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Pepsi Case Study Analysis
Transcript of Pepsi Case Study Analysis
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
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
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
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?
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
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?
Market fails to respond
Competition gains market share
Initiative is a big success
PepsiCo gains first-mover advantage
Positive image impact
The Idle Approach
Allow competition to gain first-mover advantage and absorb the risk
Intentionally lag market
Expand legacy brands into emerging markets
Public opinion suffers
Momentum shifting towards healthy alternatives
Short-term profit gains, long-term questionable
Opportunity cost to consider
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
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
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
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.
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
Growing Health Concerns
Multiple Acquisition Options
Bringing healthy products to a global market