Full Over View of the Strategic Management in Pepsico

1. STRATEGIC MANAGEMENT VIEW
ON PEPSI CO COMPANY
• GROUP (7)
• Mr P Rajarajan MBA/003
• Dr M I Siraj MBA/010
• Mr C David MBA/014
• Mr HRC Sampath PDM/004
• Ms Moh Moh Lwin PDM/006

2. CONTENTS
1. Company Profile
2. Product Profile
3. Organizational Structure
a. Environmental Scanning
b. Formulation of Strategies
c. Implementation ( Both Successful and
Failure stories)
d. Evaluation
4. Summary

3. (1) Company Profile
PepsiCo is a global food and beverage corporation
based in New York.
Founded in 1965.
Doing business in more than 200 countries
The company generated 66 billion in revenue in
2013 and has more than 274,000 employees
worldwide. ( 2013 Annual Report)

4.  During 2012 alone PepsiCo paid USD 6.5 billion
to shareholders through share purchases and
dividends, increased management operating cash
flow to USD 7.4 billion, and achieved 28% core
return on capital employed (ROE) (Annual
Report, 2012).
 The company maintains several research and
development centers in the USA, as well as,
globally in Shanghai, Hamburg, and Monterrey.

5. VISION
“Performance with
Purpose”

7. MISSION
 As one of the largest food and beverage
companies in the world, our mission is to provide
consumers around the world with delicious,
affordable, convenient and complementary foods
and beverages from wholesome breakfasts to
healthy and fun daytime snacks and beverages to
evening treats.
 We are committed to investing in our people, our
company and the communities where we operate
to help position the company for long-term,
sustainable growth.

8. GUIDING PRINCIPLES
 To advance our mission and vision with honesty,
fairness and integrity, we are committed to six
guiding principles. When conducting business
around the world, we must always strive to:

9. 1. CARE FOR OUR CUSTOMERS, OUR
CONSUMERS AND THE WORLD WE
LIVE IN.
We are driven by the intense, competitive spirit of
the marketplace, but we direct this spirit toward
solutions that benefit both our company and our
constituents. We see our success as inextricably
linked to that of our customers, consumers and
communities.

10. 2. SELL ONLY PRODUCTS WE CAN
BE PROUD OF.
 The true test of our standards is our own
consumption and endorsement of the products we
sell. Without reservation. Our confidence helps
ensure the quality of our products, from the
moment we purchase ingredients to the moment
it reaches the consumer's hand.

11. 3. SPEAK WITH TRUTH AND
CANDOR.
 We tell the whole story, not just what's
convenient to our individual goals. In addition to
being clear, honest and accurate, we are
responsible for ensuring our communications are
understood

12. 4. WIN WITH DIVERSITY AND
INCLUSION.
 We embrace people with diverse backgrounds,
traits and ways of thinking. Our diversity brings
new perspectives into the workplace and
encourages innovation, as well as the ability to
identify new market opportunities.

13. 5. BALANCE SHORT-TERM AND
LONG-TERM
 In every decision, we weigh both short-term and
long-term risks and benefits. Maintaining this
balance helps sustain our growth and ensures
our ideas and solutions are relevant both now
and in the future

14. 6. RESPECT OTHERS AND SUCCEED
TOGETHER.
 Our mutual success depends on mutual respect,
inside and outside the company. It requires
people who are capable of working together as
part of a team or informal collaboration.
 While our company is built on individual
excellence, we also recognize the importance and
value of teamwork in turning our goals into
accomplishments.

15. CORE VALUE
“Our values and philosophy are a reflection
of the socially and environmentally
responsible company we aspire to be. We
are the foundation for every business
decision we make.”

16. COMPANIES
PepsiCo companies
1.Pepsi-Cola
2.Gatorade
3.Quaker
4.Frito Lay
5.Tropicana

18. 2. PRODUCT PROFILE
1. Pepsi-Cola Brands, Pepsi ,Caffeine Free
Pepsi, Diet Pepsi etc ( Series of Pepsi)
2. Frito Lay Brands, Lay's potato chips ,
Lays Kettle Cooked potato chips, Wavy
Lay's potato chips, Baked Lay's potato
crisps ,etc
3. Gatorade Brands, Gatorade X-Factor
Thirst Quencher, Gatorade Fierce Thirst
Quencher, Propel Fitness Water

19. 4. Tropicana Brands, Tropicana Pure
Premium juices, Tropicana Twister juice
drinks, Tropicana Smoothies, Tropicana
Pure Tropics juices.
5. Quaker Brands, Quaker Oatmeal, Quaker
Instant Oatmeal, Quaker Oatmeal
Breakfast Squares, Cap‘n Crunch cereal,
Life cereal

22. 3. ORGANIZATIONAL STRUCTURE
 PepsiCo has come a long way from Pepsi
being its primary product and source of
revenue.
 The company has four units:
PepsiCo Americas Food (PAF)
PepsiCo Americas Beverages (PAB)
PepsiCo Europe
PepsiCo Asia
 These four business units handle the
company's business endeavours in
different regions of the world.

