A Strategic Case Study on PepsiCo
By
Dr. Assan Jallow
Abstract
The purpose of this paper is to provide a strategic report analysis and evaluation of PepsiCo in the
beverage industry. This includes the methods of analysis of PepsiCo’s external and internal analysis,
its marketing strategies, and SWOT analysis from the perspectives of value-chain, resource-based, and
3-circa analysis. The research draws attention to details on the competition of PepsiCo as a strategic
competitor against Coca-Cola in the beverage-cum-snacks industry. Despite being a competitive brand
that is being overshadowed by Coca-Cola regarding global marketing shares and growth, Pepsi has
become one of the world’s largest selling soft drink across national boundaries as it is liked and being
patronized by people of all ages, across the globe. Dozens of resources were cited to produce this
strategic report. In sum, the paper analyses PepsiCo’s strategic competitiveness against its rival – CocaCola in the beverage and smacks industry. The paper concludes with summary of recommendations for
consideration by PepsiCo’s corporate and business level decision-makers on how well PepsiCo should
manage its strategic intent of its marketing and product diversification programs across the boundaries
of the global market to reposition itself as a global giant beverage and snack business player.
Keywords: PepsiCo, SWOT analysis, External and Internal Analysis, Competitive advantage and
analysis
Electronic copy available at: https://ssrn.com/abstract=3828353
1.0 Introduction
PepsiCo Inc. is an international company that manufactures and distributes food and beverage products.
It owns several popular brands and products, including Pepsi Cola, Doritos, Lays, Mountain Dew, Pepsi
Diet, Cheetos, Mirinda, Ruffles, Aquafina, Quaker, and Tropicana among a list of other products. PepsiCo
was incorporated in 1919 and reincorporated in 1986 (PepsiCo 2018 Annual Report). The company is
conscious of the consumers' health and provides treats and products that are in line with consumers' tastes
and preferences. In over 200 countries, with 22 brands worth $1 billion each as well as other strong
competing brands, PepsiCo is an immensely diversified company (Ciura, 2020).
The paper presents the historical developments and evolution of PepsiCo as the parent company. This
article provides an in-depth analysis and evaluation of the Marketing Plan for PepsiCo’s beverage products
and snacks. The discussions on the paper are centered on the company's (PepsiCo Inc.) description,
mission, and vision statements. The author also discusses on the internal and external environment of the
PepsiCo, its marketing segmentation regarding target and positioning markets.
The report further highlights the fact that PepsiCo’s cola diet product has relatively good brand recognition
and reputation based on its parent company's footprint in the beverage industry. The findings of the
paper indicate that PepsiCo is one of the leading brands in the beverage industry. That PepsiCo uses the
four Ps (i.e., product, price, place, and promotion) of the Pepsi Diet.
1.1 Company Description: An Overview of PepsiCo Inc.
PepsiCo,
Inc. is an American multinational food,
snack,
and beverage
corporation headquartered
in Harrison, New York. Pepsi was first introduced as "Brad's Drink" in 1893 by Caleb Bradham, who
made it at his drugstore where the drink was sold. It was later relabeled and subsequently renamed PepsiCola in 1898 after the digestive enzyme pepsin and kola nuts used in the recipe.
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In 1965, Pepsi-Cola formed a merger with Frito-Lay, Inc., which later led PepsiCo to become one of the
world's leading food and beverage companies. PepsiCo has expanded and later acquired both Tropicana
Products in 1998 and the Quaker Oats Company in 2001, thus adding the Gatorade brand to its portfolio.
PepsiCo is made up of the many division, which includes the PepsiCo Beverages ofNorth America, FritoLay
North
America;
Quaker
Foods-North
America; Latin
America,
Europe, Sub-Saharan
Africa; Asia, the Middle East, and North Africa, respectively. Each of these divisions has contributed to
the success of the Pepsi brand.
1. Historical Development of Pepsi Diet
PepsiCo concentrates efforts on the development and production of the Pepsi Diet in 1964 as a variant
Pepsi with no sugar. It was manufactured as a no-calorie carbonated cola soft drink targeting young people
from the ages of 14-35. The first test-marketed was done in 1963 under the name of Patio Diet
Cola. And, it was later rebranded as Pepsi Diet the following year, thus becoming the first diet cola that
was distributed on a massive national scale in the United States. The Tab, Diet Rite Cola, and Diet Coke
produced by the Coca-Cola Company, and RC Cola where Pepsi Diet's main competitors in the soda
manufacturing business. The Pepsi Diet was launched in 1983 in the U.K, and since then, it has become
available on a global scale, while the U.S. still maintains the largest single market for Pepsi Diet. The
beverage composition, flavor variations, and packaging on the Pepsi Diet vary based on the countryspecific production. It is sold under the name of Pepsi Light in other jurisdictions.
