SWOT Analysis of Pepsi-Co

PepsiCo is a company based in America specializing in the manufacture, marketing, and distribution of grain-based snacks, beverages, and many other products in over 200 different countries. The company took the name PepsiCo, Inc. in 1965 after the merge of Pepsi-Cola Company and Frito-Lay, Inc., and it has expanded significantly; for instance, in 1998, PepsiCo acquired Tropicana and Quaker Oats in 2001. The headquarter of the company is in Purchase, New York, in the United States of America. Currently, PepsiCo employs over 142,000 people across more than 200 countries that the company operates. Due to its rapid growth in the past years, PepsiCo has been ranked among the considerable contributors to revenue in America and other countries worldwide (Luco & Marshall, 2020). In 2012, it was evident that each of PepsiCo's brands generated a revenue of more than $1 billion globally, pushing the net revenue to approximately $43.3 billion during the same period.

The company's commitment to the stakeholders, workers, and customers has enabled it to be among the top-performing companies and an excellent environment to work for the different employees. Across the globe, PepsiCo has been ranked the second-largest food and beverage business after Nestle, with a market value of above $159.4 billion. The CEO of PepsiCo, Indra Krishnamurthy Nooyi, has managed to see the employment of more than 274,000 people across the globe. The company being the most proactive and progressive, it is essential to enhance marketing and advertising campaigns to meet effectively compete with other companies in meeting the demand of the consumers. The company has superb management and marketing plans enabling it to enjoy a rapidly growing market compared to its rivals.

The company's macro-environment has been impressive, especially when it comes to political issues that directly or indirectly affect the competitiveness of the industry in beverage and food products. Some of the regulations, for instance, federal laws by FDA, EPA, and OSHA, has affected the production and distribution of soft drinks across the world. PepsiCo has fallen victim to environmental forces and politics; for instance, the Center of Science and Environment in India accused soft drink companies, including PepsiCo, of offering beverages that contain high levels of pesticide traces. The situation leads to the ban on soft drinks, especially in a state such as Kerala, affecting the demand for the product. Other initiatives also affected the production of soft drinks; for instance, in the United States, a soda tax was introduced to levy syrup and sugar-sweetened beverages in PepsiCo's production of its famous soft drinks.

The financial crisis of 2008 had a significant impact on the production of soft drinks in the United States of America. Industries that produce soft drinks lost approximately $55 billion during that period of the financial crisis because the demand and the sale of packaged products reduced drastically. During these economic hard times, PepsiCo had to invest in low borrowing rates in all its operations, including the developments of new products to enable it to survive the crisis. The increasing demand for healthy foods and beverages has enabled the company to adapt and introduce new products to the market, such as Diet Pepsi, Pepsi Natural, and Caffeine-free Pepsi. PepsiCo's ability to adopt technology in its operations plays a significant role in the success of the company because it satisfies the needs of large consumers. PepsiCo uses Direct Store Delivery (DSD) technology that has enabled the company to supply retailers with fresh stocks without many complications. The ability of the company to build a robust information technology infrastructure has also helped it to enhance communication and excel in corporate operations.

In the 2019 third-quarter revenue report, PepsiCo managed to record $17.19 billion compared to the estimated $16.92 billion. Excellent product pricing and the increase in organic sales enable the company to among the top-performing industries in the country. In 2019, the company's organic revenue rose by 4.3%, and the main secret to the company's success is nothing more than product innovation that enables the company to adjust to healthier products that are in high demand currently. The company management has been advocating for healthy food and drinks production, and it is now paying off for the company. In key global brands, PepsiCo has reduced sodium by 11% per serving in its food products and removed 15% of saturated fats per serving over the past decade.

The company currently reaps over 45% of its revenue from guilt-free products, including diet drinks, and other beverages containing less than 70 calories per 12 ounces, and snacks with reduced sodium levels. The company also incorporates foods and beverages with positive nutrition, for instance, vegetables, fruits, grains, water, and unsweetened tea, in the everyday nutrition portfolio. Everyday nutrition products constitute up to 27% of the total amount of sales in the company (Quan, 2020). One of the examples of the product in PepsiCo that demand is increasing is Sabra. According to the management of the company, Sabra is gaining demand across the United States, and it is currently generating about $800 million annually to the industry.

The introduction of Naked brands of fruit and vegetable juices into the market by the company is another achievement that has significantly contributed to the growth of revenue. PepsiCo is achieving all these amidst cutting the operation cost through productivity enhancement. Since 2012, the company has managed to save over $1 billion per year in annual savings and save more due to excellent management. The fluctuation of exchange and interest rates and the slowdown in the Chinese economy are affecting the operation and expansion of PepsiCo to potential countries such as China (Venkataraman, 2017). Despite the considerable challenges, the company produces excellent financial performance, transforming habits in the food and drink industry. The performance of the company is an indication of its strength and quality of the management.

PepsiCo's ability to emerge in the second position as the largest and most successful food and beverage company depends on its ability to wield the company's strengths to continue growing. Despite market saturation with food and beverage products, PepsiCo has grown and spread to over 200 countries worldwide. The SWOT analysis enables the company to identify the strengths and opportunities that the industry can harness to help address the weaknesses and threats that influence the performance of the firm. When it comes to the strengths, PepsiCo has one of the strengths brands in the market, and this enables the company to attract new consumers to the latest products. The mix of brand products also allows the company to increase its ability to reach various markets. The global production and distribution network adopted by the company is another strength of the company enabling it to grow internationally.

The company experienced some of the challenges that hinder international growth and development. The internal strategic factors that limit organizational development include low penetration of the company outside the Americas because North and South America contribute up to 70% of the total revenue to the company (Zhang, 2019). Another weakness of the company is that it operates a limited business portfolio that only consists of food and beverage products. The company needs to change how it advertises its products and incorporate marketing of guilt-free products to health-conscious consumers.

One of the opportunities of PepsiCo is its ability to acquire a complementary firm that is not dealing with food and beverage. The company also can enhance its penetration to developing worlds and supply their products in these countries. PepsiCo has the opportunity to create an alliance with a complementary business to improve its presence in the market and reaching new consumers. The company needs to diversify the business to minimize market risk exposure.

The industries that significant in the production of food and beverage experience a variety of threats. Aggressive competition is one of the main threats; for instance, Coca-Cola company poses severe competition to PepsiCo, especially when it comes to soft drinks production. The trend about healthy lifestyles is threatening food and beverage products of PepsiCo because many are considered unhealthy due to the use of sugar, salt, and fats. Environmental concern threatens the company when it comes to the handling of waste products by the consumers. The company should become environmentally conscious by enhancing the recycling of materials such as packaging to minimize pollution.

References 

Luco, F., & Marshall, G. (2020). The competitive impact of vertical integration by multiproduct firms. American Economic Review, 110(7) , 41-64.

Quan, J. (2020). The Trend of PepsiCo by Comparing PepsiCo’s Financial Reports in 2018 to 2019. International Conference on Modern Management and Education Technology , 162-166.

Venkataraman , S., & Summers, M. (2017). PepsiCo: The Challenge of Growth through Innovation.  Darden Business Publishing Cases . 

Zhang, Z. (2019). Risk Analysis of Two Leader Drink Company: PepsiCo and Coca-Cola. Asian Business Research, 4(3) , 42.