24.  Environmental Scanning

25. ENVIRONMENTAL SCANNING
 Internal Environment
 Resources
 Structure
 Culture
 External Environment
 Task Environment
 Industry Analysis- PORTER’s 5 Forces Model
 Societal Environment
 PESTEL Analysis

26. INTERNAL ENVIRONMENT

27. STRENGTHS
1. Strong brand equity
2. Well-known worldwide
3. Innovating company – Strong top management
4. Ethical, socially responsible, and sustainable
company
5. Strong advertising company with more than 40
slogans and songs
6. PepsiCo as the largest part of the market share after
Coca-Cola
7. PepsiCo owns a wide variety of smaller brands
which able them to offer a large product range from
beverages to snacks.
8. Invest more on R & D

28. WEAKNESSES
1. PepsiCo production is really expansive because
of the need to constantly develop new products
to meet the changing customers demands
2. PepsiCo is experiencing a lack of focus towards
Pepsi sodas
3. PepsiCo is experiencing product recalls
4. PepsiCo has a low employment productivity and
a weak distribution
5. PepsiCo depends too much on the US market
6. PepsiCo is far behind Coca-Cola in the
international market

29. IFAS TABLE
Internal 1 to 4 1 to 4
Strengths
Strongbrand equity 0.12 4 0.48 4 0.48
Wellknownworldwide 0.06 3 0.18 4 0.24
PepsiCo ownsawide varietyofsmallerbrandswhichablethemto offera large product
rangefrombeveragestosnacks 0.08 4 0.32 2 0.16
Innovatingcompany 0.08 4 0.32 4 0.32
Ethical, sociallyresponsible, and sustainable company 0.05 2 0.1 3 0.15
Strongadvertisingcompanywithmore than40 slogansand songs 0.07 3 0.21 3 0.21
PepsiCo asthe largestpartofthemarketshare afterCoca-Cola 0.06 4 0.24 3 0.18
Weaknesses: 0 0
PepsiCo productionisreallyexpensive becauseoftheneed to constantlydevelop new
productsto meetthechangingcostumersdemands 0.05 1 0.05 2 0.1
PepsiCo isexperiencingalackoffocustowardsPepsi 0.06 0 0
PepsiCo isexperiencingproductrecalls 0.12 1 0.12 1 0.12
PepsiCo haslowemploymentproductivityand a weak distribution 0.08 1 0.08 1 0.08
PepsiCo dependstoo muchonthe US market 0.08 2 0.16 1 0.08
PepsiCo isfarbehind Coca-Colainthe internationalmarket 0.09 2 0.18 1 0.09
1
4.68 4.96

30. EXTERNAL ENVIRONMENT

31. INDUSTRY ANALYSIS –
TASK ENVIRONMENT

33. THREAT OF NEW ENTRANTS - LOW
 PepsiCo is well established and have Pepsi
Bottling Group
 Have brand equity
 Loyal customers
 Need huge investment for R&D facilities, high
tech machineries
 Must have lots of market experience in the same
industry
 Good distribution channel

34. THREAT OF SUBSTITUTES
 Not a great deal for PepsiCo
 Consumers preference is the taste more than the
cost
 Not many carbonated drink having the same
taste as Pepsi other than Coco-Cola
 Loyal customers

35. BARGAINING POWER OF BUYERS
 Not so significant even though low switching cost
 Monetary cost is not the issue
 Consumer preference is the taste
 Convenience of the vending machine

36. BARGAINING POWER OF THE
SUPPLIERS
 Low
 Many raw materials supplier like fruit and other
ingredients
 PepsiCo partner ship with farmers and community
groups, ensuring quality supply
 For bottling and metal can, they make use 40% share
of PBG.
 Only problem may rely on bad harvesting season due
to climate change
 Fuel oil crisis

37. COMPETITIVE RIVALRY WITHIN
INDUSTRY
 Moderate to strong
 Pepsi is not no 1 in beverage market
 Pepsi is still need to compete with Coca-Cola
 Pepsi is new in food market
 Pepsi need to compete to big players like Nestle
and Craf

38. SOCIETAL ENVIRONMENT
ANALYSIS-PESTEL
 Political
 Pepsi is trying to get underdeveloped market
 They have to consider government taxation policy, environmental law
regulations for both side
 The various businesses of Pepsi are also subject to state, local and
foreign laws. The international businesses are subject to the
Government stability in the countries where PepsiCo is trying get into
(underdeveloped markets).
 Economic
 It rely on trucks for transportation
 Fuel price fluctuation is one of the important aspect
 Economic crisis will also to labor supplier and consumer’s purchasing
power

39. SOCIETAL ENVIRONMENT
ANALYSIS-PESTEL
 Social
 Population on young consumers
 Changes in life style
 Social trend and demand
 People want to be healthy
 Technology
 Awareness on new machine launching
 Advance technology automation, will affect
production efficiency R&D facilities.

40. SOCIETAL ENVIRONMENT
ANALYSIS-PESTEL
 Environmental
 Some Environmental issues like Water
Contamination
 Legal
 global political change that also creates problem or
hurdles for the company.( Pakistan)
 Many different markets across the world follow
different set of regulations, which are either relaxed
or severe.