In December 2012, Pepsi Diet changed its sweetener to sucralose ahead of a major rebranding of the soft
drink set for January 2013 (AP News, 2012). In 2015, some people expressed their dissatisfaction with the
new formula through Facebook and Twitter. PepsiCo, in response, revived its aspartame formulation, as
"Diet Pepsi Classic Sweetener Blend" for US markets in September 2016, and it was sold alongside the
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new formula. PepsiCo later announced plans to revert to Aspartame as Pepsi Diet's original
sweetener. The new formulation was released market-wide on February 25, 2018.
2.0 Mission and Vision Statement of PepsiCo
Organizations are best guided with a vision and a mission statement that spells out their desired objectives
and direction it wished to take in achieving its arduous and entrusted mandate. Besides, every organization
selects a unique path to achieve its long and short-term goals. PepsiCo ensures that its strategic mission
and vision statements are well-aligned with current global business realities. This is critical as
it highlights
the continuous
growth, diversification,
and
expansion of
the
company regarding
it product mix, test, and target marketing. PepsiCo's mission and vision statements lead the business to
develop products that suit the growing market demands of its valued clientele. With that been said, a firm's
corporate mission statement identifies actions to achieve the organizational vision.
PepsiCo Inc. has adopted the following to be its vision and mission statements that describe the goals that
it aspires to achieve in the future, with the intent to strategically position itself with the excellent pride of
exceeding customer expectations and meeting consumers' tastes despite changing needs and preferences,
2.1 Vision Statement
The vision statement of the PepsiCo specifies the company's role in the global market. Therefore, a firm's
corporate vision statement indicates the direction of organizational development, growth, and
sustainability. PepsiCo's vision statement is "to deliver top-tier financial performance over the long term
by integrating sustainability into our business strategy, leaving a positive imprint on society and the
environment."
The vision and mission statements of PepsiCo complement each other to push the company toward the
top global market position.
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The vision statement of PepsiCo focuses on three thematic areas, and this includes (i) Top financial
performance, (ii) Sustainability, and (iii) Corporate social responsibility.
The mentioned-above are critical components that PepsiCo takes pride in with a dedicated and robust
interest in giving back to communities through its corporate social responsibility. This factor is
a significant influence on the company's policies and strategies on organizational development,
especially about its impact on stakeholders.
2.2 Mission Statement
A mission statement defines the means to achieve the vision, through consolidated & refined objective
settings to achieve the stated objectives of an organization. Besides, the mission statement gives real
meaning and a purposeful reflection on how an organization's vision can be attained within a specific set
time-limit. PepsiCo's mission statement reads "to provide consumers around the world with delicious,
affordable, convenient, and complementary foods and beverages from wholesome breakfasts to healthy
and fun daytime snacks and beverages to evening treats." This statement emphasizes the global nature of
Pepsi products. It also reflects the company's determination to have the best impacts on everyone,
including the immediate consumers, through differentiated products.
PepsiCo's mission statement main points are centered on (i) Consumers around the world, (ii) Delicious,
healthy and fun products, (iii) Affordability, and (iv) Convenience. The mission statement of
PepsiCo defines the basic characteristics of its products. The point on affordability implies PepsiCo's
approach to pricing. Moreover, the convenience point is an affirmation of PepsiCo's marketing strategy
and positioning to make its products easily accessible, indicating the firm's market strategy. In this
context,
the
mission
statement suggests that
the
company
targets
all
consumers
worldwide. Besides, PepsiCo aims to provide products that appeal to its growing consumer base.
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3.0 External Analysis
3.1.1 Remote and operating environmental analysis.
Reviewing the microeconomic factors that constantly change around the world, may help PepsiCo to take
advantage of the opportunities that are available to them and knowing the threats that they may face by
doing business internationally.
•
Political factors are an important factor to consider since they define the legal and regulatory
limitations on how the company must operate, they can either benefit or limit a company (Pearce &
Robinson 2015). Currently, PepsiCo operates in over 200 countries and expose itself to different types
of political environment and political system risks, so to operate in each country, PepsiCo must
carefully analyze factors like price regulations, employee and regulation, and Tax regulation, as many
countries have soda taxes to reduce the consumption of sugary drinks (Taylor, 2016).
•
Economic factors as inflation, cost increases, taxes, and exchange rates affect business and PepsiCo is
not an exception. In the second quarter of 2020 PepsiCo revenues when down 3% as cost increased
due to the pandemic, PepsiCo reported spending nearly $400 million on costs related to the pandemic,
those costs included PPE equipment for employees (Lucas, 2020).
•
Social Factor. PepsiCo has seen the change in the preference of its customer so in order not to lose
them, they are reformulating their products to offer what the customer wants and keeping their image.
