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FUTURE PLANNING OF
PEPSICO IN INDIA
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Divyanshu shekhar jha

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FUTURE PLANNING OF PEPSICO AND THE MARKETING


STRATEGY OF PEPSICO IN NEXT 5 YEARS IN INDIA

PROJECT REPORT (MBA)


(SESSION 2011-2013)
SUBMITTED BY:

DIVYANSHU SHEKHAR JHA


(Fm3|ISBE\PGP\F11-13)
divyanshujha8@gmail.com
(8285506452,9654436684)
Area of research-Marketing

SUBMITTED TO :
PROF. PANKAJ UPADHYAY

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TABLE OF CONTENT
INTRODUCTION (4-6)
COMPANY PROFILE (7-8)
HISTORY OF PEPSI CO (9-19)
RISE OF PEPSI CO (20)
MISSION (21)
VISION (22)
COMPANY LEADER (23)
ROLE OF INDIRA NOOYI (24-28)
PEPSI CO IN INDIA (29-30)
PRODUCT PORTFOLIO (31)
MARKET ANALYSIS OF SOFT DRINK IN INDIA (32-41)
COMPETITIVE ANALYSIS (42-43)
COMPETITIVE ANALYSIS BY USING PORTER MODEL (44-45)
BCG GROWTH MATRIX OF PEPSI CO (46)
FUTURE PLANNING OF PEPSI CO AND MARKET ANALYSIS IN
INDIA (47-56)
FIVE COUNTRIES CASE STUDIES WITH REGARD TO PEPSI (5771)
CONCLUSION (72)
RECOMMENDATION (73-75)

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INTRODUCTION

Type

Public

Traded as

NYSE: PEP
S&P 500 Component

Industry

Beverages

Founded

North Carolina, U.S. (1965)

Founder(s)

Donald Kendall
Herman Lay

Headquarters

Purchase, New York, U.S.

Area served

Worldwide

Key people

Indra Nooyi
(Chairman & CEO)[1]

Products

See list of PepsiCo products

Revenue

US$ 66.504 billion (2011)[2]

Operating income

US$ 9.633 billion (2011)[2]

Net income

US$ 6.462 billion (2011)[2]

Total assets

US$ 72.882 billion (2011)[2]

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Total equity

US$ 20.899 billion (2011)[2]

Employees

297,000 (2011)[2]

Subsidiaries

List of subsidiaries

Website

PepsiCo.com

At the 20's and 30's in the 20 century, Coca-Cola was the absolute leader of soft
drink market. Pepsi-Cola was just a new brand at that time. Pepsi-Cola was thought
of just a copy of Coca-Cola and its flavor is similar to Coca-Cola. So the CocaCola did not take any importance for it. But later Pepsi-Cola developed fast and
became the strongest competitor to the Coca-Cola and now Pepsi shared 40% of
the market. It is a big threat to the Coca-Cola.
PepsiCo, Inc. is one of the world's top consumer product companies with many of
the world's most important and valuable trademarks. Its Pepsi-Cola Company
division is the second largest soft drink business in the world, with a 21 percent
share of the carbonated soft drink market worldwide and 29 percent in the United
States. Three of its brands--Pepsi-Cola, Mountain Dew, and Diet Pepsi--are among
the top ten soft drinks in the U.S. market. The Frito-Lay Company division is by
far the world leader in salty snacks, holding a 40 percent market share and an even
more staggering 56 percent share of the U.S. market. In the United States, FritoLay is nine times the size of its nearest competitor and sells nine of the top ten
snack chip brands in the supermarket channel, including Lay's, Doritos, Tostitos,
Ruffles, Fritos, and Chee-tos. Frito-Lay generates more than 60 percent of
PepsiCo's net sales and more than two-thirds of the parent company's operating
profits. The company's third division, Tropicana Products, Inc., is the world leader
in juice sales and holds a dominant 41 percent of the U.S. chilled orange juice
market. The competitor of Pepsi in the Pakistani market is coca-cola and some
local beverages are also disturbing Pepsis share in the market. E.g.: macca cola,
amrat cola and some others. Pepsi is the leading cola in the world doing business in
more than 190 countries and because of this it is very famous in every country. As
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Pepsi is a very rich brand so the advertises for its popularity are also very costly
because Pepsi hires most famous stars from show biz or from the world of sports
means cricket, football, car racing and tennis e.t.c. all the famous stars from the
world have worked in the Pepsi advertise.

Pepsi is one of the most well known brands in the world today available in
over 200 countries. The company has an extremely positive outlook for
India.
This reflects that India holds a central position in Pepsi's corporate strategy.
India is a key market for Pepsi co, and at the same time the company has added
value to Indian agriculture and industry. PepsiCo entered India in 1989 and is
concentrating in three focus areas - Soft drink concentrate, snack foods and
vegetable and food processing. 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. The
company has set up 8 Greenfield sites in backward regions of different states.
PepsiCo intends to expand its operations and is planning an investment of
approximately US$ 150 million in the next two-three years.

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PROFILE OF THE COMPANY

International

Pepsi Company 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.PepsiCo is a world leader in
convenient snacks, foods and beverages, with revenues of more than $39 billion
and over 185,000 employees.
PepsiCo International (PI)PI includes all PepsiCo businesses in the United
Kingdom, Europe, Asia, Middle East and Africa.

Shareholders
PepsiCo (symbol: PEP) shares are traded principally on the New York Stock
Exchange in the United States. The company is also listed on the Chicago and
Swiss stock exchanges. PepsiCo has consistently paid cash dividends since the
corporation was founded.

