PEPSICO

I. Background and history

PepsiCo Inc. is an American multinational food and beverage corporation based in Purchase,
New York, United States, with interests in manufacturing, marketing and distribution of snack
foods, beverages and soft drinks. It was establish in 1965 by Donald M. Kendall and Herman W.
Lay through the merge of two companies, Pepsi-Cola and Frito-Lay. It entered many potential
markets besides USA like Europe, China, India and Japan and now its products are available in
more than 200 countries. Reported in January 2012, 22 product lines’ sales reached
approximately $1 billion each, resulting in the total net revenues of $43.3 billion. At present,
PepsiCo is one of the leading food and beverage corporations in the world with 5 key brands,
consisting of Pepsi-Cola, Frito-Lay, Tropicana, Quaker and Gatorade. In 2012, Pepsi-Cola made
the first-ever global marketing campaign, making the incomes of $16.69 billion.

II. SWOT analysis

1. Strengths

Branding is the ultimate factor making PepsiCo successful in food and beverage market. PepsiCo
has five main brands, almost all of which are now distributed globally, especially in United
States of America- the most important market, PepsiCo has the largest share with beverage at
39% and snack foods at 25%.

Diversity: PepsiCo’s diversification is obvious in that the fact that each of its top 18 brands
generates annual sales of over $1 billion. PepsiCo’s products also consist of ready-to-drink teas,
juice drinks, bottled water, as well as breakfast cereals, cakes and cake mixes, which allows the
company win more purchasers.

2. Weaknesses

Overdependence on Wal-Mart - According to stastics, sales to Wal-Mart accounts for

approximately 12% of PepsiCo’s total net revenues, so Wal-Mart is of course PepsiCo’s largest
customer. However, PepsiCo’s fortunes are influenced by the business strategy of Wal-Mart.
One of them is Wal-Mart’s low price themes which put pressure on PepsiCo to hold down prices,
which makes the company’ incomes lower.

Overdependence on US Markets - Although it is a multinational corporation, 52% of PepsiCo’s

revenues originate in the US. This attention makes PepsiCo somewhat vulnerable to the impact
of changing economic conditions as well as labor strikes. Large US customers could exploit
PepsiCo’s lack of bargaining power and negatively impacts on its revenues.

3. Opportunities

Broadening of Product Base: PepsiCo is looking for to address one of its potential weaknesses –
the overdependence on US markets by acquiring Russia’s leading Juice Company, Lebedyansky,
and V Wwater in the United Kingdom. It continues to broaden its product range by introducing
TrueNorth Nut Snacks and raising its Lipton Tea project with Unilever. These recent initiatives
will enable PepsiCo to fiddle with the changing lifestyles of its consumers.

Growing Savory Snack and Bottled Water market in US: PepsiCo is positioned well to take
advantage of the increasing bottle water market - worth over $24 million by 2012 with variety of
products. Similarly, PepsiCo products such as: Doritos tortilla chips, Cheetos cheese flavored
snacks, Tostitos tortilla chips, Fritos corn chips, Ruffles potato chips, Sun Chips multigrain
snacks, Rold Gold pretzels, Santitas are also benefiting from a growing savory snack market
which is projected to grow as much as 27% by 2013, showing an increase of $28 million.

4. Threats
Potential Negative Impacts of Government Regulations - It is stated that government initiatives
related to environmental, health and safety may have the potential to negatively impact PepsiCo.
Some recent studies suggest that cancer may be related to the abortion of carbonated drinks as
well as beverage and snack food. Apparently, if the company has to follow the law and add a
warning labels in its products, many buyers may refuse to purchase and as a result it has a
negative effect on PepsiCo’ sales.

Intense Competition: besides The Coca-Cola Company I, the PepsiCo’s primary competitors,
Nestlé, Groupe Danone and Kraft Foods are now strong competitor in food and beverage market.
Intense competition may influences pricing, advertising, sales promotion initiatives undertaken
by PepsiCo.

