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PepsiCo MEA: the role of packaging in brand activation

Melodena Stephens Balakrishnan,
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 PepsiCo MEA: the role of packaging in
brand activation
Melodena Stephens Balakrishnan

Melodena Stephens Hossam Dabbous, Senior Marketing Director of Carbonated Soft Drinks, Middle East &
Balakrishnan is an Africa (MEA) region and Asmaa Quorrich, MEA Senior Marketing Manager, Cola & Malt,
Associate Professor at were discussing the role that packaging played in the brand activation strategy for the
the University of Pepsi brand. Packaging for PepsiCo is a focus area for sustainability, but, more importantly,
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Wollongong in Dubai,
it could also help drive volumes, reinforce brand image and act as an entry point in
United Arab Emirates.
markets. While packaging and designs take approximately two months from planning to
production, labels for PET (polyethylene terephthalate) bottles took longer and the
challenges were to determine the objective of packaging, make sure to keep it relevant to
local markets and produce the right quantities so that the special packages were
consumed in the promotion period. The lead time for these activities was normally six
months. The meeting between Hossam and Asmaa was called to understand which
stock-keeping unit (SKU) PepsiCo thought they could leverage to increase profitability and
reinforce brand equity using innovative packaging designs and concepts.

1. PepsiCo: a brief history

1.1 PepsiCo – the second largest global food and beverage company
PepsiCo, a world leader in convenient snacks, foods and beverages in 2011, had revenues
The author would like to
acknowledge the Academy of
of more than US$65.88 billion with operating profits of US$10.36 billion. PepsiCo was the
International Business – largest food and beverage business in North America and the second largest in the world
Middle East North Africa
Chapter for their generosity in
having 22 one-billion-dollar brands (Exhibit 1). The 2011 Annual Report highlighted the
giving the cases to the power of PepsiCo’s brands:
Emerald Emerging Market
Case Studies (EEMCS) One billion times a day, in 200 countries and territories around the world, PepsiCo provides
collection.
consumers with affordable, aspirational and authentic foods and beverages. Our consumers
Disclaimer. This case is written are refreshed, rejuvenated and restored by PepsiCo’s beloved snack, beverage and nutrition
solely for educational
purposes and is not intended
brands. That is the Power of PepsiCo.
to represent successful or
unsuccessful managerial PepsiCo – the company was positioning itself for sustainable growth “Performance with
decision-making. The author
may have disguised names, purpose, our commitment to do right for the business by doing right for the people and the
financial and other planet” had been its business strategy and vision, a way of conducting business on a day
recognizable information to
protect confidentiality. to day basis (Exhibit 2: Company Philosophy). By 2011, PepsiCo had approximately 50 per
cent of its revenue coming from outside of USA; of this, 34 per cent came from developing
and emerging markets, proving PepsiCo’s ability to innovate for local tastes and cultures.
Performance with Purpose (PwP) was a central theme that PepsiCo had been advocating
since 2006. The 2006 sustainability report focused on human sustainability (how they
worked to nourish people with their products); environmental sustainability (how they
worked to replenish the environment) and talent sustainability (how they worked to cherish
people). By the beginning of 2010, the company had a list of 47 goals and commitments

DOI 10.1108/EEMCS-03-2015-0043 VOL. 5 NO. 3 2015, pp. 1-18, © Emerald Group Publishing Limited, ISSN 2045-0621 EMERALD EMERGING MARKETS CASE STUDIES PAGE 1
 like working on reducing the sugar content in its drinks and working on a pilot plan to
introduce a 100 per cent recyclable bottle.
PepsiCo traced its history way back to over 100 years when Caleb Bradham, a pharmacist
from North Carolina, USA, first formulated Pepsi-Cola and founded the Pepsi-Cola
Company in 1898. PepsiCo was formed in 1965 through the merger of the Pepsi-Cola
Company and Frito-Lay. The H.W. Lay Company (the potato chip company) was founded
by Herman W. Lay in 1932 and, in 1961, merged with The Frito Company, which was
founded by Elmer Doolin, to form Frito-Lay. PepsiCo also acquired beverage companies.
In 1998, Tropicana, founded by Anthony Rossi (who pioneered a pasteurization process for
orange juice) became part of PepsiCo. In 2001, PepsiCo acquired The Quaker Oats
Company (which dated back to 1901) and hence also acquired Gatorade, which was
created in 1965 and had become part of the Quaker Oats Company in 1983.
By 2011, beverages contributed 52 per cent to the total revenues of PepsiCo and were
worth US$34 billion. Despite recession, the volume grew by 5 per cent in 2011. The Pepsi
brand was a leading consumer global brand and was the only product the company sold
in its first 65 years of existence. It continued to be a major part of the product portfolio of
beverage brands of the company which included carbonated soft drinks (CSD), juices and
juice drinks, ready-to-drink teas and coffee drinks, isotonic sports drinks, bottled water and
enhanced waters. Some major umbrella brands in the beverage category of the company
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were: Pepsi, Sierra Mist, 7Up (outside USA), Slice, Tropicana, Ocean Spray (licensing
agreement), Fiesta, Mirinda, Mountain Dew, No Fear, Seattle’s Best Coffee, Tazo, SoBe,
Aquafina, Starbucks (in partnership) and Lipton (in partnership).
The marketing focus of the company for 2012 was brand building. In 2011, the Pepsi brand
was ranked in the top 25 global brands according to the Interbrand ranking (Chapman,
2011). In 2012, PepsiCo, planned to increase their advertising and marketing spend from
US$500 to 600 million with a strong emphasis on the North American market. For the
beverage products, the company’s focus was on the developed market, while building on
promising gains in emerging and developing markets, especially looking at core brands
like Pepsi, Mountain Dew, Sierra Mist, 7Up, Miranda and Lipton. PepsiCo strongly felt that
their key to success was the ability to change with the times and build for the future; as part
of this philosophy, the company believed that they not only saw opportunities but they also
created them.

