Pepsi

February 4th, 2023

Coke & Pepsi Learn to Compete in India

The political environment in India has proven to be critical to company performance for both PepsiCo and Coca-Cola. There were specific aspects of the political environment in India that played key roles in both companies’ difficulties.

India is a nation with a strong belief in loyalty and devotion to their culture and Indian products. The government promoted the consumption of local products rather than that of foreign products. The Indian government also has very strict trade policies which created many entry barriers for both PepsiCo and Coca-Cola.The stern rules and regulations of their government did not allow either company to freely promote their products. Typically, foreign investment denotes that foreigners take a somewhat active role in management as part of their investment and typically works both ways. India practices a more controlled foreign investment environment. Both companies should have done extensive research on India’s political environment before attempting to enter their market.

Due to the trade barriers established by the Indian government Coca-Cola’s first entry into India’s market was not successful. Coca-Cola’s first entry into India was in 1958 but they existed in 1978 after the Indian government asked them to reveal their formula. Coca-Cola refused and decided to shut down. PepsiCo entered the market during Coca-Cola’s 16 years of exile, in 1989. Both companies face major controversy when the Centre for Science and Environment (CSE), an environmental policy-orientated non-governmental organization (NGO) announced the results of a study.The study found that soft drinks sold in India, including those made by both companies, contained a cocktail of pesticides at concentrations far higher than considered permissible by national authorities and the World Health Organization (WHO). CSE had established a formidable reputation for accurate data-gathering and sharp analysis.

They tested numerous branded aerated drinks sampled from different parts of India, which included 28 Coke brands and 29 more from Pepsi. During the crisis with contaminated water in India, Pepsi and Coca-Cola were both under fire with the consumers and government.Politicians made it exceptionally difficult for both companies to redeem themselves with the facts they had, but Coca-Cola seemed to have a more difficult come-back than Pepsi. India’s market is enormous in terms of population and geography. Both PepsiCo and Coca-Cola were able to reposition themselves in India’s market and gain some success. In response to the sheer scale of operations in India both companies produced promotional activities that aligned with sporting events and festivals in India.This gave customers the opportunity to take advantage of special sales and contests that encouraged the purchase and continued consumption of both products.

Coca-Cola also changed their pricing policy by reducing their prices by up to 25 percent. Coca-Cola offers a wide range of products to the customers and is always looking to innovate and come up with innovations. PepsiCo also offers different varieties of products ranging from carbonated to noncarbonated soft drinks, offered in a variety of different sizes.PepsiCo also, like Coca-Cola, had to adapt to the pricing barriers in India in order to survive, by making their products pricing more sensitive to India’s economy. Both companies participated in TV campaigns to promote brand awareness and PepsiCo strategy was using celebrities in the introduction of any new product. Coca-Cola had a different approach by dividing the Indian market into two different youth categories; they were able to focus on an all-encompassing theme. Global localization is a policy that both companies have implemented successfully.

It includes the ability to provide shoppers with information in their native language and currency. PepsiCo gained success in this area by forming joint ventures with two local partners of India upon initial entry to their market. To continue the adaption of Pepsi they renamed the product in India to conform to foreign collaboration rules. And the strongest global localization strategy that PepsiCo implemented was sponsoring world famous Indian athletes. PepsiCo growth has been guided by PepsiCo’s global vision of “Performance with Purpose”.This means that while businesses maximize shareholder value, they have a responsibility to all the stakeholders, including the communities in which they operate, the consumers they serve and the environment whose resources they use. PepsiCo achieved a significant milestone, by becoming the first business in the PepsiCo system to achieve ‘Positive Water Balance’ (PWB) – it replenishes more water than it consumes in its manufacturing operations.

Coca-Cola, on their second go round, joined forces with local snack vendors and participated in special promotions of India’s cultural events.There are many lessons to be taken away from bot PepsiCo and Coca-Cola’s experience with India. PepsiCo should have learned that it is beneficial to keep with local tastes and to pay attention to market trends. Also, they should take into account that celebrity advertising has a favorable appeal. Coca-Cola should have learned that it is imperative to pay attention and proceed with caution when it comes to deals made with the government. They should also have realized the importance of maintaining a good relationship with foreign governments.Coca-Cola should recognize the significance of investing in quality products as well as the crucial effects of advertisement to the entry of a new market.

Although, both companies has their share of success within India it is my belief that Pepsi has the ability to withstand longevity in their success. The reason I think PepsiCo over Coca-Cola is that Pepsi entered the Indian market on a much better foot. Also in was genius of PepsiCo to enter a joint venture in launching into the bottled water industry. Coca-Cola as well had to branch out into other products to stay current to the market needs in India.Most recently Coca-Cola has decided to enter the growing Indian market for energy drinks, forecasted to grow to $370 billion in 2013 from less than half that in 2003. The competition in this market is fierce with established firms including Red Bull and Sobe. With its new brand Burn, Coke initially targeted alternative distribution channels such as pubs, bars, and gyms rather than large retail outlets such as supermarkets.

I understand the target market concept but I believe this strategy approach limits the new product exposure to the public. These distribution limitations could result in the potential loss of market share.

February 4th, 2023

Cola Strategic Management Model

In the business world, competition is so stiff. Global organizations are acquiring more and more knowledge-skills workers in order to meet in the continuing demands of both the market and the consumers. These organizations only have one common aim – to render the best services to their consumers while at the same time increasing their market share.

These companies are into globalization which enables them to integrate with the global economies which allows them to sell products and services between countries. This also brings modernization and industrialization. (http://www.cadi.ph/globalization.htm)

Company Mission

Pepsi Cola is known for its beverages which include Pepsi, Diet Pepsi, Pepsi Twist, Mountain Dew, Mountain Dew Code Red, Sierra Mist and Mug Root Beer. The company was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay and in 1998 they acquired Tropicana and later on the company merged with Quaker Oats Company and eventually continue to creating the world’s fifth largest food and beverage company. The company produces 15 brands which generates more than $1 billion in its annual retail sales. (http://www.pepsi.com/corporate/company_info/index.php)

On the hand, Coca-Cola was established in 1886. With their desire to top the world’s beverage suppliers, they won 4 of the world’s top 5 nonalcoholic beverage brands and they have more than 90,000 associates worldwide. The company is in operation in more than 200 countries all over the world and sells more than 2,800 products in these countries. The company is guided by its established mission, vision and values. The company is inspired by their mission which is to refresh the world, to inspire moments of optimism and to create a value and make a difference. In order to achieve sustainable growths, they are also guided by their vision which includes gives importance to the people, planet, portfolio, partners and profits. The company is also guided by the value of leadership, passion, integrity, accountability, collaboration, innovation and quantity. Furthermore, Coca-cola is committed towards serving and supporting communities since they believe that their business succeeds where business thrives. (http://www.thecoca-colacompany.com/ourcompany/)

Coca-cola has been known in the global market for its beverages. When there is Coca-cola, there comes Pepsi-Cola. These two beverage companies continue to vie for “throat share” of the world’s beverage market. From 1975 – 1995, these two companies reached its annual growth of approximately 10% as both US and worldwide Carbonated Soft Drinks (CSD) consumption. According to the former CEO of Pepsi-Cola, the competition serves as continuing battle between the two large companies. He added that nothing contributes as much to the success of Coca-Cola than Pepsi. However, on the other side of the fence, Pepsi also sees Coca-Cola to be the best competitor there is.

Internal Analysis

The economy of the US Carbonated Soft Drinks (CSD) Industry continues to increase in numbers. American people consume 23 gallons of CSD and the consumption grows by an average of 3% annually. The producer of CSD combine raw material ingredients, place it in plastic canisters and ships the blended ingredients to the bottler. The most significant cost includes advertising, promotion, market research and bottler relations. The producers normally take the lead in the development of programs, more specifically in planning, researching and advertising. From the facts gathered, it is shown that the cola companies spend millions of dollars for product advertisement. In 2000, the companies spend $207.3 million for advertisement alone for Coke Classic.

Concentrate producers is one of the four major participants which are involved in the production and distribution of Carbonated Soft Drinks. The three other includes bottlers, retail channels and suppliers.

From 1975 to 2000, the financial status of the cola companies increases. For Coca-Cola company alone, the sales in 2000 reaches up to $7,870 million, its Net profit/sales is up to 10.6% which gives a total sales of $20,458 million. On the other hand, for PepsiCo, the sales in 2000 reaches to $3,289 million and its net profit/sales reaches up to 10.7%.

Moreover, the bottling process of the cola companies involves high-speed and specialized lines. The bottling costs up to $4 million to $10 million, depending on the package type and volume. The minimum costs is estimated to reach up to $25 million to $35 million, which involves building a small bottling plant with warehouse and office space. The bottlers also invested capital in trucks and its distribution networks.

In history, Coca-cola was the first producer to build a nationwide franchise bottling networks, in which, as years go by was followed by Pepsi and Cadbury Schweppes.

External Environment

The products of the cola companies are channeled and distributed through its retail channels. The distribution of CSD in the US in the year 2000 first happened in food stores, fountain outlets, vending machines, convenience stores and other outlets. The costs were affected by the delivery method and frequency, advertising and marketing. Supermarket is the main distributor for soft drinks. These CSDs are among the five largest selling product lines sold by supermarket which yields 15-20% gross margin and 3-4% of food revenues. 15% of the CSD sales are accounted by discount retailers, warehouse clubs and drug stores. These organizations have their own private label CSD which are delivered to the retailer’s warehouse while the branded CSDs are delivered directly to the stores. The retailer is responsible for the transportation, storage, merchandising and stocking the shelves.

Furthermore, producers of the concentrate required inputs such as concentrate for most regular colas which is consist of caramel coloring, phosphoric and citric acid, natural flavors and caffeine. The bottlers purchased two major inputs. First is the packaging which includes $3.4 billion in cans, $1.3 billion in plastic bottles and $0.6 billion in glass and the sweeteners which includes $1.1 billion in sugar and high fructose corn syrup and $1.0 billion in artificial sweetener. In 1978, plastic bottles were boosted home consumption of Carbonated Soft Drinks (CSDs) because of their larger sizes.

Strategic Analysis and Choice

For profit and non-profit organizations, the management needs to do strategic planning which determines where the organization is going. In strategic planning, goal-based planning is the most common organization’s mission and the goals to work toward the mission. The strategic planning starts by articulating the vision of the organization and the values to achieve the vision while adhering to those values. (McNamara, 1997-2008)

In 1886, Coca-cola was formulated by a pharmacist in Atlanta Georgia, John Pemberton, who sold the product at a drug store soda fountain as a “potion for mental and physical disorders.” Asa Candler, few years later, established a sales force and began advertising Coca-Cola brands. The product was constantly snowed under by the imitations which are aggressively fought in court by the company. In 1923, Robert Woodruff became the CEO and was working with franchised bottlers to make Coke available whenever and wherever the consumers want it. He came to the idea of pushing bottlers to an “arm’s reach of desire” by the consumers. With this, in 1920s and 1930s, Coke was the pioneering open-top coolers to storekeepers and develops automatic fountain dispensers and later on introduced the vending machines. The CEO also developed an international business for Coke. One of the strategies he applied during the World War II was he said that “every man in uniform gets a bottle of Coca-Cola for five cents wherever he is and whatever it costs the company.” Since 1942, the product was exempted from wartime sugar and was destined for the bottling plants were set up during the war. These strategies contributed to the dominance of Coke in European and Asian countries.

On the other hand, in 1893, Pepsi Cola was invented in Bew Bern, North Carolina by Caleb Bradham, a pharmacist. Pepsi adopted franchise bottling system and in 1910 it had built 270 franchised bottlers. It was very unlucky for Pepsi to declare bankruptcy in 1923, but was able to gain in 1932. When Pepsi lowered the price for its 12-ounce bottle to a nickel, Coke also charged the same price for its 6.5-ounce bottle. Pepsi also launched its “Pepsi Challenge” in Dallas Texas. After the sales rise up in Dallas, the company started to do a nationwide campaign.

In 1963, Pepsi launched its “Pepsi Generation” under the leadership of Donald Kendall, the new CEO of PepsiCo. This campaign targeted the young and the young at heart. The company’s ad agency established an intense commercial using sports car, helicopters and a catchy slogan. This helped the company narrow Coke’s lead to a 2-to-1 margin. The company also worked with its bottlers to improve store delivery services. In 1970, the franchise bottlers grew larger compared to Coke bottlers.

On one hand, Coca-Cola, in 1950, began its advertisement to recognize the existence of competitors. It was in 1960s when Coca-Cola focused on overseas markets, believing that domestic soft drink consumption. In 1980, Coke switched to the lower-priced high fructose corn syrup. This move was emulated by Pepsi three years later. The product increases its intensity in its marketing effort, increasing advertising spending from $7 million to $181 million from 1981 to 1984. The management of Coca-Cola referred to its brand as “Mother Coke”.

Long-term Objectives

For the entire soft drink industry in the late 1990s, various problems emerge which affects the organizations. US sales volume increased only 0.2% in 2000 to just fewer than 10 billion cases. This was in contrast to the 5-7% yearly growth in the US in the late 1980s. Moreover, Coca-cola was also affected by the adjustment caused in leadership transition. The successor of Roberto Goizueta, Rouglas Ivestor, had two years at the wheel. The two competing cola companies focused their attention to boosting domestic markets and diversifying into non-carbonated beverages.

In the early 1990s, the two cola companies employed a low-price strategy in the supermarket channel to compete more effectively with high-quality, low-price store brands. However, these two companies strive harder to flag cola markets in many ways. Pepsi introduced again the highly effective “Pepsi Challenge” which boosts the sales and draw attention of customers.

By the late 1990s, diet CSDs increased its CSD segment to 29.8% in 1991. the introduction of Pepsi One was responsible for the minor recovery of the diet drink segment.

Generic and Grand Strategies

The two cola companies continue to seek growth which can lead to the success of their respective organizations. In the 1990s, they are given new and free access to the markets in China, India and Eastern Europe which stimulates the intense bottles of the cola wars. When World War II ends, Coca-cola was known as the largest international producer of soft drinks. The company expanded its operation and built brand presence in the developing markets where the soft drink consumption was low. In the 1990s, Pepsi moved faster in the market and concentrated on the emerging markets. It was in 1999 when the bottler sales increased up to 5% in the international market and its operating profit increased up to 37%. And by 2000, international sales of Coke accounted of up to 62% and Pepsi’s revenues up to 9%.

The producers encountered problems in their international operations which include cultural differences, political stability, regulations, price controls, advertising restrictions, foreign exchange controls and lack of infrastructures. However, when coke attempted to acquire the international practice, it ran into roadblocks in Europe, Australia and Mexico – where in these countries the market share exceeds 50%.

It was in the year 2000 when Coke carried more than 200 brands in Japan and most of its brands include teas, coffees, juices and flavored water. Coke also offered brands of guarana which is a popular caffeinated carbonated berry drink which accounts one-quarter of the Brazil’s CSD sales.

The two companies expressed confidence that in the future they can be able to grow in the international market in terms of international consumption. This can be used as an opportunity to snatch bottlers’ distribution. They also tried to decrease their products and make it more affordable through the measures such as refundable glass packaging.

Short-term Objectives

Coca-cola and Pepsi are doing its own thing in order to achieve their respective goals and objectives. These short-term objectives serve as a guide for both cola companies so that they can continue to give the best services to their valued consumers.

Both Coca-cola and Pepsi continue to launch other new drinks in the 1990s. They acquired brands which bolstered their portfolios such as Tropicana, Gatorade and SoBe. Both companies had a prediction that in the future the market share increases which comes from beverages other than the CSDs.

At the end of the 19th century, CSDs accounted for 41.3% of non-alcoholic beverage consumption and bottled water accounted for 10.3%. The measures of non-carbonated products increased up to 18% in 1995 and 5% in 2000 as compared to 3% and 0.2% for CSDs.

Functional Tactics

It is always the aim of Coca-cola and Pepsi to render the best services to their customers which is why they keep in seeking ways and even improving their current services. The companies’ target is to gain more and more customer satisfaction which can ensure an increase in its market share and make the product available anytime and anywhere the consumers need it.

The sales of the two cola companies continue to plateau in the United States and they have started to invest hundreds of millions of dollars which can help shore up international bottlers operating at low capacity. It was in 2001 when non-cola and even convenience foods offered a diverse growth potential.

According to a former CEO of Pepsi-Cola, Roger Enrico, “The warfare must be perceived as a continuing battle without blood. Without Coke, Pepsi would have a tough time being an original and lively competitor. The more successful they are, the sharper we have to be. If the Coca-Cola Company didn’t exist, we’d pray for someone to invent them. And on the other side of the fence, I’m sure the folks at Coke would say that nothing contributes as much to the present-day success of the Coca-Cola Company than…Pepsi.”

Policies that Empower Action

Coca-Cola and Pepsi bottlers offered a direct store-door delivery which routes sales people physically managing and placing the CSD brand in the sore. The smaller national brands distribute through food store warehouses. The Direct Store Delivery needs shelf space managing by stacking the product, positions the trademarked label, cleans the packages and shelves and sets up point-of-purchase and then displays them. The bottling process needs high capital and involves high-speed specialized lines. The bottling and canning process cost from $4 million to $10 million each, depending on the volume and package type.

The two cola companies franchise agreements give bottlers a chance to handle the non-cola brands of other concentrate products. This also gives them the option as to market new beverages or not which can be introduced by concentrate producer. The franchised bottlers were given the freedom to participate or reject new package instructions which include local advertising campaigns and promotions and test marketing.

Restructuring, Reengineering and Refocusing Organizations

For Coca-Cola and Pepsi, restructuring is a relevant act to ensure that they still are able to meet the demands of the market and that of their valued consumers.

