A STUDY ON DISTRIBUTION CHANNEL

AT
PEPSICO

TABLE OF CONTENT
EXECUTIVE SUMMARY 1

1 CHAPTER 1
INTRODUCTION 2
2 CHAPTER 2
INDUSTRY PROFILE
4
COMPANY PROFILE
7
 HISTORY 8
 MARKETING STRATEGY 10
 MARKETING OVERVIEW 13
 SALES AND DISTRIBUTION 16

3 CHAPTER 3
REVIEW OF LITERATURE 23
4 CHAPTER 4
RESEARCH METHODOLOGY 25

6. CHAPTER 6
FINDINGS AND RECOMMENDATIONS 27

7. CHAPTER 7
CONCLUSION 28

8 CHAPTER 8
BIBLIOGRAPHY 29
ANNEXURE 30

EXECUTIVE SUMMARY
0
PepsiCo is one of the oldest, largest and most successful beverage and snack food companies in
the world. PepsiCo was founded by Caleb Bradham in 1902 in USA. Today PepsiCo and its
affiliates operate in more than 140 countries in the world and generate revenues in excess of $ 40
Billion. In its pursuit of never ending growth and expansion, PepsiCo entered India in 1989 in a
joint venture with Punjab Government. However, PepsiCo India very soon started its beverage
operations in collaboration with the R K Jaipuria group. Soon after entering the beverage
segment PepsiCo Established its dominance in the market owing to its expertise in sales,
marketing, operations and local collaboration. PepsiCo maintained its market dominance for
many more years to come. However, this advantage slipped and PepsiCo had to concede the
market leadership to Coca Cola India. Several actors were responsible for this development. But,
the most important are; Distribution channel is having an important role in positioning of the
product because we know that distribution channel is tool by which we can make reach our
product to the final consumers Discontinuation of slums in the distribution network by PepsiCo.
This move by PepsiCo adversely affected its position of a market leader because while PepsiCo
discontinued the use of Slums in its distribution network, Coke continued it and within one year,
it was able to snatch considerable market share from PepsiCo. Acquisition of well-established
and favored brands like Thumps Up and Limca by Coca Cola India. These two brands still
constitute a bulk of sales for Coca Cola India.
To explore the reasons behind these developments this study will analyze the marketing
initiatives and policies of PepsiCo India in detail with particular focus on its partner relationship
management.
The data collected for laid the foundations for the study and gave a platform for the analysis and
findings which lead to the fulfillment of the objectives. The data collected for research is primary
and secondary.
Primary data is collected by observation, interviews and questionnaires. The data collection and
analysis paves way for the recommendation ad conclusion of the study that reveals some
important findings regarding the strategy and corporate structure and strategy of PepsiCo India.

1.
2. INTRODUCTION
1
Distribution Channel is the chain of businesses or intermediaries through which a good or
service passes until it reaches the end consumer. A distribution channel can include wholesalers,
retailers, distributors and even the internet. Channels are broken into direct and indirect forms,
with a "direct" channel allowing the consumer to buy the good from the manufacturer and an
"indirect" channel allowing the consumer to buy the good from a wholesaler. Direct channels are
considered "shorter" than "indirect" ones.
The Distribution Channel
Distribution is also a very important component of Logistics & Supply chain management.
Distribution in supply chain management refers to the distribution of a good from one business
to another. It can be factory to supplier, supplier to retailer, or retailer to end customer. It is
defined as a chain of intermediaries; each passing the product down the chain to the next
organization, before it finally reaches the consumer or end-user. This process is known as the
'distribution chain' or the 'channel.' Each of the elements in these chains will have their own
specific needs, which the producer must take into account, along with those of the all-important
end-user.
Channels

A number of alternate 'channels' of distribution may be available:

 Distributor, who sells to retailers,

 Retailer (also called dealer or reseller), who sells to end customers
 Advertisement typically used for consumption goods

Distribution channels may not be restricted to physical products alice from producer to consumer
in certain sectors, since both direct and indirect channels may be used. Hotels, for example, may
sell their services (typically rooms) directly or through travel agents, tour operators, airlines,
tourist boards, centralized reservation systems, etc. process of transfer the products or services
from Producer to Customer or end user.

There have also been some innovations in the distribution of services. For example, there has
been an increase in franchising and in rental services - the latter offering anything from
televisions through tools. There has also been some evidence of service integration, with services
linking together, particularly in the travel and tourism sectors. For example, links now exist
between airlines, hotels and car rental services. In addition, there has been a significant increase

2
in retail outlets for the service sector. Outlets such as estate agencies and building society offices
are crowding out traditional grocers from major shopping areas.

Market factors
An important market factor is "buyer behavior"; how do buyer's want to purchase the product?
Do they prefer to buy from retailers, locally, via mail order or perhaps over the Internet? Another
important factor is buyer needs for product information, installation and servicing. Which
channels are best served to provide the customer with the information they need before buying?
Does the product need specific technical assistance either to install or service a product?
Intermediaries are often best placed to provide servicing rather than the original producer - for
example in the case of motor cars.

The willingness of channel intermediaries to market product is also a factor. Retailers in

particular invest heavily in properties, shop fitting etc. They may decide not to support a
particular product if it requires too much investment (e.g. training, display equipment,
warehousing).

Another important factor is intermediary cost. Intermediaries typically charge a"mark-

up" or "commission" for participating in the channel. This might be deemed unacceptably high
for the ultimate producer business.

Producer factors
A key question is whether the producer have the resources to perform the functions of the
channel? For example a producer may not have the resources to recruit, train and equip a sales
team. If so, the only option may be to use agents and/or other distributors.

