PEPSICO IN 2007: STRATEGIES TO INCREASE SHAREHOLDER VALUE

By: Garvit Garg

SCENARIO Established in 1965 Strong brand image, presence in more than 200 countries Market leader in beverages and convenient food sector Dfgdfd Restructuring, spin offs, acquisitions, product reformulations,

expansion of product line, Power of One strategy Currently operating as PBNA, FLNA, PepsiCo International Capturing strategic benefits throughout the value chain Entering into new segments Dividends from 2001-2006 increased at annual rate of 15%,

EPS- $1.16

ISSUES Spin Offs

Acquisitions

Product Reformulations – Good For You, Better For You

Restructuring ( Focus Strategy)- Pepsi Bottling Group

Power of one strategy

Generic Strategies esp. focussed on differentiation

SWOT AnalysisSTRENGTHS

•Brand Image•Market leader•International presence•Power of One strategy•Strong financial condition (Revenues 2008-$20,000)•Core competency- mass production, distribution•Strongly differentiated products•Strong advertising, promotion•Product innovation•Attractive customer base

WEAKNESSES

• Declining market share(carbonated:2005-06-52.9%-50.9%)

• Federal trade Commission norms

• Liking Coke:48%,Pepsi:32%

• Packaging unattractive as Coca Cola

• Quaker presence limited

• Follower in many segments

• Focus: Gen Y

• Health issues

• Presence yet to be felt in some nations

OPPORTUNITIES•Increase presence outside N.America•Servings/monthBeverages, SnacksDeveloping(5,8.8)Developed(32,13.9)•Expansion of product line(Cold Coffee, Nimbooz, Lipton RTD teas)•Expand Gatorade, Quaker internationally•Use local companies besides KFC, Pizza Hut•New technology/innovation•Acquisition/joint ventures(Haldiram)•Better for You,Good for You products•Skill transfer opportunities

THREATS

• For Quaker- Kellogg's, General Mills

• Restrictive trade: FTC norms

• Beverages-Coca Cola

• Duplication of efforts(Taka Tak)

• Beverage industry-mature

• Pesticide blame on PepsiCo

• >50% sales: Fritolay, downturn poses a big threat

• Competitive competitors: Coca Cola, Kraft, Cadbury Schweppes

• New potential competitors: Parle, Britannia, ITC

POSSIBLE STRATEGIES

Diversification into unrelated business ( restaurants, sports gear)

Offensive strategy: LMN and NIMBOOZ Defensive strategy: Metro C & C, Best Price Modern

Wholesale CSR: partnership with NGOs Shift in focus Related diversification: Sports Drink- Health Drinks Low cost strategy: Tropicana (Indian market) Distinctive image strategy: Quaker Oats

IMPLEMENTATION

Continuous expansion of product line

New geographies, new markets, new segments

Curtailing expenses

More proactive approach: NIMBOOZ

Initiatives such as Innovation Summits

Cutting edge: R & D

Market survey and research

POSSIBLE CHALLENGES

Risk Core competencies Limited competitive advantage potential Corporate expertise: weaker foundation for enhancing

shareholder value Potential benefits- offensive strategies Keeping pace with technology Differentiation- competitors- doom!!! Eroding of profitability?? “SO WHAT” attitude Too fixated on cost reductions??