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Corporate Citizenship
At PepsiCo, we believe that as a corporate citizen, we have aresponsibility to
contribute to the quality of life in our communities. This philosophy is expressed in
our sustainability vision which states:PepsiCos responsibility is to continually
improve all aspects of the world in which we operate environment, social,
economic creating a better tomorrow than
today.Our vision is put into action through programs and a focus onenvironmental
stewardship, activities to benefit society, and acommitment to build shareholder val
ue by making PepsiCo a Truly sustainable company.

PepsiCo Headquarters
PepsiCo World Headquarters is located in Purchase, New York,approximately 45
minutes from New York City. The seven-building headquarters complex was
designed by Edward Durrell Stone, one of America's foremost architects. The
building occupies 10 acres of a 144-acre complex that includes the Donald M.
Kendall Sculpture Gardens, a world- acclaimed sculpture collection in a garden
setting

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The History Of Pepsi

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 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 knew 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 rare oils,
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 a 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 PepsiCola 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,
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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 PepsiCola. Caleb was forced into a series of business gambles just to survive, until
finally, after three exhausting years, 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.
1898 Caleb Bradham, a New Bern, North Carolina, pharmacist, renames
"Brad's Drink," a carbonated soft drink he created to serve his drugstore's
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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 was 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.

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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."
1958 Pepsi struggles to enhance its brand image. Sometimes referred to as
"the kitchen cola," as a consequence of its long-time positioning as a
bargain brand, Pepsi now identifies itself with young, fashionable
consumers with the "Be Sociable, Have a Pepsi" theme. A distinctive
"swirl" bottle replaces Pepsi's earlier straight-sided bottle.
1959 Soviet Premier Nikita Khrushchev and U.S. Vice-President Richard
Nixon meet in the soon-to-be-famous "kitchen debate" at an international
trade fair. The meeting, over Pepsi, is photo-captioned in the U.S. as
"Khrushchev Gets Sociable."
1961 Pepsi further refines its target audience, recognizing the increasing
importance of the younger, post-war generation. "Now it's Pepsi, for Those
who think Young" defines youth as a state of mind as much as a
chronological age, maintaining the brand's appeal to all market segments.
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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, "Girl watchers," focuses on
the cosmetic benefits of the low-calorie cola. The "Girl watchers" 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 productoriented, 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
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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.
1976 "Have a Pepsi Day" is the Pepsi Generation's upbeat reflection of an
improving national mood. "Puppies," a 30-second snapshot of an encounter
between a very small boy and some even smaller dogs, becomes an instant
commercial classic.
1979 With the end of the '70s comes the end of a national malaise.
Patriotism has been restored by an exuberant celebration of the U.S.
bicentennial, and Americans are looking to the future with renewed
optimism. "Catch that Pepsi Spirit!" catches the mood and the Pepsi
Generation carries it forward into the '80s.
1982 With all the evidence showing that Pepsi's taste is superior, the only
question remaining is how to add that message to Pepsi Generation
advertising. The answer? "Pepsi's got your Taste for Life!," a triumphant
celebration of great times and great taste.
1983 The soft drink market grows more competitive, but for Pepsi drinkers,
the battle is won. The time is right and so is their soft drink. It's got to be
"Pepsi Now!"
1984 A new generation has emerged-in the United States, around the world
and in Pepsi advertising, too. "Pepsi. The Choice of a New Generation"
announces the change, and the most popular entertainer of the time, Michael
Jackson, stars in the first two commercials of the new campaign. The two
spots quickly become "the most eagerly awaited advertising of all time."
1985 Lionel Richie leads a star-studded parade into "New Generation"
advertising followed by pop music icons Tina Turner and Gloria Estefan.
Sports heroes Joe Montana and Dan Marino are part of it, as are film and
television stars Teri Garr and Billy Crystal. Geraldine Ferraro, the first
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woman nominated to be vice president of the U.S., stars in a Diet Pepsi


spot. And the irrepressible Michael J. Fox brings a special talent, style and
spirit to a series of Pepsi and Diet Pepsi commercials, including a classic,
"Apartment 10G."
1987 After an absence of 27 years, Pepsi returns to Times Square, New
York, with a spectacular 850-square foot electronic display billboard
declaring Pepsi to be "America's Choice."
1988 Michael Jackson returns to "New Generation" advertising to star in a
four-part "episodic" commercial named "Chase." "Chase" airs during the
Grammy Awards program and is immediately hailed by the media as "the
most-watched commercial in advertising history."
1989 "The Choice of a New Generation" theme expands to
categorize Pepsi users as "A Generation Ahead!"
1990 Teen stars Fred Savage and Kirk Cameron join the "New
Generation" campaign, and football legend Joe Montana
returns in a spot challenging other celebrities to taste test their
colas against Pepsi. Music legend Ray Charles stars in a new
Diet Pepsi campaign, "You got the right one baby."
1991 "You got the Right one Baby" is modified to "You got
the Right one Baby, Uh-Huh!" The "Uh-Huh Girls" join Ray
Charles as back-up singers and a campaign soon to become the most
popular advertising in America is on its way. Supermodel Cindy Crawford
stars in an award-winning commercial made to introduce Pepsi's updated
logo and package graphics
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
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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.
Mountain Dew sponsors the Grammy Awards. Theme line is Been There,
Done That, Tried That.
The Pepsi Lipton Tea Partnership debuts new ad campaign emphasizing,
Theres only one Original.
Pepsi Cola introduces Smooth Moos Smoothies, a line of low fat dairy
shakes.
7UP International launches 7UPIceCola, a new clear cola.