Over the years PepsiCo has worked on some advertising campaigns motivating people to improve
their health by not consuming carbonated beverages. Additionally, in 2020 they devoted more than 45
million to fight the effects of the COVID-19 (PepsiCo Commits).
•
PepsiCo is taking advantage of the current innovation in technologies and implementing them in
different departments of the company. PepsiCo has been using artificial intelligence (IA) and machine
learning to streamline their current process on production, sales, and even HR (Marr 2019)
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•
Environmental, recently there are campaigns to protect the environment. PepsiCo is adopting
sustainable practices that fulfill its corporate responsibility by decarbonizing its entire value chain by
at least 20% by 2030 (ESG Topics).
•
International/legal. Companies need to analyze the country they intend to do business to avoid
countries where legal frameworks and institutions do not protect the intellectual property rights of an
organization. There is a high risk of sanctions and penalties if PepsiCo fails to comply with rules and
regulations laid down by the local government.
3.1.2. Industry analysis
By analyzing the five competitive forces PepsiCo can gain a complete picture of what impacts the
profitability of the company and the industry; they can identify trends and opportunities for the company.
•
Threats of New Entrants -In the beverage industry has been shaped in such a way that new competitors
are unlikely to appeal. PepsiCo competes primarily on advertising and differentiation rather than
price; potential new competitors are uneven in size especially in local markets. In 2019 PepsiCo
expanded its advertising investment by 12%, making total annual investments considerably high and
making it very difficult for new competitors to fight in today's market (Williams 2019). The barriers
that PepsiCo has for new competitors are product differentiation and access to distribution channels
•
Bargaining Power of Suppliers- Suppliers for a beverage company are quite important since they
provide raw materials such as flavorings, caffeine, sugar, and services such as packaging, to produce
the final product. PepsiCo requires of it supplies to meets the quality standards establish so that the
final product meets the quality standards and the respective health laws imposed by them (ESG
Topics). Therefore, PepsiCo has the bargaining power both in price and quality, since their ingredients
are not so strange or difficult to get.
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•
Bargaining Power of Buyers - PepsiCo’s buyers are primarily food, service, and restaurant stores. The
profitability of each of these segments shows that the business power of the buyers is high because the
buyers pay different prices since they buy in bulk. PepsiCo’s list of customers is supermarkets gas
stations even there is an agreement between restaurants like pizza hut, Burger King, Taco Bell, and
Kentucky. Similarly, PepsiCo products in vending machines can be found in various places.
•
Threats of Substitute -There are several institutes of PepsiCo products among them are bottled water,
sports drinks, coffee, tea, and juice. PepsiCo's threat to substitute products is respectively high because
consumers are also concerned about consuming cheaper and much healthier beverages (Kim & Yoffie,
2011)
•
Rivalry among the Existing Competitors -The rivalry PepsiCo has with its main competitor is
moderate as with the rest of the competitors, their market share is too low to encourage any price wars.
Coca-Cola may have a cola war with PepsiCo but is unlikely that the competition will affect the longterm profitability of PepsiCo. Regardless of this PepsiCo should continue to build a sustainable
differentiation with their marketing innovation, alliances with smaller companies, and the
diversification of their products to lead the competition (Ahmed, n.d.)
3.1.3 Competitive analysis The main rival for PepsiCo is Coca-Cola. These two companies have
established a stronghold in the carbonated soft
drink industry, in the USA those two
companies hold more than 67% of the market
share. In the last year, PepsiCo has been able to
increase its shares by 19.45% and 49.20% in
the last five years, also having a market cap of
$ 188.6 billion as of May 2020. Unfortunately
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for PepsiCo, Coca-Cola is the leader of the industry however Pepsi continue to make a profit bringing
more than $ 68 billions of revenues last year (Maverick 2020).
PepsiCo has other competitors, but they are not as big; some of the other competitors are Keurig Dr.
Pepper, Monster Beverage Corp, General Mills, Conagra, Unilever, Nestlé, RedBull, Britvic, and Danone.
