PepsiCo Inc.’s Product Mix, Lines, Depth

Introduction

PepsiCo Inc. is the second largest international company producing soft beverages and the global leading manufacturer of chips and other convenient snacks. The market for carbonated drinks is highly competitive, which accounts for the fact that both competing giants, Coca-Cola and PepsiCo, now have to look for growth opportunities in new lines of products as their status as manufacturers producing exclusively soda is not good enough to allow maintaining their leading position. Indeed, negative sales have forced both companies to invest their money in a more diverse product line; however, the outcome was quite different: PepsiCo significantly outperformed its competitor. The reason for this lies mainly in the company’s approach to innovation (unlike its highly conservative competitor that sticks to the original brand and mission). The leaders of PepsiCo clearly indicate that they do not intend to stay with the initial brands and are willing to satisfy the customer’s needs regardless of how many new products they will have to introduce (Keller, 2014).

Despite its global presence, PepsiCo’s business in the Middle East and Africa can now fairly be called its improvement engine since these markets allowed the company to expand its activities to 92 more countries and test the success of both old and new products. The case with the UAE deserves separate attention as there the company has already achieved its highest market share (exceeding 70 percent). Furthermore, the product mix of PepsiCo in the UAE reflects the whole variety of goods the corporation currently produces (Lang & Heasman, 2015).

Overall Product Mix and Details of Width

Product mix can be defined as a full variety of goods offered for sale by a company, including all product lines and categories. A mixed organization manufacturing covers a number of different product lines that include items with similar, yet distinct characteristic features allowing them to refer them to different product groups. Taken together, these lines make up the company’s product mix, which stands for the whole variety of goods that it can offer to the customer and indicates the number of markets, in which the company has its share. The product mix has four basic dimensions: width, length, depth, and consistency–together, these characteristics give a holistic picture of the company’s penetration into the market (Keller, 2014).

Product mix width designates the number of product lines the company has (e.g. food, beverages, household products, cosmetics, personal care goods, etc.). In the case of PepsiCo, we can speak of two product lines–food and beverages–that cover 17 brands. Therefore, the product width of PepsiCo is rather small although the length of each line is considerable (Lang & Heasman, 2015).

PepsiCo Inc. has four major divisions that produce and sell these two categories of products (Lang & Heasman, 2015):

1. PepsiCo Americas Beverages (PAB): The division provides concentrates and syrups to Pepsi bottlers; it is also involved in direct marketing of finished products to retailers and distributors, which indicates its relative independence. The brands include Pepsi, Mountain Dew, Tropicana Fruit Juices, Gatorade Isotonic Sports Beverage, Lipton tea, Sierra Mist, Dole, and SoBe; moreover, PAB licenses and sells tea, coffee, and water products in a joint venture with Starbucks and Unilever, which allows it to get a higher profit but does not expand its width.
2. Frito-Lay North America (FLNA): The division produces various foods (mostly specializing in quick snacks), including such brands as Lays Potato Chips, Doritos Tortilla Chips, Tostitos Tortilla Chips, Cheetos Cheese Flavoured Snacks, Fritos Corn Chips, Ruffles Potato Chips, SunChips, and Smart Food–this implies that the product width of FLNA is reduced to only one product line.
3. Quaker Foods North America (QFNA): Unlike FLNA, this division is more oriented at healthy foods and does not manufacture snacks. Instead of this, they produce cereals, corn, and pasta. QFNA covers such brands as Life Cereal, Pasta Roni, Aunt Jemima, and Quaker Oats. Again, the product width is limited to one product line.
4. PepsiCo International (PI): The major task of the division is to handle international interactions of the other three. As a coordinator, it deals with licensing, marketing, region-specific products, cash flow, and other issues related to operations in the global market. This implies that all interactions PepsiCo UAE has with the head company are organized through the intermediacy of PI. The local brands the division has to control include Walkers Potato Chips, Mirinda, 7UP, Gamesa, Sabritas, and Copella juices.

Despite the fact that they are all located in North America, each of them operates internationally-selling goods practically in every country, in which the company has a market share, including the UAE (Lang & Heasman, 2015).

The analysis reveals that the product mix of the company has a small product width; however, PepsiCo’s reputation and growing popularity in the UAE (as well as in the Middle East as a whole) gives a hope that the effectiveness of their marketing and advertising strategies would make it possible to introduce other product lines, the success of which would be determined by the overall reputation of the brand (Keller, 2014).

Different Product Lines and Their Lengths

The product line designates the number of products manufactured by a company, which have similarities in use, manufacturing, and market requirement, but are still different enough to be singled out as separate brands. Since PepsiCo has only two product lines, they share the same distribution channels, require similar production facilities, and target several similar groups of customers through the same outlets (Laseter, 2017).

Product lining is the marketing strategy PepsiCo implements to offer for sale several related products as separate brands, which increases its chances for recognition and attracts more attention to potential customers. Unlike product bundling, presupposing that several related products are combined into one, product lining intentionally emphasizes differences instead of similarities. Each of the two lines of PepsiCo features products of different types, prices, colors, tastes, and other characteristics (Lang & Heasman, 2015).

