Pepsoco Project

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HIREN R. SANGHAVI

EFFECT OF 3 Ps ON THE REACH OF PEPSICO'S FOOD

PRODUCTS

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A PROJECT REPORT

ON

EFFECTS OF 3 Ps ON THE REACH OF PEPSICO'S FOOD PRODUCTS

PROJECT SUBMITTED IN FULFILMENT OF

POST GRADUATE DIPLOMA IN MANAGEMENT

SUBMITTED BY:

HIREN SANGHAVI

ROLL NO. 20

BATCH 2011-2013

UNDER THE GUIDANCE OF:

MR. RUDRESH AGASKAR

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DECLARATION

I, HIREN SANGHAVI, solemnly declare that the project work entitled, “EFFECT

OF 3 Ps ON THE REACH OF PEPSICO'S FOOD PRODUCTS”, is my original

work, it is neither copied from any earlier submitted work elsewhere or not merely

copied, this is specifically prepared as a part of PGDM curriculum, to be conducted in

Year 2012.

Signature of the student: ________________________

Name of the Student: HIREN SANGHAVI

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ACKNOLEDGEMENT

A heartfelt thank you to the Institute for Future Education, Entrepreneurship and Leadership, for

providing me with all the resources necessary for pursuing my 2 years full-time PGDM course.

I would like to thank the Institute's CEO & Dean, Dr. H.S. Cheema and Placement Cell Head, Mr.

Rudresh Agaskar for providing me this opportunity to intern with PepsiCo India Holdings Pvt. Ltd.

The special thank goes to Mr. Sachin Jadhav, CE, PepsiCo India Holdings Pvt. Ltd.. The supervision

and support given by him, truly helped the progression and smoothness of the internship program.

The co-operation is indeed appreciated.

My summer project's quality has appreciated, thanks to Prof. Deepa Dixit and Mr. Rudresh Agaskar

for their assistance, criticisms and encouragement.

Last, but not the least, I would like to thank my parents and sister. They were very supportive all

through the duration of my summer project. Their care, love and encouragement has nourished me

enough to seek continuous improvement in every endeavour I undertake.

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CERTIFICATE OF COMPLETION

HIREN SANGHAVI has successfully completed the summer project at PepsiCo India Holdings

Pvt. Ltd.., Frito Lays, Mumbai, for a period of two months from 28th May, 2012 to 28th July,

2012.

He has conducted a study entitled, "EFFECT OF 3 Ps ON THE REACH OF PEPSICO'S FOOD

PRODUCTS".

___________________ ______________

Name & Designation Department

Date:________________

Place:_______________

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CERTIFICATE

This is to certify that the project titled “EFFECT OF 3 Ps ON THE REACH OF PEPSICO'S

FOOD PRODUCTS”, has been successfully and satisfactorily completed and submitted by “Mr.

HIREN SANGHAVI” bearing a roll number, 20, as a student of Institute for Future Education,

Entrepreneurship & Leadership as prescribed by AICTE in fulfilment of the requirement for Post

Graduate Diploma in Management (PGDM) during the year 2011-13.

Mr. Rudresh Agaskar Dr. H.S. Cheema

Internal Guide CEO & Dean

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INDEX

SR. NO. TOPIC PAGE NO.

1. PEPSICO INTRODUCTION

LEADERSHIP PEPSICO LOGO EVOLUTION

MARKETING PEPSI-COLA ACQUISITION & DISINVESTMENT

PRODUCT PORTFOLIO PEPSICO: SWOT ANALYSIS

PEPSICO AT A GLANCE

9-10 11-13

14 15

16-18 19

20-21 22-23

24

2. PEPSICO INDIA 25-27

3. INTRODUCTION TO SNACKING INDUSTRY 28

4. TRENDS IN THE SNACKING INDUSTRY 29-32

5. SIZE OF THE SNACKING INDUSTRY 33-35

6. FRITO LAY 36-42

7. FRITO LAY INDIA 43-47

8. INTERNSHIP REPORT 48-73

9. CONCLUSION 74-76

10. BIBLIOGRAPHY 76-78

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GOOD TO KNOW?

Today, the brand "PEPSI" is worth $31.4 billion!

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INTRODUCTION

MISSION AND VISION

At PepsiCo, we believe being a responsible

corporate citizen is not only the right thing to

do, but the right thing to do for our business.

MISSION

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.

VISION

"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.

PERFORMANCE WITH PURPOSE

At PepsiCo, we're committed to achieving

business and financial success while leaving a

positive imprint on society - delivering what

we call Performance with Purpose.

Our approach to superior financial

performance is straightforward - drive

shareholder value. By addressing social and

environmental issues, we also deliver on our

purpose agenda, which consists of human,

environmental, and talent sustainability.

TYPE

PUBLIC

INDUSTRY

FOODS, BEVERAGES

FOUNDED

NORTH CAROLINA, U.S.

(1965)

FOUNDER(S)

DONALD KENDALL,

HERMAN LAY

HEADQUARTERS

PURCHASE, NEW YORK,

U.S.

CHAIRMAN & CEO

INDRA NOOYI

REVENUE

US$ 66.50 billion

OPERATING INCOME

US$ 9.63 billion

NET INCOME

US$ 6.46 billion

TOTAL ASSETS

US$ 62.88 billion

EMPLOYEES

297,000

DIVISIONS

PepsiCo Americas Foods,

PepsiCo Americas Beverages, PepsiCo

Europe, PepsiCo Asia, Middle East & Africa

(AMEA)

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PEPSICO VALUES & PHILOSOPHY

Our Values & Philosophy are a reflection of

the socially and environmentally responsible

company we aspire to be. They are the

foundation for every business decision we

make.

OUR COMMITMENT

We are committed to delivering sustained

growth through empowered people acting

responsibly and building trust.

WHAT IT MEANS

Sustained Growth is fundamental to

motivating and measuring our success. Our

quest for sustained growth stimulates

innovation, places a value on results, and helps

us understand whether today's actions will

contribute to our future. It is about the growth

of people and company performance. It

prioritizes both making a difference and

getting things done.

Empowered People means we have the

freedom to act and think in ways that we feel

will get the job done, while adhering to

processes that ensure proper governance and

being mindful of company needs beyond our

own.

Responsibility and Trust form the foundation

for healthy growth. We hold ourselves both

personally and corporately accountable for

everything we do. We must earn the

confidence others place in us as individuals

and as a company. By acting as good stewards

of the resources entrusted to us, we strengthen

that trust by walking the talk and following

through on our commitment to succeeding

together.

GUIDING PRINCIPLES

We uphold our commitment with six guiding

principles. 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. Our success

depends on a thorough understanding of our

customers, consumers and communities. To

foster this spirit of generosity, we go the extra

mile to show we care.

2. Sell only products we can be proud of.

The true test of our standards is our own

ability to consume and personally endorse 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 candour. 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. 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.

5. 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.

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.

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BOARD OF DIRECTORS

1.

Shona L. Brown Senior Vice President, google.org

of Google Inc.

2. Ian M. Cook Chairman, President and Chief

Executive Officer, Colgate-

Palmolive Company

3. Dina Dublon Former Executive Vice President

and Chief Financial Officer, JP

Morgan Chase & Co.

4. Victor J. Dzau, M.D. Chancellor for Health Affairs, Duke

University and President & CEO,

Duke University Health System

5. Ray L. Hunt Chairman of the Board, President

and Chief Executive Officer of

Hunt Consolidated, Inc.

6. Alberto Ibargüen President & Chief Executive

Officer, John S. and James L.

Knight Foundation

7. Indra K. Nooyi Chairman and Chief Executive

Officer, PepsiCo

8. Sharon Percy Rockefeller President & Chief Executive

Officer, WETA Public Stations

9. James J. Schiro Former Chief Executive Officer,

Zurich Financial Services

10. Lloyd Trotter Managing Partner, GenNx360

Capital Partners

11. Daniel Vasella Chairman of the Board, Novartis

AG

12. Alberto Weisser Chairman & Chief Executive

Officer, Bunge Limited

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LEADING PEPSICO

PepsiCo is a company full of strong, talented individuals starting with the company leadership. Get

to know the inspiring people helping lead PepsiCo on its 'Performance with Purpose' journey.

1.

Zein Abdalla Chief Executive Officer,

PepsiCo Europe

2. Saad Abdul-Latif Chief Executive Officer, PepsiCo

Asia, Middle East, Africa

3. Albert P. Carey Chief Executive Officer, PepsiCo

Americas Beverages

4. John Compton President, PepsiCo

5. Brian Cornell Chief Executive Officer,

PepsiCo Americas Foods

6. Indra K. Nooyi Chairman and Chief Executive

Officer, PepsiCo

1. A. Salman Amin SVP & Global Chief Marketing

Officer, PepsiCo

2. Rich Beck Senior Vice President, Global

Supply Chain Operations,

PepsiCo

3. Neil Campbell President, Tropicana Beverages

North America

4. Pamela Culpepper Senior Vice President, Global

Diversity and Inclusion Officer,

PepsiCo

5. Robert Dixon Senior Vice President and Chief

Information Officer, PepsiCo

6. Tom Greco President, Frito-Lay North America

7. Enderson Guimaraes President, Global Nutrition Group,

PepsiCo

8. Lorraine Chow Hansen President, Global Snacks,

PepsiCo

9. Brad Jakeman President, Global Beverages

Group, PepsiCo

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1. Hugh F. Johnston Executive Vice President and Chief Financial Officer,

PepsiCo

2. Dr. Mehmood Khan Executive Vice President, PepsiCo Chief Scientific

Officer, Global Research and Development

3. Tim Minges Chairman, PepsiCo Greater China Region

4. Luis Montoya President, Latin America Beverages, PepsiCo

5. Pedro Padierna President, PepsiCo Mexico

6. Jose Luis Prado President, Quaker Foods and Snacks North America,

PepsiCo

7. Grace Puma Senior Vice President & Chief Procurement Officer,

PepsiCo

8. Sarah Robb O'Hagan President, Gatorade and President, Global Sports

Nutrition Group of PepsiCo

9. Larry Thompson Executive Vice President, Government Affairs, General

Counsel and Corporate Secretary

10. Cynthia M. Trudell Executive Vice President, Human Resources and Chief

HR Officer, PepsiCo

11. Olivier Weber President, South America, Caribbean and Central

America Foods, PepsiCo

12. Jim Wilkinson Executive Vice President, Communications, PepsiCo

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PEPSICO

PepsiCo Inc. is an American multinational corporation headquartered in Purchase, New York, United

States, with interests in the manufacturing, marketing and distribution of grain-based snack foods,

beverages, and other products.

The recipe for Pepsi, the soft drink, was first developed in the 1890s by a New Bern, North Carolina

pharmacist and industrialist, Caleb Bradham, who named it "Pepsi-Cola" in 1898. As the cola

developed in popularity, he created the Pepsi-Cola Company in 1902 and registered a patent for his

recipe in 1903. The Pepsi-Cola Company was first incorporated in the state of Delaware in 1919. The

company went bankrupt in 1931 and on June 8 of that year the trademark and syrup recipe was

bought by Charles Guth who owned a syrup manufacturing business in Baltimore, Maryland. Guth

was also the president of Loft Incorporated, a leading candy manufacturer and used the company's

labs and chemists to reformulate the syrup. He further contracted to stock the soda in Loft's large

chain of candy shops and restaurants, which were known for their soda fountains, used Loft

resources to promote Pepsi, and moved the soda company to a location close by Loft's own facilities

in New York City. In 1935 the shareholders of Loft sued Guth for his 91% stake of PepsiCo in the

landmark case, Guth v. Loft Inc. . Loft won the suit and on May 29, 1941 formally absorbed Pepsi

into Loft, which was then rebranded as Pepsi Cola Company that same year. (Loft restaurants and

candy stores were spun off at this time.) In the early 1960s the company product line expanded with

the creation of Diet Pepsi and purchase of Mountain Dew.

Separately, the Frito Company and H.W. Lay & Company – two American potato and corn chip

snack manufacturers – began working together in 1945 with a licensing agreement allowing H.W.

Lay to distribute Fritos in the South-eastern United States. The companies merged to become Frito-

Lay, Inc. in 1961

PepsiCo. Inc. was formed in 1965 by Donald M. Kendall, President and Chief Executive Officer of

Pepsi-Cola and Herman W. Lay, Chairman and Chief Executive Officer of Frito-Lay, through the

merger of the two companies.

