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					COMPANY OVERVIEW ................................................................................................ 3
      BEVERAGES .............................................................................................................................. 3
      SNACK FOODS ........................................................................................................................... 4
INDUSTRY ANALYSIS ................................................................................................. 4
      BEVERAGES .............................................................................................................................. 4
      SNACK FOODS ........................................................................................................................... 6
COMPETITIVE POSITIONING ........................................................................................ 7
      BEVERAGES ...............................................................................................................................7
      SNACK FOODS ............................................................................................................................7
CORE COMPETENCIES................................................................................................ 8
DIVERSIFICATION STRATEGIES ................................................................................... 9
DISRUPTIVE TECHNOLOGIES ..................................................................................... 10
PEPSICO’S GLOBALIZATION.......................................................................................... 10
      COMPETITION ..........................................................................................................................10
      TRANSPORTATION COSTS ......................................................................................................... 11
      PRODUCT LIFE-CYCLE.............................................................................................................. 11
   Components of International Strategy ................................................................................ 11
      HANDLING EXPANTION INTO UNIQUE AND CHANGING MARKET SEGMENTS ................................ 11
      MERGERS, ACQUISITIONS AND PARTNERSHIPS .......................................................................... 12
      RELOCATION STRATEGIES ........................................................................................................ 12
      TECHNOLOGY INTENSITY ......................................................................................................... 12
      ADVERTISING AND MARKETING STRATEGIES ............................................................................. 12
   Implementation of International Strategy ........................................................................... 13
      ECONOMIES OF SCALE .............................................................................................................. 13
      COSTS OF GLOBAL COMMUNICATION......................................................................................... 13
      BARRIERS WITH BUSINESS CULTURES AND GOVERNMENT POLICIES .......................................... 13
COLLABORATION AND ALLIANCES .............................................................................. 13
      DOMESTIC COLLABORATION STRATEGIES ................................................................................. 14
      INTERNATIONAL COLLABORATION STRATEGY ........................................................................... 15
      DISTINCTION OF COLLABORATION STRATEGY BETWEEN ESTABLISHED AND EMERGING MARKETS
      ................................................................................................................................................ 16
STRATEGIC ANALYSIS CONCLUSIONS .......................................................................... 16
STRATEGIC RECOMMENDATIONS AND ALTERNATIVES .................................................. 16
      MARKETING/ADVERTSING RECOMMENDATIONS ....................................................................... 16
      RESEARCH AND DEVELOPMENT ............................................................................................... 17
      DIVESTITURE ........................................................................................................................... 17
      ACQUISITION ........................................................................................................................... 17
   Sample of Jones Soda’s current portfolio............................................................................. 19




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Executive Summary




                    2
COMPANY OVERVIEW

PepsiCo is a large international consumer products company focusing on convenient foods and
beverages. PepsiCo has two key industries: beverages, defined as non-alcoholic and non-dairy, and
snacks, defined as salty, sweet, and grain-based. PepsiCo‘s worldwide beverage operations include Pepsi-
Cola North America (PCNA), Gatorade/Tropicana North America (GTNA), and PepsiCo Beverages
International (PBI). Frito-Lay is PepsiCo‘s operating division in the snack food industry. PepsiCo has a
third operating division, Quaker Oats, which competes in the ready-to-eat cereal and other convenient
food markets. Quaker Oats is the smallest division and contributed less than 10% of the revenues to
PepsiCo. As such it has not been analyzed in depth as the beverage and snack food divisions and
industries have been for this report.

PepsiCo in total had revenues of $27 billion and net income of $2.7 million dollars. PepsiCo achieved
return on sales, assets and equity of 9.8%, 12.5% and 32.8%, respectively. The company has a current
ratio of 1.17 and a debt to equity ratio of .3 and liability to equity ratio of 1.5. Based upon these ratios it
appears that PepsiCo is in good financial health.

BEVERAGES
PCNA promotes and manufactures concentrates for sale to franchised bottlers and also sells syrups for
many Pepsi brands to national fountain accounts. It receives a royalty fee for licensing the distribution
and sale of Aquafina bottled water and also involved in joint ventures with Lipton and Starbucks to
produce and distribute tea and coffee products. PCNA manufactures and sells SoBe and Dole beverages
for distribution and sale to its bottlers. GTNA produces, markets, sells and distributes a host of
products including Gatorade, Tropicana and Dole juices. PBI manufactures concentrates for Pepsi, 7-
Up, Mountain Dew and other brands internationally for sale to both franchised and company owned
bottlers. PBI also operates bottling and distribution facilities in certain international markets. Finally,
PBI also produces, markets, sells and distributes Gatorade and Tropicana juices.

Each of PepsiCo‘s beverage operation units contributed to the overall growth of the company.
Worldwide beverage operations totaled over $10.44 billion or 39% of total net sales in 2001. Worldwide
beverage operations (before accounting for merger-related costs, restructuring, and other corporate
costs) totaled 35% or $1.68 billion of PepsiCo‘s operating profit.

PCNA reported increases of 4% in sales volume, 18% in revenue, and 13% in profit. In addition, PCNA
was able to gain market share away from Coca-Cola through innovative new products such as Pepsi
Twist, Sierra Mist, and Mountain Dew Code Red. The non-carbonated drink segment experienced
tremendous volume growth of 30% in 2001. PBI, which was formed after the PepsiCo-Quaker merger,
had increases in operating profit of 31%, revenue of 2%, and volume of 5%. PBI gained market share in
most of its top markets including significant progress in Lebanon, Russia, Vietnam, Venezuela, and
Egypt. Just as in PCNA, innovation and brand extensions helped fuel growth in a number of key
markets. However, the real key to PBI‘s success in 2001 was the substantial cost savings yielded by
combining the general and administrative functions of the Pepsi-Cola, Gatorade, and Tropicana product
lines. GTNA‘s 2001 had increases in revenue 5%, operating profit of 7%, and volume of 4%. The
increases resulted from Gatorade‘s brand extension, which helped increase Gatorade‘s 2001 volume
growth of 6%. Gatorade sells more than six times as much as its nearest competitor in major US




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channels (supermarkets, convenience, and drug stores). Tropicana not only has twice the market share
of its leading competitor, but also sells four of the top ten refrigerated juice brands in US supermarkets.

