Background ?Established in 1965 PepsiCo created in 1965 through the merger of Pepsi-Cola and Frito-Lay ? In 1997, publicly traded company to focus PepsiCo on food and beverages. ?The world’s largest snack and beverage company in 2006 In 2006, PepsiCo has approximately $35billion net revenue ?The company is broken into four business divisions: ?Frito-lay North America Frito-Lay North America manufactures, markets, sells and distributes salty and sweet snacks. Products manufactured and sold in North America include Lay’s and Ruffles brand potato chips, Doritos and Tostitos brand tortilla chips, Cheetos brand cheese-flavored snacks, Fritos brand corn chips, a variety of branded dips and salsas and Rold Gold brand pretzels. Low-fat and no-fat versions of several brands are also manufactured and sold in North America. ?PepsiCo Beverages North America Pepsi-Cola North America manufactures concentrates of brand Pepsi, Mountain Dew, Mug, Slice, Fruitworks, Sierra Mist and other brands for sale to franchised bottlers.
PCNA also sells syrups to national fountain accounts. PCNA markets and promotes its brands. PCNA also manufactures, markets and distributes ready-to-drink tea and coffee products through joint ventures with Lipton and Starbucks and licenses the processing, distribution and sale of Aquafina bottled water. In addition, PCNA manufactures and sells Dole juice drinks for distribution and sale by Pepsi-Cola bottlers. ?PepsiCo International Pepsi-Cola International manufactures concentrates of brand Pepsi, 7UP, Mirinda, KAS, Mountain Dew and other brands internationally for sale to franchised bottlers and company-owned bottlers.
PCI operates bottling plants and distribution facilities in various international markets for the production, distribution and sale of company-owned and licensed brands. PCI markets and promotes its brands internationally. Principal international markets include Mexico, China, Saudi Arabia, India, Argentina, Thailand, the United Kingdom, Spain, the Philippines and Brazil. ?Quaker Foods North America Frito-Lay International manufactures, markets, sells and distributes salty and sweet snacks. Products include Walkers brand snack foods in the United Kingdom, Smith’s brand snack foods in Australia, Sabritas brand snack foods and Alegro and Gamesa brand sweet snacks in Mexico.
Strategy Of Pepsico
Many of our U. S. brands have been introduced internationally such as Lay’s and Ruffles brand potato chips, Doritos and Tostitos brand tortilla chips, Fritos brand corn chips and Cheetos brand cheese-flavored snacks. Principal international snack markets include Mexico, the United Kingdom, Brazil, Spain, the Netherlands, Australia and South Africa. International Channel Value Chain PepsiCo’s management team was decided to capturing strategic fit benefits within the business line-up throughout the value chain.
Primary activities : •Supply Chain management oCombined corporate-wide procurement of product ingredients upon the acquisition of Quacker Oats •Producing / Manufacturing oShare marketed research information to better enable each division to develop new products likely to be hits with consumers, consolidated its purchasing to reduce costs, and manufactured similar products in common facilities whenever possible. oMaximize unutilized resources Packaging oCombined corporate-wide procurement of packaging materials upon the acquisition of Quacker Oats •Distribution and retailing oJoin distribution of Quacker snacks and Frito-Lay to reduce their distribution expenses oPower of One retailer alliance strategy to increase consumers tendency to purchase more than one product offered by PepsiCo during a store visit. •Sales and marketing oConsolidated sales and marketing functions of similar products to eliminate duplication of effort and to present one face to customers. Support Activities : •Human resource management PepsiCo respects individual differences in culture, ethnicity and color. PepsiCo is committed to equal opportunity for all employees and applicants.
oCorporate program for training employees how to work and manage in an inclusive environment •Advertising oPepsi already had experiences in advertising their products internationally. If the other line business of PepsiCo wants to do advertising in some countries, they could learn and implement the advertising technique that already implemented by Pepsi and they also already have necessary information about the country. Diversification Strategy Financial Analysis SWOT Analysis Strengths •Broader but focused product line and outstanding brand reputation •Key strategies: products innovation, close relationships with distribute allies, international expansion, strategic acquisitions •Market leader for U. S. convenience food (21%) and liquid refreshments (26%) •Capturing strategic fit benefits within the business lineup throughout the value chain •Lack of capital constraints (High availability of FCF, projected as $15 billion between 2007-2009) Weaknesses Slow move into international bottled water market •Unequally distributed international sales of Quaker Oats Products (75% of international sales was accounted for by just six countries) •A large dependency on one business division in generating profits (Over 50 percent of the company’s profits come from Frito-Lay North America) Opportunities •Promising international foods and beverages markets o$70 billion market for noncarbonated beverages in international market oHigh per capita consumption of snacks •The increase of health conscious consumers Threats •FTC’s 10-year prohibition on bundled beverages (Gatorade and PepsiCo soft drink products) contracts with retailers •The maturity of Food and Beverages industry Conclusion ?Increase the use of exclusivity agreements to boost their sales in key markets.
This may make it harder to keep costs low but will ensure added revenues. ?Continue to expand with their “Human Sustainability”. PepsiCo should become more proactive in the health food/product marketplace rather than being reactive to the market trends. They need to improve their responsiveness and future projections to market trends and changes that can therefore allude to different product segments and target markets. The healthy eating market is a demographic that will continue to grow in the future, and will provide generous profits if Pepsi Co is able to obtain a large market share.
?Expand more into social benefits, especially for those in developing nations. Pepsi’s main competitor Coca Cola has implemented a water purification program for African Villages, which provides a valuable need and at the same time introducing their brand name where it was before unknown. If Pepsi followed this same ideology with food products and water purification it too would significantly increase brand recognition ? Capture more of the aging population’s market share. Pepsi is a company focused on a younger market hoping to repeat the worldwide success of Coca Cola in regards to brand loyalty with the generations born after 1980; however, there is still a large market with the Baby boomer demographic that they could break into. PepsiCo should expand into markets and market segments that they are currently not in, such as Asia, India, and South America, It will expand their market share at the global level and to increase their overall revenue.
?PepsiCo should improve their employee relations. It will create employees all over the world to promote the product both during their work day and in their personal life in order to create “word of mouth marketing”.