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PepsiCoIncinSoftDrinks(USA)
LocalCompanyProfile|27May2014
STRATEGICDIRECTION

Accordingtotheform10KfiledinFebruary2014,PepsiCoseekstocontinuetobroadentherange
ofourproductportfolio,includingexpandingourofferingsofmorenutritiousproducts...byreducing
addedsugar,sodiumandsaturatedfatincertainkeybrands.Intermsofmarketing,thecompanywill
investindigitaltoolsandtechnologiesthatwillallowustoreachourconsumersdifferentlycontinueto
adaptouradvertisingandmarketingmodeltoharnessthepowerofsocialmedia.
KEYFACTS

Summary1PepsiCoInc:KeyFacts
Fullnameof
company:

PepsiCoInc

Address:

700AndersonHillRoad,Purchase,NY10577

Tel:

+1(914)2532000

Fax:

+1(914)2532070

www:

Pepsico.com

Activities:

Marketsbottledwater,carbonates,energydrinks,juices,RTDtea,sports
drinks

Source:EuromonitorInternationalfromcompanyreports,companyresearch,tradepress,tradesources

Summary2PepsiCoAmericasBeverages:OperationalIndicators
2011

2012

2013

Netsales

US$22,418million

US$21,408million

US$21,068million

Netprofit

US$3,273million

US$2,937million

US$2,955million

Source:EuromonitorInternationalfromcompanyreports,companyresearch,tradepress,tradesources

COMPANYBACKGROUND

PepsiCoshistoryspansover115years,datingbackto1898,whenpharmacistCalebBradham
inventedPepsiCola,claimingitcureddyspepsia,orindigestion.ThemodernincarnationofPepsiCo,
however,occurredin1965,whenPepsiColamergedwithFritoLay.
MuchofPepsiCosmodernhistoryhasbeenmarkedbystrategicacquisitionsanddivestments.
PepsiCopursuedaninterestinthefoodservicebusinessfromthelate1970sthroughtothelate1990s,
withitstriooffastfoodrestaurants.ThecompanyacquiredPizzaHutin1977,TacoBellin1978and
KFCin1986.However,PepsiCodiscoveredthatitsownershipofmajorfastfoodchainslimitedits
abilitytosellitssoftdrinksinotherfoodserviceoutlets,whichviewedthecompanyasacompetitor.As
aremedy,PepsiCospunoffitsUS$10billionfastfoodunitasTriconGlobalRestaurantsin1997.This
moveleftthecompanyfreetoconcentrateonitscoresoftdrinksandsavourysnacksmarkets.
In1991,thePepsiLiptonTeaPartnershipwascreatedwithUnilever,makerofLiptonteas.
In1998,PepsiCoseizedtheopportunitytoacquireTropicanaProductsIncfromSeagram.Tropicana
isaleadingproducerofbrandedjuices.Theacquisitionextendedthecompanyscompetitionwithrival
CocaColaintojuices,againstthelattersMinuteMaidCo.
In1998,thePepsiCoBoardofDirectorsauthorisedconversionofamajoritystakeincompanyowned
bottlingoperationstopublicownership,therebyseparatingthatlowmarginoperationfromthemore
profitablebeverageconcentratebusiness.Thebottlingoperation,knownasThePepsiBottlingGroup,
accountedforoverhalfofPepsiCovolumesalesin1999.
In2001,PepsiCopurchasedtheChicagobasedQuakerOatsCoformorethanUS$13billion.The
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acquisitionwasaimedprimarilyatacquiringQuakerOatssprizedGatoradesportsdrinkline,giving
PepsiCoalargeshareinsportsdrinks,furtherenlargingitsportfolio.Alsoin2001,PepsiCopurchased
amajorityshareinSouthBeachBeverageCo,producerofSoBefruit,herbalandenhancedsoftdrinks.