1996 Mountain Dew launches a massive beeper network called The


Mountain Dew Extreme Network.
Pepsi Co, Inc. and Lucas film Ltd. announce the largest promotional alliance in
entertainment history, linking existing and future Star Wars series with PepsiCo
beverages, snack foods and restaurant brands worldwide.
Pepsi Cola and MTV establish a partnership to develop international programming,
cross promotions, marketing tie-ins and specials events.
1997 Pepsi Cola introduces new advertising campaign with the theme
Generation Next.
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Pepsi Cola North American bottling operations become a separate unit called The
Pepsi- Cola Bottling Co.
National rollout of Aquafina bottled water.
Pepsi Cola celebrates 100th Anniversary with first worldwide bottlers conference,
held in Hawaii. The event is held during the same time as first bottlers conference.
1998 Pepsi Cola introduce two liter plastic bottle with built in grip
handle that makes it easier to grip and pour.
Pepsi introduce new look called the Globe which prominently features a 3dimensiponal Globe against a blue ice backdrop.
PepsiCo acquires Tropicana Products from Seagram Company Ltd., the biggest
acquisition ever undertaken by PepsiCo. Anthony Rossi founded Tropicana in
1947. its major brand is Tropicana Pure Premium Juices.
In March, the Pepsi Bottling Group, the worlds largest Pepsi bottler, begins
trading on the New York Stock Exchange. It is listed under the symbol PBG. The
$ 3.2 billon public offering is among the biggest initial public offerings in stock
market history.
1999 Pepsi launches The Joy of Colas advertising campaign.
2000 Pepsi-Cola revivers its Pepsi Challenge advertising campaign.
Challenge includes Pepsi One Diet Coke as well as cola.

Pepsi-Cola teams up with Yahoo Inc. the biggest web navigation company, in a
multimedia marketing campaign aimed at teens and young adults.
Pepsi-Cola launches Sierra Mist a caffeine-free, lemon/lime soda.
2001 Pepsi-Cola Company launches Dole single server juices in vending
machines, coolers and other retail outlets throughout the United States.
Pepsi-Colas flagship brand will have NEW TAGLINE, The Joy Of Pepsi.

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Pepsi-Cola launches the bold new Mountain Dew code Red nationwide. It is
Mountain Dews first line extension since the introduction of the Diet Mountain
Dew in 1988.
PepsiCo introduces a new corporate logo.
Diet Sierra Mist is introduced.
2002 Diet Pepsi has a new look
Aquafina debuts new line of great-tasting enhanced water. Aquafina Essentials
target active, health-conscious adults in four lightly sweetened varieties including
B-Power, Calcium+, Daily C and Multi-Vin 20-oz bottles.
Pepsi Brand Pepsi has a new look.
PepsiCo publishes Health and Wellness Philosophy. (on pepsico.com)
PepsiCo introduces Marathon Kids, a program that encourages kids and their
families to be more physically active, the program debuts in Dallas, TX.
2003 Pepsi-Cola launches Sierra Mist nationally.
Pepsi announces plans to launch Mt. Dew Livewire, an orange drink, this summer
Pepsi-Cola sings an exclusive four-year sponsorship deal with the Canadian
Hockey Association, making Pepsi the official soft drink.
Pepsi announces four-year sponsorship agreement with the UK Football
Association.
Pepsi Stuff Campaign kicks-off in Canada.
PepsiCo creates PepsiCo International, the business that will unite all international
snack, beverages and food units in an effort to drive faster growth and improved
profitability around the world.
2004 Pepsi-Cola to launch Pepsi Edge, the first full-flavored cola with 50%
less sugar, carbohydrates and calories than regular cola.
2005 PepsiCo re lauched Mirind Lemon (ginger flavored).
The story still not end---------------------------

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During the Great Depression, Pepsi gained popularity following the


introduction in 1936 of a 12-ounce bottle. Initially priced at 10 cents, sales were
slow, but when the price was slashed to five cents, sales increased substantially.
With a radio advertising campaign featuring the jingle "Pepsi cola hits the spot /
Twelve full ounces, that's a lot / Twice as much for a nickel, too / Pepsi-Cola is
the drink for you," Pepsi encouraged price-watching consumers to switch,
obliquely referring to the Coca-Cola standard of six ounces a bottle for the price
of five cents (a nickel), instead of the 12 ounces Pepsi sold at the same price.
Coming at a time of economic crisis, the campaign succeeded in boosting
Pepsi's status. In 1936 alone 500,000,000 bottles of Pepsi were consumed. From
1936 to 1938, Pepsi-Cola's profits doubled.
Pepsi's success under Guth came while the Loft Candy business was faltering.
Since he had initially used Loft's finances and facilities to establish the new
Pepsi success, the near-bankrupt Loft Company sued Guth for possession of the
Pepsi-Cola company. A long legal battle, Guth v. Loft, then ensued, with the
case reaching the Delaware Supreme Court and ultimately ending in a loss for
Guth.

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"PepsiCo's responsibility is to continually improve all aspects of the world in


which we operate - environment, social, economic - creating a better tomorrow
than today."
Our vision is put into action through programs and a focus on environmental
stewardship, activities to benefit society, and a commitment to build shareholder
value by making PepsiCo a truly sustainable company.
Performance with Purpose
At PepsiCo, we're committed to achieving business and financial success while
leaving a positive imprint on society delivering what we call Performance with
Purpose.

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Leadership
PepsiCo is a company full of strong, talented individuals starting with the company
leadership. Get to know the inspiring people helping lead PepsiCo on its
'Performance with Purpose' journey.