41. OPPORTUNITIES
1. Opening in market for less costly products
2. Growth opportunities in developed countries as well
as international non-established countries
3. Pepsi recently reacquired ownership of its two
largest bottlers, Pepsi Bottling Group (PBG) and
PepsiAmericas (PAS)
4. Compete in more than one industry (non-alcoholic
beverage industry, the salty or savory snack food
industry, and the breakfast food industry)
5. Growth in the carbonated drink market is the
largest in Asia and Europe
6. The world's demand is experiencing a growth with
the sports drinks, bottled water, and energy drinks

42. THREATS
1. Fierce competition from Coca-Cola, which owns the
largest piece of the market share
2. The downturn in economy, which lead customers to
shift away from bottles of water to tap water.
3. Because of the recession, customers are finding
cheaper alternatives to the national brands.
4. Customers are getting more conscious and
concerned about their eating habits and general
health.
5. Campaign against plastic containers has impacted
the sale of bottled beverages
6. Highly dependent on supplies of clean water, to
prevent contamination

43. EFAS TABLE
Key factors Weight AS TAS AS TAS
External 1 to 4 1 to 4
Opportunities:
Providelesscostlyproducts 0.05 1 3 0.15
Improvepresenceinestablishedcountriesandincreaseinternationalmarketwheretheyarenotalreadysettled 0.08 3 0.24 4 0.32
Pepsirecentlyreacquiredownershipofitstwolargestbottlers,PepsiBottlingGroup(PBG)andPepsiAmericas(PAS) 0.05 0 0
Competeinmorethanoneindustry(non-alcoholicbeverageindustry,thesaltyorsavory
snackfoodindustry,andthebreakfastfoodindustry) 0.13 4 0.52 3 0.39
GrowthinthecarbonateddrinkmarketisthelargestinAsiaandEurope 0.09 1 0.09 4 0.36
Theworld'sdemandisexperiencingagrowthwiththesportsdrinks,bottledwater,andenergydrinks. 0.13 4 0.52 4 0.52
Threats: 0 0
FiercecompetitionfromCoca-Cola,whichownsthelargestpieceofthemarketshare 0.12 3 0.36 3 0.36
Thedownturnineconomy,whichleadcustomerstoshiftawayfrombottlesofwatertotapwater. 0.05 1 0.05 4 0.2
Becauseoftherecession,customersarefindingcheaperalternativestothenationalbrands. 0.1 1 0.1 4 0.4
Customersaregettingmoreconsciousandconcernedabouttheireatinghabitsandgeneralhealth. 0.09 4 0.36 0
Campaignagainstplasticcontainershasimpactedthesaleofbottledbeverages 0.05 0 1 0.05
Highlydependentonsuppliesofcleanwater,topreventcontamination 0.06 0 0
1
Innovate products with
healthier alternative
Improve international
segment

44.  Mr.C.David MBA/010

45. STRATEGY FORMULATION

46. TOWS MATRIX
SO Strategies ST Strategies WO Strategies WT Strategies
(O4, S1, S2, S6, S7)
Continue to offer
variety or product in
various brands.
(O5, O2, S2) Expand
and focus on the
carbonated drinks and
beverage segment in
Asia and Europe.
(O6, O4, S6, S7)
Respond to the
growing demand of
sports drinks, bottled
water, and energy
drinks by expanding
product market.
(T1, S1, S2, S3, S8)
Innovate Pepsi product
line with something
that is going to
differentiate us from
Coca-Cola.
(S1, S3, O4) Innovate
products by offering
healthier alternatives.
(T2, T3, S3) Offer more
promotions or
discounts to prevent
sales from decreasing.
(T5, S1, S2, S4)
Develop more
environmentally
friendly containers.
(T6, S6) Support
environmental issues,
such as pollution,
which causes water
contamination.
(W2, W5, W6, O2, O5)
Expand Pepsi sodas
product in Europe and
Asia.
(W1, O4, O6) Improve
their sales in the
beverage segment by
responding to the
increasing demand for
sports drinks, bottled
water, and energy
drinks.
(W1, T2, T5) Adjust
production of bottles
with downturn in
economy.
(W1, T3) Produce
bigger size of bottles
and sale them at the
same price as the small
one.
(W3, T6) Be
responsible and
cautious towards
supplies of water.
(W1, W4, T6) Increase
supply chain
production by
monitoring cautiously
employees and
improving workers
training.
(W5, W6, T1) Increase
presence in the
international market.

47. CORPORATE STRATEGY
 Directional Strategy
 Growth Strategy
 Merger
 Acquisition
 Strategic Alliances
 Concentration Strategy
 Diversification Strategy
 Stability Strategy
 Pause/Proceed with Caution Strategy
 No-Change Strategy
 Profit Strategy
 Retrenchment Strategy
 Turnaround Strategy
 Captive Company Strategy
 Sell-out/ Divestment Strategy
 Bankruptcy / Liquidation Strategy
 Portfolio Strategy
 BCG Growth Share Matrix
 GE Business Screen Matrix
 Parenting Strategy

48. CORPORATE STRATEGY
 Corporate level strategy revolves around asking, "What business are we going to be
in? What business should we abandon? What types of portfolio businesses should we
hold?" Therefore a large corporation like Pepsi each quarter evaluates their
portfolio businesses (whether it is in beverages, snacks or fast food). After viewing
the performance of each, they decide to either cut activity in one or increase focus in
one.
 PepsiCo was US centric three years ago and it had a western “Push model” of
business. To accelerate global growth PepsiCo restructured its food and
beverages business in America so that it will include other region such as Canada,
Mexico and Latin America.
 To accelerate it more PepsiCo created sectors for PepsiCo Europe and PepsiCo
Asia, Middle East and Africa along with the Americas Foods and Americas
Beverages sectors. This helped in leading a new path of innovation and product
development.
 The acquisition of Quaker oats in last “August 2000” was a smart move of
PepsiCo which enabled the synergies between both the companies. After the
acquisition PepsiCo witnessed the growth of 14% in fiscal year 2001. The large
product portfolio and distribution channels of Quaker helped PepsiCo to add more to
its economies of scale.