One of the objectives of restructuring projects is to determine the best processes in which the work can be completed. This is also an opportunity of determining how the various departments of an organization fits together in the most effective way and in dealing with increasing work demands. In process reengineering, there are key players needed – the sponsors, project managers, project administrators and the project team. The latter participates in the creation of the model and assists in addressing the immediate workload distribution problems. (http://www.wghill.com/reengine.htm)

The products of the two cola companies are mainly distributed in the supermarket. They were among the top five largest selling products which get a 15-20% gross margin. These also represented a large percentage of the supermarket’s business. The discount retailers, warehouse clubs and drug stores increase its sales of up to 15% of CSD.

The strategy of the producers is directed towards can manufacturers which was typical for their supplier relationships. Coke continues to get its independent franchised bottlers and they became an investment banking firm which specializes in bottler deals.

The consolidation of the bottler made smaller producers dependent on Pepsi and Coke bottling network in the distribution of their products.

Strategic Control and Continuous Improvement

In business, strategic management is consists of the set of skills that each worker has in order to perform all the tasks and responsibilities assigned to them. This is important to capitalize on functional excellence to give way for specialists to give the greatest possible contribution to the organization and to understand how they fit in the organization in which they are a part. The successful companies give more attention on their efforts strategically. The main purpose of a strategic management process is the establishment of strategic options which can be of help in the success of the entire organization. (http://www.1000ventures.com/business_guide/mgmt_strategic.html)

Coca-Cola and Pepsi have seen the relevance of the local market and its demands for non-cola products. With this, Coke made a joint tie up with more than 200 brands in Japan and eventually in Brazil.

The yearly consumption of the consumers decreases in some regions of the country in the late 1990. However, the two cola companies were much more confident rather than worried that in the future the international consumption will increase and the use of downturn as an opportunity to snatch up bottlers. The two companies continue to make their products more available but less expensive. It is in this way where they can compensate the decrease of consumption in the previous years.

Implications for Middle Managers

In managing a large-scale enterprise, most especially if it is operating in the international market, is a very challenging tasks. It takes one genius manager to ensure the global company can continue to meet the demands of the market and the consumers. For middle managers, the success of Coca-Cola and Pepsi is also their success. Also, the success of each company is made possible because of each other. For middle managers, the good strategies of Coke and Pepsi made them stable in the local and global market. This, in turn, helps one another increase its annual profit as well as its share in the local and global market. The success also of Coke and Pepsi was made possible because of the hard work shown by each employee who might be assigned to do a specific task.

References:

CADI. 2000-2003. Globalization. Retrieved on October 3, 2008 at http://www.cadi.ph/globalization.htm.

Kotelnikov, Vadim. 2008. Strategic Management: New Approaches for the New Era of Rapid and Systematic Change. Retrieved on October 3, 2008 at http://www.1000ventures.com/business_guide/mgmt_strategic.html

McNamara, Carter. 1997-2008. Strategic Planning (in Profit or for-profit organization). Retrieved on October 3, 2008 at http://www.managementhelp.org/plan_dec/str_plan/str_plan.htm.

PepsiCo. 2008. About the Pepsi Cola Company. Retrieved on October 2, 2008 at http://www.pepsi.com/corporate/company_info/index.php.

The Coca-Cola Company, 2008. The Coca-Cola Company. Retrieved on October 2, 2008 at http://www.thecoca-colacompany.com/ourcompany/.

Ward-Green & Hill Associates Ltd. No Year. Consulting: Business Process Reengineering. Retrieved on October 3, 2008 at http://www.wghill.com/reengine.htm.

February 4th, 2023

Pepsi co Global Business Strategy

Co is one of the truly global organizations in the world with presence in many countries and offering products which are not only unique but carry a great brand value. Since Pepsi Co works in a global environment therefore its strategy is also global and focuses on achieving the strategic objectives of the firm with great greater emphasis on creating a unique set of strategies which are as applicable as they are in one country.

For example, its advertising campaigns have largely been based on creating a global awareness of its brands and are largely directed at youth of the world. (Romanik, 2007). One of the most important aspects of this global strategy is the maintaining of diversity in terms of employees as well as suppliers as Pepsi Co believes in diversity as a part of its day to day life. This not only allows to maintain local support but provides it a great opportunity to tap into the local knowledge. (PEPSICO, 2009).

It attempts to license the local bottlers and recently made a shift into industry by announcing that the smaller local bottlers will merge into larger bottlers in order to provide more sustainability and greater market penetration. Its global supply chain is based on the local suppliers providing glass bottles as well as bottle caps and as such relies largely on the local suppliers. This also means that Pepsico attempts to create and manage diversity not only in terms of its employees and customers but also in its suppliers.

(McKay, 2008).

Pepsicos global strategy is therefore, based on employing global strategy customized for the local environment and is largely executed through the local support.Bibliography 1. McKay, B. (2008, November 04).

Pepsi to invest $1. 5bn in China. The Wall Street Journal , p. 06. 2. PEPSICO. (2009). Our Commitment to Diversity. Retrieved March 18, 2009, from PEPSICO: http://www. pepsico. com/Purpose/Diversity-and-Inclusion/Commitment. aspx 3. Romanik, R. (2007, May 23). Pepsi’s Global Strategy. Retrieved March 18, 2009, from http://article. unipack. ru: http://article. unipack. ru/eng/18573/”,Samples

February 4th, 2023

Advertising and Pepsi Refresh

COMPANY Case Pepsi: Can a Soda Really Make the World a Better Place? This year, PepsiCo did something that shocked the advertising world. After 23 straight years of running ads for its flagship brand on the Super Bowl, it announced that the number-two soft drink maker would be absent from the Big Game. But in the weeks leading up to Super Bowl XLIV, Pepsi was still the second-most discussed advertiser associated with the event. It wasn’t so much what Pepsi wasn’t doing that created such a stir as much as what it was doing.

Rather than continuing with the same old messages of the past, focusing on the youthful nature of the Pepsi Generation, and using the same old mass-media channels, Pepsi is taking a major gamble by breaking new ground with its advertising program. Its latest campaign, called Pepsi Refresh, represents a major departure from its old promotion efforts in two ways: (1) The message centers on a theme of social responsibility, and (2) the message is being delivered with a fat dose of social media. At the center of the campaign is the Pepsi Refresh Project.

PepsiCo has committed to award $20 million in grants ranging from $5,000 to $250,000 to organizations and individuals with ideas that will make the world a better place. The refresheverything . com Web site greets visitors with the headline, “What do you care about? ” PepsiCo accepts up to 1,000 proposals each month in each of six different areas: health, arts and culture, food and shelter, the planet, neighborhoods, and education. Then crowdsourcing takes over, as consumers vote for their favorites. Pepsi awards the grants each month.

One-third of the way through its one-year run, the company had funded more than 100 projects, giving approximately $5 million back to local communities. The company stated that the project was right on target to award the full $20 million by the end of the yearlong effort. INTEGRATING DIGITAL THROUGHOUT THE PROMOTIONAL MIX The Pepsi Refresh campaign has been a groundbreaking effort, in part because of its heavy use of social media. PepsiCo is capitalizing on a growing trend in a way that no other major brand has done so far.

The company is quick to point out that Pepsi Refresh is not a social media add-on like almost others, where an ad simply directs people to a Web site for reasons that may or may not be relevant to the message. Nor is it a social media campaign as such, where the entire campaign takes place through social media. Rather, social media are the glue that holds together a truly integrated marketing communications effort. “It’s not about digital as its own channel anymore,” says Bonin Bough, director of digital and social media for PepsiCo. “It’s how do we infuse digital across all of our marketing programs? For starters, although PepsiCo bypassed the Super Bowl, it is not ditching broadcast media. To the contrary, Pepsi is running spot ads on the main networks as well as 30 different cable channels. The ads initially informed people about the Pepsi Refresh campaign, directing them to the refresheverything. com site. But shortly after the first grants were awarded, ads began highlighting projects that had been funded. Traditional media efforts extend to 10 print publications as well. And PR plays a role through agreements such as the one with NBC Universal for paid pitches on the “Today” show.

But this campaign underscores a shift in how PepsiCo is spending its advertising dollars. According to CEO Indra Nooyi, the world’s number two soft drink seller is shifting as much as one-third of its marketing budget to interactive and social media. This move involves not only the Pepsi brand but also Mountain Dew, Doritos, Sobe, and PepsiCo’s other brands. Certainly, PepsiCo is not alone in the trend toward digital and social media marketing. But analysts point out that its approach, moving away from high-profile spots in favor of heavy spending on a digitally focused social responsibility campaign, is both compelling and risky. I applaud Pepsi for embracing social media and technology,” said Marc Lucas, an advertising executive. “On the flip side, I think it’s very bold to not be in a place where you know you’re going to have an audience. ” The refresheverything. com Web site is just one component of the brand’s online efforts. PepsiCo is spreading the message through the big networks, such as Facebook and Twitter, and even partnering with them for advertising opportunities. For example, Pepsi Refresh held the lead ad position on Facebook during the Super Bowl.

Pepsi has also partnered with Hulu to sponsor its first original series, the reality show If I Can Dream. “It amplifies an advertising campaign by making it something people talk about, more of a social conversation,” said Jean-Paul Colaco, senior vice president for advertising at Hulu. PepsiCo even partnered with Spin magazine, music festival South by Southwest, and two Indie bands in a Web-based contest where music lovers could vote for their favorite. Metric beat out Broken Social Scene for a $100,000 grant that it gave to the Women’s Funding Network.

As another component of the integrated campaign, the company has not shied away from using celebrity endorsers. Through clever network spot ads that place celebrities inside a life-sized, threedimensional laptop made of tagboard, Kevin Bacon appeals to people to vote for his cause, SixDegrees. org. He is quick to point out that this has nothing to do with the cult trivia game, Six Degrees of Kevin Bacon. Rather, he proposes using a $250,000 grant to hand out “good cards” that people can use to donate to any of more than a million different charities.

But Bacon goes on to explain that the power of SixDegrees comes from the social networks of good card recipients. They buy more good cards and pass them on to others, and as social networking works its magic, that $250,000 grows into millions. Among various other celebrities, Pepsi has also recruited Demi Moore; NFL players Mark Sanchez, DeMarcus Ware, and Drew Brees; and NASCAR veterans Jeff Gordon, Dale Earnhardt Jr. , and Jimmie Johnson to apply for grants and act as spokespersons for the project.

These celebrities are vying for votes to award grants to such organizations as the Girls Education and Mentoring Service, the American Cancer Society, and the Brain Aneurysm Foundation. PepsiCo is also getting its message out to consumers at the point of purchase. Cans, bottles, and multipacks feature updated graphics that minimize an all lowercase Pepsi logo written vertically and highlights a new Pepsi brand mark: a large circle with swaths of red, white, and blue. That symbol replaces any “o” in Pepsi’s packaging and promotional materials.

Thus, both “Do Some Good” and “Doing Good 101” each carry four of the new Pepsi circles. To draw people into retailer outlets to see the pointof- purchase (POP) materials and hopefully buy its soft drinks, Pepsi has partnered with Foursquare, the social network that connects people through GPS in real time. Foursquare members are directed to Pepsi retailers and given offers as an incentive for them to visit. DOING WELL BY DOING GOOD Despite the growth of cause-related marketing, PepsiCo’s effort is perhaps the first example of a major brand making social responsibility the main theme of its campaign, rather than an add-on.

This does not downplay the efforts of companies like Target, which has given $273 million to local schools since 1997 through its RedCard program. But PepsiCo’s effort is built around a theme that drives the concept of “doing good” as much as it drives the brand. Coca- Cola’s response to Pepsi Refresh, donating a dollar to Boys and Girls Clubs of America each time a visitor to Coke’s Facebook page shares a virtual Coke gift, illustrates how most advertiser’s causerelated marketing efforts are peripheral to other advertising activities. Nooyi brings the centrality of Pepsi’s socially responsible message into perspective.

The Pepsi Refresh Project is a platform, but at the end of the day, what we are doing is awarding the grants, we are enabling connections. It’s having a catalytic effect on people who are actually embracing these organizations. So, we’re not only benefiting the person who received the grant, we’re benefiting the people who are the recipients of the outcome of that idea. With schools, for instance, it’s not just one classroom that’s benefited. It’s all the kids who will be able to go to that classroom. And there have been people who have worked so hard to get this money that others have stepped in and matched the money they receive.

Projects funded thus far are too numerous to list. But they include more than high-profile efforts like the celebrity campaigns. Many awards are being given to everyday people just trying to improve their own little corners of the world. Calvin Cannon received $5,000 for Clothe the N. A. K. E. D. Prom Date, his venture to sponsor low-income, upstanding dudes in Shelbyville, Tennessee, by paying for their tuxedo rentals for the prom. Jeanne Acutanza from Kirkland, Washington, got $5,000 for her children’s school so that it could manage a sustainable garden and give the harvest to local food banks.

And the Associates of Redlands Bowl received $25,000 to support performing arts in the community of Redlands, California. “I’m proud of every idea we’re supporting, but it’s the simplicity of [these ideas that is] so innovative,” says Nooyi. “You would never have thought that one simple thing could bring about a big change in the community. ” IN SEARCH OF THE HOLY GRAIL All this cutting edge promotion and the effort to change the world are wonderful. But at the end of the day, PepsiCo has to sell soft drinks. After all, it is the fiftieth largest publicly held corporation in the Fortune 500.

Pepsi is also the 23rd most valuable brand in the world according to Interbrand. If this experiment fails to support sales of its core brand, PepsiCo will no doubt abandon its innovative promotion efforts and return to its old ways. As one social marketer states, “This is big, new, getting a lot of attention. It’s impactful; it’s innovative. What the industry is talking about now is, is this a gamble that was worth taking, in terms of a lift in sales? That’s the holy grail. ” But PepsiCo remains extremely optimistic. In the first few months of the campaign, the number of Facebook fans doubled.

The company formerly got a Twitter tweet every five minutes or so. Now, it receives more tweets per minute than a person can read. But just what is the value of a Facebook or a Twitter fan? Although many advocates of social networking say questions like that are irrelevant, budget-strapped chief marketing officers want to see return on investment. That’s why Bough and his team have developed a scorecard that ties different elements of the Pepsi Refresh campaign back to the health of the brand. Using standard research methods, PepsiCo will be measuring whether or not this campaign merits the expense.

Pass or fail, many observers inside and outside PepsiCo will learn much from this first-of-its-kind social media and social responsibility campaign. Ana Maria Irazabal, director of marketing for PepsiCo, wants this campaign to become the model of the future. “We want people to be aware that every time you drink a Pepsi you are actually supporting the Pepsi Refresh Project and ideas that are going to move this country forward. We may be the first to do something like this, but hopefully, we’re not the last. ” Questions for Discussion 1.

Consider PepsiCo’s advertising throughout its history. (For a list of Pepsi slogans over the years, visit http://en. wikipedia. org/wiki/Pepsi#Slogans. ) Identify as many commonalities as possible across its various ad campaigns. How is this campaign consistent with PepsiCo’s brand image? 2. List all the promotional mix elements used in the Pepsi Refresh campaign. What grade would you give PepsiCo on integrating these elements into an integration marketing communications campaign? 3. Describe PepsiCo’s target audience. Is the Pepsi Refresh campaign consistent with that audience? . As completely as possible, analyze the campaign according to the steps listed in the chapter for developing effective marketing communication. 5. Will the Pepsi Refresh campaign be successful? Why or why not? Sources: Natalie Zmuda, “Pass or Fail, Pepsi’s Refresh Will Be Case for Marketing Textbooks,” Advertising Age, February 8, 2010, p. 1; Stuart Elliott, “Pepsi Invites the Public to Do Good,” New York Times, January 31, 2010, p. B6; Elaine Wong, “Pepsi Community Effort Finds Fans on Social Nets,” Brandweek, June 8, 2010, accessed at www. brandweek. com.

February 4th, 2023

Environmental and external analysis of Pepsi in UK

Pepsi in UK is an entity of Pepsi International division of Pepsi Inc USA. Pepsi is the worlds 3rd largest snack and beverage company. (Rafey. R et, el). As well Pepsi is the 2nd largest manufacturer of carbonated soft drinks in the world. (Rafey. R et, el). Pepsi in UK is one of the largest operations of Pepsi Inc comparable to Pepsi Mexico.In UK Pepsi Company’s main competitors are local manufacturing companies in food and beverage industry and other retailers. As well it faces competition from international Companies like Coke, Cadbury, Schweppes and Kraft etc. (Rafey. R et, el). In UK Pepsi faces sever competition from these companies and the UK market is complex and dynamic in nature.

The nature of SWOT analysis and its value in developing Marketing strategies and Marketing Plan. SWOT analysis means strengths and weaknesses of an entities internal environment in terms of human, technical, organizational, information systems operational processes and models management culture and leadership style. It also considers opportunities and threats of its immediate market conditions as well as opportunities arising from the internal organizational strengths and the threats arising from the weaknesses of its internal environment.

Pepsi Cola

9-801-458 REV. OCTOBER 24, 2008 CARLISS Y. BALDWIN LEONID SOUDAKOV PepsiCo’s Bid for Quaker Oats (A) Introduction By the end of 1999, following a multi-year restructuring effort, PepsiCo had once again become one of the most successful consumer products companies in the world. In less than four years, it had achieved an 80% increase in net income, on 30% lower sales, and with 75% fewer employees. Exhibits 1 through 3 contain the company’s recent financial statements. PepsiCo’s major subsidiaries were the Pepsi-Cola Company, which was the world’s second largest refreshment beverage company, Frito-Lay, Inc. the world’s largest manufacturer and distributor of snack chips, and Tropicana Products, the largest marketer of branded juices. PepsiCo’s leading brands included carbonated soft drinks (Pepsi, Diet Pepsi and Mountain Dew), AquaFina bottled water, Tropicana juices and juice-based drinks, Lipton tea-based beverages and Frappucino ice coffee, as well as Fritos and Doritos corn chips, Lay’s and Ruffles potato chips, and Rold Gold pretzels. Throughout 1999, PepsiCo was closely tracking several potential strategic acquisitions. In the fall of 2000, it appeared that the right moment for an equity-financed acquisition had arrived.

