THE PEPSICO CASE STUDY

PRESENTED BY:
BANTILAN, RINAH CIMAFRANCA, MARK LEST
DAGATAN, KC ENERO, JUVELLE
MANGOBA, FHIMEF JEAN SAMBILAD, FIONA MARIE
OUTLINE OF PRESENTATION
• Executive Summary
• Background of the Study
• Statement of the
Problem
• Methodology
• Solution
Executive Summary
• PepsiCo is a multinational corporation based in the United States that is
involved in the production, promotion, and distribution of beverages, snack
foods, and other products made from grains. Leading global provider of
convenient foods and drinks, PepsiCo employs over 142,000 people and
generates approximately $39.5 billion in sales.
• PepsiCo is a relatively new company, but many of its brand names date back
more than a century. By combining Pepsi-Cola and Frito-Lay, PepsiCo was
founded in 1965. The Quaker Oats Company, which owned Gatorade, and
PepsiCo combined in 2001 after Tropicana was purchased in 1998.
BACKGROUND OF THE STUDY
Pepsi-Cola was created by Caleb D. Bradham (1866–1934), a pharmacist in New
Bern, North Carolina. Hoping to duplicate the recent success of Coca-Cola,
Bradham named his sweet cola-flavored carbonated beverage Pepsi-Cola in 1898.
The drink proved so popular that in 1902 Bradham incorporated the Pepsi-Cola
Company. The first few decades would be marked by periods of growth and
setback: Not-so-roaring ’20s. After many years of moderate prosperity, the
company fell on hard times after World War I and was reorganized and
reincorporated on several occasions in the 1920s. New ownership. In 1931, the
company’s trademark and assets were picked up by Charles G. Guth (1876–1948),
founder of the modern Pepsi-Cola.
New formula, new structure. Guth established a new Pepsi-Cola Company, had a
chemist formulate a better drink, set up new bottling operations, and began
merchandising a hugely successful 12-ounce bottle for five cents. Guth v. The Loft.
Guth was also president of Loft, Inc., a candy manufacturer and soda fountain
chain founded in 1919. In legal battles between 1936–39, Guth lost a controlling
interest in the Pepsi-Cola Company to the new management of Loft.
In 1941 the Pepsi-Cola Company was merged into Loft, and the name Loft, Inc.
was changed to the Pepsi-Cola Company.
In 1950 Alfred N. Steele (1901–59), a former vice president of the Coca-Cola
Company and the husband of actress Joan Crawford, became chief executive
officer.
His emphasis on giant advertising campaigns and sales promotions increased
Pepsi-Cola’s net earnings elevenfold during the 1950s and made it the chief
competitor of Coca-Cola. (After Steele’s death, Crawford became an active director
of the company.) The next few decades would be dedicated to growth through
acquisition. Pop and chips. In 1965 Pepsi-Cola merged with Frito-Lay, Inc., the
maker of snack foods such as Fritos, Doritos, Lay’s potato chips, and Rold Gold
pretzels. Yum! The newly enlarged company diversified further with the purchase of
three restaurant chains—Pizza Hut, Inc. (1977), Taco Bell Inc. (1978), and
Kentucky Fried Chicken Corp. (1986; now called KFC)—and Seven-Up Company’s
international soft drink business (1986).
In 1997 the restaurant chains were spun off into a new, separate company called
Tricon Global Restaurants, which in 2002 was renamed Yum! Brands. Water.
In 1994, PepsiCo launched its now-ubiquitous Aquafina brand of bottled water, one
of the top five global water brands as of 2023. The water undergoes a purification
process, but in 2007, the company began relabeling its bottles to acknowledge that
it comes from a “public water source.” Oatmeal and juice. Looking to add products
that were considered healthier, PepsiCo acquired the Tropicana and Dole juice
brands from the Seagram Company in 1998. In 2001 it merged with the Quaker
Oats Company to form a new division, Quaker Foods and Beverages. With the
Quaker merger, PepsiCo’s popular brands at the turn of the century included Pepsi
cola, Frito-Lay snack products, Lipton Tea, Tropicana juices, Gatorade sports
drinks, Quaker Oats cereals, and Rold Gold pretzels. In the early 21st century, the
company shifted its focus:
International expansion. In 2008, PepsiCo bought a controlling interest in JSC
Lebedyansky, Russia’s largest juice manufacturer, and three years later it completed
its acquisition of Wimm-Bill-Dann Foods. Those investments helped make PepsiCo
the largest food and beverage company in Russia. The company also expanded into
China, Brazil, and other emerging markets. New products and flavors. Flavor (and
marketing) experiments in the 2010s yielded such products and flavors as Doritos
Locos Tacos (launched in 2012 in collaboration with Taco Bell), Mountain Dew
Kickstart (2013), Bubly sparkling water (2018), and Gatorade Zero (2018). After the
success of its FLAMIN’ HOT Cheetos, the company added that spicy kick to the
flavors of Doritos, Fritos, and its Lay’s and Ruffles brand potato chips. PepsiCo has
also strived over the decades to tailor its branding and brand marketing to local and
regional markets, either through acquisition or through new brands or products.