49. PEPSICO CORPORATE STRATEGY
 The Strategic Planning is “the process of
determining an organisation’s primary objectives
and adopting courses of action that will achieve
these objectives” (Boone and Kurtz, 2013, p.39).
 It plays a critical role in ensuring long-term
growth of a business entity.

50. 1. INTERNATIONAL MARKET
EXPANSION STRATEGY THROUGH
MERGERS AND ACQUISITIONS.
 Advantages of gaining access to competencies and
infrastructure, reducing direct costs and overheads
and achieving organic growth.
 Recently, PepsiCo has engaged in important
mergers and acquisitions such as acquisition of juice
and diary businesses Lebedyansky and Wimm-Bill-
Dann in Russia, Lucky snacks and Mabel cookies in
Brazil, and Dilexis cookies in Argentina.

51. 2. FORMATION OF STRATEGIC
ALLIANCES IN GLOBAL SCALE
 Strategic partnerships have been formed with
Tingyi in China in order to claim a share in
growing beverage market in China.
 Joint-venture with Tata in India to enhance
drinking water manufacturing capabilities, and
initiation of strategic partnership with Almarai
in Saudi Arabia can be mentioned to illustrate
PepsiCo’s adoption of strategic alliances as an
integral part of the corporate strategy.

52. 3. FOCUS ON EMERGING MARKETS
 The share of net revenues from developing and
emerging markets such as China, India, and
Russia have been increased from 24% in 2006 to
35% in 2012 (Annual Report, 2012) through
mergers and acquisitions and on the basis of
formation of direct subsidiaries.
 PepsiCo CEO IndraNooyi has publicly expressed
commitments to further increase the level of
presence of the company in emerging markets.

53. 4. FOCUS ON ORGANISATIONAL
CULTURE
 Being listed among the top 25 ‘World’s Best
Multinational Workplaces’ by the Great Place to
Work Institute in 2012 can be interpreted as an
indication of effective working culture within
PepsiCo.

54. 5. DEVELOPING AND PROMOTING
THE IDEA OF ONE PEPSICO
 CEO has been striving to increase the level of
association of individual brands with PepsiCo
company values and philosophy through
promoting the idea of One PepsiCo.
 This is meant to be facilitated through sharing
supply-chain management and infrastructure,
operational costs for many brands within
PepsiCo portfolio have been decreased.

55. 6. INNOVATION IN MARKETING
INITIATIVES
 Cross-cultural differences in various markets are
taken into account when developing and
delivering PepsiCo marketing messages.
 For example, the marketing tagline of “Live for
Now” associated with Pepsi brand has been
modified as “Yalla Now” and “Oh Yes Abhi” for
Middle East and Indian markets respectively
taking into account cross-cultural differences
associated with these markets.

56. 7. FOCUS ON INCREASING CORE
ORGANIC REVENUE
 Core organic revenue can be explained as a type
of revenue that is achieved through increasing
the volume of production and sales.
 PepsiCo core organic revenues were increased by
5% during 2012 (Annual Report, 2012) and the
company strategic level management is
committed to further increase the levels of core
organic revenues through maintaining high
quality standards and applying effective
marketing strategy.

57. GE BUSINESS SCREEN MATRIX
The EFE
Total
Weighted
Scores
High 3.0 to
4.0
Medium 2.0
to 2.99
Low 1.0 to
1.99
Strong 3.0
to 4.0
Weak 1.0 to
1.99
The IFE Total Weighted scores
Average 2.0
to 2.99
PepsiCo

58. ANSOFF MATRIX

59. BUSINESS LEVEL STRATEGY
 Competitive Strategy
 Porter’s Competitive Strategy
 Price Based Strategies
 Differentiation Strategies
 The Hybrid Strategies
 Focused Differentiation Strategies
 Failure Strategies
 Cooperative Strategy

60. BUSINESS LEVEL STRATEGIES
 PepsiCo engages in a low-cost-differentiation
strategy by taking advantage of economies of
scale through mass production of its products
and by differing their products through taste and
marketing.

61. FUNCTIONAL LEVEL STRATEGY
 Marketing Strategies
 Product
 Price
 Place
 Promotion
 Financial Strategies
 Research and Development Strategies
 Operational Strategies
 Purchasing Strategies
 HRM Strategies
 Information system Strategies

62. FUNCTIONAL LEVEL STRATEGY
 As a company PepsiCo has tremendous
opportunities and to capitalize on them PepsiCo
depends on talent of its associates and executive
leadership. Therefore talent sustainability is
their main motto. Through this investment in
people they help them in succeeding and
developing the skill that are required to move
ahead and to sustain PepsiCo long term growth.

