Pepsi co strategic management

STRATEGIC MANAGEMENT VIEW ON PEPSI CO COMPANY

• GROUP (7)

• Mr P Rajarajan MBA/003• Dr M I Siraj MBA/010• Mr C David MBA/014 • Mr HRC Sampath PDM/004• Ms Moh Moh Lwin PDM/006

CONTENTS1. Company Profile2. Product Profile3. Organizational Structure

a. Environmental Scanningb. Formulation of Strategiesc. Implementation ( Both Successful and

Failure stories)d. Evaluation

4. Summary

(1) Company ProfilePepsiCo is a global food and beverage corporation based in New York. Founded in 1965.Doing business in more than 200 countriesThe company generated 66 billion in revenue in 2013 and has more than 274,000 employees worldwide. ( 2013 Annual Report)

During 2012 alone PepsiCo paid USD 6.5 billion to shareholders through share purchases and dividends, increased management operating cash flow to USD 7.4 billion, and achieved 28% core return on capital employed (ROE) (Annual Report, 2012).

The company maintains several research and development centers in the USA, as well as, globally in Shanghai, Hamburg, and Monterrey.

VISION

“Performance with Purpose”

MISSION As one of the largest food and beverage

companies in the world, our mission is 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.

We are committed to investing in our people, our company and the communities where we operate to help position the company for long-term, sustainable growth.

GUIDING PRINCIPLES To advance our mission and vision with

honesty, fairness and integrity, we are committed to six guiding principles. When conducting business around the world, we must always strive to:

1. CARE FOR OUR CUSTOMERS, OUR CONSUMERS AND THE WORLD WE LIVE IN. We are driven by the intense, competitive spirit of the marketplace, but we direct this spirit toward solutions that benefit both our company and our constituents. We see our success as inextricably linked to that of our customers, consumers and communities.

2. SELL ONLY PRODUCTS WE CAN BE PROUD OF. The true test of our standards is our own

consumption and endorsement of the products we sell. Without reservation. Our confidence helps ensure the quality of our products, from the moment we purchase ingredients to the moment it reaches the consumer's hand.

3. SPEAK WITH TRUTH AND CANDOR. We tell the whole story, not just what's

convenient to our individual goals. In addition to being clear, honest and accurate, we are responsible for ensuring our communications are understood

4. WIN WITH DIVERSITY AND INCLUSION. We embrace people with diverse

backgrounds, traits and ways of thinking. Our diversity brings new perspectives into the workplace and encourages innovation, as well as the ability to identify new market opportunities.

5. BALANCE SHORT-TERM AND LONG-TERM In every decision, we weigh both short-term

and long-term risks and benefits. Maintaining this balance helps sustain our growth and ensures our ideas and solutions are relevant both now and in the future

6. RESPECT OTHERS AND SUCCEED TOGETHER.

Our mutual success depends on mutual respect, inside and outside the company. It requires people who are capable of working together as part of a team or informal collaboration.

While our company is built on individual excellence, we also recognize the importance and value of teamwork in turning our goals into accomplishments.

CORE VALUE

“Our values and philosophy are a reflection of the socially and environmentally responsible company we aspire to be. We are the foundation for every business decision we make.”

COMPANIES

PepsiCo companies1.Pepsi-Cola 2.Gatorade 3.Quaker 4.Frito Lay 5.Tropicana

2. PRODUCT PROFILE 1. Pepsi-Cola Brands, Pepsi ,Caffeine Free

Pepsi, Diet Pepsi etc ( Series of Pepsi)2. Frito Lay Brands, Lay's potato chips , Lays

Kettle Cooked potato chips, Wavy Lay's potato chips, Baked Lay's potato crisps ,etc

3. Gatorade Brands, Gatorade X-Factor Thirst Quencher, Gatorade Fierce Thirst Quencher, Propel Fitness Water

4. Tropicana Brands, Tropicana Pure Premium juices, Tropicana Twister juice drinks, Tropicana Smoothies, Tropicana Pure Tropics juices.

5. Quaker Brands, Quaker Oatmeal, Quaker Instant Oatmeal, Quaker Oatmeal Breakfast Squares, Cap‘n Crunch cereal, Life cereal 

3. ORGANIZATIONAL STRUCTURE PepsiCo has come a long way from

Pepsi being its primary product and source of revenue.

The company has four units: PepsiCo Americas Food (PAF)PepsiCo Americas Beverages (PAB)PepsiCo Europe PepsiCo Asia

These four business units handle the company's business endeavours in different regions of the world.