Global brands include Walkers potato crisps (U.K.), Sabritas chips, nuts, and other salty
snacks (Mexico), Uncle Chipps potato chips (India), Matutano snack foods (Spain), The
Smith’s Snackfood Company (Australia), and Gamesa cookies (Mexico and South
America).
In 1950 Alfred N. Steele (1901–59), a former vice president of the Coca-Cola Company
and the husband of actress Joan Crawford, became chief executive officer. His emphasis
on giant advertising campaigns and sales promotions increased Pepsi-Cola’s net earnings
11-fold during the 1950s and made it the chief competitor of Coca-Cola. (After Steele’s
death, his wife, actress Joan Crawford, became an active director of the company.)
In 1965 Pepsi-Cola merged with Frito-Lay, Inc., the maker of snack foods such as Fritos,
Doritos, Lay’s potato chips, and Rold Gold pretzels. The newly enlarged company
diversified further with the purchase of three restaurant chains—Pizza Hut, Inc. (1977),
Taco Bell Inc. (1978), and Kentucky Fried Chicken Corp.
(1986; now called KFC)—and Seven-Up International (1986), but in 1997 the restaurant
chains were spun off into a new, separate company called Tricon Global Restaurants, Inc.
Looking to add more products that were considered healthier, PepsiCo acquired the
Tropicana and Dole juice brands from the Seagram Company in 1998, and in 2001 it merged
with the Quaker Oats company to form a new division, Quaker Foods and Beverages. With
the merger, PepsiCo’s popular brands included Pepsi cola, Frito-Lay snack products, Lipton
Tea, Tropicana juices, Gatorade sports drinks, Quaker Oats cereals, and Rold Gold pretzels.
PepsiCo and controversies: Sustainability and social issues PepsiCo has been involved in
several controversies in the early 21st century.
PepsiCo has been accused of working with companies that exploit workers in the palm oil
industry in Indonesia. The company has been accused of encouraging illegal rainforest
destruction by working with companies throughout the supply chain that engage in negative
environmental practices
In 2017, PepsiCo was accused of trivializing the Black Lives Matter movement in order to
cash in, with an ad featuring Kendall Jenner that was pulled the very next day. The New
York State Attorney General filed a lawsuit against PepsiCo in 2023 for “harming the public
and the environment with its single-use plastic packaging.”
PepsiCo has advertised its efforts to be more environmentally and socially friendly, touting
what it calls “performance with a purpose”—investments in racial equality, commitments to
better water and land use, and a target of 100% renewable energy by 2030. From its
humble late-19th century roots to its 21st-century place as a top global food and beverage
conglomerate with a presence in more than 200 countries, PepsiCo has strived to grow its
reach through product innovation, strategic acquisition, and dynamic marketing aimed at
linking hearts, minds, and taste buds. Although its product lineup skews more toward flavor
than nutrition, the company has demonstrated a willingness to adapt its brands to changing
—and regional—tastes and preferences.
STATEMENT OF THE PROBLEM
The main purpose of this case study is to identify and analyze the
specific challenges or issues PepsiCo faced. To solve these problems,
an in-depth discussion is needed to understand them. This involves
conducting a throughout examination of the internal and external
factors that are impacting PepsiCo’s performance and growth.
This study discusses the following problems concerning the PepsiCo
operations and how they can be managed:
1.1 Lack of focus in its core operations
In the fiscal year 1996, Pepsico announced an unsatisfactory financial
performance. Although the company's revenues had increased marginally by 4% in
1995, the net income had witnessed a major decline (28.45%). Various analysts
have pointed out that this is because of the company's lack of focus on its core
operations.