SNACK FOODS
Frito-Lay, PepsiCo‘s largest division, sells products in the salty, sweet grain-based snack foods industry.
An undisputed leader in these markets, the company has eight
of the ten biggest selling snack brands in the United States.              US Snack Chip Industry
Some of these include Lays, Doritos, Tostitos, Cheetos, Ruffles,
Rold Gold Pretzels, Sunchips, Funyuns, and Quaker Oats                       Other
granola bars. Outside the US, Frito-Lay International sells in                29%
several countries, most notably Mexico, Australia, and the U.K.
                                                                   Private
                                                                    Label
Financially, the Frito-Lay division contributed to PepsiCo‘s         9%
                                                                                       Frito-Lay
32.8% return-on-equity by providing 61% of the company‘s                 Procter         59%
total sales (65% of total operating profit) in 2001. These sales           and
represented a 6% increase in 2001, totaling more than $9.3              Gamble
                                                                           3%
billion. In terms of market share, Frito-Lay controls 59% of the
US snack chip market, with P&G holding the second market position at only 3% market share.

PepsiCo began its international snack food operations in 1966. Today, with operations in more than 40
countries, it is the leading multinational snack chip company, accounting for more than one quarter of
international retail snack chip sales. Products are available in some 120 countries. Frito-Lay North
America includes Canada and the United States. Major Frito-Lay International markets include Australia,
Brazil, Mexico, the Netherlands, South Africa, the United Kingdom and Spain.
Pepsi-Cola soft drink operations beverages are available in about 160 countries and territories. Pepsi-
Cola began selling its products internationally in 1934 with its operations in Canada. Operations grew
rapidly beginning in the 1950s. In addition to brands marketed in the United States, major products
include Mirinda and Pepsi Max. Pepsi-Cola North America includes the United States and Canada. Key
international markets include Argentina, Brazil, China, India, Mexico, Philippines, Saudi Arabia, Spain,
Thailand and the United Kingdom. PepsiCo Beverages International also produces, sells and distributes
Gatorade sports drinks as well as Tropicana and other juices internationally. Pepsi-Cola International
includes the business of Seven-Up International.

Major Frito-Lay products include Ruffles, Lay's and Doritos brands snack chips. Other major brands
include Cheetos cheese flavored snacks, Tostitos tortilla chips, Santitas tortilla chips, Rold Gold pretzels
and SunChips multigrain snacks. Frito-Lay also sells a variety of snack dips and cookies, nuts and
crackers.

INDUSTRY ANALYSIS

BEVERAGES
The first model deals with the bargaining power of suppliers. Overall, there is a low force on the
beverage industry because each of the three units performs several key operations in the production and
distribution of its products. As stated above, PCNA promotes and manufactures the concentrates,
which are sold to the franchised bottlers, of which they are part owners domestically. PBI manufactures




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concentrates for sale to company owned bottlers internationally, where the product is then produced,
distributed, and sold. Internationally, they own and operate the entire supply chain which helps explain
why the bargaining power of suppliers is low. For GTNA, the force is also low due to its low
commodity base. Essentially, the four key units of GTNA are sugar, water, oranges, and its machinery
for production and distribution of product. For the most part, the input costs are quite low on a product
unit level and relatively easy to obtain. Granted, GTNA does rely on farmers worldwide to produce
quality fruits for its Tropicana juices and it is possible that bad weather may impact crops and thus, lead
to higher costs down the road. However, these higher costs, which can be passed directly to the end
customer, are only temporary. GTNA will acquire its oranges, apples, and other fruits from other
farmers in a different geographic area in order to produce its products.

The second force deals with the threat of new entrants into the industry. Overall, there is a low-to-
medium force in the worldwide beverage operations industry for a number of reasons. First, there are
significant barriers to entry because of the initial start-up costs associated with a strong production and
distribution network. These costs also include the cost of acquiring machinery, raw materials,
transportation vehicles, and so forth. Second, barriers to entry may exist such as government regulations
for a company such as PepsiCo to enter into a new international market. As we read in one of our cases
for Professor Jennings‘ class, PepsiCo encountered significant obstacles in trying to re-enter the India
market, which has a population just under 1 billion potential Pepsi drinkers. While mom-and-pop may
try to enter the industry and produce private label brand products, unless they have a strong distribution
and marketing network, they can‘t compete against the systems and resources that stronger companies
such as PepsiCo have in place. Over time, the smaller and weaker companies are either bought out and
re-tooled, exit out of the beverage industry, or simply go out of business. As a result, there is a low-to-
medium force on the industry, which decreases over time.

Porter‘s third force talks about the rivalry among existing firms within the worldwide beverage industry.
There is a high force because of Coca-Cola, PepsiCo‘s long time nemesis. Coca-Cola goes head to head
with PepsiCo‘s worldwide beverage operations fiercely because they both have strong domestic and
international portfolios of products and also have strong distribution and production (bottlers) systems
in place, which they either own or license. In addition, differentiation plays a significant role among the
existing firms within the industry as innovations such as product design such as contour bottles, new
products and brand extensions and even institution such as Tropicana Nutrition Center and the
Gatorade Sports Science Institute exist as a way to not only better understand and serve the needs of its
existing and potential new customers, but also to differentiate itself from the competition. In this
industry, competition is extremely fierce for existing market share as the existing companies continue to
scour the globe for untapped opportunities to penetrate and gain additional revenues and market share.

The fourth force describes the threat of substitute products. In this industry, there is a high, but rapidly
declining force as Pepsi continues to expand into the non-carbonated beverage segment. Eventually all
the companies within the industry will produce all possible types of beverages. In short, if consumers
drink it, and there is sufficient profit potential, someone will make it. With PepsiCo‘s merger of Quaker
Oats, PepsiCo is now a major player in the rapidly growing non-carbonated beverage segment.
Examples include iced tea, bottled water, juices, coffee beverages, etc.

Finally, Porter‘s fifth force talks about the bargaining power of buyers, which is the end consumer at the
grocery store, convenience mart, vending machine, restaurant, etc. Just as in the fourth force referenced




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above, there is also a high but declining force as Pepsi continues to expand its product line. Switching
costs remain low as consumers will continue to purchase beverages whether they are carbonated or non-
carbonated. While customers cannot directly negotiate on the price of the products, they can influence
the purchasing activity of the distribution channel, which in turn, can affect the revenues and market
share for PepsiCo and the rest of the firms within the industry. For example, if demand declines in a
particular region, then a firm might either increase its advertising in a given market or engage in a price
war with its competitors.