4.0 INTERNAL ANALYSIS
4.1. Revenue Streams
PepsiCo has two main divisions of revenue: Food, with a net revenue percentage of 54%, and Beverage,
with net revenue of 46%. Inside those two divisions, there are multiple divisions including Frito-Lay North
America, Quaker Foods North America, PepsiCo Beverages North America, Latin America, Europe,
Africa, the Middle East and South Asia, and the Asia Pacific, Australia, and New Zealand, and China
Region. Figure 2 below shows the Net Revenue Percentages of all the individual divisions for PepsiCo
(PepsiCo, 2020):
Figure 2: For 2019, PepsiCo had net revenue of $67,161 Million, an increase of 4% from 2018 (PepsiCo,
2020)
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4.2. Profit Model
PepsiCo reports on two main divisions for profit: the U.S., with a net profit percentage of 58%, and Outside
the U.S., with a net profit percentage of 42%. Inside those two divisions, there are multiple divisions—
the same as listed above under Revenue Streams. Figure 3 below shows the Division Operating Profit
Percentages for all the individual divisions for PepsiCo (PepsiCo, 2020):
Figure 3: For 2019, PepsiCo had a Core Operating Profit of $10,602 Million, an increase of 2% from 2018
(PepsiCo, 2020)
4.3. Managerial Board, Their Background, and Career Experience
Chairman and Chief Executive Officer - Ramon L. Laguarta
•
24-year PepsiCo veteran
•
Before joining PepsiCo in 1996, Ramon worked for Chupa Chups, S.A. (A Spanish leading
confectionery company). He has held a variety of positions inside PepsiCo including leading
the acquisition and successful integration of the company’s dairy business in Russia. Between
2015-2017, Ramon was CEO of the Europe Sub-Saharan Africa sector (ESSA), then became
President of PepsiCo, followed by CEO and Chairman (Leadership, n.d.).
•
Has served as CEO since October 2018 and Chairman of the Board since February 2019
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•
Has begun pivoting the company toward accelerated growth, embracing a new corporate mission—to
Create More Smiles with Every Sip and Every Bite
Senior Vice President and Controller – Marie Callagher
•
Joined PepsiCo in 2005
▪
Prior to this, served as assistant controller of Altria Corporate Services, Inc. (Part of the team
that led the Nabisco acquisition and the Kraft IPO)
•
As Chief Accounting Officer, is responsible for PepsiCo’s global financial reporting and SOX
processes, overseeing a staff of over 1,000 control employees (Leadership, n.d.).
Vice-Chairman and Chief Financial Officer – Hugh F. Johnston
•
Joined PepsiCo in1987
•
“Assumed role of CFO in 2010 and is responsible for providing strategic financial leadership for
PepsiCo, including ensuring the company’s strategy creates shareholder value, communicating the
company’s strategies and performance to investors, and implementing a capital structure, financial
processes, and controls to support the company’s growth and return on investment goals” (Leadership,
n.d.).
•
Also supported and lead the PepsiCo information technology function since 2015, global e-commerce
business from 2015-2019, and Quaker Foods North America division from 2014 to 2016 (Leadership,
n.d.)
Chief Executive Officer, Europe – Silviu Popovici
•
Silviu held positions in general management with Coca-Cola early in his career, followed by senior
leadership roles at Wimm-Bill-Dann. Once at PepsiCo, he spent three years as president, PepsiCo
Russia, followed by heading up the business in Russia, Ukraine, and CIS (The Commonwealth of
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Independent States) for two years. Silviu served as President, Europe, Sub-Saharan Africa from
September 2017 to March 2019, before becoming Chief Executive Officer of PepsiCo Europe in
August 2019 (Leadership, n.d.).
Chief Executive Officer, Latin America – Paula Santilli
•
Paula joined the Quaker Oats Company back in 1992. The Quaker Oats Company was acquired by
PepsiCo in 2001—starting her employment with PepsiCo. At PepsiCo, she was Vice President and
General Manager for their Savory business in Mexico. After that, she became the Chief Operating
Officer (COO) of all business units of PepsiCo Mexico Foods, followed by the President of PepsiCo
Mexico Foods. Paula became the Chief Executive Officer of PepsiCo Latin America in May 2019
(Leadership, n.d.).
Executive Vice President and Chief Human Resources Officer – Ronald Schellekens
•
Ronald started his career working at AT&T, PepsiCo, Royal Dutch Shell, and Vodafone—all in
Human Resources roles. Ronald joined PepsiCo in 2018 and oversees the company’s global HR
functions (Leadership, n.d.).
Chief Executive Officer, PepsiCo Beverages North America – Kirk Tanner
•
Kirk joined PepsiCo in 1992. He held roles as “Senior Vice President and General Manager of FritoLay's West Business Division; Vice President of Sales at PepsiCo U.K. and Ireland; Vice President of
Frito-Lay North America’s Mountain Region; Vice President of Frito-Lay North America’s MidAmerican Region; and Vice President of Frito-Lay North America’s California Region” (Leadership,
n.d.). Kirk then served as President and Chief Operating Officer of North America Beverages, before
being named CEO of PepsiCo Beverages North America in 2019 (Leadership, n.d.).
Chief Executive Officer, Africa, Middle East, South Asia – Eugene Willemsen
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•
Eugene joined PepsiCo in 1995. He held positions of General Manager of PepsiCo’s snack business,
Senior Vice President and General Manager, Commercial for PepsiCo Europe, as well as heading up
the company’s global tea joint venture with Unilever. Eugene became the Executive Vice President of
Global Categories & Franchise Management from 2015 to 2019, followed by Chief Executive Officer,
Sub-Saharan Africa in 2019 (Leadership, n.d.).
