PepsiCo-2005PepsiCo-2005

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Presented By:Presented By:

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Introduction: An international food and beverage company with

sales of $29.3 billion and net income of $4.0 billion in 2004.

PepsiCo has grown from being solely a soft drink

company in 1960 to being the third-largest food and beverage company in the world, behind only Nestle and Kraft Foods.

PepsiCo’s mission statement

“To be the world’s premium consumer products company focused on convenience foods and

beverages.”

History in summary:

1898 Caleb Bradham (pharmacist) formulated Pepsi as a cure for indigestion

1903 Pepsi-Cola registered as a trademark.

1914- 1918 Stock piled sugar anticipating increase sugar prices after WW-I

After WW-I On the verge of bankruptcy (sugar prices plunged)

1931 Pepsi-Cola sold to Loft Candy Company (LCC) as a subsidiary

1933 Coca-Cola refused an opportunity to buy it

(Increased the size of bottles to 12 ounces but kept the price at 5cent)

1941 Name changed to Pepsi-Cola Company on merging

1963 Growth started under CEO Donald Kendall (Introduced “Pepsi Generation”)

Acquisitions:

Under CEO – Donald Kendall1964 Mountain Dew (carbonated drink)1965 Frito-Lay (potato chips and other snack foods) (Name of parent company was changed to PepsiCo)

Under CEO’s Andrall Pearson (1971-1984) and Wayne Calloway (1984-1996)

1977 Pizza Hut1978 Taco Bell1986 Kentucky Fried Chicken (KFC)1990 Hot ‘N’ Now

1995 PepsiCo ranked 21st in Fortune’s listing of the 500 largest U.S. corporations under CEO Wayne Calloway

More acquisitions:

1998 Tropicana Orange Juice2001 Quaker Oats (with Gatorade under Quaker Oats) South Beach Beverage Company (specialty beverages)

Pepsi Challenge (1975-1983) – PepsiCo conducted it highly successful “Pepsi challenge”, a blind test between Coca-Cola and Pepsi in which most participants expressed a preference for Pepsi.

Unsuccessful diversifications – PepsiCo was less successful with its attempts at unrelated diversification. Acquiring North American Van Lines in 1968 and Wilson Sporting Goods in 1970 and sold both of them in 1985.

Market Summary of PepsiCoMarket Summary of PepsiCo

Coke classic

Pepsi

Diet Coke

Mountain Dew(pepsi)

Diet Pepsi

Sprite(coke)

Dr pepper(cadbury)

CF diet Coke

Diet Dr pepper(Cadbury)

Sierra Mist(pepsi)

1. Market share of top10 soft drinks (U.S.A)

0

500

1000

1500

2000

2500

3000

2002 2003 2004

FLNA

PBNA

PI

QFNA

2.Net Division Operating Profits for PepsiCo Divisions (in $ million), 2002-2004.

0

5

10

15

20

25

30

2004sales 2004income

PepsiCo

Coca Cola

3.Net sales and income of PepsiCo and Coca-Cola (in $ billion) in 2004

0

10

20

30

40

50

Coke P epsi Cadbury Cott

Market share (%)

2003

2004

4. Market share (%) of the top 4 carbonated soft drink companies in the U.S.A in year 2004 in comparison to year 2003.

STRENGTHSSTRENGTHSWorld’s 3rd largest food and beverage companyPepsi is the world’s 2nd most popular drinkMarket leader in snack foodsMarkets more than 200 varieties of food and beverage products in more than 200 countries.Possesses a strong strong distribution system.Has removed trans fats from snack foods

WEAKNESSESWEAKNESSESDoes not posses a clear strategic planNot doing enough for international marketOver reliance on customers i.e. retailers to serve ultimate consumersWeekly visits to 450,000 retail accounts by Frito Lay’s staffOver diversificationThe international markets are overlooked by only one central division

OPPORTUNITIESOPPORTUNITIESGrowth opportunity in emerging marketsSales of non-carbonated soft drinks are increasing in all over the worldNon alcoholic beverages comprise 87% of U.S. beverage marketGrowing markets for non carbonated soft drinks and energy drinks

THREATSTHREATSBusiness in U.S. in maturity stage.Adverse changes in global conditions.Conflict of objectives between local regulatory requirements and PepsiCo.Coca cola and Cadbury Schweppes in beverage industryKraft Foods, Kellogg and General Mills in snack foods and cereals industryLess than 1% overall growth in carbonated drinks marketDecreasing market share and growth of PepsiCo in U.S.A, and U.K and Canada

IssueIssue

How to revive the position of PepsiCo in the industry

Strategic aimsStrategic aimsTo increase revenue and net income.To achieve 15% and above growth in the earnings

Recommended Recommended StrategiesStrategies

Market DevelopmentMarket Development: Continue to milk the U.S market, but invest to : Continue to milk the U.S market, but invest to develop the growing markets as South America and Asia Pacific regiondevelop the growing markets as South America and Asia Pacific region

Leverage on strong distribution system and presence in most of the Leverage on strong distribution system and presence in most of the parts of the world to accelerate the international growthparts of the world to accelerate the international growth

Enhance relationship with retailers by giving them financial and non Enhance relationship with retailers by giving them financial and non financial incentives based on local practicesfinancial incentives based on local practices

Do aggressive but ethical lobbying with local governments and Do aggressive but ethical lobbying with local governments and regulatory authorities(ST)regulatory authorities(ST)

Blue Ocean Strategy:Follow Blue Ocean strategy for natural and energy drinks and foods business,

while keep on milking the existing carbonated drinks business

Natural and healthy drink and food businesses

Soft drinks and snack foods business

Shift in focus

Continue milking

Rising Star Question Marks

Cash cows Dogs

Ind

ust

ry g

row

th

rate

Relative market share position

Low

HighHigh Low

Soft drinks and snack food

Healthy drink and food business

Cash flow from cash cows channeled to support rising star

Product growth strategies

Organic M&A

•Increase R&D budget for development of new products

•Focus on developing new healthy foods and drinks

•Inorganic growth to achieve speed to market

•Setting up of M&A team to look into potential business initiatives

•Bundling:Bundling: Offer all breakfast related products in the form a bundle at

relatively low price

• Market Penetration:Market Penetration: In order to materialize above strategies, pursue Market penetration so that the

rivals could be contained

•Joint Ventures:Joint Ventures: Establish Joint Ventures only for carbonated drinks’ markets; establish JV with Cadbury

Schweppes in the U.S.A and U.K

•Related Diversification:Related Diversification: One of the reason of decreases sales, profits and market share is PepsiCo’s

unrelated diversification, thus it should strive for related diversification

•Retrenchment:Retrenchment: Install ERP and extend to customers, to avoid the cost related to visits made by

sales staff to retailers

•Organizational Structure:Organizational Structure: Change in to matrix structure in order to manage

vast product line in more than 200 countries

Thank You