PepsiCo was the largest company in the Universe that focused on snacks and beverages. In 2014, the company had generated revenues of about $66.7 billion. In 2015, the firm’s portfolio of business involved granola bars of Quaker Chewy, Frito-Lay snacks, soft drinks, Tropicana orange juice and many other frequently consumed products. The organization saw the lineup as very correlative because most of its goods could be engrossed together. For instance, the orange juice of Tropicana might be taken during breakfast with Doritos, and Quarter Oatmeal, as well as a Mountain Dew, might be consumed by someone during lunch hour. By 2015, the business lineup of the company included roughly twenty-two billion dollars global brands.
The key managers of the firm concentrated on sustaining the extraordinary performance via various strategies aimed at product innovation, quality relationships with allies of distribution, strategic acquisitions as well as international expansion. New products that were introduced in the market like Mountain Dew, Starbucks Refreshers, Quaker Real Medleys as well as Gatorade Energy Chews estimated for fifteen to twenty percent of all recent growth in current years. Innovations of new products that looked at the health of consumers together with wellness concerns were critical contributors to firm’s growth. The company’s good-for-you, as well as better-for-you goods, became focal points in the organization’s recent initiatives of product development. The nutrition business of PepsiCo in 2014, reckoned for approximately twenty billion dollars of the firm’s net revenue.
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Other than concentrating on strategies created to deliver earning growth and income, the company maintained an effective dividend policy with more than fifty-three billion dollars given back to shareholders between 2003 and 2012. The company expanded its profit for the forty-second successive year in 2014 and offered payments of about $8.7 billion to its shareholders via stock repurchases and dividends, which indicated a thirty-six percent increase over 2013 (Turnipseed, PepsiCo's diversification strategy in 2015, 2015). PepsiCo reinforced its cash returns via careful thought capital acquisitions and expenditures and a concentration on operational excellence.
PepsiCo’s Performance with Purpose plan used investments in manufacturing automation, an intellectualized universal production plan, re-engineered the systems of distribution as well as simplified company structures to encourage efficiency. Moreover, the firm’s performance with Purpose plan was fixated on decreasing the effect of the company on the environment by lowering the consumption of energy and water. It also wanted to reduce its utilization of packaging material, supplying an inclusive and safe workplace for its workers, and giving their support and investing in the local communities in which it performed their business. The company appeared on the list of Dow Jones Sustainability World Index for eight years in a row and was also listed on the index of North America for nine years in a row as of 2014.
Despite the fact that the firm had recorded many impressive achievements over the past years, its advancement had decreased since 2011. The spikes in the organization’s revenue growth since 2000 had led to major acquisitions like the purchase of Quaker Oats in 2001 which cost $13.6 billion. Also, the acquisition of the earlier independent PepsiCo Americas and Pepsi Bottling Group for eight billion dollars, as well as the procurement of the leading food and beverage firm in Russia, Wimm-Bill-Dann Foods for roughly four billion dollars in 2011 (Turnipseed, PepsiCo Diversification Strategy in 2015, 2015).
The History of PepsiCo
PepsiCo was developed in 1965 when the shareholders of Frito-Lay and Pepsi-Cola acceded to a merger between the giant of soft drinks and the icon of salty-snacks. The new organization was created with yearly revenues of $510 million and famous brands like Pepsi-Cola, Ruffles, and Lay's Cheetos came up. The roots of PepsiCo can be discerned to 1898 when Caleb Bradham of North Carolina pharmacy developed the formula for a carbonated drink that he called Pepsi-Cola. In 1932, the salty-snack business of the firm started, when Elmer Doolin of Texas started producing and marketing Fritos chips, and Herman Lay began the distribution of potato chips in Nashville, Tennessee. Lay and Doolin agreed in 1961, to a merger between their companies to create the Frito-Lay Firm.