At this time, PepsiCo management decided to initiate confidential discussions with The Quaker Oats Company about a potential business combination. Gatorade, a key brand in Quaker’s portfolio, had long been on PepsiCo’s wish list. On October 5, 2000, an investment-banking team from Merrill Lynch met with the top executives of PepsiCo to discuss a possible business combination between PepsiCo and Quaker. The goals of the meeting were: • to assess the value of Quaker’s businesses; to estimate potential synergies associated with a Pepsi-Quaker merger; and to come up with an effective negotiation strategy. • PepsiCo executives were confident that Quaker’s beverage and snack food businesses could contribute to Pepsi’s profitable growth in convenience foods and beverages. However, PepsiCo’s managers, led by CEO Roger Enrico and CFO Indra Nooyi, were committed to upholding the value of PepsiCo’s shares, and as a result, they were determined not to pay too much for Quaker. ________________________________________________________________________________________________________________ Leonid Soudakov (MBA ‘01) prepared this case from published sources under the supervision of Professor Carliss Y.

Baldwin. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2001, 2002, 2008 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www. hbsp. harvard. edu.

No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School. 801-458 PepsiCo’s Bid for Quaker Oats (A) PepsiCo’s Origins and History In the summer of 1898 Caleb D. Bradham, a young pharmacist from North Carolina, looked for a name that would better describe the “Brad’s Drink,” his concoction of carbonated water, sugar, vanilla and kola nuts.

He decided to buy the name “Pep Kola” from the local competitor, which he later changed to Pepsi-Cola, maintaining that the beverage aided in curing dyspepsia, or indigestion. In 1902, Bradham applied for federal trademark protection and founded the first Pepsi-Cola Company. As a result of Bradham’s gambling on the post-World War I price of sugar, the company went bankrupt in 1923, and its assets were sold for $30,000. It was reorganized as the National Pepsi-Cola Company in 1928, only to go bankrupt again three years later. Emerging from bankruptcy with new owners, the company’s fortunes changed uddenly in 1934. That year, in the middle of the Great Depression, it introduced a 12-ounce bottle of Pepsi Cola for “just a nickel. ” Its sales soared, and the Pepsi-Cola Company embarked on six decades of sustained and profitable growth. In 1965, the company merged with the Texas-based snack manufacturer, Frito-Lay, Inc. In 1970, its total food and beverage sales passed the $1 billion mark. The major products in its portfolio at this time were Pepsi-Cola, Diet Pepsi and Mountain Dew beverages, plus Fritos, Lay’s, Ruffles, Doritos, Cheetos, and Rold Gold snacks.

The company, now called PepsiCo, continued to grow through the 1970s and 1980s. During this period, it used acquisitions to diversify out of its profitable, but relatively slow-growth beverage and snack businesses, acquiring North American Van Lines, a trucking company, in 1968; Wilson Sporting Goods in 1970; Pizza Hut restaurants in 1977; and the Taco Bell fast food chain in 1978. In 1984, PepsiCo was restructured to focus on soft drinks, snacks and restaurants, and the transportation and sporting goods businesses were sold.

To strengthen its restaurant division, PepsiCo acquired Kentucky Fried Chicken in 1986; purchased an equity interest in California Pizza Kitchen in 1992; and acquired East Side Mario’s Restaurants and D’Angelo Sandwich Shops a year later. By 1995, PepsiCo sales had reached $30 billion, and it had 470,000 employees worldwide. It was the world’s third largest employer. Restructuring in the Mid-1990s In the mid-1990s, PepsiCo began to encounter severe problems in its international bottling operations and in its restaurant division.

In August of 1996, PepsiCo’s long-time archrival, The CocaCola Company, bought Pepsi’s largest Venezuelan bottler, and PepsiCo was left with no presence in that market practically overnight. In Brazil and Argentina, a bottler jointly owned by PepsiCo and local investors, came close to bankruptcy. The bottler’s debts were converted into equity, a move that essentially eradicated Pepsi’s claim: PepsiCo reported a one-time loss of $576 million as a result of this restructuring. Simultaneously, the company suffered volume and profit declines in its restaurant businesses.

Between 1988 to 1994, PepsiCo had invested close to $7 billion to acquire thousands of fast food and casual dining outlets. But the operational complexity of these businesses was a tax on PepsiCo’s management. Moreover, because of their capital intensity, even profitable restaurant chains could not maintain high returns on invested capital without commensurately high levels of debt. Finally, PepsiCo’s beverage sales to other restaurant chains suffered because of the company’s dual role as a beverage supplier and a major competitor through its own fast food chains. 2

PepsiCo’s Bid for Quaker Oats (A) 801-458 In April 1996, Roger Enrico, formerly the head of the Frito-Lay division, became the CEO of PepsiCo. He acknowledged that the company had invested “too much money too fast, trying to achieve heroic overnight success where, in retrospect, the odds were tougher that they seemed. ”1 In the restaurant division, Enrico’s team began by divesting PepsiCo’s restaurant supply and distribution company and the smaller casual dining businesses. Simultaneously, the company announced plans to spin off its core restaurant businesses into a separate company.

In 1997, PepsiCo combined its three restaurant businesses, Pizza Hut, KFC and Taco Bell, into a new corporate entity, Tricon Global Restaurants. PepsiCo received $4. 5 billion in cash from Tricon as repayment of certain amounts due and a dividend; Tricon’s shares were then distributed to PepsiCo’s shareholders, and simultaneously listed on the NYSE. These moves created a new public company, with $10 billion in sales and a market capitalization of $4. 5 billion. Altogether, the divestitures of the restaurant businesses brought $5. 5 billion of cash proceeds to PepsiCo.

At the same time, PepsiCo’s managers embarked on a major restructuring of the international beverage division. The goals of the program were to lower fixed costs, write down underperforming assets, and divest noncore businesses. Following the lead of Coca-Cola, the company consolidated its previously dispersed bottling operations into the hands of a few large, well capitalized “anchor” bottlers, who were focused solely on manufacturing, selling and distributing Pepsi’s line of beverages. The new bottlers were designed to be counterweights to large retailers, like Wal-Mart and Carrefour, in the rapidly consolidating retail marketplace.

Thus in 1998 PepsiCo created the Pepsi Bottling Group (PBG) with $7 billion in sales, and bottling operations in countries ranging from the United States to Russia. This move separated the bottling and concentrate parts of the business, and allocated responsibility for building operational efficiency to the bottling companies. Retaining a 35% noncontrolling interest, PepsiCo sold 65% of PBG’s equity in an initial public offering in 1999. The sale brought $1 billion in cash onto Pepsi’s balance sheet, and led to a significant reduction in the company’s asset base.

Signaling management’s confidence in the new corporate strategy, PepsiCo used the cash generated by the restaurant and bottling divestitures to launch a share repurchase program. It bought back 54 million shares in 1996, 69 million shares in 1997 and 59 million shares in 1998. Management was now able to focus on building a strong portfolio of brands in beverage and snack foods. In 1998, PepsiCo acquired the Tropicana juice business from Seagram’s for $3. 3 billion in cash. The acquisition gave the company a strong market presence in the fast-growing noncarbonated beverage segment.

Compared to Pepsi’s existing businesses, Tropicana provided a lower return on assets and invested capital, but PepsiCo’s managers, especially Enrico and Indra Nooyi, the CFO, saw a great opportunity for strong margins and profitable growth if this superior brand were brought under the PepsiCo umbrella. Investment analysts and portfolio managers were more skeptical, however. At the time of the Tropicana acquisition, there was a perception on Wall Street that Pepsi might have paid too much. Two years later, however, the Tropicana acquisition was viewed as an outstanding success.

Tropicana’s sales volume and profitability consistently exceeded market expectations every quarter from the date of acquisition in the fall of 1998 through September 2000. Moreover, the integration of the new business into PepsiCo’s corporate structure was seamless: neither Tropicana’s brand heritage, nor its unique distribution system was harmed by the acquisition process. 1 Letter From the Chairman, 1996 PepsiCo Annual Report. 3 801-458 PepsiCo’s Bid for Quaker Oats (A) Exhibit 4 shows PepsiCo’s stock price history from October 31, 1997 through October 4, 2000.

Throughout 1999, PepsiCo’s stock price stagnated as investors shied away from the traditional packaged goods companies in favor of the Internet and technology stocks. This lackluster performance caused PepsiCo’s management to abstain from any major acquisitions. In the words of CFO Indra Nooyi, “we wanted a few quarters of solid performance behind us, and our currency— that is, our stock price—to reflect our underlying value. ”2 When the Internet bubble burst in March 2000, PepsiCo’s stock price began to rise: between March 8 and October 4, it appreciated from $30. 0 to $45. 125, or almost 50%. PepsiCo’s managers believed that it was time to see if a deal could be struck with Quaker that would be advantageous to both sides. The Quaker Oats Company Nearly a century old in 1999, Quaker Oats was a worldwide consumer goods company with annual sales of $4. 7 billion. In addition to its hot cereals, Quaker Oats and Quaker Instant Oatmeal, the company’s portfolio of brands included Gatorade sports beverages, Granola snack bars, Life and Cap’n Crunch ready-to-eat cereals, and Rice-a-Roni and Near East flavored grain dishes.

Exhibits 5-7 contain Quaker’s most recent financial statements as of October 4, 2000. Exhibit 8 provides data on Quaker’s financial performance broken down by beverage and food segments and by region. Exhibit 9 shows Quaker’s total sales and growth rates by product line for the years 1994-1999. In 1999, Quaker was emerging from a period of restructuring and refocusing of its core businesses. During the decade prior to 1999, Quaker divested businesses with more than $2 billion in revenues, or about a third of its initial asset base.

The divested operations included chemicals, toy manufacturing, specialty retailing, restaurants and pet foods, as well as the infamous Snapple beverage business. (In 1994, Quaker paid $1. 7 billion for Snapple Corporation, which sold branded juice-based beverages. Quaker then made the mistake of replacing Snapple’s distributors, and alienating the brand’s target consumers. After incurring dramatic losses, Quaker sold the business to Triarc in 1997 for $300 million. ) Robert Morrison joined the company as CEO in 1997, and proceeded to lead the company through an impressive turnaround.

By 1999, 93% of Quaker’s U. S. sales came from brands holding the number-one or number-two positions in their product categories, and the company was perceived to be one of the best-managed companies in the packaged food and beverage industry. However, because it was a relatively small player in a highly concentrated and competitive global industry, Quaker was also seen as a potential acquisition target. Table A shows the distribution of revenues among the major players in the global packaged food and beverage industries.

Indeed, in August 2000, David Nelson, an analyst at CSFB estimated Quaker’s synergies with various large food and beverage companies, and translated those figures into a potential takeover price for the company. His calculations are summarized in Table B. 2 Quoted in Lauren R. Rubin, “Profitable Fit,” Barron’s, December 11, 2000. 4 PepsiCo’s Bid for Quaker Oats (A) 801-458 Table A Major Companies Competing in the Global Packaged Food and Beverage Industries Annual Revenues, $Bns 50 40 30 20 10 0 Heinz Kraft Quaker Oats Hershey General Mills Coca-Cola Campbell PepsiCo Unilever Keebler Danone Kellogg Nestle

Table B Potential Acquirer’s Estimated Synergies ($ in millions) Synergy Estimates Savings Kellogg Campbell Philip Morris Coca-Cola Pepsi-Cola Nestle Danone Source: Capitalized Value Total 450 200 450 650+ 425 400 275 Per OAT Share $20. 36 $9. 05 $20. 36 $30. 00+ $19. 23 $18. 10 $12. 45 Potential Takeover Price $95. 36 $84. 05 $95. 36 $105+ $94. 23 $93. 10 $87. 45 Revenues 150 25 150 500+ 250 150 100 300 175 300 150 175 250 175 CSFB Equity Research Report on Quaker Oats, August 1, 2000. Interest in Quaker was centered on its Gatorade line of sports beverages, which accounted for 39% of Quaker’s sales in 1999.

According to one analyst report in August 2000, “As a small, publicly traded, now well-managed company owning possibly the fastest-growing billion dollar growth potential product in the food and beverage industry, there is little doubt that Quaker is an attractive target or at least a highly desirable merger partner. ”3 3 David C. Nelson, David S. Bianco, “Quaker Oats: Is It in the Stock? ,” Credit Suisse First Boston Equity Research, 08/01/2000, p. 4. 5 801-458 PepsiCo’s Bid for Quaker Oats (A) Rumors linking PepsiCo and Gatorade first surfaced in 1994.

Late in 1996, Quaker reportedly attempted to sell both its beverage businesses (Gatorade and Snapple) as a package for about $3 billion. A year later, analysts predicted that PepsiCo’s would use the proceeds from the spin-off of its restaurant unit to finance an acquisition of Gatorade. Finally, in a report published in March 2000, Bill Pecoriello, an analyst at Sanford C. Bernstein & Co. , advocated a PepsiCo-Quaker merger, saying that PepsiCo was “strongly positioned” to leverage Gatorade through its distribution system in the US and internationally, and to sell Quaker snacks through its Frito-Lay network.

Fueled in part by speculation that it might be acquired, Quaker stock appreciated almost 80% from its low of $45. 9375 on March 14 to its recent high of $79. 125 on September 29, 2000. Exhibit 10 shows Quaker’s stock price history from October 1997 through October 4, 2000. Exhibit 11 calculates selected ratios for PepsiCo and Quaker for the years 1996 to 2000. Exhibit 12 provides data on comparable companies. Exhibit 13 shows market interest rates as of October 4, 2000. Gatorade Gatorade was created on the campus of the University of Florida in 1965.

Researchers at the school wanted to create a drink that would prevent dehydration among athletes. The drink was named for school’s football team, the Gators: its introduction in the early 1970s launched the commercial sports beverage industry. Quaker acquired rights to the formula and the name in 1983. By 1999 Gatorade was well established as the world’s leading sports drink with $1. 9 billion in global sales, and 82 percent of the U. S. sports beverage market. Its growth had been remarkable: From 1997-1999, Gatorade’s sales grew at an annual rate of 12 percent, while profits grew at around 15 percent (see Exhibits 8 and 9).

Over the next five years (2000-2004), Quaker’s management expected Gatorade sales to increase by $1 billion, implying a 9. 25% cumulative average growth rate. Should that growth materialize, economies of scale were expected to drive profits upward at a 13. 5% rate over the same time period. As a rehydrating and energy beverage, Gatorade was a seasonal product, with the majority of its sales occurring in the warmer months of April to October. Highest levels of per capita consumption were in the southern parts of United States. Gatorade’s international presence was limited, however: less than 20% of its sales came from outside North America.

Its European launch in the mid-1980s had been unsuccessful, partly because of poor brand positioning, but also because heat-driven beverage consumption was not common in Europe’s colder climates. Quaker’s managers believed that Gatorade had huge growth potential in the warm-weather climates of Latin America and Asia, but the shaky economies in these regions presented major challenges to sustained, profitable growth. At the time of the acquisition by Quaker, Gatorade had only two flavors on the market: orange and lemon-lime. By 1999, there were more than twenty different flavors, from Whitewater Splash to Cool Blue Raspberry.

Quaker was also seeking to extend the Gatorade’s brand into new product arenas. In the summer of 2000, Quaker launched a vitamin-fortified flavored water called Propel under the Gatorade brand umbrella in southern U. S. markets. This new product was advertised as a “fitness water”: it delivered the vitamins, carbohydrates, and antioxidants present in Gatorade with only one-fifth of the calories. This move marked Gatorade’s entrance into the fast-growing bottled water market. At the same time, the company launched Torq, a quick energy, high-carbohydrate diet supplement for intense athletes.

Although Torq was a niche product with limited market prospects, it signaled Gatorade’s continuing commitment to sports nutrition, thereby enhancing consumers’ perception of the brand. 6 PepsiCo’s Bid for Quaker Oats (A) 801-458 Finally, Quaker’s management had decided to extend the Gatorade brand into the $500 million energy bar market, which was growing at an annual rate of 30%. This was a natural move, given Quaker’s core expertise in snack bar products (see below), and the fact that nearly 70% of energy bar consumers also drank Gatorade. Quaker’s Food Businesses

Quaker’s food businesses were based on an assortment of brands in the categories of hot and ready-to-eat cereals, grain products, snack bars, maple syrups, pancake mixes and grits. Following Morrison’s restructuring, all product lines were profitable, but for the most part their growth rates were low (see Exhibits 8 and 9). None of Quaker’s current food brands had the potential to exceed $ 1 billion in sales in the foreseeable future:? Hot cereals Oats were Quaker’s original product, but by 1999, hot cereals represented only 13% of the company’s U.

S. sales. Still oats were the company’s most profitable product line with operating contribution margins of almost 30%, and high returns on invested capital. Recently, sales had benefited from a growing consumer focus on healthy living and diet. Thus in 1999, Quaker’s hot cereal sales increased by 12. 5% compared with the compound annual sales growth of 1. 6% over the prior five years (see Exhibit 9). Quaker managers projected considerable volume growth in this category as the baby boomers grew older and became even more health conscious.

