Company Name: PepsiCo, Inc
Headquarters: Atlanta, ‎Georgia‎, U.S‎

Competitors: Coca-Cola | Dr. Pepper Snapple | Red Bull

PepsiCo is an American food and beverage multinational company. Its net worth is around 11 billion U.S. dollars and the company’s last year’s revenue was approximately $20.19 billion. The company expressed that they are going to change their pricing strategy and apply a hybrid everyday value pricing strategy. Under this strategy, they will cut off all the holiday discounts and offers.

The Product Pricing Strategy

PepsiCo considers consumers’ perceptions when it comes to deciding a suitable pricing strategy. PepsiCo’s top sold products are Pepsi Cola, Mountain Dew, Lay’s Potato Chips, Gatorade, etc. The diversified portfolio works as an strength for PepsiCo. For the beverages, PepsiCo doesn’t go into a price war as the current lifecycle of the soft drinks industry is quite stable. They more or less follow the predetermined price. In the case of Lay’s, they follow the market-oriented pricing strategy. When it comes to Gatorade, PepsiCo has gone for the premium pricing strategy.

Strategies Applied by PepsiCo

PepsiCo sets its prices according to the demand of the consumers. PepsiCo offers a variety of products starting from chips to energy drinks, they have it all. For that reason, they need to take different pricing strategies for different products. 

Pricing of Carbonated Drinks

Carbonated soft drinks are priced in a different way. The pricing of CSD products entirely depends on the competitors and consumers’ demand. As the pricing of CSD depends on the consumer’s pocket’s state, PepsiCo offers different sized bottles at different rates. In this way, they don’t miss out on any of the segments. At first, they decide the quantity of the product, depending on that they set the pricing. While deciding the price, they follow the competitors. As the market of beverages is at a stable point, there’s no scope for entering into a price war. Hence, PepsiCo has to follow the already given price. 

Premium Pricing

For healthy items like energy drinks, PepsiCo follows the premium pricing strategy as people are ready to pay more for healthier items. They also observe the competitors in order to maintain a balance. After analyzing the market thoroughly, they decide the suitable pricing for the product. But in the case of, Gatorade, they follow the premium pricing strategy. 

Pricing of Lay’s potato chips

Lay’s have been people’s favorite for decades. Because of its pricing and taste, people love it so much. When it comes to Lay’s, PepsiCo follows multiple pricing strategies. PepsiCo follows a more value-oriented pricing mix in order to ensure accessibility, a reasonable approach and maintain the quality of the product. PepsiCo also maintains a competitive pricing approach in order to match the pricing of its rivals. In this way, they can easily earn consumer loyalty. Alongside that, PepsiCo uses promotional pricing strategies to further attract consumers and increase sales volume for a shorter period. It gives bundle offers, extra products, discounts and so on. 

The pricing strategy of PepsiCo varies a lot as they have a huge number of diversified products. There are in total 23 brands under PepsiCo. As a whole, the company follows two major pricing strategies. These are:

• Market-based pricing strategy: The majority of PepsiCo’s products are priced according to the market-based pricing method. The reason behind following this strategy is, PepsiCo wants to ensure that the price is justified, is competitive and is per the condition of the market. 
• Hybrid Everyday Value pricing strategy: Hybrid Everyday Value pricing strategy is applied for some of the products which include beverages. The main motive behind taking this approach is to reduce the differences between the regular price and the discounted price. Usually, consumers buy more soft drinks during the holidays. PepsiCo wants people to buy beverages on a day-to-day basis. Hence, this approach is taken. 

Besides, there are some additional factors that affect PepsiCo’s pricing strategies. One of them is the consumer’s perception. For example, the prices of the CSD are determined by the market itself. PepsiCo will never enter into a price war with other brands to gain a cost advantage. Consumers already have a perception when it comes to soft drinks. PepsiCo just like other brands, prefer to stick to it. 

What PepsiCo does, they provide a better-quality product and try to outrun the competitors. They also set competitive pricing to gain an advantage. Even after that, the average price of the beverage industry is rising at a steady rate. As the operating costs are constantly increasing, the overall prices are also increasing. 

Finally, PepsiCo has a partnership with the retailing giant Walmart which pushes the brand to maintain a lower price. As a result, PepsiCo tries to reduce its operating cost and maintain its current price. 

PepsiCo’s global pricing strategy

PepsiCo globally follows the market-based pricing strategy where they follow the prices of the competitors and take decisions accordingly. When competitors launch a product on the market, a company already gets an idea by seeing consumers’ reactions towards it. If the consumers are appreciating a product, this means that the pricing is suitable for that product. Hence, PepsiCo can also take that approach and choose a price around that range. Recently they have been taking the hybrid value strategy globally for their highest sold products, the beverage items. These items are mostly sold during the holiday season. As PepsiCo wants people to buy them throughout the year, they have taken this approach. This reduces the gap between everyday prices and discounted amounts.

Pricing Strategies Applied by the Competitors

PepsiCo’s biggest competitor is Coca-Cola. Both PepsiCo and Coca-Cola take the perceived value pricing as the prices of beverages are market-based. Companies stick to a fixed price and avoid going into a price war. When it comes to other products, competitors of PepsiCo usually like to stick to a market-based pricing strategy.

Recommendations

PepsiCo has been in business for years and its pricing strategy has kept the company’s growth intact for decades. PepsiCo can give bundle offers to consumers as reports have shown that consumers are more attracted to offers like these. For example, if PepsiCo gives a Lay’s with a Mountain dew, it will certainly increase the sales volume. Tactics like these will further improve the pricing strategy of the company.