63.  Dr. M.I.Siraj MBA/010

64. IMPLEMENTATION

65. STRATEGY IMPLEMENTATION
 Programs
 Budgets
 Procedures

66. HISTORY STONES

67. HISTORY
 The Pepsi-Cola story
began in New Bern,
North Carolina.
 A pharmacist named
Caleb Bradham
operated a drug store
and soda fountain.
 He often
experimented with
exotic oils and fruit
extracts hoping to
make a soft drink that
tasted good.

68.  One of his creations
became popular (1893)
among the local
patrons, which they
called Brad’s Drink.
 In 1898, the drink was
renamed Pepsi-Cola.

69.  The first known
Pepsi-Cola newspaper
advertisement
appeared in 1902.
 The ad proclaimed the
health benefits of
Pepsi-Cola.

70.  In 1903, Bradham
registered the
Pepsi-Cola name
with the United
States Patent and
Trademark Office.

71.  That same year, the
Pepsi-Cola script was
used in a newspaper
ad for the first time.

72.  Early in the 20th
century, major
advancements in the
soft drink industry
made bottling a viable
alternative to fountain
drinks.
 In 1905, Pepsi-Cola
was made available in
bottles

73.  To take advantage of
this new market,
Bradham began
offering bottling
franchises.
 By 1909, there were
250 Pepsi-Cola
bottlers in 24 states.

74.  The Pure Food and
Drug Act was adopted
in 1906.
 The new law forced
many soft drink
manufacturers to
change their formula.
 The Pepsi-Cola
formula met the
new requirements
and did not need to
be altered.

75.  Between 1905 and
1910, the Pepsi-Cola
Company experienced
phenomenal growth
and profits.
 These profits were
used to improve Pepsi-
Cola advertising.

76.  In 1908, famous race
car driver, Barney
Oldfield became the
first celebrity
endorser for Pepsi-
Cola.

77.  Unfortunately, the
amazing growth
experienced by the
Pepsi-Cola Company
during the early
1900’s came to an
abrupt halt with the
onset of World War I.
With the war came
price controls and
sugar rationing.

78.  By the end of World
War I, the Pepsi-Cola
Company was in dire
financial straights.
 The conditions were
made worse by an
unstable sugar
market.
 By 1923, the Pepsi-
Cola Company was
bankrupt.

79.  Roy Megargel, a
wall street financier,
headed a group of
investers that
purchased the Pepsi-
Cola trademark and
formula from the
bankruptcy.

80.  In 1923, Pepsi-Cola
headquarters moved
to Richmond,
Virginia, where
Megargel tried to
revive the Pepsi-Cola
Company.

81.  By 1929, there was a
glimmer of hope
within the Pepsi-Cola
Company.
 That ended in October
of 1929, when the
stock market crashed
and the country
plunged into the great
Depression.
 Again bankrupt.

82.  Mr Charles Guth,
President of Loft
Candies.
 Loft operated a chain
of candy stores in the
New York etropolitan
area that dispensed
Coca-Cola at their
soda fountains.

83.  Guth wanted a
volume discount from
the Coca-Cola
Company.
 Coke refused.
 Guth would not take
no for an answer.

84.  Aware that Pepsi-Cola
was bankrupt, Guth
made an agreement
with Megargel to buy
the Pepsi-Cola
trademark and
formula.
 In August of 1931,
Guth formed a new
Pepsi-Cola Company,
and replaced Coca-
Cola in all the Loft
stores.

85.  Immediately, the
Coca-Cola company
filed law suits
against Loft and
Pepsi-Cola for
substitution occurs
when the drink
ordered is replaces by
another drink without
the customer’s
knowledge.

86.  He offered pepsi-Cola
in bottles rather than
glasses.
 12-ounce bottle sold
for 10 cents with clear
trademark on bottles.

87.  The results were disastrous.
 Consumers were used to paying 5 cents for a soft
drink regardless of the size.
 Therefore, Guth changed the price of the 12-
ounce bottle from 10 cents to 5 cents.
 Sales skyrocketed.

89.  To keep cost down, Guth purchased
used beer bottles. He was able to buy
them for a penny each.
 He decided to market Pepsi-Cola
nationwide.
 Initially, he used distributors, but he
soon realized he needed a network of
bottlers across the United States.

90.  He hired territorial
representatives who
proceeded to sign up
bottlers throughout
the country.
 Qualified individuals
were given the
opportunity to become
Pepsi-Cola bottlers for
the sum of $315.

91.  For their investment,
a new bottler received
one unit of
concentrate and
enough crowns and
labels to produce 1200
cases of Pepsi-Cola.

92.  Between 1934 and
1939, over 350 Pepsi-
Cola Bottling
franchises were
issued.
 Sales were booming.

93.  Pepsi-Cola bottlers
operated on a smaller
profit margin than
their competitors.
 The key to their
success was increased
volume.
 In 1939, Pepsi-Cola
made a concerted
effort to develop the
take home market
to increase volume.

94.  That same year,
Walter Mack became
president of the Pepsi-
Cola Company.
 Mack’s top priority
was Pepsi-Cola
advertising.

95.  Pepsi-Cola signed an
exclusive agreement
with a skywriting
company to write the
Pepsi- Cola name in the
sky.
 At that time, the use of
skywriting for
advertising was
unheard of.
 Because of this, every
time the Pepsi-Cola
name appeared in the
sky, it made the news in
the local papers.