1.2 PepsiCo Asia, Middle East and Africa

Asia, Middle East and Africa (AMEA) is one of the four major divisions of the PepsiCo family
with its headquarters in Dubai, United Arab Emirates (UAE). The other divisions are
PepsiCo Americas Beverages, PepsiCo Americas Foods and PepsiCo Europe. The
company entered the Middle East and Africa (MEA) market in 1945 when it opened its first
bottling plant in the Middle East. By 2010-2011, AMEA contributed 11 per cent to PepsiCo’s
net revenues and 8 per cent to the company’s operating profits (Exhibit 3). In the Middle
East, PepsiCo had a presence across 29 countries with 70 manufacturing facilities; of
these, 15 were company owned food and beverage manufacturing plants and 55 were
franchisee-owned bottling plants.
In the AMEA market, PepsiCo the company manufactured and marketed leading snack
food brands such as Lay’s, Kurkure, Chipsy, Doritos, Smith’s, Cheetos, Red Rock Deli and
Ruffles. They also marketed nutritional brands like Quaker brands which included cereals
and snacks. Within the beverages, beverage concentrates, fountain syrups and finished
goods, their brands included famous names like Pepsi, Mirinda, 7Up, Mountain Dew and
the ready-to-drink Lipton Tea (a joint venture agreement with Unilever). The manufacture
and selling of these brands were done through company-owned business operations or
franchisee-owned business operations that source the concentrate from PepsiCo. The
company’s water brand called Aquafina was also licensed to some of the company’s

PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 5 NO. 3 2015

 authorized bottlers. In this context, it should be stated here that the MEA market was
considered a subdivision of the AMEA sector.

1.3 Pepsi brand: the role of packaging

Insights into consumer behavior of PepsiCo products in the USA found that 50 per cent of
the time when a customer bought a salty snack, they also bought refreshments. Hence if
this behavior was also exhibited in the MEA markets, there was tremendous scope for
potential growth of PepsiCo products. The role packaging played in the soda industry was
multifaceted. It was used to:
 protect, reinforce and add to brand equity;
 drive consumption and contribute to revenues and profits;
 protect the product contents; and
 reflect the country requirements in terms of legality, culture, national events and pricing.
The packaging for Pepsi was of four types:

1. aluminum cans;
2. PET bottles;
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3. returnable glass; and

4. non-returnable glass.
Aluminum cans and non-returnable glass bottles were typically used for single consumer,
single usage occasions. Aluminum was a commodity product, but over the past few years,
the price of this metal had increased considerably because of demand like most other
commodities. As a metal, aluminum was 100 per cent recyclable. PET bottles were meant
for multiserve, not one single consumption occasion and hence the profit per product was
much smaller than aluminum cans as the volume of liquid served in a PET bottle was larger.
As an organization, PepsiCo had committed to rethink the way they grew, sourced, created,
packaged and delivered their products to minimize their impact on the environment.
Pepsi in the Middle East, unlike most other markets, continued to be a market leader. Pepsi
had always been positioned as a younger, trendier and a more relevant brand for the new
generation. To keep this position, they had to keep on innovating. So as a brand, Pepsi kept
re-energizing their brand (see Exhibit 4 for Pepsi Brand Evolution). In the Middle East
market, Pepsi had been an established brand and was a “Defender” brand unlike other
markets where it was perceived as the “Challenger” brand, and this meant that they (Pepsi)
were not necessarily viewed as a young brand in MEA. Consumers in MEA felt that it was
a way of life “I grew up drinking it and it is the drink of my life”.
There were some unique challenges in some difficult markets that Pepsi was in. An
example would be Iraq where three to four brands had similar logos to the Pepsi logo.
PepsiCo created a unique packaging for the Iraq market using an emblem that sent an
“authenticity message of pure Pepsi” (Exhibit 5). To reinforce this message, advertising
commercials focused on communicating the difference between an authentic Pepsi and
other similar brands in the marketplace through the packaging of its can. Pepsi further
engaged the consumers through their Web sites which were mentioned on their cans:
Pepsiarabia.com; Pepsiarabia-facebook and Pepsiarabiatv.com.
Brand equity could be activated through different platforms and one such platform was
product packaging. Packaging as an equity builder drove brand health and enhanced key
performance indicators (KPIs), balancing the focus on volumes and profit. The other
platform that PepsiCo used to enhance its brand equity was sponsorship of music and
sporting events. In 2012, Pepsi sponsored the Arab Idol program and designed its cans to
reflect this sponsorship. It allowed engagement with the target audience as consumers
could download an application via a QR code on the pack that allows them to view

