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Pepesi Regeneration
Case Study
Jennifer Ceballos
BUS675
Redlands University
Professor Young

Introduction

Pepsi-Cola and Coca-Cola were the Goliaths of the soft drink industry. Seemingly
the two companies had battled for prominence, often through vivid television
advertisements promoting their new and innovated new products. By the 1990s the competitors
were squaring off through celebrities, with Pepsi standing out by singing superstar Michael
Jackson, basketball superstar Shaquille ONeal, and musical legend Ray Charles and the
Rayettes, who introduced the phenomenally popular refrain, Youve Got the Right One, Baby,
Un-huh. The goal of these advertisements was to stimulate primary demand, as well as increase
share. In1990 Coke held roughly 40% of the domestic cola market, and Pepsi held 30%.
Traditionally, Pepsi had focused almost exclusively on selling products under the Pepsi
brand name, including Pepsi-Cola, Diet Pepsi, and Caffeine-Free Pepsi. By 1990, however, the
company began to face several competitive challenges. Overall, soft-drink
growth was softening, with the cola market slipping even further. Private-label colas were both
gaining share and depressing industry prices. Alternative beverages, including bottled water,
ready-to-drink tea, and fruit drinks, were growing in popularity. The newly increased importance
of the bottling operations challenged Pepsis culture, which traditionally applauded individual
heroics and big picture coups like the Jackson and ONeal promotions. One senior vice
president described the typical Pepsi manager as an individual gunslinger, whose philosophy
was you make things happen, you take the ball and run with it. If you can take the ball from
someone else and run with it, all the better. The bottling business, with its emphasis on the nuts
and bolts of operations, presented a stark contrast. By June 1990 Weatherup felt that things
werent right and had to change. He began to interview customers, employees, and outside
experts on organizational change, while carefully analyzing the companys financials. The full
case analysis describes the three year Pepsi Regeneration efforts that he spearheaded. The most
critical issues are summarized in this case analysis.
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Key External Factors
Non-Carbonated substitutes (the mango season)- new drinks
Beverage industry is mature- market is growing
Soft-drink category growth
Private label soft drinks started taking off in supermarkets...
Pepsi-Cola's net prices continued to lag inflation...
Soft-Drink Growth

Key Internal Factors

Political franchises
Centralized decision making

Decline in taste
Motivational factor
Not all product bear the company name
Management on board with the changes being made

Significant Factors
Lack of communication- over half of the employees stated that is was a lot of talk and a lot less
action.
Financial Factors (in the millions)
1991 $6,918.2
1992 $7,605.6
1993 $8,638.2
Summary of Findings
Right Side Up-The company dedicate themselves to creating a truly outstanding PepsiCola Company, broadly recognized as a great Company to do business with, as a great
place to work and as the driving force in making PepsiCo one of the best long-term
investment.
The 3-Step Method for Customer Valued Process Improvement
Start with the Customer- Understand their needs, and select the highest priority needspeed of delivery
Establish measures and success criteria
Select the process with the greatest impact on the chosen need
Understand Ourselves and Plan Improvement. Analyze the current process

Critical Issues
Process Improvement- Management team had no buy in they became much against it.
PROCESS

1. Determine customer product needs deal lead time met deal communicated effectively
forecast accuracy right equipment expectations
2. Make product specifications met taste vs. gold standard every route loaded as ordered
equipment reliability
3. Deliver product every delivery window met correct in-store invoice satisfied drivers
4. Service/merchandize product-orderly backroom-proper merchandizing no surprises on
equipment and installation properly operating equipment no equipment downtime

Recommendations
Establish organization- around the work vs. departments-look at the employees work;
job descriptions; whom can do what; strengths in the employee.
Inform staff immediately- A learning orientation is valued
Be clear-define of roles and how they are to be executed. It is paramount a precise
organizational logic flow from our customers to our line organization to our support
resources.
Roles need to reflect the right decision being made at exactly the right level in the
organization ,i.e., what people do we want thinking about what; where do we want what
decisions made.
Conclusion
In conclusion, the wake of the reorganization the executives believed that they spent more time
listening to customers and employees so as to support the Business and Market Units in serving
their customers. In the old Pepsi, you might not go out to the marketplace the customers would
come to you. Now the orientation is, how can we serve you? Business Units also provided
functional expertise and support to the Market Unit managers. In the old days, one or two people
sitting around at six at night would scribble a price on an envelope, throw it out into the market,
and see what would stick. In the new world, pricing is considered part of the Deal Creation and
communication process, and the whole process has changed as to whos involved, what to
consider, the level of effort and analysis, and how we communicate to customers and the ultimate
consumer. Today the company sends out binders describing the process to Market Unit
Managers, and then they execute. The new works have made Pepsi even more popular today.