Another factor is the extent to which producers want to maintain control over how, to whom and
at what price a product is sold. If a manufacturer sells via a retailer, they effective lose control
over the final consumer price, since the retailer sets the price and any relevant discounts or
promotional offers. Similarly, there is no guarantee for a producer that their product/(s) are
actually been stocked by the retailer. Direct distribution gives a producer much more control
over these issues.

3. INDUSTRY PROFILE
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Barbara Murray (2006c) explained the soft drink industry by stating, “For years the story
in the nonalcoholic sector centered on the power struggle between…Coke and Pepsi. But as the
pop fight has topped out, the industry's giants have begun relying on new product flavors…and
looking to noncarbonated beverages for growth.” In order to fully understand the soft drink
industry, the following should be considered: the dominant economic factors, five competitive
sources, industry trends, and the industry’s key factors. Based on the analyses of the industry,
specific recommendations for competitors can then be created.

Soft Drink Industry, the production, marketing, and distribution of nonalcoholic, and generally
carbonated, flavored, and sweetened, water-based beverages. The history of soft drinks in the
United States illustrates important business innovations, such as product development,
franchising, and mass marketing, as well as the evolution of consumer tastes and cultural trends.
Many Europeans long believed natural mineral waters held medicinal qualities and favored them
as alternatives to often-polluted common drinking water. By 1772, British chemist Joseph
Priestley invented a means to synthetically carbonate water, and the commercial manufacturing
of artificial mineral waters began with Jacob Schweppes’s businesses in Geneva in the 1780s and
London in the 1790s. The first known U.S. manufacturer of soda water, as it was then known,
was Yale University chemist Benjamin Silliman in 1807, though Joseph Hawkins of Baltimore
secured the first U.S. patent for the equipment to produce the drink two years later. By the 1820s,
pharmacies nationwide provided the beverage as a remedy for various ailments, especially
digestive.
Though the drinks would continue to be sold in part for their therapeutic value, customers
increasingly consumed them for refreshment, especially after the 1830s, when sugar and
flavorings were first added. Soda fountains emerged as regular features of drugstores by the
1860s and served beverages flavored with ginger, vanilla, fruits, roots, and herbs. In 1874 a
Philadelphia store combined two popular products to make the first known ice-cream soda. The
first cola drink appeared in 1881.
In the late 1800s, several brands emerged that were still popular a century later. Pharmacists
experimenting at local soda fountains invented Hires Root Beer in Philadelphia in 1876, Dr.
Pepper in Waco, Texas, in 1885, Coca-Cola in Atlanta, Georgia, in 1886, and Pepsi-Cola in New
Bern, North Carolina, in 1893, among others. Reflecting two of the middle-class mores of the

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period—temperance and feeling overwhelmed by the pace and burdens of modern life—early
marketing touted these drinks as alternatives to alcohol and/or as stimulants. Coca-Cola inventor
John S. Pemberton's first print advertisement for his creation read "Delicious! Refreshing!
Exhilarating! Invigorating!," while Asa Candler, the eventual founder of the Coca-Cola
Company, promoted his product in the years leading up to Prohibition as "The Great National
Temperance Beverage."

The history of Coca-Cola reveals how national markets in soft-drink brands developed. To limit
the cost of transportation, manufacturers of syrup concentrates licensed bottlers to mix the
product, package, and distribute it within a specific territory. Candler underestimated the
importance of the bottling side of the business and in 1899 sold the national rights to bottle Coke
for a fairly small sum to Benjamin F. Thomas and Joseph B. Whitehead, who then started a
national network of bottlers, creating the basic franchising format by which the industry is still
run. Candler and his successor after 1923, Robert Woodruff, were aggressive and innovative in
marketing Coke as a leading consumer product and cultural icon. Coupons for free samples and
giveaways of items bearing the drink's name and logo publicized the beverage, and pioneering
efforts in market research helped define how best to take advantage of advertising and
promotions. During World War II, Woodruff opened bottling operations overseas to supply U.S.
military personnel, and after the war, Coke was poised to enter these international markets, not
only as a consumer product, but also as a symbol of "the American Century."
After World War II, the soft-drink industry became a leader in television advertising, the use of
celebrity endorsements, catchy slogans, tie-ins with Hollywood movies, and other forms of mass
marketing, particularly focusing on young consumers and emphasizing youth-oriented themes.
As health and fitness consciousness and environmental awareness became popular, the industry
responded with sugar-free and low-calorie diet sodas, beginning in the 1960s, and later, caffeine-
free colas and recyclable containers.

The most famous rivalry within the industry has been between Coke and Pepsi, which waged two
rounds of "cola wars" in the twentieth century. In the 1930s and 1940s, Pepsi challenged the
industry leader by offering a twelve-ounce bottle for the same five-cent price as Coke's standard
six ounces. In the 1970s and 1980s, "Pepsi challenge" taste-tests led Coke to change its formula

5
in 1985, a campaign that failed because it underestimated the attachment Coke drinkers had to
the tradition and symbolism of the brand.

In 2001, the soft-drink industry included approximately five hundred U.S. bottlers with more
than 183,000 employees, and it achieved retail sales of more than $61 billion. Americans that
year consumed an average of 55 gallons of soft drinks per person, up from 48 in 1990 and 34 in
1980. The nine leading companies accounted for 96.5 percent of industry sales, led by Coca-Cola
with more than 43 percent of the soft drink market and Pepsi with 31 percent. Seven individual
brands accounted for almost two-thirds of all sales: Coca-Cola Classic (itself with nearly 20
percent of the market), Pepsi-Cola, Diet Coke, Mountain Dew (a Pepsi product), Sprite (a Coca-
Cola product), Dr. Pepper, and Diet Pepsi. Domestic sales growth slowed in the late 1990s
because of increased competition from coffee drinks, iced teas, juices, sports drinks, and bottled
waters. The industry continues, however, to tap lucrative international markets; Coke and Pepsi
each have bottling operations in more than 120 countries.