Environmental Scanning

ENVIRONMENTAL SCANNING Internal Environment

Resources Structure Culture

External Environment Task Environment

Industry Analysis- PORTER’s 5 Forces Model Societal Environment

PESTEL Analysis

INTERNAL ENVIRONMENT

STRENGTHS1. Strong brand equity 2. Well-known worldwide3. Innovating company – Strong top management4. Ethical, socially responsible, and sustainable

company5. Strong advertising company with more than 40

slogans and songs6. PepsiCo as the largest part of the market share

after Coca-Cola7. PepsiCo owns a wide variety of smaller brands

which able them to offer a large product range from beverages to snacks.

8. Invest more on R & D

WEAKNESSES1. 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 recalls4. PepsiCo has a low employment productivity

and a weak distribution5. PepsiCo depends too much on the US market6. PepsiCo is far behind Coca-Cola in the

international market

IFAS TABLEInternal 1 to 4 1 to 4StrengthsStrong brand equity   0.12 4 0.48 4 0.48

Well known worldwide 0.06 3 0.18 4 0.24

PepsiCo owns a wide variety of smaller brands which able them to offer a large product range from beverages to snacks 0.08 4 0.32 2 0.16

Innovating company 0.08 4 0.32 4 0.32

Ethical, socially responsible, and sustainable company 0.05 2 0.1 3 0.15

Strong advertising company with more than 40 slogans and songs 0.07 3 0.21 3 0.21

PepsiCo as the largest part of the market share after Coca-Cola 0.06 4 0.24 3 0.18Weaknesses: 0 0PepsiCo production is really expensive because of the need to constantly develop new products to meet the changing costumers demands 0.05 1 0.05 2 0.1

PepsiCo is experiencing a lack of focus towards Pepsi 0.06 0 0

PepsiCo is experiencing product recalls 0.12 1 0.12 1 0.12

PepsiCo has low employment productivity and a weak distribution 0.08 1 0.08 1 0.08

PepsiCo depends too much on the US market 0.08 2 0.16 1 0.08

PepsiCo is far behind Coca-Cola in the international market 0.09 2 0.18 1 0.091

4.68 4.96

EXTERNAL ENVIRONMENT

INDUSTRY ANALYSIS – TASK ENVIRONMENT

THREAT OF NEW ENTRANTS - LOW PepsiCo is well established and have Pepsi

Bottling Group Have brand equity Loyal customers Need huge investment for R&D facilities, high

tech machineries Must have lots of market experience in the

same industry Good distribution channel

THREAT OF SUBSTITUTES Not a great deal for PepsiCo Consumers preference is the taste more than

the cost Not many carbonated drink having the same

taste as Pepsi other than Coco-Cola Loyal customers

BARGAINING POWER OF BUYERS Not so significant even though low switching

cost Monetary cost is not the issue Consumer preference is the taste Convenience of the vending machine

BARGAINING POWER OF THE SUPPLIERS Low

Many raw materials supplier like fruit and other ingredients

PepsiCo partner ship with farmers and community groups, ensuring quality supply

For bottling and metal can, they make use 40% share of PBG.

Only problem may rely on bad harvesting season due to climate change

Fuel oil crisis

COMPETITIVE RIVALRY WITHIN INDUSTRY Moderate to strong Pepsi is not no 1 in beverage market Pepsi is still need to compete with Coca-Cola Pepsi is new in food market Pepsi need to compete to big players like

Nestle and Craf

SOCIETAL ENVIRONMENT ANALYSIS-PESTEL Political

Pepsi is trying to get underdeveloped market They have to consider government taxation policy,

environmental law regulations for both side The various businesses of Pepsi are also subject to state, local

and foreign laws. The international businesses are subject to the Government stability in the countries where PepsiCo is trying get into (underdeveloped markets).

Economic It rely on trucks for transportation Fuel price fluctuation is one of the important aspect Economic crisis will also to labor supplier and consumer’s

purchasing power

SOCIETAL ENVIRONMENT ANALYSIS-PESTEL Social

Population on young consumers Changes in life style Social trend and demand People want to be healthy

Technology Awareness on new machine launching Advance technology automation, will affect

production efficiency R&D facilities.

SOCIETAL ENVIRONMENT ANALYSIS-PESTEL Environmental

Some Environmental issues like Water Contamination

Legal global political change that also creates problem

or hurdles for the company.( Pakistan) Many different markets across the world follow

different set of regulations, which are either relaxed or severe.

