Presentation on theme: "Primary Question for PepsiCo"— Presentation transcript:
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 DrinksSalty SnacksComplementary GoodsStrategic AcquisitionAbility to Build Strong BrandsStrong Relationships with Retail PartnersGrowth
4 PepsiCo GrowthPepsiCo’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 CategoryIssueThreats/OpportunitiesRanking(1-5)PoliticalFTC stipulations to merger of Quaker OatsThreat- not allowing PepsiCo to utilize Power of One Strategy with Gatorade. May impact their ability to acquire other companies in future.4EconomicRising incomes in BRIC countriesOpportunity – increase in discretionary income will raise spend on drinks and snacks5SocialChange in customer preferences to healthier food and drink options in developed countriesThreat to many of PepsiCo’s existing products.Opportunity for Quaker brands and new product innovationTechnologicalIT 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 BeverageShare of Total US BeveragesVolume Growth RatePepsi BrandPepsi Market SharePepsi Market PositionCarbonated Soft Drinks48%-2.6%Several31.1%#2 behind Coke (41.6%)Bottled Water29%6.9%Aquafina15%#1Fruit Beverages13%-3.3%Tropicana30%#1, Coke Brand Minute Maid #2 at 25%Sports Drinks4.4%2.5%Gatorade76%RTD Tea/Coffee3%14.3%Lipton and Frappuccino39.5%#1, 4x Coke’s NesteaEnhanced Water1.7%30.5%Propel40%Energy Drinks1%24.6%SoBeNegligibleNegligible (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/RegionCarbonated Market ShareSalty Snack Market ShareIndia49%46%Russia24%43%China36%16%BrazilN/AMexico75%CountryCarbonated Soft Drinks per monthSalty Snacks per monthUnited States60 servings6.6 servingsOther Developed23 servings4.0 servingsDeveloping6 servings0.4 servingsGreat opportunity for growth in both developed and developing international markets, especially Brazil and China. Strong market share in many today, with exception of China2. 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 productsStrong salesWith 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 ProductVolume Growth RateMarket ShareMarket PositionQuaker OatsN/A58%#1Quaker Ready to Eat CerealMid single digits14%#3 behind Kellogg’s (30%) and General Mills (26%)Aunt JemimaSlight declineRice-A-RoniDouble digit decline33%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 Revenue36% Operating Income28% Capital Expenditures22% Total AssetsPepsiCo Beverages North America (PBNA)26% Net Revenue28% Operating Income20% Capital Expenditures24% Total AssetsQuaker Foods North America (QFNA)5% Net Revenue7% Operating Income2% Capital Expenditures3% Total AssetsPepsiCo International (PI)40% Net Revenue29% Operating Income50% Capital Expenditures50% Total Assets
11 PepsiCo after 2008 Realignment PepsiCo Inc.PepsiCo Americas BeveragesPepsiCo Americas FoodsNorth AmericaFrito LayQuaker Foods North AmericaLatin America FoodsPepsiCo InternationalUK and EuropeMiddle EastAfrica and AsiaAppears 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.
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 MarketShare2010 Market Sizes (projected)Mexico75#4Holland59South Africa57Australia55Brazil46#1 or #2IndiaUnited Kingdom44#3Russia43#5Spain41China16There 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.