Saad Abdul-Latif
President, PepsiCo

Zein Abdalla
Chief Executive Officer, PepsiCo Asia
Middle East, Africa

Albert P. Carey

Brian Cornell

Chief Executive Officer,


Pepsico Americas Beverages
,

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Chief Executive Officer,


PepsiCo Americas Foods

Indra K. Nooyi
Chairman and Chief Executive Officer, PepsiCo

Chief Executive Officer (CEO) Role and Responsibility


Mandate
The mandate of the CEO is to manage the day-to-day operations of the PCC and
ensure that operations
are consistent with the policies developed by the Board of Directors and are carried
out in such a way that
meets the requirements of the Capital Commission Act.
Accountabilities
The CEO is accountable to the Board for:
contributing to the development of annual goals and objectives
ensuring that Commission procedures and overall management are designed in
accordance with
established Board policy
keeping the Board informed of existing or impending Board policy issues
Duties and Responsibilities
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The CEO is responsible to the Board. The Board and the CEO work together to
develop policies and
plans consistent with the mandate as expressed by the Shareholder. The Board is
responsible to ensure
the CEO is not subjected to political interference.
a) Operations
1. Develop and implement operational policies, strategic plans, and Annual
Operating Plans to
guide the PCC within the limits prescribed, delegated authority, and the framework
of the
strategic directions approved by the Board
2. Operate the PCC within established policies, maintain a regular policy review
process, and revise
or develop policies for presentation to the Board
3. Ensure the PCC operates within all regulatory requirements of a Crown
Corporation
4. Ensure the PCC operates within approved budgets and operating plans
5. Keep abreast of issues which may significantly impact the PCC
6. Ensure the PCC meets audit requirements.
b) Human Resources
1. Create and maintain an organizational environment that promotes positive staff
morale and
performance
2. Ensure effective human resources programs are developed and maintained to
support the
26 | P a g e

strategic goals of the PCC (including recruiting, performance management,


training, succession
planning, employee relations, and compensation)
3. Direct, motivate and maintain a competent, well-trained, flexible and responsive
staff capable of
meeting current and future needs
4. Develop and recommend the overall PCC organizational structure and staffing to
the Board
5. Develop and maintain an annual Board-approved plan for the development and
succession
management.
Role
The function and duties and the delegated responsibilities of the CEO (specified by
the Board of Directors
pursuant to Part 2 2, contained herein) are to:
1. develop annual planning guidelines, oversee the development of the
Corporations annual Service
Plan and recommend strategies to achieve the Corporation goals and objectives
2. develop, and recommend to the Board, the annual operating and capital budget
3. upon approval of the service plan and annual budget and with full delegated
authority, implement the
plan in its entirety4. inform Chair of expenditures out of CEO contingency

27 | P a g e

5. monitor the Corporations performance against objectives and provide a


quarterly performance report
to the Board
6. oversee the day-to-day operations and activities of the PCC
7. upon informing the Board, exercise authority to approve: all goods and services
purchases, all capital
purchases under $1 million, lease commitments under $1 million, and disposition
of tangible assets
with a market value of less than $1 million
8. oversee the preparation of quarterly budget variance reports, the annual report
and annual financial
statements
9. be accountable to the Board of Directors for the activities of the PCC, carry out
the functions and
duties that the Board specifies and provide a highlight report featuring issues that
management has
or will be addressing
10. maintain overall responsibility to the Board of Directors for the implementation
of Board policies and
the efficient and effective operations of the Corporation
11. work to support Board members and the Chair
12. participate in an annual CEO performance evaluation (See Appendix 4)
13. provide interpretation of government policy to the Board of Directors
14. provide leadership and direction to staff of the PCC

28 | P a g e

15. exercise delegated authority to appoint officers and employees necessary to


carry on the business
and operations of the Corporation, define their duties, determine their
remuneration, evaluate their
performance, take disciplinary action as required, negotiate the collective
agreement and handle all
union grievances
16. act as a primary spokesperson for the Corporation
17. communicate closely with the public regarding the operation of the PCC
18. perform such other duties or activities as required by the Board from time-totime.

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PepsiCo In India
PepsiCo entered India in 1989 and has grown to become one of the countrys
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.

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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 Indias
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. Local brands Lehar Evervess
Soda, Dukes Lemonade and Mangola add to the diverse range of brands.
PepsiCos 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 Lays Potato Chips, Cheetos extruded snacks, Uncle Chipps and
traditional snacks under the Kurkure and Lehar brands. The companys high
fibre breakfast cereal, Quaker
Oats, and low fat and roasted snack options enhance the healthful choices
available to consumers. Frito Lays core products, Lays, 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.

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The group has built an expansive beverage and foods business. To support its
operations, PepsiCo has 43 bottling plants in India, of which 15 are company
owned and 28 are franchisee owned. In addition to this, PepsiCos Frito Lay foods
division has 3 state-of-the-art plants. PepsiCos business is based on its
sustainability vision of making tomorrow better than today. PepsiCos commitment
to living by this vision every day is visible in its contribution to the country,
consumers and farmers.

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PRODUCTS OF PEPSI

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Soft and Aerated Drinks

The 50-bn-rupee soft drink industry is growing now at 6 to 7% annually. In India,


Coke and Pepsi have a combined market share of around 95% directly or through
franchisees. Campa Cola has a 1% share, and the rest is divided among local
players. Industry watchers say, fake products also account for a good share of the
balance. There are about 110 soft drink producing units (60% being owned by
Indian bottlers) in the country, employing about 125,000 people. There are two
distinct segments of the market, cola and non-cola drinks. The cola segment
claims a share of 62%, while the non-cola segment includes soda, clear lime,
cloudy lime and drinks with orange and mango flavours.

