entire empties situation, showing the location and status of crates, kegs, or pallets, and helping optimize return logistics. It should also permit quick access of each customer’s empties account as well as print delivery notes or invoices recording the empties involved in a delivery. Manage rebates and bonus agreements – Rebate and bonus agreements are critical to enhancing relationships among beverage manufacturers, wholesalers and customers. Yet, the task of managing rebate programs is becoming increasingly difficult as current rebate arrangements often involve numerous parties, including many that are not directly involved in the initial transactions. Effective beverage solutions provide companies with the tools needed to manage easily and accurately large, complex partner

constellations with any number of bonus or rebate arrangements. They should also provide coupon management. These functions apply both to direct and indirect customers. Manage commissions – In the beverage industry, complex commission structures are needed to motivate the sales force and to encourage them to push certain brands and to develop specific markets. Best-in-class solutions allow companies to complete commissionbased transactions, make payments both to internal and external sales forces, and track the payment of these commissions over time.

6. Conclusion

The relative market share of the soft drink sub-sectors (carbonates, juices, bottled water, energy drinks) vary widely across Europe, America and Asia due to the differences in consumption habits, brand awareness and lifestyles. On the aggregate, the total value of soft drink consumption is expected to reach about $347 billion USD by 2006. Despite its size, annual growth is often limited to increases in the world’s population base, especially expansions in the middle-class. In mature markets, such as North America and the European Union, where population growth is limited, achieving real profitable growth requires specific strategies for truly differentiated business performance. While all beverage businesses start from different baselines, there are common themes in their potential paths to success: -Better understanding the consumer – Beverage

and related businesses will need to keep an eye on fast-moving changes in consumer requirements. Growing consumer expectations for quality and variety, more diverse populations, and rising concerns over beverage safety will require firms to introduce new products targeted to more specialized markets and to rethink their production processes and supply chains. -Effective innovation and new product introduction The ability to respond with agility to changing customer and consumer demands is essential, and it must be accomplished via the introduction of new products and formats that are successfully planned and executed. This represents the largest single opportunity to drive profitable growth. -Closer customer relationships – As retailers rationalize their supply base across all product categories, beverage companies will need to work more closely with a smaller number of customers, each of whom represent a growing portion of their business. -Operations Excellence – An agile, cost-effective supply chain is vital to the success of a modern beverage company. Requests from the trade for outstanding service quality and reduced order-todelivery cycles are challenging suppliers to re-assess their approaches to planning and managing their supply chains. Ensured product availability, delivery flexibility, and improved forecasting are the most important elements for success in the beverage aindustry. -Actionable information to manage the business Examining accurate and timely data about sales and consumer behavior allows companies to gain a true picture of product and customer profitability. This provides the foundation upon which to make good management decisions and to take the proper actions in the market. Companies that can successfully address these issues

will be those that prosper. The key to managing these challenges, and ultimately to driving profitable growth, lies in designing and implementing effective processes and supporting them with a flexible, integrated information system capable of meeting the distinct, and constantly evolving, needs of the soft drink industry.

Reference

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www.pepsico.com

 www.pepsiworld.com 

www.adexindia.com



www.//en.wikipedia.org/wiki/pepsi-cola



www.cocacola.com



www.pepsizonemusic.com



www.pepsi.com/home.php



www.pepsiarena.com



www.kotlermarketing.com Company details: Records of PepsiCo. Brochures. Files. Philip kotler – Marketing book

Analysis and Interpretation

1. How many members are their in your family.

A- 0% B- 8% C- 22% D- 30% E- 40%

1.

How many members of your family drink soft-drink.

A- 5% B- 10% C- 15% D- 30% E-

40%

1.

Among the following drinks,which one you prefer the most.

A- 20% B- 25% C- 40% D- 15% E- 0%

1. Which one among the following you prefer to buy for your family.

A- 0% B- 5% C- 15% D- 38%

E- 42%

1.

When do you consume soft drink ?

A- 25% B- 20% C- 45% D- 10%

1.

Will you buy soft drinks,if available at your door step.

A- 0% B- 100%

1.

Among the following promotion schemes , which five you prefer the most.

A- 20% B- 25% C- 8% D- 32% E- 15% F- 0% G- 0% H- 0% I- 0%

1.

Among the following , which one is best door to door delivery channel of pet pls rank.

A- 20% B- 26% C- 38% D- 16%

1.

What do you think , soft drink industry is making use visual merchandising to increase their sales.

A- 35% B- 30% C- 15% D- 20%

1.

Are you aware of all products of pepsico.

A- 100% B- 0%

CONSUMER QUESTIONNAIRE

(1)How many members are there in your family? (a) One

(b) Two (c) Three (d) Four (e) more than four

(2) How many members of your family drink soft-drinks? (a) One

(b) Two (c) Three (d) Four (e) more than four

(3)Among the following drinks, which one you prefer the most? (a) Pepsi (b) Coca-cola (c) Fruit juice (d) lemon juice (e) Others (4) Which one among the following you prefer to buy for your family? Plz. Rank as per your Choice. (a) 200 Ml. Glass Bottle ( ) (b) 300 Ml. Glass Bottle ( ) (c) 500 Ml. PET Bottle ( ) (d) 1.5 Lts. PET

Bottle ( )

(e) 2 Lts. PET

Bottle ( )

(5) When do you consume soft drink? Please rank the following. (a)At the time of watching TV

( )

(b) With the meal

( )

(c) When you go out for movies

( )

(d) Whenever you feel like consuming it

( )

(6)Will you buy soft drinks, if available at your door Step? (A)no (b)yes (c)if no then why (7) Among the following promotion schemes, which five you prefer the most? (a) Coupons (b) premium (gifts) (c) Price off (d) Prizes (e) Samples (f) Cash refunds (g) Co-Branding (h) free liquid (i) any other

(8) Among the following, which one is the best door to door delivery channel of PET please rank?

(a) Vegetable vendor (b) Hawkers (c) The milk man (d) Others (please specify) (9) what

you think, soft drink industry is making use of visual

merchandising to increase their sales? (a) excellent (b) very good (c) good (d) fair (10) are you aware of all product of pepsico? (a) yes (b) no (c)if no then why (11)give your comment

Personal Details Name

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