QUALITY ON THE FLOORS OF PEPSI

Established in the Carolinas in 1898, Pepsi-Cola has a long and rich history. The drink is the
invention of Caleb Bradham, a pharmacist and drugstore owner in New Bern, North Carolina. This young
pharmacist 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. The business began to grow, and on June 16, 1903,
"Pepsi-Cola" was officially registered with the U.S. Patent Office. Pepsi-Cola's first bottling line resulted
from some less-than-sophisticated engineering in the back room of Caleb's pharmacy. Building a strong
licensing 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.

Pepsi Cola international is well reputed multinational company which is doing its business in
almost every country of the world. The company is registered in New York stock exchange
U.S.A. to make a better control over the business the company has given the manufacturing
rights to different companies. Now these companies are producing the products on the behalf of
the company by using their trademark. To maintain their goodwill in the market the company has
a strict policy while granting the manufacturing rights Pepsi-Cola have standardized products all
over the world (e.g, same in size, shape and quality). The franchises have to follow all the
standards as given by the company. Even they have the mobile team, which check the companies
after 2 or 3 months. Each company is producing products according to the standards given by the
Pepsi Cola international.

Pepsi cola is also very popular in Pakistan that’s why it has major market share, being the market
leader. Pepsi Cola International, a remarkable name in the cola industry is doing its business in
Pakistan through licensing. In Pakistan Pepsi Cola has 9 franchises. Shamim & company is one
of these, established in 1967 as a private limited company. It started its business in 1968. Allah
Nawaz Khan Tareen (Ret. DIG) got license of 7-up franchise and was producing only one
product, 7-up. But in 1973 it became Pepsi Cola franchise.

In Pakistan, at present Shamim & company is the largest production unit out of the 9. Shamim &
company covers the area of Southern Punjab which consists of Multan, Bahawalpur,
Bahwalnagar, Dera Ghazi Khan, Sahiwal, Khanewal, Rajan Pur, Mianwali and Layyah. The
company is properly serving all these areas with quality products. There are 4- processing
plants, and 6 filling lines which are imported from Philippines, Italy, Japan and these plants are
used according to seasonal demand.
 Avg. output rate =15000, cases per day per plant.
 Here 1- day =24 hours and 1-case = 24 bottles.
  Maximum or peak capacity =20,000, cases per day per plant.
 Effective capacity = 15,000 cases per day per plant.
At start, there was only 1-manual plant having capacity of 2000-cases per day. But now due to
Increase in market size (population) and Increase in demand there are 4-plants in Shamim &
Company in just 33-years.
 Quality is not a recent phenomenon; it has been there in every aspect of man’s life. Just the
perspectives through which it is perceived have been varying. From the various views in the past, it is
now viewed through the eyes of the customer and aims at satisfying the customer every time and even
going beyond customer expectations. Quality management has moved from an initial stage of inspecting,
sorting and correcting standards to an era of developing quality manuals and controlling process
performance; quality management systems have been developed for third party certification; quality
management has become a strategic organizational concern that is based on continuous improvement as
the driving force, i.e. TQM (Garvin 1988). Integrity, methodology and humanity have become as the
essential features of quality management (Nassa L’Abbe 1991).

The beauty of this view is that it covers every aspect of the operations of a business. And Pepsi
has adopted this view in its true sense. It has named each of its departments in terms of quality e.g. quality
purchase department, quality sales department, quality production department etc. While studying the
quality systems in an organization, there is a set of key variables or precepts that can help us and which
are essential for achieving business excellence. For Sitkin et al (1994, p.41), these precepts can be
conceptually distinguished into three clusters. Focusing on customer satisfaction, stressing continuous
improvement and treating the organization as a total system. Similarly Deming, Juran and Crosby also
identified and advocated key principles for achieving excellence. All these can be found being
implemented in Pepsi, and this case study analyses the above mentioned aspects in Pepsi viewing all its
strengths and weaknesses.

Pepsi has incorporated quality in its vision, stating that their responsibility is to continuously
improve all the aspects of the world in which they operate- the environment, social, economic-
creating a better tomorrow than today. This means that quality practices are quite fundamental to the
operations of Pepsi. The first step that they take towards bringing quality into their ranks is the
development of strategies. Strategy is conceptualized as:

1) What is the firm trying to achieve in the long-term (mission)?

