An analysis of the strategy and parenting advantage 

Group 3Sarah Bennani Vladimir Pushmin Anton Telepnev Maria Zatkova

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PepsiCo – Performance With Purpose  

1960s1965: PepsiCo, Inc. was established through the merger of Pepsi-Cola and Frito-Lay

1966: Introduction of Doritos in USAPepsi’s entry into Japan and Eastern Europe market

1970s1970: Pepsi introduces its first two-liter bottle Frito-Lay starts its expansion: more than one new plant each year

1974: Pepsi Cola becomes the first American consumer product to be sold in the former Soviet Union

1977: PepsiCo acquires Pizza Hut. Inc.

1977: PepsiCo acquires Pizza Hut. Inc.

1980s

1981: Frito-Lay starts the nutritional labeling1982: First Pepsi-Cola operation in China1982: Introduction of Diet Pepsi

1985: PepsiCo became the largest beverage company1989: PepsiCo acquires Walkers, UK snack food company

1990s

1990: PepsiCo acquires GAMESA, the largest cookie company in Mexico

1995: Introduction of Lays Crisps in 20 countries1998: PepsiCo acquires TROPICANA= the biggest acquisition

2000s

2001: PepsiCo merges with the Quaker Oats Company

2005: 40th Anniversary of PepsiCo, Inc.

2007: Introduction of the project “Performance with Purpose”

2010s

2010: PepsiCo acquires Pepsi Bottling Group, Inc

2014: First Pepsi Spire, a fountain Beverage

23%

4%

13%

10%17%

33%

% Net Revenue by Division

Frito-Lay North America

Quaker Foods North America

Latin America

Asia, Middle East & North Africa

Europe Sub-Saharan Africa

North America Beverages

47%53%

% Revenue by segment

BeverageFood

44%56%

% Revenue by region

Outside USAUSA

PepsiCo is one of the world’s leading food and beverage company with over $63 billion in net revenue in 2016 and a global portfolio of 22 diverse and beloved brands

1 Strategic Expansion

Mergers and acquisitions• Seizing all the merges and

acquisition opportunities in order to gain in competencies and infrastructure

• Consequence of the strategy implementation: 22 global brands- each of them has generated $1 billion sales in 2015

Strategic AlliancesGlobal dispersion: China, India, Saudi-Arabia as an integral part of the corporate strategy

Emerging market• Strengthening its operations in

China, Middle-East, Pakistan• Doubling its e-commerce

Business in China

4 Branding• Through the combination of

innovative ideas, effective communication and aggressive advertising; PepsiCo has been able to stay relevant to its customers

• Price based on customer perceptions

• Focusing its positioning strategy on teens and young adult segment

• Use of social media to promote products

2 Innovation in Marketing• Celebrity endorsement• Cross-cultural differences are

taken into account when delivering messages

5 5Cs of Business Strategy• Commercial Agenda• New Capabilities • Increased focus on cost• Culture of collaboration • Disciple on capital returns

3Performance with purpose• $550 million of packaging weight

removed • 23% reduction in operational

water use per unit/production• 6 million people provided access

to safe water in developing countries so far

• 434,000 metric tons of added sugar removed from the U.S. & Canada production

Group Level Strategy 

Customer identification

Generation Y:Active students, video gamers, adrenalin seekersOlder audience:Drivers, office workers, etc.

Crisps lovers of all ages with a dominant concern about quality and nutritive factors and ability to afford premium prices for crisps

Mainly athletes and coaches –20 – 40 years old, both men and women with a high athletic performance

Health and environment conscious individuals with above average income and desire for some higher quality drinks

Customer engagement

While there is some freedom in choosing various products company’s business model utilizes the “bus” system, which produce a limited selection of products in a standardized manner

Pure bus model. The product line is aimed at mass customer and offers no customisation. However, the firm offers a wide range of flavours to satisfy different tastes

Company’s business model utilizes the “bus” system, which produce a limited selection of products in a standardized manner, but still offers wide range of flavors

Bus model. Products are aimed at mass market and offer no customization. However, customers can choose between and within product lines to choose the drink with the best flavor