The per capita consumption of soft drinks in India is around 5 to 6 bottles (same as
Nepal's) compared to Pakistan's 17 bottles, Sri Lanka's 21, Thailand's 73, the
Philippines 173 and Mexico 605. The industry contributes over Rs 12 bn to the
exchequer and exports goods worth Rs 2 bn. It also supports growth of industries
like glass, refrigeration, transportation, paper and sugar. The Department of Food
Processing Industries had stipulated that 'contains-no-fruit-juice' labels be pasted
on returnable glass bottles. About 85% of the soft drinks are currently sold in
returnable bottles. There was a floating stock of about 1000 mn bottles valued at
Rs 6 bn. If the industry were to abide by the new guidelines, it would have to
invest in new bottles, resulting in a cost outgo of Rs 5 bn. Neither Coke nor Pepsi
is in a position to invest such a large amount.

Around 400,000 tonnes of raw material would be required to replace the existing
stock of bottles. Instead, the soft drink industry suggested that a seven-year

35 | P a g e

moratorium be extended to the industry so that it can incorporate the change in a


phased manner. There is no such mandatory requirement anywhere in the world to

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PEPSICO operates in a highly competitive market. They compete against global,


regional, local, and private label manufacturers on the basis of price, quantity,
product variety, and distribution. Their chief competitor is The Coca-Cola
Company.
Coca-Cola currently has a
slightly larger share of carbonated soft drink (CSD) consumption in the U.S. and
maintains a significant CDS share advantage in many markets outside North
America.

However,

PEPSICO has

a larger share of chilled juices and isotonics and PepsiCo Internationals snack
brands hold significant leadership positions in the snack industry worldwide.
According to PepsiCos 2006 Annual Report, corporate management believes that
the strength of their brands, innovation and marketing, coupled with the quality of
their products and flexibility of their distribution network allows the corporation to
compete effectively.
With this said, PepsiCo is the worlds second largest food and beverage company,
37 | P a g e

accounting for almost $40 billion net sales. They beat out their chief competitor in
the CSD market, Coca-Cola by nearly $20billion and are second only to the Nestle
Corporation in net sales.
PepsiCos many subdivisions and brands also allow the corporation to succeed in
their competitive markets. PepsiCo currently owns 21 mega-brands, which
generate sales revenues of at least $1billion each. Five of these 17 generate more
than $5 billion each. Along with this massive brand equity, PepsiCo and its
subdivisions also rely on their efficient distribution systems to maintain a
competitive edge over other corporations.

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COMPETITIVE ANALYSIS OF PEPSICO BY USING PORTER MODEL

PepsiCo produces soft-drinks, snack foods and other beverages. Its operations are
conducted through PepsiCo, Frito-lay, and Quaker brands both domestically and
internationally. The competitive analysis of PepsiCo is done using Michael
porters Five Force Model.

Rivalry among existing competitors:


The PepsiCo and Coca-Cola form a strong duopoly market in this industry. The
desire to be the market leader or to corner a large market share leads to great
rivalry between these two giants. Greater competition for market share and
increased cost pressure has resulted in weaker companies losing market share to
these two companies.

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Threat of New entrants:


The beverages and food industries are highly saturated, as a result of which the
barriers to new entrants are generally very low. With strong presence in the market
Pepsi and Coco-cola enjoys good relationship with retail channels. This has
enabled them to defend their position in the market thus increasing the barriers for
new entrants.
Threat of Substitutes:
There seems to be a perceptible threat of substitutes emerging as replacements with
increasing popularity of fresh juices. This occurred due to the shift in consumption
pattern of the people towards increased awareness of health consciousness. This is
further enhanced by the declining prices of substitutes like Tea, Milk, Beer, Coffee,
and Wine etc. Juices already enjoy high levels of penetration and frequency as a
result of habitual drinking by consumers in the morning.
Bargaining power of Buyers:
The bargaining power of buyers is more in case of purchases made at super
markets and mass merchandisers. This will reduce the profitability of PepsiCo.
Whereas in case of then vending machines the buyers do not enjoy any bargaining
power.
Bargaining power of Suppliers:
The primary suppliers are those who supply sugar and packaging materials. As
both sugar and aluminium are present abundant in the market, also there exist huge
competition in these two industries, the bargaining power of the suppliers is low.

40 | P a g e

BCG Growth Share Matrix

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FUTURE PLANNING OF PEPSICO. IN


INDIA

Currently PepsiCo India buy the right to PepsiCo bagging the title
sponsorship of the forthcoming Indian Premier League (IPL) for just under
Rs 397 crore for the next five years starting January 1, 2013. Cricket has
been a national passion in India and IPL with its easy-to-consume format,
glamour and razzmatazz has made it a must-have in any mass-marketer's
annual budgetary allocation. In the recently concluded bid, Pepsi-Co has
gone ahead and made a hefty outlay towards the title rights, which a rival
company's head, on condition of anonymity, points out is a big risk to take
especially in the current unpredictable economic scenario .

Plans to increase advertising and marketing support behind its global


brands by $500-$600 million in 2012, with particular focus on North America;
going forward, it expects to maintain or increase that rate of support as a
percentage of revenues

Multi-year productivity program expected to generate $1.5 billion of


incremental cost savings by 2014 through optimization of operating practices
and organization structure, including a reduction in force of about 8,700
employees, about 3 percent of global workforce

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Company targets high-single-digit core constant currency* EPS growth


for 2013 and beyond after a transition year in 2012, in which it expects core
constant currency EPS to decrease by 5%

Announces plan to increase returns to shareholders in the form of


higher dividends and share repurchases in 2012
PepsiCo (NYSE: PEP) announced today a series of strategic investment and
productivity initiatives to deliver top-tier, sustainable long-term growth for its
shareholders. These decisions are based on a comprehensive review by the
Company's management of its portfolio, brands, costs, organization and capital
structure. As a result of its review, the Company reaffirmed its commitment to an
integrated food and beverage portfolio through a one-company platform.

