PEST Analysis Of PepsiCo

PESTLEanalysis Team
PESTLEanalysis Team
Table of Contents
Table of Contents

You would think a company as large as PepsiCo would have no problems in today’s business landscape, but that couldn’t be further from the truth according to this PEST analysis of PepsiCo.

Did you know PepsiCo was founded 119 years ago?

Your grandparents likely remember when Pepsi Cola first appeared in their iconic glass bottles. But the company don’t just offer carbonated drinks anymore. They’ve branched out into snack foods too like Doritos, Gatorade, and Tropicana.

You would think a company as large and recognizable as PepsiCo would have no problems in today’s business landscape, but that couldn’t be further from the truth. The glory years are gone. Now PepsiCo is conforming to consumer demands or else they’ll lose their relevance. Especially with the latest boom in health consciousness.

Things are changing. But PepsiCo is ready. See what we mean by reading this PEST analysis of PepsiCo.

Political factors: Soda taxes are killer

A leading dominator in the soda industry is PepsiCo. Their (only worthy) rival is Coca-Cola. Although they’re often on one end of the boxing ring, in 2017 both companies grappled over a new American tax called the soda tax. The price of soda rose 3 cents per ounce when adopted by Philadelphia. Although this soda tax originated in 2015, it’s only now coming to light. And since Philadelphia’s adoption, Oakland, Seattle (Washington), San Francisco, and Boulder Colorado have also integrated this change.

The point of this law? For people to drink less soda. PepsiCo has already taken hits now that society is focusing on improving their health. Sugary drinks just don’t fit in anymore. That hasn’t stopped collaborations with governments overseas though. Not to mention Pepsi spent over $2.3 million on lobbying.

Want to know the truth? Consumer buying power is the only factor of success in business. If a customer isn’t buying, you’ve no sales, revenue, or profit. And with so many studies linking artificial sugar consumption to debilitating health conditions like diabetes, consumers are saying “Goodbye!” to carbonated drinks. They’re on the lookout for healthy alternatives and so far, PepsiCo hasn’t met the demand. Now, this soda tax, which studies show reduces soda consumption, will only worsen matters for the company.

Health-conscious laws are springing up all over the United States — and there’s nothing PepsiCo can do. Sure, they can toss millions towards marketing to change public opinion. But with health organizations (backed by the government) continuing to push for smart, healthy choice-making, PepsiCo will find their backs against the wall. They’re not out for the count, but they need to do something big sooner than later.

Economic factors: The dollar working against them

PepsiCo isn’t worried about the past recession impacting their sales. No, they fear the strength of the dollar and consumer opinion. Both caused a 0.4 percent loss in PepsiCo’s revenue within one year.

Inflation, economic stability, and taxes affect PepsiCo. And that, mostly, is manageable. It becomes trickier when so many of their products are bought overseas. Their prices are affected by the local currency. But PepsiCo felt the first signs of trouble between 2015 and 2016.

The foreign-exchange rate can be a hit or miss for any company, PepsiCo especially. They offer products all over the world after all. But the state of the dollar put pressure on PepsiCo in 2016. The dollar was strong, but that only worsened matters for overseas ventures. Trouble also appeared in Venezuela because the company couldn’t exchange the local currency.

The negative media image associated with their carbonated drinks impacted revenue that year too. People shied away from soda, causing nearly a $1 billion dollar loss between 2015 and 2016 for PepsiCo.

Social factors: Moving along with the times

PepsiCo is affected by the changes in their target market. Meaning, fluctuations in lifestyles, money spending, and buying behavior impact sales and revenue. For any company, these changes can be positive or negative. Lately, for PepsiCo, it’s been on the negative end.

Consumers are focused on making healthy lifestyle choices. Besides exercising, this often means improving their diet. Buying and drinking soda is at an all-time low right now. In fact, the beverage of choice for consumers is now water (overtaking soda). It’s not just that bottled water is healthy and convenient. People are using the water as a base for artificial sweeteners.

Artificial sweeteners are powder or liquid flavors added to water to “jazz it up” — without transforming the drink into hundreds of calories. Although more studies about the dangers of artificial sweeteners are appearing, the public believes these flavor alternatives are a smarter choice than soda. And that’s adding up for PepsiCo (as mentioned in the political and economic sections above).

PepsiCo sees these changing trends. They know their consumers are looking to consume less “bad” sugars. While they won’t change their oldest and beloved products, they are reformulating and offering new products for the health-conscious consumers. They’ve reduced the amount of sugar in their 7Up products. They’ve also launched a probiotics drink line to branch into the healthy juices market. PepsiCo knows if they don’t get with the times, there will be a time they no longer exist.

Technological factors: Everything they could ever want is at their fingertips

Even a company as well-known as PepsiCo still needs to advertise. Gone are the days of throwing up a 20-second ad on television and seeing sales skyrocket. Thanks to the lovely development of the internet, PepsiCo can now take advantage of online advertisements, social media, and video marketing (YouTube).

We’ve seen other big name companies take advantage of online marketing. Remember the Coca-Cola name campaign? They put random people's names on their iconic coca cola glass bottles. Customers went out, bought these bottles, and posted images all over social media. It was fun, quirky, and easy. It made people think this bottle is for me!

It was a brilliant and wholesome marketing approach. PepsiCo had the means to accomplish the same if they had so wanted. With their funds, PepsiCo can take advantage of the newest technological advancements regarding artificial intelligence, machine learning, and digital bots.

There’s no better way to connect with customers than through online marketing. It’s especially easy for companies like PepsiCo, who are recognized all over the world. They don’t have to compete with new companies who struggle to find their place in business.

Photo by Elijah O'Donell on Unsplash

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