96.  One of Mack’s big ideas for
advertising Pepsi-Cola
was to use Popeye.
 Instead of eating spinach
for his strength, Popeye
would drink Pepsi-Cola.
 The asking price for the
rights to use Popeye was
more than Pepsi-Cola
could afford.
 Instead, they came up
with Pepsi and Pete, the
Pepsi-Cola cops.
 Pepsi and Pete ran in the
Sunday comics from
1939 to 1951.

97.  An ad agency
presented Mack with
a radio commercial
that was 45 seconds of
spoken word, and 15
seconds of a jingle.
 Mack did not like the
spoken part of the
commercial, but he
loved the jingle.

98.  He asked the ad
agency to trim the
commercial down to
the 15 second jingle.
 The public loved it!
 The jingle was so
popular that it was
installed in juke boxes
– where people paid to
listen to it.

99.  As Pepsi-Cola’s
popularity grow, Mack
concerned that used
beer bottles would
have a negative
impact on sales.
 In 1940, he introduced
their first
standardized
bottles.

100.  On December 7th
,
1941, Japan bombed
Pearl Harbour.
 The country was at
war.
 The government
imposed rationing of
strategic materials,
including Sugar .

101.  Pepsi-Cola bottlers were hit harder than Coca-
Cola bottlers.
 The rationing rules favored those in business in
longer.
 Pepsi-Cola was relatively a new company, their
quotes were much lower.

102.  In an effort to help the bottlers survive, Mack
had the Pepsi-Cola company build a syrup plant
in Maxico, so he could import syrup which
contain sugar.
 The syrup called El Masco, translated to “the
Mask”.
 That is exactly what Mack was doing masking
the sugar as syrup.
 This effort kept many bottlers operating during
the war years.

103.  In 1943, Pepsi-Cola
decided to reenter the
fountain business.
 Because of the war,
they were unable to
get enough men and
equipment to market
fountain Pepsi-Cola.
 They turned to the
bottlers and offered
them fountain
franchise
agreements.

104.  In the summer of 1945,
the war ended.
 The US celebrated the
victory, and the Pepsi-
Cola Company prepared
for the future.
 They believed the worst
was behind them, and
were optimistic about
their prospects.
 However, post war
inflation presented the
Pepsi-Cola with a
challenge they were not
prepared for.

105.  Consumers believed
that a soft drink should
cost 5 cents, despite the
size.
 But Pepsi-Cola bottlers
were selling twice as
much for the same price.
 As post war inflation
drove up the cost of raw
materials, the small
margin that Pepsi-Cola
bottlers operated on was
being decimated.

106.  Something had to give.
 Either they had to change the price,
 or change the size of the bottle.
 Pepsi-Cola’s reputation was built on the “big
nickel drink.”
 Some bottlers opted to sell the 12-ounce bottle for
6 cents, while others decided to try to sell a 10-
ounce bottle for a nickel.

107.  The 10-ounce bottle was
the same height as the
12-ounce bottle, but
slimmer.
 The 10-ounce bottle was
a success for bottlers
and consumers alike.
 It still gave the
consumers the big drink
they wanted, and it gave
the bottlers the profit
they needed.

108.  Mack wanted to sell Pepsi-Cola to everybody.
 He did not see color – he only saw customers.
 He felt the African-American community was a
source of potential sales.
 He created advertising for this market that
was not demeaning or condescending.

109.  Mr.HRC Sampath Bandara PDM/004

110.  He recruited a sales
force of African-
American men to
promote Pepsi-Cola
within the African-
American community.
 This helped to break
the color barrier in
corporate America.

111.  By 1949, Pepsi-Cola
profits were almost
non-existent.
 The lack of profits and
the internal battle
over the price of the
12-ounce bottle caused
many to lose
confidence in Mack.
 In 1950, Al Steele
became president of
the Pepsi-Cola
Company.

112.  Many believed that Steele
was hired to dismantle the
Pepsi-Cola Company.
 The opposite was true.
 Steele was there to
transform Pepsi-Cola into
a modern soft drink
company.
 The first thing he did was
to update the trademark
and reformulate Pepsi-
Cola.
 He believed that Pepsi-
Cola was too sweet for the
modern consumer.

113.  In 1953, Pepsi-Cola
introduced the
advertising slogan, “The
Light Refreshment.”
 This referred to a new
Pepsi-Cola formula that
contained less sugar.
 During the 1940’s,
Pepsi-Cola had a
reputation as a bargain-
basement drink.
 Steele hoped this new
advertising would not
only increase sales, but
would improve the
image of Pepsi-Cola.

114.  One of the big problems Pepsi-Cola
faced at this time was a lack of
consistency.
 The look of the Pepsi-Cola trucks, the
uniform of its route salesmen, and the
taste of the product were different
depending on which part of the
country you were in.
 Steele set up standards for the look
of the trucks and uniforms.
 He employed mobile labs to travel
around the country to test product
quality.

115.  In 1955, Steele married
Hollywood legend, Joan
Crawford.
 Crawford brought some
Hollywood glamour to the
Pepsi-Cola Company.
 Everywhere Steele and
Crawford traveled,
thousands of people would
be there to see the
businessman and the
actress.
 She was invited to the
openings of new Pepsi-Cola
bottling facilities.
 When she cut the ribbon,
scores of reporters were
there to record the event.