"In a volatile global environment over the past five years, PepsiCo has delivered
double-digit compound annual growth in core net revenue, 8% compound annual
growth in core EPS, and returned about $30 billion to shareholders in the form of
dividends and share repurchases," said PepsiCo Chairman and CEO Indra Nooyi.
"Our goal is to continue on that earnings trajectory over the next 5 to 10 years,
fully recognizing that we need to make changes in how we operate to address the
challenges we identified in the review process. 2012 will be a transition year, in
which we will be taking the appropriate steps to build a stronger, more successful
company going forward."

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Key Initiatives

The Company reaffirmed the underlying strength of its integrated food and
beverage portfolio and concluded that PepsiCo offers the most compelling value to
shareholders as one company.
Beginning in 2012, PepsiCo is undertaking a number of key actions to further
strengthen the Company and enhance shareholder value. The Company said it
plans to:

Significantly increase investments in its iconic brands and in bringing


innovation to market. Advertising and marketing spending will increase by $500$600 million in 2012, the majority in North America. Going forward, it expects to
maintain or increase that rate of support as a percentage of revenues. To drive
efficiencies, it will reduce the number of agency partners and also take steps to
leverage the global scale of its top brand platforms. The brand investments are
expected to drive topline growth and enable greater price realization;

44 | P a g e

Implement a three-year productivity program that is expected to generate


over $500 million in incremental cost savings in 2012, further incremental
reductions in the cost base of about $500 million in 2013, and an additional $500
million in 2014. The productivity savings will span every aspect of the business:
leveraging new technologies and processes across operations, go-to-market and
information systems; heightened focus on best practice sharing across the globe;
consolidating manufacturing, warehouse and sales facilities; and implementing
simplified organization structures, with wider spans of control and fewer layers of
management. This effort includes headcount reductions of about 8,700 employees
across 30 countries, about 3% of the Company's global workforce. The
productivity programs will enhance the Company's cost-competitiveness as well as
provide a source of funding for future brand-building and innovation initiatives.

Improve its net return on invested capital by at least 50 basis points annually
beginning in 2013 through increased focus on capital spending and working capital
management. As an example, in 2012 we will be reducing capital expenditures by
10% versus 2011. The emphasis is on systematically improving the efficiency of
the existing asset base; and

Enhance returns to shareholders in 2012 through both a 4% increase in its


annual dividend beginning with the June 2012 dividend payment, and also the
execution of a share repurchase program this year of at least $3 billion.
2012: A Transition Year, with Accelerated Productivity, Stepped-Up Brand
Investment, and High Commodity Costs
"As we implement our strategic priorities in 2012, we've had to make some tough
decisions," said Chief Financial Officer Hugh Johnston. "As a result, 2012 will be
45 | P a g e

a year of transition, one in which we will make the right investments to position
PepsiCo properly to achieve long-term high-single-digit core constant currency
EPS growth."
For 2012, the Company is targeting mid-single-digit core constant currency net
revenue growth, in-line with its long-term target. It expects a decline in core
constant currency EPS of approximately 5 percent from its fiscal 2011 core EPS of
$4.40, reflecting a combination of strategic and macroeconomic factors, primarily:

Marketplace Investments: In 2012, the Company will step-up its strategic


brand investments by $500-$600 million, particularly in North American beverages
and food -- the benefits from which will be increasingly seen in the second half of
2012 and into 2013. Further, the Company anticipates a larger increase in
consumer-facing spending through marketing efficiency initiatives. Additionally,
incremental investments in routes and display racks will total about $100 million in
2012.

Commodities: The Company anticipates a second consecutive year of global


commodity cost inflation that is well above historic levels. In a different economic
climate the Company would likely offset these additional costs through increased
pricing. However, it does not anticipate that it can pass through all of the higher
commodity costs to its consumers in 2012 given the continuing challenges that
consumers are facing, particularly in the developed economies.

Pension/Interest/Taxes: Additionally, the Company expects higher pension


costs as a result of a lower discount rate, higher net interest expense as it increases
indebtedness and also terms-out debt in a low interest rate environment, and a core
tax rate of approximately 27%, about 50 basis points higher than in 2011.

46 | P a g e

Productivity: Partially offsetting these additional costs, major productivity


initiatives are expected to result in about a $500 million incremental reduction in
operating expenses in 2012.
Based on the current forex market consensus, foreign exchange translation would
have a three percentage point unfavorable impact on the Company's full-year core
EPS growth in 2012.
The following table presents the key elements explaining the difference between
the Company's long-term core constant currency EPS growth target and its 2012
core constant currency EPS growth target:

Long-Term Core EPS Growth Target (CC)

HSD

~8%

Increased Marketplace Investments

(8)

Excess Commodity Inflation

(9)

Higher Pension Costs

(1)

Higher Interest and Taxes

(2)

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Incremental Productivity

+7

2012 Core EPS Growth Target (CC)

~(5)%

On a reported basis, the Company's results will reflect charges from its three-year
productivity program, primarily severance costs associated with workforce
reductions. In the fourth quarter of 2011, the Company incurred pre-tax non-core
restructuring charges of $383 million, and it anticipates additional charges of
approximately $425 million in 2012 and another $100 million from 2013 through
2015.
The Company is targeting about $8 billion in cash flow from operating activities
and more than $6 billion in management operating cash flow (excluding certain
items) in 2012, which will include the favorable impacts of a 10% reduction in
capital expenditures and incremental working capital efficiency. The Company also
expects to make a pre-tax discretionary pension and retiree medical contribution of
$1 billion in 2012.

