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Pepsi Case Study Analysis

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by

Jared Grobels

on 25 June 2014

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Transcript of Pepsi Case Study Analysis

Questions?
PepsiCo's Turning Point: Establishing A Role In A Sustainable Society
Risks & Opportunities

Acquisitions cost significant capital

Inherent financial risk in acquiring smaller companies

Use higher margin F&B profits to fund long-term opportunities

Timing critical if base business suffers

Easier to acquire an established brand than experiment in-house

Market risk mitigated, product is proven

Focus on sales expansion, rather than R&D


Choosing a Direction
PepsiCo's Future in a
Changing Market
Joseph Tkac, Jared Grobels, Qijia (Vikie) Huang, Michael Maiorelli
Growing criticism toward the food and beverage industry

Partially responsible for the increasing trend in obesity, disease and widespread ecological devastation

Mainly due to the production and sale of food and beverages that are high-calorie, nutrient-poor, while containing high levels of sugar and saturated fats

Market Position
PepsiCo is one of the largest and most widely recognized in the industry

Huge opportunity to target the consumers who seek out healthier organic alternatives

Can increase brand image by producing healthier products and by being ecologically friendly
Consumer Awareness
An increasing number of scientific studies are confirming that many processed foods are unhealthy to consume

Due to today's widespread internet access as well as the use of social media more and more consumers are becoming aware of the associated risks with consuming convenient processed foods

The market is seeing a shift as more and more consumers are seeking more healthy organic choices
CEO Indra Nooyi has recognized that "society, people, and lifestyles have changed", she has also realized that PepsiCo has no choice but to move in healthier directions

The food and beverage industry in its entirety needs to make changes for a healthier more sustainable future
How Will This Be Accomplished
PepsiCo as well as many other food and beverage companies have already helped shaped consumer tastes and behavior in the past

Why can't we continue this trend but in a more healthy and sustainable direction?

What advantages and disadvantages does Pepsi Co possess which can help steer consumers toward a healthier more sustainable lifestyle?
SWOT Analysis
Potential Courses of Action for PepsiCo
Considerations for Planning
Small margin for error

10% profit margin, volume driven

Full ROI analysis

Significant advertising investment needed

Present investors a rock-solid implementation timeline

Prepare disaster plan
Big-Bang Approach
Shift out of unhealthy products and ingredients

High risk, high reward in current market

An investment in PepsiCo's future

Requires extensive market research

Do consumer?s really want healthy Pepsi?

Test Markets
Potential Outcomes
Market fails to respond

"New Coke?"

Competition gains market share

Initiative is a big success

PepsiCo gains first-mover advantage

Positive image impact

The Idle Approach
Do nothing

Allow competition to gain first-mover advantage and absorb the risk

Intentionally lag market

Expand legacy brands into emerging markets
Potential Outcomes
Public opinion suffers

Momentum shifting towards healthy alternatives

Short-term profit gains, long-term questionable

Opportunity cost to consider
Hybrid Approach
Acquire or launch healthy brands

e.g., Plentils, Nasoya

Economies of scale

Maintain base business, focus on new

Cross-promote healthy options

Diversify portfolio, mitigate market risk.

More prepared to react to a shift towards organics
Recommendations
Acquire a Healthy Brand

Coca-Cola had great success with this strategy

"It's a perfect match connecting the hottest active lifestyle brand with the full resources of the world's best beverage company," said J. Darius Bikoff, Energy Brands founder and chief executive officer.

1. The Coca-Cola Company Press Release of May 25, 2007 at the Wayback Machine (archived May 27, 2007) retrieved from archive.org
Recommendations
Co-Promotion and Awareness

Co-Promote newly acquired healthy products to take full advantage of the company's marketing power

Promotions will focus on the short and long term benefits of healthy living for the consumer

Recommendations
Change their production and distribution plans.

Foods and raw ingredients can be locally sourced and produced

Healthier products due to less chemicals needed to allow for the products to survive long transportation.

More Costly
Recommendations
Annual Competition

Hold an annual competition for health products

The winner will be offered a contract with Pepsi to have their product produced and distributed in a test market for 6-months

Depending on the test market results the product could be released to a wider market for a longer duration
Conclusion
Changing Industry

Growing Health Concerns

Multiple Acquisition Options

Bringing healthy products to a global market
Recommendations
Full transcript