In the eyes of consumers, the main drawbacks of oatmeal were its taste and inconvenience in preparation. New product development focused on these issues. Thus in 1999 Quaker introduced several new instant oatmeal flavors, including baked apple, French vanilla, and cinnamon roll. It was testing convenient single-serve microwave-ready cups designed to eliminate the need for a bowl in preparation. Other new hot oatmeal products included Dinosaur Eggs, which were targeted towards kids: when hot water was added to the instant oatmeal, the eggs hatched little dinosaurs.

Ready-to-eat cereal In 1999, Quaker held the number four position in the intensely competitive ready-to-eat (RTE) cereal market category, trailing General Mills (33%), Kellogg (31%) and Kraft (16%). The business included three strong brands: Life and Cap’n Crunch, with more than $150 million in annual sales each, and the Toasted Oatmeal line, with sales of around $100 million. The balance of the segment was made up of bagged cereals: Sweet Crunch, Cocoa Blasts, and Marshmallow Safari. Real per-capita RTE cereal demand had decreased about 6% annually in the United States since 1994.

Bucking this trend, Quaker’s RTE sales had increased by 1%-2% on average over the last five years (see Exhibit 9). But, although Quaker’s top RTE cereal brands were competing effectively for share in this declining category, it was increasingly difficult to maintain their profitability. In this difficult segment of their business, Quaker management had decided to focus on efficiency. In 2000, the company announced a two-year restructuring plan designed to achieve significant cost savings by closing manufacturing facilities, consolidating manufacturing lines, and reconfiguring the RTE ereal distribution network. Golden Grain Quaker’s Golden Grain business produced flavored rice and pasta. Sales had been flat for the last five years (see Exhibit 9), but Quaker still held the number one position in flavored rice with a 37% market share, and the number two position in flavored pasta with a 33% market share. Competition was increasing in these markets, however: Mars was aggressively marketing flavored rice under its Uncle Ben’s brand, and General Mills was promoting flavored pasta under the Betty Crocker label.

In response to these competitive moves, Quaker managers felt they might have to defend share by increasing expenditures on promotion and advertising or dropping 7 801-458 PepsiCo’s Bid for Quaker Oats (A) prices. The division contributed about $50 million in operating profits annually, and accounted for about 7% of Quaker’s 1999 operating income. Grain-based snacks Quaker’s Snack Foods division sold Chewy Granola Bars, Fruit & Oatmeal Bars, Rice Cakes, and new Crispy Mini-Rice Cakes. Its products accounted for 17. 4% of the snack/granola bar market, second only to Kellogg Co.

Quaker’s Chewy Granola Bars led the $360 million granola bar category with a 39% market share. Over the past five years, Chewy’s growth in revenues averaged 8% annually. Quaker Fruit & Oatmeal Bars were number two to Kellogg’s NutriGrain in the cereal bar category. Quaker Rice Cakes had an impressive 66% market share in the $165 million rice cake category. The profits of the snack business had grown at 10% per year over the past three years, owing to the strength of demand for granola and cereal bars, and successful new product introductions (see Exhibit 9). Other U. S. nd international foods Quaker also sold Aunt Jemima syrup and pancake mixes, and through them held a 17% share of the $560 million syrup category and 21% of the $300 million pancake mix category. Quaker Grits dominated the $100 million corn grits market, with a 77% share. These were highly profitable brands, but they were in categories that promised little in the way of future growth. The Quaker’s international food businesses lacked critical mass. Its Latin American food sales were concentrated in Brazil, where sales had declined 17% in 1999, due to severe currency devaluation and economic recession.

In Europe, Quaker had a small, growing RTE cereal business, which was concentrated in the United Kingdom and Scandinavia. Its Asian food business was minuscule, accounting for less than $25 million in sales in 1999. Potential Synergies Gatorade If the acquisition succeeded, PepsiCo’s management expected that Gatorade would dramatically enhance both the company’s strategic position and its economic performance. PepsiCo would become the clear category leader in noncarbonated beverages, a market, which was growing at 8%-9% annually, three times faster than the carbonated soft drink market.

With Tropicana and Gatorade combined, PepsiCo would control a full quarter of this $23 billion market. One of the major benefits of combining the two companies’ operations would stem from distribution. Gatorade used a warehouse brokers’ distribution system to deliver beverages to convenience stores and supermarkets, whereas PepsiCo’s used a Direct Store Delivery (DSD) system. Each system worked best for different types of products and retail outlets. The DSD system was much more expensive, usually amounting to 15%-20% of sales, but it gave PepsiCo direct control over product selection, in-store visibility and the size of product displays.

Moreover, the labor and equipment costs of DSD were mostly fixed, hence the contribution margins of incremental unit sales were high. DSD worked well for high volume products (like colas), but it was not an economical way to supply lower volume products in large varieties) to supermarkets and convenience stores. As indicated, Quaker used a warehouse brokers’ distribution system. In the case of Gatorade, however, robust consumer demand acted to offset many of the disadvantages of selling through brokers, including lower margins, potential stock-outs and poor product presentation.

As a fastmoving convenience store item, Gatorade was regularly allocated highly visible shelf space, almost entirely without slotting fees, which were customary in the retail business. Moreover, Gatorade’s new products and packages historically had won increased shelf space for the brand, instead of taking up the same shelf space and cannibalizing older products. 8 PepsiCo’s Bid for Quaker Oats (A) 801-458 The acquisition of Quaker would enable PepsiCo to distribute Tropicana’s nonrefrigerated juices, like Twister and Dole, through Gatorade’s warehouse brokers’ distribution system.

The merger would thus considerably enhance company’s position in the $7 billion nonrefrigerated juice segment: According to CEO Enrico, PepsiCo would become the “category captain” of the nonrefrigerated juice aisle. PepsiCo’s managers estimated that using Gatorade’s warehouse distribution system for Tropicana juices could generate an incremental $400 million in sales and $45 million in operating profit by the year 2004. The PepsiCo management team also projected procurement savings of approximately $60 million annually by 2004 from reductions in the costs of raw materials and supplies.

Moreover, Gatorade used “hot-fill” production lines, which were similar to those used by PepsiCo’s Twister, Lipton teas, Frapuccino and SoBe beverages. If the two companies were combined, the team anticipated cost savings from better capacity utilization in manufacturing, warehouse, delivery and logistics systems. Collectively, these cost savings were expected to reach $65 million annually by 2004. Other potential benefits of the business combination were more difficult to quantify.

For example, PepsiCo’s managers believed that Pepsi’s extensive cooler distribution network could be used to increase Gatorade’s penetration in vending machines, schools, and smaller convenience stores as well as other niche vending channels and food service accounts. PepsiCo CFO Indra Nooyi argued: “The combination of Gatorade and AquaFina in vending machines is a no-brainer. ” Over the longer term, PepsiCo could accelerate Gatorade’s international expansion by using the existing sales and distribution organizations of both Pepsi-Cola International and Frito-Lay International.

Finally, the sports technology expertise of the Gatorade Sports Science Institute might be combined with the health research capabilities of the Tropicana Nutrition Center to develop products that would meet the refreshment and nutrition needs of beverage consumers in new ways. Snacks If the acquisition succeeded, PepsiCo’s managers planned to integrate the Quaker’s snack food division into its Frito-Lay unit, which was already the world’s leader in salty snacks. They saw a significant opportunity in the $2 billion snack bars market, which was growing at 9% annually.

Frito-Lay was in the process of reengineering its direct store delivery (DSD) distribution system to handle more product units. PepsiCo’s management believed that distributing Quaker’s Chewy Granola and other snacks through Frito-Lay’s system could increase Quaker’s revenues from snacks by an incremental $200 million and its operating profit by $34 million by 2004. A nonquantifiable benefit of the acquisition would be that Quaker snacks were not salty. For the most part, its brands connoted nutrition and health more than good taste or fun.

Quaker brands’ positioning would give Frito-Lay access to numerous consumption occasions, for example, in the morning, that its existing salty snack brands did not serve. According to Roger Enrico, PepsiCo CEO: “We see bars as an ideal way to “smuggle” nutrition into more daily diets. ” Other foods If the acquisition succeeded, Quaker’s nonsnack food businesses would represent 10% of the combined company’s pro forma sales. Quaker Oatmeal, RTE cereals, Golden Grain, and Aunt Jemima businesses did not fit within PepsiCo’s convenience-food strategy, nor did they represent significant growth opportunities.

Yet these businesses were highly profitable, and were expected to generate substantial free cash flows and modest growth over the foreseeable future. Lastly, their unit volumes supported the scale of Quaker’s (hence Gatorade’s) warehouse brokers’ distribution system. One complexity of the proposed acquisition stemmed from the fact that PepsiCo’s management would only consider a stock-for-stock transaction. Under that transaction structure, the company would be able to account for the merger as a pooling-of-interests. With a pooling-of-interests 801-458 PepsiCo’s Bid for Quaker Oats (A) accounting treatment, no goodwill would be created, and neither PepsiCo’s nor Quaker’s shareholders would have to recognize a gain or loss as a result of the merger for income tax purposes. On the other hand, under pooling-of-interests accounting, PepsiCo was precluded from selling any significant assets of Quaker for two years following the merger. Thus, if the acquisition succeeded, PepsiCo would not be able to divest Quaker’s slower-growth food divisions for at least two years.

By the same token, PepsiCo would not be able to repurchase shares in any significant quantity for two years. Both Pepsi and Quaker used share repurchases as their primary mode of returning cash to shareholders (see Exhibits 3 and 7). If the acquisition succeeded, Pepsi would have to change its cash distribution policy radically. Decision PepsiCo had to determine its initial offer before approaching the Quaker. The timing was critical, as several other companies were likely to be attracted by Quaker’s obvious strengths (see Tables A and B).

At the same time, PepsiCo management had two major concerns. First, although Gatorade’s synergies and growth prospects provided a clear strategic rationale for the acquisition, Gatorade plus the snack business accounted for only about 40%-45% of Quaker’s sales and operating income. Food products like Quaker Oats, which PepsiCo was not directly interested in, constituted the bulk of Quaker’s business. Second, Quaker traded at 23 times the earnings, which was lower than PepsiCo, but still at a premium compared to other food manufacturers (see Exhibit 12).

Depending on the price and the value of realized synergies, a stock-for-stock transaction could potentially dilute PepsiCo’s earnings and diminish earnings per share, at least in the short run. 10 PepsiCo’s Bid for Quaker Oats (A) 801-458 Sources This case was prepared using the following published sources: PepsiCo, Inc. 2000 Annual Report, available at www. pepsico. com/2000/annual2000. html PepsiCo, Inc. 1999 Annual Report, available at www. pepsico. com/1999/annual1999. html PepsiCo, Inc. 1998 Annual Report, available at www. pepsico. com/1998/content. shtml PepsiCo, Inc. 997 Annual Report, available at www. pepsico. com/1997/content. shtml PepsiCo, Inc. 1996 Annual Report, available at www. pepsico. com/1996/content. shtml The Coca-Cola Company 1999 Annual Report, available at www. cocacola. com/annualreport The Quaker Oats Company 1999 Annual Report, available at www. quakeroats. com The Quaker Oats Company 1998 Annual Report, available at www. quakeroats. com The Quaker Oats Company 1997 Annual Report, available at www. hoovers. com Form S-4, Registration Statement under the Securities Act of 1933, as filed by PepsiCo, Inc. ith SEC on 01/09/2001 “Pepsi Seeks $5B Credit Line,” Dow Jones News Service, 10/12/1994 “Analysts Dubious on Pepsi’s Interest in Quaker,” Dow Jones News Service, 10/12/1994 “Quaker Rises on Pepsi Report,” The Milwaukee Journal Sentinel, 11/30/1996 Michael J. Branca, “PEP: The Good, The Bad and The Ugly,” Lehman Brothers Equity Research, 11/03/2000 Cathleen Egan, “S. Bernstein Analyst Muses over a Pepsi-Quaker Merger,” Dow Jones News Service, 03/13/2000 Cathleen Egan, “Quaker in Talks to Sell Gatorade, Snapple to Pepsi,” Dow Jones News Service, 11/29/1996 David C.

Nelson, David S. Bianco, “Quaker Oats: Is It in the Stock? ,” Credit Suisse First Boston Equity Research, 08/01/2000 Lauren R. Rubin, “Profitable Fit,” Barron’s, 12/11/2000 Patricia Sellers, “Can Coke and Pepsi Make Quaker Sweat? ” Fortune, 07/10/1995 Janet Kidd Stewart, “Pepsi Chief Pooh-poohs Deal for Quaker Drinks,” Chicago Sun-Times, 01/25/1997 11 801-458 PepsiCo’s Bid for Quaker Oats (A) Exhibit 1 PepsiCo Financial Statements: Consolidated Statement of Income ($ millions, except per share data) 9/2/00a 1999 1998 1997 1996

Net sales New PepsiCo Bottling operations Total net sales Costs and expenses Cost of sales SG&A Amortization of intangible assets Impairment and restructuring charge Total costs and expenses Operating profit New PepsiCo Bottling operations and equity investments Total operating profit Bottling equity income, net Gain on bottling transactions Interest expense Interest income Income before taxes Provision for income taxes Income from continuing operations Income from discontinued operations, net Net income Net income per share of common stock, $ 14,028 0 14,028 8,244 2,123 20,367 14,686 7,662 22,348 13,655 7,262 20,917 20,337 5,433 6,209 96 0 11,738 8,198 9,103 183 65 17,549 9,330 9,924 222 288 19,764 8,525 9,241 199 290 18,255 8,452 9,063 206 576 18,297 2,290 0 2,290 135 0 (156) 43 2,312 740 1,572 0 1,572 1. 09 2,765 53 2,818 83 1,000 (363) 118 3,656 1,606 2,050 0 2,050 1. 40 2,460 124 2,584 0 0 (395) 74 2,263 270 1,993 0 1,993 1. 35 2,252 410 2,662 0 0 (478) 125 2,309 818 1,491 651 2,142 1. 40 2,040 (565) 91 1,566 624 942 207 1,149 0. 73 Source: Company 10(K) and 10(Q) filings. aData for 36 weeks ended September 2, 2000. 2 PepsiCo’s Bid for Quaker Oats (A) 801-458 Exhibit 2 Assets PepsiCo Financial Statements: Consolidated Balance Sheet ($ millions) 9/2/00a 705 97 1,835 975 588 4,200 9,209 (3,928) 5,281 4,531 3,011 636 8,178 17,659 1999 964 92 1,704 899 514 4,173 8,816 (3,550) 5,266 4,735 2,846 531 8,112 17,551 1998 311 83 2,453 1,016 499 4,362 13,110 (5,792) 7,318 8,996 1,396 588 10,980 22,660 1997 1,928 955 2,150 732 486 6,251 11,294 (5,033) 6,261 5,855 1,201 533 7,589 20,101 1996 307 289 2,276 853 225 3,950 10,908 (4,822) 6,086 6,036 1,147 491 7,674 4,450 22,160

Cash and cash equivalents Short-term investments, at cost Accounts and notes receivable, net Inventories Prepaid expenses and other current assets Total current assets Property, plant and equipment, net Accumulated depreciation Net PP&E Intangible assets, net Investments in unconsolidated affiliates Other assets Net II&O Net assets of discontinued operations Total assets Liabilities and Shareholders’ Equity Short-term borrowings Accounts payable and other current liabilities Income taxes payable Total current liabilities Long-term debt Other liabilities Deferred income taxes Common stock Capital in excess of par value Retained earnings Accumulated other comprehensive loss Less: Repurchased common shares, at cost Total shareholders’ equity Total liabilities and shareholders’ equity Average shares outstanding, millions 16 3,337 168 3,621 2,737 3,033 1,380 29 963 15,040 (1,219) (7,925) 6,888 17,659 1,446 233 3,399 156 3,788 2,812 2,861 1,209 29 1,081 14,066 (989) (7,306) 6,881 17,551 1,466 3,921 3,870 123 7,914 4,028 2,314 2,003 29 1,166 12,800 (1,059) (6,535) 6,401 22,660 1,480 0 3,617 640 4,257 4,946 2,265 1,697 29 1,314 11,567 (988) (4,986) 6,936 20,101 1,528 0 3,378 413 3,791 8,174 1,997 1,575 29 1,201 9,184 (768) (3,023) 6,623 22,160 1,564 Source: Company 10(K) and 10(Q) filings. aData for 36 weeks ended September 2, 2000. 13 801-458 PepsiCo’s Bid for Quaker Oats (A) Exhibit 3 PepsiCo Financial Statements: Consolidated Statement of Cash Flows ($ millions) 9/2/00a 1999 1998 1997 1996

