Strategic Management and Success Story of PepsiCo (GC0373)
Table of Contents
Success Story of PepsiCo.
1.1 Introduction.
1.2 Success history of PepsiCo.
1.3 Conclusion.
SWOT Analysis of Pepsico.
2.1 Introduction.
2.2 SWOT Analysis of Pepsico.
2.3 Conclusion of SWOT Analyse son Pepsico.
2.4 Recommendation for Pepsico based on SWOT Analysis finding.
References.
1.1 Introduction
PepsiCo. Inc. is an American multinational industry dealing with food and beverage. Founded in 1965, the company has grown its business in more than 200 countries by selling snack foods, beverages, and other products. 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, and PepsiCo Asia. These four business units handle the company’s business endeavors in different regions of the world. PepsiCo’s overall mission is to increase the value of our shareholder’s investment. PepsiCo does this through sales growth, cost controls, and wise investment of resources. Its commercial success depends upon offering quality and value to our consumers and customers; providing products that are safe, wholesome, economically efficient, and environmentally sound; and providing a fair return to our investors while adhering to the highest standards of integrity.
1.2 Success history of PepsiCo
PepsiCo, Inc. is one of the world’s top consumer product companies with many of the world’s most important and valuable trademarks. Its Pepsi-Cola Company division is the second-largest soft drink business in the world, with a 21 percent share of the carbonated soft drink market worldwide and 29 percent in the United States. Three of its brands–Pepsi-Cola, Mountain Dew, and Diet Pepsi&mdashe among the top ten soft drinks in the U.S. market. The Frito-Lay Company division is by far the world leader in salty snacks, holding a 40 percent market share and an even more staggering 56 percent share of the U.S. market.
In the United States, Frito-Lay is nine times the size of its nearest competitor and sells nine of the top ten snack chip brands in the supermarket channel, including Lay’s, Doritos, Tostitos, Ruffles, Fritos, and Cheetos. Frito-Lay generates more than 60 percent of PepsiCo’s net sales and more than two-thirds of the parent company’s operating profits. The company’s third division, Tropicana Products, Inc., is the world leader in juice sales and holds a dominant 41 percent of the U.S. chilled orange juice market. On a worldwide basis, PepsiCo’s product portfolio includes 16 brands that generate more than $500 million in sales each year, ten of which generate more than $1 billion annually.
Ups and Downs in the Early Years
Doc Bradham, like countless other entrepreneurs across the United States, was trying to create a cola drink similar in taste to Coca-Cola, which by 1895 was selling well in every state of the union. On August 28, 1898, at his pharmacy in New Bern, North Carolina, Bradham gave the name Pepsi-Cola to his most popular flavored soda. Formerly known as Brad’s Drink, the new cola beverage was a syrup of sugar, vanilla, oils, cola nuts, and other flavorings diluted in carbonated water. The enterprising pharmacist followed Coca-Cola’s method of selling the concentrate to soda fountains; he mixed the syrup in his drugstore, then shipped it in barrels to the contracted fountain operators who added the soda water. He also bottled and sold the drink himself.
In 1902 Doc Bradham closed his drugstore to devote his attention to the thriving new business. The next year, he patented the Pepsi-Cola trademark, ran his first advertisement in a local paper, and moved the bottling and syrup-making operations to a custom-built factory. Almost 20,000 gallons of Pepsi-Cola syrup were produced in 1904.
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, Bradham began to establish a network of bottling franchises. Entrepreneurs anxious to enter the increasingly popular soft drink business set themselves up as bottlers and contracted with Bradham to buy his syrup and sell nothing but Pepsi. With little cash outlay, Pepsi-Cola reached a much wider market. Bradham’s first two bottling franchises, both in North Carolina, commenced operation in 1905. By 1907, Pepsi-Cola had signed agreements with 40 bottlers; over the next three years, the number grew to 250 and annual production of the syrup exceeded one million gallons.
Pepsi-Cola’s growth continued until World War I, when sugar, then the main ingredient of all flavored sodas, was rationed. Soft drink producers were forced to cut back until sugar rationing ended. The wartime set price of sugar–5.5 cents per pound–rocketed after controls were lifted to as much as 26.5 cents per pound in 1920. Bradham, like his rivals, had to decide whether to halt production and sit tight in the hope that prices would soon drop, or stockpile the precious commodity as a precaution against even higher prices; he chose the latter course. But unfortunately for him, the market was saturated by the end of 1920, and sugar prices plunged to a low of two cents per pound.
Bradham never recovered. After several abortive attempts to reorganize, only two of the bottling plants remained open. In a last-ditch effort, he enlisted the help of Roy C. Megargel, a Wall Street investment banker. Very few people, however, were willing to invest in the business and it went bankrupt in 1923. The assets were sold and Megargel purchased the company trademark, giving him the rights to the Pepsi-Cola formula. Doc Bradham went back to his drug dispensary and died 11 years later.
Megargel reorganized the firm as the National Pepsi-Cola Company in 1928, but after three years of continuous losses, he had to declare bankruptcy. That same year, 1931, Megargel met Charles G. Guth, a somewhat autocratic businessman who had recently taken over as president of Loft Inc., a New York-based candy and fountain store concern. Guth had fallen out with Coca-Cola for refusing the company a wholesaler discount and he was on the lookout for a new soft drink. He signed an agreement with Megargel to resurrect the Pepsi-Cola company, and acquired 80 percent of the new shares, ostensibly for himself. Then, having modified the syrup formula, he canceled Loft’s contract with Coca-Cola and introduced Pepsi-Cola, whose name was often shortened to Pepsi.