SoBeproductsarepositionedaselixirsandenergydrinkswithintherapidlygrowingUSsportsand
energydrinkscategory.
In2006,PepsiCoacquiredArdeaBeverageCo,anenergysodamanufacturer,IZZEBeverage
Company,asparklingjuicemanufacturer,andNakedJuiceCo,manufacturerof100%juiceand
smoothies.
In2009,thecompanyrebrandeditssignatureTropicanaPurePremiumOrangejuice.Theredesigned
packageswereveryshortlived,beingdiscontinuedshortlyafterlaunch.Manyconsumersstrongly
opposedtheredesignandwereveryvocalabouttheirfeelingstothecompany.Inadditiontosimplynot
likingthenewdesign,manyconsumersfounditdifficulttodifferentiatebetweendifferenttypesofjuice
withtheupdatedpackaging.Thecompanyrevertedbacktotheoriginaldesign,hopingtoregainthe
trustofloyalconsumers.
In2009,thecompanyannouncedthatitsAquafinabottledwaterbrandwouldseethelaunchofthe
EcoFinaBottle,thelightest500mlbottleofanynationallydistributedbottledwaterbrandinthemarket.
TheEcoFinaBottleisthelatestofthecompanysecofriendlyefforts,whichbeganin2002,todevelop
thelightestandthemostenvironmentallyfriendlybottlesonthemarket.TheEcoFinabottleismade
with50%lessplasticthanthe500mlbottlesoriginallyproduced.Thecompanyestimatesthenew
packagingwilleliminateapproximately34,000tonnesofplasticannually.In2011,PepsiCowasina
racewithitsrivalCocaColaCotobecomethefirsttoproduceaplasticsodabottlemadeentirelyfrom
plants.InDecember2011,thecompanyannouncedthatitwasonscheduletoconductatestin2012
thatinvolvedproducing200,000bottlesmadefromplantonlyplastic.However,itremainstobeseen
whetherproductioniscommerciallyviableonalargescale.
In2009,thecompanypilotedaprojectintroducingclimatefriendlyvendingmachinesintheUS.The
programmebeganwith30machinesintheWashingtonDCarea,withthemachinesfeaturingaspecial
greenrefrigerantstickerindicatingthattheyuselessenergyandgeneratelessgreenhousegas
emissionsthanexistingmachines.Thenewmachinesusecarbondioxide(CO2),anaturalrefrigerant,
insteadofhydrofluorocarbons(HFCs).
In2009,PepsiCoannouncedplanstoacquireAmococo,Brazilslargestcoconutwatercompany.The
agreementindicatesPepsiCosrecentstrategytotransformitsbeverageportfolio.Thecompany,like
CocaCola,iseagertoenterintothefastgrowingcoconutwaterniche,hailedforitsnaturalhydration
properties.
In2012,PepsiCoannouncedinvestmentofUS$500millioninmarketingtoregainlostshareinthe
beverageindustry.ThecompanyhiredpopculturebrandambassadorssuchasNickiMinajand
BeyoncKnowles,andsponsoredtheFebruary2013SuperBowlHalftimeShow.
In2010,PepsiCosCEOIndraNooyistressedthatthecompanywillfocusonalternativebeveragesto
fitthehealthandwellnessgoalssoughtbymanyAmericans.MostrecentlaunchesfromPepsiCohave
focusedonbetterforyou(BFY)beverages.ExamplesincludePropelZero,anenhancedwater(2011)
andNakedJuiceslowcaloriesmoothieswithcoconutjuice(2010).Thecompanyalsolaunchedmid
caloriecolaPepsiNexttotryandrevitaliseitsdietorreducedsugarofferings.Theinitialfeedback
regardingPepsiNext,whichcontains60caloriesper12floz,showsthatthebeveragefailedtocapture
consumerslookingtomoveawayfromfullflavouredcolacarbonatesbutwhodislikedthetasteofdiet
drinks.
PRODUCTION