OPPORTUNITIES1. Opening in market for less costly products2. Growth opportunities in developed countries as

well as international non-established 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

THREATS1. Fierce competition from Coca-Cola, which owns

the largest piece of the market share2. 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

EFAS TABLE

Key factors Weight AS TAS AS TASExternal 1 to 4 1 to 4Opportunities:Provide less costly products 0.05 1 3 0.15

Improve presence in established countries and increase international market where they are not already settled 0.08 3 0.24 4 0.32

Pepsi recently reacquired ownership of its two largest bottlers, Pepsi Bottling Group (PBG) and PepsiAmericas (PAS) 0.05 0 0

Compete in more than one industry (non-alcoholic beverage industry, the salty or savory snack food industry, and the breakfast food industry) 0.13 4 0.52 3 0.39

Growth in the carbonated drink market is the largest in Asia and Europe 0.09 1 0.09 4 0.36

The world's demand is experiencing a growth with the sports drinks, bottled water, and energy drinks. 0.13 4 0.52 4 0.52Threats: 0 0Fierce competition from Coca-Cola, which owns the largest piece of the market share 0.12 3 0.36 3 0.36

The downturn in economy, which lead customers to shift away from bottles of water to tap water. 0.05 1 0.05 4 0.2

Because of the recession, customers are finding cheaper alternatives to the national brands. 0.1 1 0.1 4 0.4

Customers are getting more conscious and concerned about their eating habits and general health. 0.09 4 0.36 0

Campaign against plastic containers has impacted the sale of bottled beverages 0.05 0 1 0.05

Highly dependent on supplies of clean water, to prevent contamination 0.06 0 01

Innovate products with

healthier alternative

Improve international

segment

Mr.C.David MBA/010

STRATEGY FORMULATION

TOWS MATRIXSO Strategies ST Strategies WO Strategies WT Strategies

(O4, S1, S2, S6, S7) Continue to offer variety or product in various brands.

(O5, O2, S2) Expand and focus on the carbonated drinks and beverage segment in Asia and Europe.

(O6, O4, S6, S7) Respond to the growing demand of sports drinks, bottled water, and energy drinks by expanding product market.

(T1, S1, S2, S3, S8) Innovate Pepsi product line with something that is going to differentiate us from Coca-Cola.

(S1, S3, O4) Innovate products by offering healthier alternatives.

(T2, T3, S3) Offer more promotions or discounts to prevent sales from decreasing.

(T5, S1, S2, S4)

Develop more environmentally friendly containers.

(T6, S6) Support environmental issues, such as pollution, which causes water contamination.

(W2, W5, W6, O2, O5) Expand Pepsi sodas product in Europe and Asia.

(W1, O4, O6) Improve their sales in the beverage segment by responding to the increasing demand for sports drinks, bottled water, and energy drinks.

(W1, T2, T5) Adjust production of bottles with downturn in economy.

(W1, T3) Produce bigger size of bottles and sale them at the same price as the small one.

(W3, T6) Be responsible and cautious towards supplies of water.

(W1, W4, T6) Increase supply chain production by monitoring cautiously employees and improving workers training.

(W5, W6, T1) Increase presence in the international market.

CORPORATE STRATEGY Directional Strategy

Growth Strategy Merger Acquisition Strategic Alliances Concentration Strategy Diversification Strategy

Stability Strategy Pause/Proceed with Caution Strategy No-Change Strategy Profit Strategy

Retrenchment Strategy Turnaround Strategy Captive Company Strategy Sell-out/ Divestment Strategy Bankruptcy / Liquidation Strategy

Portfolio Strategy BCG Growth Share Matrix GE Business Screen Matrix

Parenting Strategy

CORPORATE STRATEGY Corporate level strategy revolves around asking, "What business are we

going to be in? What business should we abandon? What types of portfolio businesses should we hold?" Therefore a large corporation like Pepsi each quarter evaluates their portfolio businesses (whether it is in beverages, snacks or fast food). After viewing the performance of each, they decide to either cut activity in one or increase focus in one.

PepsiCo was US centric three years ago and it had a western “Push model” of business. To accelerate global growth PepsiCo restructured its food and beverages business in America so that it will include other region such as Canada, Mexico and Latin America.

To accelerate it more PepsiCo created sectors for PepsiCo Europe and PepsiCo Asia, Middle East and Africa along with the Americas Foods and Americas Beverages sectors. This helped in leading a new path of innovation and product development.

The acquisition of Quaker oats in last “August 2000” was a smart move of PepsiCo which enabled the synergies between both the companies. After the acquisition PepsiCo witnessed the growth of 14% in fiscal year 2001. The large product portfolio and distribution channels of Quaker helped PepsiCo to add more to its economies of scale.