During the initial five years of PepsiCo as a beverage and snack company, it came up with new products like Funyuns and Doritos, accessed markets in Eastern Europe and Japan and came up with an average of one new snack-food plant per annum. By 1971, the company had doubled its revenues to one billion dollars. PepsiCo started pursuing growth through various acquisitions outside beverages and snacks as early as 1968, however, its 1977 acquirement of Pizza Hut incomparably shaped the strategic direction of the firm for the next twenty years. The acquirement of Kentucky Fried Chicken in 1986 and taco bell in 1978 developed a portfolio of business explained by Wayne Calloway as a stabilized three-legged stool. Calloway held the belief that the combination of soft drinks, snack foods as well as fast food gave ample skill-transfer and cost-sharing opportunities, and he frequently changed managers among the business’s three divisions as part of the firm’s management development efforts.
The portfolio of snack foods of PepsiCo was improved during the 1980s and 1990s with the acquirement of Walkers Crisps, Mug Root Beer, Smartfood popcorn, Smith’s Crisps as well as Mexican cookie firm Gamesa together with Sunchips. Calloway increased quick-service restaurants Hot-n-Now in 1990, pizza kitchens in California in 1992, Shops of D’Angelo Sandwich as well as East Side Mario’s. The firm grew beyond carbonated beverages via an agreement in 1992 with Ocean Spray to disburse single-serving juices, the launch of Lipton ready-to-drink teas in 1993, and the launch of Frappuccino coffees and Aquafina bottled water in 1994.
The Acquisition of Quaker Oats in 2001
Quaker Oats was the largest purchase of PepsiCo at $13.9 billion, and it bestowed it the number one brand that dealt with oatmeal in America with more than sixty percent category share. It was also the number one brand of granola snack bars, rice cakes and other famous brands of groceries like Cap’n Crunch as well as Aunt Jemima. Nonetheless, Quaker’s most valuable asset in its many brands was Gatorade.
Gatorade has created the researchers of Florida University in 1965. However, it was not advertised commercially till the formula was disposed of to Stokely-Van Camp in 1967. In 1983, when Quaker Oats got the brand from Stokely-Van Camp, Gatorade continuously made a change from a regionally distributed well with yearly sales of ninety million dollars to a two-billion-dollar powerhouse. Gatorade had the ability to grow its sales by more than ten percent yearly during the 1990s, with no recent entrant to the sports beverage group posing a dangerous threat to the dominance of the brand. Coca-Cola, PepsiCo, Danone group of France as well as Nestle a Swiss food giant were all attracted to Gatorade since it had a commanding market share and because of the contemplated growth in the category of isotonic sports beverage.
PepsiCo was the prosperous bidder of Gatorade and Quaker Oats with an agreement signed in December 2000. Nonetheless, the merger would not get the approval of U.S Federal Trade Commission until August 2001. The primary concern of the FTC over the merger was that Gatorade’s incorporation in the portfolio of PepsiCo of snacks and beverages might give the business too much leverage in negotiations with convenience stores and fundamentally force smaller beverage and snack-food firms out of proper outlet channels. In its consent of the merger, the FTC particularized that PepsiCo and Gatorade’s soft drinks could not be distributed together for ten years.
Acquisitions after 2001
After the consummation of the Quaker Oats acquirement in 2001, the firm concentrated on the integration of snack, food as well as beverage brands for Quaker Oat into the portfolio of PepsiCo. The business made many acquisitions of beverage companies that were small and had a potential to grow fast internationally and the United States to widen its brand portfolios. The acquisitions in 2006 involved pita chips and Stacy’s bagel, Izze carbonated drinks, Star Foods in Poland as well as Duyvis nuts based in the Netherlands. The acquisitions that were made in 2007 included Ukraine’s Sandora juices, beverages of Naked Juice Fruit, Bluebird snacks of New Zealand, Bulgaria’s Penelopa nuts and seeds as well as Lucky the Brazilian snack producer. The organization also embarked on a joint venture in 2007 with the Strauss group to market Sabra, the fastest-growing as well as the top-selling brand of hummus in Canada and the United States of America. In 2008, the firm acquired Lebedyansky, a producer of Russian beverages for $1.8billion. Also, in 2010, it purchased Marbo which was a potato chip manufacturing operation in Serbia.