COMPANY PROFILE

Type : Public (NYSE: PEP)

Founded : Chicago, Illinois, U.S. (1965)
Headquarters : Purchase, New York, U.S.
Area served : Worldwide
Key people : Indra Krishnamurthy Nooyi(Chairwoman, President & CEO )
Industry : Food Non-alcoholic beverage

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 HISTORY OF THE COMPANY

It was first introduced in North Carolina in 1898 by Caleb Braham who made a pharmacy
which sold the drink which was known back then as "Brad's Drink", and was later named
Pepsi Cola possibly due the digestive enzyme pepsin and kola nuts used in the recipe. Braham
sought to create a fountain drink that was delicious and would aid in digestion and boost energy.

In 1903, Braham moved the bottling of Pepsi-Cola from his drugstore into a rented warehouse.
That year, Bradham sold 7,968 gallons of syrup. The next year, Pepsi was sold in six-ounce
bottles, and sales increased to 19,848 gallons. In 1926, Pepsi received its first logo redesign
since the original design of 1905. In 1929, the logo was changed again. In 1929, automobile race
pioneer Barney Oldfield endorsed Pepsi-Cola in newspaper ads as "A bully drink...refreshing,
invigorating, a fine bracer before a race".

In 1931, the Pepsi-Cola Company went bankrupt during the Great Depression- in large part
due to financial losses incurred by speculating on wildly fluctuating sugar prices as a result of
World War I. Assets were sold and Roy C. Megargel bought the Pepsi trademark. Eight years
later, the company went bankrupt again. Pepsi's assets were then purchased by Charles Guth; the
President of Loft Inc. Loft was a candy manufacturer with retail stores that contained soda
fountains. He sought to replace Coca-Cola at his stores' fountains after Coke refused to give him
a discount on syrup. Guth then had Loft's chemists reformulate the Pepsi-Cola syrup formula.

During the Great Depression, Pepsi gained popularity following the introduction in 1936 of a 12-
ounce bottle. Initially priced at 10 cents, sales were slow, but when the price was slashed to five
cents, sales increased substantially. With a radio advertising campaign featuring the jingle "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," arranged in such a way that the jingle never ends. Pepsi encouraged price-
watching consumers to switch, obliquely referring to the Coca-Cola standard of six ounces per
bottle for the price of five cents (a nickel), instead of the 12 ounces Pepsi sold at the same price.
Coming at a time of economic crisis, the campaign succeeded in boosting Pepsi's status. In 1936
alone 500,000,000 bottles of Pepsi were consumed. From 1936 to 1938, Pepsi-Cola's profits
doubled.

7
1940s advertisement specifically targeting African Americans.
Pepsi's success under Guth came while the Loft Candy business was faltering. Since he had
initially used Loft's finances and facilities to establish the new Pepsi success, the near-bankrupt
Loft Company sued Guth for possession of the Pepsi-Cola company. A long legal battle, Guth v.
Loft, then ensued, with the case reaching the Delaware Supreme Court and ultimately ending in a
loss for Guth.

PepsiCo in India

PepsiCo gained entry to India in 1988 by creating a joint venture with the Punjab government-
owned Punjab Agro Industrial Corporation (PAIC) and Voltas India Limited. This joint
venture marketed and sold Lehar Pepsi until 1991, when the use of foreign brands was allowed;
PepsiCo bought out its partners and ended the joint venture in 1994. Others claim that firstly
Pepsi was banned from import in India, in 1970, for having refused to release the list of its
ingredients and in 1993, the ban was lifted, with Pepsi arriving on the market shortly afterwards.
These controversies are a reminder of "India's sometimes acrimonious relationship with huge
multinational companies." Indeed, some argue that PepsiCo and The Coca-Cola Company have
"been major targets in part because they are well-known foreign companies that draw plenty of
attention."
In 2003, the Centre for Science and Environment (CSE), a non-governmental organization in
New Delhi, said aerated waters produced by soft drinks manufacturers in India, including
multinational giants PepsiCo and The Coca-Cola Company, contained toxins, including lindane,
DDT, malathion and chlorpyrifos — pesticides that can contribute to cancer, a breakdown of the

8
immune system and cause birth defects. Tested products included Coke, Pepsi, 7 Up, Mirinda,
Fanta, Thumps Up, Limca, and Sprite. CSE found that the Indian-produced Pepsi's soft drink
products had 36 times the level of pesticide residues permitted under European Union
regulations; Coca Cola's 30 times. CSE said it had tested the same products in the US and found
no such residues. However, this was the European standard for water, not for other drinks. No
law bans the presence of pesticides in drinks in India.

The Coca-Cola Company and PepsiCo angrily denied allegations that their products
manufactured in India contained toxin levels far above the norms permitted in the developed
world. But an Indian parliamentary committee, in 2004, backed up CSE's findings and a
government-appointed committee, is now trying to develop the world's first pesticides standards
for soft drinks. Coke and PepsiCo opposed the move, arguing that lab tests aren't reliable enough
to detect minute traces of pesticides in complex drinks. On December 7, 2004, India's Supreme
Court ruled that both PepsiCo and competitor The Coca-Cola Company must label all cans and
bottles of the respective soft drinks with a consumer warning after tests showed unacceptable
levels of residual pesticides. Both companies continue to maintain that their products meet all
international safety standards without yet implementing the Supreme Court ruling. As of 2005,
The Coca- Cola Company and PepsiCo together hold 95% market share of soft-drink sales in
India.