PepsiCo. has since expanded from its namesake product Pepsi to a broader range of food and

beverage brands, the largest of which include an acquisition of Tropicana in 1998 and a merger with

Quaker Oats in 2001—which added the Gatorade brand to its portfolio.

As of January 2012, 22 of PepsiCo's product lines generated retail sales of more than $1 billion each,

and the company’s products were distributed across more than 200 countries, resulting in annual net

revenues of about $65 billion.

Based on net revenue, PepsiCo is the second largest food & beverage business in the world. Within

North America, PepsiCo is ranked (by net revenue) as the largest food and beverage business.

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PEPSI-COLA LOGO EVOLUTION

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MARKETING PEPSI-COLA!

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1975:

Pepsi introduced the Pepsi

Challenge marketing

campaign where PepsiCo set

up a blind tasting between

Pepsi-Cola and rival Coca-

Cola. During these blind taste

tests the majority of

participants picked Pepsi as

the better tasting of the two

soft drinks. PepsiCo took

great advantage of the

campaign with television

commercials reporting the

results to the public.

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Film actress Joan Crawford, after marrying then Pepsi-Cola

President Alfred N. Steele became a spokesperson for Pepsi,

appearing in commercials, television specials and

televised beauty pageants on behalf of the company.

Crawford also had images of the soft drink placed prominently

in several of her later films.

1940s advertisement specifically

targeting African Americans, A

young Ron Brown is the boy

reaching for a bottle

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ACQUISITIONS AND DIVESTMENTS

PepsiCo went on to acquire many businesses between 1970s and mid-1990s. Some of the brands that

PepsiCo acquired during this period are;

1. Pizza Hut

2. Taco Bell

3. KFC (previously known as Kentucky Fried Chicken)

4. Hot n Now

5. East Side Mario's

6. D'Angelo Sandwich Shops

7. Chevys Fresh Mex

8. California Pizza Kitchen

9. Stolichnaya, a Russian vodka, via licensed agreement

10. Wilson Sporting Goods

11. North American Van Lines.

Towards the beginning of 1997, PepsiCo started selling off its non-core businesses to concentrate on

its core business of beverages and snacks. While selling its non-core businesses, PepsiCo started

expanding its product portfolio beyond soft drinks and snacks.

1998: It purchased orange juice company, Tropicana Products.

2001: PepsiCo merged with Quaker Oats Co., which added Gatorade sports drinks, Chewy Granola

bars, Aunt Jemima and several other brands to its product portfolio.

2009: PepsiCo acquired the two largest bottlers of its products in North America; Pepsi Bottling

Group and PepsiAmericas. The acquisition cost $7 billion and was completed in 2010.

2011: PepsiCo acquired a majority stake(two-thirds) in Wimm-Bill-Dann Foods, a Russian company.

This is PepsiCo's largest international acquisition. In October 2011, PepsiCo acquired the

remaining 23% stake of Wimm-Bill-Dann Foods and became the largest food and beverage

company in Russia.

GLOBAL BUSINESS PRESENCE

As of 2010, PepsiCo is separated into four main divisions;

1. PepsiCo Americas Foods,

Frito-Lay North America (FLNA),

Quaker Foods North America (QFNA),

Latin America Foods (LAF)

2. PepsiCo Americas Beverages,

3. PepsiCo Europe, and

4. PepsiCo Asia, Middle East and Africa.

As of 2009, 71% of the company’s net revenues came from North and South America, 16% from

Europe and 13% from Asia, the Middle East and Africa.

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As a result of the acquisitions led by PepsiCo, today it is a global food and beverage company,

operating in about 200 countries! It has about 100 global and local brands!

PRODUCT PORTFOLIO

PepsiCo’s product mix as of 2012 (based on worldwide net revenue) consists of 63 percent foods,

and 37 percent beverages. On a worldwide basis, the company’s current products lines include

several hundred brands that in 2009 were estimated to have generated approximately $108 billion in

cumulative annual retail sales.

The primary identifier of a food and beverage industry main brand is annual sales over $1 billion. As

of 2009, 19 PepsiCo brands met that mark: Pepsi-Cola, Mountain Dew, Lay's, Gatorade, Tropicana,

7Up, Doritos, Lipton Teas, Quaker Foods, Cheetos, Mirinda, Ruffles, Aquafina, Pepsi Max, Tostitos,

Sierra Mist, Fritos, and Walker's.

PEPSICO BRANDS

BEVERAGES

1. Pepsi

2. Diet Pepsi

3. Gatorade

4. Tropicana

5. 7 UP

6. Lipton

7. Aquafina

8. Mirinda

9. Sierra Mist Natural

10. Sierra Mist Zero Calorie

11. AMP Energy

12. SoBe

13. Mountain Dew

14. Diet Mountain Dew

15. Naked Juice

16. IZZE

17. Propel Zero

18. Tropicana Trop 50

19. Pepsi Max

20. G Series Pro

21. Mug

22. Dole Juices & Blends

23. Ocean spray

FOOD

1. Quaker Oats

2. Quaker pancake syrup &

mixes

3. Rice A Roni

4. Quakes

5. Chewy Granola Bar

6. Near East

7. Cap 'n' Crunch

8. Doritos

9. Frito Lay

10. Cheetos

11. Ruffles

12. Tostitos

13. Walker's

14. Fritos

15. Lays

16. Sun Chips

17. Aunt Jemima

18. Gamesa

19. Quaker Life

20. Mother's

21. Sabritas

22. Smith's

23. Lebedyansky

24. Sabra

25. Sonric's

26. KURKURE

27. Stacy's

28. Grandma's Cookies

29. Miss Vickie's

30. Lehar

31. Red Rock

32. Bocabits

33. Crujitos

34. Fandangos

35. Hamka's

36. Niknaks

37. Hostess potato chips

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PEPSICO BEVERAGES

PEPSICO FOODS

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STRENGTHS

Branding - One of PepsiCo’s top brands is of course Pepsi, one of the most recognized

brands of the world, ranked according to Interbrand. As of 2008 it ranked 26th amongst top

100 global brands. Pepsi generates more than $15,000 million of annual sales. Pepsi is joined

in broad recognition by such PepsiCo brands as Diet Pepsi, Gatorade Mountain Dew, Thirst

Quencher, Lay’s Potato Chips, Lipton Teas (PepsiCo/Unilever Partnership), Tropicana

Beverages, Fritos Corn, Tostitos Tortilla Chips, Doritos Tortilla Chips, Aquafina Bottled

Water, Cheetos Cheese Flavoured Snacks, Quaker Foods and Snacks, Ruffles Potato Chips,

Mirinda, Tostitos Tortilla Chips, and Sierra Mist.

The strength of these brands is evident in PepsiCo’s presence in over 200 countries. The

company has the largest market share in the US beverage at 39%, and snack food market at

25%. Such brand dominance insures loyalty and repetitive sales which contributes to over

$15 million in annual sales for the company

Diversification - PepsiCo’s diversification is obvious in that the fact that each of its top 18

brands generates annual sales of over $1,000 million. PepsiCo’s arsenal also includes ready-

to-drink teas, juice drinks, bottled water, as well as breakfast cereals, cakes and cake mixes.

This broad product base plus a multi-channel distribution system serve to help insulate

PepsiCo from shifting business climates.

Distribution - The company delivers its products directly from manufacturing plants and

warehouses to customer warehouses and retail stores. This is part of a three pronged approach

which also includes employees making direct store deliveries of snacks and beverages and

the use of third party distribution services.

WEAKNESSES

Overdependence on Wal-Mart - Sales to Wal-Mart represent approximately 12% of

PepsiCo’s total net revenue. Wal-Mart is PepsiCo’s largest customer. As a result PepsiCo’s

fortunes are influenced by the business strategy of Wal-Mart specifically its emphasis on

private-label sales which produce a higher profit margin than national brands. Wal-Mart’s

low price themes put pressure on PepsiCo to hold down prices.

Overdependence on US Markets - Despite its international presence, 52% of its revenues

originate in the US. This concentration does leave PepsiCo somewhat vulnerable to the

impact of changing economic conditions, and labour strikes. Large US customers could

exploit PepsiCo’s lack of bargaining power and negatively impact its revenues.

Low Productivity - In 2008 PepsiCo had approximately 198,000 employees. Its revenue per

employee was $219,439, which was lower than its competitors. This may indicate

comparatively low productivity on the part of PepsiCo employees.

Image Damage Due to Product Recall - Recently (2008) salmonella contamination forced

PepsiCo to pull Aunt Jemima pancake and waffle mix from retail shelves. This followed

incidents of exploding Diet Pepsi cans in 2007. Such occurrences damage company image

and reduce consumer confidence in PepsiCo products.

PEPSICO SWOT ANALYSIS

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OPPORTUNITIES

Broadening of Product Base - PepsiCo is seeking to address one of its potential weaknesses;

dependency on US markets by acquiring Russia’s leading Juice Company, Lebedyansky, and

V Water in the United Kingdom. It continues to broaden its product base by introducing True

North Nut Snacks and increasing its Lipton Tea venture with Unilever. These recent

initiatives will enable PepsiCo to adjust to the changing lifestyles of its consumers.

International Expansion - PepsiCo is in the midst of making a $1, 000 million investment in

China, and a $500 million investment in India. Both initiatives are part of its expansion into

international markets and a lessening of its dependence on US sales. In addition the company

plans on major capital initiatives in Brazil and Mexico.

Growing Savoury Snack and Bottled Water market in US - PepsiCo is positioned well to

capitalize on the growing bottle water market which is projected to be worth over $24 million

by 2012. Products such as Aquafina, and Propel are well established products and in a

position to ride the upward crest. PepsiCo products such as, Doritos tortilla chips, Cheetos

cheese flavoured snacks, Tostitos tortilla chips, Fritos corn chips, Ruffles potato chips, Sun

Chips multigrain snacks, Rold Gold pretzels, Santitas are also benefiting from a growing

savoury snack market which is projected to grow as much as 27% by 2013, representing an

increase of $28 million.

THREATS

Decline in Carbonated Drink Sales - Soft drink sales are projected to decline by as much as

2.7% by 2012, down $ 63,459 million in value. PepsiCo is in the process of diversification,

but is likely to feel the impact of the projected decline.

Potential Negative Impact of Government Regulations - It is anticipated that government

initiatives related to environmental, health and safety may have the potential to negatively

impact PepsiCo. For example, manufacturing, marketing, and distribution of food products

may be altered as a result of state, federal or local dictates. Preliminary studies on acryl amide

seem to suggest that it may cause cancer in laboratory animals when consumed in significant

amounts. If the company has to comply with a related regulation and add warning labels or

place warnings in certain locations where its products are sold, a negative impact may result

for PepsiCo.

Intense Competition - The Coca-Cola Company is PepsiCo’s primary competitors. But

others include Nestlé, Groupe DANONE and Kraft Foods. Intense competition may influence

pricing, advertising, sales promotion initiatives undertaken by PepsiCo. Recently Coca-Cola

passed PepsiCo in Juice sales.

Potential Disruption Due to Labour Unrest - Based upon recent history, PepsiCo may be

vulnerable to strikes and other labour disputes. In 2008 a strike in India shut down production

for nearly an entire month. This disrupted both manufacturing and distribution.

PEPSICO SWOT ANALYSIS

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PEPSICO AT A GLANCE

PepsiCo is a $66 billion global

powerhouse focused on two

complementary businesses with attractive

growth, margins and returns — global

snacks and global beverages. In 2011, they

delivered core net revenue growth1 of 14

percent. Nestled within these two

businesses is our global nutrition business,

which in 2011 grew core net revenue 19

percent, excluding acquisitions.

Global Snacks

Our $32 billion global foods portfolio includes a snacks business that is one of the consumer

packaged goods industry's best performing franchises of the last two decades. We've also

expanded into adjacencies like bread snacks and refrigerated dips, in which we have built a

market-leading presence.

Our brands include Lay's, the largest global food brand, with more than $9 billion in retail

sales in 2011; Doritos, the world's leading corn snack; and Cheetos, the leader in its category.

In 2011, all three of these snack mega brands delivered double-digit volume growth in

markets around the world.

In 2011, global snacks volume2 rose 8 percent.