PepsiCo acquired the earlier independent PepsiCo Americas and Pepsi Bottling Group in 2010 for $8.26 billion and the common shares of PepsiCo. The acquisition was created to better integrate its worldwide distribution system for its business of beverages. In 2011, it attained the leading food and beverage firm in Russia, Wimm-Bill-Dann Foods, for roughly four billion. The consolidation of acquisitions and the strength of the main snacks and drinks of PepsiCo enabled the revenues of the company to increase from around $29 billion in 2004 to greater than $66 billion in 2013.
Building the value of shareholder in 2015
Three individuals had become the CEO since PepsiCo started its restricting of its portfolio in 1997. Despite the fact that Roger Enrico was the principal architect of the company lineup as it was seen in 2007, Steve Reinemund, his successor as well as Indra Nooyi, the CEO of the firm in 2007, were both gravely involved in the restructuring. Nooyi became a member of PepsiCo in 1994 and created a reputation as a no-nonsense negotiator who directed the 1997 spin-off the restaurants of Pepsi, led the 1998 acquisition of Tropicana, and played an important part in the1990 IPO of the bottling operations of PepsiCo.
After receiving a promotion to chief financial officer, Nooyi was critically involved in the acquisition of Quaker Oats in 2001. Nooyi was chosen as the CEO of the company upon the retirement of Reinemund in October 2006. Nooyi immigrated to America in 1978 to get to Yale Graduate’s School of Business, and she also worked with Motorola, Boston Consulting Group as well as Asea Brown Boveri before arriving at PepsiCo in 1994. In the eight years under the leadership of Nooyi, the revenues of PepsiCo had grown by approximately ninety percent, and the price of its share had increased by half.
In 2014, the corporate strategy of PepsiCo had transformed the organization into sweet and salty snacks, orange juice, soft drinks, ready-to-drink teas and coffees, bottled water, functional and purified waters, products that are grain-based, breakfast cereals that are hot and ready-to-eat, isotonic beverages as well as breakfast condiments. A majority of PepsiCo brands were among the top ten positions in their corresponding food and beverage groups via strategies aimed at the innovation of products, quality relationships with allies of distribution, strategic acquisitions as well as international expansion. The firm strived to come up with highest-quality products in each group and was performing their duties diligently on goods reformulations to make beverages and snack foods less unhealthy. The firm held the belief that its efforts to come up with better-for-you as well as good-for-you products would develop opportunities for growth from the intersection of public and business interests.
PepsiCo was divided into six business divisions, which all proceeded from the strategic approach of the company. Frito-Lay in North America produced snack foods like Lay's potato chips, smart food popcorn, and Doritos tortilla chips. Quaker Foods North America produced cereals, pasta dishes and other foods that were sold in supermarkets. Latin American foods focused on the marketing of snack foods and Quaker-branded cereals as well as snacks in Latin America. PepsiCo Americas focused on selling fountain syrups, concentrates of beverages, Gatorade and Tropicana throughout South and North America. PepsiCo in Europe sold drinks and snacks throughout Europe while the firm’s Africa, Middle East and Asia distributed brands of beverages and snacks in more than one hundred and fifty nations in those regions.
Frito-Lay North America
From 2015, the three important trends that were shaping the market was a convenience, indulgent snacking and an increasing awareness of snack foods’ nutritional content. In 2013, Frito-Lay was the owner of the top-selling chip brand in each America salty-snack group. It's 36.6 percent market share of preferred foods sold in America was greater than Kellogg’s market share of about 6.9%. Such provisions included sweet and salty snacks like chips crackers, snack nuts, and cookie bars. The performance of the company with Purpose goals correlated to all its units in business. The net revenues of Frito-Lay North America (FLNA) grew by three percent during 2014, operating profit rose by 5 per cent, and the company’s volume increased by two percent. FLNA concentrated on manufacturing more better-for-you products to increase its market share of the consumption of snacks.