Chief Executive Officer, PepsiCo Foods North America – Steven Williams
•
Steven joined the Quaker Oats Company in 1997. He started his career at PepsiCo in 2001 with the
acquisition of the Quaker Oats Company. Early in his career with PepsiCo, Steven led the global
Walmart business, followed by Senior Vice President and General Manager for Frito-Lay's East
division. Steven then held the role of Senior Vice President and Chief Commercial Officer for FritoLay's U.S. organization, finally followed by Chief Executive Officer of PepsiCo Foods North America
since 2019 (Leadership, n.d.).
Executive Vice President, General Counsel, and Corporate Secretary – Dave Yawman
•
Dave Yawman started his career as a law clerk in the United States District Court for the law firm
Fried, Frank, Harris, Shriver & Jacobson. Dave joined PepsiCo in 1998 and held multiple positions in
charge of global government affairs and public policy along with chief compliance and ethics officer.
Steve assumed his role as Executive Vice President, General Counsel, and Corporate Secretary in 2017
and leads the company’s worldwide legal and compliance and ethics functions (Leadership, n.d.).
5.0 SWOT Analysis
The beverage business environment, despite the plethora of opportunities it provides, is competitive in
nature and requires organizations to be strategic in their decision-making, resource management, and
diversification programs. This is to avoid missed opportunities by capitalizing on the organization’s core
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competence and business synergy that creates customer value based on strategic intent, innovation, and
technology (Holbrook, 2005; Anderson and Narus, 1998; (Pearce & Robinson, 2015). Value is the
“combination of benefits received, and cost paid by customers” (Daft, 2018). To develop industry
foresight based on trends in technology, demographics, government regulations, values, and lifestyles and
identify new competitive advantages we’ve created a situational analysis through the adaptive sails of
SWOT analysis (i.e., strengths, weaknesses, opportunities, and threats). It offers an organized review of
performance regarding strategic positioning, growth, and sustainability. Every organization is a part of an
industry, confronted with a myriad of challenges and opportunities on consumer changing preferences,
marketing competition, pricing, government regulations, and sales. These challenges and opportunities
are both internal and external. PepsiCo as a business uses the situation analysis to obtain external
information from a variety of sources, which includes and not limited to customers, government reports,
suppliers, and consultants to access current growth examine the internal strengths and weaknesses,
challenges, and future opportunities from sources such as budgets, financial ratios, profit-and-lossstatements of accounts, employee surveys.
1. Strengths
a. Brand equity: ranked as the globe’s #29 most valuable brand worth $18.8 billion (Forbes, 2019)
as the company has not been found in any implicating scandals of compromising the standards and
quality of its products.
b. A highly diversified portfolio: With more than 22 brands and selling both food and snacks (such
as Frito Lays, Cheetos, Doritos, Kurkure, etc.,) and beverages (such as Pepsi, Gatorade, Tropicana)
under one business chain of which its food business accounts for 54%, and beverages for 46%,
respectively (Miguel, 2020, Moss et al., 2012).
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c. An extremely loyal customer base is strong among the younger generation who love the iconic
taste of the company’s soft drinks.
2. Weaknesses
a. Weak distribution channels, failure to match Coca-Cola’s target marketing, segmentation, sales,
and brand, unresponsiveness to changing consumer preference, and the inability of PepsiCo to
innovate, market, and distribute some of its products such as Pepsi has negatively impacted the
company’s brand.
b. Lacks strategic focus and marketing towards Pepsi soda and diet as these products sell at the same
price as that of Coke-Diet, and not being conscious of Coke’s strategic position, market
penetration, and market-base. This is caused by the company’s high production cost.
c. PepsiCo’s products are perceived as unhealthy by many health-conscious consumers. Most of its
carbonated soft drinks contain high sugar concentrates while its snacks are excessively salted with
chemical additives and flavors.
3. Opportunities
a. Increasing demand for healthy products with the rapidly evolving tastes and preferences of its
valued and target customers (i.e., youth from 14 – 30 and the old, particularly those who are
affected by diabetes) opens the door for PepsiCo to introduce new healthy products such as milk
or vegetable-based shakes.
b. Expanding operations in emerging markets in Africa, Middle East, Asia, and South
America provide PepsiCo with an invaluable opportunity to expand its operations in these markets
and grow its customer base.
4. Threats
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a. Changes in demographics in Europe caused by the rising older population in Europe and the
changes in customers’ tastes and preferences create a factor of limitation on its value-proposition
as consumers are becoming conscious of their healthy lifestyles.
b. Threats from substitutes such as bottled water, diet sodas, and fruit juices.