PEPSICO CORPORATE STRATEGY The Strategic Planning is “the process of

determining an organisation’s primary objectives and adopting courses of action that will achieve these objectives” (Boone and Kurtz, 2013, p.39).

It plays a critical role in ensuring long-term growth of a business entity.

1. INTERNATIONAL MARKET EXPANSION STRATEGY THROUGH MERGERS AND ACQUISITIONS.

Advantages of gaining access to competencies and infrastructure, reducing direct costs and overheads and achieving organic growth.

Recently, PepsiCo has engaged in important mergers and acquisitions such as acquisition of juice and diary businesses Lebedyansky and Wimm-Bill-Dann in Russia, Lucky snacks and Mabel cookies in Brazil, and Dilexis cookies in Argentina.

2. FORMATION OF STRATEGIC ALLIANCES IN GLOBAL SCALE Strategic partnerships have been formed

with Tingyi in China in order to claim a share in growing beverage market in China.

Joint-venture with Tata in India to enhance drinking water manufacturing capabilities, and initiation of strategic partnership with Almarai in Saudi Arabia can be mentioned to illustrate PepsiCo’s adoption of strategic alliances as an integral part of the corporate strategy.

3. FOCUS ON EMERGING MARKETS The share of net revenues from developing

and emerging markets such as China, India, and Russia have been increased from 24% in 2006 to 35% in 2012 (Annual Report, 2012) through mergers and acquisitions and on the basis of formation of direct subsidiaries.

PepsiCo CEO IndraNooyi has publicly expressed commitments to further increase the level of presence of the company in emerging markets.

4. FOCUS ON ORGANISATIONAL CULTURE Being listed among the top 25 ‘World’s Best

Multinational Workplaces’ by the Great Place to Work Institute in 2012 can be interpreted as an indication of effective working culture within PepsiCo.

5. DEVELOPING AND PROMOTING THE IDEA OF ONE PEPSICO CEO has been striving to increase the level of

association of individual brands with PepsiCo company values and philosophy through promoting the idea of One PepsiCo.

This is meant to be facilitated through sharing supply-chain management and infrastructure, operational costs for many brands within PepsiCo portfolio have been decreased.

6. INNOVATION IN MARKETING INITIATIVES Cross-cultural differences in various markets

are taken into account when developing and delivering PepsiCo marketing messages.

For example, the marketing tagline of “Live for Now” associated with Pepsi brand has been modified as “Yalla Now” and “Oh Yes Abhi” for Middle East and Indian markets respectively taking into account cross-cultural differences associated with these markets.

7. FOCUS ON INCREASING CORE ORGANIC REVENUE Core organic revenue can be explained as a

type of revenue that is achieved through increasing the volume of production and sales.

PepsiCo core organic revenues were increased by 5% during 2012 (Annual Report, 2012) and the company strategic level management is committed to further increase the levels of core organic revenues through maintaining high quality standards and applying effective marketing strategy.

GE BUSINESS SCREEN MATRIX

The EFETotal Weighted Scores

High 3.0 to 4.0

Medium 2.0 to 2.99

Low 1.0 to 1.99

Strong 3.0 to 4.0

Weak 1.0 to 1.99

The IFE Total Weighted scoresAverage 2.0

to 2.99

PepsiCo

ANSOFF MATRIX

BUSINESS LEVEL STRATEGY Competitive Strategy

Porter’s Competitive Strategy Price Based Strategies Differentiation Strategies The Hybrid Strategies Focused Differentiation Strategies Failure Strategies

Cooperative Strategy

BUSINESS LEVEL STRATEGIES PepsiCo engages in a low-cost-differentiation

strategy by taking advantage of economies of scale through mass production of its products and by differing their products through taste and marketing.

FUNCTIONAL LEVEL STRATEGY Marketing Strategies

Product Price Place Promotion

Financial Strategies Research and Development Strategies Operational Strategies Purchasing Strategies HRM Strategies Information system Strategies

FUNCTIONAL LEVEL STRATEGY

As a company PepsiCo has tremendous opportunities and to capitalize on them PepsiCo depends on talent of its associates and executive leadership. Therefore talent sustainability is their main motto. Through this investment in people they help them in succeeding and developing the skill that are required to move ahead and to sustain PepsiCo long term growth.

Dr. M.I.Siraj MBA/010

IMPLEMENTATION

STRATEGY IMPLEMENTATION Programs Budgets Procedures

HISTORY STONES

HISTORY The Pepsi-Cola story

began in New Bern, North Carolina.

A pharmacist named Caleb Bradham operated a drug store and soda fountain.

He often experimented with exotic oils and fruit extracts hoping to make a soft drink that tasted good.