Cash Flows from Operating Activities Net income from continuing operations Adjustments to reconcile net income to net cash provided by operating activities: Gain on bottling transactions Bottling equity income, net Depreciation and amortization Noncash portion of 1998 income tax benefit Noncash portion of restructuring charges Deferred income taxes Other noncash charges and credits, net Net change in operating working capital Net Cash Provided by Operating Activities Cash Flows from Investing Activities Capital spending Investments in unconsolidated affiliates Sales of businesses Sales of property, plant and equipment Short-term investments, by original maturity: More than three months – purchases More than three months – maturities Three months or less, net Other, net Net Cash Used for Investing Activities Cash Flows from Financing Activities Proceeds from issuances of long-term debt Payments of long-term debt Short-term borrowings, by original maturity: More than three months – proceeds More than three months – payments Three months or less, net Cash dividends paid Share repurchases Proceeds from exercises of stock options Other, net Net Cash Used for Financing Activities Net cash from discontinued operations Effect of Exchange Rate Changes Net (Decr. )/Incr. in Cash and Cash Equivalents Cash and Cash Equivalents – Beginning of year Cash and Cash Equivalents – End of period Source: Company 10(K) and 10(Q) filings. aData represents 36 weeks ended September 2, 2000. 1,572 2,050 1,993 1,491 942 0 (135) 642 0 0 138 191 (295) 2,113 (1,000) (83) 1,032 0 37 529 364 98 3,027 0 0 1,234 (259) 254 150 237 (398) 3,211 0 0 1,106 0 233 51 342 196 3,419 0 0 1,073 0 366 160 505 146 3,192 (574) (66) 0 0 (582) 577 0 (137) (782) (1,118) (430) 499 126 (2,025) 2,008 12 (144) (1,072) 1,405) (4,537) 17 134 (525) 584 839 (126) (5,019) (1,506) (119) 221 80 (92) 177 (735) (96) (2,070) (1,630) (75) 43 9 (115) 192 736 (214) (1,054) 108 (716) 103 (32) 375 (594) (1,238) 408 0 (1,586) 0 (4) (259) 964 705 3,480 (1,123) 3,691 (2,741) (2,856) (778) (1,285) 308 0 (1,304) 0 2 653 311 964 990 (2,277) 2,713 (417) 1,753 (757) (2,230) 415 0 190 0 1 (1,617) 1,928 311 0 (1,875) 146 (177) (1,269) (736) (2,459) 403 5 (5,962) 6,236 (2) 1,621 307 1,928 1,772 (1,432) 740 (1,873) 89 (675) (1,651) 323 (9) (2,716) 605 (5) 22 285 307 14 801-458 -15- Exhibit 4 PepsiCo Stock Price History PEP Historical Price Performance, October 31, 1997-October 4, 2000 Oct 4: Last close $45. 125 50 45 40 35 30

Mar 8: 52 week low of $30. 50 25 Jul-98 Jul-99 Jan-98 Apr-98 Jun-98 Oct-98 Jan-99 Apr-99 Jun-99 Oct-99 Jan-00 Feb-00 Apr-00 Jun-00 Jul-00 Nov-97 Dec-97 Feb-98 Mar-98 Feb-99 Mar-99 Mar-00 Aug-00 Aug-99 Sep-99 Nov-99 May-99 Dec-99 May-00 Aug-98 Nov-98 May-98 Source: Prepared by casewriter based on CRSP data. Sep-98 Dec-98 Sep-00 Oct-00 20 801-458 PepsiCo’s Bid for Quaker Oats (A) Exhibit 5 Quaker Financial Statements: Consolidated Statement of Income ($ millions, except per share data) 9/30/00* Net sales Cost of goods sold Gross Profit SG&A Impairment and restructuring (gain) or charge Interest expense Interest income Foreign exchange loss, net Income before taxes

Provision (benefit) for income taxes Net income Preferred dividends, net Net income available for common Net income per share of common stock, $ 4,045 1,805 2,240 1,551 172 40 1999 4,725 2,137 2,588 1,904 (2) 62 (12) 18 618 163 455 4 451 3. 36 1998 4,843 2,374 2,468 1,873 129 70 (11) 12 397 112 285 5 280 2. 04 1997 5,016 2,565 2,451 1,939 1,486 86 (7) 11 (1,064) (133) (931) 4 (934) (6. 80) 1996 5,199 2,808 2,392 1,981 (113) 107 (7) 9 416 168 248 4 244 1. 80 477 165 312 3 309 2. 34 Source: Company 10(K) and 10(Q) filings. aData for nine months ended September 30, 2000. 16 PepsiCo’s Bid for Quaker Oats (A) 801-458 Exhibit 6 Quaker Financial Statements: Consolidated Balance Sheet ($ millions)

Assets Cash and cash equivalents Short-term investments, at cost Accounts and notes receivable, net Inventories Other current assets Total current assets Property, plant and equipment Accumulated depreciation Net PP Intangible assets, net Other assets Total assets Liabilities and Shareholders’ Equity Short-term borrowings Accounts payable Other current liabilities Total current liabilities Long-term debt Other liabilities Deferred income taxes Preferred stock Deferred compensation Tresury preferred stock Total preferred stock, net Common stock Capital in excess of par value Retained earnings Accumulated other comprehensive loss Deferred compensation Less: Repurchased common shares, at cost Total shareholders’ equity Total liabilities and shareholders’ equity Average shares outstanding, millions /30/00* 111 126 391 287 234 1,149 1,872 (797) 1,075 231 57 288 2,512 89 258 648 995 672 510 0 100 (27) (47) 25 840 126 1,051 (108) (22) (1,578) 310 2,512 132 1999 283 0 254 266 193 997 1,852 (745) 1,107 237 56 293 2,396 155 214 570 938 715 523 0 100 (39) (39) 22 840 101 855 (95) (46) (1,457) 197 2,396 134 1998 327 28 283 261 216 1,115 1,819 (749) 1,070 246 79 325 2,510 137 168 704 1,009 795 533 0 100 (48) (30) 22 840 79 556 (80) (68) (1,176) 151 2,510 137 1997 84 0 306 256 487 1,133 1,913 (748) 1,165 351 49 400 2,697 169 191 586 946 888 579 36 100 (57) (22) 21 840 29 431 (82) (91) (899) 228 2,697 137 1996 111 0 295 275 209 890 1,943 (743) 1,200 2,237 69 2,306 4,394 568 210 576 1,355 994 559 238 100 (65) (16) 19 840 0 1,521 (68) (103) (960) 1,230 4,394 135 Source: Company 10(K) and 10(Q) filings. Data for nine months ended September 30, 2000. 17 801-458 PepsiCo’s Bid for Quaker Oats (A) Exhibit 7 Quaker Financial Statements: Consolidated Statement of Cash flows ($ millions) 9/30/00* 1999 455 124 14 (5) 4 0 13 (38) 32 31 631 (222) 14 (185) 219 14 0 (160) (156) 34 1 (96) 83 (373) (9) (516) 2 (44) 327 283 1998 285 133 (31) (27) 90 38 12 (41) 32 23 514 (205) 266 (166) 143 8 240 287 (160) (17) 2 (109) 112 (377) (8) (557) (1) 242 84 327 1997 (931) 161 (12) 1,151 66 40 42 (91) 20 43 490 (216) 300 0 0 0 0 84 (159) (453) 8 (54) 121 (50) (6) (593) (7) (26) 111 84 1996 248 201 14 (82) 23 0 29 (70) 22 27 410 (243) 174 0 0 0 0 (68) (157) (125) 2 (78) 31 0 (6) (331) 6 17 93 111

Cash Flows from Operating Activities Net income from continuing operations Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Deferred income taxes (Gains) losses on divestitures, net Restructuring charges** Asset impairment losses Loss on disposition of property and equipment Net change in operating working capital Change in deferred compensation Other items Net Cash Provided by Operating Activities Cash Flows from Investing Activities Additions to property, plant and equipment Business divestitures, net of tax Purchase of marketable securities Proceeds from sale of marketable securities Proceeds from sale of PP Capial gains tax recovery Net Cash Used for Investing Activities Cash Flows from Financing Activities Cash dividends paid Change in short-term debt Proceeds from issuances of long-term debt Reduction of long-term debt Issuance of common treasury stock Repurchases of common stock Repurchases of preferred stock Net Cash Used for Financing Activities Effect of Exchange Rate Changes Net (Decr. )/Incr. in Cash and Cash Equivalents Cash and Cash Equivalents – Beginning of year Cash and Cash Equivalents – End of period 312 99 4 0 177 0 2 (132) 35 15 512 (199) 0 (354) 232 5 0 (316) (115) (25) 1 (84) 105 (236) (9) (364) (4) (172) 283 111 Source: Company 10(K) and 10(Q) filings. a Data for nine months ended September 30, 2000. bThe 2000 number represents the sum of restructuring charges, asset impairments and losses (gains) on divestiture. 18 801-458 -19- Exhibit 8 Quaker Oats Operating Segment Information (dollars in millions, except per share data) b

Year Ended December 31 1999 Net Sales a 1998 1997 Operating Income (Loss) 1999 1998 1997 $2,359. 5 308. 4 215. 4 2,883. 3 1,502. 3 229. 1 103. 8 1,835. 2 4,718. 5 6. 7 $4,725. 2 $2,274. 1 372. 9 202. 9 2,849. 9 $399. 8 26. 2 21. 1 447. 1 253. 9 16. 5 (7. 3) 263. 1 710. 2 -$710. 2 $2,287. 8 371. 4 205. 7 2,864. 9 1,183. 3 232. 2 103. 0 1,518. 5 4,383. 4 632. 3 $5,015. 7 $369. 8 28. 2 (1. 2) 396. 8 214. 9 25. 6 (7. 4) 233. 1 629. 9 (2. 4) $627. 5 $390. 3 34. 0 (9. 9) 414. 4 182. 7 19. 3 (15. 0) 187. 0 601. 4 (34. 6) $566. 8 1,338. 2 267. 7 103. 1 1,709. 0 4,558. 9 283. 6 $4,842. 5 Foods: U. S. and Canadian Latin American Other c Total Foods Beverages: U. S. nd Canadian Latin American Other c Total Beverages Total Ongoing Businesses Total Divested Businesses d Total Sales/Operating Income Less: (Gains) losses on divestitures, restructuring charges, asset impairments and other–net e (2. 3) 25. 9 50. 2 18. 1 618. 3 163. 3 $455. 0 $3. 36 $3. 23 128. 5 31. 9 58. 9 11. 6 396. 6 112. 1 $284. 5 $2. 04 $1. 97 1,491. 1 50. 1 79. 1 10. 8 (1,064. 3) (133. 4) ($930. 9) ($6. 80) ($6. 80) General corporate expenses Interest expense–net Foreign exchange loss–net Income (Loss) before income taxes Provision (Benefit) for income taxes f Net Income (Loss) Per Common Share: Net income (loss)e Net income (loss)–diluted 801-458 -20- Exhibit 8 (continued) (dollars in millions) Year Ended December 31 1999 Identifiable Assets 1998 1997 1999

Capital Expenditures Net of Depreciation 1998 1997 Foods: U. S. and Canadian Latin American Other c Total Foods Beverages: U. S. and Canadian Latin American Other c Total Beverages Total Ongoing Businesses Total Divested Businesses g Total Operating Segments Corporateh Total Consolidated $1,124. 6 174. 0 110. 1 1,408. 7 522. 7 105. 4 79. 6 707. 7 2,116. 4 0. 0 2,116. 4 279. 8 $2,396. 2 464. 2 94. 6 109. 5 668. 3 2,115. 1 37. 5 2,152. 6 357. 7 $2,510. 3 364. 5 81. 9 98. 2 544. 6 1,845. 4 335. 9 2,181. 3 515. 7 $2,697. 0 69. 8 20. 4 1. 7 91. 9 99. 5 0. 0 99. 5 (0. 9) $98. 6 $1,187. 0 167. 7 92. 1 1,446. 8 $1,056. 9 122. 4 121. 5 1,300. 8 $3. 7 3. 7 0. 2 7. 6 $37. 5 6. 5 (0. ) 43. 4 26. 1 6. 3 0. 8 33. 2 76. 6 (3. 5) 73. 1 (0. 9) $72. 2 $7. 2 9. 7 12. 3 29. 2 26. 4 (0. 9) 20. 0 45. 5 74. 7 (18. 7) 56. 0 (1. 7) $54. 3 Source: Company financial statements and casewriter calculations. aIntersegment sales are not material. bOperating results exclude restructuring and asset impairment charges, gains and losses on divestitures and certain other expenses not allocated to operating segments such as income taxes, general corporate expenses and financing costs. cOther includes European and Asia/Pacific businesses. d1999 includes net sales and operating results (through the divestiture date) for the Brazilian pasta business. 998 includes net sales and operating results (through the divestiture date) for the Ardmore Farms, Continental Coffee, Nile Spice and Liqui-Dri businesses and the business divested in 1999. 1997 includes net sales and operating results (through the divestiture date) for the Snapple beverages and certain food service businesses and the businesses divested in 1999 and 1998. e1999 includes pretax restructuring charges of $12. 7 million, or $0. 06 per share, a pretax divestiture gain of $5. 1 million, or $0. 03 per share, and pretax adjustments of $9. 9 million, or $0. 04 per share, to reduce prior restructuring and divestiture reserves. 1998 includes pretax restructuring charges of $89. 7 million, or $0. 8 per share, pretax asset impairment losses of $38. 1 million, or $0. 18 per share, and a combined pretax divestiture loss of $0. 7 million, or a gain of $0. 20 per share, due to certain tax benefits. 1997 includes pretax restructuring charges of $65. 9 million, or $0. 27 per share, a pretax net charge of $4. 8 million, or $0. 02 per share, for an asset impairment loss partly offset by a cash litigation settlement, and a combined pretax loss of $1. 42 billion, or $8. 41 per share, for business divestitures. f1999 includes reductions in the provision for income taxes of $59. 3 million, or $0. 44 per share, related to previously recorded tax accruals and tax assets. Includes the following Divested Businesses: in 1999, the Brazilian pasta business in 1998 Ardmore Farms, Continental Coffee, Nile Spice, Liqui-Dri and the business divested in 1999; in 1997, Snapple, certain food service businesses and the businesses divested in 1999 and 1998. hIncludes corporate cash and cash equivalents, short-term investments and miscellaneous receivables and investments. PepsiCo’s Bid for Quaker Oats (A) 801-458 Exhibit 9 Quaker Oats Company Operations Summary 1994-1999 Annual Sales (dollars in millions) 1994 U. S. and Canadian Gatorade a International Gatorade Total Beverages U. S. Hot Cereals U. S. Ready-to-Eat Cereals Golden Grain Grain-based Snacks Other U. S. nd Canadian Foods Latin American Foods European and Asian Foods Total Foods Total Sales $908 269 1,177 416 679 334 275 483 301 233 2,721 $3,898 1995 $1,040 308 1,348 402 665 324 298 505 319 210 2,723 $4,071 1996 $1,095 283 1,378 440 626 316 285 518 345 207 2,737 $4,115 1997 $1,183 335 1,518 462 693 343 269 521 371 208 2,867 $4,385 1998 $1,338 371 1,709 431 712 341 291 500 373 203 2,851 $4,560 1999 $1,502 333 1,835 485 725 344 305 501 308 215 2,883 $4,718 CAGR 10. 6% 4. 4% 9. 3% 3. 1% 1. 3% 0. 6% 2. 1% 0. 7% 0. 5% -1. 6% 1. 2% 3. 9% Distribution of Annual Sales (%) 1994 U. S. and Canadian Gatorade a International Gatorade Total Beverages U. S. Hot Cereals U. S. Ready-to-Eat Cereals Golden Grain Grain-based Snacks Other U. S. nd Canadian Foods Latin American Foods European and Asian Foods Total Foods Total Sales 23% 7% 30% 11% 17% 9% 7% 12% 8% 6% 70% 100% 1995 26% 8% 33% 10% 16% 8% 7% 12% 8% 5% 67% 100% 1996 27% 7% 33% 11% 15% 8% 7% 13% 8% 5% 67% 100% 1997 27% 8% 35% 11% 16% 8% 6% 12% 8% 5% 65% 100% 1998 29% 8% 37% 9% 16% 7% 6% 11% 8% 4% 63% 100% 1999 32% 7% 39% 10% 15% 7% 6% 11% 7% 5% 61% 100% Source: Company financial statements. aIncludes Europe, Asia-Pacific and Latin America. 21 801-458 -22- Exhibit 10 Quaker Oats Stock Price History OAT Historical Price Performance, October 31, 1997-October 4, 2000 90 Oct 4: Last close $76. 0625 80 70 60 50 40 Mar 14: 52 week low of $45. 9375 Jul-98 Jul-99 Jan-98 Apr-98 Jun-98 Oct-98 Jan-99 Apr-99 Jun-99 Oct-99 Jan-00

Apr-00 Jun-00 Jul-00 Feb-98 Mar-98 Feb-99 Mar-99 Feb-00 Nov-97 Dec-97 Aug-98 Sep-98 Nov-98 Dec-98 Aug-99 Sep-99 Nov-99 Dec-99 Mar-00 Aug-00 May-99 May-00 Source: Prepared by casewriter based on CRSP data. May-98 Sep-00 Oct-00 30 PepsiCo’s Bid for Quaker Oats (A) 801-458 Exhibit 11 PepsiCo PepsiCo and Quaker Oats: Selected Ratios 1996-2000 36 Wks. 00 39% 44% 16% 16% 32% a 1999 40% 45% 14% 15% 44% -2% 26% 40% 64% 53% 12% 30% 1998 42% 44% 12% 17% 12% 0% 33% 49% 82% 35% 12% 31% 1997 41% 44% 13% 16% 35% -4% 30% 36% 62% 54% 13% 21% 1996 42% 45% 10% COGS/Sales SGA/Sales Operating Profit/Sales New Pepsi Operating Profit/New Pepsi Sales Tax Rate NWC (excl.

