Pepsi Case Analysis
Pepsi Case Analysis
PAPER
SHAHBANO KHAN
202147
CHAPTER I
INTRODUCTION
I.
COMPANY BACKGROUND
Back in 1880s, the recipe for Pepsi was developed by
Caleb
Bradham in New Bern, North Carolina who had renamed it PepsiCola
in 1898. As the cola industry develop in popularity, Caleb created
PepsiCola Company in 1902 and registered a patent for his recipe in 1903.
As Pepsi-Cola Company went bankrupt in 1931, Charles Guft
who
owned a syrup manufacturing in Baltimore Maryland acquires
the
trademark and recipe to Loft Inc. In the year 1941, Pepsi was
formally
absorbed to Loft, and Loft Inc. rebrands its company name to Pepsi
Cola
Company.
Up until today, Pepsi Cola Company further will be mentioned
as
PepsiCo has successfully expanded it area of products through
mergers
and acquisition of other companies, such as Frito-Lay Company,
Quaker
Oat Company and other companies.
PepsiCo has developed its divisions into 5, PepsiCo
Americas
Foods (PAF), PepsiCo Americas Beverages (PAB), PepsiCo Europe,
and
PepsiCo Asia, Middle East and Africa (AMEA) with the structure
shown in
PEPSIC
O
PepsiCo. Americas Foods
(PAF)
PepsiCo. Ameri
cas
Beverages (PA
PepsiCo. International
(PI)
Frito-Lay North
America (FLNA)
Each of the division has their own R&D team to match local
needs
of the customers. That explains the broad product line aside
from
PepsiCos massive acquisitions.
II.
PROBLEM STATEMENTS
Due to companys background and strategic management
approaches, problems that appeared which I will analyze later in
Chapter
II:
CHAPTER II
STUDY ANALYSIS
I.
Vision Statement
PepsiCos responsibilty is to continually improve all aspects
of the
world in which we operate environment, social,
economic
creating a better tomorrow than today.
This vision statement is implied by Pepsico. to continuosly
bring
improvement in food and beverages products and market,
the
environment, society and economy for a healthier and
better
tomorrow.
I. b.
Mission Statement
To be the worlds premier consumer products company
focused on
convenient foods and beverages. We seek to produce
financial
rewards to investors as we provide opportunities and
the
communities in which we operate. And in everything we
do, we
strive for honesty, fairness and integrity.
Factors
Yes/No
Customer
Product
No
Yes
Philosophy
No
Market
No
Technology
No
Yes
No
Yes
No
as
we
enrichment
healthy
financial
rewards
to
our
employees,
our business
EXTERNAL ANALYSIS
II. a. PESTEL ANALYSIS
1.
operations
and
employees
incentives
in
2.
Economic Forces
Economic factors have some signifcant impact on
Pepsicos
business. If the income level per capita of the
people
inrcreases, it will have a positive effect on the
consumption
of its products. Meanwhile, if there is an inflation, it will
have
a negative effect on Pepsico as peoples purchasing
power
decrease, they will consume less. Since Pepsico is
operating
and distributing in
should make
4.
Technological Forces
Given how capital-intensive the food/beverage industry is,
it
is imperative for Pepsico to stay ahead of the curve in
terms
of the most advanced technological breakthroughs, as
the
company requires highly mechanizedassembly lines
designed both for long production runs and flexibility.
The
growing technology gives new opportunity for Pepsico
to
have new ways for Pepsico marketing strategy.
The
proliferation of Internet users also opens up further
market
opportunities for Pepsico to market its products.
5.
Competitive Forces
In the food and beverage industry, Pepsico has the
second
largest market share. The summary of
Pepsicos performance compared to its
competitors
industry,
within
which
are
the
food
Coca
and
Cola and
beverage
Kraft,
is
Market Cap
108.85B
Employees
297
146,2
-0.05
0.01
65.70B
0.52
EBITDA (ttm)
Operating Margin (ttm)
Net Income (ttm)
EPS (ttm)
P/E (ttm)
0.15
5.92B
3.76
18.7
4
168.19B
47.60B
0.60
13.01
B
0.23
0.17
8.80B
1.91
19.6
0
27.45B
N/A
0.03
18.88
B
0.33
3.53B
1.94B
3.28
14.14
PEG (5 yr expected)
4.07
P/S (ttm)
1.65
2.30
3.5
5
2.58
1.46
strategy
Bargainin
g Power
of
Suppliers
Threat of
Substitut
e
Rivalry
Among
Existing
Competito
rs
Threats
of New
Entrants
Bargainin
g Power
of Buyers
10
Analysis:
1.