2) What internal and external issues impact on the firm’s ability to achieve its mission (strategic
issues)?
3) Which markets should a firm compete in (markets)?
4) What products/services are needed to offer customers in the chosen markets (customer needs)?
5) What internal resources (assets, skills, competencies, relationship, finance, and facilities) are
necessary in order to compete (resources)?
6) How can a firm perform better than the competition (competitive advantage)? (Jeremy
Galbreath, 2008)

Starting with the mission, Pepsi Co.'s overall mission is to increase the value of
shareholders’ investment. They do this through sales growth, cost controls and wise investment
of resources. They believe their commercial success depends upon offering quality and value to
their consumers and customers; providing products that are safe, wholesome, economically
efficient and environmentally sound; and providing a fair return to their investors while adhering
to the highest standards of integrity. In handling the various internal and external issues faced
during the process of its activities are handled with one principle in the forefront i.e. maintaining
quality of its operations and the goodwill of the organization. Then comes the competition in
markets, and the only basis Pepsi has been competing its competitors over such a long period is
the quality of its products. This is the only thing that has bound its consumers to its products;
nothing else can serve this purpose over a long period.

Identification of the customer needs is the basic step in ensuring quality and Pepsi performs this
function quite diligently through market surveys (mostly interactive), enabling them to be
constantly in touch with their customers. This helps in knowing the customer preferences in
terms of taste. They introduced Pepsi Lemon to offer a new flavor to its consumers but soon
realized through customer responses that it was not going to be successful, so they abandoned it.
Resources are the next, and without quality resources the quality products and services cannot
be provided. We will look at the quality of various resources as this study progresses. It’s
worthwhile to mention here that Pepsi ensures quality in all of its resources (assets, skills,
competencies, relationship, finance, and facilities) through various measures and is always seeking to
maintain high quality resources for its processes. All these aspects are given due consideration
while developing strategies and the implementation plans for these strategies. These six
dimensions of strategy when implemented cover the whole working of an organization. We will
now explore in detail the various aspects of these dimensions as the study progresses.

All the success that Pepsi has achieved has been the result of its personal ventures and it
has seldom entered into any alliance with any outside party. (There have been some alliances
few and far between, that too in its promotion campaigns and its efforts aimed at pursuing
corporate social responsibility.) With its suppliers too, it has no fixed alliance for a long period
of time. It has to get several items from outside suppliers e.g. plastic and glass bottles, the bottle
caps and CO2 to name a few. The suppliers for these and other items have been varying over the
years and the sole criterion that they use is the quality of the materials supplied. Some of these
items come even from Baluchistan. Tin cans are currently supplied by Mobeen & Brothers
Karachi and beverage bottles by the Ghani group. New bottles are acquired from glass factories
like Toyo Nasic, DGL (Balochistan). Water is obtained from local resources as the company has
its own plant of water acquisition & treatment. ‘A’ Grade sugar is bought from Ittefaq Sugar
Mills, Layyah Sugar Mills and also imported from Dubai. Concentrate and flavor come from
Pepsi Co. International. Company has its local plant for CO 2, which does not fulfill requirement
of company. So it is purchaed from other gas companies like Pak Gases, and Multan Gases. So
they get their supplies through the most reliable suppliers in terms of quality. Quality of these
items is not only tested on the suppliers’ end, but also at the Pepsi plants (as we will see further
in this study).
To promote the sales, however, the company has agreements with various restaurants,
universities and other educational institutions whereby they obtain the exclusive rights to sell
their brands at these places. Further, they provide freezers and refrigerators to the shopkeepers to
enhance their loyalty at the final level of the distribution channel.

Quality products and services cannot be produced without quality human resource. At
Pepsi, the quality of human resource is maintained through training programs organized
periodically for managerial and production level workers. Managers and trainers are also invited
from outside the country to give trainings regarding latest best practices in production and
management. The new workers are properly trained through various programs especially in the
quality control department. However, there is no trend of educational programs for employees in
Shamim & Co.

Employee empowerment is the key to motivation and productivity. An employee who

feels he or she is valued and can contribute is ready to help and grow in the job. Shamim and Co.
though licensed to a multinational, has inclination towards the centralized decision making.
Strategies and policies always flow from the top to bottom. It is the duty of the top management
to establish the policies and plans, with input from the employees.

This type of management clearly indicates that there is low employee empowerment. Employees
at Shamim and Co. are not always appreciated to take part in the decision making. This might
lead to low job satisfaction. Employees are only expected to participate when any query is put
forward towards them from the top management. Even though there might be low employee
empowerment still employees suggestions are not completely undermined.