Cash ST Inv and ST Debt)/Sales a Net PPE/Sales a Net II/Sales a Invested Capital/Sales Shareholders Equity/Invested Capital Return on Invested Capital d Return on Equity c 40% -2% 30% 38% 66% 50% 9% 14% -1% 26% 40% 66% 52% 17% 23% Quaker Oats, Inc. COGS/Sales SGA/Sales b Operating Profit/Sales Tax Rate NWC (excl. Cash ST Inv and ST Debt)/Sales a Net PPE/Sales a Net II/Sales a Invested Capital/Sales Shareholders Equity/Invested Capital Return on Invested Capital d Return on Equity c a 9 Mos. 00 45% 38% 13% 35% 0% 20% 5% 25% 23% 33% 100% 1999 45% 40% 15% 26% -2% 23% 6% 28% 15% 38% 229% 1998 49% 39% 10% 28% -2% 22% 7% 26% 12% 26% 185% 1997 51% 39% -19% 13% 5% 23% 8% 37% 12% -46% -410% 1996 54% 38% 10% 40% 0% 23% 44% 67% 35% 9% 20% Source: Company financial statements. aAnnualized. Quaker Operating Profit = Gross Profit – SG – Impairment, consistent with PepsiCo’s definition. cReturn on Invested Capital = [Operating Profit * (1 – Tax Rate)]/Invested Capital. dReturn on Equity = Net Income from Continuing Operations/Shareholders’ Equity. 23 801-458 -24- Exhibit 12 Quaker Oats: Comparable Food and Beverage Companies Source: Company Annual Reports, Hoover’s Online Business Network. aSara Lee financial information includes RYA/Monarch, the sale of which is scheduled to close in second quarter of fiscal 2001. bH. J. Heinz EBIT includes $464. 6 million gain on the sale of Weight Watchers. Hershey EBIT includes $243. 8 million gain on the sale of U. S. pasta business. Kellogg EBIT incorporates $244. million in restructuring charges and equipment write-offs. PepsiCo EBIT includes $1,000,000 gain on bottling transactions. cAverage diluted shares outstanding, in millions of per-share calculations, including stock options, ESOP and non-vested awards. dCommon Stock price data for 52 weeks prior to October 4, 2000, includes Danone ADR’s traded at NYSE. eP/E calculated as Closing Common Stock price divided by EPS for the last full fiscal year. fMarket Capitalization calculated as the Closing Common Stock price times the average diluted shares outstanding. Using last-available diluted shares outstanding would not change the calculation significantly. PepsiCo’s Bid for Quaker Oats (A) 801-458 Exhibit 13

February 4th, 2023

Research Project on Nimbooz by Pepsico

Market research includes social and opinion research, and is the systematic gathering and interpretation of information about individuals or organizations using statistical and analytical methods and techniques of the applied social sciences to gain insight or support decision making. The process of market research included – Step 1: Problem Definition The first step in any marketing research project is to define the problem. In defining the problem, the researcher should take into account the purpose of the study, the relevant background information, what information is needed, and how it will be used in decision making.

Problem definition involves discussion with the decision makers and analysis of secondary data. Once the problem has been precisely defined, the research can be designed and conducted properly. Step 2: Development of an Approach to the Problem Development of an approach to the problem includes formulating an objective or theoretical framework, analytical models, research questions, hypotheses, and identifying characteristics or factors that can influence the research design. This process is guided by case studies and simulations, analysis of secondary data and pragmatic considerations.

Step 3: Research Design Formulation A research design is a framework or blueprint for conducting the marketing research project. It details the procedures necessary for obtaining the required information, and its purpose is to design a study that will test the hypotheses of interest, determine possible answers to the research questions, and provide the information needed for decision making. Conducting exploratory research, precisely defining the variables, and designing appropriate scales to measure them are also a part of the research design.

The issue of how the data should be obtained from the respondents (for example, by conducting a survey or an experiment) must be addressed. It is also necessary to design a questionnaire and a sampling plan to select respondents for the study. Step 4: Data Collection Data collection handing out questionnaires to respondents for study. It involves a certain level of interaction with the respondents. Step 5: Data Preparation and Analysis Data preparation includes the editing, coding, transcription, and verification of data. Each questionnaire or observation form is inspected, or edited, and, if necessary, corrected.

Number or letter codes are assigned to represent each response to each question in the questionnaire. Step 6: Report Preparation and Presentation The entire project is documented in a written report which addresses the specific research questions identified, describes the approach, the research design, data collection, and data analysis procedures adopted, and present the results and the major findings. The findings should be presented in a comprehensible format so that they can be readily used in the decision making process. The project incorporates the analysis of the customer preference of Nimbooz.

The research studies the overall post-launch consumer behavior and analyses the customer preference of Nimbooz. | INTRODUCTION TO THE BEVERAGE INDUSTRY A beverage is a drink specifically prepared for human consumption. Beverages almost always largely consist of water. Drinks often consumed include: Water (both flat or carbonated),Juice based drinks, Soft drinks, Sports and Energy drinks, Alcoholic beverages like beer or spirits ,Coffee, tea ,Dairy products like milk. Filling of beverages can be done cold, hot, ambient and cold-aseptic filling to mention the latest trend of beverage marketing and technology.

The beverage is mainly categorized into two major categories based upon the alcoholic and nonalcoholic nature of the drink: An alcoholic beverage is a drink containing ethanol, commonly known as alcohol. Alcoholic beverages are divided into three general classes: beers, wines, and spirits. They are legally consumed in most countries, and over 100 countries have laws regulating their production, sale, and consumption. In particular, such laws specify the minimum age at which a person may legally buy or drink them. This minimum age varies between 16 and 25 years, depending upon the country and the type of drink.

Most nations set it at 18 years of age. A non-alcoholic beverage is a beverage that contains less than 0. 5% alcohol by volume. Non-alcoholic versions of some alcoholic beverages, such as non-alcoholic beer mocktails, are widely available where alcoholic beverages are sold. Non-Alcoholic beverages are further of two types based upon carbon content. Carbonated beverages which include sodas, soft drinks which are “fizzy” and carbonated under pressure. Non-Carboanted beverages are those that lack any carbon content these beverages include contain Fruit juices, Coffee, Tea and other flavoured drinks like lemonade, gigerale etc.

The beverage market is worth $55 billion worldwide. The tides are turning for many beverage categories. While the carbonated soft drink and beer categories are merely treading water with flat sales, the energy drink category is surging ahead like never before. Bottled water, ready-to-drink coffee, ready-to-drink tea and sports drinks follow close behind with substantial sales increase- drinks without added sugar, no beer, along with developments in juice drinks and dairy-based drinks, are helping to turn around sales in these categories.

What follows is a category-by-category look at the state of the beverage industry, including the top brands, new products, innovations and future trend setters. The above graph shows the relative share of all the beverages worldwide. As shown by the above graph the different beverage sectors can be classified according to importance. THE CHANGING BEVERAGE INDUSTRY In order to be successful in the marketplace, one has to think in terms of health innovation, flavor innovation, ingredient innovation and specific age groups. These are the factors that will shape the future of the beverage industry.

Today’s consumers are concerned with overall health and wellness. As a result, there is significant impact on food and beverage purchases. Many studies have shown that consumers are as concerned with good health as they are about maintaining a high quality of life. Beverage Industry have gone deep into the consumer preferences and tastes. The soft drink industry is training people to seek out new products, even the big companies are coming out with limited-edition flavors, and consumers are beginning to see that there is more flavor activity going on in the category.

Whether that really nets anybody any sales gains is another thing, but it is teaching consumers to seek out and try new products. The beverage industry has grown drastically in the last 10-15 years. Each year the beverage manufacturers turnover increase and they continue to introduce new beverages. The graph shows that the Non carbonated sector is the dark horse which has shown tremendous growth rate from 1997-2010. With health and wellness being major concerns and obesity becoming a global issue, the future of the beverage industry is the non carbonated sector as shown. Packaging Technologies

With the increasing global customer base, beverage retailing is transforming. However, with the move toward globalization, it requires longer shelf life, along with monitoring food safety and quality based upon international standards. To address these needs, nanotechnology is enabling new food and beverage packaging technologies. Applications in nano-enabled packaging p development of improved tastes, color, flavor, texture and consistency of beverages, increased absorption and bio-availability of nutrients and health supplements, new food packaging materials with improved mechanical, barrier and antimicrobial properties.

According to a study by iRAP, Inc. , the total nano-enabled food and beverage packaging market in the year 2008 was US$4. 13 bln, which is expected to grow in 2009 to US$4. 21 bln and forecasted to grow to US$7. 30 bln by 2014, at a CAGR of 11. 65%. Active technology represents the largest share of the market, and will continue to do so in 2014, with $4. 35 billion in sales. In spite of several challenges and restrictions faced by this industry, it is a ‘roll’ like never before. Customer preferences may have shifted, but they are still always on the lookout for a can of ‘coke’ or a new ‘flavored’ drink to quench their thirst

INDIAN BEVERAGE MARKET India has a population of more than 1. 15 Billions which is just behind China. According to the estimates, by 2030 India population will be around 1. 450 Billion and will surpass China to become the World largest in terms of population. Beverage Industry which is directly related to the population is expected to maintain a robust growth rate. The price stability throughout the year has contributed to the increase in domestic liquor sales. India is a booming market for the beverage industry. It already accounts for about ten per cent of global beverage consumption today.

This means that the country has the third-largest beverage consumption after the USA and China. But that is not the end of the road. Market analyses indicate that beverage sales in India will be increasing by more than 60 per cent between 2008 and 2012. Since India is a country of tea and coffee drinkers, packaged cold drinks have enormous potential. Packaged water, beer, spirits and carbonated drinks are recording what rates are in some cases high double-digit growth. All in all, annual per capita consumption of packaged beverages is supposed to triple from 2. 6 litres in 2000 to 8. 7 litres in 2012.

The total carbonated beverages and juices market is estimated at 284 million crates a year. The market is highly seasonal in nature with consumption varying from 25 million crates per month during peak season to 15 million during offseason. REASONS FOR GROWTH: In India, various positive factors drive the beverage markets. One is the rising number of people in the middle class with extra money to spend on new beverages like wine, new brands of imported whiskey, or the fancy energy drinks, some of which are really good to enable people to work longer, to listen longer during conferences, and even to party longer and have fun. Economic drivers: With strong economic drivers of consumer spending, India is a very different market from that of the 1980s or 1990s. With a GDP of USD800 billion and a GDP growth rate in 2005-06 of over 8 percent, India is now the third largest economy in Asia. Average GDP growth of the last 10 years has been 6. 5 percent per annum. And most significantly, the stepping up of GDP growth is driven primarily by domestic demand rather than exports. * Demographic drivers: Macro There are compelling demographic trends in the country that promise new and sustained opportunities for beverage product suppliers who can read right the signals.

The country boasts an expanding middle class that is currently 350 million strong (a population larger than that of the USA or the European Union). The rapid growth in the retail sector (over 20 percent per annum) is a confirmation of the increasing buying power of the middle class. FRUIT BEVERAGE INDUSTRY: The Indian beverage market offers hot options. The fruit beverages industry in India now stands at Rs 1100 crores (approx. Euro 180 million) and the market has grown at the rate of 30%. Part of the industry of fast moving consumer goods is also the beverage industry.

The total beverage industry in India is being estimated to grow at 17% this year, according to experts. Food and beverages segment has not suffered despite the slowdown in the economy. FMCG in stores has done very well. In fact, it registered 10-15% growth in this segment last year. CARBONATED BEVERAGE INDUSTRY Approximately 120 billion liters of beverages are consumed by Indians every year, but only 5% represent store-bought packaged beverages. The majority of Indian consumers (75%) still consume non-alcoholic store-bought beverages less than once a day’, highlighting a large untapped market opportunity, particularly in the carbonated drinks and juice or juice-based categories (estimated to be worth $1. 5 Billion and $. 25 billion respectively). In order to increase consumption and penetration of such beverages manufacturers will have to address the two primary reasons why some Indians abstain entirely, that is, health concerns and undesirable taste Beverage majors like Coca Cola India, for example, again reported growing sales.

Coca-Cola in India reported a solid first quarter 2009 results not only despite a challenging economic environment, but also with unit case volume increasing by 31%. And eight quarters out of the 11 quarters had a double-digit growth. . MILK BASED BEVERAGES Demand for milk and milk-based beverages are also rising. India is the world’s biggest producer and consumer of milk, since milk plays a major role in the Indian diet. The consumption of milk and milk-based beverages has increased by an annual average of 2. 7 per cent in the last four years and most of them (65 per cent) are sold “loose” / unpackaged.

The proportion of the market accounted for by packaged milk and dairy products are increasing, however. In the past four years, for example, demand for milk filled in pouches has grown by 4. 5 per cent annually, while the fi gure for milk in cartons is about 25 per cent. The rising consumption is making it necessary for appropriate investments to be made by the beverage industry. The sector is highly fragmented and 95 per cent of these producers have small or very small operations. Of this, the health beverage industry is valued at $230 million.

The Indian beverage industry faces over supply in segments like coffee and tea. However, more than half of this is available in unpacked or loose form. Indian hot beverage market is a tea dominant market. Consumers in different parts of the country have heterogeneous tastes. The urban-rural split of the tea market was 51:49 in 2000. Coffee is consumed largely in the southern states. The size of the total packaged coffee market is 19,600 tonnes or $87 million. Increasingly packaged coffee is becoming extremely popular and so is the “cafeteria culture” as promoted by Barista and Cafe Coffee Day.

PACKAGED WATER Though not technically a beverage. Packaged mineral water is also considered to be a part os the Beverage Industry. Mineral water market in India is a 65 million crates ($50 million) industry. On an average, the monthly consumption is estimated at 4. 9 million crates, which increases to 5. 2 million during peak season. BEVERAGES FOR HEALTH AND WELLNESS IN INDIAN MARKET The global health and wellness trends in the beverage sector are beginning to notice an increasing level of activity in India.

There is today a growing health and wellness consciousness among consumers and an increasing importance given to fitness and healthy lifestyle choices. Changing work and lifestyle habits leave less time for home cooking and therefore spur demand for convenience and ‘complete nutrition’ from meal replacements. There is a greater inclination to ‘self-care’ rather than ‘medicate’, a greater awareness of the ‘functional’ benefits of health beverages and a greater willingness to pay a premium for such beverages. RESPONSE TO HEALTH AND WELLNESS

With these strong drivers of growth, it is not surprising that the beverage industry in India has begun to respond with products that are marketed clearly on a health and wellness platform. However, to set the record straight, ‘health and wellness’ is not a wholly new platform for the Indian market. India has, for decades, had a thriving health food drinks market. Market leader, GlaxoSmithKline Consumer Healthcare (GSKCH), has had iconic brands ‘Horlicks’, ‘Boost’, ‘Viva’ and ‘Maltova’ create ‘top-of-the-mind’ recall across generations of Indians.

The fact is that there has all along been a strong multinational presence in beverage market and more recently this has been witnessing the emergence of Indian ‘multinationals’ across this sector. However, much of the marketing for health food drinks in the past has been general health and energy positioning, rather than the focus on specific benefits or ingredients that is characteristic of most mature health food markets. This is now changing and the specific initiatives of some companies are going a long way to creating a truly dynamic health and wellness beverage sector in India.

Global market leader in Probiotic fermented milk drinks, Yakult, has teamed up with Danone to start manufacturing its probiotic fermented milk drink in India from 2007. Calcium-fortified beverages are a rapidly growing market. Some examples of brands that have introduced calcium-fortified products are ‘Amul Shakti’, Coca-Cola India’s ‘Mazza’, GCMMF launched sports drink ‘Stamina’ in early 2006. ‘Red Bull’ was launched in India in 2003. Carbonated beverage giants Coke and Pepsi have also planned to widen their product portfolio with ‘health-based’ beverages (non-carbonated).

Pepsi’s ‘Gatorade’ is already on the market. And in what must be among the most significant recent commercialization efforts of a traditional Indian drink, ‘Amul Masti’ Spiced Buttermilk was launched (in a 200 ml tetra pack), marketed on the platform of being free of colour, preservatives, acids and sucrose sugar. SUMMARY: * Indian Beverage Market CAGR[2007-2010]:21% * India ranked 3rd in largest beverage consumption after the USA and China * Total Indian Beverage Consumption every year:120 billion liters * Fruit Beverages Market size: Rs 1100 crores (approx.

Euro 180 million) * Fruit Beverage market growth rate: 30% * Majority of Indian consumers:75% consume Non-alcoholic beverages and 25% Alcoholic Beverages * Carbonated Drinks Market size: $1. 5 Billion * Juice or juice-based Drinks Market size: $. 25 billion * Health beverage industry is valued at $230 million * Indian Beer Market Growth Rate: 7 – 8 % * Indian Beverage Industry is 10% of Global beverage consumption today. * Milk-based beverages consumption has increased by an annual average of 2. 7 per cent in the last four years * Total packaged coffee market size: 19,600 tons or $87 million. The Indian soft drink market is worth Rs. 21,600 million a year with a growth of around 7%. * The total soft drink (carbonated beverages and juices) market is estimated at 284 million crates a year or $1 billion. * Peak season soft drink consumption : 25 million * Off-season soft drink consumption: 15 million * The market is predominantly urban with 25 per cent contribution from rural areas. * Coca cola and Pepsi dominate the Indian soft drinks market. * Indian Mineral water market size : 50 million industry. BARRIERS IN THE INDIAN BEVERAGE INDUSTRY

Despite this flurry of activity, the market is still plagued by low levels of awareness and a lack of sophistication in consumer choices. Price remains a stumbling block. Public concerns over safety and quality of beverages have been aggravated by research findings over alarming levels of pesticide residues in bottled water and soft drinks. Furthermore, there is a lack of detail and clarity in food safety regulation regarding nutraceuticals and functional beverages, and regarding health claims. Within the beverage industry there is inadequate understanding of how to take traditional ingredients into the modern food processing environment.

Finally, the retail sector, despite its growth, is still mostly unorganized and this limits the ability to differentiate health and wellness products through the allocation of exclusive shelf space devoted to this category. OVERCOMING BARRIERS: To overcome these challenges, beverage suppliers need to approach the market with a multi-pronged strategy for increasing penetration. It can be given as follow: * Price resistance can, to some extent, be overcome by moving from ‘imported’ to manufactured in India’ products. For example, imported ‘Gatorade’ cost INR45 per 200 ml bottle.