PepsiCo has also been accused by the Puthussery panchayat in the Palakkad district in Kerala,
India, of practicing "water piracy" due to its role in exploitation of ground water resources
resulting in scarcity of drinking water for the panchayat's residents, who have been pressuring
the government to close down the PepsiCo unit in the village.

In 2006, the CSE again found that soda drinks, including both Pepsi and Coca-Cola, had high
levels of pesticides in their drinks. Both PepsiCo and The Coca-Cola Company maintain that
their drinks are safe for consumption and have published newspaper advertisements that say
pesticide levels in their products are less than those in other foods such as tea, fruit and dairy
products. In the Indian state of Kerala, sale and production of Pepsi-Cola, along with other soft
drinks, was banned by the state government in 2006, but this was reversed by the Kerala High

9
Court merely a month later. Five other Indian states have announced partial bans on the drinks in
schools, colleges and hospitals.

MARKETING STRATEGY

In 1975, Pepsi introduced the Pepsi Challenge marketing campaign where PepsiCo set up a blind
tasting between Pepsi-Cola and rival Coca-Cola. During these blind taste tests the majority of
participants picked Pepsi as the better tasting of the two soft drinks. PepsiCo took great
advantage of the campaign with television commercials reporting the test results to the public.

In 1976 Pepsi, RKO Bottlers in Toledo, Ohio hired the first female Pepsi salesperson, Denise
Muck, to coincide with the United States bicentennial celebration.

Pepsi logo (1973-87). In 1987, the font was modified slightly to a more rounded version
which was used until 1991.
In 1996, PepsiCo launched the highly successful Pepsi Stuff marketing strategy. By 2002, the
strategy was cited by Promo Magazine as one of 16 "Ageless Wonders" that "helped redefine
promotion marketing."

In 2007, PepsiCo redesigned their cans for the fourteenth time, and for the first time, included
more than thirty different backgrounds on each can, introducing a new background every three
weeks. One of their background designs includes a string of repetitive numbers 73774. This is a
numerical expression from a telephone keypad of the word "Pepsi”.

10
“Pepsi’s logo (2003-09. Currently using with Pepsi Wild Cherry and Pepsi ONE)

In late 2008, Pepsi overhauled their entire brand, simultaneously introducing a new logo and a
minimalist label design. The redesign was comparable to Coca-Cola's earlier simplification of
their can and bottle designs. Due to the timing of the new logo release, some have criticized the
logo change, as the new logo looked strikingly similar to the logo used for Barack Obama's
successful presidential campaign, implicating a bias towards the President. Also in 4th quarter of
2008 Pepsi teamed up with Google/YouTube to produce the first daily entertainment show on
YouTube. This daily show deals with pop culture, internet viral videos, and celebrity gossip. Pop
tub is refreshed daily from Pepsi. Since 2007, Pepsi, Lay's, and Gatorade have had a "Bring
Home the Cup™," contest for Canada's biggest hockey fans. Hockey fans were asked to submit
content (videos, pictures or essays) for a chance at winning a party in their hometown with The
Stanley Cup and Mark Messier.

In 2009, "Bring Home the Cup™," changed to "Team Up and Bring Home the Cup™." The new
installment of the campaign asks for team involvement and an advocate to submit content on
behalf of their team for the chance to have the Stanley Cup delivered to the team's hometown by
Mark Messier. Pepsi has official sponsorship deals with three of the four major North American
professional sports leagues: the National Football League, National Hockey League and Major
League Baseball. Pepsi also sponsors Major League Soccer.
Pepsi also has sponsorship deals in international cricket teams. The Pakistan cricket team are just
one of the teams that the brand sponsors. The team wears the Pepsi logo on the front of their test
and ODI test match clothing.

11
COMPETITION

The Coca-Cola Company has historically been considered PepsiCo’s primary competitor in the

beverage market, and in December 2005, PepsiCo surpassed The Coca-Cola Company in market
value for the first time in 112 years since both companies began to compete. In 2009, the Coca-
Cola Company held a higher market share in carbonated soft drink sales within the U.S. In the
same year, PepsiCo maintained a higher share of the U.S. refreshment beverage market,
however, reflecting the differences in product lines between the two companies. As a result of
mergers, acquisitions and partnerships pursued by PepsiCo in the 1990s and 2000s, its business
has shifted to include a broader product base, including foods, snacks and beverages. The
majority of PepsiCo's revenues no longer come from the production and sale of carbonated soft
drinks. Beverages accounted for less than 50 percent of its total revenue in 2009. In the same
year, slightly more than 60 percent of PepsiCo's beverage sales came from its primary non-
carbonated brands, namely Gatorade and Tropicana.

PepsiCo's Frito-Lay and Quaker Oats brands hold a significant share of the U.S. snack food
market, accounting for approximately 39 percent of U.S. snack food sales in 2009. One of
PepsiCo's primary competitors in the snack food market overall is Kraft Foods, which in the
same year held 11 percent of the U.S. snack market share.

PRODUCTS AND BRAND

PepsiCo’s product mix as of 2009 (based on worldwide net revenue) consists of 63 percent
foods, and 37 percent beverages. On a worldwide basis, the company’s current products lines
include several hundred brands that in 2009 were estimated to have generated approximately
$108 billion in cumulative annual retail sales.

The primary identifier of companies' main brands within the food and beverage industry are
those which generate annual sales exceeding $1 billion, and 19 of PepsiCo's brands met this
description as of 2009: Pepsi-Cola, Mountain Dew, Lay's, Gatorade, Tropicana, 7Up, Doritos,
Lipton Teas, Quaker Foods, Cheetos, Mirinda, Ruffles, Aquafina, Pepsi Max, Tostitos, Sierra
Mist, Fritos, and Walker's.

