1. Pepsi Company
- An Analysis of Corporate Strategy-
Presented by:
Danny Fehrenbach, Derek Chestnut, Kaitlyn
Rawson, Kelsey Lushenko, Tim Mahoney
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2. Background of Pepsi. Co
• Started as a syrup production company
• Kendal took leadership and built up the Pepsi
brand image and pushed for aggressive tactics
• Complimentary interest allowed expansion
into snack food industry
• Leadership was grounded around high
employee expectation and the 3 P’s
– People, People, People!
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3. Organizational Structure of Pepsi
• Strong management, high expectations
• Managers move to different positions within
company
• Emphasis on people, not products, in
resource allocation decision-making
• “We take eagles and teach them how to fly in
formation” –Wayne Calloway
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4. Market Segmentation
Pepsi breakdown of industry sales
 Restaurants are the plurality of
Pepsi’s sales 36% 35% Soft Drinks
 With a relationship with
Snack Foods
CPK, there could be expansion
and more growth within the 29% Restaurants
restaurant segment
 Calloway believed in investing
where there were the highest
returns
 The entirety of sales in 1991
accounted for $20 billion.
 With the Food service revenue
the greatest market potential
Greatest
rests within quick service Market
restaurant, family, and Potential
institutional
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5. Current
Restaurants
• Consumers want variety in their food
purchasing opportunities.
• The U.S. population is growing towards health
and nutritional trends that began in 1980’s.
• Pizza Hut- shifted focus from casual dining to
quick-serve and delivery, leaving opportunity
to develop a mid-scale restaurant segment.
• No coordination in purchasing costs between
restaurants. (potential $100 million in annual
savings)
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6. CALIFORNIA PIZZA KITCHEN AND
CARTS OF COLORADO
FINANCIALS
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7. California Pizza Kitchen
Financials
Carts of Colorado Financials
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8. Threats of Acquiring COC
 With Restaurants holding the most capital spending, partnering with a backwards integrated
company might increase expenditures drastically
 In manufacturing the physical carts, Pepsi runs the risk of increased sunk costs and
depreciation
 As a larger firm, CPK offers greater financial incentives in relation to an acquisition or alliance
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9. Interpreting the Numbers…
• Consistent sales growth in both firms
• Larger total sales in CPK, showing less liability
• More market reach and revenue potential from
California Pizza Kitchen
• Past mishaps in manufacturing and
management restrictions with COC might cause
inconsistent growth
• Pepsi’s past attempts at dine-in establishments
have shown great potential, and CPK provides
strong resources for the target segment’s needs
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10. CARTS OF
COLORADO
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11. Choosing modes of change for Carts of
Colorado
Change in Food Pepsi hold high brand
Service consumers Lack of equity and coherence
manufacturing
Manufacturing Internal
Experience? Development
COC produce a Resource
Specialized product Markets
And service
Alliance
Mkt Failures are
Extensive? Acquisition 11

12. Carts of Colorado
• In 1980 brothers Stanley and Daniel Gallery became the
first creators of NSF-approved food carts.
• Designer, manufacturer and merchandiser of mobile food
carts and kiosks.
• 30% of business owned by venture capital firm
• Management problems: Company almost went bankrupt
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13. Current Strategy of COC
• Sell carts to companies for use of sales of
their products
• Ability to make large profits and to serve
customers without the high costs of a
restaurant.
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14. Pepsi’s Interest in COC
• Large customer list
– Burger King, Coca-Cola, Dunkin Donuts
• Low cost with returns of a typical restaurant
– Returns as high as 1.2 million annually
• Accounted for 20% of COC’s sales in 1990
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15. Changing Competitive Environment and
Firms Capabilities
• Changing from a central knowledge in
restaurants to manufacturing
• Changing their capacity to accommodate a
smaller growing company (as in La Petite
Boulangerie)
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16. Gap
• Backwards integration
– Pepsi is not in the business of manufacturing
• No internal development available
• Moving into a whole different industry
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17. Alliance or Acquisition
We would advise against either an alliance or
an acquisition
• May lose customers: Major companies COC
currently supplies to are competitors (Burger
King, Coca-Cola)
• Not specialized in backwards integration therefore
no economies of scales would exist.
• Not used to expanding small businesses, most
successful ventures are acquiring established
businesses.
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18. CALIFORNIA PIZZA
KITCHEN
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19. California Pizza Kitchen
• Started and owned by Larry Flax and Rick
Rosenfield
• Best known for individual-sized pizza with
unique healthy toppings
• Located in affluent, urban and suburban
shopping centers
• High level of service with intense staff
training
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20. CPK Current Strategy
• Moderately priced, yet comparable- quality
alternative to a fine dining restaurant
• Targeting young, upscale singles and
couples, families and retired people
• Select cities with the potential to support
more than one CPK
• Limited advertising
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21. Failed and Successful Ventures
• 1965- Merged with Frito-Lay Company
• 1970- Acquired Wilson Sporting Goods Co.
• 1976- Acquired Lee Way Motor Freight
• 1977- Acquired Pizza Hut
• 1978- Acquired Taco Bell
• 1984- Sold Lee Way Motor Freight
• 1985- Sold Wilson Sporting Goods
• 1986- Acquired Seven-UP and KFC
• 1987- Sold La Petite Boulangerie
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22. Pepsi’s Interest
• Casual dining segment
• Table turnover was nearly double that of a
typical fine dining restaurant
• Growth rate of 42% net income
• 25 restaurants in 8 states
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23. Changing Comp Environment/ firm
capabilities
• Pepsi would change from:
– A fast food industry to a higher end service
restaurant
– Less advertising and more unique products
– Pre-made frozen food to fresh ingredients
• Firm Capabilities:
– Experience in running chains
– Already have experience in pizza industry
– Money to invest and grow CPK
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24. The Gap
• Level of customer service
• Environment designed to draw customers in
• Value chain in getting fresh ingredients
• Location strategy for restaurants
• Innovative ideas for continually building the
menu with unique items
• Pepsi is moving further away from
homogenous products
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25. Alliance or Acquisition
• Flax and Rosenfield want to remain apart of
their company
• The training and quality management of
servers must be closely maintained
• Limited Liability
• Merging point with going public and
aligning with Pepsi
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26. PLANS FOR THE
FUTURE
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27. Follow up Plan for Pepsi
• We would want the alliance of CPK with Pepsi
to operate as an equity alliance that could
possibly lead to an acquisition.
• Create detailed contracts partnering with
current owners and build a Pepsi team to join
with the current CPK management team.
Alliances
Arms-Length Long-Term Non-Equity Equity Alliance
Contracting Contract Alliances / Joint Venture Acquisition
Administrative Controls
In the Incentive Alignment In the Firm
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(Hierarchy)
Market Low High

28. QUESTIONS?
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