Now, made in India, it costs INR25. * Substitution or modification is in some ways easier to execute than addition. (Examples of substitution would be herbal tea replacing regular tea or soy milk replacing regular cow’s milk. Examples of modification would be ‘low-fat’, ‘no-fat’, ‘lite’ variants of established beverage brands). * The growing trend towards on-the-go consumption/out-of-home consumption (at the workplace, in schools, colleges and gyms) presents suppliers with new place and form of consumption options (for example, vending machines for dispensing health drinks at schools). Abandoning the ‘one-size-fits-all’ positioning and generic selling points of the past, in favour of targeted and specific messaging based on validated health benefits is likely to be more effective to the better informed middle class today. * Leveraging the intrinsic appeal of traditional Indian ingredients such as ayurvedic, herbal or oleoresin ingredients, but delivered in a modern, safe, convenient and consistent form, or packaging and branding traditional Indian health drinks such as buttermilk and lassi, could create whole new markets that derive their strength from known and trusted traditional ingredients or drinks. In the end, beverage suppliers who unlearn many of the long-held misconceptions about Indian consumers and respond instead to their changing needs and priorities will be best placed to maximize the health and wellness opportunity in this large and growing market LEADING COMPANIES Coca-Cola Company: The Coca-Cola Company (Coca-Cola) manufactures, markets and distributes nonalcoholic beverage concentrates and syrups. The syrups, concentrates and beverage bases for Coca-Cola and nearly 400 other soft-drink brands are manufactured and sold by the Coca-Cola Company and its subsidiaries in nearly 200 countries around the world.

More than 60% of its products are sold outside of the US. It is headquartered in Atlanta, Georgia. The company recorded revenues of $23,104 million during the fiscal year ended December 2005, an increase of 6. 3% over 2004. The company’s net profit was $4,872 million in fiscal year 2005, an increase of 0. 5% over 2004. PepsiCo, Inc. : PepsiCo is a leading global snack and beverage company. The company manufactures, markets and sells a range of salty, convenient, sweet and grain-based snacks, carbonated and non-carbonated beverages and foods.

The company operates in 200 countries besides the US and Canada. It is headquartered in Purchase, New York. The company recorded revenues of $32. 6 billion during the fiscal year ended December 2005, an increase of 11. 3% over 2004. The net profit was $4,078 million in fiscal year 2005, a decrease of 3. 2% from 2004. Parle Bisleri Pvt Ltd : Parle Bisleri is an Indian bottled water company. The group is also involved in the production of fruit juices under the Alfa brand. Bisleri is a brand of bottled water in India. Bisleri has 60% market share in packaged drinking water in India Unilever:

Unilever Group (Unilever) is one of the leading companies in the global fast-moving consumer goods segment. Unilever operates under a dual structure. Unilever NV and Unilever PLC are the twin parent companies of the Unilever Group. Also, Unilever NV, Unilever PLC and their group companies constitute a single reporting entity for presenting consolidated accounts. The group operates primarily in Europe, the Americas, Asia and Africa. It is headquartered in Blackfriars, the UK and employs about 206,000 people. The group recorded revenues of $49,310. million during the fiscal year ended December 2005, an increase of 2. 9% over 2004. The operating profit of the group was $6,605. 1 million during fiscal year 2005, an increase of 25. 4% over 2004. The net profit was $4,940. 8 million in fiscal year 2005, an increase of 35. 2% over 2004. Parle Agro Pvt Ltd: Parle Agro is an Indian company in the beverages industry and has brands like Frooti, consistent winner of India’s fruit beverage brand, Appy, Appy Fizz and packaged drinking water, Bailley. A pioneer in the Indian industry, Parle Agro is associated with many firsts.

They were the first to introduce fruit drinks in tetra packaging, first to introduce apple nectar and the first to introduce fruit drinks in PET bottles. In 2008, Parle Agro forayed into foods with the launch of two confectionery brands, Mintrox mints and Buttercup candies. This was soon followed by two more brands – Buttercup Softease and Softease Mithai. Recent beverage products from Parle Agro include Saint Juice, LMN and Grappo Fizz. In 2009, Parle Agro forayed into snacks with the launch of Hippo, in line with the company’s vision of becoming a major player in the foods and beverages industry.

SWOT ANLYSIS OF THE BEVERAGE INDUSTRY * STRENGTH * Renewal and investment * Innovation and Technological development * Experience in searching for new markets, niches and partners * Availability of key raw materials, cheaper labour costs and presence across the entire value chain gives India a competitive advantage. * WEAKNESS * Old technologies and poor work organization * Insufficient pace of creation and implementation of innovations * Insufficiently effective activities of small and medium-sized businesses * Change in household consumption patterns * OPPORTUNITIES Presence of a favorable market * Market globalization * Foreign direct investment promoting knowledge and developing export channels * Transfer of production to the countries with smaller labour costs * Well established distribution network * THREATS * Unfavorable market trends in energy resources * Increasing competition among exporters and decreasing dependency on one market * Intense competition between the organized and unorganized segments and low operational cost. * Water scarcity in India INTRODUCTION TO PEPSICO COMPANY Pepsi Co. : An Introduction

PepsiCo, Incorporated is a large conglomerate with interests in manufacturing, marketing and selling a wide variety of carbonated and non-carbonated beverages, as well as salty, sweet and grain-based snacks, and other foods. Company Profile Type : Public (NYSE: PEP) Founded : New York, (1965) Headquarters : Purchase, New York Area served : Worldwide Key people : Indra K. Nooyi (Chairwoman), (President) & (CEO) Industry : Food, Non-alcoholic beverage The PepsiCo challenge (to keep up with archrival The Coca-Cola Company) never ends for the world’s no. carbonated soft-drink maker. Its soft drinks include Pepsi, Mountain Dew, and Slice. Cola is not the company’s only beverage: Pepsi sells Tropicana orange juice brands, Slice mango drink, Gatorade sports drink, Nimbooz lime drink and Aquafina water. The company also owns Frito-Lay, the world’s no. 1 snack maker with offerings such as corn chips (Doritos, Fritos) and potato chips (Lay’s, Ruffles). Its Quaker Foods division offers breakfast cereals (Life), pasta (Pasta Roni), rice (Rice-A-Roni), and side dishes (Near East). A true global giant, Pepsi’s products are available in some 200 countries.

HISTORY Born in the Carolinas in 1898, Pepsi-Cola has a long and rich history. The drink is the invention of Caleb Bradham (left), a pharmacist and drugstore owner in New Bern, North Carolina. The information published here is provided by PepsiCo, Inc. and may be accessed at their site: www. pepsi. com. The story behind Pepsi co. goes as follows, in summer of 1898, as usual, was hot and humid in New Bern, North Carolina. So a young pharmacist named Caleb Bradham began experimenting with combinations of spices, juices, and syrups trying to create a refreshing new drink to serve his customers.

He succeeded beyond all expectations because he invented the beverage known around the world as Pepsi-Cola. Caleb Bradham had known that to keep people returning to his pharmacy, he would have to turn it into a gathering place. He did so by concocting his own special beverage, a soft drink. His creation, a unique mixture of kola nut extract, vanilla and rareoils, became so popular his customers named it “Brad’s Drink. ” Caleb decided to rename it “Pepsi-Cola,” and advertised his new soft drink. People responded, and sales of Pepsi-Cola started to grow, convincing him that he should form company to market the new beverage. In 1902, he launched the Pepsi-Cola Company in the back room of his pharmacy, and applied to the U. S. Patent Office for a trademark. At first, he mixed the syrup himself and sold it exclusively through soda fountains. But soon Caleb recognized that a greater opportunity existed to bottle Pepsi so that people could drink it anywhere. The business began to grow, and on June 16, 1903, “Pepsi-Cola” was officially registered with the U. S. Patent Office. That year, Caleb sold 7,968 gallons of syrup, using the theme line “Exhilarating, Invigorating, Aids Digestion. He also began awarding franchises to bottle Pepsi to independent investors, whose number grew from just two in 1905, in the cities of Charlotte and Durham, North Carolina, to 15 the following year, and 40 by 1907. By the end of 1910, there were Pepsi-Cola franchises in 24 states. Pepsi-Cola’s first bottling line resulted from some less-than-sophisticated engineering in the back room of Caleb’s pharmacy. Building a strong franchise system was one of Caleb’s greatest achievements. Local Pepsi-Cola bottlers, entrepreneurial in spirit and dedicated to the product’s success, provided a sturdy foundation.

They were the cornerstone of the Pepsi-Cola enterprise. By 1907, the new company was selling more than 100,000 gallons of syrup per year. Growth was phenomenal, and in 1909 Caleb erected a headquarters so spectacular that the town of New Bern pictured it on a postcard. Famous racing car driver Barney Oldfield endorsed Pepsi in newspaper ads as “A bully drink… refreshing, invigorating, a fine bracer before a race. ” The previous year, Pepsi had been one of the first companies in the United States to switch from horse-drawn transport to motor vehicles, and Caleb’s business expertise captured widespread attention.

He was even mentioned as a possible candidate for Governor. A 1913 editorial in the Greensboro Patriot praised him for his “keen and energetic business sense. ” Pepsi-Cola enjoyed 17 unbroken years of success. Caleb now promoted Pepsi sales with the slogan, “Drink Pepsi-Cola. It will satisfy you. ” Then came World War I, and the cost of doing business increased drastically. Sugar prices see sawed between record highs and disastrous lows, and so did the price of producing Pepsi-Cola. Caleb was forced into a series of business gambles just to survive, until finally, after three exhausting ears, his luck ran out and he was bankrupted. By 1921, only two plants remained open. It wasn’t until a successful candy manufacturer, Charles G. Guth, appeared on the scene that the future of Pepsi-Cola was assured. Guth was president of Loft Incorporated, a large chain of candy stores and soda fountains along the eastern seaboard. He saw Pepsi-Cola as an opportunity to discontinue an unsatisfactory business relationship with the Coca-Cola Company, and at the same time to add an attractive drawing card to Loft’s soda fountains. He was right.

After five owners and 15 unprofitable years, Pepsi-Cola was once again a thriving national brand. One oddity of the time, for a number of years, all of Pepsi-Cola’s sales were actually administered from a Baltimore building apparently owned by Coca-Cola, and named for its president. Within two years, Pepsi would earn $1 million for its new owner. With the resurgence came new confidence, a rarity in those days because the nation was in the early stages of a severe economic decline that came to be known as the Great Depression. TIMELINE – 1898 Caleb Bradham, a New Bern, North Carolina, pharmacist, renames “Brad’s Drink,” a carbonated soft drink he created to serve his drugstore’s fountain customers. The new name, Pepsi-Cola, is derived from two of the principal ingredients, pepsin and kola nuts. It is first used on August 28. * 1902 Bradham applies to the U. S. Patent Office for a trademark for the Pepsi-Cola name. * 1903 In keeping with its origin as a pharmacist’s concoction, Bradham’s advertising praises his drink as “Exhilarating, invigorating, aids digestion. * 1905 A new logo appears, the first change from the original created in 1898. * 1906 The logo is redesigned and a new slogan added: “The original pure food drink. ” The trademark is registered in Canada. * 1907 The Pepsi trademark is registered in Mexico. * 1909 Automobile racing pioneer Barney Oldfield becomes Pepsi’s first celebrity endorser when he appears in newspaper ads describing Pepsi-Cola as “A bully drink… refreshing, invigorating, a fine bracer before a race. ” The theme “Delicious and Healthful” appears, and will be used intermittently over the next two decades. 1920 Pepsi appeals to consumers with, “Drink Pepsi-Cola. It will satisfy you. ” * 1932 The trademark is registered in Argentina. * 1934 Pepsi begins selling a 12-ounce bottle for five cents, the same price charged by its competitors for six ounces. * 1938 The trademark is registered in the Soviet Union. * 1939 A newspaper cartoon strip, “Pepsi ; Pete,” introduces the theme “Twice as Much for a Nickel” to increase consumer awareness of Pepsi’s value advantage. 1940 Pepsi makes advertising history with the first advertising jingle ever broadcast nationwide. Nickel, Nickel” will eventually become a hit record and will be translated into 55 languages. A new, more modern logo is adopted. * 1941 In support of America’s war effort, Pepsi changes the color of its bottle crowns to red, white and blue. A Pepsi canteen in Times Square, New York, operates throughout the war, enabling more than a million families to record messages for armed services personnel overseas. * 1943 The “Twice as Much” advertising strategy expands to include the theme, “Bigger Drink, Better Taste. ” * 1949 “Why take less when Pepsi’s best? ” is added to “Twice as Much” advertising. 1950 “More Bounce to the Ounce” becomes Pepsi’s new theme as changing soft drink economics force Pepsi to raise prices to competitive levels. The logo is again updated. * 1953 Americans become more weight conscious, and a new strategy based on Pepsi’s lower caloric content is implemented with “The Light Refreshment” campaign. * 1954 “The Light Refreshment” evolves to incorporate “Refreshing Without Filling. “. * 1963 In one of the most significant demographic events in commercial history, the post-war baby boom emerges as a social and marketplace phenomenon.

Pepsi recognizes the change, and positions Pepsi as the brand belonging to the new generation-The Pepsi Generation. “Come alive! You’re in the Pepsi Generation” makes advertising history. It is the first time a product is identified, not so much by its attributes, as by its consumers’ lifestyles and attitudes. * 1964 A new product, Diet Pepsi, is introduced into Pepsi-Cola advertising. * 1966 Diet Pepsi’s first independent campaign, “Girlwatchers,” focuses on the cosmetic benefits of the low-calorie cola. The “Girlwatchers” musical theme becomes a Top 40 hit.

Advertising for another new product, Mountain Dew, a regional brand acquired in 1964, airs for the first time, built around the instantly recognizable tag line, “Ya-Hoo, Mountain Dew! ” * 1967 When research indicates that consumers place a premium on Pepsi’s superior taste when chilled, “Taste that beats the others cold. Pepsi pours it on” emphasizes Pepsi’s product superiority. The campaign, while product-oriented, adheres closely to the energetic, youthful, lifestyle imagery established in the initial Pepsi Generation campaign. 1969 “You’ve got a lot to live. Pepsi’s got a lot to give” marks a shift in Pepsi Generation advertising strategy. Youth and lifestyle are still the campaign’s driving forces, but with “Live/Give,” a new awareness and a reflection of contemporary events and mood become integral parts of the advertising’s texture. * 1973 Pepsi Generation advertising continues to evolve. “Join the Pepsi People, Feelin’ Free” captures the mood of a nation involved in massive social and political change. It pictures us the way we are-one people, but many personalities. 1975 The Pepsi Challenge, a landmark marketing strategy, convinces millions of consumers that Pepsi’s taste is superior. * 1992 Celebrities join consumers, declaring that they “Gotta Have It. ” The interim campaign supplants “Choice of a New Generation” as work proceeds on new Pepsi advertising for the ’90s. Mountain Dew growth continues, supported by the antics of an outrageous new Dew Crew whose claim to fame is that, except for the unique great taste of Dew, they’ve “Been there, Done that, Tried that. ” * 1993 “Be Young, Have fun, Drink Pepsi” advertising starring basketball superstar Shaquille O’Neal is rated as best in U.

S. * 1994 New advertising introducing Diet Pepsi’s freshness dating initiative features Pepsi CEO Craig Weatherup explaining the relationship between freshness and superior taste to consumers. * 1995 In a new campaign, the company declares “Nothing else is a Pepsi” and takes top honors in the year’s national advertising championship. * 1998 – Pepsi celebrates its 100th anniversary. PepsiCo. Chairman and CEO Roger A. Enrico donates his salary to provide scholarships for children of PepsiCo employees. Pepsi introduces PepsiOne – the first one calorie drink without that diet taste! STRENGTH & WEAKNESSES OF PEPSI CO.

Pepsi Cola throughout its 100 years of existence has developed much strength. One of the strengths that have developed Pepsi into such a large corporation is a strong franchise system. The strong franchise system was the backbone of success along with a great entrepreneur spirit. Pepsi’s franchise system and distributors is credited to bring Pepsi from a 7,968 gallons of soda sold in 1903 to nearly 5 billion gallons in the year of 1997. . Pepsi-Cola provides advertising, marketing, sales and promotional support to Pepsi-Cola bottlers and food service customers. This includes some of the world’s best-loved and most-recognized advertising.

New advertising and exciting promotions keep. Pepsi-Cola brands young. The company manufactures and sells soft drink concentrate to Pepsi-Cola bottlers. The company also provides fountain beverage products. Pepsi also has had the good fortune of making very wise investments. Some of the best investments have been in their acquiring several large fast food restaurants. They have also made wise investments in snack food companies like Frito Lay, which at present time is the largest snacks company in the world. Probably high on the list of strengths is Pepsi’s beverage line up.

Pepsi has four soft drinks in the top ten beverages in the world. These brands are Pepsi, Mountain Dew, Diet Pepsi, and Caffeine Free Diet Peps. Some other strong brands are All Sport, Slice, Tropicana, Nimbooz, Aquafina and a license agreement with Ocean Spray Juices. Pepsi Cola like any company has weaknesses. Ironically, the one strength that has been credited for most of its success in the past has now become a weakness for Pepsi. This former strength is the franchise system. The franchise system in Pepsi Corporate view has become a liability. Pepsi in today’s market must be able to act as one instead of several separate units. * The franchise system has become a hurdle to Pepsi because many of these franchises have become very strong and will not be dictated by PepsiCo on how to handle their operations. Some of these franchises are unwilling to support certain Pepsi products and at times produce their own private label products that are in direct competition with Pepsi products. * Secondly the franchisees are not willing to make capital expenditures to keep up with Coca-Cola who is a firm believer in reinvesting into their infrastructure (Coca Cola at present time does not operate a franchise bottling system). * Pepsi customers buy nearly five billion gallons of soft drinks per year. Pepsi customers buy their products because of taste, price, packaging and promotional factors and of a wide variety of brands. Pepsi customers also buy their products due to the high accessibility of Pepsi brands. * Pepsi products are distributed to many outlets. For example, supermarkets where Pepsi buys large shelf area and display areas so the customer can find them easier, viz, Convenience stores, Restaurants, Movie theaters and almost and other conceivable spots. * Another competitive advantage that Pepsi has is in their product Mountain Dew. Mountain Dew has grown a staggering 74. 1% over the last five years. Mountain Dew has a 6. 3% market share and has recently become the No. 4 soft drink in America. At this current pace Mountain Dew will become the first non-cola to reach the 1billion gallon mark in one year. * Pepsi also has an advantage as an innovator in their field. They are the first soft drink makers to introduce a new one-calorie soda called Pepsi-One with, just approved by the FDA, Ace-K. PEPSICO IN INDIA

PepsiCo entered India in 1989 and has grown to become one of the country’s leading food and beverage companies. One of the largest multinational investors in the country, PepsiCo has established a business which aims to serve the long term dynamic needs of consumers in India. PepsiCo India and its partners have invested more than U. S. $1 billion since the company was established in the country. PepsiCo provides direct and indirect employment to 150,000 people including suppliers and distributors. PepsiCo nourishes consumers with a range of products from treats to healthy eats, that deliver joy as well as nutrition and always, good taste.