Global Beverages

Our $34 billion global beverages business has a strong and diverse portfolio that enables us to

move into emerging markets early and quickly, as shoppers new to consumer packaged goods

seek out the simple pleasures of beverages. Our beverages business also helps us scale up our

food brands in these markets.

Our beverages portfolio includes Pepsi, one of the world's leading consumer brands;

Mountain Dew, the fastest-growing major carbonated soft drink trademark in North America

as measured by 2011 retail sales; and Sierra Mist, which in 2011 attracted new consumers to

the category.

In 2011, global beverages volume2 grew 5 percent.

Global Nutrition

Our global nutrition business leverages the strength of our core products, enabling us to stay

ahead of the increasing demand for more nutritious food and beverage choices. Our nutrition

brands include Quaker, Tropicana and Gatorade.

Our nutrition portfolio is a more than $13 billion business. We intend to grow it to $30 billion

by 2020.

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PEPSICO INDIA

PepsiCo entered India in 1989 and has grown to become one of the largest food and

beverage businesses in India.

With an investment of over $1 billion, PepsiCo India has built an expansive beverage

and snack food business supported by 43 beverage bottling plants and 3 food plants.

PepsiCo India’s extensive portfolio includes iconic brands like Pepsi, Lay’s,

Tropicana 100%, Gatorade, Quaker, and fast growing brands i.e. Nimbooz.

PEPSICO BEVERAGE PORTFOLIO

PepsiCo India’s expansive beverage portfolio includes:

Iconic refreshment beverages: Pepsi, 7UP, Nimbooz, Mirinda, Mountain Dew

Low-calorie options: Diet Pepsi

Hydrating and nutritional beverages: Aquafina (drinking water), Gatorade (isotonic sports

drink)

Fruit juices: Tropicana100%

Juice-based drinks: Tropicana Nectars, Tropicana Twister, Slice

Local brands: Lehar Evervess Soda, Dukes Lemonade, Mangola

HEAD OFFICE

PepsiCo India, 3B, DLF Corporate Park, ‘S’ Block, Qutab Enclave, Phase-III,

Gurgaon – 122002, Haryana, India.

Tel.: 0124-2880699, 0124-2355880

CUSTOMER CARE: [email protected]

Tel.: 1800 224 020

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PEPSICO INDIA's PERFORMANCE WITH PURPOSE

1. One of the largest food and beverage businesses in India: PepsiCo India’s diverse

portfolio includes iconic brands like Pepsi, Lay’s, Kurkure, Tropicana 100%,

Gatorade, Quaker and young, but immensely popular and fast growing brands, such as

Nimbooz and Aliva. PepsiCo India has not only grown to become one of the

country’s largest food and beverage businesses but has also become a powerful and

consistent driver of PepsiCo’s global growth.

2. A growing portfolio of enjoyable and wholesome snacks and beverages PepsiCo’s

portfolio reflects its commitment to nourish consumers with a diverse range of fun

and healthier products. The portfolio includes several healthier treats like Quaker

Oats, Tropicana juices, multigrain Aliva range which is baked, rehydrator Gatorade,

Tata Water plus, Lay’s baked range and Lehar Iron Chusti fortified extruded snack

with superior quality iron & B-vitamins.

3. Model partnership with over 24,000 farmers: PepsiCo has pioneered and

established a model of partnership with farmers and now works with over 24,000

happy farmers across nine states. More than 45 percent of these are small and

marginal farmers with a land holding of one acre or less. PepsiCo provides 360-

degree support to the farmer through assured buy back of their produce at pre-agreed

prices, quality seeds, extension services, disease control packages, bank loans,

weather insurance, and the latest technological practices.

4. Exemplary employment practices: PepsiCo India presently employs 6,400 people

and provides indirect employment to almost 2,00,000 people. The company believes

in providing employment and growth opportunities to local talent. Its ‘College of

Leadership’, ensures early identification of talent, and employees’ focused

development through critical experiences. The company emphasizes “Winning with

Diversity and Inclusion” and has a significant number of women in the leadership

team in India. PepsiCo India has won the prestigious Hellen Keller Award from the

National Centre for Promotion of Employment for Disabled People (NCPEDP).

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PEPSICO INDIA: GIVING BACK TO THE SOCIETY

1. Care for the environment: PepsiCo is focused on reducing its carbon footprint.

Nearly 30 percent of its energy is today generated from renewable sources such as

rice husk boilers and wind turbines. Initiatives such as reduction of use of chemicals,

eco-friendly packaging initiatives and efficient waste management help reduce load

on the environment. PepsiCo India’s award-winning Waste to Wealth recycling

program reaches 465,000 families.

2. Global leader in water conservation: In 2009, PepsiCo India achieved a significant

milestone, by becoming the first business to achieve ‘Positive Water Balance’ in the

beverage world, a fact verified by Deloitte Touché Tohmatsu India Pvt. Ltd and has

been Water Positive since then. The company made this possible through innovative

irrigation practices like direct seeding, water recharging, and by reducing the

consumption of water in its manufacturing facilities. PepsiCo is lauded for its efforts

for water conservation.

3. PepsiCo India HIV/AIDS Initiative PepsiCo India embarked on the HIV / AIDS journey in 2005, along with our

Technical partner The International Labor Organization (ILO), with the purpose of

spreading awareness amongst all our stakeholders. We have built the whole program

in a manner to build capacity within and externally and have focused on the “Each

one Teach one” approach to ensure sustainability. The program was kicked off by

creating a pool of Master Trainers and Peer Educators who could cascade the program

across all our work locations along with NGOs who were also trained along with

PepsiCo employees. We started the program by cascading HIV / AIDS awareness

amongst our employees. This was progressively enhanced to cover other stakeholders

including spouses of employees, business partners, distributors, contractual workers,

and our bottling partners. We further strengthened the impact of our efforts through

community outreach programs where we leveraged our NGO partners across the

country.

Today we have 58 Master Trainers and 175 Peer Educators across both businesses

and our endeavor is to continue to create more and most Master Trainers and Peer

Educators. PepsiCo India has been awarded TERI Corporate Award for Business

Response to HIV/AIDS in 2009.

4. PepsiCo India – Akshay Patra Partnership PepsiCo India has partnered with Akshay Patra, an NGO that supports the "Mid-day

meal" program launched by Government of India feeding over 1.2 underprivileged

students everyday of the school year, in 17 locations, across 7 states in India. For

children belonging to the weaker economic sections of society, a full meal, even once

a day, is a strong incentive to stay in school. This program enables hunger free

education and it has lead to a significant rise in enrollment and attendance. So this

partnership has a simple but powerful mission - to change the trajectory of countless

lives in our community. In the first stage, PepsiCo India is funding equipment and

vehicles to set up a kitchen, near Kapashera, Delhi which has the capacity to feed

75,000 children through the mid-day meal program. Through this program PepsiCo

India employees can participate in this cause by contributing as little as Rs 2900 to

keep 5 children in a school in a year. PepsiCo foundation will match the employee

contribution and double the impact.

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The brief introduction was about PEPSICO in the global arena and India as well.

Before talking about the food business of PEPSICO, let us get to know about the

snacking industry worldwide and in India!

INTRODUCTION TO THE SNACKING INDUSTRY

Q.1. What is the Snack Food Production Industry?

This industry comprises manufacturers that produce snack foods, including potato and corn

chips, pretzels, popcorn and other similar snacks. This industry does not include cookies and

crackers , bakery products or cereal and granola bars. Industry establishments primarily

prepare nuts, process grains or seeds into snacks, and manufacture chips, popped popcorn and

similar snacks.

Q.2. Industry Products;

1. Bulk nuts

2. Canned nuts

3. Seeds

4. Peanut butter

5. Potato chips

6. Corn chips

7. Other chips

The snacks manufacturers have started diversifying into other product categories like granola

bars, crackers, cookies, baked biscuits, pork rinds, pretzels, jerky, yoghurt, etc.

The reasons for such diversification have been explained under the heading, "TRENDS IN

THE SNACKING INDUSTRY".

Q.3. Industry Activities;

Salting, roasting, drying, cooking, or canning nuts

Processing grains or seeds into snacks

Producing peanut butter

Manufacturing potato chips

Producing corn chips

Producing popped popcorn

Producing pretzels (except soft)

Manufacturing pork rinds

Producing rice cakes

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TRENDS IN THE SNACKING INDUSTRY

A recent survey by Snack Factory’s Pretzel Crisps® brand reveals that nearly half of

consumers(employed or unemployed), (40 percent) would prefer to reach for snack foods

throughout the day instead of eating the traditional three square meals. Many admit to

indulging in snack foods for lunch (78 percent) and even dinner (55 percent). While snacking

may be a habit of both men and women of all ages, younger generations tend to skip the full

course meal and go right to the snack aisle when they are hungry. In fact, close to half (46

percent) of 18 to 49-year-olds make snacking a major part of their day as compared to only

31 percent of their 50 and older counterparts.

Despite the generational gap, more and more people of all ages are relying on snacks to get

them through the day. Whether it’s sweet, salty, crunchy or full of flavour, snack foods have

become a staple in the American diet.

"Snacks are not just the snack aisle anymore. When people snack they want to put

something good in their body"

Rethink Your Snack Survey, conducted by Kelton Research, finds that when it comes to snack

time, a majority of Americans (59 percent) prefer to keep it interesting and sample a variety

of treats. However, in the debate between snacks that taste good and snacks that are healthy,

America’s taste buds are guiding their decisions. More than two thirds of the nation (63

percent) would rather eat a snack that appeals to their senses than their waistlines and nearly

the same amount (60 percent) confess to consuming more than the recommended

portion. The good news is that there are plenty of better-for-you snacks that offer a selection

of satisfying flavors without the guilt or the added weight.

“When it comes to snacking, people want something that tastes good, satisfies their cravings

and doesn’t make them feel guilty for eating it, even if they overindulge a little,” said Perry

Abbenante, Vice President of Marketing for Pretzel Crisps

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SMART SNACKING

Almost nine in ten (86% customers & consumers take the health content of their snack foods

into consideration. When selecting small bites, calories (55%) and fat (48%) are the top two

pieces of nutritional information customers look for, carbohydrates (31%) are far less

important. Those seeking a healthier snack food, nearly three in four customers (74%) see

pretzels as a nutritious option, placing the diverse twists at the top of the list as one of the

healthiest salty treats (28%) above corn chips (16%), potato chips (6%) and cheese curls

(3%).

“Think of our bodies like race cars. As we go through the day we need to refuel. There can

be long hours between meals, so plan to have a ready-to-go healthy snack that keeps the

energy level steady,” said Kathy Kaehler, celebrity trainer, fitness expert and author. “To

make the most of snack time, pair low fat, low calorie snacks like Pretzel Crisps with a little

protein rich peanut butter or my favourite, a scoop of Greek yogurt for a boost of energy.”

A NATION THAT SNACKS

While in the car, sitting at the office or lounging on the couch, seven in ten people

(70%) prefer to munch in peace and quiet, making snack time a solo activity. When reaching

for a snack, most of the nation (57%) reaches for salty treats over sweet indulgences and

despite what Hollywood portrays, most do not rely on indulgent snacks and treats to ease

their pain and tears. In fact, 62% say they snack when they are feeling happy, not sad.

When it comes to parenting, variety can often be the key to keeping children happy. Perhaps

that is why more parents than non-parents (66% vs. 56%) prefer an assortment of go-to

snacks instead of sticking to the usual snack food suspects. The wide snack selection could

also be why more parents than those without children (56% vs. 45%) choose snacks for

breakfast.

PERPETUAL SNACKING - SMALL BITES

This trend is coming about due to longer work days, increasing mobility, shorter breaks, etc.

There are now 7 to 10 meal occasions per day, eating is no longer relegated to the traditional

meal occasions of breakfast, lunch and dinner. Food & beverage trend watchers are seeing

many more.

Example; "On a given day a busy Mom might start the morning with a Grab n Go snack

while driving the kids to school (early morning) and then come home and feed a younger

child (late morning). Other scenarios might include a student who has dinner and then is

studying late into the night and will fit in another late night meal prior to going to bed."

Starbucks Petites are small bites… Cake Pops, mini Cupcakes, Whoopie Pies and Sweet

Squares. All Petites appear to be doing very well and it is win-win for everyone. For the

consumer, they can indulge in perpetual snacking. The smaller portion Petites help the

consumer eat better with fewer regrets. According to Joy, for Starbucks, the Petites line has a

better margin".