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PACKAGING AND RECYCLING

Environmental advocates have raised concern over the environmental impacts surrounding the
disposal of PepsiCo’s bottled beverage products in particular, as bottle recycling rates for the
company’s products in 2009 averaged 34 percent within the U.S. The company has employed
efforts to minimize these environmental impacts via packaging developments combined with
recycling initiatives. In 2010, PepsiCo announced a goal to create partnerships that prompt an
increase the beverage container recycling rate in the U.S. to 50 percent by 2018.

One strategy enacted to reach this goal has been the placement of interactive recycling kiosks
called “Dream Machines” in supermarkets, convenience stores and gas stations, with the intent
of increasing access to recycling receptacles.[85][86] The use of resin to manufacture its plastic
bottles has resulted in reduced packaging weight, which in turn reduces the volume of fossil
fuels required to transport certain PepsiCo products. The weight of Aquafina bottles was reduced
nearly 40 percent, to 15 grams, with a packaging redesign in 2009. Also in that year, PepsiCo
brand Naked Juice began production and distribution of the first 100 percent post-consumer
recycled plastic bottle.

Our Mission

"To be the world's premier consumer Products Company focused on convenience food and
beverages. We seek to produce healthy 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."

Our Vision

"To build India’s leading total beverage company, delighting consumers by best meeting their
everyday beverage needs, and stakeholders, by delivering performance with purpose, through our
talented people."

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MARKETING OVERVIEW OF PEPSICO INDIA

Marketing Environment:
Marketing environment is the overall environment in which a Company operates. This consists
of the Task Environment and the Broad Environment.

Task Environment
Task Environment includes the immediate players involved in producing, distributing and
promoting the offering. The main players are the company, suppliers, distributors, dealers and
the target customers. Suppliers include the material and service suppliers such as marketing
research agencies, advertising agencies, banking and insurance companies, transportation
companies, and telecommunications companies. The dealers and distributors include agents,
brokers, manufacturer representatives and others who facilitate finding and selling to customers.

The suppliers for PepsiCo India include the bottle suppliers for the soft drinks. These include the
Pet bottles and the Glass bottles. One of the most vital products required in the operation is
Refrigerator. PepsiCo does not manufacture the refrigerators; instead they are supplied by
different vendors who get time bound contracts from the company The distributors and dealers
are part of the sales and distribution network. This will be explained later under the section of
‘Place’, in the 4 P’s segment.
The target customer for PepsiCo is primarily the youth. But, because of increasing competition
from Coke PepsiCo has expanded its target customer base which now includes people who are
prospects for beverages beyond the CSD category. PepsiCo has started targeting this segment by
offering products in the Non- CSD category, these include fruit based non-carbonated drinks,
juice based drinks, energy drinks, sports drinks, snack food (from the snack food division i.e.
‘Frito Lay’).

Broad Environment:
This contains forces that can have a major impact on the players in the task environment. This
includes six components: demographic environment, economic environment, physical
environment, technological environment, political – legal environment, and socio – cultural
environment. Companies need to pay close attention to the trends and developments in these

14
environments and make timely adjustments to their marketing strategies in order survive and
succeed in the market. This will be explained in detail in the strategic marketing segment.

Value Delivery Process:

The value delivery process consists of the value creation and delivery sequence. This is done in
three phases. The first phase, choosing the value, represents the homework done by the
marketing department before the product exists. Marketing is required to segment the market,
select the appropriate the target market, and develop the offering’s value proposition. This is
known as Segmentation, Targeting and Positioning and is the essence of strategic marketing.

Once the business unit has chosen the value, the second phase is providing the value. Marketers
need to determine specific product features, prices and distribution.
The task in the third phase is communicating the value by utilizing the sales force, sales
promotion, advertising, and other communication tools to announce and promote the product.
Each of these value phases has different cost implications.

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SALES AND DISTRIBUTION NETWORK OF PEPSICO

COMPANY

COBO
FOBO

WAREHOUSE

C & F Agents DISTRIBUTERS

SALESMAN SALESMAN

WHOLESALER

RETAILER
SLUMS

RETAILER

CUSTOMER

CUSTOMER

Initially the focus of the Company remains on reaching all the markets and then the Company
shifts its focus on increasing the frequency of sales in the respective markets so that the sales and
profitability of the Company can be increased. Company (PepsiCo): PepsiCo India provides the
salt to all the bottling plants in the Country that carry out the bottling operations.

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COBO: These are Company owned bottling operations operating directly under the Company.
Out of 32 bottling plants, PepsiCo owns 15.

FOBO: These are Franchise owned bottling operations. R K Jaipuria group does all the
franchisee-bottling operations for PepsiCo India; currently R K J Group has 17 bottling plants for
Pepsi.

Warehouses: These are Company or franchisee owned warehouses spread over various locations
that cover the respective territories and come under the purview of their respective Area or
Territory Offices. Stocks are sent from the bottling plants to these warehouses, from where they
are sent to the C & F centers and Distributor Points.

C & F Centers: These are the biggest centers in the distribution network and receive proper
assistance from the Company (either COBO or FOBO). The C & F center is owned by a private
player and not by the Company. The vehicles (Delivery Vans) are owned by the Company, and
the Salesmen at the C & F points are on the Company Payroll.

Distributors: These are small, compared to C & F centers. Everything at the Distributor point
owned and managed by the distributor, even the salespersons are on the Distributors payroll.

Wholesalers: These are smaller than C & F centers and Distributor points and get the stock
directly from the Company or Franchisee. They get their stock directly from the Company and
thus get special rates and extra discounts from the Company.