1.2 Immerging competition from both domestic and overseas markets
For the fiscal year 1996, PepsiCo's beverages division reported an operating profit
of $582 M on $10.5 B in revenues. This is significantly lesser compared to Coca-
Cola's profit and revenue by $3.3 B and $8 B respectively. The overall performance
of PepsiCo deteriorated as it faced intense competition from emerging companies
in both domestic and overseas markets.
1.3 Sustainability and Social Issues
At the beginning of the 21st century, PepsiCo has been involved in several
controversies. These include controversies like the exploitation of the
company's workers in Indonesia, encouraging illegal rainforest destruction, and
trivializing the Black Lives Matter movement to cash in.
METHODOLOGY
This case study is conducted through SWOT analysis matrix to assess the strengths,
weaknesses, opportunities, and threats of PepsiCo. This analysis provides a structured
framework for evaluating the internal and external factors that contribute to the success of
the organization. The analysis should be accurate and focus on the real-life context. The
SWOT analysis is a dynamic process, and the factors can change over time. It should be
regularly reassessed and updated to stay relevant. It also utilize the strength of a resilient
brand lineup to tailor products or services to the specific needs and preferences of rapidly
developing economies. This might involve adapting product features, packaging, or pricing
to align with local market demands while maintaining brand consistency and quality.
SWOT ANALYSIS MATRIX
STRENGTH-WEAKNESSES STRATEGY
S1, S3, W2- PepsiCo will leverage its strong brand
recognition and efficient supply chain to drive innovation
and diversification while prioritizing proactive risk
management measures to mitigate legal challenges and
uphold its reputation.
S4W4 - Building on their strengths in effective marketing
and sportsmanship, PepsiCo will focus on refining
marketing strategies, prioritizing honesty, authenticity, and
listening to consumers, to improve brand perception and
address any shortcomings in marketing initiatives.
WEAKNESSES- OPPORTUNITIES STRATEGY
W1, W3, 02-PepsiCo can improve public health outcomes
by gradually reducing sugar content in its carbonated
drinks and prioritizing the development and promotion of
healthier options like organic beverages and snacks.
STRENGTH-OPPORTUNITIES STRATEGY
S4, O1, 03 - PepsiCo will enhance its marketing
strategies by leveraging e-commerce platforms to
reach online customers and targeting consumers in
developing markets, while continuously refining its
approach to address past marketing missteps and
capitalize on emerging opportunities.
WEAKNESSES-THREATS STRATEGY
W1, W3, T1 -To address unhealthy perceptions and reduce dependence on
carbonated drinks, PepsiCo will diversify its product range with healthier
options, while remaining responsive to changing consumer preferences, thereby
mitigating the threat posed by evolving market trends.
W2,T3- PepsiCo will implement proactive legal risk management strategies to
address involvement in lawsuits, while closely monitoring and adapting to
changing government regulations, thereby minimizing legal vulnerabilities and
ensuring compliance with evolving regulatory frameworks.
SOLUTIONS
Strategic Alignment: PepsiCo should realign its business strategies to focus more on its core operations,
such as beverages and snacks, to improve performance. This may involve divesting non-core businesses
that are not contributing significantly to the company's growth.
Operational Efficiency: Implement measures to enhance operational efficiency and cost management to
ensure that resources are utilized effectively in core operations.
Market Research: Conduct thorough market research to understand consumer preferences and trends,
enabling the company to tailor its products and marketing strategies effectively.
• Competitive Analysis: Conduct a detailed analysis of competitors, both domestic and international, to
identify areas of strength and weakness and develop strategies to differentiate PepsiCo's products in the
market.
• Innovation: Invest in research and development to innovate new products and improve existing ones to
stay ahead of the competition.
• Global Expansion: Explore opportunities for global expansion while adapting products to suit local
market demands and preferences.
• Ethical Sourcing: Ensure that PepsiCo's supply chain adheres to ethical standards, including fair
treatment of workers and sustainable sourcing practices.
• Community Engagement: Engage with communities and stakeholders to address social issues and
contribute positively to society, demonstrating a commitment to social responsibility.
• Transparency and Accountability: Enhance transparency in operations and communication to build
trust with consumers and address any controversies promptly and effectively.
ALTERNATIVE SOLUTION
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