BCG Matrix of PEPSI
BCG Matrix also is known as the growth-share matrix is used by organizations to classify their business units or products into 4 different categories: Dogs, Stars, Cash Cows and Question Mark.
The growth rate of an industry and the market share of a respective business relative to the largest competitor present in the industry are taken as the basis for the classifications, for that reason, BCG Matrix is also called as Growth-Share Matrix.
Past few years have been an inflection point for the company with Pepsico seeing a major drop in their carbonated drinks business, thus prompting it to go back to the drawing board and relook at its future strategy and also its product offerings.
In this BCG matrix, we will talk about different brands of Pepsico which over the years have seen a fall in market share due to changing market scenarios and also brands which saw exponential growth in their market share.
Let’s see what are the 4 different quadrants of BCG Matrix:
These are the products with low growth or market share
These are low growth or low market share products and have very few chances of showing any growth.
The investment strategy for these products has to be very well thought through by the management as there are chances that these businesses might not yield any profit for the organization.
These business units or products are cash traps and therefore are not seen as a useful source of earning.
These are the products which are in low growth markets with high market share.
Products which are market leaders in their specific industry and their industry is not expected to see any major growth in the future are considered as Cash Cows.
These products are the money churners for the company and require very low investments to sustain their leadership and profitability in the market.
These are the products which are in high growth markets with a high market share.
Products or Business Units which hold a high market share and are also considered to grow in the future are positioned as Stars.
As a result, companies are interested to invest in developing these units further to gain a larger market share and attain a stronger position in the market.
These products have the potential of being positioned as cash cows in the future owing to the industry growth prospects.
Products in high growth markets with a low market share.
Products or business units of the company that are still in the nascent stage of their product lifecycle and can either become a revenue generator by taking the position of a Star or can become a loss-making machine for the company in the future.
The industry has high potential to grow hence giving the room to the products to grow as well only if the pertinent issues are managed effectively.
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Let’s check out the BCG Matrix of Pepsi and what products of the company fall under what Quadrant.
Cashcows are the products that have a high market share in a market that has low growth.
For Pepsi, Frito Lays is undoubtedly the Cash Cow for the company.
Ξ Frito Lays dominates the savory snacks market in the U.S with a 36.6% market share. The next biggest manufacturers in this sector are Kellogg’s and Mondelez with much smaller 7% and 5.6% share respectively.
In the tortilla and tostada chips segment, Frito lays command a market share of 72.4% with strong brands such as Doritos and Tostitos contributing to this market share gain.
The product requires very less investment to maintain its market share and fight off any competition.
The products or business units that have a high market share in high growth industry are the stars of the organization.
Ξ In the case of Pepsico, Pepsi falls in the Star quadrant of the BCG Matrix of Pepsi.
Over the years, Pepsi has faced stiff competition from Coca-Cola and has also seen its market share take a hit.
The company has to spend millions of dollars on brand awareness and promotional activities in order to maintain its market share.
People are turning away from sugary drinks and empty calories. Evolving tastes and sugar taxes have encouraged brands like Pepsi to invest in healthier alternatives.
Because of stiff competition from Coca-Cola and changing customer preferences towards healthy and low-calorie drinks, Pepsi is seeing a shift from STAR quadrant to Dogs quadrant.
Ξ Aquafina is one other brand which can be placed in star quadrant, Aquafina holds 15% of bottled water market share and is second to Bisleri which has 36% market share.
Aquafina is slowly and steadily catching up with Bisleri and is expected to see a twice a growth in the next 5 years.
Ξ Tropicana and Gatorade: Amid falling sales of aerated drinks as consumers shift to healthier drinks, Pepsico aims to double the Tropicana business by 2020.
Carbonated soft drinks segment has seen a major decline in the past few years, the overall liquid refreshment beverage market has been growing. Consumers aren’t drinking fewer fluids, they are just not drinking sugary sodas as much anymore.
This change in consumer preferences is what has helped Gatorade see an exponential growth in its market share.
Ξ Gatorade has been a forerunner for Pepsi in sports drink market with a mammoth 77% share, whereas Powerade has 20% of this market.
Growing healthier lifestyle trends and emerging markets have prompted the brand to invest large amounts of investments in healthier beverages and snacks in order to differentiate from competitors and grow brand awareness.
There are products that formulate a part of the industry that is still in the phase of development, yet the organization has not been able to create a significant position in that industry. The small market share obtained by the organization makes the future outlook for the product uncertain, therefore investing in such domains is seen as a high-risk decision.
Diet Sodas, once seen by consumers looking to cut calories as an alternative to traditions sodas, are losing their fizz.
Ξ Diet Pepsi was launched with an aim to help Pepsico regain their market share but failed to capture the desired response from the customers and one of the major reasons for that was tough competition from Diet Coke.
Ξ 7up Nimbooz is one more brand which failed to succeed, launched in India in 2009, the brand was not able to achieve significant sales volume.
Dogs are those products that were perceived to have the potential to grow but however failed to create magic due to the slow market growth.
Failure to deliver the expected results makes the product a source of loss for the organization, propelling the management to withdraw future investment in the venture. Since the product is not expected to bring in any significant capital, future investment is seen as a wastage of company resources, which could be invested in a Question mark or Star category instead.
Ξ Pepsi – Seeing Pepsi in Dog quadrant will shock a lot of people but considering the present and future scenario, Pepsi will see a shift from Star to Dog quadrant.
Pepsi’s has dropped from 10.3% to 8.4%,
Declining carbonated soft drinks segment share due to increasing demand for low calorie and healthy beverages and snacks is what is attributing the diminishing sales of Pepsi brand.
This concludes the BCG Matrix of Pepsi.
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