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’
• 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?
Keys to PepsiCo’s Success and Growth
Soft Drinks Salty Snacks
Build Strong Growth
Acquisition with Retail
• PepsiCo’s growth strategy has been mainly
– Several successful mergers and acquisitions over
• Adapting to changes in the external
environment are critical to sustainable
External Environment: PEST
Category Issue Threats/Opportunities
Threat- not allowing PepsiCo to
utilize Power of One Strategy
Political FTC stipulations to merger of Quaker Oats with Gatorade. May impact 4
their ability to acquire other
companies in future.
Opportunity – increase in
Economic Rising incomes in BRIC countries discretionary income will raise 5
spend on drinks and snacks
Threat to many of PepsiCo’s
Change in customer preferences to healthier food and drink existing products.
options in developed countries Opportunity for Quaker brands
and new product innovation
Opportunity – improved
Technological IT improvements in distribution network. relationships with retailers, less 3
chance of stock outs.
US Liquid Refreshment Market
Beverage Share of Total Volume Growth Pepsi Brand Pepsi Market Pepsi Market
US Beverages Rate Share Position
Carbonated Soft 48% -2.6% Several 31.1% #2 behind Coke
Bottled Water 29% 6.9% Aquafina 15% #1
Fruit Beverages 13% -3.3% Tropicana 30% #1, Coke Brand
Minute Maid #2
Sports Drinks 4.4% 2.5% Gatorade 76% #1
RTD Tea/Coffee 3% 14.3% Lipton and 39.5% #1, 4x Coke’s
Enhanced 1.7% 30.5% Propel 40% #1
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.
PepsiCo International Markets
Country/Region Carbonated Salty Snack
Country Carbonated Salty Snacks Market Share Market Share
Soft Drinks per month India 49% 46%
United States 60 servings 6.6 servings Russia 24% 43%
Other 23 servings 4.0 servings China 36% 16%
Developed Brazil N/A 46%
Developing 6 servings 0.4 servings
Mexico N/A 75%
1. 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.
Quaker Foods Brands
Weak International Sales
($500 million total, 75%
from 6 countries)
(over ½) in better-for-you
and good-for-you products
With exception of Gatorade, Quaker brands have limited success internationally.
Opportunity for growth in US and developed countries as consumers shift to
Quaker Foods North America
Product Volume Market Share Market
Growth Rate Position
Quaker Oats N/A 58% #1
Quaker Ready Mid single 14% #3 behind
to Eat Cereal digits Kellogg’s (30%)
Aunt Jemima Slight decline N/A #1
Rice-A-Roni Double digit 33% N/A
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.
PepsiCo Organizational Structure 2007
PepsiCo Quaker Foods
Frito Lay North PepsiCo
Beverages North North America
America (FLNA) International (PI)
America (PBNA) (QFNA)
29% Net 26% Net 40% Net
5% Net Revenue
Revenue Revenue Revenue
36% Operating 28% Operating 7% Operating 29% Operating
Income Income Income Income
28% Capital 20% Capital 2% Capital 50% Capital
Expenditures Expenditures Expenditures Expenditures
22% Total Assets 24% Total Assets 3% Total Assets 50% Total Assets
PepsiCo after 2008 Realignment
Americas Foods International
UK and Europe
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.
Question Facing PepsiCo
Carbonated Healthy Snacks
How is Pepsico Performing in the
Snack Foods Industry?
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.
differentiate its products
while staying committed Indulgent Snacking
of nutritional content
to the industry trends.
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. Acquired Flat Earth Eliminated Trans Fats from popular chips
(fruit & vegetable snacks) (Lays, Fritos, Cheetos, Doritos, etc.)
•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
Doritos & Sun Chips flavors.
U.S. Convenience Food Market Share
• Pepsico is the leading
manufacturer in the
market due to its Pepsico
commitment to industry 21% Kraft Foods
•Their only close Master Foods
competition seem to be 12% P&G
from Kraft Foods & Private Label
Hershey. But you cannot Others
count out the 37% of the 9%
market that “other”
Pepsico’s International Salty Snack Food Market Share
Country 2006 % of Market 2010 Market
Share Sizes (projected)
Mexico 75 #4
South Africa 57
Brazil 46 #1 or #2
United Kingdom 44 #3
Russia 43 #5
China 16 #1 or #2
There is significant growth opportunity in international markets. Pepsico will
need focus on gaining more market share in the top 3 markets in 2010. They
will also benefit from an increase in servings per month in both developed and
developing international countries.