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Given, consumer's dependence on snacks as alternatives to meals, the nutritional value of

snacks is being revolutionized, and the change is manifested in the form of energy and

nutrition bars, proteins packed cereal crisps, low fat and trans-fat free products. As a result,

snack foods are shedding their unhealthy images, thanks to the aggressive promotional efforts

of food companies. Nutritional snacks with their attractive health profiles are today vying for

the share of meal substitutes and health foods.

Multiple meal occasions present a challenge to food & beverage brands in terms of defining

categories and fitting products into these categories.

Example: Once a food category consumed as part of a more traditional main meal, appetizers

are now being consumed on their own, which fits into the new categories of Portion-able

Meals and Smaller Bites.

THE RISING DEMAND FOR ARTISAN FOOD PRODUCTS

Artisan food products refer to the wonderful food products made by the local, passionate

"foodies" with their hands and not big food processing machines.

The food made with hands, with utmost care and edibility, is what consumers are expecting

more of, then products out of huge factories practicing economies of scale.

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EATING AT HOME, SAVINGS ON A RISE!

As consumers continue to limit dining out, they will seek a restaurant-quality experience at

home. Media communications portraying snacks as a must to add to shopping list for the

restaurant-quality experience would be helpful!

SAVOURY SNACKS WITH A HEALTH EMPHASIS

“Despite the increasing competition from other snacks, savoury snacks and nuts are more

than holding their own, largely via growing emphasis on authenticity, originality, strong and

exotic flavours and more convenient packaging concepts, often supported by a healthy or

natural angle and strong branding,” says Lu Ann Williams, research manager, Innova Market

Insights.

“Overall, despite the often fairly low level of interest in health in purchasing decisions for

impulse products such as snacks, nearly 40% of launches recorded by Innova Market Insights

in 2011 had a health positioning of some kind,” she says.

“This is mainly with regard to passive benefits, such as wholegrain, organic, gluten-free or

low and light, but also to a much lesser degree active benefits, such as vitamin- and mineral-

fortification, levels of omega-3 fatty acids or bone health. This rises to over 60% in the US.

“The rise of gluten-free products has also been fairly dramatic, with nearly 10% of global

snacks launches using that platform in 2011, rising to over 20% in the US, with the number

of gluten-free launches internationally trebling over a five-year period,” says Williams.

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FRONT OF PACK LABELLING

Yes! This trend of giving nutrition facts on the front side of the package makes it easier for

the consumers to choose.

NATURAL PRODUCTS

Though more people "indulge" in snacking, healthy snacking has been growing stably and

looks more promising as more and more people are looking for healthier and delicious

snacking!

Customers are switching to products with organic ingredients! Now, you remember LAY's

Natural!

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RISING DEMAND FOR BANANA CHIPS!

A sub-segment in the chips market, is gaining popularity. The trend started in Southern

Indian and is picking up in other parts of the country.

Banana chips now contribute approximately 3.1% to total branded sales of namkeens, up

from 2.7% in 2001, while volume contribution was 3.6% in 2002. Industry sources estimate

the market at far higher tonnage and value.

IMPULSIVE BUYING DECREASING

About 64% of the consumers work from a pre-made shopping list.

66% of the consumers are looking for their favourite brands; 23% seek their favourite brands

at reasonable price and 43% seek their favourite brand when on sale!

The rest 34% are switching brands for a lower price!

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SIZE OF THE SNACKING INDUSTRY

THE GLOBAL SNACK FOODS MARKET WILL REACH $380 BILLION BY 2017, ACCORDING TO

NEW REPORT BY GLOBAL INDUSTRY ANALYSTS, INC.

GIA announces the release of a comprehensive global report on Snack Foods market. Global

snack foods market is forecast to reach US$380 billion by the year 2017, driven primarily by

changing consumer demographics and affluence levels. Innovation stands out as a major

growth driver charging the market’s expansion both in terms of value and volume.

Fast growing economies in Asia Pacific, Latin America, and Eastern Europe spell strong,

attractive, and lucrative business opportunities driven by strong economic growth and

increased westernization of diet patterns.

In 2011 savoury and salty snacks accounted for just under two-thirds of the total launches,

and snack nuts and seeds the remainder. Asia and Latin America saw the biggest increases in

snacks launch numbers. Launches in Asia accounted for nearly 40% of total snacks

introductions, ahead of Europe with just under 30%.

Changes in lifestyles and careers have fuelled the consumption of snack foods. A rise in

disposable incomes, fast-paced modern lifestyles and long working hours also have reduced

elaborate luncheons and meals to desk snacks.

Growing preference for convenience meals, coupled with the rise in disposable incomes, has

paved the way for a new era of microwave cooking and invigorated the market for

microwaveable snacks. With microwave cooking heralding the trend of kids preparing their

own choice of after-school snacks, manufacturers are increasingly targeting new

microwavable food products that can be safely prepared by children.

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INDIAN SNACKS INDUSTRY: SIZE AND TRENDS

Munching between two meals or at tea /coffee time is a habit with most Indians. The variety

of snacks offered is almost mind-boggling with specialities from all regions, which have

gained national acceptance. For example, banana chips from Kerala are sold not only across

the country, but the entire world. Potato wafer is no longer considered a wafer-thin business.

According to an APEDA (Agricultural and Processed Food Products Export Development

Authority) survey, there are about 1,000 snacks items and 300 types of savouries sold in the

country. Salty snacks – whether potato chips, banana chips or crispies made of corn or wheat

flour, just fried or baked for the health-conscious – today have usurped home-made savouries

to become the first choice not just for people in the big cities but also in small-town India. No

wonder then, the market today for branded chips and wafers alone stands at Rs.1, 100 crore.

It has grown more than 60% over the last six years. And it is by far the single biggest item in

the snacks and savoury category.

The snacks food industry in India can broadly be categorised into three segments – staple

(biscuits category), traditional (namkeens) and ready-to-eat packaged snacks (chips / crisps).

The RTE snacks food is slowly but surely coming into its own, with a number of new / high

profile entrants joining the fray. As consumers and companies turn experimental, as reflected

in the new variety of snacks available in the market, extruded snacks which include the likes

of PepsiCo India’s Kurkure will soon overtake potato chips as the biggest snack item in the

Indian market. Extruded snacks are snacks cooked, pressurised and pushed out of a die that

gives them their unique shape. According to a report by consultancy firm KPMG, the market

value for extruded snacks which in 2009 stood at $223.7 million will touch $298.7 million by

2011. Not just that, it will be growing the fastest in the next five years.

While Haldiram’s, one of India’s oldest traditional snacks makers, and PepsiCo with its Lays

and Kurkure brands dominate the market, the last five years have seen more companies join

the fray. Not so long ago, the unorganised players had a field day with the consumer opting

for quantity over quality. The trend is slowly changing with rising incomes and health-

consciousness. Brand consciousness is taking precedence over cost consciousness among a

large section of consumers.

To PepsiCo goes the credit of expanding the organised snacks market. Till 1995, when

PepsiCo introduced two brands Lays and Cheetos, there were only Haldiram’s and Amrit

Agro that launched potato chips under the brand name Uncle Chips. When PepsiCo launched

Kurkure in 1999, it became a runaway success. In 2000, Frito Lay India, a division of

PepsiCo India, acquired the Uncle Chips brand. And from then on there was no looking back.

Aliva, the latest in its kitty, marks Frito Lay India’s creation of yet another category –

borrowing ingredients and textures from biscuits and flavours from namkeens and is

positioned as a healthier snacking option.

The next big leap happened in 2007, when fast moving consumer goods company ITC

launched an array of potato chips and finger snacks products under the brand name Bingo!

Within a year, it grabbed a market share of 9%. Bingo brought tastes which were familiar to

the Indian taste buds but with a hint of unfamiliarity. The next innovation in the market came

in lesser time. Parle Agro’s Hippo and Parle Products’ Smart Chips entered the market in

2009. Currently, the salty snacks market stands at around Rs.7, 000 crore. It is the high pace

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of growth that has attracted a lot of players. The increase in competition has seen players

launching their own versions of the popular snacks of their rivals.

Consumers now want variety and new tastes. They are not loyal to any particular brand.

Another factor that has worked towards the shift from the home-made snacks to the branded

packs is the price. It is challenging to give quality and quantity at the price points of Rs.5 and

Rs.10. The bulk of the consumers are in the middle and lower middle classes. Therefore,

affordability is what has driven the upsurge in the demand for snacks.

Even as there has been a proliferation of brands in the salty snacks category, there has been a

gradual shift towards offering healthier snacking options. Whether it is the no trans-fat tag or

healthier snacks like Smart Chips or Aliva, consumers are looking for healthier alternatives in

every food category. “What is driving innovation in the segment is the need to balance taste

and health without compromising on one or the other and break this credit-debit lifestyle we

live every day,” says Deepika Warrier, marketing director, Frito Lay India, PepsiCo.

Several manufacturers are putting new face on snacks. One is appropriately named Sensible

Portions that presents a wide range of “better-for-you” snacks including “all-natural” choices

such as multigrain crisps, pita crackers and pita chips. In addition to convenient packaging

that gives built-in portion control, ingredients like whole grains, soya protein, vitamins, iron,

and fibre are included and trans-fats, saturated fats and cholesterol are avoided. It provides a

healthier feel to snacking that is highly marketable.

Use of nuts in healthy snacks continued to rise including staples like almonds and cashews as

well as exotics like pistachios and hazelnuts. Skinless almonds and cashews are roasted with

real herbs and spices for extraordinary flavour. One line of almonds has been released with

low-sodium sea salt, vinegar and bold wasabi soya variants. Another nut company introduced

snack nuts that are gluten-free with all-natural ingredients and some organics like cocoa,

vanilla extract and coconut.

Peanuts can support and complement a vast range of spices and flavours. Peanut is a canvas

upon which one can display works of art, delivering healthy snacks. Fat in peanuts is also

healthy which can help lower LDL cholesterol and the risk of cardiovascular diseases. It is an

excellent source of protein.

Indeed, Indians continue to show a great appetite for snacks. According to a survey

conducted by electronics payments company VISA on mystery spending or cash spent but

which cannot be accounted by consumers, Indians spend the second highest on snacks. The

average mystery spending per week of young Indians in the age group of 18 to 24 years stood

at Rs.383 of which almost 36% was on snacks. The total spending per year on snacks for one

person thus stands at around Rs.7, 000.

As per data from The AC Nielsen Company, the compounded annual growth rate for snacks

in the rural market over the last two years stood at 26.7% as against 13.2% for urban areas.

Though rural’s contribution is only about 33%, it’s growing much faster than the urban

markets. The way things are happening -- better spending power of the people, good

knowledge and great exposure – better times are ahead for the snacks industry.

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NOBLE BEGININGS OF FRITO-LAY

H.W. LAY & COMPANY

In the 1920s, salesman Herman Lay sold potato chips in southern United States out of his car.

In 1932, Lay began a potato chip business in Nashville, Tennessee. Lay was hired as a

salesman for the Barrett Food Products Company, an Atlanta, Georgia manufacturer of

Gardner's Potato Chips, and eventually took over Barrett's Nashville warehouse as a

distributor. Lay hired his first salesman in 1934, and three years later had 25 employees and a

larger manufacturing facility where he produced popcorn and peanut butter sandwich

crackers.

A representative of the Barrett Food Company contacted Lay in 1938, offering to sell

Barrett's plants in Atlanta and Memphis to Lay for $60,000. Lay borrowed $30,000 from a

bank and persuaded the Barrett Company to take the difference in preferred stock. Lay

moved his headquarters to Atlanta and formed H.W. Lay Lingo & Company in 1939. In

1942, Lay introduced the first continuous potato processor, resulting in the first large-scale

production of the product. He later purchased the Barrett manufacturing plant in Jacksonville,

Florida, along with additional plants in Jackson, Mississippi, Louisville, Kentucky and

Greensboro, North Carolina.

Lay retained the Gardner trademark of Barrett Food Products until 1944, when the product

name was changed to Lay's Potato Chips.

Lay's became the first snack food manufacturer to purchase television commercials, with Bert

Lahr as a celebrity spokesman. His signature line, "so crisp you can hear the freshness,"

became the chips' first slogan along with "de-Lay-sious!" As the popular commercials aired

during the 1950s, Lay's went national in its marketing and was soon supplying product

throughout the United States.