6.0. Value Chain Analysis of PepsiCo
PepsiCo has an expansive VCA that supports its line of business and this includes but not limited to
inbound logistics, operations, outbound, sales, and marketing and services (Pratap, 2020).
Figure 4 (Pratap, 2020)
7.0 RBV Analysis
The resources and capabilities of a firm play a critical role in directing and formulating its strategy to drive
growth and competitive advantage over its competitors in the same market segment or industry. In this
context, the individual resources of PepsiCo include its capital equipment, skills, and competence of its
employees, pricing, patents, brand, and financial resources. Grant (1991) indicates that “resources and
capabilities are the primary sources of the firm's profitability.” Therefore, the key to a resource-based
approach to strategy formulation is understanding the relationships between resources, capabilities,
competitive advantage, and attractiveness of the industry, and how to best utilize it to one’s advantage to
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maintain the cost-benefits of a competitive advantage that can be sustained over time against a competitor.
Resource capability drives the outcome results of profitability earned higher than the cost of invested
capital, which is properly utilized and invested to profit the firm in its growth strategies for expansion and
competitiveness. The resource-based view (RBV) refers to the directional strategic resources firms use
and exploit to achieve a sustained competitive advantage against competitors in the same industry (Priem
and Butler, 2001; Valentine, 2001; Barney, 1991; Amit and Shoemaker, 1993). Resources that cannot be
easily transferred or purchased and require an extended learning curve or a major change in the
organization climate and culture, are more likely to be unique to the organization and, therefore, more
difficult to imitate by competitors.
Row Labels
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Grand Total
Sum of Stock Price Sum of Book Value per Share Sum of Price to Book Ratio
125.08
28.35
13.24
188.18
40.03
18.78
181.44
39.52
18.42
161.71
38.31
17.02
190.77
52.31
14.59
199.77
59.02
13.59
216.48
56.3
15.42
260.89
59.79
17.47
299.26
57.91
21.03
327.1
39.59
33.65
370.65
33.06
44.95
414.6
34.11
48.97
410.36
32.68
51.24
507.16
41.09
49.37
531.32
28.68
55.22
4384.77
640.75
432.96
600
500
400
300
Sum of Stock Price
Sum of Book Value per Share
200
Sum of Price to Book Ratio
100
0
Figure 5 & 6: PepsiCo Price/Book Ratio Historical Data 200-2020
8.0 3-circle Analysis of PepsiCo The 3Cs which refer to a
company’s offering, competitor’s offer, and customers’ need
are critical components in driving business growth, customer
loyalty, and branding development (Urbany and Davis,
2007). The 3 circles do not stand alone. That is because each
area within the circles represents a strategically important
Figure 7
1
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business segment, but the combination of A, B, and C within the strategic thread are the forces behind
building competitive advantage.
9.0 Current Business Strategies
To better understand the internal strategic motivations at PepsiCo, we will establish PepsiCo’s guiding
principles. Principles are the underpinnings of larger business strategy, and John Dudovskiy (2016),
outlines the 5C’s framework used by corporate managers to guide long-term business strategy planning.
PepsiCo’s 5C’s are: 1) Unified commercial agenda, 2) Building new capabilities, 3) Increasing focus on
costs, 4) Fostering a culture of collaboration, and 5) Exercising discipline with regards to capital returns
(Dudovskiy, 2016).
Those principles guide the implementation of intensive strategies to fulfill PepsiCo’s larger, grand
strategies. Using Porter’s Model to analyze PepsiCo’s competitive advantage strategy, PepsiCo uses Cost
Leadership and Broad Differentiation strategies to maintain and sustain its competitive advantage
(Ferguson, 2017). While Cost Leadership and Broad Differentiation are generic strategies, more intensive
strategies are outlined by the board chairman.
Laguarta writes in his 2019 letter to shareholders that PepsiCo is on track to become “great in the
marketplace, great in (our) capabilities and talent, great for the sustainability of our planet and
communities” (PepsiCo, 2020). These aims rest under PepsiCo’s mission to Create more smiles with every
sip and every bite and vision to be the global leader in convenient foods and beverages by winning with
the purpose (PepsiCo, n.a.). Laguarta distills the company’s strategy into a set of “aspirations” he calls
Faster, Stronger, Better, which will serve as a framework to categorize PepsiCo’s strategies. Here and in
the table below, we will analyze the strategies (PepsiCo, 2020).
FASTER: Innovative advertising and marketing, improvements across the supply chains, and accelerated,
new product innovation and development are short-term strategies to accomplish the longer-term
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strategies apart of the Faster aspiration. All of these strategies are in alignment with the company’s vision
steering the company towards its mission, directly and indirectly. Faster strategies also contribute to
generic, competitive advantage strategies (PepsiCo, 2020).