Slums: They are generally smaller than the Wholesalers are. However, they get special discounts
from the C & F centers and Distributor points. All the different players in the distribution
channel namely C & F centers, Distributor points, Wholesalers and Slums have different
designated markets and are not supposed to operate in the market designated to any other player.

Retailer: Retailers are the most important chain in the distribution channel of Pepsi as they are
the only point of contact with the customers. Retailers get their stock from all the other channel
members in the distribution channel.

17
SALES AND MARKETING HIERARCHY OF PEPSICO

MUM

UM UM

TDM
MDM

ADC MDC

CE ME

SALES PERSON
MARKETING
ASSISTANT

MUM – Marketing Unit Manager:

In charge of specific zones (e.g. north, south, east, west) and report to the corporate office.
UM - Unit Manager:

18
In charge of day to day operations and supervision of all the functions within the organizations
including operations, logistics, sales and distribution, marketing. The Unit Manager reports to the
MUM.

TDM - Territory Development Manager:

TDM is the in charge of the sales and distribution network of a particular territory within a zone.
Responsible for the daily, monthly and annual sales within the territory decides the daily
schemes for products and incentives for salespersons. He is also responsible for cost
effectiveness, profit generation and profit maximization within the territory.

MDM - Marketing Development Manager:

MDM is responsible for all the marketing activities and their effectiveness within a territory.
Decides the format and time frame of the marketing and promotional activities and the incentives
given to the retailers.

ADC - Area Development Coordinator:

Reports to the TDM, and is in charge of a C & F center and the distributor point in the area. He is
directly responsible for any issues in the area and is supposed to ensure the smooth functioning
of the entire sales and distribution network in the area. ADC is responsible for timely disposal of
any issue faced by the retailers. He decides and approves the boards, displays and hoardings in
the area.

MDC - Marketing Development Coordinator:

Reports to MDM, and is in charge of carrying out all the marketing activities in the area. He is
responsible for the execution and success of marketing and promotional activities. Coordinates
with the outside agencies for displays, boards, checks conducted in the market. He is also
responsible to keep a check on the expenditure of the marketing activities in the market.
CE - Customer Executive:
Reports to the ADC and is in charge of the salespersons. He is required to visit the market and
accompany every salesperson as frequently as possible. He is the first person to get information
about the market / area and is the first contact if the salespersons or retailers face issue.
Responsible for assigning and achieving daily sales target given to the salespersons.

19
ME - Marketing Executive:
Reports to the MDC and is responsible for the daily functioning of the marketing activities in the
including awareness of promotions in the market and the response in the market

Salesperson:
They are the most important asset for the company as they are the ones who sell the products, are
responsible for acquiring new customers, and retain the old ones. Their work also includes
informing the retailers about the promotions and any new scheme launched. They are also
required to push for the sale of any new product launched in the market and make sure that the
retailers are following the company guidelines regarding the launch and the maintenance of V.C.
coolers. They report to the CE.

Marketing Assistant:
Reports to the ME and is responsible for the distribution and usage of the displays and boards in
the area. Also has to check whether retailers are following the guidelines of the company
regarding promotional displays, other displays and displays in the V.C coolers.
They report to the ME. Pepsi is one of the most well known brands in the world today available
in over 160 countries. The company has an extremely positive outlook for India. "Outside North
America two of our largest and fastest growing businesses are in India and China, which include
more than a third of the world’s population." (PepsiCo’s annual report, 1999) This reflects that
India holds a central position in Pepsi’s corporate strategy. India is a key market for PepsiCo,
and at the same time the company has added value to Indian agriculture and industry. PepsiCo
entered India in 1989 and is concentrating in three focus areas – Soft drink concentrate, snack
foods and vegetable and food processing. Faced with the existing policy framework at the time,
the company entered the Indian market through a joint venture with Voltas and Punjab Agro
Industries. With the introduction of the liberalization policies since 1991, Pepsi took complete
control of its operations. The government has approved more than US$ 400 million worth of
investments of which over US$ 330 million have already flown in. One of PepsiCo’s key
strategies was to develop a completely local management team.
Pepsi has 15 company owned factories while their Indian bottling partners own 28. The company
has set up 8 Greenfield sites in backward regions of different states. PepsiCo intends to expand

20
its operations and is planning an investment of approximately US$ 500 million in the next three
years.

Sustainable Competitive Advantage:

Competitive advantage is a company’s ability to perform in one or more ways that its
competitors cannot or will not match. When a company is able to maintain that advantage a long
period of time that gives it an edge over its competitors then, this advantage is termed as
sustainable competitive advantage. Any competitive advantage must be seen by customers as a
customer advantage. Then only that competitive advantage can be transformed into a sustainable
competitive advantage. Three major competitive advantages give PepsiCo India a competitive
edge in the market place. They are:

 Big Muscular Brands built through better market positioning and heavy investment in
advertising and promotions;
 Proven ability to innovate and create differentiated products through superior operating
base;
 Powerful go to market system built with the help of superior relationship base and an
impeccable sales and distribution network. Making it all work are the extraordinarily
talented and dedicated people who are an integral part of PepsiCo India.

21
Communicating with the Customer:
Marketing Communication is the means by which firms attempt to inform, pursued and remind
consumers directly and indirectly about the products and brands they sell. Marketing
Communication is the central instrument of making brand equity. Marketing Communication
consists of six major modes of communications called the marketing communication mix.

 Advertising.
 Sales promotion.
 Events and Experiences.
 Public Relations and Publicity.
 Direct Marketing.
 Personal Selling.

Although PepsiCo uses all the modes in some form or the other, but this study will examine
various aspects of communication with the internal customers.