SNACK FOODS
Suppliers for the snack foods industry produce ingredients, packaging, and manufacturing tooling and
equipment. While most of these products are commodities, specialty agricultural products and food
manufacturing equipment require heightened supplier relationships. For example, partnering farmers
produce proprietary/patented potatoes for Frito-Lays‘ chip business. In spite of these partnerships,
suppliers for this industry generally have little power and as a result put little pressure on the salty, sweet
snack food industry.

Consumers in this industry are characterized as fickle and price conscious. As a result, low switching
costs and fads cause huge variation in product demand. For example, in the early 90‘s SunChips by
PepsiCo were wildly popular, but subsequently demand quickly faded. The fickle tastes of consumers
results in high pressure on the snack foods industry.

There are a large variety of substitutes to the snack food industry‘s products. Some of these include
candy, fruits and vegetables, bread and dairy products, home cooked meals, and pre-cooked restaurant
or concession foods. Market pressure from these substitutes is high.

Competition in this industry is divided into two groups. Top-tier producers are large multinational
snack foods companies such as PepsiCo (Frito-Lay) and Procter and Gamble. Bottom-tier snack foods
producers make private label, boutique, novelty, and regional snacks. Examples of these producers
include Tim‘s Cascade Chips, Poore Brothers, Tillamook, and Obertos. Competition in these ―sub-
industries‖ (Top and Bottom) differs because of the varying barriers to entry characteristic of each. In
addition, competition is increased by slow market growth (especially domestically) and the ability of
entrenched competition to retaliate. For example, PepsiCo‘s control of an overwhelming 59% of the US
market allows them to successfully wage price wars to punish competitors.

New entrants to the top-tier of this industry face formidable barriers to entry. These barriers include
substantial investment requirements, economies of scale, branding, market share, and shelf-space. Large
investment requirements for manufacturing and distributing on an international level preclude many
from competing in this industry‘s top-tier. Similarly, economies of scale recognized in the distribution
channels, research and development, production facilities, and learning curve, allow large producers to
minimize unit cost and reduce competitive pressures. Branding in this industry is vital. Well-known
brands in this industry, such as Frito-Lay‘s Doritos and P&G‘s Pringles deter competition by increasing
the costs of market share. Finally, new entrant must overcome existing producer‘s relationships with
chain-retailers such as Wal-mart. These relationships result in lowered transaction costs and
manufacturer‘s control of large blocks of shelf-space




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Bottom-tier suppliers compete at regional levels or and in specialty goods unattractive to large
producers. At this level, economies of scale (while still substantial) are decreased and distribution
channel requirements diminished. However, growth is limited by threats that undue success would
induce retaliation or buy-outs from top-tier producers. As a result, threats to entry are low for top-tier
suppliers and moderate for bottom-tier suppliers.

In the US, slow market growth and high market pressure from buyers, substitutes, and competitors will
reduce the profit potential of competitors in this market. However, smaller bottom-tier producers, with
modest cost structures, have greater opportunity to realize profits if they focus on specialty or regional
products.

COMPETITIVE POSITIONING

BEVERAGES
A firm in any industry can obtain a competitive advantage over its competitors by doing something that
is unique in some valuable way. For PepsiCo, some examples of a differentiation strategy include the
innovations such as product design (ex: Pepsi contour bottles), brand extensions (ex: Mountain Dew
Code Red), and research institutions listed in Porter‘s third force. This strategy increases the consumer‘s
willingness to consume PepsiCo‘s products and hopefully add a long-term Pepsi consumer. Another
potential way to gain a competitive advantage is by entering in exclusive agreements where PepsiCo
products are exclusively served. By purchasing these rights, PepsiCo has a captive audience devoid of
any competitors. One example of this is PepsiCo‘s allowance with United Airlines in which only Pepsi
products will be served on all domestic flights. Another example is Pepsi‘s multiyear agreement with
Baja Fresh Mexican Grill. In this situation, both PepsiCo and Baja win whenever customers order a
beverage to go with their meal. PepsiCo wins by adding another steady customer and Baja wins by
getting its beverage products and supplies at a lower price per unit or perhaps getting better service than
its previous supplier. A third example deals with pouring rights at sporting events, concerts, and other
venues. Once again, both the venue/foodservice operator and PepsiCo win because the operator gets a
reduced ―wholesale‖ price from PepsiCo, thus increasing its profit margins. PepsiCo wins by adding
increased sales, and exclusive marketing and other brand exposure at the stadium, arena, or other venue.
For example, think of the marketing value when the Pepsi logo is affixed next to an arena or a sports
league. In fact, in 1997 PepsiCo purchased the naming and pouring rights to the Denver area (aptly
named the Pepsi Center), which is the new home of the Denver Nuggets and Colorado Avalanche.
Throughout the arena, and even on the arena floor, the Pepsi name and logo is everywhere adding
exposure and brand recognition. In the past few years, PepsiCo has been very aggressive and successful
(especially in MLB and the NHL) in outbidding Coca-Cola for pouring rights at a number of sports
stadiums.

SNACK FOODS
PepsiCo‘s Frito-Lay division focuses on product innovation to differentiate its snack foods from those
of other producers in the market. Premium products such as Frito-Lay Doritos, Cheetos, and Sunchips
demonstrate this differentiation strategy. These products are comparatively high-priced, offering more
than just a typical salty snack. This strategy effectively creates a competitive advantage, increasing the
consumer‘s willingness-to-pay while maintaining or decreasing costs.




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In order to increase the consumer‘s willingness-to-pay, Frito-Lay focuses on adding product value
through product innovation. For example, to find the perfect ―chipping‖ potato Frito-Lay develops
―thousands of proprietary potato seed varieties not available to other manufacturers.‖1 Frito-Lay has
also patented a process that intensifies flavoring by coating both sides of its potato chips. Both of these
examples show efforts to differentiate potato chips (an unlikely candidate) in order to increase prices.

While Frito-Lay works to differentiate its products by adding value, it also is involved in aggressive cost
cutting measures. Investments in improved distribution channels, such as through the merger with
Quaker Oats, will reduce lead times and inventory carrying costs. Maintaining or lowering product costs
allows PepsiCo/Frito-Lay to further gain a competitive advantage and increase operating profits.