One of his creations became popular (1893) among the local patrons, which they called Brad’s Drink.

In 1898, the drink was renamed Pepsi-Cola.

The first known Pepsi-Cola newspaper advertisement appeared in 1902.

The ad proclaimed the health benefits of Pepsi-Cola.

In 1903, Bradham registered the Pepsi-Cola name with the United States Patent and Trademark Office.

That same year, the Pepsi-Cola script was used in a newspaper ad for the first time.

Early in the 20th century, major advancements in the soft drink industry made bottling a viable alternative to fountain drinks.

In 1905, Pepsi-Cola was made available in bottles

To take advantage of this new market, Bradham began offering bottling franchises.

By 1909, there were 250 Pepsi-Cola bottlers in 24 states.

The Pure Food and Drug Act was adopted in 1906.

The new law forced many soft drink manufacturers to change their formula.

The Pepsi-Cola formula met the new requirements and did not need to be altered.

Between 1905 and 1910, the Pepsi-Cola Company experienced phenomenal growth and profits.

These profits were used to improve Pepsi-Cola advertising.

In 1908, famous race car driver, Barney Oldfield became the first celebrity endorser for Pepsi-Cola.

Unfortunately, the amazing growth experienced by the Pepsi-Cola Company during the early 1900’s came to an abrupt halt with the onset of World War I. With the war came price controls and sugar rationing.

By the end of World War I, the Pepsi-Cola Company was in dire financial straights.

The conditions were made worse by an unstable sugar market.

By 1923, the Pepsi-Cola Company was bankrupt.

Roy Megargel, a wall street financier, headed a group of investers that purchased the Pepsi-Cola trademark and formula from the bankruptcy.

In 1923, Pepsi-Cola headquarters moved to Richmond, Virginia, where Megargel tried to revive the Pepsi-Cola Company.

By 1929, there was a glimmer of hope within the Pepsi-Cola Company.

That ended in October of 1929, when the stock market crashed and the country plunged into the great Depression.

Again bankrupt.

Mr Charles Guth, President of Loft Candies.

Loft operated a chain of candy stores in the New York etropolitan area that dispensed Coca-Cola at their soda fountains.

Guth wanted a volume discount from the Coca-Cola Company.

Coke refused. Guth would not take

no for an answer.

Aware that Pepsi-Cola was bankrupt, Guth made an agreement with Megargel to buy the Pepsi-Cola trademark and formula.

In August of 1931, Guth formed a new Pepsi-Cola Company, and replaced Coca-Cola in all the Loft stores.

Immediately, the Coca-Cola company filed law suits against Loft and Pepsi-Cola for substitution occurs when the drink ordered is replaces by another drink without the customer’s knowledge.

He offered pepsi-Cola in bottles rather than glasses.

12-ounce bottle sold for 10 cents with clear trademark on bottles.

The results were disastrous. Consumers were used to paying 5 cents for a

soft drink regardless of the size. Therefore, Guth changed the price of the 12-

ounce bottle from 10 cents to 5 cents. Sales skyrocketed.

To keep cost down, Guth purchased used beer bottles. He was able to buy them for a penny each.

He decided to market Pepsi-Cola nationwide.

Initially, he used distributors, but he soon realized he needed a network of bottlers across the United States.

He hired territorial representatives who proceeded to sign up bottlers throughout the country.

Qualified individuals were given the opportunity to become Pepsi-Cola bottlers for the sum of $315.

For their investment, a new bottler received one unit of concentrate and enough crowns and labels to produce 1200 cases of Pepsi-Cola.

Between 1934 and 1939, over 350 Pepsi-Cola Bottling franchises were issued.

Sales were booming.

Pepsi-Cola bottlers operated on a smaller profit margin than their competitors.

The key to their success was increased volume.

In 1939, Pepsi-Cola made a concerted effort to develop the take home market to increase volume.

That same year, Walter Mack became president of the Pepsi-Cola Company.

Mack’s top priority was Pepsi-Cola advertising.

Pepsi-Cola signed an exclusive agreement with a skywriting company to write the Pepsi- Cola name in the sky.

At that time, the use of skywriting for advertising was unheard of.

Because of this, every time the Pepsi-Cola name appeared in the sky, it made the news in the local papers.

One of Mack’s big ideas for advertising Pepsi-Cola was to use Popeye.

Instead of eating spinach for his strength, Popeye would drink Pepsi-Cola.

The asking price for the rights to use Popeye was more than Pepsi-Cola could afford.

Instead, they came up with Pepsi and Pete, the Pepsi-Cola cops.

Pepsi and Pete ran in the Sunday comics from 1939 to 1951.

