Primary Question for PepsiCo
Can PepsiCo continue their strong
performance in the North America market,
and also strengthen their presence in
developing markets, while at the same time
responding to changes in consumers’
preferences?
Secondary Questions
•
•
•
What has PepsiCo done in the past to grow?
How is Pepsi structured and what are the relative
performances of those divisions?
How are those divisions performing in various markets?
•
How is Pepsico performing in the snack foods industry?
Keys to PepsiCo’s Success and Growth
Soft Drinks
Strategic
Acquisition
Complementary
Goods
Salty Snacks
Ability to
Build Strong
Brands
Strong
Relationships
with Retail
Partners
Growth
PepsiCo Growth
• PepsiCo’s growth strategy has been mainly
external focused.
– Several successful mergers and acquisitions over
the years.
• Adapting to changes in the external
environment are critical to sustainable
growth.
External Environment: PEST
Category
Political
Economic
Social
Technological
Threats/Opportunities
Ranking
(1-5)
FTC stipulations to merger of Quaker Oats
Threat- not allowing PepsiCo to
utilize Power of One Strategy
with Gatorade. May impact
their ability to acquire other
companies in future.
4
Rising incomes in BRIC countries
Opportunity – increase in
discretionary income will raise
spend on drinks and snacks
5
Change in customer preferences to healthier food and drink
options in developed countries
Threat to many of PepsiCo’s
existing products.
Opportunity for Quaker brands
and new product innovation
4
IT improvements in distribution network.
Opportunity – improved
relationships with retailers, less
chance of stock outs.
3
Issue
US Liquid Refreshment Market
Beverage
Share of Total
US Beverages
Volume Growth
Rate
Pepsi Brand
Pepsi Market
Share
Pepsi Market
Position
Carbonated Soft
Drinks
48%
-2.6%
Several
31.1%
#2 behind Coke
(41.6%)
Bottled Water
29%
6.9%
Aquafina
15%
#1
Fruit Beverages
13%
-3.3%
Tropicana
30%
#1, Coke Brand
Minute Maid #2
at 25%
Sports Drinks
4.4%
2.5%
Gatorade
76%
#1
RTD Tea/Coffee
3%
14.3%
Lipton and
Frappuccino
39.5%
#1, 4x Coke’s
Nestea
Enhanced
Water
1.7%
30.5%
Propel
40%
#1
Energy Drinks
1%
24.6%
SoBe
Negligible
Negligible (Red
Bull #1 at 40%)
Pepsi trailing Coke in large but negative growth carbonated soft drinks. Also little
presence in high growth energy drinks. Possibly look to acquire Red Bull.
Pepsi dominating in the rapidly growing non-carbonated beverage categories which
position it well in North American market as consumers look for healthier drink options.
PepsiCo International Markets
Country
Country/Region
Carbonated
Market Share
Salty Snack
Market Share
Carbonated
Soft Drinks
per month
Salty Snacks
per month
India
49%
46%
United States
60 servings
6.6 servings
Russia
24%
43%
Other
Developed
23 servings
4.0 servings
China
36%
16%
Brazil
N/A
46%
Developing
6 servings
Mexico
N/A
75%
0.4 servings
1. Great opportunity for growth in both developed and developing international
markets, especially Brazil and China. Strong market share in many today, with
exception of China
2. Pepsi should be focused on growing market share in China Salty Snacks,
predicted to be largest market by 2010.
3. Power of One strategy could play well in international markets.
Quaker Foods Brands
Weak International Sales
($500 million total, 75%
from 6 countries)
Strong sales
(over ½) in better-for-you
and good-for-you products
With exception of Gatorade, Quaker brands have limited success internationally.
Opportunity for growth in US and developed countries as consumers shift to
eating healthier.
Quaker Foods North America
Product
Volume
Growth Rate
Market Share
Market
Position
Quaker Oats
N/A
58%
#1
Quaker Ready
to Eat Cereal
Mid single
digits
14%
#3 behind
Kellogg’s (30%)
and General
Mills (26%)
Aunt Jemima
Slight decline
N/A
#1
Rice-A-Roni
Double digit
decline
33%
N/A
Many Quaker Foods brands have strong market share, but not
in the salty food or beverage markets. Majority of brands
compete in Ready to Eat Cereal space, against wellestablished competitors Kellogg’s and General Mills.
PepsiCo Organizational Structure 2007
PepsiCo Inc.
Frito Lay North
America (FLNA)
PepsiCo
Beverages North
America (PBNA)
Quaker Foods
North America
(QFNA)
PepsiCo
International (PI)
29% Net
Revenue
26% Net
Revenue
5% Net Revenue
40% Net
Revenue
36% Operating
Income
28% Operating
Income
7% Operating
Income
29% Operating
Income
28% Capital
Expenditures
20% Capital
Expenditures
2% Capital
Expenditures
50% Capital
Expenditures
22% Total Assets
24% Total Assets
3% Total Assets
50% Total Assets
PepsiCo after 2008 Realignment
PepsiCo Inc.
PepsiCo
Americas
Beverages
PepsiCo
Americas Foods
Frito Lay
North America
PepsiCo
International
UK and Europe
Quaker Foods
North America
Middle East
Latin America
Foods
Africa and Asia
Appears goal of realignment of divisions was to put more focus on
growth outside North America.
Question we have is did PepsiCo go far enough? Does not appear to
be much of a change.
Question Facing PepsiCo
DOES
NonCarbonated
Drinks
Healthy Snacks
Complementary
Goods
How is Pepsico Performing in the
Snack Foods Industry?
Salty Snack Food Industry – Key Trends
Convenience
• Due to these 3 key
industry trends, Pepsico
started developing new
flavors of salty snacks,
using healthier oils in
chips, & packaging
snacks in smaller bags.
•Pepsico should
differentiate its products
while staying committed
to the industry trends.
Indulgent Snacking
Growing Awareness
of nutritional content
Frito Lay’s Commitment to Industry Trends
• Eliminating trans fats &
acquiring Flat Earth showed
FLNA’s commitment to the
publics growing awareness of
nutritional content.
•Introduction of new chip
flavors was a commitment to
the indulgent snacking trend.
Acquired Flat Earth
(fruit & vegetable snacks)
Eliminated Trans Fats from popular chips
(Lays, Fritos, Cheetos, Doritos, etc.)
•Did these commitments to
industry trends help or hurt
Pepsico’s market share of
convenience food?
Introduced indulgent
Doritos & Sun Chips flavors.
U.S. Convenience Food Market Share
• Pepsico is the leading
manufacturer in the
market due to its
commitment to industry
trends.
•Their only close
competition seem to be
from Kraft Foods &
Hershey. But you cannot
count out the 37% of the
market that “other”
manufacturers currently
have.
21%
37%
12%
9%
Pepsico
Kraft Foods
Hershey
Kellogg
Master Foods
General Mills
P&G
Private Label
Others
Pepsico’s International Salty Snack Food Market Share
by Country
Country
2006 % of Market
Share
2010 Market
Sizes (projected)
Mexico
75
#4
Holland
59
South Africa
57
Australia
55
Brazil
46
India
46
United Kingdom
44
#3
Russia
43
#5
Spain
41
China
16
#1 or #2
#1 or #2
There is significant growth opportunity in international markets. Pepsico will
need focus on gaining more market share in the top 3 markets in 2010. They
will also benefit from an increase in servings per month in both developed and
developing international countries.