Competitors in the salty snack foods industry use a variety of positioning strategies. Proctor and
Gamble, Frito-Lays largest competitor, uses a similar differentiation strategy to position its Pringles
potato chip line. The innovative Pringles round cylinder packaging adds customer value by improving
quality (less broken chips) and increasing product awareness (branding). Alternatively, generic chip
producers pursue a low cost position. These generic products come in plain packaging and are sold at a
discount. In these companies, competitive advantage will be gained through the efficient operation of
their production and distribution facilities.

CORE COMPETENCIES

A core competency is driven by the resources and capabilities a company has at its disposal. As such to
understand the core competency of PepsiCo, it is required to first understand the resources and
capabilities of PepsiCo.

A resource is any physical or intangible item that a company has to use. Examples are the people, plants
and ideas a company will use to create its product or service. Analysis of PepsiCo shows the following
major resources it has at its disposal.
      Institutional knowledge of the snack market and consumer snack consumption patterns and
        behaviors.
      Proprietary potatoes and oranges developed to use in product production
      Secret formulas for the PepsiCo‘s soft drinks.
      Significant financial resources at its disposal.
      Celebrity endorsements
      Brand equity
A capability is a process in which the company uses some of its resources at its disposal.
Some of PepsiCo‘s capabilities are as follows.
      Special manufacturing processed for its products.
      Ability to create new and innovative products based upon the institutional knowledge it has
        obtained.
      Ability to build and keep brand equity.




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The core competence of the corporation is the use of capabilities and resources to create value for the
customers. Through the analysis it was determined that PepsiCo has two major core competencies,
branding and new product innovation.

Branding is important for PepsiCo in that its products have significant competition and are not highly
differentiated from each other without the brand differences. In addition the products are in markets
that are highly price sensitive and little competition can be made on the basis of price. PepsiCo uses its
brand equity and celebrity endorsements to create value for its customers in many ways through
branding. Customers enjoy wanting to be like celebrities and one way to do so is to use the same
products the celebrities do. PepsiCo‘s branding of its products has created a sense of community
between its customers. The branding also gives the consumer a sense of the quality of the product. The
consumer knows the product will be of high quality and taste no matter where the buy the product
because of the significant efforts PepsiCo has made in branding and producing its products.

The other major core competency is product development. PepsiCo is must constantly develop new
products because consumer‘s tastes and preferences are constantly changing as discussed in the industry
analyses. The constant changes forces PepsiCo to create new and different products to maintain its
competitive advantages.

DIVERSIFICATION STRATEGIES

PepsiCo diversification strategy uses most diversification strategy rationales. The major diversification
rationales include dominant logic, synergies and core competencies. These rationales can be seen when
reviewing the recent acquisition of the Quaker foods brands, which included Gatorade.

PepsiCo appears to use the dominant logic rationale, which is the belief that managers can share
methods and practices across businesses and industries. Before the acquisition PepsiCo was in the two
major industries as discussed above beverage and snack food. Each requires a specific knowledge, but is
related in many ways such as low cost, high volume, sold at many of the same locations, and similar
distribution chains. Quaker foods acquisition fits into this management needs almost exactly. The
Gatorade products fit into PepsiCo‘s beverage markets to fill in existing product gaps. Quaker foods are
slightly different but in many ways the same. The distribution chain is the same as PepsiCo snack foods
and product production is going to be similar. The significant difference is the slight change in product
Quaker foods are not in the snack food market, but in a similar convenience food market, where
PepsiCo should be able to leverage its core competencies.

PepsiCo also uses the core competency rationale, which is the belief that companies have the ability to
gain a competitive advantage from a process and can move that competency to the new business to gain
an advantage there. The acquisition of Quaker and Gatorade also falls in with PepsiCo‘s core
competencies. Both have significant brand names that PepsiCo will be able to grow and use. In addition
both require constant innovations to keep consumers happy and buying the products.

PepsiCo is using the synergy rationale also. Synergy is the thought that a business is worth more than the
sum of its parts. PepsiCo is in the non-alcoholic, non-diary beverage market. The acquisition of the
Gatorade brand and products allows PepsiCo to fill in a gap in its product offerings. This will allow




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PepsiCo to take advantage of its supply chain and helps its vendor by having to deal with only company
to get a wide range of product offerings.

PepsiCo has tried many diversification strategies that have not worked in the past. The most telling
example is its purchase and divesting of TriCon food chains. In the 80‘s PepsiCo had acquired these
food chains, which include Taco Bell, KFC and Pizza Hut, in the belief that it could obtain synergies.
Unfortunately because the industries are so different PepsiCo was having problems managing the chains
correctly and had to divest them in 1997. These food chains did not match well with any of the
diversification strategies expect for the core competency rationale, but PepsiCo was not able to leverage
that into a competitive advantage.

DISRUPTIVE TECHNOLOGIES

In the snack foods and beverages industries disruptive technologies might take the form of new or
drastically improved food additives or preservatives. These additives would become disruptive if they
improve at a quick rate and substantially increase demand. A recent example of this type of disruptive
technology is Olestra, used in PepsiCo Frito-Lay‘s WOW Tostido and Dorito chips. Olestra is a low-
calorie fat substitute. Unfortunately,                                                                               due
to minor side effects, Olestra has
recently been the subject of media
attention. As a result, the current
performance of the product is                                         provem
                                                                              ent
                                                             ance Im
                                                 Performance




                                                                            et
somewhat low (see graph). However,                  Perform ired by Mark                                              as
                                                         Requ
these side effects are eliminated the                                e duction
                                                                               s in
                                                             pical R
steep performance trajectory will                    (I.e. Ty Calories)                       Expected Trajectory of
                                                                                              Olestra Performance
result in a disruptive technology. In                                                         (I.e. Calorie and
other words, in the long run the use                                                          Fat reduction)          of
Olestra will reduce calories quicker
than required by the market. These                                                  Current Olestra Performance
performance increases will result in
drastically increased demand for                                         Time
those products that use the Olestra
additive.