An ad agency presented Mack with a radio commercial that was 45 seconds of spoken word, and 15 seconds of a jingle.

Mack did not like the spoken part of the commercial, but he loved the jingle.

He asked the ad agency to trim the commercial down to the 15 second jingle.

The public loved it! The jingle was so

popular that it was installed in juke boxes – where people paid to listen to it.

As Pepsi-Cola’s popularity grow, Mack concerned that used beer bottles would have a negative impact on sales.

In 1940, he introduced their first standardized bottles.

On December 7th, 1941, Japan bombed Pearl Harbour.

The country was at war.

The government imposed rationing of strategic materials, including Sugar .

Pepsi-Cola bottlers were hit harder than Coca-Cola bottlers.

The rationing rules favored those in business in longer.

Pepsi-Cola was relatively a new company, their quotes were much lower.

In an effort to help the bottlers survive, Mack had the Pepsi-Cola company build a syrup plant in Maxico, so he could import syrup which contain sugar.

The syrup called El Masco, translated to “the Mask”.

That is exactly what Mack was doing masking the sugar as syrup.

This effort kept many bottlers operating during the war years.

In 1943, Pepsi-Cola decided to reenter the fountain business.

Because of the war, they were unable to get enough men and equipment to market fountain Pepsi-Cola.

They turned to the bottlers and offered them fountain franchise agreements.

In the summer of 1945, the war ended.

The US celebrated the victory, and the Pepsi-Cola Company prepared for the future.

They believed the worst was behind them, and were optimistic about their prospects.

However, post war inflation presented the Pepsi-Cola with a challenge they were not prepared for.

Consumers believed that a soft drink should cost 5 cents, despite the size.

But Pepsi-Cola bottlers were selling twice as much for the same price.

As post war inflation drove up the cost of raw materials, the small margin that Pepsi-Cola bottlers operated on was being decimated.

Something had to give. Either they had to change the price, or change the size of the bottle.

Pepsi-Cola’s reputation was built on the “big nickel drink.”

Some bottlers opted to sell the 12-ounce bottle for 6 cents, while others decided to try to sell a 10-ounce bottle for a nickel.

The 10-ounce bottle was the same height as the 12-ounce bottle, but slimmer.

The 10-ounce bottle was a success for bottlers and consumers alike.

It still gave the consumers the big drink they wanted, and it gave the bottlers the profit they needed.

Mack wanted to sell Pepsi-Cola to everybody. He did not see color – he only saw

customers. He felt the African-American community was

a source of potential sales. He created advertising for this market

that was not demeaning or condescending.

Mr.HRC Sampath Bandara PDM/004

He recruited a sales force of African-American men to promote Pepsi-Cola within the African-American community.

This helped to break the color barrier in corporate America.

By 1949, Pepsi-Cola profits were almost non-existent.

The lack of profits and the internal battle over the price of the 12-ounce bottle caused many to lose confidence in Mack.

In 1950, Al Steele became president of the Pepsi-Cola Company.

Many believed that Steele was hired to dismantle the Pepsi-Cola Company.

The opposite was true. Steele was there to

transform Pepsi-Cola into a modern soft drink company.

The first thing he did was to update the trademark and reformulate Pepsi-Cola.

He believed that Pepsi-Cola was too sweet for the modern consumer.

In 1953, Pepsi-Cola introduced the advertising slogan, “The Light Refreshment.”

This referred to a new Pepsi-Cola formula that contained less sugar.

During the 1940’s, Pepsi-Cola had a reputation as a bargain-basement drink.

Steele hoped this new advertising would not only increase sales, but would improve the image of Pepsi-Cola.

One of the big problems Pepsi-Cola faced at this time was a lack of consistency.

The look of the Pepsi-Cola trucks, the uniform of its route salesmen, and the taste of the product were different depending on which part of the country you were in.

Steele set up standards for the look of the trucks and uniforms.

He employed mobile labs to travel around the country to test product quality.

In 1955, Steele married Hollywood legend, Joan Crawford.

Crawford brought some Hollywood glamour to the Pepsi-Cola Company.

Everywhere Steele and Crawford traveled, thousands of people would be there to see the businessman and the actress.

She was invited to the openings of new Pepsi-Cola bottling facilities.

When she cut the ribbon, scores of reporters were there to record the event.

To further enhance the new, modern image of Pepsi-Cola, the swirl bottle was introduced in 1958.

The success achieved by the Pepsi- Cola Company in the 1950’s was enormous.

Case sales increased by 182% between 1950 and 1959.

Teem was introduced in 1959, which gave Pepsi-Cola a lemon-lime drink.