116.  To further enhance
the new, modern
image of Pepsi-Cola,
the swirl bottle was
introduced in 1958.

117.  The success achieved by the Pepsi- Cola
Company in the 1950’s was enormous.
 Case sales increased by 182% between 1950 and
1959.

118.  Teem was introduced
in 1959, which gave
Pepsi-Cola a lemon-
lime drink.
 Unfortunately, Steele
passed away that
same year.

119.  Prosperity and mobility in the 1960’s
began a trend among consumers for
more convenient packaging.
 Pepsi responded by authorizing
contract canners to produce Pepsi-
Cola.
 Additionally, they began test
marketing an assortment of sizes and
styles of non-returnable glass bottles.
 By the end of the decade, Pepsi and
Pepsi bottlers began building their
own canning facilities.

120.  Don Kendall became president of the
Pepsi-Cola Company in 1963.
 Kendall’s service with the company
made him uniquely qualified.
 In 1947, he started in the fountain
sales department.
 Over the years, he held many different
positions that brought him in contact
with the bottlers.
 He developed lasting relationships and
a keen understanding of bottler issues.
 When he became president, the bottlers
knew they had a friend at
headquarters.

121.  The pivotal moment in
Kendall’s career was when
he was able to get the
Russian premiere, Nikita
Khrushchev, to sample Pepsi
at the 1959 trade expo in
Moscow.

122.  In 1961, Pepsi decided
to change the focus of
their advertising from
the product to the
people that
consumed it.
 This philosophy
inspired the “Come
Alive! You’re in the
Pepsi Generation”
advertising in 1964.

123.  This advertising campaign was loved by
consumers and critics alike.
 It completely captured the spirit of the baby
boomer generation.
 Shortly after the introduction of the Come Alive
theme, many in the media identified baby
boomers as the Pepsi Generation.

124.  Prior to the 1960s, diet drinks
were considered drinks for those
with medical conditions.
 In the early 1960s, some
consumers decided they wanted
sugar-free drinks.
 Pepsi responded in 1963 with
Diet Patio Cola.
 Sales were disappointing.
 The funds for marketing Diet
Patio Cola were inadequate.

125.  In 1964, Pepsi decided to
change the name to Diet
Pepsi.
 That was the first time a
major soft drink company
used their brand name on a
diet product.
 By changing the name,
Pepsi-Cola was able to
advertise Pepsi and Diet
Pepsi together.

126. ACQUISITION
 Many of Pepsi’s best ideas come
from their bottlers.
 Mountain Dew is one of those
great ideas.
 Mountain Dew was created by
Tip Corporation, with the help of
Pepsi-Cola bottlers in North
Carolina.
 The bottlers needed a product to
compete with Sun Drop.
 Mountain Dew did that and
more.
 In 1964, Don Kendall made a
deal with Tip Corporation to
purchase Mountain Dew.

127.  Miss.Moh Moh Lwin PDM/006

128. PEPSICO
 The idea to merge Frito-
Lay and Pepsi-Cola was
the result of the friendship
between Don Kendall and
Herman Lay.
 They had met at an
industry tradeshow.
 As their friendship grew,
so did their desire to bring
the two companies
together.

129. MERGING
 In 1965, Pepsi-Cola
merged with Frito-Lay
and became
PepsiCo.
 Wall Street called this
“a marriage made
in snack food
heaven.”

130.  The Pepsi Generation advertising continued
throughout the 1970’s. In 1973, the slogan was
“Join the Pepsi People Feel in’ Free.
 Undoubtedly, the most memorable commercial of
this campaign was “Puppies.”
 The commercial that aired on television was not
the commercial the advertising agency had
planned.

131.  During the shooting of the
commercial, the little boy
accidently spilled Pepsi on
himself.
 The puppies eagerly licked
the spilled Pepsi off the boy,
which caused the boy to
giggle.
 They rewrote the
commercial to incorporate
this scene and as they say,
the rest is history.

132. PEPSI CHALLENGE.
 Dallas, Texas was a very tough market for Pepsi.
None of the advertising campaigns or promotions
used by the local bottler increased sales.
 With nothing to lose, their advertising agency
suggested they try a taste test.
 Consumers were asked to take the Pepsi Challenge.
They were given unmarked cups of cola and then
asked which one they preferred.
 Overwhelmingly, the participants preferred Pepsi.
The results were used in commercials. Sales shot up.
 The program was so successful in Dallas that other
Pepsi bottlers began to use the Pepsi Challenge.
 By 1978, the entire country wanted to take the Pepsi
Challenge.

134. ACQUISITION
 In 1977 PepsiCo acquires Pizza Hut, Inc
 In 1978 PepsiCo acquires Taco Bell
 In 1982 Inauguration of the first Pepsi-Cola
operation in China.

135.  When Roger Enrico became president of Pepsi-
Cola in 1983, he believed Pepsi’s advertising had
lost its focus.
 The Pepsi Generation advertising that started in
1963 had lost the magic.
 Enrico asked Pepsi advertising guru, Alan
Pottasch, to recreate the energy and magic of the
original Pepsi Generation advertising.

