As a fast consuming commodity, the sales of soft drinks are expected to depend on the distributing channels. The success of distribution strategy is able to encourage the consumers make purchase decision right away. Pepsi is one of the leading beverage companies in the world. Apart from Cola and soft drinks, the company also supplies water, juice, tea drinks, etc. One of the remarkable slogans of Pepsi is “Dare for more”. Channel strategies are related to several factors, including places, margins, brand strategies, etc. However, the most important factor must be the business objective of the company. As for Pepsi, certainly, the distribution strategy plays an important role in relation to the long term business strategy of Pepsi. In general, the distribution strategies of Pepsi contain several aspects, traditional retailing distribution, online channel and franchised partner.
Originally, like most of drink vendors, and also like the key competitor Coca-Cola, Pepsi has established a hierarchical distribution system, including wholesaler, retailer and finally to the consumers. Generally, wholesaler plays the role of warehouse and retailer management. There are only one or two wholesalers in a region to ensure the interests of them and motivate the wholesaler to support Pepsi with more resources. Under the wholesaler, various retailers are distributing Pepsi. These retailers include supermarket, convenience store, vending machine, etc. The distributers also include grocery stores and drug stores, almost every place where people might pass by to buy a bottle of coke. In some large regions, there are first level retailer and second level retailer to further segment the retailer markets (Ciciretti et. al, 2015). In order to increase the sales in retailers, Pepsi communicates with the retailers to place the marketing information and guide the category distribution directly. Consumers are able to obtain the promotion information from these channels, as shown in below picture.
Figure 1: Pepsi’s distribution stand in a Chinese supermarket (Ciciretti et. al, 2015).
Vending machine is another widely seen distributing channel. In particular, vending machine is considered as a SST (self-service technology) channel. The sales performance of vending machine depends on where the machine is placed (Greewald, 2007). As compared to traditional channels, the company does not need to manage the retailer and margin. In public areas, such as schools, stadium, or subway, vending machines are widely distributed.
Figure 2: Vending machine of Pepsi (Greenwald, 2007).
Online shop is an emerging distributing channel in recent years. People intend to buy drinks online, especially using mobile phone to order the soft drinks. Along with the increasing sales volume, online channel plays an increasing important role among all the distributing channels. The advantage of online channel is that the company is able to manage the price and promotion strategies directly on the online channel, regardless of the margin space for wholesaler and retailers (Madden, 2007). Nevertheless, the disadvantage of online channel is that price and promotional strategies are too transparent, which encourages the fierce competition among all soft drink vendors with least premium competence.
After all, the franchised partner is an important distribution strategy to generate fixed sales outcome with long term cooperation. One of the classical cooperative partners for Pepsi is Yum! Group. In the members of Yum! Group, KFC and Pizza Hut, Pepsi soft drinks are supplied exclusively (Parmar, 2011). Apart from considerable sales generated from this channel, the partnership allows the restaurant to enjoy a lower price when purchasing Pepsi drinks, while also allows Pepsi to apply marketing information in the restaurant. In addition, Pepsi does not sell bottled drinks in KFC; instead, coke syrup and beverage dispenser are sold together.
Figure 3: Pepsi beverage dispenser in KFC (Parmar, 2011).
Ciciretti, R., Hasan, I., & Waisman, M. (2015). Distribution strategy and movie performance: an empirical note. Eurasian Economic Review, 5(1), 179-187.
Greenwald, J. (2007). How pepsi picked a warehouse site. Njbiz(Feb 5).
Madden, N. (2007). New faces at coke, pepsi in china signal emphasis on digital media. Advertising Age.
Parmar, J. S. (2011). Consumer behaviour towards the marketing of pepsico brand ‘nimbooz’. Political Economy Journal of India.