Dividend Increase/Higher Share Repurchases


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Reflecting the Company's commitment to return capital to shareholders and


confidence in its long-term growth targets, PepsiCo today announced that it will
raise the annualized common stock dividend, effective with the dividend payable in
June 2012, by 4 percent to $2.15 per share, the 40th consecutive year of dividend
growth. The Company anticipates increasing share repurchases in 2012 by at least
$3 billion, which will be financed by operating cash flow and additional debt.
Long-Term Financial Targets

PepsiCo provided its long-term target of mid-single-digit constant currency net


revenue growth. It also announced that it is targeting long-term core constant
currency operating profit growth of 6-7%, and long-term high-single-digit core
constant currency EPS growth after a transition year in 2012, driven by positive
returns from executing its strategic initiatives.

About PepsiCo

In its global portfolio of food and beverage brands, PepsiCo has 22 different brands
that generate more than $1 billion each in annual retail sales. Our main businesses
also make hundreds of other enjoyable foods and beverages that are respected
household names throughout the world. With net revenues of over $65 billion,
PepsiCo's people are united by our unique commitment to sustainable growth by
investing in a healthier future for people and our planet, which we believe also
49 | P a g e

means a more successful future for PepsiCo. We call this commitment Performance
with Purpose: PepsiCo's promise to provide a wide range of foods and beverages
for local tastes; to find innovative ways to minimize our impact on the
environment, including by conserving energy and water usage, and reducing
packaging volume; to provide a great workplace for our associates; and to respect,
support, and invest in the local communities where we operate.

Cautionary Statement:

Statements in this communication that are "forward-looking statements," including


PepsiCo's 2012 guidance and long-term growth targets, are based on currently
available information, operating plans and projections about future events and
trends. Terminology such as "believe," "expect," "intend," "estimate," "project,"
"anticipate," "will" or similar statements or variations of such terms are intended to
identify forward-looking statements, although not all forward-looking statements
contain such terms. Forward-looking statements inherently involve risks and
uncertainties that could cause actual results to differ materially from those
predicted in such forward-looking statements. Such risks and uncertainties include,
but are not limited to: changes in demand for PepsiCo's products, as a result of
changes in consumer preferences and tastes or otherwise; PepsiCo's ability to
compete effectively; unfavorable economic conditions in the countries in which
PepsiCo operates; damage to PepsiCo's reputation; PepsiCo's ability to grow its
business in developing and emerging markets or unstable political conditions, civil
unrest or other developments and risks in the countries where PepsiCo operates;
50 | P a g e

trade consolidation or the loss of any key customer; changes in the legal and
regulatory environment; PepsiCo's ability to build and sustain proper information
technology

infrastructure,

successfully

implement

its

ongoing

business

transformation initiative or outsource certain functions effectively; fluctuations in


foreign exchange rates; increased costs, disruption of supply or shortages of raw
materials and other supplies; disruption of PepsiCo's supply chain; climate change,
or legal, regulatory or market measures to address climate change; PepsiCo's
ability to hire or retain key employees or a highly skilled and diverse workforce;
failure to successfully renew collective bargaining agreements or strikes or work
stoppages; failure to successfully complete or integrate acquisitions and joint
ventures into PepsiCo's existing operations; failure to successfully implement
PepsiCo's global operating model; failure to realize anticipated benefits from our
productivity plan; any downgrade of our credit ratings; and any infringement of or
challenge to PepsiCo's intellectual property rights.
For additional information on these and other factors that could cause PepsiCo's
actual results to materially differ from those set forth herein, please see PepsiCo's
filings with the SEC, including its most recent annual report on Form 10-K and
subsequent reports on Forms 10-Q and 8-K. Investors are cautioned not to place
undue reliance on any such forward-looking statements, which speak only as of the
date they are made. PepsiCo undertakes no obligation to update any forwardlooking statements, whether as a result of new information, future events or
otherwise.

Glossary

51 | P a g e

Core: Core results are non-GAAP financial measures which exclude certain items
from our historical results. In 2006, core results exclude certain tax adjustments
and restructuring and impairment charges. In 2011, core results exclude the
commodity mark-to-market net impact included in corporate unallocated expenses,
restructuring charges, an extra week of results, as well as merger and integration
costs and certain inventory fair value adjustments in connection with our
acquisitions of The Pepsi Bottling Group, Inc. (PBG), PepsiAmericas, Inc. (PAS)
and WBD. With respect to our 2012 and longer-term guidance, our core results
exclude the commodity mark-to-market net impact included in corporate
unallocated expenses, merger and integration charges, restructuring and
impairment charges, and the impact of certain hedging contracts in connection with
our acquisitions of PBG and PAS. For more details and reconciliations of our 2011
core results and 2012 and beyond core and core constant currency guidance, see
"Reconciliation of GAAP and Non-GAAP Information" in the exhibits attached
hereto.
Constant currency: Financial results assuming constant foreign currency exchange
rates used for translation based on the rates in effect for the comparable prior-year
period. In order to compute our constant currency results, we multiply or divide, as
appropriate, our current year U.S. dollar results by the current year average foreign
exchange rates and then multiply or divide, as appropriate, those amounts by the
prior year average foreign exchange rates.
Management operating cash flow: Net cash provided by operating activities less
capital spending plus sales of property, plant and equipment. This non-GAAP
financial measure is our primary measure used to monitor cash flow performance.
See the attached exhibits for a reconciliation of this measure to the most directly
comparable financial measure in accordance with GAAP (operating cash flow).
52 | P a g e

Management operating cash flow, excluding certain items: Management operating


cash flow, excluding: (1) discretionary pension and retiree medical contributions,
(2) restructuring payments, (3) merger and integration payments in connection with
our PBG, PAS and WBD acquisitions, (4) capital investments related to thebottling
integration, and (5) the tax impacts associated with each of these items, as
applicable.