STRONGER: Since PepsiCo is already present and visible in global markets, they aim to use data analytics
to target emerging markets at a more granular level. Implementing Stronger strategies also includes
continuous improvement of organizational culture and implementing unified cost management policies.
In 2019, PepsiCo saw $1 billion in savings due to cost management policies and plan to continue with that
same savings goal through 2023 (PepsiCo, 2020). Cost minimization will occur as PepsiCo moves into
new markets while gaining efficiencies across supply chains (Ferguson, 2017). The Stronger strategies fit
under the scope of PepsiCo’s vision, but it is mostly through indirect means that it moves them toward
their mission.
BETTER: PepsiCo’s Better strategies, both long and short term, speak to the company’s purpose and
methods as they aim for their vision. They plan to improve global and regional food systems by investing
in farmer education and resources. Better strategic initiatives include environmental conservation and
improvement programs that are also in step with PepsiCo’s vision win through purpose (PepsiCo, 2020).
9.1 Evaluation of Business Strategies
A detailed table below, titled PepsiCo Strategy Analysis, outlines PepsiCo’s grand and intensive strategies
while indicating the corresponding hierarchy of objectives and strategy. The table also illustrates whether
the strategies contribute to PepsiCo’s competitive advantage and in what fashion each strategy is in
alignment with the mission or vision. Finally, the strategies are correlated with balanced scorecard
perspectives. The Faster, Stronger, Better framework is still used to categorize the grand and intensive
strategies (Pearce & Robinson, 2015).
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As we have identified, out of the 20 short- and long-term PepsiCo strategies: eight address internal
processes, two focus on financial perspectives, four reflect customer perspectives, and six address learning
and growth perspectives. Acknowledging that each strategy is not equally weighted, the heavy
consideration given to internal processes indicates that PepsiCo understands that organizational culture
and operations are a key component to their long-term success.
After reviewing PepsiCo’s strategies, we find that PepsiCo balances its goal of profitability by paying
attention to all four balanced scorecard perspectives: Financial, Customer, Internal Process, and Learning
& Growth. Recommendations will focus on more specific strategic objectives to support their welldeveloped long-term strategies.
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Mission: Create more smiles with every sip and every bite
Vison: Be the global leader in convenient foods and beverages by winning with purpose
PepsiCo Strategy Analysis
Long Term (Grand Strategy)
Ends
(What is to be
achieved?)
Vision
Balanced
Scorecard
Perspective
√√
√
√
indirect
direct
financial
√√
√√
√
√
direct
direct
customer
√
√√
√√
√
indirect
direct
customer
√
√√
√√
indirect
direct
internal
√
√√
√√
indirect
direct
learn & grow
√
√√
√√
indirect
direct
internal
√
√√
√√
direct
direct
customer
√
√√
√√
√
indirect
direct
internal
add manufacturing capacity
√
√√
√√
√
add new products
accelerate innovation
√
√√
√√
2: Stronger
3. Better
Board of Corp
Biz
Fx
Low Cost
Broad
Directors Mngers Mngers Mngers Leadership Differentiation Mission
√√
boost capabilities that will be
hard to match competitively
continuous improvement of
organizational culture
2: Stronger
Alignment
√
top line growth
grab market share
3: Better
Competitive Advantage
√
1: Faster
1. Faster
Short Term (Intensive Strategies)
Strategic Decision Makers
Means
(How is it to be achieved?)
build a more sustainable food
system
integrate purpose into all
strategy and brands
increase investment in global
ads
andmarket
marketing
expand
presence by
making improvements across
the supply chains
√
√
√√
√√
√
Achive "Precison of Scale"
using data-analytics
√
√√
√√
√
boost omnichannel capabilitites
√
√√
√√
The PepsiCo Way initiative
implement and maintain holistic
cost management
√
√√
√√
√
√√
√√
Sustainable Farming Program
√
√√
Positive Water Impact
√
Circular Future for Packaging
Promote diversity and equity
throughout the supply chains
Reduce greenhouse gases
√
direct
direct
internal
√
direct
direct
internal
√
indirect
direct
internal
indirect
direct
customer
√
direct
direct
internal
indirect
indirect
internal
indirect
direct
financial
√√
indirect
direct
learn & grow
√√
√√
indirect
direct
learn & grow
√√
√√
indirect
direct
learn & grow
√
√√
√√
indirect
direct
learn & grow
√
√√
√√
indirect
direct
learn & grow
√
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10.0 Recommendations
Since 2004, PepsiCo has the second market leader behind Coca-Cola in the beverage and food industries,
according to Statista. Their strategic plans have proven to be solid and successful over the years. With
that, there are no fears that the management team of PepsiCo has what it takes to move the company to
the next level. Even though as a group does not see a need for change in their strategic plans, we would
recommend the following strategy in addition to what is on the ground.