REVIEW OF LITERATURE

22
PepsiCo is one of the oldest, largest and most successful beverage and snack food companies in
the world. PepsiCo was founded by Caleb Bradham in 1902 in USA. Today PepsiCo and its
affiliates operate in more than 140 countries in the world and generate revenues in excess of $ 40
Billion. In its pursuit of never ending growth and expansion, PepsiCo entered India in 1989 in a
joint venture with Punjab Government. However, PepsiCo India very soon started its beverage
operations in collaboration with the R K Jaipuria group.
Soon after entering the beverage segment PepsiCo Established its dominance in the market
owing to its expertise in sales, marketing, operations and local collaboration. PepsiCo maintained
its market dominance for many more years to come. However, this advantage slipped and
PepsiCo had to concede the market leadership to Coca Cola India. Several actors were
responsible for this development. But, the most important are; Distribution channel is having an
important role in positioning of the product because we know that distribution channel is tool by
which we can make reach our product to the final consumers Discontinuation of slums in the
distribution network by PepsiCo. This move by PepsiCo adversely affected its position of a
market leader because while PepsiCo discontinued the use of Slums in its distribution network,
Coke continued it and within one year, it was able to snatch considerable market share from
PepsiCo. Acquisition of well-established and favored brands like Thumps Up and Limca by
Coca Cola India. These two brands still constitute a bulk of sales for Coca Cola India.
To explore the reasons behind these developments this study will analyze the marketing
initiatives and policies of PepsiCo India in detail with particular focus on its partner relationship
management.
The above-mentioned objectives can be achieved by carrying a proper and planned research
involving different types and methods. The data collected for laid the foundations for the study
and gave a platform for the analysis and findings which lead to the fulfillment of the objectives.
The data collected for research is primary and secondary. Primary data is collected by
observation, interviews and questionnaires. The data collection and analysis paves way for the
recommendation ad conclusion of the study that reveals some important findings regarding the
strategy and corporate structure and strategy of PepsiCo India.

REARCH METHODOLOGY

23
MEANING OF RESEARCH:
Research in a parlance refers to a search for knowledge. One can also define research as a
systematic search for pertinent information on specific topic. In fact research is an art of
scientific investigation.

DEFINITION:
According to Clifford woody “Research comprises defining and redefining problem, formulating
hypothesis or suggested solutions, collecting, organizing and evaluating data, making deduction
and reaching conclusion to determine whether they fit the formulating hypothesis”. A research
design is a logical and systematic plan preparing for directing a research study. It specified the
objective of the study the methodology and techniques to be adopted for achieving the objective.
It constitutes the blue print for the collection, measurement and analysis of the data.
Methodology is defined as “A particular procedure or set of procedures, the analysis of the
principle or procedure of enquiry in particular fields.” This chapter gives a clear picture of how
the study has been carried on. It summarizes the procedure in this study. It describes the
objective of the study, the basic for the final analysis the methods of data collection, for selecting
samples and limitation of the study. The value of any scientific and systematic study lies in its
methodology.
TITLE OF THE STUDY:
“A STUDY ON DISTRIBUTION CHANNEL AT PEPSICO ”

NEED OF THE STUDY:

The study was mainly conducted to identify distribution channel Strategy of PepsiCo.

STATEMENT OF THE PROBLEM:

The study was conducted to know the problems faced by the retailers and distributors and their
perception towards the company and the customer’s perception towards the PepsiCo.

PURPOSE AND OBJECTIVE OF THE STUDY:

The objective of the study was:
24
  TO know distribution channel Strategy of PepsiCo.

 To know the importance of Distribution channel strategy in Positioning of the product.

 TO know the PepsiCo planning towards the distribution channel strategy.

 How strong relationship PepsiCo has with the distributors and retailers.

 Perception of consumer towards the PepsiCo product.

 Perception of retailers towards the distribution channel of the PepsiCo.

STUDY DESIGN:
“A study design is the arrangement of the condition for the collection and analysis of data in a
manner which helps the purpose of the study.” As the study was made on the distribution
channel of PepsiCo and such documents being considered confidential, the questionnaire method
of surveying the distributer was adopted and separate questionnaire was prepared for the
customers and retailers. Each question has 2-4 options, giving sufficient options to the
respondents. On the bases of the answers to these questions, the findings are analyzed.
RESEARCH METHODOLOGY:
Method of research- Description research was used.
Tools used for data collection: A questionnaire was structured together the primary
Information.
SOURCES OF DATA COLLECTION:
The data has been collected from both primary and secondary methods have been used.
Primary data- It was collected by surveying the distributers of PepsiCo and Retailers and
randomly to the customers going to retailers.

Secondary data- it was collected from,

• General library research source like marketing book.

25
• Advertising journals like magazines and newspaper.
• Internet: PepsiCo website, wiki

Structured questionnaire: Structured questionnaire is a printed list of questions to be filled

by the respondents. The structured questions are being made as short as possible and simple to
understand. The questionnaire is designed such that it helps to elicit the accurate information.

TOOLS AND TECHNIQUES:

The first hand information was collected by interviewing the Distributor regarding the
Strategies followed by the company for distribution channel. A questionnaire was formulated
and circulated to the retailers and customers. Hence the survey method is the tool used here for
data collection.

LIMITATION OF THE STUDY:

• Biased- The study was purely based on the information provided by the respondents and they
may be biased.
• Time constraint- The study was conducted in a short period of time and a detailed
study was not possible.
• Cost constraint- This being a academic study suffers from cost constraint.

• Area constraint- The area of study is limited to only Bangalore city.

• Sample constraint- The sample size was not large enough as planned, as the time factor was
the key limitation in the study.
• Confidential constraint- Due to confidential constraint certain information, not all
details could be obtained.

