Balanced Scorecard Case Study
1. History
In 1965: PepsiCo, Inc. is founded by Donald M. Kendall, President and CEO of Pepsi-Cola and
Herman W. Lay, Chairman and CEO of Frito-Lay, through the merger:
1. Pepsi-Cola In 1898: Caleb Bradham, a New Bern, North Carolina, pharmacist, created
"Brad's Drink," a carbonated soft drink he created to serve his drugstore's fountain
customers.
2. Frito Company
3. H. W. Lay Company
The Major products of the companies are:
 Pepsi-Cola Company
 Fritos brand corn chips, Lay's brand potato chips, Cheetos brand cheese flavored
snacks, Ruffles brand potato chips, Rold Gold brand pretzels.
 Mountain Dew
2. Growth
1966:
Doritos is introduced
Pepsi enters Japan and Eastern Europe.
1970:
PepsiCo moves from New York City to new world headquarters in Purchase, N.Y
Pepsi is the first company to respond to consumer preference with lightweight,
recyclable, plastic bottles.
1977:
PepsiCo acquires Pizza Hut, Inc
1978
Taco Bell
1980:
PepsiCo Food Service International (PFSI) is formed to focus on overseas
development of restaurants.
1982: Pepsi Free and Diet Pepsi Free, the first major brand caffeine-free colas, are
introduced.
Inauguration of the first Pepsi-Cola operation in China.
1985:
PepsiCo is now the largest company in the beverage industry. The company has
revenues of more than $7.5 billion, more than 137,000 employees.
Pepsi-Cola products are available in nearly 150 countries and territories around the
world. Snack food operations are in 10 international markets.
1986:
PepsiCo purchases 7Up International, the third largest franchise soft drink
operation outside the United States.
1993:
Pepsi-Cola introduces Aquafina bottled water into test market.
1996:
Pepsi-Cola launches Pepsi World at www.pepsiworld.com
1
3. Global
Pepsi products are in almost 200 countries throughout the world. There are 22 different
brand lines that account for at least $1 billion per year per brand
In 2009
 Celebrated 75 years in Canada
 Was on the “Best Food for Women” list in Women’s Health magazine
 Began a partnership with the NFL
 Won U.S. EPA SmartWay Environmental Excellence award
 Became official beverage of Norwegian Cruise Lines
4. Mission Statement
Our mission is to be the world's premier consumer products company focused on convenient
foods and beverages. We seek to produce financial rewards to investors as we provide
opportunities for growth and enrichment to our employees, our business partners and the
communities in which we operate. And in everything we do, we strive for honesty, fairness
and integrity.
5. Vision Statement
PepsiCo's responsibility is to continually improve all aspects of the world in which we operate
- environment, social, economic - creating a better tomorrow than today."
Our vision is put into action through programs and a focus on environmental stewardship,
activities to benefit society, and a commitment to build shareholder value by making PepsiCo
a truly sustainable company.
6. Proposed mission
Our mission is to be the world's premier consumer products company focused on convenient
foods and beverages through stores as well as our website. (1,2.3,4) We seek to produce
financial rewards to investors as we provide opportunities for growth and enrichment to our
employees, our business partners and the communities in which we operate. (5,8,9) And in
everything we do, we strive for honesty, fairness and integrity. (6,7)
1.
2.
3.
4.
5.
6.
7.
8.
9.
Customer
Products or Services
Markets
Technology
Concern for survival, profitability, and growth
Philosophy
Self-Concept
Concern for public image
Concern for employees
10. Proposed Vision
PepsiCo, in association with smaller brands, offers a wide variety of products from beverages
to snacks at low cost.
2
11. External Assessment
11.1.
Opportunities
1. Opening in market for less costly products
2. Growth opportunities in developed countries as well as international nonestablished
countries
3. Pepsi recently reacquired ownership of its two largest bottlers, Pepsi Bottling Group
(PBG) and PepsiAmericas (PAS)
4. Compete in more than one industry (non-alcoholic beverage industry, the salty or
savory snack food industry, and the breakfast food industry)
5. Growth in the carbonated drink market is the largest in Asia and Europe
6. The world's demand is experiencing a growth with the sports drinks, bottled water,
and energy drinks
11.2.
Threats
1. Fierce competition from Coca-Cola, which owns the largest piece of the market share
2. The downturn in economy, which lead customers to shift away from bottles of water
to tap water.
3. Because of the recession, customers are finding cheaper alternatives to the national
brands.