The first recommended strategy is to intensify marketing efforts to increase sales of healthy snacks and
food items. The world’s population is drifting towards consuming more healthy options on snacks and
drinks. Developed markets like the carbonated drink market have not only stagnated, but their short and
long-term outlook is not looking good either (Industry Market Research, 2020). We believe that future
growth for PepsiCo will come from intensifying efforts to develop and promote healthy products.
Short-Term objectives
•
Introduce healthier options of drinks and snacks into the market to cater to the ever-growing healthconscious population.
•
Evaluate existing healthy products to determine if ingredients or receipt needs to be changed to
better suit the healthy option purpose.
•
Inclusion of caloric and energy labeling on all products to promote openness.
Long-term objectives include.
•
Brand repositioning to change consumer perspective of PepsiCo from a general unhealthy drink
company to a company that cares about the health of their consumers.
•
Sustainable Increase in both market share and profit from the healthy drink and snack market.
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Secondly, PepsiCo should focus on getting more market share in emerging and developing countries.
Such markets are not as saturated as it is in the United States giving PepsiCo an opportunity for future
growth. Even though PepsiCo has an international presence, it is not as much its major competitor CocaCola who had taken advantage of building a global network for themselves. In 2005, PepsiCo’s
international sales spiked by 15% because of expanding the distribution of Gatorade sports drinks in China
coupled with increased promotions for their Mirinda brand in Argentina (PepsiCo Earnings Rise as
Overseas Sales Surge, 2005). Examples like this show that the international markets are growth drivers,
and how important it is to pursue merging and developing economies for sustainable growth.
Short-term objectives
•
Launching a market campaign in unsaturated economies like countries in Africa and Asia and
other big emerging markets (BEM), to capture market share in those areas.
•
Strengthen the distribution processes in the mentioned economies to increase both product
availability and accessibility.
Long term Objectives
•
PepsiCo should open research centers in identified regions to make snacks and drinks that suit the
local population of the region. This purposed at boosting regional sales, increase customer loyalty,
and increase brand presence.
Increasing social Benefits by extending help to communities in need. Examples of the project may include
water purification for villages in Africa.
Thirdly, PepsiCo should encourage the initiation of new cost-saving efforts to make the company leaner
and more attractive to investors. For PepsiCo to increase its overall competitiveness in the beverage and
food industry it must find ways to reduce operational costs, reduce prices, and give promotion offers from
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a marketing standpoint. Also, cost savings initiatives within an organization improve the company’s
balance sheet and income statement.
Short-Term Objectives
•
Encourage cost-saving initiatives and increased efficiency across manufacturing facilities,
distribution centers, procurements, and sales.
•
Imbibe a lean culture across the company at large
Long-Term Objectives
•
Invest in research and development in PepsiCo’s sustainability plans.
11.0 Benefits, Risks, and Issues of Implementation.
The world we live in today is characterized by strong competition. To be successful, an organization must
continually research and develop innovative products. In the case of PepsiCo, their strategy has and will
continue to increase the product value proposition. Benefits of pursuing our team’s recommendations
include Increased diversification which contributes to the company’s designation and power to meet the
always-changing customer needs by producing innovative products that differentiate it from traditional
drinks. It also contributes to long-term growth where the sales and consumption of carbonated drinks have
declined. With these recommended strategies, PepsiCo can also establish a presence in new regions,
penetrate the market, then innovate and introduce new products into these emerging markets. Furthermore,
they can increase sales, decrease prices through economies of scale, and attract more consumers because
of its competitive pricing (Pratap, 2019).
With any strategy, there will be inherent and spontaneous risks. Recent trends in the consumer-spending
environment in the United States coupled with rising raw material costs raise concern. According to an
article on marketing charts, Half of US consumers are sending less money. Indeed, Covid 19 has not only
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slowed down marketing in general but also the dynamics of consumer spending. Such factors hinder the
continuous implementation of a grand strategy. Besides, PepsiCo faces competition from Coca-Cola
Company that has the highest market share on Carbonated drinks in and outside the united states (RiskReward Balanced at PepsiCo, 2012). In a competitive environment like the soft drink industry, many costsaving initiatives in alignment with a cost leadership strategy could easily be duplicated (Pearce, 2015).
Even though Cost-cutting initiatives are positive steps towards a company’s development, it does come
with its disadvantages. Sometimes, while companies are focused on cost reduction, they might be
shortsighted towards it affecting product quality and in turn affect the company’s brand value and longterm vision (Bhasin, 2019). We warn against short-sightedness, becoming too busy chasing new markets
that it neglects its existing market. Such situating might lead to damaging brand name and reputation.
PepsiCo must continually uphold it standard both in existing and new markets in the areas of customer
service, organizational culture, and their external partners.
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