Value Chain Linkages

Red Bull use a wall-to-wall manufacturing - can manufacturing and filling process carried out on the same site in Bangkok, product is distributed through national and regional distributors

Tyrrells manufactures its "Home made" crisps in small batches Helfordshire using traditional production processes and potatoes from local farms with further distribution to wholesalers

Works by analysing and seeking to meet the athletic customer’s demand by being easily accessible through online service worldwide, grocery and healthy stores, gyms and fitness centers

Works closely with various fruit producers to get the best ingredients and then sells the drinks directly to a range wholesalers around the country

MonetizationRed Bull charges a premium price, which is 1,5X times higher than its closest rival “Monster”

Tyrrells charges a premium price of £1.99 for a standard 125gr pack, which is 1/3 more expensive that most of its competitors

Drinks are usually sold in cases, where 12 SuperDrink bottles cost $23.95

Drinks are sold with a premium price through a large range of intermediaries all around the country

Competing business models 

Premium juices

Crisps

• Tropicana and Cawston Press are both focusing on providing the market high quality, healthy juice-based drinks.

• Both firms try to attract new customers through various marketing campaigns and heavy investment in their R&D process to constantly come up with new flavors for the market, however they do it in different ways.

• Tropicana mainly expands through expanding its existing range, by adding more and more flavors and mixes to its existing fruit juices range, like new Probiotic mixes

• Cawston Press often focuses on differentiation of its product lines and offering new vegetable juices and making multi-million-pound investment into production of fruit soft drinks.

Energy drinks

Sports drinks

• AMP energy drink made by PepsiCo mainly targets millennials, primarily those who are interested in gaming and racing (NASCAR)

• Red Bull attracts new customers through heavy advertising using various media channels and other ways of online promotion, sponsorships, etc., while AMP use only social media platforms, which creates sales problems, due to product nature

• AMP is priced at the same level as other energy drinks (£1,39 for 500 ml can), but below the Red Bull price and usually sell it in cases of 12 cans

• AMP create awareness and trust among consumers on new markets through collaboration with Mountain Dew drink, where AMP acts as an energy extension of the carbonated product

• BodyArmor’s and Gatorade’s customers are mainly athletes and coaches, who are keen on refreshing their bodies with post-workout drinks, while supporting their immune system

• BodyArmor claims that it is one of the few healthy sports drinks out there, when others aren’t.

• Part of BodyArmor’s success is recruiting an all-star cast of athletes who aren't paid to endorse the product but are instead invited to take an equity stake in the company. In the same time, Gatorade uses the traditional means of advertising.

• Gatorade constantly updates its product line following the trends by adding new types with the latest addition of the G Organic sport drink.

• Tyrrells’s strategy focuses on a smaller part of the market by serving high-income crisps lovers, with the production of premium quality crisps.

• It’s struggling to keep up with competition in UK and primarily focuses its attention on the expansion abroad through exporting its products in Europe and acquisition of local similar brands like Aroma Snacks Co, German organic crisps producer.

• PepsiCo’s Walkers is currently the biggest crisps seller in the UK, over 53% of UK market. Bigger R&D budget allows to invest a lot into new technologies and innovations to further improve its production processes and bring new products to the customer. Furthermore, the company invests heavily into the extensive marketing campaign that fuels its fast growth by attracting many new customers.

Comparison by segment 

Healthy JuicesBenefit: High. Significant gains in R&D, production, marketing and distribution capabilities.Feel: High. Possesses all of the core competencies due to operation in the related industry.Energy drinksBenefit: High. Significant gains in R&D, production, marketing and distribution capabilities.Feel: Medium. Part of the PepsiCo diversification strategy, but not coreCrispsBenefit: High/Medium. Significant gains in marketing and distribution capabilities.Feel: Medium. An important part of PepsiCo’s diversification strategy but noncore.Sports drinksBenefit: High. Significant gains in R&D, production, marketing and distribution capabilities.Feel: High. Core part of PepsiCo group-level strategy

”Feel” and “Benefit” analysis

Parenting matrix

Parenting advantage