Global finance concepts and applications

Pepsi -- Organizational Evolution and International Market Entry Channels

Coke may be 'it' and Coca-Cola may be the soda classic and market leader, but it is actual Pepsi-Cola that dominates all other soda markets, internationally. Drink Mountain Dew (versus Coca-Cola's Mellow Yellow) and you are drinking a Pepsi-Cola product. Slice, Mug Root beer, and the popular Latin American beverage Miranda Orange are all Pepsi beverages. The Purchase, New York State-based Pepsi Co Company sells not simply soda, but Tropicana Juices, Gatorade, and Quaker Food products as well was the staple, cola rival to Coca-Cola.

According to its official website Pepsi-Cola North America's non-carbonated beverage portfolio also includes Aquafina, which is the number one brand of bottled water in the United States. This is impressive, given the new dominance of non-carbonated beverages in an increasingly soda-phobic America and bodes well for an expanding international profile of the company's palate, into regions where carbonation is less popular to the consumer base of beverage drinkers. Pepsi also sells Dole single-serve juices and SoBe ice teas. The latter ice teas offer a wide range of drinks with herbal ingredients and are increasingly popular in a nation and a world that wants 'more' from its drinks in terms of herbal remedies. The Pepsi Company also makes and markets North America's best-selling, ready-to-drink iced teas and coffees via joint ventures with Lipton and Starbucks, respectively, domestically and internationally.

Pepsi thus has developed a strong sense of what will sell in America and new American tastes and trends but also has reached an international batch of consumers as far as Russia and Japan through the use of joint ventures and skillful branding and advertising. It was one of the earliest American companies to make use of skillful merging with complementary companies and brands. Again, according to the company's official website, "PepsiCo, Inc. was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay. Tropicana was acquired in 1998. In 2001, PepsiCo merged with the Quaker Oats Company, creating the world's fifth-largest food and beverage company, with 15 brands - each generating more than $1 billion in annual retail sales. PepsiCo's success is the result of superior products, high standards of performance, distinctive competitive strategies and the high level of integrity of our people." ("Pepsi -- Company Information," 2005)

The original Pepsi-Cola actually began in the Southern United States, like the Atlanta-based Coca-Cola. A man named Caleb D. Bradham, born in Chinquapin, North Carolina in 1866 to a well-to-do family founded the company. "Caleb was a very well liked young man who was not only very smart, but very popular as well. He seemed to be destined for great things in life. Caleb wanted to become a doctor and after graduating the University of North Carolina he entered medical school at the University of Maryland. However, in his second year of medical school his father's business failed. Caleb had to quit school and take a job, so he moved to New Bern, North Carolina and took a job teaching school." ("Pepsi-Cola," The Soda Museum) Caleb later, after the business failed several times during the tumultuous years of the Great Depression, moved the company to New York State, to locate it away from its rival Coca-Cola, a rivalry it still engages with the red-labeled soft drink firm, most clearly manifested in the 'Pepsi Challenge' of the 1970s, where consumers were openly asked to chose between Coke and Pepsi.

Cola is a term based on the African kola nut used for its caffeine content, a stimulant with again, a strong palate affinity in many countries around the world. The original version of Caleb's Pepsi drink "didn't contain either the kola nut or any caffeine, but it did taste pretty close to the already popular 'Coca-Cola.'" The "Pepsi" part of the Pepsi-Cola name "comes from pepsin, an enzyme" that "aids in digestion and was also a popular ingredient in early soft drinks" as well as antacids of the day and chewing gum. Pepsi "was marketed originally to Americans as a digestive drug, rather than a sweet or tasty treat. However, by the time it had globally expanded, as early as 1939, when "Pepsi was already in Canada, Cuba, Britain, Bermuda, Mexico, the Dominican Republic, and Puerto Rico," it was seen as a confectionary rather than a drug. ("Pepsi-Cola," The Soda Museum)

Far earlier than rival Coke, the Pepsi-Cola trademark was known internationally, in over eighty different countries, quickly permeating Mexico, Latin America, and the Caribbean because of those nation's love of sugary tasting, cool liquids on hot days. "Expansion into Europe had to be put on hold due to World War II, because of sugar rationing. Even then, the company bought sugar in Mexico, converted it into a sugar syrup that was shipped it into the United States. "This solution worked for about two years, and since the sugar was being purchased in Mexico it wasn't taking sugar away from other Americans. However, after two years the [United States] government declared the Mexican syrup to actually be sugar and disallowed its importation." ("Pepsi-Cola," The Soda Museum)

Early on in its history, international marketing through branding and creative use of channels of distribution were key to Pepsi. By 1956 Pepsi "had over 118 bottling plants in 52 foreign countries. ("Pepsi-Cola," The Soda Museum) Today, the logo of Pepsi depicts a modified globe, and its global outreach has become a predominant feature of the image of the product, which unlike the symbol of 'American-ness' like Coke, has the connotations of a 'Next Generation,' in the words of one of its most successful advertising campaigns.

It has been observed that most organizations go through four stages of international expansion, beginning as local entities, then, through competitive positioning, becoming international in their focus, and moving onto multinational, then a global outreach. Pepsi did so through the use of licensing agreements early on during the 1930s and 1940s with its agreements with suppliers in Mexico. Then it made use of joint venture, such as exemplified in the Pepsi-Frito merger, whereby a separate entity sponsored by two or more firms takes a multinational focus, followed by a consortium, whereby a firms ventures into new product through agreements with other firms on an international scale, such as the ever-popular Starbucks today.

As a globalization strategy a product design and advertising and marketing strategy must be somewhat standardized throughout the world, at least enough so that the product is recognizable. Pepsi early on established its brand as well with a jingle that became internationally famous, despite its American reference: "Pepsi-Cola hits the spot/Twelve full ounces, that's a lot / Twice as much for a nickel, too/Pepsi-Cola is the drink for you." The jingle was so catchy, despite its reference to the American nickel; it was recorded in fifty-five different languages. Over one million records containing the Pepsi jingle were produced. "It is hard to convey just how big this jingle was," but it was very popular for nearly a decade and was even described as "immortal." ("Pepsi-Cola," The Soda Museum)

How many people decided to give Pepsi a try because of this jingle cannot be overestimated." This demonstrates how Pepsi was both American in its image, yet global in its outreach and its use, unlike Coke, of the international medium of sound as well as visual imagery. Thus, a firm's multinational strategy must always make use of forces that effectively deploy global integration, yet the firm must make use of a multi-domestic strategy as well, whereby product design and advertising must be tailored to specific circumstances of each country. For example, as the French do not drink orange juice at breakfast, Pepsi-Tropicana's campaign to solicit buyers of orange juice is likely to be ineffective. The Pepsi logo was originally translated into the Cyrillic alphabet when the company established a joint venture in Russia during the 1970s yet was still manifestly recognizable as Pepsi. ("Contemporary Trends in Corporate Design," 2001)