PEPSICO’S GLOBALIZATION

COMPETITION
Coca-Cola has hindered PepsiCo‘s worldwide growth much more substantially than their domestic
expansion. Coke is the current global leader, dominating the worldwide soft drink industry with a 58%
market share. Comparatively, Pepsi maintains a distant second position with 21% of the market.2 Coke
has succeeded at maintaining their leadership position through worldwide changing business
environments with their expertise in branding power, which can be attributed to universal availability,
universal awareness, and strong trademark protection, which Pepsi has not yet been able to achieve. For
this reason, Coca-Cola has taken over the Russian market, which used to be entirely controlled by
Pepsi.3




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Multi-Domestic – Pepsi utilizes the multi-domestic strategy, modifying its product-lines worldwide to
accommodate local tastes and preferences. Often Frito-Lay products are known by local names. These
names include Matutano in Spain, Sabritas and Gamesa in Mexico, Elma Chips in Brazil, Walkers in the
United Kingdom and others. The company markets Frito-Lay brands on a global level, and introduces
unique products for local tastes. The Tropicana Brand differs in offering Frui'Vita, Loóza and Copella.4
The biggest new brand entrant is the international lemon cola drink, domestically named Pepsi Twist,
which is likely to be branded in India as Pepsi Aha.5

Numbers of types offered differs among countries – Today the Tropicana brand is available in 63
countries, and in contrast to North America‘s principal brands of Tropicana Pure Premium, Tropicana
Season‘s Best, Dole Juices and Tropicana Twister, these countries‘ principal brands include only
Tropicana Pure Premium and Dole juices.

Chauvinism – Where chauvinism benefits companies domestically, it works against them globally. Pepsi
has managed this hindrance by labeling products under localized brand names.

TRANSPORTATION COSTS
Because the addition of water substantially increases the weight of the soda, and hence increases the
shipping costs, Pepsi only ships their secretly formulated syrup, and then delegates the addition of the
water to the local distribution centers. This also allows the local Pepsi subsidiaries to perform the
product development and quality control.

PRODUCT LIFE-CYCLE
Because Pepsi does not have a limited product life cycle, and is theoretically endless as long as there is a
demand for soda, this factor is not a substantial determinate of the company‘s global expansion.

Components of International Strategy

HANDLING EXPANTION INTO UNIQUE AND CHANGING MARKET SEGMENTS
Unique Markets – PepsiCo‘s international division has seen tremendous growth because they have
expanded into regions with no competition due to political or logistical barriers to entry. Pepsi enters
countries considered to have oppressive regimes, with subsidiaries in Burma, Mexico, the Philippines
and Turkey, and operates bottling plants in China. Pepsi has recently invested $40 million into Russia to
expand their system to reach 70% of the country. During the years of economic sanctions against South
Africa, PepsiCo continued a sales and licensing agreement with a South African company. The
company receives about 29 percent of their revenue from these foreign sales. Changing Markets – A
rise in worldwide carbonated soft drink is expected, advancing by an annual average of 3.4% from 1999
to 2004, with per-capita consumption growing from 7.8 to 10.6 gallons. For PepsiCo Beverages
International, growth was led by Russia, China and Brazil. North America's share is expected to decline,
along with that of Europe, Africa and Oceania, while growth will be strong in Asia and South America,
and moderate in the Middle East. 6




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MERGERS, ACQUISITIONS AND PARTNERSHIPS
Merging, acquiring and partnering with local companies have been a key component of Pepsi‘s
international expansion. It has helped them create or buy local brands, and re-label as these brands in
order to take advantage of these company‘s brand equities and reduce the effects of chauvinism.
Acquisitions accounted for 2% of salty snack growth from 2000-2001, mostly from European joint
ventures. Additionally, a joint venture with Empressas Polar SA has allowed Frito-Lay to expand into
nine Latin America countries.7

RELOCATION STRATEGIES
Pepsi has no incentive to move because there is no relocation cost savings. Shipping across the globe is
expensive, so the company opens numerous small plants around the world instead of large operations in
fewer key areas.

TECHNOLOGY INTENSITY
Pepsi‘s use of very detailed consumer buying patterns, preferences and tastes research is with the use of
advanced technologies. This plays a substantial role in their globalization strategy.

ADVERTISING AND MARKETING STRATEGIES
Global advertising strategy – Pepsi modifies its domestic advertising to be utilized internationally, such
as a multi-decade TV commercial starring pop star Britney Spears and footballer David Beckham that
was tailored and placed into local ad showings. Its ―Sumo‖ spot is already proving a hit with urban
India. With two global advertising campaigns known for falling in the top 100 of the century, Pepsi has
developed a core competency in its reputation as a solid brand image.

Global marketing strategy – Pepsi‘s marketing is their international competitive advantage, so the
company heavily relies on expanding and improving this for continued success. To sustain growth, they
rely on their advertising firm of 42 years, BBDO Worldwide Advertising, to leverage its vast
international business network to make tighter connections with consumers around the world. Pepsi
requires a very diversified capability scope from the firm. BBDO is needed to provide everything from
the overall strategy development and coordination for the market in Paris, to adapting Pepsi campaigns
for the very different segment in the Philippines. Also, the ad firm has creative resources in such
countries as Spain, Brazil, Australia and France that offers an international perspective on execution.8
Along with Pepsi cola, 7UP and Mirinda are the key drivers in Pepsi‘s international markets. Because of
this, BBDO offers 7UP and Mirinda the same level of intensive creative support as brand Pepsi in the
international markets.

Recently Pepsi has been making international marketing headway over the worldwide web. Pepsi-Cola
International partnered with StarMedia Network, Inc. to co-brand a Latin American website called
pidemasonline.com, which means ―ask for more‖ in Spanish. The site was aimed at the Spanish and
Portuguese-speaking audiences, which is StarMedia's bread and butter. The Pepsi arrangement
exemplifies how the company is utilizing joint marketing agreements with online media players in search
of new niche markets.9




                                                                                                      12
Implementation of International Strategy

ECONOMIES OF SCALE
Consistent brand equity creates synergy internationally – Over the past 100 years, Pepsi has established a
few of the world's best-recognized global trademarks. The formula for the successful globalization of
the company‘s brands has been to implement a synergistic marketing strategy that includes forging
consistent goals, developing compelling positionings that translate across the marketing mix, brand
development and a wide variety of cultures, delivering global imagery, events and properties, and
maintaining a structured innovation process and common tracking models.10

A global advertising agency creates efficiencies – BBDO Worldwide's international network offers
Pepsi-Cola International organizational capabilities and media buying efficiencies which supports
continued international growth across the entire Pepsi brand portfolio. The ad firm is also always
working to develop any other marketing synergies that support Pepsi‘s business. For example, BBDO
and Pepsi decided to consolidate Pepsi International's 7UP and Mirinda brands with the Pepsi brand
because it would provide extensive integrated international resources to stimulate the growth of all of
the brands.