Coca cola. b.
and
Pepsi
are
the
predominant
because
product.
c.
product
as
there
are
b.
c.
4.
11
b.
c.
There is high initial cost, therefore, few company
want
to enter this market.
5.
Weigh Ratin
t
g
Scor
e
0.09
0.36
0.10
0.30
0.10
0.30
0.10
0.20
0.07
0.14
0.09
0.36
TOTAL
0.55
1.66
Threats
1. Strong competition in every division
0.10
0.20
0.08
0.08
0.10
0.20
0.07
0.14
cramps in consumers
0.10
0.10
(Coke)
12
TOTAL
0.45
0.72
GRAND TOTAL
1.00
2.38
and
Threats.
It
also
shows
that
Pepsi-Cola
Coca-Cola
Kraft
(CPM)
Critical Success Factors
Financial Positions
0.15
0.45
0.60
0.45
Advertising
0.15
0.60
0.60
0.45
Market Share
0.10
0.30
0.40
0.30
Customer Loyalty
0.20
0.60
0.60
0.60
Price Competitiveness
0.10
0.30
0.30
0.30
Expansions
0.15
0.45
0.60
0.45
Brand Image
0.15
0.60
0.60
0.60
Total
1.00
3.30
3.70
3.15
position.
PepsiCo scores 3.30 which lays between Coca-Cola
Company and Kraft Foods. The advertising really helps
PepsiCo to capture
13
INTERNAL ANALYSIS
III. a. STRENGTHS
Strong brand name is one of the greatest strengths
for
PepsiCo. It is one of the largest brands that could be
recognized be
the people in the world. In all around the world the
company use the name PepsiCo in every country
in the world. The strong brand presence makes it
easier for the company to market its products around
the world. PepsiCo did not provide only the cola
product but also provide various numbers of products.
All these brands have rode on the success of the
company brand and have found it easy to sell since
the company brand in largely accepted in the market.
The popularity of PepsiCo corporate brand has also
made it easier for the company to introduce new
products in the market. All PepsiCo has to do in order
to make a new product success is to attach it with the
companys corporate brand which has already attained
a signifcant level of brand loyalty in the beverage
market.
PepsiCo is a large distribution network; this is the
other
strength of PepsiCo. The organizations ability to take it
product
near the consumer is one of the core elements that define
the
company success. The frm has managed to do this
through
creation of a massive distribution system. The organization
runs
14
numerous
features
that
gives
it
an
edge
over
it
been
on
fore
front
in the
development
of
market
over
20-diferent
product.
The
innovative
products
15
most of
the individual investors have limited capacity to
make such investments.
16
Weight
Rating
Score
Strengths
1. Strong brand
0.09
0.36
0.07
0.28
3. Products availability
0.08
0.24
0.08
0.24
5. Market share
0.07
0.21
6. Competent workforce
0.05
0.15
0.05
0.15
0.02
0.08
TOTAL
0.51
around globe
1.71
Weaknesses
1. High debts
0.07
0.14
2. Health Issues
0.08
0.08
0.09
0.18
0.10
0.10
0.05
0.05
0.10
0.10
TOTAL
0.49
0.65
GRAND TOTAL
1.00
2.36
17
IV.
SWOT-TOWS Matrix
Favorable
Internal
Origin
External
Origin
Unfavorable
STRENGTHS
WEAKNESSES
1. Strong brand
2. Strong marketing
and advertising
3. Products
availability 4.
Revenue and Profits
5. Market share
6. Competent workforce
7. Wide variety of
productsOPP
8. OHigh
RTUNEPS
ITIES
1.
2.
3.
4.