Lay expanded further in the 1950s with the purchase of The Richmond Potato Chip Company

and the Capitol Frito Corporation. By 1956, with more than 1,000 employees, plants in eight

cities and branches or warehouses in thirteen others, H.W. Lay & Company was the largest

manufacturer of potato chips and snack foods in the United States.

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THE FRITO COMPANY

In 1932, Charles Elmer Doolin, manager of the Highland Park Confectionery in San Antonio,

purchased a corn chip recipe, a handheld potato ricer and 19 retail accounts from a corn chip

manufacturer for $100, which he borrowed from his mother.

Doolin established a new corn chip business, The Frito Company, in his mother's kitchen.

Doolin and his mother and brother produced the corn chips, named Fritos, and had a

production capacity of approximately 10 pounds per day. Doolin distributed the Fritos in 5¢

bags. Daily sales totalled $8 to $10 and profits averaged about $2 per day. In 1933, the

production of Fritos increased from 10 pounds to nearly 100 pounds due to the development

of a "hammer" press. By the end of the year, production lines were operating in Houston and

Dallas. The Frito Company headquarters also moved to Dallas to capitalize on the city's

central location and better availability of raw materials. In 1937,

The Frito Company opened its Research and Development lab and introduced new products,

including Fritos Peanut Butter Sandwiches and Fritos Peanuts, to supplement Fritos and

Fritatos Potato Chips, which had been introduced in 1935.

In 1941, the company opened its Western Division in Los Angeles with two sales routes,

which would become the prototype for The Frito Company's distribution system. In 1945,

The Frito Sales Company was established to separate sales from production activities.

Expansion continued with the issue of six franchises through the Frito National Company in

the same year.

In 1950, Fritos were sold in all 48 states. The Frito Company issued its first public stock

offering in 1954. At the time of Doolin's death in 1959, The Frito Company produced over

forty products, had plants in eighteen cities, employed over 3,000 people and had sales in

1958 in excess of $50 million. By 1962, Fritos would be sold in 48 countries.

Product Promotion: A beautiful girl selling FRITO chips at a busy food joint!

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FORMATION OF FRITO-LAY, INC.

In 1945, the Frito Company granted the H.W. Lay & Company an exclusive franchise to

manufacture and distribute Fritos in the Southeast. The two companies worked toward

national distribution and developed a close business affiliation. In September 1961, The Frito

Company and H.W. Lay & Company merged to become Frito-Lay, Inc., combining their

headquarters in Dallas, Texas. At this point, the company's annual revenues totalled $127

million, largely generated from sales of its four main brands at the time: Fritos, Lays, Cheetos

and Ruffles.

Shortly thereafter, Lays introduced its best-known slogan "betcha can't eat just one." Sales of

the chips became international, with marketing assisted by a number of celebrity endorsers.

DIVISION OF PEPSICO, INC.

In February 1965, the board of directors for Frito-lay, Inc. and Pepsi-Cola announced a plan

for the merger of the two companies. On June 8, 1965, the merger of Frito-Lay and Pepsi-

Cola Company was approved by shareholders of both companies, and a new company

called PepsiCo, Inc. was formed.

At the time of the merger, Frito-Lay owned 46 manufacturing plants nationwide and had

more than 150 distribution centres across the United States.

The merger was pursued for multiple factors, one of which was the potential for Frito-Lay

snacks to be distributed outside of its initial markets of the United States and Canada—via

Pepsi-Cola's existing presence and distribution network in 108 countries at the time of the

merger. International distribution of Frito-Lay products expanded shortly following the 1965

merger, and its U.S. presence grew at the same time, resulting in Lay's becoming the first

potato chip brand to be sold nationwide (in all 50 U.S. states) in 1965.

Also at this time, PepsiCo had envisioned marketing Frito-Lay snacks alongside Pepsi-Cola

soft drinks. In an interview with Forbes in 1968, PepsiCo CEO Donald Kendall summarized

this by noting that "Potato chips make you thirsty; Pepsi satisfies thirst." Plans to jointly

promote the soft drink and snack products were averted later that year, with the Federal Trade

Commission ruling against it.

A new formulation of chip was introduced in 1991 that was crisper and kept fresher longer.

Shortly thereafter, the company introduced the "Wavy Lays" products to grocery shelves. In

the mid to late 1990s, Lay's modified its barbecue chips formula and rebranded it as "K.C.

Masterpiece," named after a popular sauce, and introduced a lower calorie baked version and

a variety that was completely fat-free (Lay's WOW chips containing the fat substitute

olestra).In the 2000s, kettle cooked brands appeared as did a processed version called Lay's

Stax that was intended to compete with Pringles, and the company began introducing a

variety of additional flavour variations. Frito-Lay products currently control 59% of the

United States savoury snack-food market.

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THE EVOLUTION OF FRITO LAY

1965–1980

Upon the formation of PepsiCo, Frito-Lay maintained the same brand and product line;

consisting of Fritos, Lay's, Cheetos, Ruffles, and Rold Gold pretzels. It soon began efforts to

expand with the development of new snack food brands in the 1960s and 1970s,

including Doritos (1966), Funyuns (1969) and Munchos (1971). The most popular new Frito-

Lay product launched during this era was Doritos, which initially was positioned as a more

flavourful tortilla chip. At first the chip was perceived by consumers as being too bland. In

response, the company re-launched Doritos in Taco, and later Nacho Cheese, flavours. The

spicier composition proved successful, and Doritos quickly became the second most popular

Frito-Lay product line, second only to Lay's potato chips.

Frito-Lay faced increased competition in the 1970s, from competing potato chip brands such

as Pringles, launched by Proctor & Gamble in competition with Lay's. Nabisco and Standard

Brands also expanded in the 1970s to produce potato chips, cheese curls and pretzels, which

placed added pressure across Frito-Lay's entire line of snack food brands.

1980–2000

Frito-Lay acquired Grandma's Cookies in 1980, which launched nationwide in the United

States in 1983. In January 1978 Frito-Lay's product development group led by Jack

Liczkowski has completed development of TOSTITOS, authentic Mexican-style tortilla

chips. The chips were round, made of white corn and had this Mexican, slightly soapy

flavour. To achieve this taste, it was discovered that Mexicans after cooking corn with lime,

do not wash the corn as well as one would desire, therefore the resulting stone ground corn

masa has higher content of lime and lower pH. When deep fat frying the formed chips,

calcium hydroxide reacts with oil and gives this specific taste. After successful test marketing

in 1979, Tostitos Traditional Flavour and Tostitos Nacho Cheese Flavour went in 1980 into

national distribution in the United States and have reached the sales of $140 million, making

it one of the most successful new products introduction in Frito-Lay history. Tostitos sales

grew quickly, and in 1985 it had become Frito-Lay's fifth-largest brand, generating annual

sales of $200 million. Ahead of Tostitos at the time were Doritos, Lay's, Fritos and Ruffles,

each recording annual sales between $250 and $500 million. While Tostitos became a long-

term success, several other new products launched in the 1980s were discontinued after

lacklustre results. In the late 1980s, Frito-Lay acquired Smartfood, a brand of cheese-

flavoured popcorn which it began to distribute across the United States. International sales

began to increase significantly at this time as well, with annual revenues from sales outside of

the U.S. and Canada accounting for $500 million in 1989, contributing to total Frito-Lay

sales of $3.5 billion in the same year.

Several new products were developed internally at Frito-Lay and launched in the 1990s, the

most successful of which was Sun Chips, a multi-grain chip first sold in 1991. Sun Chips,

along with new Baked (instead of fried) variants of Tostitos and Lay's, represented Frito-

Lay's intent to capitalize on an emerging trend among adults in the U.S., who were displaying

42 | P a g e

a growing preference for healthier snack alternatives. In 1994, Frito-Lay recorded annual

retail sales of nearly $5 billion, selling 8 billion bags of chips, popcorn and pretzels during

that year—outpacing competitors Eagle (owned by Anheuser-Busch) and Wise (owned by

Borden).

Up until the mid-1990s, Frito-Lay was represented in PepsiCo's organizational structure as

Frito-Lay, a single division of PepsiCo. This changed in 1996 when PepsiCo merged its

snack food operations into what was titled the "Frito-Lay Company", made up of two

subsequent divisions, Frito-Lay North America and Frito-Lay International. In 1997, Frito-

Lay acquired the candied popcorn snack brand Cracker Jack, followed in 1998 by multiple

international acquisitions and joint ventures, including Smith's Snackfood

Company (Australia), as well as Savoy Brands (Latin America).

(2000 – PRESENT)

In the early 1980s, PepsiCo continued to grow its Frito-Lay brands in two ways—through

international expansion and acquisition. Through a joint-venture with Walkers, a U.K. chip

and snack manufacturing company, Frito-Lay increased its distribution presence in Europe.

Similar joint-ventures were arranged in other regions of the world in the 2000s,

including Smith's in Australia, and Sabritas and Gamesa in Mexico. As a result of these

international arrangements, some global Frito-Lay products (such as Doritos) are branded

under the same name worldwide. Others maintain their original name within North and South

America, while being branded under region-specific names in other parts of the world. For

example, Lay's chips are branded as Walkers Crisps in the U.K.

The Quaker Oats Company merged with PepsiCo in 2001, resulting in Quaker snacks

products becoming organized under the Frito-Lay North America operating division. This

operating structure was short-lived, and in 2003, as part of a restructuring, the international

operations of Frito-Lay (formerly Frito-Lay International) were brought within the PepsiCo

International division, while Frito-Lay North America was maintained as its own division,

comprising Frito-Lay business within the United States and Canada.

Frito-Lay introduced Reduced Fat Lay's and Cheetos in 2002. The "Baked" product line also

expanded in 2002 to include Baked Doritos. In 2003, Frito-Lay introduced the first products

in its "Natural" line, which were made with ingredients that had been organically produced.

The first of these included Organic Blue Corn Tostitos, Natural Lay's Potato Chips (seasoned

with sea salt), and Natural Cheetos White Cheddar Puffs.

In 2005, Stacy's Pita Chip Company was acquired, which represented "Frito-Lay's desire to

participate more broadly in the $90 billion macro snack category", particularly involving

snack foods made with more natural ingredients. In 2010, Frito-Lay reformulated Lay's

Kettle and Lay's flavoured chips into a new variant labelled as being made with all-natural

ingredients. Sales of Lay's potato chips grew by 8% following the change to all-natural

ingredients. As a result, Frito-Lay announced in 2010 its plans to convert approximately half

of all Frito-Lay products, including Sun Chips, Tostitos, Fritos and Rold Gold pretzels, to all-

natural ingredients in 2011.

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FULL LIST OF FRITO LAY BRANDS

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FRITO LAYS AREA OF BUSINESS

As of 2010, Frito-Lay operates production plants, distribution centres and regional offices in

more than 40 countries.

NORTH AMERICA

PepsiCo Americas Foods consists of PepsiCo's food and snack operations in North and South

America. This operating division is further segmented into Frito-Lay North America,

Sabritas, Gamesa and Latin America Foods. It also contains Quaker Foods North America.

Food and snack sales in North and South America combined made up 48 percent of

PepsiCo’s net revenue as of 2009.

Frito-Lay North America controls Frito-Lay product research and development, sales

and distribution within the U.S. and Canada. Its primary brands include Lay's and Ruffles

potato chips, Doritos tortilla chips, Tostitos tortilla chips and dips, Cheetos cheese flavoured

snacks, Fritos corn chips, Rold Gold pretzels, Sun Chips and Cracker Jack popcorn. Products

made by this division are sold to independent distributors and retailers, and are transported

from Frito-Lay's manufacturing plants to distribution centres.

Sabritas and Gamesa are two of PepsiCo’s food and snack business lines headquartered

in Mexico. Sabritas markets Frito-Lay products, such as Cheetos, Fritos, Doritos and Ruffles,

in Mexico. It also distributes local brands such as Poffets, Rancheritos, Crujitos and

Sabritones. Gamesa is the largest manufacturer of cookies in Mexico, distributing brands

such as Emperador, Arcoiris and Marías Gamesa.

CENTRAL AND SOUTH AMERICA

PepsiCo’s Latin Americas Foods sells Frito-Lay branded snack foods in Central and South

America. Its portfolio of brands includes Lay's, Cheetos, Fritos and Doritos, as well as local

brands such as Lucky snacks in Brazil.