VOL. 5 NO. 3 2015 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3

 exclusive content on the Arab Idol program and get a chance to win tickets for the live
finale. This was a seasonal packaging design that was available on shelf during the entire
period Arab Idol was running on TV (Exhibit 6). Research indicated that the youth or the
so-called mobile generation found that sponsorship of music and sports events helped
extend the consumer experience (Frederick and Patil, 2010), increase brand awareness,
reinforce favorable brand image, support brand positioning and effectively reach opinion
leaders and innovators (Fan and Pfitzenmaier, 2002).
In today’s marketplace, it was noticed that packaging could be designed for special
occasions. During the 2010 football season, Pepsi came out with a special can with an
embossed football on it. This 2010 packaging was a 500 ml can and not the standard 355
ml can that was available in the Kingdom of Saudi Arabia (KSA). While the can was sold for
a premium, the profits collected were used to sponsor a notable corporate social
responsibility (CSR) program whereby Pepsi built several football pitches all around the
KSA. The can design was also a very good equity driver for brand Pepsi during the football
season (Exhibit 7). Pepsi also released a special can for the 2012 football season with the
football players’ profiles on the can (Exhibit 8).
Seasonal festivals like the holy month of Ramadan were an occasion for Pepsi to express
their affinity with the local market, embracing the culture and respecting tradition. Every
year for the month of Ramadan which lasted for 30 days, Pepsi introduced a can designed
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for the occasion (Exhibit 9). In the UAE, for the nation’s 40th year National Day celebrations,
the company released a commemorative can that included deigns from the seven Emirates
(states) of the nation (Exhibit 10).
Packaging had the ability to drive consumption. Keeping this in mind, PepsiCo had
different can sizes to suit various consumer needs in different countries across MEA. In
some countries, the standard can size was 250 ml – this was meant to bring value, as it was
cheaper than the other regular sizes like the 300 or 350 ml size. In countries like the KSA
and the UAE, the company introduced cans sizes of 355 ml. Pepsi’s smaller can size of 250
ml looked sleek and slim, and being more affordable, it was able to penetrate
price-sensitive markets like Egypt (Exhibit 11). Accordingly, what consumers lost in terms
of volume of liquid, they gained in terms of price and convenience.
Another factor affecting packaging size and material was the consumer consumption
behavior. For example, if most consumers in a country consumed CSD on the go outside
their homes, Pepsi was able to sell a mix of cans and bottles. In such countries, where
consumption of CSD was mostly at home, consumption was skewed toward the PET
bottles. In countries where consumers tended to drink on their own, they preferred cans or
non-returnable bottles which were made of glass. In countries such as Algeria, Egypt,
Ethiopia, Iraq, Ivory Coast, Jordan, Lebanon, Libya, Morocco, Namibia, Nigeria, Pakistan,
the Kingdom of Saudi Arabia, Sudan, Bahrain and Kuwait, returnable glass bottles were
cheaper than cans and hence there was a resistance from the customer to embrace
single-serve aluminum cans. In terms of income and consumption, low-income countries
preferred value packs and larger 1.5-liter bottles over the 1-liter PET bottles. PET bottles did
well for large families like the GCC. Pepsi needed to balance the promotions, e.g. offer 0.5
liters free while selling a 2-liter PET bottle with the image-conscious consumer. It was
important for the company to plan this product mix, based on a country’s economic variable
and the consumption patterns in terms of where and how the consumer choose to consume
the product.
PepsiCo’s bottles and cans were often packed in multipacks, e.g. 24 pack for cans, 12
pack for both cans and bottles, 8 pack for bottles (and cans being introduced in 2012) and
6 pack for cans and bottles (Exhibit 12). The sale and consumption of multipacks was a
function of the market consumption patterns. For example, in the KSA, 50 per cent of the
sales were in cans which was a very unusual consumption pattern compared to the rest of
MEA, as people drank from cans on the go and at home. In the KSA, there was a low

