Case Analysis: Pepsi-Cola Spain

Presented by: Sachin Udas

Roll No: 07153

Case Background

Case Synopsis
Pepsi Cola Spain had initial positive effects in the form of increase sales and
market shares, band name recall (unaided), Share of voice and other measures
by 1993 after adopting alternative strategic decisions on 1992, focusing to make
its distribution effective and increase brand image. Pepsi Spain in March 1994
has dilemma what strategy to adopt: continue with promotion campaign which
only focuses on youth and has adopted its own Spanish advertisement which is
not in alignment with the Parent Corporate Image of Pepsi or to adopt other
positioning and promotion strategy also focusing on positing Pepsi brand for all
age and market segment as some executive feared losing the market in long
term.

Case Background.
Pepsi Cola has been operating in Spain from 1953 in low profile. It had adopted
franchising approach for it’s distribution. Promotion and advertisement was
more thematic advertisements and concepts adopted from America experience
with as not effective. Pepsi went on with the “the choice of new generation”
campaign, “Pepsi Challenge” and tried positioning itself youthful, attractive and
modern image with campaigns featuring rock stars and pop musicians such as
Michael Jackson, Tina Turner but every attempt failed to materialize in
improved brand image and sales. The failures were due to high brand image and
effective distribution channel of coke.

Pepsi Headquarter realized the need to focus on Spain after it loss of 278
million in 1990. At the same years industry growth rate of American market
were saturated, Spain was the seventh largest consumer country of soft drinks
and had opportunities ahead with growing economy. Pepsi Headquarter
determined to focus on European market so targeted Spain as its platform for
European market.

Pepsi had by 1987 realized the distribution and brand image was its major
challenge in the Spain that was stopping. There were challenges of buildings its
own network of distribution with control on its own. It acquires 30% shares of
KAS with strong distribution channel in northern part in an attempt. By 1992
the action was paying off.
 Case Analysis: Pepsi-Cola Spain
Presented by: Sachin Udas
Roll No: 07153
Pepsi Cola Spain after fully realizing that thematic advertisement would not
work in case of Spain Consulted and employed Tiempo BBDO to think for it

In 1992 Pepsi Cola Spain pushed resources to make and impact. In the year it
acquires 100% shares of KASA owner of KAS and become second largest
company in the soft drinks and juice category. It has now some strong
distribution in some parts of Spain and had grip in some products.

The year company repositioned itself as realistic, aggressive, unique and new
product promotion strategy focused on youths was implemented. The add line
being “Are you crazy...Drink Pepsi”. The attempt was to be different then
corporate brand image which failed for long years.

The new strategy paid up in 1993 and beginning of 1994. Sales increase twice
as compared to Coke, Pepsi Spain was taking over other market share. Even in
recession in 1993 when industry growth was negative, Pepsi growth was
positive. Revenue grew by 13 % in 1993 to 68 billion than in earlier year.
Consumer survey showed positive response in case of Brand name recalls,
Quality of Soft drinks, share of voice and other variables.

But higher executive from headquarter and executives from other European
division showed concern for the narrow focus of the Pepsi-Cola Spain. It
planned to launch Pepsi Max but headquarter had

Case Issues

• Selection of Advertisement Alternatives in situation where present

promotion is having an impact but is unaligned with corporate brand
image.
• Focus on only narrow market segment and worries on loosing focus on
other segment like family, children and old people.
• Product line increase through product development to satisfy specific
market needs and avail company brands to parallel competitor’s product
brand.
• To Launch Pepsi Max or not at the time when flagship brand was
beginning to pick up market share against Coke.
 Case Analysis: Pepsi-Cola Spain
Presented by: Sachin Udas
Roll No: 07153
BCG Matrix (1993 Pepsi Cola Spain)

20 STAR QUESTION MARK

10
Market Growth
CASH COW DOG

10 x 1x 0.01 x

Market Share

Pepsi Cola-Spain is in Question Mark (?) as Market share is low and Industry
Growth is relatively high. There is lot of threats around it. Brand image is not
high, Distribution channel is strong. As the one in STAR is very powerful with
own resources and market share to penetrate Pepsi-Cola Spain is always in
danger. So it should put resources to gain more market share and increase it’s
brand image to create a market of it’s own.