In2010,PepsiCocompleteditsacquisitionofPBG(PepsiBottlingCo)andPAS(PepsiAmericasInc).
Theacquisitionswereintendedtohelpcreateamorefullyintegratedsupplychainandgotomarket
businessmodel,toimprovetheeffectivenessandefficiencyofthedistributionofitsbrandsandto
enhancerevenuegrowth.ThenewventurewillaccountforapproximatelythreequartersofPepsis
bottlingsystembyvolume,withindependentfranchisersaccountingfortheremainder.Itwillallowthe
companytobemoreflexibleandmoveproductstoconsumersfaster.Itwillalsoallowittoofferamore
diverseproductrange,primarilyinthehealthandwellnessarena.Thecompanywillalsobeableto
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undertakejointmarketingventureswithitsproductsthataretypicallysoldtogether,suchassavoury
snacksandrefreshmentbeverages.
AsofDecember2013,PepsiCoAmericasBeverages(PABincludesallofPepsiCosNorth
AmericanandLatinAmericanbeveragebusinesses)ownsorleases80bottlingandproductionplants
andproductionprocessingfacilities.
COMPETITIVEPOSITIONING

PepsiCocontinuedtotrailbehindCocaColaandrankedsecondinbothcarbonatesandoverallsoft
drinkswithofftradevaluesharesof27%and12%,respectively,in2013.Thecompanyssharehas
beendecliningovertheyears,asconsumershavebecomemorefocusedonhealthandwellness
productsandmovedawayfromcarbonates.
Toappealtohealthconsciousconsumers,PepsiCohasinvestedinnewproductinnovationand
makingexistingproductshealthierinanattempttocaptureconsumerinterest.Stevia,anaturalplant
derivedsweetener,wasusedinitsSoBeLifeWaterproductsassoonasitwasapprovedbytheFDA.
Steviahasfewercaloriesthanregularsugarand,sinceitisplantbased,itstillallowsthecompanyto
marketitsproductasnatural,unlikeotherartificialsugarsubstitutes(egaspartameandsucralose).
Inlinewiththehealthandwellnesstrend,PepsiCosGatoradelaunchedPropelZeroin2011,azero
calorie,nutrientenhancedwaterwithvitaminsandantioxidantsinthefunctionalbottledwatercategory,
whereVitaminWater(CocaCola)hasbeentakentocourtformisleadingconsumerswithitsname.The
GatoradeCoLtdisownedbyPepsiCoandrankedfourthintermsofofftradevalueshare(5%)in
overallsoftdrinksin2013.PepsialsointroducedPepsiNextin2012,amidcaloriecolacarbonatethat
combinesablendofartificialsweetenersandhighfructosecornsyrupforacolathatcontains60%less
sugarthanfullflavouredPepsi.
PepsiCowantstomarketmorenaturalproducts.In2010,PepsiCoreformulateditsSierraMist
producttousecanesugarinsteadofhighfructosecornsyrupandcalledtheproductSierraMist
Natural.Thecompanyusedthetagline,thesodanaturewoulddrinkifnaturedranksoda.
InaFebruary2014earningscall,thecompanysCEOIndraNooyimentionedthatthecompanywill
introducenewnoncolabeveragessweetenedwithsteviaandsugarintheUSlaterin2014whilecola
productssweetenedwithsteviaandsugarwouldbetestedinothermarkets.
LikeitslargercompetitorTheCocaColaCo,PepsiCoIncdrawsvaluefromitsproductionand
distributioncapacitiesbypartneringwithcompetitorsthroughlicensingarrangements.Thecompany
distributestheleadingRTDteabrandLiptonthroughitsstakeinthePepsiLiptonTeaPartnership,and
in2008addedTazoRTDteasfromStarbuckstothatportfolio.In2009,LiptonintroducedRTD
SparklingGreenTea,creatingrenewedinterestinRTDteaasawhole,andin2011,thepartnership
launchedLipton100%NaturalIcedTea.Alsoin2008,thecompanyreachedanagreementtodistribute
RockstarEnergyDrinkandMuscleMilkthroughitsPepsiBottlersandPepsiBottlingGroup
relationships.ThesetypesofdealsallowPepsiCotogainentryquicklytocategorieswithgrowth
potential,inawaythatismoreimmediatelyprofitablethandevelopingbrandsonitsown.Throughthis
typeofagreement,PepsiCogainedthedistributionrightsforOrangeCrush,thefastestgrowingorange
carbonatesproductintheUS.
PepsiCousesnumerousplatformstomarketitsbeveragesincludingtelevision,print,eventmarketing
andsocialmedia.ThecompanyspendsheavilytoattractUSconsumers.Pepsisponsoredthe
February2014SuperBowlHalftimeShowfeaturingsingerBrunoMarsandthemusicgroupTheRed
HotChiliPeppers.PepsiwasalsoasponsorduringtheAugust2013VideoMusicAwards,theJanuary
2014GrammyMusicAwardsandtheFebruary2014AcademyAwardsbroadcast.Totargetyoung,
techsavvytrendsetters,thecompanypromotedseveralofitsbeveragesincludingBriskteaand
MountainDewattheMarch2014SouthbySouthwest(SXSW)interactivemusicandfilmfestival.
PepsiCotrailsCocaColainontradesalesofsoftdrinksbyawidemargin,owinginparttoitspast
historyasachainedfastfoodrestaurantoperator.ThecompanyownedtheKFC,TacoBellandPizza
Hutchainsuntiltheyweredivestedin1997.Inthepast,manyfoodserviceaccountsthereforewentto
CocaCola,ascompetitorsdidnotwanttohelpPepsiCosoverallbusinessbystockingitsdrinks.These
accountsareoftenlongtermdeals,andithasbeendifficultforPepsiCotoconvincefoodservice
operatorstoswitch.OnerelationshipithasdevelopedisthatwithStarbucks,and,in2008,itreachedan
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agreementtoexpandtheNakedJuicelineintoStarbucksbrandedoutlets.
InJanuary2014,TacoBelladdedsixPepsiCobeveragesDietMountainDewBajaBlast,Mountain
DewSangritaBlast,ManzanitaSol,BriskManoFiesta,BriskIcedTeaandLemonade,andSoBe
LifewaterYumberryPomegranate.
Summary3PepsiCoInc:CompetitivePosition2013
Producttype

Retailvalueshare

Rank

Carbonates

26.6%

Bottledwater

5.7%

Sportsandenergydrinks

1.1%

Juice

3.1%

Source:EuromonitorInternationalfromcompanyreports,companyresearch,tradepress,tradesources,tradeinterviews

EuromonitorInternational2015

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