High debts
Health issues
Low sales in some products
Negative impact due to
product recall
5. Product focus
6. High operating expense
1. New products
penetration 2.
Fastest growing
industry 3. Social trends
4. Media promotions and
vending machines
5. Partnerships
6. Sport tournaments
1.
2.
THREATS
Strong competitions
Carbonated drinks
sector growth
3. Mature beverage
industry 4. Health issues
5. Agressive strategy
conducted by competitor
Weaknesses
1.
High debts
2.
Health issues
3.
4.
Negative impact
9. Strong brand
10. Strong marketing
and
advertising
11. Products
due to product
availability 12.
Revenue and Profits
13. Market share
14. Competent
workforce 15. Wide
variety of products
16. High EPS
recall
5.
Product focus
6.
18
Opportunities
1. New products
S-O Strategies
W-O Strategies
1.
1.
Increase marketing
penetration 2. Fastest
and advertising to
penetrate new
issues to comprehend
trends
O3)
vending machines
2.
Promote investments
2.
Sampling in events
5. Partnerships
to capture
6. Sport tournaments
existing promising
customers by
Threats
offering
better taste
W-T
Strategies
1.
1. Strong competitions
Sufficient financial
resources can help
company
to develop more in
growth
carbonated drinks
4. Health issues
5. Agressive strategy
T4, T5)
conducted by competitor
2.
Overwhelm main
competitors by
conduting agressive
2.
Develop healthy
energy drinks for
youth for customer
retention (W6, T6)
BCG MATRIX
Market Growth
Rate
V.
High
Low
High
Low
STARS
QUESTION MARK
(Frito-Lay)
(Aquafna)
CASH COWS
DOGS
(Pepsi-Cola)
Analysis:
1.
2.
3.
:
Pepsi-Cola
19
VI.
SPACE Matrix
Internal Strategic Position
X Axis
Market Share
-2
Growth Potential
Product Quality
-1
Resource Utilization
Brand Image
-2
Financing Access
Customer Service
-2
Customer Loyalty
-2
Barriers to Entry
Manufacturing Expenses
-1
Industry Profits
AVERAGE
AVERAGE
1.7
Y Axis
ROE
Competitive Pressure
-3
Revenue Increase
-3
Liquidity
Demand Variability
-2
EPS
Inflation Rates
-2
Cash Flows
Technological Changes
-1
Efficiency Ratios
-2
AVERAGE
AVERAGE
2.2 = 2.0
TOTAL Y AXIS SCORE
Agressive
Conservative
2.0
Suggested
Strategy
Type
2.3
Defensive
Competitive
20
CHAPTER III
CONCLUSION AND RECOMMENDATIONS
Strategy Recommendation and Implementation for PEPSI CO.
Pepsi Co is currently a strong worldwide leader in the food
and
beverage industry. Throughout its growth, it has stayed true to its
mission
and objectives, while becoming a dominant force within the United
States as
well as abroad. Known throughout the world for quality products
and
customer care, Pepsi Co should make no major strategic changes to its
plan.
However, like in any business situation there are areas that Pepsi Co
can
improve upon. Some of the recommendations are as follows:
is
a company
focused
on
younger
market
21
by
10%
as
an
original
amount,
and
then
R&D
in
order
to research
potential
new
product
23
RECOMMENDATIONS
STRATEGIC DIRECTION
PROPOSED MISSION
To be the world leader in beverages and food business to create better tomorrow for our
customers.
LONG TERM OBJECTIVE
STRATEGIC OBJECTIVES
1. To increase market share by 3% by the year 2011.
2. To achieve technological leadership by innovation and research and development.
3. Purchase 3 brands and their goodwill costing 30M by the year2011.
FINANCIAL OBJECTIVES
1. To increase revenue by 30% by the year 2011.
2. To increase gross profit margin from 52% to 55% by the year 2011.
3. To increase ROA from 14% to 18% by the year 2011.
STRATEGIES
CORPORATE LEVEL STRATEGY
Corporate level strategy will be Grow and build, market penetration by extensive
advertisements and with effective and motivated sales force, product development
through research & development with innovative ideas, market development to new
geographical areas. Diversification through mergers and acquisitions.