Unfortunately, Steele passed away that same year.

Prosperity and mobility in the 1960’s began a trend among consumers for more convenient packaging.

Pepsi responded by authorizing contract canners to produce Pepsi-Cola.

Additionally, they began test marketing an assortment of sizes and styles of non-returnable glass bottles.

By the end of the decade, Pepsi and Pepsi bottlers began building their own canning facilities.

Don Kendall became president of the Pepsi-Cola Company in 1963.

Kendall’s service with the company made him uniquely qualified.

In 1947, he started in the fountain sales department.

Over the years, he held many different positions that brought him in contact with the bottlers.

He developed lasting relationships and a keen understanding of bottler issues.

When he became president, the bottlers knew they had a friend at headquarters.

The pivotal moment in Kendall’s career was when he was able to get the Russian premiere, Nikita Khrushchev, to sample Pepsi at the 1959 trade expo in Moscow.

In 1961, Pepsi decided to change the focus of their advertising from the product to the people that consumed it.

This philosophy inspired the “Come Alive! You’re in the Pepsi Generation” advertising in 1964.

This advertising campaign was loved by consumers and critics alike.

It completely captured the spirit of the baby boomer generation.

Shortly after the introduction of the Come Alive theme, many in the media identified baby boomers as the Pepsi Generation.

Prior to the 1960s, diet drinks were considered drinks for those with medical conditions.

In the early 1960s, some consumers decided they wanted sugar-free drinks.

Pepsi responded in 1963 with Diet Patio Cola.

Sales were disappointing. The funds for marketing Diet

Patio Cola were inadequate.

In 1964, Pepsi decided to change the name to Diet Pepsi.

That was the first time a major soft drink company used their brand name on a diet product.

By changing the name, Pepsi-Cola was able to advertise Pepsi and Diet Pepsi together.

ACQUISITION Many of Pepsi’s best ideas

come from their bottlers. Mountain Dew is one of those

great ideas. Mountain Dew was created by

Tip Corporation, with the help of Pepsi-Cola bottlers in North Carolina.

The bottlers needed a product to compete with Sun Drop.

Mountain Dew did that and more.

In 1964, Don Kendall made a deal with Tip Corporation to purchase Mountain Dew.

Miss.Moh Moh Lwin PDM/006

PEPSICO The idea to merge Frito-

Lay and Pepsi-Cola was the result of the friendship between Don Kendall and Herman Lay.

They had met at an industry tradeshow.

As their friendship grew, so did their desire to bring the two companies together.

MERGING In 1965, Pepsi-Cola

merged with Frito-Lay and became PepsiCo.

Wall Street called this “a marriage made in snack food heaven.”

The Pepsi Generation advertising continued throughout the 1970’s. In 1973, the slogan was “Join the Pepsi People Feel in’ Free.

Undoubtedly, the most memorable commercial of this campaign was “Puppies.”

The commercial that aired on television was not the commercial the advertising agency had planned.

During the shooting of the commercial, the little boy accidently spilled Pepsi on himself.

The puppies eagerly licked the spilled Pepsi off the boy, which caused the boy to giggle.

They rewrote the commercial to incorporate this scene and as they say, the rest is history.

PEPSI CHALLENGE. Dallas, Texas was a very tough market for Pepsi.

None of the advertising campaigns or promotions used by the local bottler increased sales.

With nothing to lose, their advertising agency suggested they try a taste test.

Consumers were asked to take the Pepsi Challenge. They were given unmarked cups of cola and then asked which one they preferred.

Overwhelmingly, the participants preferred Pepsi. The results were used in commercials. Sales shot up.

The program was so successful in Dallas that other Pepsi bottlers began to use the Pepsi Challenge.

By 1978, the entire country wanted to take the Pepsi Challenge.

ACQUISITION In 1977 PepsiCo acquires Pizza Hut, Inc In 1978 PepsiCo acquires Taco Bell In 1982 Inauguration of the first Pepsi-Cola

operation in China.

When Roger Enrico became president of Pepsi-Cola in 1983, he believed Pepsi’s advertising had lost its focus.

The Pepsi Generation advertising that started in 1963 had lost the magic.

Enrico asked Pepsi advertising guru, Alan Pottasch, to recreate the energy and magic of the original Pepsi Generation advertising.

ADVERTISING In 1984, “Pepsi-the Choice

of a New Generation” was introduced.

The new advertising campaign kicked off with the signing of Michael Jackson to appear in a Pepsi commercial.

Many believe that this was the tipping point that caused Coca-Cola to change their 100 year old formula.

