1. Primary Question for PepsiCo
Can PepsiCo continue their strong performance in the North America market, and also strengthen their presence in developing markets, while at the same time responding to changes in consumers’ preferences?

2. Secondary Questions What has PepsiCo done in the past to grow?
How is Pepsi structured and what are the relative performances of those divisions?
How are those divisions performing in various markets?
How is Pepsico performing in the snack foods industry?

3. Keys to PepsiCo’s Success and Growth
Soft Drinks
Salty Snacks
Complementary Goods
Strategic Acquisition
Ability to Build Strong Brands
Strong Relationships with Retail Partners
Growth

4. PepsiCo Growth
PepsiCo’s growth strategy has been mainly external focused.
Several successful mergers and acquisitions over the years.
Adapting to changes in the external environment are critical to sustainable growth.

5. External Environment: PEST
Category
Issue
Threats/Opportunities
Ranking
(1-5)
Political
FTC stipulations to merger of Quaker Oats
Threat- not allowing PepsiCo to utilize Power of One Strategy with Gatorade. May impact their ability to acquire other companies in future. 4
Economic
Rising incomes in BRIC countries
Opportunity – increase in discretionary income will raise spend on drinks and snacks 5
Social
Change in customer preferences to healthier food and drink options in developed countries
Threat to many of PepsiCo’s existing products.
Opportunity for Quaker brands and new product innovation
Technological
IT improvements in distribution network.
Opportunity – improved relationships with retailers, less chance of stock outs. 3
“Significance” represents value-neutral impact, and may be either positive or negative for Whole Foods.

6. US Liquid Refreshment Market
Beverage
Share of Total US Beverages
Volume Growth Rate
Pepsi Brand
Pepsi Market Share
Pepsi Market Position
Carbonated Soft Drinks
48%
-2.6%
Several
31.1%
#2 behind Coke (41.6%)
Bottled Water
29%
6.9%
Aquafina
15% #1
Fruit Beverages
13%
-3.3%
Tropicana
30%
#1, Coke Brand Minute Maid #2 at 25%
Sports Drinks
4.4%
2.5%
Gatorade
76%
RTD Tea/Coffee 3%
14.3%
Lipton and Frappuccino
39.5%
#1, 4x Coke’s Nestea
Enhanced Water
1.7%
30.5%
Propel
40%
Energy Drinks 1%
24.6%
SoBe
Negligible
Negligible (Red Bull #1 at 40%)
Pepsi trailing Coke in large but negative growth carbonated soft drinks. Also little presence in high growth energy drinks. Possibly look to acquire Red Bull.
Pepsi dominating in the rapidly growing non-carbonated beverage categories which position it well in North American market as consumers look for healthier drink options.

7. PepsiCo International Markets
Country/Region
Carbonated Market Share
Salty Snack Market Share
India
49%
46%
Russia
24%
43%
China
36%
16%
Brazil
N/A
Mexico
75%
Country
Carbonated Soft Drinks per month
Salty Snacks per month
United States
60 servings
6.6 servings
Other Developed
23 servings
4.0 servings
Developing
6 servings
0.4 servings
Great opportunity for growth in both developed and developing international markets, especially Brazil and China. Strong market share in many today, with exception of China
2. Pepsi should be focused on growing market share in China Salty Snacks, predicted to be largest market by 2010.
3. Power of One strategy could play well in international markets.

8. Quaker Foods Brands
($500 million total, 75% from 6 countries)
Weak International Sales
(over ½) in better-for-you and good-for-you products
Strong sales
With exception of Gatorade, Quaker brands have limited success internationally.
Opportunity for growth in US and developed countries as consumers shift to eating healthier.

9. Quaker Foods North America
Product
Volume Growth Rate
Market Share
Market Position
Quaker Oats
N/A
58% #1
Quaker Ready to Eat Cereal
Mid single digits
14%
#3 behind Kellogg’s (30%) and General Mills (26%)
Aunt Jemima
Slight decline
Rice-A-Roni
Double digit decline
33%
Many Quaker Foods brands have strong market share, but not in the salty food or beverage markets. Majority of brands compete in Ready to Eat Cereal space, against well-established competitors Kellogg’s and General Mills.

10. PepsiCo Organizational Structure 2007
PepsiCo Inc.
Frito Lay North America (FLNA)
29% Net Revenue
36% Operating Income
28% Capital Expenditures
22% Total Assets
PepsiCo Beverages North America (PBNA)
26% Net Revenue
28% Operating Income
20% Capital Expenditures
24% Total Assets
Quaker Foods North America (QFNA)
5% Net Revenue
7% Operating Income
2% Capital Expenditures
3% Total Assets
PepsiCo International (PI)
40% Net Revenue
29% Operating Income
50% Capital Expenditures
50% Total Assets

11. PepsiCo after 2008 Realignment
PepsiCo Inc.
PepsiCo Americas Beverages
PepsiCo Americas Foods
North America
Frito Lay
Quaker Foods North America
Latin America Foods
PepsiCo International
UK and Europe
Middle East
Africa and Asia
Appears goal of realignment of divisions was to put more focus on growth outside North America.
Question we have is did PepsiCo go far enough? Does not appear to be much of a change.

12. Question Facing PepsiCo
DOES
Non-Carbonated Drinks
Healthy Snacks
Complementary Goods

13. How is Pepsico Performing in the Snack Foods Industry?

14. Salty Snack Food Industry – Key Trends
Due to these 3 key industry trends, Pepsico started developing new flavors of salty snacks, using healthier oils in chips, & packaging snacks in smaller bags.
Pepsico should differentiate its products while staying committed to the industry trends.

15. Frito Lay’s Commitment to Industry Trends
Eliminating trans fats & acquiring Flat Earth showed FLNA’s commitment to the publics growing awareness of nutritional content.
Introduction of new chip flavors was a commitment to the indulgent snacking trend.
Did these commitments to industry trends help or hurt Pepsico’s market share of convenience food?

16. U.S. Convenience Food Market Share
Pepsico is the leading manufacturer in the market due to its commitment to industry trends.
Their only close competition seem to be from Kraft Foods & Hershey. But you cannot count out the 37% of the market that “other” manufacturers currently have.

17. Pepsico’s International Salty Snack Food Market Share by Country
2006 % of Market
Share
2010 Market Sizes (projected)
Mexico 75 #4
Holland 59
South Africa 57
Australia 55
Brazil 46
#1 or #2
India
United Kingdom 44 #3
Russia 43 #5
Spain 41
China 16
There is significant growth opportunity in international markets. Pepsico will need focus on gaining more market share in the top 3 markets in They will also benefit from an increase in servings per month in both developed and developing international countries.