BUSINESS LEVEL STRATEGIES
BEVEREGAS
COMPETITIVE STRATEGIES
For beverages business level strategy will be
Based on cost leadership- best value and differentiation with high quality innovative
products with merge and acquire leading brands.
SNACKS (FOOD)
CO-OPERATE STRATEGIES
For snacks (food) business level strategy will be
Based on cost leadership- best value and differentiation with high quality innovative
products with merge and acquire leading brands.
PepsiCo should expand its healthy line of beverages and snacks, develop carbonated
flavored waters, expand overseas with carbonated sodas, sports drinks and healthy
snacks, develop new types of environmentally friendly packaging, reduce high salt semiprepared meals, reformulate older products to meet todays health conscious consumer
tastes, develop targeted low cost brand name snacks, reduce its long term debt and
expand on its powdered drink line. If PepsiCo follows these strategic recommendations
their brand sales will grow, they will develop new brands and they will have increased
sales while having lower fixed costs. Once PepsiCo has several quarters of increased
sales and lower fixed costs they will then be able to pay off their long term debt brought
on by restructuring.
Income Statement
(in millions unless specified)
2008
2012
Projected
43,251
20,351
65,000
21,000
15,901
16,000
Net Income
5,142
6,500
Accounts Payable
8,237
7,000
7,858
6,200
Current Liabilities
369
350
-14,122
(5,000)
Cash
2,064
3,100
Comments
PROJECTED FINANCIAL
STATEMENTS
PepsiCo projected income statement.
in million
net revenue
cost of sales
gross profit
gross profit%
selling, general and administrative exp
amortizationof intengible assets
expense on new plants
operating profit
bottling equity income
interest expense
interest income
income before income taxes
provision for income taxes
net income
Actual
2008
43251
20351
22900
52.90%
15901
64
6935
374
-329
41
7021
1879
5142
2009
475776
22698.5
24877.5
52%
17650.11
64
6.6
7156.79
374
-338.8
41
7232.99
1934.8
5298.18
2010
52333.6
23916.4
28417.2
54%
19591.5
64
6.6
8755.1
374
-410.8
41
8759.3
2343.1
6416.2
2011
57566.96
25905.13
31661.83
55%
21746.5
64
6.6
9844.73
374
459.8
41
9799.9
2621.5
7178.4
2008
2009
2010
2011
2064
3096
4644
6966
213 4683
4683
4683
4683
2522
2774
3051
3356
1324
1324
1324
1324
10806
11877
13702
16329
11663
11669.3 11676.26 11682.92
723
723
723
723
5124
10
10
10
1128
1128
1128
1128
6252
6252
6252
6252
3883
3883
3883
3883
2658
2658
2658
2658
35994
31948.3 33780.26 36413.92
increased 50 ann
no short term inv
same
10% increase ann
same
same
purchased 3 bran
same
same
same
same
CURRENT LIABILITIES
short term obligations
account payables and other current liab.
income taxs pay ables
TOTAL CURRENT LIABILITIES
longterm debt obligations
other liabilities
deffered income taxes
TOTAL LIABILITIES
commitments & contingencies
preferred stock, no par value
repurchase preferred stock
COMMON SHAREHOLDERS' EQUITY
common stock, par value 1 2/3 per share
(authorized 3600 shares issued 1782 shares)
capital in excess of par value
retained earnings
accumulated other comprehensive loss
repurchased commen stock,at cost
(229 & 177 shares respectively)
TOTAL COMMON SHAREHOLDERS'S
EQUITY
TOTAL LIABILITIES & SHARE HOLDERS
EQUITY
369
8273
145
8787
7858
7017
226
23888
-
3269
8273
145
11687
7808
7017
226
26738
-
41
-138
30
351
30638
-4694
-14122
3269
8273
145
11687
7758
7017
226
26688
-
41
32
352
30639
3269
8273
145
11687
7708
7017
226
26638
41
-138
36
353
30694
12203 12209
12220
3599431948.3
33780.26
41
-138
39
355
30640
36413.92
same
same
same
24