136. ADVERTISING
 In 1984, “Pepsi-the Choice
of a New Generation” was
introduced.
 The new advertising campaign
kicked off with the signing of
Michael Jackson to appear
in a Pepsi commercial.
 Many believe that this was
the tipping point that caused
Coca-Cola to change their 100
year old formula.

137. ACQUISITION
1986
PepsiCo is listed on the Tokyo stock exchange.
Pepsi-Cola acquires Mug Root Beer.
PepsiCo purchases Kentucky Fried Chicken
(KFC).

138.  Roger Enrico became the CEO of
PepsiCo in 1987.
 Craig Weatherup was selected to
replace him as president of the
Pepsi-Cola Company.
 Weatherup’s biggest challenge was
the ever-increasing consumer desire
for more choices of refreshment
beverages.

139. 1989
PepsiCo acquires Walkers Crisps and Smith
Crisps, two of the United Kingdom's leading snack
food companies.
PepsiCo enters the top 25 of the Fortune 500
ranking
During the 1990s, Pepsi-Co expanded its business
outside its primary brands.

140. JOINT VENTURE
 In 1991, Weatherup set Pepsi on
a course to become a total
beverage company.
 Pepsi-Cola forms a joint
venture with Unilever to
develop and market tea-based
drinks.
 He expanded the Pepsi portfolio
to include waters, teas, and fruit
drinks.
 Currently, the Pepsi portfolio
includes over 188 different
beverages, and scores of sizes
and styles of packaging.

141. GLOBAL MARKETING
 In 1994, Pepsi-Cola is the first major soft drink
maker to begin producing and distributing its
product in Vietnam.
 PepsiCo and Starbucks form the North American
Coffee Partnership to jointly develop ready-to-
drink coffee beverages

142. 1997
 Company and Brands like Pizza Hut, KFC, Taco
Bell, and Stolichnaya were all once a part of
PepsiCo, but the company later sold some and
spun off some into Tricon Global Restaurants.

143.  The company purchased Tropicana
Products in 1998.
 The company also merged with Quaker
Oats in 2001.
 In 2003 Pepsi-Cola trademark turns 100
years old.
 2006 Pepsi acquires IZZE Beverage
Company. Indra Nooyi named chief
executive officer of PepsiCo

144.  In 2008 PepsiCo announces plans to invest US $1
billion in China over the next four years as part
of the strategy to expand in emerging markets
and broaden the portfolio of locally relevant
products.
 In 2009, PepsiCo and Calbee Foods Company
announce a strategic alliance to make and sell
a wide range of food products in Japan.
 In 2013, Müller Quaker Dairy, a joint venture
between PepsiCo and The Müller Group, open a
new state-of-the-art yogurt manufacturing
facility in Batavia, New York.

145.  In 2014, Pepsi introduces Pepsi Spire, a portfolio
of innovative fountain beverage dispensers.
Consumers can create more than 1,000
customized beverages with the touch of a button.
 In 2015, PepsiCo celebrates its 50th anniversary
as a combined food and beverage company.

146. CORPORATE SOCIAL
RESPONSIBILITY
 PepsiCo started PepsiCo Foundation as a part
of its Corporate Social Responsibility.
 The foundation's primary area of interest is
nutrition, safe water and water usages efficiency.
 PepsiCo donated $27.9 million in the year 2009
for various causes.

147. The Factors behind success
 Sustained Growth is fundamental to motivating
and measuring the company’s success.
 Empowered People means that Pepsi Cola has
the freedom to act and think in ways that will
get the job done.
 Responsibility and Trust forms the foundation
for healthy growth.
 Pepsi Cola holds themselves both personally
and corporately accountable for everything
they do.

148. EVALUATION

149. BALANCED
SCORECARD
Area of Objectives Measure of Target Time Expectation
Primary
Responsibility
Customers
1. Customer satisfaction
Costumer Survey
Webinars
Quarterly Human Resources
Representatives
1. Improve production
efficiency
Increase in
production
Biannually
Supply chain
Operations
2. Offer employee trainings
Employee surveys
Production efficiency
Yearly Human Resources
Community/ Social
Responsibility
1. Eco-Friendly company
Increase in
recyclable bottle
Being involve in
more events
regarding water
contamination
Yearly CEO
2. Ethical Company
Number and success
of charitable events
UNICEF amount of
money donated
Yearly CEO
Operations/Processes
1. Innovation
New products
Product appearance
Acquisition of new
brands
Yearly
CEO
2. Brand expansion
Numbers of new
countries entered
Number of sales in
the International
Segment
Yearly CEO
Financial
1. Reduce cost of
production
Income Statement Quarterly Chief Financial Officer
2. Increase profitability
Increase annual
report
Quarterly Chief Financial Officer

150. SUMMARY
 Today, Pepsi faces numerous challenges, from
health and wellness to government mandates.
 Despite these issues, the future looks promising.
 The Pepsi Spirit is alive and well. Through
innovation and hard work, the Pepsi story
continues.

152. REFERENCE
 Porter (1979), “How Competitive Forces Shape
Strategy,” Harvard Business Review.
 Thomas L. Wheelen, J. David Hunger(2011), “
Strategic Management and Business Policy”, 13th
Edition.
 http://www.pepsico.com/
 The Pepsi- Cola Story by Bob Stoddard (2013)