FINDINGS AND RECOMMENDATION

26
FINDINGS
 Some retailers are unable to get the services which are provided by the company
 There are some retailers are not happy with services provided by the distributors and the
company.
 There is a gap between the retailers and the company
 Distributers are not satisfied with the services like margins, product availability, credit
facility
 Customers prefer the taste of Thumbs Up more than the PepsiCo’s product.
 Most of the time desired products are not available or not chilled due to unavailability of
visi coolers.
 In most of the mix outlet company has not provided its Visi Cooler, so it is becoming the
major cause for not getting fulfill of the demand. Because retailers are promoting that
brand to the consumer which company is satisfying them more in terms of Visi Cooler,
Schemes, Relationship etc
 Retailers are not happy with the MDC (Marketing Development Coordinator) of
PepsiCo. Retailers are saying that what they promise, do not fulfill that.
 Marinating good relationship with the retailers as well distributors is very important for
having a strong distribution channel
 Visi cooler have an important role in enhancing the distribution channel and policy.
 Time concern is very important in good distribution channel, it means providing product
at retailers door within a time.
 Company should provide better facility of logistics because without logistics any
company cannot maintain good distribution strategies.

RECOMMENDATION

27
This is one of the most important and most difficult part of the study. I arrived at certain
recommendations for PepsiCo India after the analysis of the data. Some of the important
recommendations are as follows.

 There should be and correct feedback from the retailers on the performance of salesmen.
This will help improve their efficiency and accountability. Moreover, this will also help
in reducing the confusing that the retailers have at times because the salesman does not
explain the schemes properly.
 As already mentioned V.C. coolers are a major reason of dissatisfaction among retailers.
The periodical maintenance check of V.C. coolers is done at three months. This should be
done at an interval of 45 days or 60 days instead of the current practice of 90 days.
 Company should adopt aggressive marketing strategy that it could reach each and every
place.
 Company should have better logistics facility for making reach the product at retailer’s
door at a right time.
 Marketing Development Coordinators/ Marketing Executives/ Sales Executives of the
company must focus more for making better relationship with retailers.
 Company should provide visi cooler to every retailer. Because who is having visi cooler
of which company they are promoting the same brand to the consumer.
 Company should more focus on youth of the country because youths more prefer the soft
drinks.
 Company should focus on the consumers taste and preferences and launch new product
according to the consumer taste and need.

28
CONCLUSION

After analyzing all the aspects of the data available and giving some important recommendations
a suitable conclusion which should be derived for this study. However, before starting the
conclusion part, the objective of the research must be kept in mind so that we can arrive at a
befitting conclusion for the research problem. The primary objective of this research was to
know distribution channel Strategy of PepsiCo and to know the importance of Distribution
channel strategy in Positioning of the product. The data collected provided a sound base for
understanding the overall organizational set up of PepsiCo in India. By analyzing the data and
the literature review, following conclusion was inferred:
The Sales and Distribution Network of Pepsi is very strong and almost flawless. PepsiCo India
had the first mover advantage when it entered the market and it capitalized on that advantage to
grab the market. Franchisee based operations combined with the Company’s operations add
strength to the overall presence of the Company in the market.
Franchisee takes care of its operations and PepsiCo does not interfere in its operations. The
Franchisees are required to report to the Company at specific time intervals.
The Advertising Campaigns are conceived, implemented by the PepsiCo and Franchisee has no
say in that. It is very important to develop good relationship with the retailers by providing them
better services and schemes. Maintaining the good relationship with the distributors are very
important for the company because they are the main part of the distribution channel.

29
 4. BILBLIOGRAPHY

BOOKS:

I. Philip Kilter, Marketing management, Pearson education, New Delhi, seventh Indian
print 2005.
WEB/INTERNET RESOURCES:
 PEPSICO INTERNATIONAL OFFICIAL WEBSITE,
 PEPSICO INDIA WEBSITE.
 PEPSICO INTERNATIONAL INTERNAL REPORT.
 http://en.wikipedia.org/wiki/PepsiCo
 www.pepsicoindia.com.
 http://www.pepsico.com/

Questionnaire:

30
01. PepsiCo have good distributions channel?
a. Strongly agree b. Agree c. Can’t say d. strongly disagree e. Disagree

02. Distribution channel has an important role in positioning of the product?

a. Strongly agree b. Agree c. Can’t say d. disagree

03. Are you being provided the V.C.coolors by the company?

a. yes b. no

04. PepsiCo has good relationship with the distributors/retailers?

a. Strongly agree b. Agree c. Can’t say d. disagree

05. Perception of retailers/distributors towards the PepsiCo’s Distribution Channel?

a. Excellent b. good c. bad d. worst

06. How much time, Company takes to make reach the product at retailer shop?
a. One day b. 3 day c. One week 4. One month.

07. If better scheme is given then replace with coke"

a. Strongly agree b. Agree c. Can’t say d. strongly disagree e. Disagree

08. You are having logistics facility of company or own?

a. own b. Company

09. Does Logistic Facility affects the Distribution Channel?

a. Strongly agree b. Agree c. Can’t say d. disagree

10. Perception of retailers/distributors towards the PepsiCo Distribution channel if V.C

coolers provided by the company.
A. E
x
c
e
l
l
e
n
t

B. G
o
o
d
C. B
a
d
D. W

31
 o
r
s
t
11. How many times you go for soft drink in a week?
a. One b. Two to three c. three to five d. more than five

12. Which brand’s soft drink you usually drink?

a. PepsiCo b. Coke c. others.

13. Do you get easily your demanded brand in the market?

a. yes b. No

14. Why you prefer this brand?

a. Availability b. Advertisement c. Taste d. Others………..

32