Shamim & Co. uses both formal and non-formal ways to gather information form employees.
Employees are also provided with the training to analyze the processes in a critical ways and
then make suggestions about those problems in a more effective manner. Training helps both the
organization and the employees, because trained employees make decisions more efficiently,
which help company to grow and employees’ decision making power also improves.

Employees at the company are appreciated to take part in the brainstorming sessions. These
sessions are used frequently at Shamim & Co. for solving the quality problems which are
encountered by the company. During brainstorming different techniques such as cause and effect
diagram are used to solve the problems in more productive way. Nominal group techniques are
also used at Shamim & Co. to appreciate team work. Usage of these techniques gives strong
indication that team work is given some importance in the company.

Suggestion box is another technique for getting input from employees which has been in place
for very long time in the company. Employees can make suggestions at any time to management
that they think is necessary to be made. This increases the employee involvement, but employees
seem to be hesitant to use suggestion boxes at the company. One reason behind this is that it is a
very slow procedure, and also employees do not receive any response from company which
would suggest that their suggestions have been entertained. Walking and talking approach is
used to the extent of keeping things under control, but suggestions are not appreciated by the
managers while they manage during walking.

Shamim & Co. has a code of conduct. This code of conduct has been developed in the light of
the Pepsi Internationals code of conduct. Shamim & Co. code of conduct also does not ignore the
values of the Pakistani people. Company’s management has shaped the code of conduct, and
management expects that employees would strongly follow the code of conduct and expects the
employees to exhibit their best behavior at workplace as well as in the public, which would
enhance the company’s image.

New employees in their orientation are informed about the company’s code of conduct.
Employees are also provided with proper training, regarding adopting the code of conduct.
Employees are also guided about ethical dilemmas they might face during their job, they are also
provided with proper guidelines for behaving in the organization.

It is due to Shamim & Co. quality culture that the new employees find it easy to learn the ethics
in a very short time. When employees are working in the organization they have constant
guidance of their senior employees and the top management which helps employees to learn the
company culture in a smooth way. Employees, whether the top managers or the lower
employees, are treated with respect. This quality culture helps organization to survive in the
hostile environment of the beverages industry.

Feedback is a very common practice in Shamim & Co. This feedback is required for all
employees of the company. Promotions are based on feedback. This is very strong point of the
company. Feedback is taken from all employees about their seniors, juniors and colleagues. This
is a major reason why employees behave ethically in the organization. But most of the
employees at the Shamim & Co. have reservations regarding the evaluation and feedback process
of the company.

Leadership is very critical for organizations to attain sustained growth in a dynamic environment.
Shamim & Co. does not have a very conducive culture for the development of employees into
potential leaders. Employees are never really empowered to make their own decisions or to take
part in any work without the official authority of the top management. This does not serve a great
deal in the employee character building.

Employees are also not given any specific training regarding enhancing their leadership abilities.
Although there are different training programs which helps build employees communication
skills but leadership is rather neglected. This becomes clearer through their employee turnover
ratio. Most of the employees leave the company due to lack of promotions. Shamim & Co. also
tries to hire top managers from outside rather than promoting their own employees.
 There is job dissatisfaction and very low motivation on the staff due to:

 Low salary.
 Daily allowance has been eliminated.
 Overtime is rewarded in terms of holidays not in monetary terms. According to
technicians, they normally do not get a chance of making allowed vacations due to
workload so the extra holidays are of no use for them.
 Higher positions are filled from outside.
 Sales targets are set without the consent of staff.
 Post Mix staff has no knowledge of ISO standards.
 The new machines are not available for installation.

Shamim & Co. also sets high ethical standards when it comes to external stakeholders. Company
was one of the first to help the victims of 2005 earth quake and they also took active part in
providing temporary shelters to 2010 flood victims. Company also helped to build flood victims’
houses.

Pepsi always promotes the sports in any country they operate. Same is the case in Pakistan. Pepsi
is the official sponsor of the PCB. Pepsi also invests in the local level sports. They are very much
aware of the fact that sports are important for the growth of the society.

Pepsi also tries to be ethical in their advertisings. Pepsi never develops a promotional campaign
that would hurt the feelings of the any group of the society. That is why they draft their
promotional campaigns very carefully.