COSTS OF GLOBAL COMMUNICATION
Pepsi has paid substantial costs associated with their global marketing strategies. The company spends
about $1.7 billion dollars spent in advertising annually. In addition to the standard marketing costs,
there are other costs of communicating globally. An example of this is in Pepsi‘s famous global
marketing mistake with their ―Come Alive With the Pepsi Generation‖ campaign, which, when
translated into Chinese, meant ―Pepsi Brings Your Ancestors Back From the Grave.‖ This cost the
company with lost sales and a damaged reputation.

Communications has cost Pepsi a profit in some markets. The company‘s investment in China has
failed to produce a profit so far because of the substantial spending on marketing. Since it started its first
plant in Shenzhen in 1982, Pepsi has set up nearly 30 businesses there, with a total investment of $500
million. Without the marketing expenditures, the investment would have turned a profit. However,
Pepsi believes in the potential of the Chinese market, and the possibility of a profit for Pepsi in the near
future. 11

BARRIERS WITH BUSINESS CULTURES AND GOVERNMENT POLICIES
Blurb about Pepsi in India.

COLLABORATION AND ALLIANCES

The spectrum of Pepsi‘s collaboration strategy varies widely between its domestic and international
divisions. As part of its collection of domestic collaboration strategy, Pepsi pursues alliances with
distribution channels, sports sponsorships, celebrity partnership, and movie co-promotion. While Pepsi
also pursues promotional alliances internationally, much of its strategy involves developing corporate
partnerships with local companies. This distinction in the way Pepsi approaches corporate partnerships




                                                                                                         13
or alliances in its domestic versus its international strategy is notable and will be examined in more detail
after we examine each of these markets separately.

DOMESTIC COLLABORATION STRATEGIES
Pepsi‘s domestic collaboration strategy in the United States is consistent with industry rivals. A look at
the main competition shows that while Coke is not as active with sports sponsorship and celebrity
partnerships, they use a wide variety of distribution channel alliances. Of note recently are their eight-
year strategic marketing and beverage agreement with Skyteam member airlines and their five-year global
marketing and product alliance with Blockbuster Inc.12 While Pepsi is lagging behind Coke in
distribution alliances with the airline industry, its recent alliance with United Air Lines is notable for the
fact that it‘s a switch from Coke to Pepsi. The deal with United only represents about 3 million cases
per year, which is a very small portion of the billions of cases that Pepsi sells yearly. More importantly
though, the deal can be seen as a positive step for Pepsi‘s effort to gain consumer mindshare from Coke,
or as Brown analyst Marc Greenberg puts it, ―It‘s more about mindshare than income contribution.‖13

Pepsi‘s other notable distribution alliance is with its spin-off Tricon Restaurants. Tricon owns the
chains Taco Bell, Pizza Hut, and Kentucky Fried Chicken, where Pepsi has an exclusive beverage
distribution alliance. This distribution alliance is very important to Pepsi in the soda fountain market
within fast food restaurant chains as it represents nearly 44% of the market. Coke owns the other 66%
with its deals to distribute to McDonald‘s, Wendy‘s, and Burger King. The importance of this channel is
very important as each of Tricon‘s restaurant chain provides Pepsi with the sole opportunity to gain
customer mindshare.

Looking at most of Pepsi‘s other collaboration strategy for its brands reveals a strategy that relies heavily
on its branding core competency. Most of its collaborations are with partners who are independently
recognizable in the sports and entertainment mass media.

Pepsi‘s sports partnership strategy includes sponsorships and alliances with the National
Football League, the National Collegiate Athletic Association‘s national college basketball championship
tournament, stadium naming rights with the Tampa Bay Buccaneers‘ football stadium, and the Fiesta
Bowl football championship game. These alliances with sports entities provide Pepsi with the
opportunity to market their brands and also further network to a market segment that historically has
associated with both their soft drink and salty snack food products. In a lot of cases, many of Pepsi‘s
brands of products are promoted as a complimentary product required by consumers for the full
enjoyment of their sports entertainment experience.

Pepsi‘s entertainment partnership strategy centers around its advertisement and the promotion of an
image associated with their celebrity partner. The most recent of these programs is their promotion
with Britney Spears, which debut in television commercial form during this year‘s Super Bowl. Past
promotions include commercials with Halle Eisenburg for the Pepsi brand, Halle Barry for Pepsi Twist,
Barry Boswic for Diet Pepsi Twist, and Ali Landry for Doritos. Other promotional partnership includes
the promotion of Monster, Inc. with Disney and Pixar studios, where Doritos introduced a special version
of its 3D product, which changes color when consumed. Another unique twist to Pepsi‘s entertainment
partnership was Doritos title sponsorship of Drew Carey‘s pay-per-view special, which was promoted in
conjunction with Drew Carey‘s appearance in Super Bowl commercials with John Elway and Jim Kelly.




                                                                                                         14
The success of Pepsi‘s recent partnership with Britney Spears will be watched very carefully as it is a
result of Pepsi‘s merchandising and promotion partnership with Tracy Locke Partnership. The
partnership, which was announced by Frito-Lay on December 17, 2001, will consolidate Pepsi‘s U.S.
promotional and retail merchandising as well as marketing activities. As John Compton, Frito-Lay
Senior Vice President of Marketing, indicated, ―We believe this agency consolidation will provide a more
potent, more efficient marketing force that will help us achieve bigger and better growth-driving
ideas.‖14

A recent landmark partnership between Pepsi and Cooper Aerobics Center announced on April 03,
2002, paves a way for Pepsi‘s expansion of its portfolio of products into functional food and beverages.
The partnership agreement is intended to promote nutrition, fitness, and wellness. As Dr. Cooper said,
―Through our collaborative efforts, we hope people all over the world will benefit and PepsiCo will
become known as the international corporate leader in the field of health promotion.‖15

INTERNATIONAL COLLABORATION STRATEGY
Internationally, Pepsi has historically on developing long-term partnerships with strong local companies
and leveraging their partner‘s local knowledge and locally recognized brands. Pepsi‘s method of
operation internationally starts with the development of smaller businesses to gain experience in the
local market prior to making larger investments. With successful development of these smaller
businesses, Pepsi historically expanded operations through synergetic joint ventures with local partners.
Their partnerships with Suntory in Japan and Empresas Polar SA are prime examples of this line of
collaboration strategy.