III. Success and failure:

1. Success
PepsiCo has gained great successes until now. PepsiCo is the second largest food and beverage
business in the world and by net revenue it is the largest food and beverage business in North
America. PepsiCo is a global food and beverage leader with a diverse product portfolio that
includes 22 brands that each generate more than $1 billion each in retail sales yearly. In addition,
PepsiCo has received various awards & recognition. According to the website [Link],
generally in 2012: PepsiCo ranked #9 on Reputation Institute’s America’s Most Reputable
Companieslist, with a score of 77.6. On Reputation Institute’s World’s Most Reputable
Companies list, the company scored 68.11 points and stood at #84. Turning to 2013, PepsiCo
achieved a score of 6.94 and ranked #37 among the Top 50 companies on Fortune’s 2013
World’s Most Admired Companies list. PepsiCo also ranked #3 in the Consumer Food Products
industry sub-list. At the same time, PepsiCo was included in Ethisphere’s 2013 World’s Most
Ethical Companies. 2013 is the seventh year they have PepsiCo on this list.
2. Failure
However, in its milestones, PepsiCo has experienced plenty of considerable defeats. In the article
“Loud Sun Chips Bag – 1 of Pepsi’s 5 Worst Branding Disasters, Crystal Pepsi and Tropicana
cartons also make the list” by Jeff Reeves, Editor of [Link], the author ranked
Tropicana Cartons as its third worst failure. According to that, in 2009 Tropicana Pure Premium
orange juice replaced its well-known packaging and straw-in-orange design with a modern image
of OJ-filled stemware half on one side and half on another. The straw-in-orange was very famous
for fresh taste, so this change hurt branding. In addition, it materially decreased the sales by 20%.
PepsiCo also implemented another similar rebranding in 2009 considering the sports drink icon,
Gatorade. PepsiCo executives made a decision of changing the old lightning-bolt logo and even
the name – opting to call it G. As the result, Gatorade volume sales declined by 13.7% in the first
three months after the project launched and it lost 6 points in market share. Pepsi has tried hard
to restore its brand power with its three-part Gatorade campaign of Prime, Perform and Recover,
but the majority of consumers are still not in favour of the new appearance. The worst branding
disaster was Crystal Pepsi. In 1992 the company decided what the world was waiting for was a
clear cola. After all, there had already been a variety of diet colas, cherry colas, sugar-free colas,
caffeine-free colas, caffeine-enhanced colas, and all had achieved at least some form of success.
By creating a clear cola not colored like the rest, Pepsi believed that Crystal Pepsi would meet a
“new consumer demand for purity” but after being launched in 1993, it was halted in 1994. Clear
cola didnot succeed and fail to please customers.
IV. Conclusion and recommendation

Some practical implications can be inferred from PepsiCo’s failures. Firstly, don’t think that
gaps should always be filled. If you spot a hole in the market, it doesn’t mean that you should fill
it. Just because clear cola didn’t exist, it didn’t mean it had to be invented. Secondly, don’t
relaunch a failed product. Crystal idea collapsed once, but Pepsi still believed the world was in
need of a clear cola. The second version performed even worse than the first. Moreover,
differentiating yourself from your main competitor is important as well. Finally, it’s a good idea
that your brand and your company engage the customer in ways that are socially compelling and
significant. Products should go beyond the mere advertising and promotional words to regard
their true values.
REFERENCES

“Awards and Recognition” ,

[Link] (Accessed 17 May,

2013)

Nolan, H. 2009, PepsiCo 'Rebranding' Hustlers Fail Big Time. Availbble at

[Link]

“PepsiCo”, [Link] (Accessed 17 May, 2013)

“PepsiCo, Inc. - Company Profile, Information, Business Description, History, Background

Information on PepsiCo, Inc.”, [Link]
[Link] ( Accessed 17 May, 2013

Ramirez, A. 2001, “Pepsico Out of South Africa Following Failure of Bottler”. Available at
[Link]
[Link]
Reeves, J. 2011, “Loud Sun Chips Bag – 1 of Pepsi’s 5 Worst Branding Disasters”.
Available at
[Link]

“SWOT Analysis PepsiCo”,

[Link] (Accessed 17 May, 2013)

Williams, J. 2012, Profitability Analysis Of PepsiCo. Available at

[Link]
 APPENDIX

To prepare for the case study analysis, both of us had looked up for information from different
sources and channels. One of us also had a practical experience of visiting the PepsiCo plant in
Bac Ninh, one of the biggest factory in Asean. After collecting and analysing the data, we
delegated tasks to each member to write the report. Do Thu Ha was assigned the brief description
of the company’s background, its internal strengths and weaknesses, its external opportunities
and threats. Dang Phuong Anh was responsible for its external opportunities, threats, its success
and failure, recommendation, appendix and glossary. When each of us had finished our own
writing tasks, we combined them and completed the whole report. We shared the same work load
and studied hard for this project assignment.