An important role in maintaining the quality and implementation of quality standards is of

the Quality Control Department. It is responsible for the following functions:

 Water treatment (for bottle filling & washing)

 Syrup making (pasteurization room)
 Calibration

Of Laboratory equipment

Of Production equipment

 Incoming raw material testing

 In process testing
 Finished goods testing
 Market complaints handling
Market rejections
Customer rejections
Trade sampling
  Quality testing of CO2 plant and Boiler

Water is the main ingredient of the beverage product so water testing is an important step
of quality testing. Raw water is treated so as to make it free of all impurities and useable in the
mixing process. There are several water tests. One is the Water Testing 2P-M Indicator Method.
The purpose of "2P-M" or "A " alkalinity test is to verify that water treatment plant is operating
correctly and final treated water for processing conforms to the quality standards. High alkalinity
leads to undesirable effects. Then there is Total Dissolved Salts Testing In Water. The purpose of
this test is to provide rapid, indirect evaluation of the total dissolved salts in a water sample. The
level of total dissolved salts is a useful measure to gauge the overall consistency of the mineral
contents in the water, which ultimately affect the quality of the beverage. The frequency of the
test is after every four hours.

There’s another test named Water Test Chlorine Residual. Chlorine "residual" is the
amount of chlorine that remains after the natural chlorine demand of the water has been satisfied.
Twofold purpose of this test is to test, on one side, where chlorine is necessary, to demonstrate
that the level of chlorine present is adequate for water oxidation & disinfections purposes and on
the other side, where chlorine is prohibited, to confirm that it is absent. The frequency of test for
water treatment is after an hour and for washer final rinser is once in a shift. Then there is a test
for the Taste, Odor and Appearance of the Treated Water. The purpose of this test is to provide a
rapid, gross evaluation of major defects in treated water for syrup & beverage making. In this
test, the taste, odor and appearance of treated water samples are assessed hourly.

Finally, there is a Water Hardness Test. Water hardness is the gradual decrease in the
tendency of water to form foam due to presence of impurities like chlorides, sulphates etc. The
hardness in the water affects the beverage quality as well as produces scale in washers, boilers
etc. The rest of the tests are conducted during the production process.

At first, there is a Bottles Washing Plant. Here, the syrup (from syrup tanks) and water (from
water treatment) are mixed at a specific ratio called flow mix. The mixture then moves to carbo
cooler where carbonation of product i.e. absorption of CO 2 in the syrup at low temperature takes
place. It then moves to filler where product is filled in empty bottles and crown caps are put on
it. The final product moves towards packing machine through conveyer. Most of the time bottles
are packed into cases manually. At Shamim & Co., they have installed a new plastic packaging
machine.

After the bottle washing plant comes the CO 2 (Carbon Dioxide) plant. CO2 assures the product a
measure of added sanitary protection and greater shelf life. CO 2 gas in addition to product
carbonation, contributes to the production process itself by displacing air from water and product
during processing and supplying counter pressure needs for some filler bowls. CO 2 enhances
both the taste of the beverage and its appearance. Carbon Dioxide imparts a pungent, slightly
acidic taste to the finished product as well as creating greater eye appeal. Each individual product
should be carbonated to a level most suited for that flavor.
 There are some other specific tests for IN PROCESS TESTING which go on throughout
the production process at different steps. BRIX BY HYDROMETER TEST is conducted to
measure by weight, the percent solids of sugar in simple syrup, finished syrup, control drinks and
final beverage. Brix is defined as by weight percent solids of sugar. BRIX INVERSION TEST is
conducted to break the sugar molecule into simple molecule of glucose and fructose, Inversion is
performed to confirm on-line brix target. The test is taken after an hour of starting tank on
production line. FILL HEIGHT TEST is conducted to verify that containers are consistently
filled to the correct level as established depending upon package size. Fill height is the distance
from the top of bottle to the meniscus of the liquid. It is tested both through a laser beam and by
a manual worker.

pH TESTING is quite important for beverages. pH scale indicates the amount of acidity
or alkalinity. pH is measured for Raw water, treated water, control drink, finished beverage, T.A.
testing and incoming raw material. The purpose of the test is to define the line Brix. This also
helps in predicting the sensory attributes of the beverage. TITRATABLE ACIDITY TEST is for
measuring the acidity level in the test sample.