EUROPE

Frito-Lay snacks are distributed in Europe under the PepsiCo Europe operating division,

previously PepsiCo International. Its products includes Walkers Crisps, Doritos, Paw Ridge,

Smiths, Cheetos, Duyvis, Snack-a-Jacks, Looza, Twistos, and Solinki. PepsiCo maintains

manufacturing plants in Europe, the largest of which are two snack manufacturing and

processing plants located in Leicester, United Kingdom and Coventry, United Kingdom.

ASIA, MIDDLE EAST & AFRICA

Frito-Lay products sold under the PepsiCo Asia, Middle East & Africa division represent the

smallest (as of 2010) proportion on a revenue basis. However, its distribution is growing

more quickly than Frito-Lay's primary markets. While the primary global Frito-Lay brands

are sold in some parts of these regions, many snack food products have been created to match

local taste and cultural preferences. In India, one of these is Kurkure Twisteez, a potato-based

snack food produced in flavors popular in the country such as "Masala Munch". Frito-Lay

has also employed alternate distribution means in these regions. In South Africa, it hired

delivery drivers who had grown up in their delivery areas, with the intent of "making the

product seem less foreign".

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FRITO LAY INDIA

Since its entry in India in 1989, PepsiCo’s snack foods division Frito Lay India (FLI) has

become the clear leader in branded salty snack segment with popular brands like Lay’s,

Kurkure, Uncle Chips Cheetos and Lehar Namkeens. Quaker Oats, & Aliva, baked savoury

crackers Cheetos whole grain salty snacks enhance the choices available to the growing

health and wellness needs of FLI consumers. Frito Lay India produces its snacks at its state-

of-the-art plants in Channo (Punjab), Pune (Maharashtra) and Sankrail (West Bengal). The

company operates over 40 distribution centres that serve more than 2,500 active stockists,

reaching approximately 1 million retail outlets that in turn makes the product available at an

arms length. Lay’s is the World’s No. 1 and India’s favourite Potato Chip brand. It has a wide

range of flavours and formats. It is available in Indian flavours like Magic Masala and the

recently launched India’s lime and Masala Masti and also has brought innovative

international flavours like Spanish Tomato Tango, American Style Cream & Onion,

Caribbean Hot & Sweet Chilli and Classic Salted to the youth.

PEPSICO FOOD PORTFOLIO

PepsiCo’s food division, Frito-Lay, is the leader in the branded salty snack market. All Frito-

Lay products are free of trans-fat and MSG.

Frito-Lay’s core products are:

Lay's potato chips

Kurkure

Uncle Chipps

Lehar

Cheetos extruded snacks (including Cheetos Whoosh made of whole grain and vegetables)

Aliva

Quaker Oats (high-fibre breakfast cereal)

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PRODUCT IMAGES

1. ALIVA: MULTIGRAIN & MILK MINIS

2. KURKURE:

47 | P a g e

3. LAYS:

4. QUAKER OATS:

48 | P a g e

DIRECT COMPETITORS

1. Balaji

2. ITC (Bingo)

3. Parle (Hippo)

4. Procter & Gamble

5. A-Top

6. Haldiram's

7. MTR (Mavalli Tiffin Room)

8. Perfetti (Stop Not Fofos & Stop

Not Golz chips)

9. Mother Dairy (with "Aaja Khaja",

snacking product)

10. Hostage

11. Binnie's

12. Funmunch

13. Marvel

14. Garden

15. MOTA chips

16. Chedda

17. Ok

18. Brijwasi

19. Monginis

20. Satnam Overseas (Kohinoor

Namkeenz)

21. Prakash Namkeens (Madhya

Pradesh's local brand

22. Akash Namkeens (Madhya

Pradesh's local brand)

23. Unorganised Snacks industry

INDIRECT COMPETITORS

24. Snack bars

25. Fast food outlets (McDonalds,

Jumbo Vada Pav, etc.)

26. Biscuit industry

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OATS Main Players

1. Quaker

2. GSK

3. Kellogg

4. Bagrrys

5. Marico

6. Britannia

OATS Indirect Competitors

1. Maggi Healthy Noodles

2. Muesli

3. Cornflakes

4. Indian wheat-based/ home-made breakfast

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INTERNSHIP REPORT

SUMMER PROJECT DURATION: 29th May, 2012 to 29th July, 2012

PEPSICO INDIA HOLDINGS PVT. LTD. (Frito Lay India Office)

R.O.: 202, XLNC Chambers, 2nd floor, Sion-Trombay Road, Chembur, Mumbai-400071.

PROJECT TITLE: Effect of 3Ps on the reach/ penetration of PepsiCo food products.

OBJECTIVE

The project title, "Effect of 3Ps on the reach/ penetration of PepsiCo food products", was

decided by Frito Lays India's Zonal Manager, Mr. Durga Prasad Rath. He has the states of

Maharashtra, Madhya Pradesh, Gujarat, Goa and, Chattisgarh, under his supervision. He

looks after organized trade* of Frito Lay in these five states.

As per his instructions;

1. As an intern at Frito Lay India, I had to increase the reach of PepsiCo's food products

in the region allotted to me. The food products were; Lays, Kurkure, Aliva, Cheetos &

Quaker Oats.

2. Besides increasing the customer base, I had to understand the reasons why customers/

consumers love our products (strengths), and also why customers/ consumers don't

buy our products (weakness).

3. The obstacles faced can be broadly categorised as solvable and unavoidable, (the

categorisation has been given by me). The obstacles and its nature have been

explained later in the project.

4. Understanding what our competitors are doing better than us, why customers/

consumers prefer our competitors over us, etc.

*OT: explained later in the project.

So, now as we know the objective of my summer project, I would start with giving you an

introduction about the FRITO LAY's CATEGORIES & CHANNEL STRUCTURE.

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FRITO LAY CATEGORY INFORMATION

The food business has been broadly categorised as;

1. SNACKS: Snacks include biscuits, baked biscuits, traditional snacks, and western

salty. Western Salty snack is available in three types; potato chips, bridge and

extruded.

2. BREAKFAST CEREALS: Quaker Oats is a breakfast cereal.

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FRITO LAY CHANNEL STRUCTURE

As mentioned in the picture above; the FRITO LAY INDIA business is divided into two

branches;

1. TRADITIONAL TRADE

This branch looks after supply of Pepsi foods to the kirana stores across India and

collection of bills as well. Currently, about 80% of FRITO LAY revenue comes from

this branch.

2. ORGANIZED TRADE

This branch looks after supply of Pepsi foods to transport centres, means of transport,

entertainment institutes, food outlets, etc. The POS in the organized are shown in the

picture above. Currently, about 20% of FRITO LAY revenue comes from organized

trade.

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HIERARCHY

The organized trade on the territory of Mumbai was looked after by;

1 Zonal Manager

1 Area Sales Manager

3 Customer Executives

5 Distributors

About 20 Pre-Sales Executives

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BUILDING BLOCKS OF ORGANIZED TRADE

Primary and Secondary Sale: Primary sales is what a distributors buys from PepsiCo

and Secondary sales is what the distributors sells to the customers.

Distributor: Each zone in O.T. has one distributor. The distributor is responsible for

recruiting PSRs, cracking new outlets, delivering ordered products on time, paying

PSRs, etc.

Role of Pre Sales Representative (PSR): A PSR is recruited by the distributor. His

primary role is to service the existing clients/ customers, i.e. he has to visit them

regularly and take orders, get feedback, collect pending bills, market new products

and flavours, etc.

Role of Customer Executive (CE): A CE is recruited by PepsiCo. He is a link between

the ASM and PSRs and distributor. He overlooks the work of the PSRs and

distributors. He is also responsible for cracking new outlets.

Role of Area Sales Manager (ASM): The ASM is also recruited directly by PepsiCo.

In O.T., only one ASM is responsible for the whole of Mumbai, i.e. all five zones. He

sets targets for the CE to achieve. The target is in volume as well as in value. He also

forecasts future sales (requirement) and forwards it to the manufacturing unit. This

enables the manufacturing facility of PepsiCo to meet the market demands. He takes

weekly briefings of all the CEs under him. He is also responsible for tying up with

food & beverage outlets, e.g. SUBWAY, etc. He plans all the promotional schemes

and strategies.

Role of Zonal Manager (west zone): The zonal manager, west zone, has under him the

five states of Maharashtra, Gujarat, Goa, Madhya Pradesh and Chattisgarh. He visits

the market on regular basis to find the problems faced by Frito Lay. He plans all the

promotional schemes and strategies.

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TERRITORY DIVISIONS

Territory: Mumbai

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MUMBAI DIVISIONS

1. DAHISAR TO BANDRA

2. MAHIM TO CHURCHGATE

3. CST TO MULUND (CENTRAL LINE)

4. CST TO CHEMBUR (HARBOUR LINE)

5. GOVANDI TO PANVEL & THANE

CST- CHATRAPATI SHIVAJI TERMINUS

ZONE ALLOCATION

1. ZONE 1 : Mr. Sachin Jadhav

2. ZONE 2 : Mr. Mohammad Ilias

3. ZONE 3 : Mr. Mohammad Ilias

4. ZONE 4 : Mr. Mohammad Ilias

5. ZONE 5 : Mr. Vibhash

ZONE 1

ZONE 2

ZONE 3

ZONE 4

ZONE 5

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CHARACTERISTICS OF ORGANIZED TRADE

1. Average business volume per outlet

The amount of business provided by one outlet under O.T. channel is much higher

than an outlet in the T.T. channel. As a result, more revenue is generated in O.T. than

in T.T. even with equal number of outlets.

Thus, we can summarise that, as per average business per outlet; O.T. > T.T.

2. Discount rates

As the amount of business per outlet in O.T. is more, the buyers in this channel are

given higher discounts than retailers in the T.T. channel.

3. Credit period

As the customers in the O.T. channel usually give voluminous orders, they are likely

to get more credit period than the retailers in T.T. channel. In the O.T. channel,

customers get a credit period of up to 2 months.

Higher credit period is to encourage the customers to keep ordering and thus, maintain

a healthy business relationship.

4. Documentation

In O.T., most of orders are directed through a central purchasing system/ practice

followed by the company/ client. As result of other such practices followed by the

company/ client, a lot of documentation is needed in O.T. E.g.: Vendor Registration

Form, requiring to fill a lot of details, Quotation, Credit Period approval letter, etc.

5. Urgency of Delivery

In O.T., we receive lots of orders on a short notice. The deliveries tend to be on

urgency basis. The orders being large and clients being important, the delivery cannot

be delayed.

As a result, operating costs go up. With even 10 urgent deliveries per month, the

logistics cost goes up considerably and moreover, manpower crunch.

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6. O.T. Vendor Authentication

The O.T. channel faces issues of overlapping from the T.T. channel. The distributors

of T.T. end up supplying to O.T. potential clients. As they are not entitled to give

higher discounts, the account is lost out to a competitors on the grounds of

uncompetitive pricing!

WHY ORGANIZED TRADE?

1. In developed countries, organized trade accounts for about 75% of the revenue

generated by Frito Lay and traditional trade accounts for a mere 25% of the revenue.

The reason for such a vast difference in India clearly points out at the scope for

development of the O.T. channel.

2. Apart from the above mentioned reasons and characteristics of the O.T. channel, India

is a developing economy and provides greener pastures for investments. A good

number of MNCs are either entering the Indian markets or expanding their Indian

operations. Hence, we are looking at a growing number of corporate offices in India,

which provides for a bright business opportunity for Frito Lay.

3. Coffee shops are popping up across India. India also has a couple of established

coffee shop chains, like CCD, Barista, etc. Such coffee shops can be a potential

revenue generator.

4. In comparison with developed nations, India still has a lot of scope for development

when it comes to airline industry. So, keeping in mind a bright future of the Indian

airline industry, supplying PepsiCo food products to airline caterers can contribute

enormously to PepsiCo's revenues.

5. Hospitals: Developed nations have about 300 beds per 1000 people. Whereas India

has only 30 beds per 1000 people. So, definitely, hospital business is going to boom

in the years to come. Hospitals have canteens to cater to patients and visitors.

PepsiCo has food products which are healthy as well as indulgent! So, definitely

it can make its way into hospital canteens.