The partnership with Suntory in Japan started in 1998 and has a term of 30 years. Suntory was named
Pepsi‘s master franchisee and had the responsibility of doing all marketing, production, and distribution
of Pepsi soft drink in Japan. Suntory was also responsible for managing the existing relationships with 9
existing franchise bottlers. Pepsi also transferred all existing company owned bottlers to Suntory. Pepsi
Japan would continue to provide Suntory with concentrate for the Pepsi, Diet Pepsi, 7Up, and Mt. Dew
products. As former Pepsi CEO Craig Weatherup indicated, ― New relationship with Suntory fits
perfectly with our strategy to align with strong local franchisees.‖ The deal with Suntory also created the
#2 beverage company in Japan, behind Coke, and would boost the current vending ability by 3 times.
This local distribution capability offered by Suntory was key to providing a synergetic relationship, as
Mr. Weatherup further indicated that, ―Suntory‘s proven ability to build powerhouse brands in Japan
through dynamic marketing and ubiquitous distribution is the envy of the industry.‖16

Following the partnership with Suntory in Japan, Frito-Lay entered into a similar joint venture with
Empresas Polar SA in Latin America at the end of 1998. The annual sales of the joint venture in Latin
America were estimated at $3 Billion and would be operated by Frito Lay. Each company would own
50% of the joint venture, which encompassed 9 Latin American countries: Venezuela (Polar‘s
headquarters), Chile, Colombia, Ecuador, Guatemala, Honduras, Panama, Peru, and El Salvador, and
Polar would transfer its popular local brands, Pepitos and Cheese Trix, to Frito-Lay. The synergy from
the joint venture was seen as a way to improve operational economy of scale to lower cost and as the
means to make and distribute their products more economically.
Pepsi‘s only notable global alliance that even resembled its entertainment partnership strategy
domestically was the promotional alliance with Pokemon. The alliance with Pokemon was intended
leverage the Pokemon product fad to drive product sales growth in the Mexican and Latin American



                                                                                                      15
markets in 2000. This alliance effort was intended to promote growth in the European, Middle Eastern,
and African markets in 2001.17

Evidence of the success of these international collaborations is clearly shown by the growth of sales
versus profit for both PepsiCo Beverages International and Frito-Lay International. Over the past three
years, from 1999 to 2001, the net sales growth for PepsiCo Beverages International and Frito-Lay
International during this period was 7.2% and 20%, respectively. However, the operating profit grew at
a much faster rate. PepsiCo Beverage International‘s operating profit grew by $113 million or over 51%,
and Frito-Lay International‘s operating profit grew by $172 million or 37.8%. While these gains cannot
be fully attributed to their joint ventures, it is evident that at least some of this difference is the result of
the synergy created from joint ventures internationally with strong local and regional companies.

DISTINCTION OF COLLABORATION STRATEGY BETWEEN ESTABLISHED AND EMERGING MARKETS
When analyzing Pepsi‘s collaboration strategy, it‘s also important to take a look at how Pepsi fills and
expands its portfolio offering. Clearly in the international arena, Pepsi favors a strategy of establishing a
small business in the local market and developing a joint venture with an established local company. In
the case of Suntory, Pepsi handed over the control of the joint venture to Suntory, while with Polar,
Frito-Lay controlled the joint venture. In the much more established local market in the United States,
Pepsi seems to favor partnerships where its core competency of branding can be put to use. As noted
with the examples of sports and entertainment partnerships, Pepsi domestically favors a strategy where
they ally with an image conscious partner in other industries. In case of sports and cinema
entertainment, the consumption of Pepsi products even adds to the overall customer value of the
experience.

STRATEGIC ANALYSIS CONCLUSIONS

STRATEGIC RECOMMENDATIONS AND ALTERNATIVES

MARKETING/ADVERTSING RECOMMENDATIONS

    1. Focus efforts in expansion and improvements in marketing and advertising. Pepsi‘s core
       competency is in their marketing and advertising, and it is the driving force behind the strong
       brand image and global recognition. Since most of the potential expansion lies in expanding
       into new and changing markets, this global recognition is pertinent to growth. Additionally,
       because Pepsi‘s marketing expertise inferior to Coca-Cola‘s, Pepsi continues to lose out to Coke
       in revenues and market share. (Considering Pepsi beats Coke in actual taste tests.) For these
       reasons, Pepsi would want to take drastic steps in improving their marketing. Specifically, Pepsi
       could:
           a. Continue BBDO partnership because of their global expertise, but consider bringing in
               a multi-national advertising staff for specific, local campaigns to better target each
               segment.
           b. Continue multi-domestic strategy, with strong marketing research in keeping up to date
               with changing consumers‘ tastes and preferences. Continue to apply these finding to
               international product diversification. Additionally, Pepsi could begin to apply this global
               research more heavily into branding and trademark strategies.




                                                                                                            16
            c. Utilize guerilla marketing—It is not necessarily the dollar amounts spent on advertising,
               but the methodology used. For advertising to be successful, it needs to be new and
               different, and something that stands out. The most successful advertising is sometimes
               free when it is press related. Pepsi needs to think out of the box, and find ‗guerilla‘
               tactics to create a substantial buzz and rise above their tough competitors.
            d. Continue with their specific campaigns in utilizing musical talent, sponsors, NFL
               partnership, and web-based media contracts. Their track record indicates a very
               successful history in creating these campaigns. (See Exhibit 2.)
            e. Use philanthropy to create a first rate brand image, and increase donations to charitable
               organizations around the globe.
            f. Consider repackaging materials in order to utilize the several different product offerings
               PepsiCo has. This would include bundling, multiple purchase price discounting and
               cross marketing. This uses the brand equity of one product to stimulate growth in
               another.

RESEARCH AND DEVELOPMENT
An innovator in the snacks and beverages industries, Frito-Lay continually leads the development of
unique preservatives, additives, and packaging technologies. As a result, it is likely that they will be
the developers of future disruptive products. However, as in other industries, large companies like
Frito-Lay are often married to existing methods of doing business and are vulnerable to disruptive
technologies. To mitigate this vulnerability, it is important that Frito-Lay continues investing in
R&D and incorporating new potentially disruptive technologies into its products.

