Pepsi Next Case Study-Shivam Dubey

Brief Introduction about the Case

Pepsi Next was launched by PepsiCo into the US market in February 2012.

The new product is described as a mid-calorie cola beverage, having a mix of sugar and artificial sweeteners, designed to deliver a full cola taste with reduced calories.

They already had “Good-For-You” product range like Gatorade, Quaker oats, etc. where consumers were already quite health-conscious and probably more responsive to healthier options.

But a “Fun-For-You” range of Pepsi may have less benefit when compared to G2, Trop50. So they came up with Pepsi next which is between normal Pepsi and diet Pepsi.

The US soft drink market generates over $70 billion in sales. Volumes (units) have weakened slightly since 2005.

One of the main reason for launching Pepsi Next is decline in Carbonated soft drink (CSD) market.

It was due to Shift of consumer to other beverages like fruit juices, energy drinks, mineral water etc.

Before Pepsi Next, they came with Jake's diet cola and Pepsi XL which too were low calorie soft drinks.

Coca-Cola came with Coca-Cola C2 which took away the market share of Pepsi XL and Jake's Diet cola. They lasted only 18 months in the market.

Pepsi continues to battle Coca-Cola’s range of brands for market share in the CSD market and so they saw the new Pepsi Next product as a viable low-sugar alternative to traditional soft drinks, and a product that could tap into consumer’s emerging dietary needs and to generate sales from outside the traditional cola market and to win back lost cola consumers

Pepsi Next was promoted via TV advertising, digital marketing, direct mail, heavy free trials and in-store point-of-promotionIt was released with two variations cherry vanilla and mango paradise for limited time only.Initially the product captured 1% of market share but gradually sale weakened.Perhaps the initial strong sales results were somewhat propped up by the novelty taste, the extensive free sampling and significant initial discounting

Q) New Product Process of Pepsi Next

• Step 1:- Idea GenerationThe company came with the idea of having mid-calorie cola drink after taking a market research, receiving suggestions from their audiences. It was basically taken to fill the market gap

• Step 2:- Idea ScreeningIn this step, the company sets some specific criteria's on the basis of which the idea would be screened out. PepsiCo Screened the idea by evaluating its market potential and risks.

• Step 3:- Concept development and testingUsing a small group of your true customer base – those that convert – the idea need to be tested to see their reaction. The idea should now be a concept, with enough in-depth information that the consumer can visualise it.

• Step 4:- Business analysisIncludes a detailed marketing strategy, highlighting the target market, product positioning and the marketing mix . Pepsi Company had targeted those consumers that may sometimes prefer lower-calorie drinks but are concerned with the taste.

• Step 5:- Product DevelopmentIf the new product is approved, it will be passed to the technical and marketing development stage. This is when a prototype or a limited production model will be created.

• Step 6:- Market Testing Pepsi conducted blind taste-test wherein the consumers were able to taste variety of Pepsi cola drinks which were actually Pepsi Next. The result of market testing was positive.

• Step 7:- Commercialisation When the concept has been developed and tested, final decisions need to be made to move the product to its launch into the market• Step 8:- LaunchCompany launched the product with tag line “Drink it to believe it”. Pepsi Next was promoted via TV advertising, digital marketing, direct mail, heavy free trials and in-store point-of-promotion

Q) PepsiCo has been quite persistent with pursing mid-calories beverage products – why do you think this is the case?• Decline in CSD market in recent years• Consumer shifting to other beverages• Consumer's preference to reduce sugar

Q) How is the performance and market acceptance of Pepsi Next likely to impact the overall brand equity of Pepsi?

• The performance of Pepsi Next will eventually enhance the brand equity of Pepsi. This could be done by ensuring that product is well received in the market. Company did this by conducting various promotional campaigns. A social media campaign via Facebook as well as YouTube formed a key platform in their overall promotional mix. This increased the consumer’s engagement with the brand.

Q) The launch strategy seemed to heavily focus on generating trials. Why was this important?

The launch strategy included Free trials or samples of Pepsi Next where several “challenge vans” were set up in Australia. It was mainly focused to blind taste-test Pepsi Next against regular cola drink. It appears that generating initial trials was done with the hope of generating more number of Repeat customers