Then, several other tests are conducted under INCOMING RAW MATERIAL
TESTING, including Sodium hydroxide (Caustic Soda) %purity test, Processing material
calcium chloride test, and Test of Conductivity Ash in granular sugar by conductivity meter
whose purpose is to test the incoming sugar for its ash contents in order to define quality. Sugar
ash is primary indicator of sugar sensory performance in a beverage. It is comprised of organic
and in-organic salts left over from the refining process. The sugar is used in syrup making.

The bottle caps are also tested. Crown Corks/Caps Inspection/ Attribute Analysis is
performed whose purpose is to ensure that incoming lot of crown corks/caps fulfills the
appearance requirement and is free from defects. Crown caps are used for packing (sealing) of
bottles after filling. Crowns and closures should match supplier shipment label and purchase
order. The characteristics considered in the analysis are outside printing, inside printing, color,
shell or liner flash, cracks, band etc.

The glass bottles are tested through Glass Bottles Inspection/ Attribute Analysis whose
purpose is to identify the visual defects affecting the beverage quality in the incoming glass. The
defects are categorized as:

Very critical defects: Any defect dangerous for personnel.

Critical defects: The defects that result in hazardous or unsafe conditions for using,
maintaining or depending upon the product. These could be Struck glass, Loose glass,
False bottoms etc.
 Major defects: The defects likely to result in failure or reduce materially the usability of
the product for intended purpose. The defects are Cracks, Choked necks, Bent neck,
Stones over 1.6mm (1/16 inch) etc.

Minor defects: Minor defects are departure from established standards having little
bearing on the effective use. These could be Brush marks, Seeds, dirty molds, Dirty
finishing etc.

Taste, Odor & Appearance Test is also conducted for Granular Sugar for its sensory attributes for
consignment acceptance or rejection for every delivery. There is a CO 2 purity test for CO 2 used
in Carbo-cooler for absorption and Chlorine (sodium hypo chlorite) test for chlorine used in
water treatment.

Post Mix tanks inspection is performed to test undiluted fountain syrup that is delivered to
retailers in transfer tanks. The inspection is performed before filling new or market returned
tanks. A form is filled with the following format:

Tank Appearanc Pre-inspection Safety

Product Washing Filling Performed
# e O-ring Wolves

Then, Post Mix tanks washing is performed in order to eliminate the chances of contamination.
The steps are;

 Rinse with treated water

 Clean with detergent
 Rinse with treated water
 Sanitize with chlorine
 Rinse with treated water
 Sanitize with steam

Calibration is very integral and critical because instruments are eyes into the process and
if these are not working properly, the process may produce unexpected or undesired results. The
calibration ensures that the equipment is fit for its intended use. It has several categories.
PRESSURE GAUGE CALIBRATION is performed to test the non-existence of pressure
difference & note if difference exists. HYDROMETER CALIBRATION is for testing the non-
existence of difference in Brix reading and noting down if difference existed. THERMOMETER
CALIBRATION is performed to ensure that thermometers are properly tested for their exact
temperature reading. This calibration is for Dial thermometers for washers and Mercury/ Alcohol
thermometers for laboratory testing. Further categories of calibration include pH meter model
H18424 calibration, pH meter model H8314 calibration, Calibration for TDS meter,
Conductivity meter calibration, Refract meter calibration, Incubator calibration, Syrup tanks
calibration to get actual syrup volumes, Temperature gauge to test their exact temperature,
Pressure gauge calibration, and calibration for Hand refract meter.

Another important step towards ensuring quality and encouraging franchises to attain
highest quality standards is the PCI QUALITY RATING. PCI collects product samples from
market, tests them in their labs against standards, sends monthly test results summary to their
franchisers and allots rating (colors) to franchisers after every three months. The PCI Operations
Director - Quality Systems for Middle East, North Africa & Pakistan sends rating of 44 factories
located in these areas. The color ratings include Red, Orange, Yellow and Green, from highest to
lowest.

SUGGESTIONS

 Arrangements should be made for creating and appreciating leadership qualities in

employees.
 In the production hall, every concerned person must use masks, gloves and safety glasses.
 Earplugs should be provided to the people working in the production hall.
 Proper sitting room should be provided to CO2 supervisor to keep the spare parts, tools
and documents safely.
 Proper arrangements should be made for draining.
 The vehicles must be fit and available on time. It is in their best interest and makes their
job safe, convenient and speedy.
 People within the company should be promoted to the managerial as well as chief
technician and sales supervisor level.