DIVESTITURE
Because we do not see the Quaker Oats division recently acquired completely fitting into Pepsico‘s
core competencies and existing industries, we recommend that PepsiCo consider divesting the
Quaker Oats division into a new company or sell to a competitor. It appears the major reason
Quaker Oats was acquired was to obtain the Gatorade beverage brands that Quaker Oats owned.
The Gatorade brand completely fits into the beverage industry in which PepsiCo competes and
should allow PepsiCo to use its core competencies and industry knowledge to gain market share and
earnings growth. Keeping the Quaker Oats division requires the PepsiCo management to learn an
additional industry, while although in some ways similar to the snack food industry has major
differences. The ready to eat meal industry in which Quaker competes is much more highly
competitive and low profits should be expected from the division. We can see from PepsiCo‘s past
problems they have encountered in dealing with new industries that do not relate well with their
existing industries. As shown by the Tricon divestiture PepsiCo could not adequately acquire the
necessary knowledge in the fast food industry to have a competitive advantage. PepsiCo should
remember this and should consider whether they can obtain a competitive advantage in the ready to
eat market, which we do not believe they can and should then divest Quaker Oats.

ACQUISITION
Pepsi has had recent consistency in identifying successful merger and partnering targets. Much of this
success derives from identifying and implementing proper synergy strategies and from utilizing and
supplementing their branding core competency with their targeted partners.




                                                                                                     17
As a continuation of these successful strategies, we researched and analyzed several companies who
presented probably alternatives for either acquisition or partnership. We researched both domestic and
international opportunities. International opportunities were difficult to identify as overall analysis of
each national market and its growth opportunities needed to be determined. We suggest detailed
research of each country, its beverage and ready-to-eat snack consumption, existing competition, and
future growth potential, prior to making entry decision for each specific country. With this condition in
mind, we focused on analysis of domestic partners or acquisition targets.

After an analysis of the current beverage portfolio, we felt that the most logical extension would be
towards the premium soda niche of the market. After reviewing several alternatives, Jones Soda appears
to offer the best synergy and growth opportunity. Jones Soda offers a unique portfolio of products,
termed ―New Age Beverage‖, based on its lines of juice, soda, and energy drink products. What makes
Jones Soda unique are the variety of soda flavors and wide range of labels. (See Exhibit #) The labels
are produced from a portfolio of unique user submitted photos and allow buyers to collect a wide
variety of unique products. This variety of flavors and labels allows Jones Soda to command a price
premium for its products. Jones Soda has a cult following based on its offering of a variety of labels.
Collecting its unique bottles is a hobby for many loyal consumers.

We believe that this unique blend of product offering will enhance the beverage product portfolio and
that Pepsi can leverage the existing distribution system to bring the product to more markets. This
―New Age Beverage‖ was determined to be a $10 billion market in 2000, with an average growth rate of
12.7% over the past three years.18 During 2000, Jones Soda‘s return on equity was 49.70 with total
revenues of $19.1 million and profits of $1.5 million. In analyzing the Jones Soda‘s finances, we believe
that acquisition can be made for about $15.2 million. At present growth rates and conservative profit
margin, the net present value of Jones Soda‘s profit over the five years returns nearly $20 million. We
believe that this profit margin can be greatly increased when the benefits of consolidation of distribution
channels and marketing are realized.

After the analysis of the current snack food portfolio we believe that a product line extension through
acquisition would be appropriate. As stated in the 2001 annual report PepsiCo is trying to increase the
product offerings of Frito-Lay and hope that the Quaker Oats acquisition will be able to help them. As
we noted above, we do not necessarily agree with this assessment as the product lines and distribution
channels are different. We recommend that PepsiCo extend the snack food portfolio into sugary type
foods through the acquisition of Interstate Bakeries Corporation (IBC). IBC owns the Hostess,
Wonderbread and Dolly Madison brand names. The Hostess and Dolly Madison products we believe
completely fit into the Frito-Lay product line as being a snack food. We also believe that PepsiCo would
be able to achieve synergies through its distribution channels as Hostess and Dolly Madison are sold in
all the same locations that Frito-Lay products are sold. The sugar snack foods would appear to fit into a
strategic diversification strategy through dominant logic as well. Frito-Lay should be able to use its
existing practices and methods in the new product line. This acquisition would also fit PepsiCo‘s core
competencies. Hostess and Dolly Madison are significant brand names and PepsiCo should be able to
leverage it competency in branding and marketing to increase those brands. Also the products will
require significant new products to stay competitive. PepsiCo will be able to use it customer research to
bring new products to market and obtain a competitive advantage through differentiation.




                                                                                                      18
                                                Exhibit #




Sample of Jones Soda’s current portfolio

1
  Pepsi Corporation‟s 10K Financial Report
2
   “Soft Drink Markets in 174 Countries Worldwide,” Beverage Marketing Press, New York, NY, 15 June 2001.
3
  http://www.southwestern.edu/~stepheng/fob2.html
4
   “PepsiCo: Conquering the Asian Snack Market,” Retail Asia, May/June 1996, pp. 10-16.
5
   “India's Summer Cola Wars—Coke, Pepsi Fight It Out,” Ad Age Global, April 2002.
6
  http://www.southwestern.edu/~stepheng/fob2.html
7
  “Frito-Lay Announces Major Joint Venture in Latin America with Empresas Polar SA,” Pepsico Press Release,
Piano, TX, Nov. 25, 1998.
8
  “Pepsi-Cola International Consolidates Advertising With BBDO Worldwide To Sustain Steady Growth,” PepsiCo
Press Release, Purchase, N.Y., November 8, 2000.
9
  “StarMedia, Pepsi „Ask For More‟ Latino Teens,” NY Staff, May 24, 2000.
10
   ―Similar advertising,” M. D'amore, Somers, NY, May 2001.
11
   “Pepsi Confident in China,” Xinhua News Agency, April 09, 2002.
12
   “Coca-Cola and Delta Expand Worldwide Partnership, Announce New Marketing Agreement with Skyteam,” and
“Blockbuster Inc. and the Coca-Cola Company Announce Global Marketing and Product Alliance,” Coca-cola press
release, April 10, 2002 and March 11, 2002.
13
   “Pepsi Lands United,” Forbes.com, March 25, 2002.
14
   “Frito-Lay Selects Tracy Locke Partnership as Promotions/Merchandising Agency of Record,” Frito-Lay Press
Releases, December 17, 2001.
15
   “PepsiCo and Dr. Kenneth Cooper Form Partnership,” PepsiCo Inc. Press Releases, April 2, 2002.
16
   “Pepsi Names Suntory Japan Master Franchisee,” Beverage Digest, October 3, 1997.
17
   Frito-Lay International Report
18
   Jones Soda, 2000 Annual Report




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