59 | P a g e

6. WINE shops: After recent hike in alcohol prices and service tax and VAT, bars and

pubs have been experiencing a downfall in average footfall! People, now-a-days,

prefer to buy alcohol from wine shops and consume it in the comfort of their homes

or other suitable places.

This wine shops frequenters prefer to eat some snacks while consuming

alcohol. So here we have another potential source of revenue!

7. With the multiplex culture catching up in India, it opens up more outlets for selling

PepsiCo food products like Lays, Kurkure and Aliva.

For e.g.

CINEMAX, a multiplex chain, is in about 40 locations across India and are in

the process of opening up more multiplexes.

40 locations means they at the least have about 80 screens across India. 80

screens means a lot a cinema goers, i.e. on an average about 4500 people per

week!

Calculating further, per year it makes up about 3,00,000 viewers; and that too

if each location has only "2" screens!

CINEMAX allows food companies to sell their products across its 40 screens

provided the food companies sign a branding deal of Rs. 50,00,000!

Now, as per my experience during my internship, even a single screen theatre orders

about 6 cartons of Lays or Kurkure per week. The SKUs are of Rs.10/-, which is

given to the theatres at Rs.8/- and each carton contains 90 packets.

So, per month a single screen theatre gives a business of Rs. 21,600/-.

(5weeks x 6cartons= 30 cartons;

30 cartons x 90pieces= 2700 pieces;

2700pieces x Rs.8= Rs. 21600/-)

So, annually, a single screen theatre would give a business of Rs. 2,59,200/-

So, as per all the above points; even if a food company signs branding deal

with CINEMAX, it would still make profits. Calculations are given below;

BRANDING DEAL calculation: Rs.259200 x 40screens= Rs. 1,03, 68, 000/-

By signing a Rs.50 lakhs deal with CINEMAX, a food company stands a

chance of earning about Rs.1 crore in revenue!

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8. Apart, from the above mentioned opportunities, given below are other potential

sources of revenue;

Amusement Parks

Upcoming Metro stations

Star rated Hotels

Railway AHAR and IRCTC

Airports

Bus stands

Juice parlours

Events (Corporate events, fairs, exhibitions, etc.)

Educational Institutes

Bakery shops

Petrol pumps, etc.

Thus, Organized Trade is an attractive channel with more average business per outlet.

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ACHIEVING THE OBJECTIVE

On the first day, the Zonal Manager (West), Mr. Durga Prasad Rath briefed me about

the kind of work I was supposed to do. He gave me my summer project title. I was

explained how I can leverage my field work experience to realise my project title with

full integrity.

As rightly said by David Ogilvy, "The more informative your advertising, the more

persuasive it will be." So, putting the quote in practice, I studied all the food products

thoroughly; MRP, weight, benefits, flavours, etc. Knowing what your product really

helps while selling it!

From the second day, I started with my field training under Mr. Sachin Jadhav (CE,

Dahisar to Bandra) and Intern Mr. Pratik Rangari. I learnt how they started the

conversation with potential customers and how they pursued them and closed the

deal.

Price negotiation was an important part and so also giving the right price.The training

continued for five days.

Post training, I was allotted the area form Dahisar to Bandra. I was to increase the

reach in institutions like; colleges, schools, hospitals, theatre, restaurants, pubs, wine

shops, etc.

I started from Dahisar and Borivali on the first day. Using Google, just dial, Google

map; I choked out a road map, outlet list to help me how to go about tracking new

outlets. The other regions were visited later on. Certain regions were covered

completely on foot so as to not miss any potential outlets.

As I advanced, I learnt that telling a customer how the product can benefit him

generates a positive response, in most cases. Telling them about the size of the

company really doesn't help. Apart, from the price and product, regular service

matters a lot to retailers.

So, basically it was through training, product research, competitor's analysis and self-

learning, I went about achieving my objectives.

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GRAPHICAL PRESENTATION: CLIENT VISITS

At the end of the summer project duration, I had visited and cracked a good number of

outlets. The above given graph gives a rough idea about the types of outlets visited.

In B2B marketing, follow-up visits take up most of your time spend on field!

0

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63 | P a g e

MARKETPLACE CHALLENGES & SOLUTIONS

1. Creating a database of potential customers. In order to create one, I used internet, Just

Dial services, conversed with retailers and well connected people, took help from

salesman and CE Mr. Sachin Jadhav. Covering the allotted area on foot helped in

reaching maximum number of outlets.

2. Competitor's schemes and policies. Our competitors provided better margins and they

also exchanged packages that were eaten away by rodents. PEPSICO didn't entertain

such kind of exchange. So, the only option left was to provide them will anti-rodent

racks. But the racks cost about Rs. 5000/-. So, if the customer is not giving a good

business to the company, their rack request wasn't entertained. As far as, credit policy

is concerned, it rests with the distributor. It may differ from region to region.

So, on this front, there was point where I had to just focus on the product's brand

image and quality and tell them about how fast moving our products are!

3. Rumours which malign the brand's name. Rumours like Kurkure containing plastic

was a major concern for the customers to trust our company's other products as well.

The only thing I had to fall back on was to tell them, that there has been no complains

nor has any consumers suffered after eating our products. If that would have been the

case, the company would have shut down the particular product's manufacturing!

4. Fixing an appointment.

5. Differentiating between the quality of Pepsi Co.'s and competitor's products. As a

salesman, it was my duty to know the difference between the our products and those

of our competitors. The customers thought that Balaji and others have the same taste

as of Lays and Kurkure. But that wasn't really the case.

6. Quantity issues; a decision can only be taken by the senior management.

7. Aligning distribution schedule with customer's preferences, a proper time-table for

delivery schedules, which day-which place.

8. Getting a lower price passed from the company's senior officials for a big order.

Giving more liberty to Customer Executives in terms of margin flexibility. Fixing

margin slabs as per the volume ordered.

9. Travelling and route planning. A thorough study of the routes frequented for delivery

and choosing the delivery time as per the traffic. Preparing a best route chart as per

the different time of the day.

10. Getting the salesmen service the new outlets.

11. Getting racks from the company to provide to the customers.

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LEARNINGS & OBSERVATIONS AT THE MARKETPLACE

1. As far as market share is concerned, Lays still has the leading market share, followed

by Balaji which is gaining steady grounds. Bingo, Hippo, Diamond, A- Top, etc. are

also prevalent. (MARKET SHARE IMAGE IS ON PAGE 44)

2. Our competitor's aim at increasing their market share by giving more quantity in all

the SKUs and better margin to the retailers.

3. Balaji provides better value for money,(more quantity at the same price) than Lays

and Kurkure.

Balaji gave more quantity in certain flavours it launched first. This flavours were

mostly all Indian snacks. The flavours that the launched later have almost the same

quantity as Kurkure.

Now, it has become a talk of the town that Balaji gives more quantity always at the

same price!

4. Many people due to religious sentiments prefer to keep Balaji. The name "Balaji"

refers to the Indian deity, "Venkateswara", a form of Vishnu.

5. More and more retailers have started pushing our competitors products as they

provide better margins. Many have even stopped keeping Lays, primary reason being

poor service.

6. Lays has an edge over its competitors with regards to products like, ASCO (American

style Cream and Onion. Other flavours are effortlessly imitated by the competitors.

The taste of the imitated products is not as good as Lays but the majority of the

consumers don't really opt for trial and error method. They prefer to go with more

quantity at same price.

7. W.r. to salesmen, recruitment and job enrichment is not good enough. The quality of

work suffers. As a result, distribution system and service also gets affected.

8. Late deliveries, often.

9. Frito Lays spends a fortune on advertising, but does a little for the very people who

help them sell their products. Cutting down a little on advertising budget and giving

an incentive to retailers would be a good idea. To prove my point, I can give Balaji as

an example. Balaji doesn't advertise and passes on the benefit in terms of more

quantity and better margins. Even without marketing, Balaji is known to every

consumer of snacking products.

65 | P a g e

10. With increase in taxes, boozing out in pubs and bars has become expensive. As a

result, more and more people have started buying from wine shops and are having

their drinks at home or outside. They prefer eating chips as a snack while boozing.

Now the kind of consumer in this category are mostly price sensitive and conservative

by taste.

11. To attract this price sensitive consumers, we need to come up with lesser priced SKUs

which are more Indian in taste. The answer is LEHAR, a Pepsi Co. product. But the

distribution and manufacturing has been outsourced to A-TOP. What I am suggesting

is that, if we get the distribution in our hands, it would become easier to sell Lays and

Kurkure along with Lehar to wine shops. A whole range of products with different

flavours and price, (Rs. 2 & 5). Another reason, alcohol is priced at 5s, 8s, 4s,etc. (98,

65, 55, etc). So such prices solve the problem of "change" for the wine shop operator.

ANALYSING THE 3 Ps

As per the project title, out of the four marketing Ps, only three have been considered;

Product

Price

Promotion

The fourth P, Place, has been considered common as Mumbai.

PRODUCTS & PRICING

Analysis of FRITO LAY INDIA products & its prices;

1. LAYS

2. LAYS BAKED(Lays Baked Original Salted, Cream, Herb & Onion, Sunkissed

Tomato)

3. KURKURE

4. ALIVA

5. LEHAR

6. QUAKER OATS

7. CHEETOS

8. UNCLE CHIPS

(P.S.: LEHAR Namkeen, though a product of PEPSICO, its manufacturing and distribution

has been outsourced to ATOP, another chips manufacturer).

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SR.NO. PRODUCT FLAVOUR WEIGHT

PIECES PER

CARTON VALUE IN R.S.

1 LAYS MAGIC MASALA 13 208 5

2 LAYS SPANISH TOMATO 13 224 5

3 LAYS AMERICAN ONION 13 224 5

4 LAYS CLASSIC SALTED 13 208 5

5 LAYS HOT & SWEET 13 224 5

6 KURKURE MASALA MUNCH - 25 225 5

7 KURKURE RAJASTHANI 25 225 5

SR.NO. PRODUCT FLAVOURS WEIGHT

PIECES PER

CARTON VALUE IN R.S.

8 KURKURE HYDERABADI 25 225 5

9 KURKURE RED CHILLY CHATKA- 25 225 5

10 KURKURE TWISTEEZ 25 234 5

11 LAYS MAGIC MASALA- 27 90 10

12 LAYS SP.TANGO 27 90 10

13 LAYS AMERICAN CREAM N ONION 27 90 10

14 LAYS CLASSIC SALTED 27 90 10

15 LAYS HOT & SWEET 27 90 10

16 LAYS L-M-N LIME 27 90 10

17 UNCLE CHIPS UC ST 36 96 10

18 UNCLE CHIPS UC PS 36 96 10

19 UNCLE CHIPS UC CM 36 120 10

20 UNCLE CHIPS PAPRI CHAT 36 120 10

21 KURKURE MASALA MUNCH 52 96 10

22 KURKURE RAJASTHANI 50 96 10

23 KURKURE HYDERABADI 50 96 10

24 KURKURE RED CHILLY CHATKA 50 96 10

25 KURKURE TWISTEEZ 50 96 10

26 LAYS MAGIC MASALA 61 56 20

27 LAYS SP.TANGO 61 56 20

28 LAYS AMERICAN CREAM N ONION 61 56 20

29 LAYS CLASSIC SALTED 61 56 20

30 KURKURE MASALA MUNCH 115 60 20

31 KURKURE HYDERABADI 115 60 20

32 KURKURE RAJASTHANI 115 60 20

33 KURKURE RED CHILLY CHATKA 115 60 20

34 CHEETOS MASALA BALL 34 120 10

35 CHEETOS TANGY LOOPS 34 120 10

36 CHEETOS CHEESE PUFF 34 88 10

37 CHEETOS CHEESE BALL 34 120 10

38 ALIVA ALIVA ORIGINAL SALTED 60 96 15

39 ALIVA ALIVA PINDI MASALA 60 96 15

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40 ALIVA ALIVA MINT & HERBS 60 96 15

41 ALIVA ALIVA TOMATO & ROASTED 60 96 15

42 ALIVA ALIVA INDIAN MASALA 60 96 15

43 ALIVA ALIVA CHEESE DELIGHT 60 96 15

44 LAYS BAKED BAKED O.SALTED 35 80 15

45 LAYS BAKED BAKED SUN TAMATO 35 80 15

46 LAYS BAKED BAKED CH/ONION 35 80 15

47 QUAKER OATS QUAKER OATS REFILL 1KG 1 KG 12 129

48 QUAKER OATS QUAKER OATS REFILL 400GM 400 GMS 24 61

ANALYSIS:

(The comments are made in general after analysing all the products sold by PepsiCo. In case

of a special comment, it has been mentioned).