ACQUISITION1986PepsiCo is listed on the Tokyo stock exchange.Pepsi-Cola acquires Mug Root Beer.PepsiCo purchases Kentucky Fried Chicken (KFC).

Roger Enrico became the CEO of PepsiCo in 1987.

Craig Weatherup was selected to replace him as president of the Pepsi-Cola Company.

Weatherup’s biggest challenge was the ever-increasing consumer desire for more choices of refreshment beverages.

1989PepsiCo acquires Walkers Crisps and Smith Crisps, two of the United Kingdom's leading snack food companies.PepsiCo enters the top 25 of the Fortune 500 rankingDuring the 1990s, Pepsi-Co expanded its business outside its primary brands. 

JOINT VENTURE In 1991, Weatherup set Pepsi

on a course to become a total beverage company.

Pepsi-Cola forms a joint venture with Unilever to develop and market tea-based drinks.

He expanded the Pepsi portfolio to include waters, teas, and fruit drinks.

Currently, the Pepsi portfolio includes over 188 different beverages, and scores of sizes and styles of packaging.

GLOBAL MARKETING In 1994, Pepsi-Cola is the first major soft

drink maker to begin producing and distributing its product in Vietnam.

PepsiCo and Starbucks form the North American Coffee Partnership to jointly develop ready-to-drink coffee beverages

1997 Company and Brands like Pizza Hut, KFC,

Taco Bell, and Stolichnaya were all once a part of PepsiCo, but the company later sold some and spun off some into Tricon Global Restaurants.

The company purchased Tropicana Products in 1998.

The company also merged with Quaker Oats in 2001.

In 2003 Pepsi-Cola trademark turns 100 years old.

2006 Pepsi acquires IZZE Beverage Company. Indra Nooyi named chief executive officer of PepsiCo

In 2008 PepsiCo announces plans to invest US $1 billion in China over the next four years as part of the strategy to expand in emerging markets and broaden the portfolio of locally relevant products.

In 2009, PepsiCo and Calbee Foods Company announce a strategic alliance to make and sell a wide range of food products in Japan.

In 2013, Müller Quaker Dairy, a joint venture between PepsiCo and The Müller Group, open a new state-of-the-art yogurt manufacturing facility in Batavia, New York.

In 2014, Pepsi introduces Pepsi Spire, a portfolio of innovative fountain beverage dispensers. Consumers can create more than 1,000 customized beverages with the touch of a button.

In 2015, PepsiCo celebrates its 50th anniversary as a combined food and beverage company.

CORPORATE SOCIAL RESPONSIBILITY PepsiCo started PepsiCo Foundation as a

part of its Corporate Social Responsibility. The foundation's primary area of interest is

nutrition, safe water and water usages efficiency.

PepsiCo donated $27.9 million in the year 2009 for various causes.

The Factors behind success Sustained Growth is fundamental to

motivating and measuring the company’s success.

Empowered People means that Pepsi Cola has the freedom to act and think in ways that will get the job done.

Responsibility and Trust forms the foundation for healthy growth.

Pepsi Cola holds themselves both personally and corporately accountable for everything they do.

EVALUATION

BALANCED SCORECARD

Area of Objectives Measure of Target Time Expectation Primary Responsibility

Customers

1. Customer satisfaction Costumer Survey Webinars Quarterly Human Resources

Representatives 1. Improve production

efficiency Increase in production Biannually Supply chain

Operations

2. Offer employee trainings Employee surveys Production efficiency Yearly Human Resources

Community/ Social Responsibility

1. Eco-Friendly company

Increase in recyclable bottle Being involve in

more events regarding water contamination

Yearly CEO

2. Ethical Company

Number and success of charitable events UNICEF amount of

money donated

Yearly CEO

Operations/Processes

1. Innovation

New products

Product appearance Acquisition of new

brands

Yearly CEO

2. Brand expansion

Numbers of new countries entered

Number of sales in the International

Segment

Yearly CEO

Financial

1. Reduce cost of production Income Statement Quarterly Chief Financial Officer

2. Increase profitability Increase annual report Quarterly Chief Financial Officer

SUMMARY Today, Pepsi faces numerous challenges,

from health and wellness to government mandates.

Despite these issues, the future looks promising.

The Pepsi Spirit is alive and well. Through innovation and hard work, the Pepsi story continues.

REFERENCE Porter (1979), “How Competitive Forces Shape

Strategy,” Harvard Business Review. Thomas L. Wheelen, J. David Hunger(2011), “

Strategic Management and Business Policy”, 13th Edition.

http://www.pepsico.com/ The Pepsi- Cola Story by Bob Stoddard (2013)