Loft’s customers were wary of the brand switch and in the first year of Pepsi sales, the company’s soft drink turnover was down by a third. By the end of 1933, Guth bought out Megargel and owned 91 percent of the insolvent company. Resistance to Pepsi in the Loft stores tailed off in 1934, and Guth decided to further improve sales by offering 12-ounce bottles of Pepsi for a nickel–the same price as six ounces of Coke. The Depression-weary people of Baltimore–where the 12-ounce bottles were first introduced–were ready for a bargain and Pepsi-Cola sales increased dramatically.
Guth soon took steps to internationalize Pepsi-Cola, establishing the Pepsi-Cola Company of Canada in 1934 and in the following year forming Compania Pepsi-Cola de Cuba. He also moved the entire American operation to Long Island City, New York, and set up national territorial boundaries for the bottling franchises. In 1936, Pepsi-Cola Ltd. of London commenced business.
Guth’s ownership of the Pepsi-Cola Company was challenged that same year by Loft Inc. In a complex arrangement, Guth had organized Pepsi-Cola as an independent corporation, but he had run it with Loft’s employees and money. After three years of litigation, the court upheld Loft’s contention and Guth had to step down, although he was retained as an adviser. James W. Carkner was elected president of the company, now a subsidiary of Loft Inc., but Carkner was soon replaced by Walter S. Mack, Jr., an executive from the Phoenix Securities Corporation.
Mack established a board of directors with real voting powers to ensure that no one person would be able to wield control as Guth had done. From the start, Mack’s aim was to promote Pepsi to the hilt so that it might replace Coca-Cola as the world’s best-selling soft drink. The advertising agency Mack hired worked wonders. In 1939, a Pepsi radio jingle–the first one to be aired nationally–caught the public’s attention: ‘Pepsi-Cola hits the spot. Twelve full ounces, that’s a lot. Twice as much for a nickel, too. Pepsi-Cola is the drink for you.’ The jingle, sung to the tune of the old British hunting song ‘D’Ye Ken John Peel,’ became an advertising hallmark; no one was more impressed or concerned than the executives at Coca-Cola.
In 1940, with foreign expansion continuing strongly, Loft Inc. made plans to merge with its Pepsi-Cola subsidiary. The new firm, formed in 1941, used the name Pepsi-Cola Company since it was so well-known. Pepsi’s stock was listed on the New York Stock Exchange for the first time.
Sugar rationing was even more severe during World War II, but this time the company fared better; indeed, the sugar plantation Pepsi-Cola acquired in Cuba became a most successful investment. But as inflation spiraled in the post-war U.S. economy, sales of soft drinks fell. The public needed time to get used to paying six or seven cents for a bottle of Pepsi which, as they remembered from the jingle, had always been a nickel. Profits in 1948 were down $3.6 million from the year before.
In other respects, 1948 was a notable year. Pepsi moved its corporate headquarters across the East River to midtown Manhattan, and for the first time, the drink was sold in cans. The decision to start canning, while absolutely right for Pepsi-Cola and other soft drink companies, upset the franchised bottlers, who had invested heavily in equipment. However, another decision at Pepsi-Cola ignore the burgeoning vending machine market because of the necessarily large capital outlay improved to be a costly mistake. The company had to learn the hard way that as canned drinks gained a larger share of the market, vending machine sales would become increasingly important.
The 1950s: The Steele and Crawford Era
Walter Mack was appointed company chairman in 1950, and a former Coca-Cola vice-president of sales, Alfred N. Steele, took over as president and chief executive officer, bringing 15 other Coke executives with him. Steele continued the policy of management decentralization by giving broader powers to regional vice-presidents, and he placed Herbert Barnet in charge of Pepsi’s financial operations. Steele’s outstanding contribution, however, was in marketing. He launched an extensive advertising campaign with the slogan ‘Be Sociable, Have a Pepsi.’ The new television medium provided a perfect forum; Pepsi advertisements presented young Americans drinking ‘The Light Refreshment’ and having fun.
By the time Alfred Steele married movie star Joan Crawford in 1954, a transformation of the company was well underway. Crawford’s adopted daughter, Christina, noted in her best-seller Mommie Dearest: driven Pepsi into national prominence and distribution, second only to his former employer, Coca-Cola. Pepsi was giving Coke a run for its money in every nook and hamlet of America. Al Steele welded a national network of bottlers together, standardized the syrup formula …, brought the distinctive logo into mass consciousness, and was on the brink of going international.’ In fact, Pepsi-Cola International Ltd. was formed shortly after Steele’s marriage.
Joan Crawford became the personification of Pepsi’s new and glamorous image. She invariably kept a bottle of Pepsi at hand during press conferences and mentioned the product at interviews and on talk shows; on occasion, she even arranged for Pepsi trucks and vending machines to feature in background shots of her movies. The actress also worked hard to spread the Pepsi word overseas and accompanied her husband, now chairman of the board, on his 1957 tour of Europe and Africa, where bottling plants were being established.
Steele died suddenly of a heart attack in the spring of 1959. Herbert Barnet succeeded him as chairman and Joan Crawford was elected a board member. Pepsi-Cola profits had fallen to a postwar low of $1.3 million in 1950 when Steele joined the company, but with the proliferation of supermarkets during the decade and the developments in overseas business, profits reached $14.2 million in 1960. By that time, young adults had become a major target of soft drink manufacturers and Pepsi’s advertisements were aimed at ‘Those who think young.’…………….
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