The BCG Matrix was developed by the Founder and former CEO of BCG, Bruce Henderson. It takes into account two factors: relative market share and growth rate to categorize product lines or SBUs into Star, Question Mark, Cash Cow, and Dog. This matrix helps companies analyze their corporate strategy to understand which products they can invest in, allocate resources to, or cash out from. In addition to the growth rates factors like market attractiveness and product innovation are essential.
The ‘Star’ represents the highest-performing product of the company in terms of Market Share with a high growth rate. ‘Question Mark’ depicts a product with considerable growth potential but a low market share, a company can determine whether they can turn this product into a star or divest from it. ‘Cash Cow’ as the name suggests, is a product with a very high market share and revenue but little growth potential, they milk the cow and use the revenue on developing products with potential. The ‘Dog’ is a product with a low market share and lesser growth possibilities, the company can look to phase out this product.
Pepsico is an International conglomerate having more than 23 operational brands under the soft drinks, processed snacks, energy drinks, cereal and energy bar segments, and many others. These 23 brands individually contribute over a Billion dollars each to Pepsico’s revenue annually. Pepsico operates many product lines including Pepsi, and Non-American Beverages: Mirinda and Mountain Dew, Doritos, Lays, Cheetos, Quaker, Auqafina, Gatorade, etc.
Star:
Gatorade is the star product for the company as the beverage is the market leader in the sports drink industry. The reason behind Gatorade’s stronghold on the market seems to be the shift of consumers from aerated and fizzy drinks to water-based beverages due to health concerns. While most products saw a decline in growth due to the pandemic, Gatorade capitalized on the opportunity to capture the market as people moved towards exercising and fitness at home and reported a revenue of $8.8 Billion in 2021. Gatorade Zero – a sugar-free version of the drink has also gained traction in the United States which shows the growth potential of the brand.
Tropicana is another star product for the company and commands 44% of the market in the United States. In the United States, the brand has a vast array of products such as Tropicana Season’s Best, Tropicana Smoothies, and Tropicana Twisters among others. The brand outsells its biggest competitor and archrival Coca-Cola’s equivalent product – Minute Maid. In India, its quarterly growth rate touched 80% in 2021 amidst tough competition from Dabur’s Real Fruit Juice.
Aquafina is a product that is slowly turning into a star product for Pepsico. The brand yields over $ 1 Billion from its sales of packaged water and commands a decent market share in a competitive market. The brand has witnessed a 6 to 8% growth rate in the past and with an industry CAGR of over 6%, Aquafina requires investment from Pepsico to retain its market share and fend off competition.
Question Mark:
Quaker has been owned by Pepsico since 2001. The brand dominates the hot cereals segment however, it loses out in other segments and has a very minute share in the overall cereals market. With this, the brand has built a niche customer base for itself which has resulted in the brand losing out on the market share to its competitors, while having many growth opportunities to expand and grow its other product lines.
Diet Pepsi and Diet Mountain Dew are also ‘Question Mark’ products for Pepsico. While many diet versions of soda drinks have been phased out due to negligible demand, Diet Pepsi continues to see YoY growth and can grow to become a star product as the trend toward diet beverages continues. Diet Pepsi at its peak acquired over 9% of the carbonated soft drinks market, however, it has failed to hold onto its share. Diet Mountain Dew has had a market share of about 6% in the past years. As health concerns rise and consumer preferences shift towards alternatives, Diet drinks can capitalize on this opportunity.
Cash Cow:
Frito Lays is another Cash Cow product line for Pepsico. The product line includes many popular processed snack brands like Lays, Doritos, Cheetos, Fritos, and many more. The product line generated over $ 4.8 Billion for the company and leads the market with a 60% market share in the category. However, the brand faces the dilemma of not being able to create products that match the demand and popularity of the existing products. However, it does not need significant investment to continue its contribution to Pepsico’s revenue.
Dog:
Pepsi served to be the star product for Pepsico for many decades. Of late, it has become a ‘dog’ product for the company amidst lesser demand for sugar-based carbonated drinks. The brand has lost its share to Coca-Cola and its drinks – Sprite and Thums Up. The drink has a relative market share of 0.7 points globally.
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