The total number of products within one line is referred to as the length of this line; when the company adds a new product to one of the lines, it means that the length of the line gets extended. As far as PepsiCo is concerned, its food group includes seven brands while the beverage group consists of ten brands, the complete list of which runs as follows (Lang & Heasman, 2015):

Foods:

• Lays;
• Cheetos;
• Kurkure;
• Lehar;
• Quaker Oats;
• Uncle chips;
• Aliva.

Beverages:

• 7 UP;
• Mirinda;
• Pepsi;
• Mountain Dew;
• Nimbooz;
• Slice;
• Tropicana;
• Aquafina;
• Duke’s;
• Gatorade.

Products and Their Depth

Each brand within the line has more than one variation. Products can vary in their size, color, flavor, target audience, and any other factors that customers may find significant. The total of all variations is defined as the product depth (Keller, 2014).

For instance, the depth of Pepsi as the initial product of the company comprises (Lang & Heasman, 2015):

• Pepsi Free;
• Pepsi Wild Cherry;
• Diet Pepsi;
• Caffeine Free Pepsi;
• Caffeine Free Diet Pepsi;
• Diet Wild Cherry Pepsi;
• Pepsi Vanilla;
• Pepsi One;
• Pepsi NEXT Cherry Vanilla;
• Pepsi NEXT Paradise Mango;
• Diet Pepsi Lime;
• Diet Vanilla Pepsi;
• Pepsi;
• Pepsi MAX;
• Pepsi NEXT;
• Pepsi Throwback.

As far as the second-largest brand, Lay’s Chips, is concerned, it also features a significant depth: The product can be found in a number of different sizes and with different flavors, including international and local ones. Those available in the UAE include (Laseter, 2017):

• India’s Magic Masala;
• Classic Salted;
• Spanish Tomato Tango;
• American Style Cream & Onion.

Other less popular flavors that can also be found in some stores include:

• Chile Lemon;
• French Salt and Cracked Pepper
• Swiss Grilled Cheese.

Recently, there have also appeared baked chips, although innovation is not popular with customers (Laseter, 2017).

Histories of Changes in the Product line, Product Mix and Depths of Products

PerpsiCo Inc. appeared as a result of the merger of Pepsi-Cola (created in the 1890s by Caleb Bradham) and Frito-Lay (formed in 1961 by merging Frito Company, founded by Elmer Doolin in 1932, and Lay company, created by Herman Lay in the same year)–thus, the initial width of product mix was exactly the same as it is today and consisted of food and beverages. However, the length of these lines was quite small and included: Pepsi-Cola (1898), Diet Pepsi (1964), Mountain Dew (1948), Fritos Brand Corn Chips (1932), Lay’s Brand Potato Chips (1938), Cheetos Brand Cheese Flavored Snacks (1948), Ruffles Brand Potato Chips (1958) and Rold Gold Brand Pretzels (acquired 1961). The history of innovations in the product line and depth can be summed up as follows (Keller, 2014):

The 1960s: The company introduces Doritos Brand Tortilla Chips.

The 1970s: Taco Bell and Pizza Hut are acquired; Pepsi Light, with a lemon taste, is created as an alternative to diet colas; the company introduces recyclable, plastic bottles and the industry’s first two-liter bottle.

The 1980s: PepsiCo launches Slice and Diet Slice (soft drinks with fruit juice), Pepsi Free, Diet Pepsi Free (caffeine-free colas) and Tostitos Brand Crispy Round Tortilla Chips; it also acquires Mug Root Beer, Kentucky Fried Chicken (KFC), Walkers Crisps and Smith Crisps and a controlling interest in Gamesa (Mexico’s largest cookie producer).

The 1990s: The company enters a joint venture with Unilever, acquires Cracker Jack, and Tropicana Products.

The 2000s: PepsiCo merges with The Quaker Oats Company, acquires a majority stake in South Beach Beverage Company, IZZE Beverage Company, Sandora, Naked Juice Company, Bluebird Foods, and Pita Chip Co.; it also launches Sierra Mist.

The 2010s: PepsiCo acquires The Pepsi Bottling Group, Inc., PepsiAmericas, Inc., Russia’s Wimm-Bill-Dann, and Mabel, launches AMP Energy Juice and Pepsi Next; Pepsi Spire, a fountain beverage dispenser, is introduced.

Critical Comments on Product Mix

The analysis of the product mix of PepsiCo Inc. proves that the company is successful in its strivings to be the global leading producer of food and beverages. However, in order to stay afloat, it should also be more attentive to the changing trends and keep investing in healthier food options. The market for soda drinks is in decline since a healthy lifestyle gains popularity. They are still popular in the UAE but the general tendency is threatening. PepsiCo must launch less harmful variants of beverages and develop the non-carbonated sector. Also, the company is now youth-oriented and ignores the middle-aged audience, which is an evident gap in its product policy.

References

Keller, K. L. (2014). Designing and implementing brand architecture strategies. Journal of Brand Management, 21(9), 702-715.

Lang, T., & Heasman, M. (2015). Food wars: The global battle for mouths, minds and markets. London, UK: Routledge.

Laseter, T. M. (2017). PepsiCo: QTG emerging channel investment. Darden Business Publishing Cases, 13(1), 1-18.