4. Customers are getting more conscious and concerned about their eating habits and
general health.
5. Campaign against plastic containers has impacted the sale of bottled beverages
6. Highly dependent on supplies of clean water, to prevent contamination
11.3.
Market share
6%
14%
PepsiCo
Coca-Cola
Others
80%
3
11.4.
Revenue distribution
11.5.
Stock price history
12. Internal Assessment
12.1.
Strenghts
1. Strong brand equity
2. Well-known worldwide
3. Innovating company
4. Ethical, socially responsible, and sustainable company
5. Strong advertising company with more than 40 slogans and songs
6. PepsiCo as the largest part of the market share after Coca-Cola
4
7. PepsiCo owns a wide variety of smaller brands which able them to offer a large
product range from beverages to snacks
12.2.
Weaknesses
1.PepsiCo production is really expansive because of the need to constantly develop
new products to meet the changing customers demands
2. PepsiCo is experiencing a lack of focus towards Pepsi sodas
3. PepsiCo is experiencing product recalls
4. PepsiCo has a low employment productivity and a weak distribution
5. PepsiCo depends too much on the US market
6. PepsiCo is far behind Coca-Cola in the international market
12.3.
Income statement
(in millions except per share amounts)
Net Revenue
Cost of sales
Selling, general and administrative expenses
Amortization of intangible assets
Operating Profit
Bottling equity income
Interest expense
Interest income
Income before Income Taxes
Provision for Income Taxes
Net Income
Less: Net income attributable to noncontrolling
interests
Net Income Attributable to PepsiCo
Net Income Attributable to PepsiCo per Common
Share
Basic
Diluted
5
2009
$43,232.00
$20,099.00
$15,026.00
$63.00
$8,044.00
$365.00
($397.00)
$67.00
$8,079.00
$2,100.00
$5,979.00
$33.00
$5,946.00
$3.81
$3.77
12.4.
Balance Sheet
(In millions except per share amounts)
Assets
Current Assets
Cash and cash equivalents
Short-term investments
Accounts and notes receivable, net
Inventories
Prepaid expenses and other current assets
Total Current Assets
Property, Plant and Equipment, net
Amortizable Intangible Assets, net
Goodwill
Other nonamortizable itangible assets
Nonamortizable Intangible Assets
Investments in Noncontrolled Affiliates
Other Assets
Total Assets
Liabilities and Equity
Current Liabilities
Short-term obligations
Accounts payable and other current liabilities
Income taxes Payable
Total Current Liabilities
Long-Term Debt Obligations
Other Liabilities
Deferred Income Taxes
Total Liabilities
Commitments and Contigencies
Preferred Stock, no par value
Repurchased Preferred Stock
PepsiCo Common Shareholders' Equity
Common stock, par value 1 2/3 cents per share
(authorized 3,600 shares, issued 1,782 shares)
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
Repurchased common stock, at cost (217 and 229
shares,respectively)
Total PepsiCo Common Shareholders' Equity
Noncontrolling interests
Total Equity
Total Liabilities and Equity
2009
$ 3,943.00
$
192.00
$ 4,624.00
$ 2,618.00
$ 1,194.00
$ 12,571.00
$ 12,671.00
$
841.00
$ 6,534.00
$ 1,782.00
$ 8,316.00
$ 4,484.00
$
965.00
$ 39,848.00
$
464.00
$ 8,127.00
$
165.00
$ 8,756.00
$ 7,400.00
$ 5,591.00
$
659.00
$ 22,406.00
$
$
41.00
(145.00)
$
30.00
$
250.00
$ 33,805.00
$ (3,794.00)
$ (13,383.00)
$ 16,908.00
$
638.00
$ 17,442.00
$ 39,848.00
13. Strategy


Market development is a strategy that PepsiCo should apply by expanding in countries
that not already established
Use forward integration to acquire smaller companies in foreign markets to increase
their market share
6

Product development and related diversification should also be considered while
trying to produce and distribute healthier products
13.1.



In the next 3 years, PepsiCo should acquire 3 brands per year in an international
marketplace
 One of these 3 brands per year must be healthy
Increase production and distribution of carbonated drinks in Asian and European
countries
PepsiCo will expand into Africa to make use of the international market they are not
part of
13.2.





Objectives
Spend $15 million on a healthier more eco-friendly beverage brand in an already
established country
Spend $15 million on a healthier more eco-friendly snack brand in an already
established country
Spend $10 million to acquire a smaller brand in Africa
Increase our revenues by 5% in 2010
Start our own environmental cause fund with $1 million
13.3.




Recommendation
Assumption
Spend $40 million to acquire new brands
Spend $1 million to start an environmental cause group
Revenue increase of 5%
Decrease short-term and long-term debt by using some of our cash and cash
equivalents as well as retained earnings
Questions:
Develop the Strategy Map and the Balanced Scorecard for the PepsiCo
7