Quaker Foods North America
Quaker Foods manufactured and marketed ready-to-eat cereals, syrups, pancake mixes as well as pasta side dishes in America and Canada (Turnipseed, PepsiCo Diversification Strategy in 2015, 2015). In 2014, it recorded sales of roughly $2.56 billion. Quaker Oats was the most selling product with a huge share of the market of North America for oatmeal in 2013. Rice-A-Roni was also popular in the pasta and rice dish segment of the food industry.
Latin American Foods
The management of PepsiCo held the belief that international markets offered the greatest opportunity for growth for the company since most people consumed snacks. Creating a comprehension of the taste preferences of consumers was essential to expanding into international markets. The choices for flavors for salty snacks were more similar in a variety of countries compared to other food items, and this enabled PepsiCo to make only limited changes to its snacks in most nations. The company run fifty snack-food producing and processing plants and 640 warehouses in Latin America, with its biggest facilities found in Guarulhos, Brazil. It was the second largest company that sold snacks and beverages in Mexico. Most of its brands were well known throughout Latin America.
PepsiCo Americas Beverages
The company was the largest seller of beverages in the United States, with a market share of about twenty-four percent in 2013. The second-largest non-alcoholic beverage was Coca-Cola with a market share of 21 percent. The beverage business of PepsiCo contributed largely to the company’s overall flow of cash and profitability. In 2013, PepsiCo Americas beverages reckoned for 32 percent of the total revenues of the enterprise and 26 percent of its operating profits.
PepsiCo Europe
All of the universal brands of PepsiCo were sold all over Europe, together with its state or region-particular brands like Agusha and Chjudo. In Europe, the company operated 125 plants and roughly 525 distribution centers, warehouses, and offices in Western and Eastern Europe. The acquisition of Wimm-Bill-Dann foods enabled it to be the best company in Russia. Also, it was the number one seller of snacks and beverages in the United Kingdom. The management of PepsiCo Europe held the belief that there was the existence of more opportunities in other markets internationally, with opportunities to engage in redistribution of a majority of its current brands and formulations of product throughout Europe. In 2014, the company supplied 20 percent of the company’s net revenues as well as 12 percent of its operating profits.
The Strategic Situation of PepsiCo in 2015
The chief managers of PepsiCo expected the lineup of the business of beverage, snack and grocery items to bring operating cash flows enough to reinvest in its central businesses. , provide a 7.3 percent growth in cash dividends to the shareholders, finance a $5 billion share-buyback plan as well as follow acquisitions that would supply attractive returns. However, the small profit margins of the International business of the company developed the requirement for a continued analysis of its strategy and operations to additionally exploit strategic fits between the firm’s international business units.
The company had come up with an original divisional structure in 2008 to bring together its beverage and food businesses into Latin America into one division. Also, the international activities of the firm were reorganized to increase profit margins in Asia and Europe, Africa as well as the Middle East. Nonetheless, more than six years after the reorganization, the company’s performance in international business extended to lag that of its North American businesses by a considerable margin. Some analysts of the food and beverage industry had suspected that more changes in corporate strategy might also be needed to enhance the success of international operations of PepsiCo and to assist the company in restoring earlier earnings and revenue growth rates. Possible activities might involve a reprioritization of internal utilization of cash, recent acquisitions, and more efforts to acquire strategic fits that exist between the firm’s different business, and businesses’ divestiture with poor anticipation of growth in the future as well as minimum strategic fit with the other companies of PepsiCo.
Conclusion
In a nutshell, PepsiCo was one of the largest companies in the globe that concentrated on the production as well as marketing of snacks and beverages. The managers of the company focused on product innovation, quality and strong relationships with distribution allies together with strategic acquisitions as well as expanding internationally. The innovation of new products contributed to the growth of PepsiCo. Also, the diversification of the company into other business largely contributed to its success. The expansion of the business into international markets was also a good move where the corporation was able to make a lot of profits.
References
Turnipseed, J. E. (2015). PepsiCo Diversification Strategy in 2015 . 1-13.
