PepsiCo

Group 8

Nilesh Desale D012

Subham Mohta D033

Sukrut Parikh D038

Saurabh Prabhu D043

Aditya Limaye H030

Tejas Gijare C023

Competitors’ Analysis

Coca Cola is the primary beverage competitor w.r.t PepsiCo.

The below table indicates direct comparison between the key indicators of PepsiCo and Coca-Cola
(Beverage industry competitor):

The major competitors, in the food and beverages industry, to Pepsi are Dr Pepper Snapple Group,
Nestle, Kellogg, Kraft Heinz Company, Mondelez International and few others.

The below table indicates direct comparison between the key indicators of PepsiCo and its major
food and beverage industry competitors:

Company Analysis

The company – PEPSICO was incorporated in Delaware in 1919 and reincorporated in North Carolina
in 1986. It is a leading global food and beverage company with a complementary portfolio of
enjoyable brands, including Frito-Lay, Gatorade, Pepsi-Cola, Quaker and Tropicana. Through its
operations, authorized bottlers, contract manufacturers and other third parties, the company
makes, markets, distributes and sells a wide variety of convenient and enjoyable beverages, foods
and snacks, serving customers and consumers in more than 200 countries and territories.

Percentage of revenue from food division worldwide has increased to 52% of the total revenue
whereas the revenue from beverages has decreased to 48% of the total revenue owing to the shift
of consumers towards healthier drinking options. Moreover, as of 2017 25% of the company’s
revenue comes from its nutrition line of products.
Revenue

The revenue of PepsiCo has declined over the years the reason for which is –

1. Consumers have started to get more health conscious and have started to switch to

healthier food products and beverages. Due to which the main brands of PepsiCo such as

Pepsi and Lays suffered in sales. 2. The sales of PepsiCo in Latin America has declined from 6.8 billion
(2014) to 9.4 billion (2016) 3. The sales in European sub Saharan Africa has also declined from 13
billion (2014) to 10.2 billion (2016).

Profits

The profits have remained stable over the years despite a decrease in revenues except a slight dip in
the year 2015. The reason for which is an increase in the operational efficiency in its day to day
operations as in mentioned in the annual report of PepsiCo that it saved 600 million since 2011 with
environmental sustainability initiatives and an annual savings of 1 billion through its productivity
agenda.
Strategy

PepsiCo’s approach is to diversify and distribute its supply chain hubs. For example, the company
operates supply chain hubs for each regional market. In this way, PepsiCo optimizes response times
to fluctuations in demand

Value chain activities

Value chain analysis of PepsiCo is done to identify the ways in which business creates value for
customers. Its value chain activities are segregated as under:

1. Inbound logistics

PepsiCo portfolio consists of 22 brands including Pepsi-Cola, Tropicana, Gatorade, Mountain Dew
and Diet Pepsi and each brand belonging to PepsiCo generated at least one billion USD in retail sales
in 2016.

The economies of scale can be specified as the main source of value for PepsiCo derived from
inbound logistics primary activity. PepsiCo also benefits from locating its production sites within
close geographical proximity to the main sources of raw materials in order to save on transportation
costs.

Technology is another driver of innovation that provides advantage to PepsiCo’s supply chain. One of
the innovations that PepsiCo is exploring is 3D printing.

On the contrary, Coca Cola has managed a very large supply chain which consists of lakhs of
suppliers who are treated as business partners. Coca Cola also focuses on responsible environmental
and workplace policies and practices.

2. Operations

PepsiCo operations are divided into the following the following six operational segments:

a) Frito-Lay North America (FLNA). This segment engages in manufacturing, marketing, distributing
and selling branded snack foods.
b) Quaker Foods North America (QFNA). This segment is assigned with producing, marketing,
distributing and selling cereals, rice, pasta and other branded products.

c) Latin America segment produces markets, distributes and sells a several snack food brands for
Latin American market. These brands include Doritos, Cheetos, Marias Gamesa, Ruffles, Emperador,
Saladitas,Sabritas, Lay’s, Rosquinhas Mabel and Tostitos.

d) Asia, Middle East & North America (AMENA). AMENA segment makes, markets, distributes and
sells many leading snack food brands including Lay’s, Kurkure, Chipsy, Doritos, Cheetos and Crunchy
through consolidated businesses, as well as through non-controlled affiliates.

e) Europe & Sub-Saharian Africa (ESSA). This segment engages in manufacturing, marketing,
distributing and selling many snack food brands either independently or in conjunction with third
parties. f) North America Beverages (NAB). Operations in NAB segment revolve around producing,
marketing, distributing and selling concentrates, fountain syrups and finished goods under various
beverage brands including Pepsi, Gatorade, Mountain Dew, Diet Pepsi, Aquafina, Diet Mountain
Dew, Tropicana Pure Premium, Sierra Mist and Mug.

As it is illustrated in Figure below, North America Beverages and Frito-Lay North America segments
are the biggest sources of PepsiCo revenues and they account for 55 per cent of the total revenues.

Figure - Net revenue distribution along operational segments

PepsiCo conducts its productions operations with use of sophisticated operational systems and
advanced technologies. A particular focus on sustainability issues as an integral part of its CSR
strategy is an important feature of PepsiCo operations. Moreover, PepsiCo adjusts its products to
local tastes and preferences and this is reflected on operations. For example, PepsiCo has tailored its
products to suit the Indian palette and introduced various local flavours to the Lay’s brand.
Coca Cola operates through many local channels by selling manufactured beverage bases to bottling
operations which are not owned by Coca Cola.

3. Outbound logistics

PepsiCo distribution costs amounted to USD9.4 billion in 2015 and USD9.7 billion in 2014 PepsiCo
creates value in outbound logistics via using multiple product distribution formats. Specifically,
PepsiCo outbound logistics integrate the following three formats of product distribution:

a) Direct-Store-Delivery - This distribution format is especially popular with product categories that
are re-stocked very often. Direct-Store-Delivery provides PepsiCo the advantages of merchandizing
with maximum visibility and appeal within stores. b) Deliveries to customer warehouses - Mainly less
fragile and perishable products are distributed in this format and this is the most cost-effective
distribution format. c) Using distributor networks - Third-party distributors are needed to facilitate
the distribution to locations far from PepsiCo manufacturing plants and warehouses.

Marketing and sales

PepsiCo has an advertising budget of about USD 1.46 billion and PepsiCo marketing strategy makes
an extensive use of print and media advertising, social media marketing, celebrity endorsement and
product placement. The marketing message attempts to associate the consumption of PepsiCo
products with the perceptions of enjoying life to the full extent, staying active and spending quality
time together with friends and loved ones.

Coca Cola spends around USD 2.5 million on advertising though the advertising media being print
media, outdoor marketing, digital channels and social media which are the same as PepsiCo’s. It also
runs several campaigns from time to time.

After Sales

PepsiCo sells its products to final consumers only via re-sellers and intermediaries such as
supermarkets, grocery stores of various formats, restaurants, fast-food chains and other catering
business. Therefore, PepsiCo does not provide customer services to the final consumer directly at
the point of purchase. Nevertheless, PepsiCo deals with customer service inquires and questions
related to its brands and specific products via customer service phone numbers and online contact
forms available on its official website.