PepsiCo India’s expansive portfolio includes iconic refreshment beverages Pepsi, 7 UP, Mirinda and Mountain Dew, in addition to low calorie options such as Diet Pepsi, hydrating and nutritional beverages such as Aquafina drinking water, isotonic sports drinks – Gatorade, Tropicana100% fruit juices, and juice based drinks – Tropicana Nectars, Tropicana Twister and Slice. PepsiCo’s foods company, Frito-Lay, is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG. It manufactures Lay’s Potato Chips, Cheetos extruded snacks, Uncle Chipps and traditional snacks under the Kurkure and Lehar brands.

The company’s high fibre breakfast cereal, Quaker Oats, and low fat and roasted snack options enhance the healthful choices available to consumers. Frito Lay’s core products, Lay’s, Kurkure, Uncle Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labeling on their packets. The group has built an expansive beverage, snack food and exports business and to support the operations are the group’s 39 bottling plants in India, of which 17 are company owned and 22 are franchisee owned. PEPSICO VS COCACOLA IN INDIA

Both target all income segments of as their products are attractive and likeable. Both companies produce parallel products and services (Coca Cola Company, 2009). It is a known factor that when a company goes beyond the national boundaries, the distribution channel and production becomes main concern. When PepsiCo. launches new product and a new promotion strategy, Coca Cola, follows its fierce competitor, with its own version or vice-versa. Both companies are multinational and as they enter new market, they consider many issues such as legal risk, political risk, business risk etc. ecause of the fact that in past these companies had to leave the market due to above mentioned reasons. The companies are very conscious towards taste preferences of the targeted customers. Both companies work on ethics and moral values. They both have public relation department which serves as a chain between consumers and the company. The above graph shows the beverage ranking as at the beginning of 2011. Pepsi reverses a global trend in India, beating its main rival Coca-Cola in market share. In terms of Brand Trust too, Pepsi at rank 36 is at 160% higher than its closest cola competitor, Coca-Cola at 60th rank.

However the Coke camp has 5 brands among the top 300, as compared to the Pepsi-camp which is only represented by 3 brands among the 300 Most Trusted Brands of India. PEPSICO INDIA SWOT ANALYSIS: Strengths – (a) Pepsico is a well-known brand in FMCG sector. (b) Pepsico is offering many attractive sales promotion schemes. (c) Pepsico is having good market share. (d) Pepsico is offering many brands like 7up, Slice, Mirinda etc. (e) Pepsico is offering Varity of tastes to select. Weakness – (a)Lack of effective customer services. (b) Retailers are not getting proper schemes of Pepsi. c)Visis are out of order. In Jaipur town there is appropriate maintenance services available. (d) Retailers are complaining about cooling. Visis are not cooling well mainly 300 and 400 liters. Opportunities: – (a) Large beverage market. (b) Popular in youth as well as children. (c) New taste can be introduced like apple, even health drink also. (d) In India the major competitors of Pepsi are tea, coffee, lassi, inthis case Pepsi can come in 100 ml or even 50 ml at Rs. 3 or 4. Threats: – (a) Increasing competitors day by day. (b) Poor publicity by competitors. c) Numberless innovation’s area in beverage industry. PEPSICO INDIA PERFORMANCE Pepsi is one of the most well known brands in the world today available in over 160 countries. The company has an extremely positive outlook for India. Outside North America two of our largest and fastest growing businesses are in India and China, which include more than a third of the world’s population. (PepsiCo’s annual report, 1999) Faced with the existing policy framework at the time, the company entered the Indian market through a joint venture with Voltas and Punjab Agro Industries.

With the introduction of the liberalization policies since 1991, Pepsi took complete control of its operations. The government has approved more than US$ 400 million worth of investments of which over US$ 330 million have already flown in. One of PepsiCo’s key strategies was to develop a completely local management team. Pepsi has 19 company owned factories while their Indian bottling partners own 21. Since the entry of Pepsi-Cola to India in 1989, the soft drink industry has under gone a radical change. When Pepsi-Cola entered, Parle was the leader with the Thums-up being its flagship brand.

Other products offering by Parle included Limca & Goldspot, another upcoming player in the market was, the erstwhile bottler of Coca-Cola, “pure drinks”. Its offering includes Campa- Cola, Campa-Lemon & Campa-Orange The two advertisements tags: ‘yehi hai right choice baby’ and ‘nothing official about it’ immediately ring a bell- it’s got to be Pepsi. The advertisement tag ‘yehi hai right choice baby’ was the first ‘Hinglish’ slogan ever used in the in the Indian market. This slogan proved to be the best suited one for Pepsi and it was a mega hit and at that moment of time.

Pepsi in a short p of its operations in India has found a place in the hearts and minds of the Indian consumers. The success has primarily been due to the innovative and passionate Indian team, which has been built over the years. Pepsi is a trendsetter managed and run by Indians, where important decisions are taken locally. The RKJ group is India’s leading supplier of retailer brand Carbonated and Non-Carbonated soft drinks, with beverage manufacturing facilities in India and Nepal. It has the license to supply beverages in the territories of Western U. P. part of M. P. , half of Haryana, whole of Rajasthan, Goa, 3 districts of Maharashtra, 9 districts of Karnataka and whole of Nepal. The group has in total 18 bottling plants in India & Nepal and is responsible for producing and marketing 44% of Pepsi requirement in India. This group has brought name and fame to the Pepsi as in all this regions Pepsi is at the commanding position and in the mean this group has diversified itself into ice cream, suiting and shirtings, restaurants, beer plant in Mauritius & edible oil plant in Sri Lanka PESTICIDE CONTROVERSY 2003:

Although Pepsi’s sales were hurt post-cola contamination controversy, Pepsi spokesperson maintained that “it was difficult to assess whether the slump was due to the controversy or a lean monsoon. Weather has played a spoilt sport, too, and the season has been dull so they were cross fingered whether sales have been hit by the pesticides issue alone. ” PERFORMANCE IN 2010: PepsiCo reported that volume, revenue and profit growth for the fourth quarter and the full year of 2010 were driven by gains across its worldwide snacks and beverage businesses.

Beverage performance for the quarter was led by high double-digit growth in India, For the full year, beverage volume was led by double-digit growth in India and China. The net revenue grew by 34 per cent, net income rose by six per cent and core constant currency net income rose by 15 per cent. PepsiCo said, “Our snack and beverage volume gains for the quarter and full year were led by strong performance in key emerging markets. The Middle East, India and China, each reported snack volumes growing by strong double digits, and acquisitions contributed two points of snacks volume growth in the quarter and for the full year. . The company further strengthened its position in India through the formation of a joint venture with Tata Global Beverages to develop and market hydration beverages for the India market. The chronology PEPSICO. in India was: 1977: Parle launched Thums-up and pure drinks launched Coca-Cola. * 1998: In September, final approval for the Pepsi Foods Ltd. Project granted by the “Cabinet Committee” on economic affairs of the “Rajeev Gandhi Govt. ” * 1990: In March, “Pepsi-Cola and 7-up” launched markets in north India. 1990: In May, The government cleared the Pepsi-Cola project again but with a change in brand name to “Lehar Pepsi”, simultaneously it rejects the Coca-Cola application “Citra” from the Parle, stable hited the market. * 1991: Pepsi-Cola extended its soft drinks business and reached at national scale. Pepsi-Cola launched its product in Delhi and Bombay. * 1992: In January, Brito foods application is cleared by the FIPB. Pepsi-Cola and Parle start initial negotiation for a strategic alliance but took break off after a while. * 1993: Pepsi-Cola launched “Slice and Teem” captured about 25-30% of the soft drink market in about 2 years. 1994: Pepsi bought “Dukes & Sones”. * 1995: Pepsi-Cola lunched cans, having capacity of 330ml in various flavors. * 1996: Pepsi-Cola domestic and international operations combined into a Pepsi-Cola Company. International and domestic operations combined into one business unit called “Frito-lay Company”. * 1997: Pepsi-Cola brought “Mirinda Orange” opposite to “Fanta”. * 1998: Pepsi-Cola launched “Mirinda Lemon” opposite to “Limca”. * 1999: Pepsi-Cola launched “Diet Pepsi” in can and 1. 5 Lit. PET bottle for health conscious people. * 2001: Pepsi-Cola launched Slice in “Tetra” Pack. 2003: Pepsi-Cola launched “Pepsi Blue” to get the favour of world cup season. * 2005: Pepsi-Cola launched Mirinda in “Straw Berry” flavour to get the favour of movie Batman. * 2005: Pepsi-Cola launched 7-up as “7-up ice”. * 2009: Pepsi- Cola launches “Nimbooz”. NIMBOOZ: PEPSICO’S NEWEST OFFERING! INTRODUCTION Numbu Paani is a delicious thirst quencher made from freshly squeezed lemons, salt and sugar. It has a clean and refreshing flavour and is rich with vitamin C. Nimbu Paani, which is nothing but lemonade or lemon squash. It is commonly available in all the towns of India, particularly in the summer season.

It is very easy to prepare. Fresh lemon is squeezed in a glass and salt and sugar is added to it. Crushed ice may also be added. Nimbu Paani’ has always been the most commonly consumed cold beverage for Indians, especially during hot summers. Hence it made perfect business sense to launch a non-fizzy drink during summers as it scores above the colas in the health aspect (carbonated drinks actually soaks up the body’s moisture leaving the system more dry). With links to childhood obesity and tooth decay, soft drink sales were down for the first time in 20 years.

And sales of bottled water, juices and energy drinks are continuing to eat into the soda market. At such a time PepsiCo decided to launch “Nimbooz”. The added advantage of it being a very familiar natural refreshing drink which is now being offered in a hygienic and convenient way would make the mothers prefer it over the Colas. LAUNCH OF NIMBOOZ: The lime-lemon category is the fastest growing segment of the Rs 7,000-crore aerated soft drink market, with both competing brands Sprite from Coca-Cola and PepsiCo’s 7-Up registering healthy growth rates.

At the onset of the summer, PepsiCo India had launched packaged nimbu paani, Nimbooz by 7UP. The product has been created to suit Indian tastes. PepsiCo was delighted to introduce Nimbooz, a packaged nimbu paani offering specially developed to suit Indian tastes and preferences. Nimbu paani is a well loved Indian drink and Nimbooz brings consumers this well-loved taste backed by PepsiCo quality. PepsiCo claimed that Nimbooz contained no artificial flavours and contained real lemon juice. On 26 Feb 2009 PepsiCo India, the country’s leading food & beverage company, launched its packaged nimbu paani, Nimbooz by 7Up.

Inspired by fresh, home-made nimbu paani, India’s favourite beverage, Nimbooz by 7Up has been specially created to suit Indian tastes. Nimbooz is a delicious nimbu paani, with real lemon juice, no fizz, and no artificial flavours. Available in trendy, convenient packs, Nimbooz is a great way to enjoy nimbu paani ina hygienic format. PepsiCo has drawn up an intensive consumer activation campaign to market Nimbooz. The 360 degree marketing communication plan will build awareness through multi-city launches and road shows, 3D activation, leveraging Out-of-Home (OOH) media, radio, press and outdoors.

Aggressive trial generation & sampling initiatives were also be taken forward across major cities of the country. A special ‘Nimbooz Highway Gadi’ had been created that would visit the four major highways connecting Delhi to Jaipur, Dehradun, Agra to drive trails and consumer education To introduce the beverage, as part of the teaser campaign which kicked off on March 15, an 18-foot tall wooden lemon squeezer with a four-foot lemon replica in it was placed outside various malls and junctions. The message on it read, “Asli Refresher Coming Soon”.

This innovation was executed at Ambi Mall, Gurgaon; Great India Place, NOIDA; Court Chowk, Amritsar; and Fun Republic Mall, Chandigarh. For the revealer, the lemon was replaced with a 20-foot high Nimbooz bottle on March 18. The teaser in Mumbai was spread across five days. For this, a knotted gunny bag stuffed with lemons was mounted on a canter at Mahim Causeway. The message on the sack read, “4 Din Mein Asli”. Day 2 saw an untied sack with lemons scattered around it and a similar message, with the number of the day changed.

The sack got shorter for the next two days and on the fifth day, a returnable glass bottle (RGB) of Nimbooz appeared on the canter. The on-ground initiative was supported by a TV commercial that reflects Nimbooz ‘Ekdum Asli Indian’ proposition. The film had been created by BBDO India. In times of tough competition, branding needs to stand out and this is where outdoor media helps, by making the communication as big as possible. Lemon is central to the idea of Indian refreshment and the same thought went in the making of Nimbooz.

They decided to keep the brand proposition simple, yet appealing, by dwelling on the authenticity of Ekdum Asli Indian Nimbu-Paani. “Its like rebirth of nimboo pani with a new refreshing and energetic taste. Definitely this product has given great and tough competition to the other drinks of its segment. People really love its taste and want to purchase Nimbooz. also pushing friends and family member to try it as they believe once they will try then rest Nimbooz will handle in short YEHI HAI RIGHT CHOICE” WHAT IS A MARKETING MIX? The term “marketing mix” was coined in 1953 by Neil Borden in his

American Marketing Association presidential address. However, this was actually a reformulation of an earlier idea by his associate, James Culliton, who in 1948 described the role of the marketing manager as a “mixer of ingredients”, who sometimes follows recipes prepared by others, sometimes prepares his own recipe as he goes along, sometimes adapts a recipe from immediately available ingredients, and at other times invents new ingredients no one else has tried. The marketing mix is probably the most famous marketing term. Its elements are the basic, tactical components of a marketing plan.

Also known as the Four P’s, the marketing mix elements are price, place, product, and promotion. Elements of the marketing mix are often referred to as the “Four P’s”: * Product – It is a tangible object or an intangible service that is mass produced or manufactured on a large scale with a specific volume of units. Intangible products are service based like the tourism industry & the hotel industry or codes-based products like cellphone load and credits. To retain its competitiveness in the market, product differentiation is required and is one of the strategies to differentiate a product from its competitors. Price – The price is the amount a customer pays for the product. The business may increase or decrease the price of product if other stores have the same product. * Place – Place represents the location where a product can be purchased. It is often referred to as the distribution channel. It can include any physical store as well as virtual stores on the Internet. * Promotion represents all of the communications that a marketer may use in the marketplace. Promotion has four distinct elements: advertising, public relations, personal selling and sales promotion. MARKETING MIX OF NIMBOOZ

PRODUCT: PepsiCo India launched a packaged nimbu paani offering – Nimbooz – under its 7Up brand to expand its non-carbonated drinks portfolio. Nimbooz is a non-carbonated lemon drink which contains no artificial flavors and contains real lemon juice. INGREDIENTS: * Water * Sugar * Concentrated Lemon Juice (0. 8%) * Acidity regulators (296,330) * Salt * Preservatives (202) *contains added flavor (natural and nature identical flavouring substances) NUTRIONAL FACTS| ENERGY (kcal)| 43|

CARBOHYDRATES (g)| 10. 8| SUGARS (g)| 10. 5| PROTEIN (g)| 0| FAT (g)| 0| PACKAGING: Nimbooz offers great value to consumers in three packaging formats of: * 200ml returnable glass bottles * 350ml pet bottles * 200 ml tetra .PRICE: Nimbooz is relevant and affordable offering for consumers on the go because of its ready-to-drink format that is both convenient and hygienic. The proposition of the Indian refresher perfectly captures the mass appeal of this product and will certainly drive consumer connect.

The pricing strategy adopted is of course that of PENETRATION PRICING as followed by all PepsiCo products. PLACE: PepsiCo already has well established distribution network for its other brands so it becomes easier for them to cover the entire Indian market and place Nimbooz in retail outlets and restaurants. Traditional Trade :At Kirana stores in the above mentioned packages. Modern trade:Distribution through sports clubs, gymnasiums, tie ups with sports institutes etc. Wheel and Spokes model: In rural areas, where one dealer serves many villages.

After the launch a newspaper article cited the following: | | | PROMOTION PepsiCo has drawn up an intensive consumer activation campaign to market Nimbooz. The 360 degree marketing communication plan has build awareness through multi-city launches and road shows, 3D activation, leveraging Out-of-Home (OOH) media

OUR GIFT TO YOU

15% OFF your first order

Use a coupon FIRST15 and enjoy expert help with any task at the most affordable price.

Claim my 15% OFF Order in Chat

Pepsi

Coke & Pepsi Learn to Compete in India

Cola Strategic Management Model

Pepsi co Global Business Strategy

Advertising and Pepsi Refresh

Environmental and external analysis of Pepsi in UK

Pepsi Cola

Research Project on Nimbooz by Pepsico

Sometimes it is hard to do all the work on your own