InvestWrite Essay Nicholas Siodlarz Fry Elementary School, Naperville nd
National Award: 2 Place, grades 4‐5 Sharon Phares, Teacher “It’s the Cola”/”Dare for more PepsiCo (ticker symbol PEP) is a company in the snack food and beverage industry. It is a large company with a history of acquiring and selling off a number of companies; including Yum! Foods. They find their major competition in the beverage market from Coca‐Cola Company and the food and snacks, where Kraft Foods is a major competitor. PepsiCo stock is a long term investment for three main reasons. First, PepsiCo has amazing brand diversity. At the end of 2011, PepsiCo had TWENTY‐TWO billion dollar brands, including Pepsi, Lays, Mountain Dew, Gatorade, Tropicana, and Doritos. The company is split nearly 50/50 between beverage and food products. With such variety in products, the company is protected in case one or two of its brands fails. Not only is PepsiCo diverse in the United States, but the food and snack division has an impressive portfolio of major global brands, including Sabritas, a major Mexican snack producer owned by PepsiCo. The second reason PepsiCo is a good buy is because of the focus on a major expansion overseas, currently putting a lot of effort into building their business in Latin America, Asia, the Middle East, and Africa. Two examples include, opening a snack manufacturing plant in China and purchasing a major dairy and snack Food Company in Russia. The third reason PepsiCo is a good buy is that they are starting to shift to “better for you” types of products. They are putting a focus on, on‐the‐go food and drinks with healthier choices. This includes products like Pepsi NEXT, Baked Lays potato chips, Naked Juice, and many Quaker products. This has to do with the PepsiCo’s plans for the future as well as its dividend history. The CEO of PepsiCo, Indra Nooyi, has outlined steps the company is taking to grow stronger long term. Mainly, they involve marketing. They recently switched to a new company slogan known as “Live for Now”, meant to appeal to the younger generation and their desire to “capture the excitement of now”. They also signed musician Nicki Minaj as a spokesperson. Additionally, PepsiCo wants to double the revenue from its new products. An example of a recent highly successful new product is the Doritos Locos Tacos sold at Taco Bell. PepsiCo is also working to get its products sold in more locations, including restaurants such as Papa John’s Pizza. In addition to marketing, the company is striving to be smarter about spending and operating expenses. For these LONG TERM solutions, I think that PepsiCo would be a stock to buy as a long‐term investment. Finally, PepsiCo has an excellent record of raising dividends to shareholders. During the 20 year span from 1992‐2012, the company has shown an average yearly increase in dividend payout of 10.9% and is known as one of Fortune magazine’s most admired companies. With any investment, there are events that could cause the price of the stock to increase or decrease. An example of an event that could cause the price of PepsiCo stock to decrease would be a major recall due to a product that caused injury or death. If a batch of a snack or beverage owned by PepsiCo were infected with bacteria that made large numbers of people sick, it would have a big effect on sales. If sales significantly decrease and a company loses money, shareholders will sell stock and potential shareholders become reluctant to buy stock. This drives stock prices down. An example of an event that would cause the price of PepsiCo to increase would be the introduction of a new product that sells well‐‐‐‐such as the Doritos Locos Tacos earlier this year. Shareholders always hope for more successful new products and fewer product recalls! Playing the Stock Market Game, I learned how to compromise in teams because when we bought Whole Foods (WFM). Our team had a big debate where each member shared evidence and opinions whether to sell the stock or keep it. This helped us make informed decisions. I realized that we were not getting any work done until we took time to support our thinking with facts. We ended up keeping Whole Foods, but we always remember to stay as a team. 2012, Econ Illinois, Northern Illinois University, DeKalb, IL
877 – I DO ECON; Web: www.econed-il.org