PAGE 4 EMERALD EMERGING MARKETS CASE STUDIES VOL. 5 NO. 3 2015

 preference for the 12 pack, as they found it too bulky and too expensive. In response, Pepsi
introduced and marketed to them a more affordable and a less bulky multipack consisting
of either six or eight cans. Packaging could also differ based on the type of retail channel;
for example, in airports, restaurants and cafes, a special 300-ml can was served instead of
the 350 or 355-ml product. In the airplanes can sizes were of 150 ml. Also various countries
had different rules and restrictions based on size, language, labeling and price. All such
information was displayed on the side panel, so this made the product immobile across
national borders. The normal shelf of a Pepsi can was nine months, while Diet Pepsi had a
shelf life of six months.

2. Future opportunities
Pepsi needed to look at consumption patterns to discover future opportunities in the
different markets across the region. For example, research in Egypt showed Pepsi tended
to be consumed outside home and often during lunch time. In the KSA, the consumption
took place mostly at home, at the same time during lunch hours. In the KSA, when people
consumed Pepsi beverages during the work day, they wanted the product conveniently
placed in the shopping outlets. Pepsi was trying to get data on consumers regarding what
package they preferred and why, which type of pack suited them, did they consume CSD
during their meals and which meals, did they drink alone and why? In short, they wanted
to address the 6Ws and 1H – Where, What, When, Why, Which, Who and How. At a macro
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worldwide level, 70 per cent of sales of PepsiCo products were cans and the profit margins
were dependent on the commodity price of aluminum. In the MEA region, sales increased
by 40 per cent in summer, peaking from April to August (depending on the country).
How does Pepsi increase penetration in MEA? What consumer insights can they use to
Keywords: redesign packaging to help brand activation, increase sales and reach brand KPIs?
International business, Packaging for beverages was constantly innovating, bottles of aluminum shaped like the
Consumer behaviour, original glass bottle, slimmer cans, reusable packaging, interactive packaging, collector
Brand activation, items, multipacks and various packaging material were just some of the elements Pepsi
Products strategy could play around with.

References
Chapman, M. (2011), “Interbrand’s top 100 global brands 2011: Coca-Cola still top but Apple gaining
fast, marketing”, available at: www.marketingmagazine.co.uk/news/1096967/Interbrands-top-100-
global-brands-2011-Coca-Cola-top-Apple-gaining-fast/

Frederick, H. and Patil, S. (2010), “The dynamics of brand equity, co-branding and sponsorship in
professional sports”, International Journal of Sport Management and Marketing, Vol. 7 No. 1, pp. 44-57.

Fan, Y. and Pfitzenmaier, N. (2002), “Event sponsorship in China”, Corporate Communications: An

International Journal, Vol. 7 No. 2, pp. 110-116.

VOL. 5 NO. 3 2015 EMERALD EMERGING MARKETS CASE STUDIES PAGE 5

 Exhibit 1. PepsiCo mega brands

Figure E1
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PAGE 6 EMERALD EMERGING MARKETS CASE STUDIES VOL. 5 NO. 3 2015

 Exhibit 2. Company philosophy

Figure E2
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Exhibit 3. AMEA divisional contribution to PepsiCo (2010-2011)

Figure E3

VOL. 5 NO. 3 2015 EMERALD EMERGING MARKETS CASE STUDIES PAGE 7

 Exhibit 4. Pepsi brand evolution (displayed on Dubai, UAE metro station)

Figure E4
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PAGE 8 EMERALD EMERGING MARKETS CASE STUDIES VOL. 5 NO. 3 2015

 Exhibit 5. Iraq authenticity seal on Pepsi can

Figure E5
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Exhibit 6. Pepsi Arab idol 355-ml can (UAE)

Figure E6

VOL. 5 NO. 3 2015 EMERALD EMERGING MARKETS CASE STUDIES PAGE 9

 Exhibit 7. Football 500-ml can (KSA)

Figure E7
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Exhibit 8. Pepsi football 2012

Figure E8

PAGE 10 EMERALD EMERGING MARKETS CASE STUDIES VOL. 5 NO. 3 2015

 Exhibit 9. Ramadan special packaging design, 2012

Figure E9
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Exhibit 10. UAE 40th year national day celebration

Figure E10

VOL. 5 NO. 3 2015 EMERALD EMERGING MARKETS CASE STUDIES PAGE 11

 Exhibit 11. Pepsi aluminum can of 250 ml (relative size to 355 ml)

Figure E11
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Exhibit 12. Secondary packaging

Figure E12

PAGE 12 EMERALD EMERGING MARKETS CASE STUDIES VOL. 5 NO. 3 2015