The case is about Pepsi Cola Spain, which is planning to launch its new product PEPSI MAX, a sugar free cola targeted at young people. The company wants to advertise for the product and is looking at four possible alternatives. The case also looks at the use of the different brand image of Pepsi and specific advertising campaign in Spain rather than using the standardized advertising campaign as run by the corporate office. The case further discusses the strategies used by PEPSI to gain more market share and popularity in Spain.
Pepsi Cola Spain is the Spanish subsidiary of the global cola drinks major Pepsi. Pepsi was introduced in Spain in the year 1955.The Spanish soft drink market was the seventh largest market in the world. Hence it was one of the major markets both Pepsi and Coca Cola. The total sales in the Spanish Market in 1993 were 2.8 billion liters and the projected growth for 1994 was almost 10 %. The per capita soft drink consumption had increased from 70.5 liters in the year 1990 to around 73.7 liters in 1993. The Spanish market was divided into two large segments. the Food Channel and the Hotel, Bar and Restaurant segment which were the immediate point of consumption of Colas. The Food chain sold around 1.9 billion liters almost 80% of the total sales. Pepsi was lagging behind Coca Cola in terms of sales and consumer preference. People didn’t know of Pepsi in Spain and it was on the verge of extinction in Spain. It was not seen as a brand in Spain unlike the situation in USA and other countries where it had strong presence and high market share. In order to cope up with such situation Pepsi Spain came up with a strategic decision i.e. a new promotional strategy. Pepsi Spain used a new advertisement for Spain, which was a deviation from the thematic advertisement used by Pepsi for all the countries. It came up with a new tagline and positioning. Such move resulted in success for Pepsi as it was able to gain market share and its growth rate was the double of Coca Cola.
The major competitors of Pepsi in Spain were Coca Cola, Schweppes, La Casera a local brand and other regional and private label bottlers. Coca Cola had a market share of almost 60% of the market. Also the company had also been successful in developing new categories. PEPSI though it was operating in a market with high growth rate it was not able to capture the desired market share and the image it wanted to create. It was nowhere in the market and only 2 % of the total consumers preferred Pepsi while 50% chose Coca Cola as their preferred brand. The consumers associated Coca Cola as a life style drink which reflected love, friendship, affection, music, and friendship, the attributes that consumers can relate to their daily life style. Vending machines were also growing very fast and Coca Cola controlled almost 65 % of the vending machines. Coca cola also had a strong distribution network in Spain and hence it was able to capture higher sales. Coca Cola targeted all the different age groups whereas Pepsi’s main target was the youngster. Schweppes mainly was a bigger player in the orange juice market. Pepsi had tied up with Schweppes for its distribution and thus Pepsi had very less leverage over the other colas. The other competition for Pepsi was from La Casera. La Casera mainly positioned itself as a carbonated drinks and hence it didn’t give stiff competition to the cola market. Pepsi faced stiff competition from Private Label bottlers who had large presence in the most important hypermarket of Spain and supermarket chains and thus has a large shelf space in such markets. Private Label Bottlers were increasing at a rate of more than 25% per annum.
SWOT Analysis :-
➢Second in the Spanish Cola and Fruit Juice Segment
➢Effectiveness of Specific advertisement for Spanish Consumers
➢Weak Brand Identity