The quality of the products is the best in the chips market

Moreover, the flavours are also good. Though, there have been imitation of these

flavours, they have not been successful to create the same taste as FRITO LAY.

So, when it comes to quality and taste, PepsiCo still has an upper hand!

The issue is that of quantity!

Our competitors are eating up into Lay's market share by giving more quantity. Their

focus is on the middle class consumers and this class is in majority in India.

A competitor played smart by providing good quantity in its initial launches and thus,

created the perception that they provide more at the same price. The flavours that

were launched eventually had lesser quantity. Though, not as less as FRITO LAY's.

The packaging is up to standards as made mandatory by the FDA. The nutrition table

clearly mentions all the details.

Moreover, the packaging is also smarter than the contemporaries in the industry.

The pricing is the same as our competitors. Hence, the issue of value comes into

picture. The majority of the consumers prefer products with more quantity.

It comes naturally, that the middle class wants more quantity at the same price.

QUAKER OATS: The instant oats available for Rs.10/- is a good way to make the

consumers try it at least once. The other SKUs are also attractively priced. The rising

concern for health is helping the Oats industry to grow at a CAGR of 25%.

KEY STRENGHTS IN Product & Pricing segment: Taste of the flavours, packaging, brand

name.

Time for another PEPSI CHALLENGE, of reminding the consumers of the FRITO

LAY taste & reliability?

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PROMOTION

This part deals with the promotional activities undertaken by PepsiCo for increasing reach of

its products.

For the end-consumer:

1. LAYS

'No one can eat just one' campaign

'What's the programme?' campaign featuring Saif Ali Khan and later, M.S.

Dhoni

'Fight for you Flavour' consumer engaging campaign featuring Saif Ali Khan

and M.S. Dhoni.

Chip-N-Sauce campaign wherein a sauce sachet was given inside the packet;

Chilli Chinese with a Schezwan Sauce sachet and Chatpata Indian with a

Tamarind Sauce sachet.

Be a Little Dillogical

Pal Banaye Magical

Guess Whose Flavour?

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WORLD CUP CAMPAIGN

2. LEHAR

Taste zyada kyunki oil taza!

Khushiyon ka Khazana

The Joy of Sharing- Khao Khilao Khushiyan Badhao

3. UNCLE CHIPPS

Bole Mere Lips I love Uncle Chipps!

Uncle Chipps is warm, playful, lively, companionable and traditional at heart,

just like the good-natured uncle everyone in the family relates to and no

family gathering is complete without!

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4. KURKURE

Spend time with family ad campaign

Tedha hai par mera hai ad campaign

Saas Bahu ad campaign

Desi Beats campaign; No fun without Desipann!

Muh Kurkure Karo ad campaign

Chai-time Achievers campaign

Kurkure has been placed as fun and lovable quirks, i.e. crunchy new-age snack which stands

for light-hearted fun!

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5. QUAKER OATS

'Say Good Morning To Your Heart' ad campaign

'Make India Heart Healthy' campaign in association with APPOLO Hospitals.

www.goodmorningheart.com wherein register for a heart health test!

Quaker Smart Heart Challenge for 30 Days!

6. ALIVA

Tasty hai, Acha hai ad campaign

Upar se tasty, Andar se healthy featuring Vidya Balan, a bollywood actress.

Available in about 11 healthy flavours!

7. CHEETOS

Cheetos promotional campaign didn't last much long. The most memorable one

was CHEETOS WHOOSH campaign! It was about seeing the world differently

and hence, get a fun and different life!

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FOR RETAILERS:

1. In order to convince retailers to keep PepsiCo products, they are given free pieces for

every dozen they order, in Traditional Trade. In O.T., they are given better margins

and no free units.

2. They are provided with display racks, simple ones or anti- rodent racks.

3. If the products are not sold until expiry, they are exchanged!

4. If the retailers are giving good business, they are given an added benefit of credit

period, on demand.

5. For some seasonal flavours which don't attract good sales, in order to extinguish the

remaining stock, they are given away to the Point Of Sales, at a very discounted rates

or even for free!

The comparison of retailer's scheme of Frito Lay and its competitors has been done in the

earlier part of the project.

Some of the attractive schemes given by the competitors;

Retailer's Platinum Card, Gold Card, etc. adopted by ITC.

Margin scheme by Balaji

Free SKUs scheme

Exchange of rodent damaged SKUs, etc.

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SUGGESTIONS

1. With the distributors, prepare a logistics and delivery plan, also keeping in mind

sudden and urgent orders. A logistics plan will help in timely deliveries.

2. Creating a standard procedure (& checklist) for recruitment of a new salesman and

strict rules and regulations to be followed by all the salesmen.

3. Making it compulsory to report to the distributor point at the end of each working day

and pass over the whole day's working to the distributor (order and progress). This

helps in inducing a certain amount of discipline and control over the work force.

4. Creating a standard procedure for selection of distributor.

5. Moreover, making it mandatory for the senior officials to meet the distributor at

regular intervals and the distributor needs to submit certain reports to the company.

Reports like primary and secondary business report, Stock, Expiry stock, progress

report, SKU progress report, Flavour report, salesmen report, etc.

6. Such reports will help the senior officials in understanding the market in a better way

and help them in forecasting, planning, firing, marketing, etc. An added benefit would

be that the distributor would be disciplined and automatically answerable to the

company.

7. Provide with anti-rodent racks to potential customers, of course with a minimum

opening order.

8. Developing an automatic ordering system for repeat orders.

9. If not the 7th option, then sending out the delivery van along with the salesman.

Delivery given right at the time of order.

10. Proper training for CEs, salesmen and distributor and also a product test.

11. Schemes for retailers. A display to be placed at their shop and they will get some cash

for keeping the ad. This cash would cover up for lesser margin. Another scheme can

be like free packets or point system.

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12. Keep certain running flavours as perennial and making other flavours a seasonal

affair.

EXAMPLE;

Lays flavours like American Style Cream and Onion, Classic Salted and Magic

Masala are the fast moving ones. So this flavours will be year round.

Other flavours like Hot n Sweet, Spanish Tomato, IPL Season, etc. should be made a

seasonal affair. This flavours should be used as a seasonal attraction, to keep things

new and running.

13. May be popularising a concept like LAYS Calendar can be a good idea. Lays

Calendar means, January, February and March are the Hot n Sweet Months, April and

May IPL Season and so on.

14. The pizza industry is gaining momentum in India. So, may be tying up with Pizza

Hut, only for home deliveries, to give out Lays and Kurkure SKUs for free or instead

of change.

15. Tying up with Shivneri, luxury bus service of the state government. About 300

Shivneri bus trips originate from Mumbai each day. So, a similar concept of giving

away Lays and Kurkure SKUs instead of change or keep it in Shivneri buses for sale

would be new channel for sale. To avoid any agitation from the bus conductor, for

every packet he sells, he will get 50 paise or a certain amount.

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KEY LEARNINGS:

1. Apart from increasing visibility on television and other mediums of communication, I

would concentrate a little more on devising a scheme for retailers, display benefits or

better margins.

2. The realisation comes from the fact that fewer and fewer consumers will be concerned

about buying a certain product once they disappear from the retailer's shelf.

3. I would not sideline the wealth on the bottom of the pyramid, making a rich product

but a little more quantity, would maintain the image of the product for the rich ones as

well as maintain a goodwill among the lesser privileged.

4. Lack of advertisement may work in the favour of the brand, provided it's product and

distribution is good. The brand may emerge to be a business brand.

5. Negotiation skills have improved.

6. Got to know about how to understand a market i.e. market analysis.

7. There are many problems apart from marketing and production problems that are not

easily visible. But together this problems hamper the functioning of company. Putting

in efforts to know about such problems is worth it.

76 | P a g e

CONCLUSION

BARGAINING POWER OF SUPPLIERS

1. As Frito Lays follows "Partnership with Farmers" , they are not under

much of pressure from the supplier i.e. the farmer.

2. PepsiCo practices contract farming across the country in order to source

raw material or its products.

3. The other suppliers: Frito Lays' products sell like hot pancakes in India.

Besides, it is also a MNC and hence, it also exports some of its Indian

products. With such a lucrative business opportunity for its other

suppliers, why would someone lose such a account by merely

pressurising.

4. Lays has already gotten into making organic products, (LAYS

NATURAL) in the US.

So, as of now, there are not many organic farmers in India. So, in order to

take such a decision in India, it needs to do a lot of pre-launch work of

partnering with more farmers to grow organic crops.

5. Supplies do determine the success of Frito Lay in the market.

6. There is no supplier's threat for forward integration.

7. Switching cost may be moderate, but if production slow down is

considered, it may be termed as high.

BARGAINING POWER OF BUYERS

1. Buyers are definitely large in number and small in size, (retailers, etc).

2. The threat of substitute products is high.

3. Frito Lay's products are not critical for the buyer's success.

4. Switching costs are not at all high.

5. With food processing plant costing about $80 million, there is a low risk

of backward integration from the buyers.

6. However, if all these retailers brought together, they form an association

which have a united voice to speak up against the company. For example,

P&G was boycotted by Mumbai's medical shop and retail shop owners as

they would not give a good margin. After the boycott, P&G started giving

higher incentives

77 | P a g e

THREAT OF SUBSTITUTE PRODUCTS

1. The customers/ consumers have to bear no switching cost to switch to its

substitute product or even competitor's product.

2. There are substitute products which are lower in cost and there also substitute

which cost the same but give more quantity, i.e. more value.

3. Both of the above mentioned substitute's quality is acceptable enough.

4. The products offered by Frito Lays is definitely not a differentiated product.

RIVALRY

1. There is tremendous competition in snacks industry with giants like Parle, ITC,

MTR, Perfetti, Procter & Gamble , ConAgra Foods, Nabisco, etc and other

SMEs fighting for a pie of the Rs. 7000 crore snacking market.

2. Apart from the branded snacks segment, the unorganized or unbranded snacks

industry is the biggest competitor for Frito Lays.

3. Another major competition is from healthy snacking industry due to a rising

concern for eating healthy and to avoid snacks!

4. The fast food joints also pose a major threat to Frito Lay's products. E.g.:

McDonalds, Vada pav stalls, etc.

THREAT OF NEW ENTRANTS

1. The capital needed to get into the snacking industry is not so high.

2. Economies of scale is achievable if the new entrant has that much of capital. But

achieving efficiency on such a large scale may take some time.

3. Customer switching costs are not high at all.

4. Distribution in the urban areas may be easy and doable but penetrating into the rural

areas and developing such a network will take a long time and lots of efforts.

5. Pepsi does have an advantage in terms of raw material procurement due its "

Partnership with Farmers" initiative. Other cost advantage can be promotional

advantage.

6. Government regulations for the snacking industry are not steep.

7. FRITO LAYS does enjoy a brand loyalty with the highest market share of about 48%.

The snacking industry is a highly competitive industry with wide of range of substitutes

available, branded and unbranded.

With entry barrier being low, it further intensifies the fight for higher market share.

With continuous innovation needed in this industry, small players may not be able to

stick around for a long time.

78 | P a g e

WORKING WITH PEPSICO

Working with PEPSICO was a great learning curve. I got to know many ground realities. I

got a chance to work with lower most people in the company's hierarchy as well as chance to

interact with the sellers of our product. Selling provides a unique way of conducting a survey,

which helps in knowing the retailer psychology. It has helped me in becoming better at

communication, not as per English, but saying the right words at the right time and place.

As mentioned earlier, at the time of my joining there were about 160 outlets, at the end of my

internship there were about 250 outlets. Some of the outlets are still under negotiations which

were initiated by me.

BIBLIOGRAPHY

Primary Source:

1. Observation

2. Q&A with retailers

3. Q&A with consumers at random

4. Q&A with sales rep. of other companies.

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79 | P a g e

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80 | P a g e

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PRINT:

1. Book on Strategic Management by;

Mr. Mani Kutti

Robert A. Hitt

2. National Sunflower Association;

Dynamics of the Snack Food Industry by Sally Lyons Wyatt

3. Economic Times

4. Marketing Management by Mr. Philip Kotler

5. PEPSICO Annual Report 2011

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