SWOT Analysis

Strength
• Strong distribution network of KAS in Northern Area
• Good market share of orange and lemon-flavored drinks.
• Financial support for promotion and expansion of distribution network.
• Second largest soft drink and Juice Company in Spain.
• Increasing revenue and sales even in recession.
• Increasing Brand name recall (unaided)

Weakness
• Lacking distribution on other parts of Spain
• Corporate brand image of Pepsi in American countries.
 Case Analysis: Pepsi-Cola Spain
Presented by: Sachin Udas
Roll No: 07153
• Lack of Exclusive rights in major public gathering places like soccer
stadiums, indoor arenas, bullrings.
• Brand positioning and promotion only focused on youths.
• Separate brand image than corporate brand.
• Low market share in on the sport consumption distribution channel.
• Comparatively low brand image in the market.
• Low product lines
• Low purchase preference

Opportunity
• Sales growth rate of Sugar free and Calorie less drinks (8% in 1994)
• Big market of soft drinks in Spain. (2.8 billion ltrs in 1993) and projected
10% growth in 1994.
• Per capita soft drinks consumption growing ( 1990: 70.5 liters to
1993:73.7 liters)
• Competitors loosing their market shares slowly.
• Fast growing vending machine, greater attention and control over
distribution also bigger margins.

Threats
• Strong Brand Image and consumer preference of Coke in Spain
• Strong and efficient distribution network of Coke
• Increasing growth rate of private label brand.
• Homogeneous selling approach of national level stores.
• Strong local competitors in carbonated drinks segment : La Casera
• Coke large product line.

Possible Alternatives

Possible Alternatives

1. Continue with a specific focus on the Spanish market, with aggressive

copy that would help the younger consumer identify with the brand.
2. Launch two campaigns, One with specific focus on the Spanish market,
with aggressive copy targeted that youth and another the thematic
advertising prepared by the head office, giving the product a broader
appeal with greater potential reach among a wider range of demographic
segments. Then increasing weight to Spanish-Specific keeping some of
 Case Analysis: Pepsi-Cola Spain
Presented by: Sachin Udas
Roll No: 07153
the classic advertising in order to retain the more conservative
consumers.
3. Improving the acceptance of the product in the distribution channel,
especially at the point of sale where the drinks was consumed on the
spots i.e hotels, bars, and restaurants. Adopting campaign like used by La
Casera “if there’s no Casera….we’re leaving”

Best Course of Action

Pepsi Cola Spain should continue with the Spain Specific Strategy adopted in
1992. Pepsi Cola Spain is a market follower with only approximately 10%
market share of in the market after acquiring KASA. Coke hold strong brand
image and distribution channel. In this case followers could only make flank
attack by which specific segment could be target to take over slowly creating
brand image and then leveraging the image to other segment and market.

As we can see that share of voice and brand recall (unaided) is rising and in
1993 and prediction of 1994 show that Pepsi Spain having increase in sales
volume and revenue. The challenge is to turn recall and share of voice into
preference and ultimately to purchase. In this case the La Casera success in on
the spot consumption success could be one sales promotion campaign that could
be implemented. As Pepsi-Cola is focused on youth and position as real,
aggressive and unique we could say “If there is no Pepsi… We are leaving”

With this course of action Pepsi-Cola Spain should also increase it’s vending
machine as it’s attractiveness is raising, distribution is in companies control,
margins are high, promotes brand and above all attraction is increasing towards
it.

Pepsi-Cola Spain should at the same time focus on taking over the northern part
distribution strength so that it can expand it success stories and market on it.

Pepsi-Cola has to focus on product line development to avail it’s product in

parallel to Coke so that loyal customers specific needs are also fulfilled. To
compete with coke it’s very important.

Pepsi Max should not be launched as it drives away resources from flagship
brands which is yet to create high brand image so that there are other leverage
for other products of under Pepsi.
 Case Analysis: Pepsi-Cola Spain
Presented by: Sachin Udas
Roll No: 07153
The logic behind all the courses to be taken is Soft drinks consumption is high
among youths from 14 to 30 and population also consist high percentage of
youth from age 15 to 29.