Country Analysis
(5 COUNTRIES CASE STUDY WITH REGARD TO PEPSI)
India
Overview.
As can be expected, India is one of the top 3 choices Central Players
recommends for foreign market entry. It has the second largest population in the
world and is becoming one of the most sought after markets for large corporations.
Although it has the lowest per capita income, Central Players believe that the
culture continues to be interested in Westernized products, PepsiCo will have a
positive influence with its inexpensive products. Indias growth and density
measures prove that it would be the most beneficial country to enter because of its
potential market share opportunities. GDP and Inflation rates were rather dismal
for India but Central Players see potential with the economy because of the
increased educational levels and the global demand for Indian contractors. Central
Players has identified that import tariffs and infrastructure scores were low and will
need to be continuously monitored. Intellectual property rights are essential to the

53 | P a g e

development of foreign markets and India scored high. Unfortunately, India scored
extremely low with the political risk indicator that Central
Players would have to evaluate and analyze how it could overcome the risks.
Finally, India. scored the highest with the level of foreign competition and tax rates
that are extremely promising for PepsiCos potential revenue.

Strengths.
India has recently become a popular location for expansion. The economy
has showed recent growth spurts of 9% annually in recent years and is projected to
grow 7 to 8 percent each year for the next 5 years (Johansson, 2009, p.296). An
article by the Press Trust of
India (2010) stated, In 2001-02, out of the total of 188.2 million households, the
number of high income families was only 13.8 million, whereas those in the low
income category stood at 65.2 million.
In the last 30 years, Indian marketing segments have seen a shift from the rural
poor population to an increasingly well-off middle class 62 percent of
Indian households belong to the middle class, which is the target of most consumer
goods firms
As the middle class continues to grow, they are gaining their own
identity in the consumer market and making up a significant part of the market for
consumer goods. This coincided with an increase in the size of cities, increases of
disposable income, and families having fewer children Even with large city
expansion, rural areas still present over 70% of the population in India and also
54 | P a g e

present opportunity This population becomes more aware of popular brands and
have started demanding consumer products and services The fantastic education
system and outsourcing of U.S. jobs to India has led to women contributing to
household income Increases in expendable income as well as the emerging female
segment both present opportunities for American companies looking to expand to
India. Exposure to new products and services has increased the appetite for
further purchasesproducts that were earlier a luxury now have become
necessities
Indian consumers are starting to look more like the market in the United States,
with inessential items becoming desired purchases as a symbol of status and
success. However, the similarity to the United States market does not imply that
companies will not need to localize their marketing strategy and product
positioning. Several companies have overlooked this aspect, along with
overestimating demand, and failed in India.
Weaknesses/Threats.
The emerging economy also presents some weaknesses. Per
capita figures are still low due to a rapidly increasing population.
In other words, there is an expanding middle class, but there is still a very large
poor population in India The upside to the growing economy as a whole is
balanced with high political risk due to ethnic and religious violence \ Expanding
into India also requires that companies adapt their products to the Indian market
and taste, particularly when marketing to the
poorer consumer in rural areas.
Potential client size.

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According to the CIA World FactbookA (2011), India has the


second largest population in the world, estimated as 1,189,172,906 people in July
of 2011. When comparing the target market to the population in our chosen market
area, World FactbookA (2011) indicates 64.9% of the population falls between the
ages of 15-64 years old.
This is most likely the strongest market for Pepsi Products. This would place our
client size in the area of If we estimate having ten percent of the market share, the
size of our client will be approximately 77,200,000.
Proposed entry mode.
The four entry modes that PepsiCo could use are exporting,
licensing, joint venture, and direct investment. Using joint ventures to enter the
market there are strict regulations imposed by the government . But creating a joint
venture entry business agreement benefits the two parties that are equally invested
and would be most beneficial for PepsiCo. After the success of entry, one of the
businesses may decide to buyout the joint partnership of that other half. A joint
venture allows both parties to share the burden of the project, as well as the
resulting profits.
Marketing strategy.
The marketing strategies of PepsiCo in India should be to advertise
through athletics In India, cricket celebrities have been used to advertise brands
It would be valuable to use Indias famous Bollywood celebrities. Using the
Bollywood stars would help create and establish product and brand acceptance,
similar to how consumers in America look up to celebrities and movie stars

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PepsiCo should market to the globally adept college-aged and recent graduate
students and that are willing to try and adapt to new products. As the Hofstede
study mentioned, and like
the PepsiCo brand, this market likes to stand out with their unique style (Hofstede,
2009). In our opinion, this market is one to readily adapt to new things and help
push the product trend in that
market. India is becoming more westernized so the PepsiCo trends may take off if
marketed towards this market.

Adaptation strategy.
As previously mentioned, adaptation will be required to enter into
India, particularly into the poorer, rural parts of the country. This may include
needing to lower prices by reducing package sizes, simplifying designs, and
offering less service where failing to do so can result in a local company creating
a cheaper, knock-off product If this is not possible, going into business with a local
company or creating a distribution center in India can help decrease prices, but will
likely require a larger overhead.

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JAPAN
Overview.
Japan scored extremely well with most of the indicators provided by Central
Players. It has a high per capita income that would benefit PepsiCo. Its population
growth is not
PEPSICO

positive but it has the second largest density rate that would

accommodate PepsiCos products quite nicely. It is tied with China for GDP that
means it sees healthy growth in the economy in relation to goods and services,
ideal for PepsiCo. Japan had one of the highest import tariffs score that represents
lower taxes on carbonated sugary beverages. PepsiCo can easily leverage
its streamlined infrastructure to deliver products to retailers effectively and
efficiently. Japans intellectual property rights and political risks scores were not
ideal for Central Players because of the intense government regulations and
involvement. Its level of foreign competition and tax rates scored average amongst
the countries that Central Players dont see affecting PepsiCos
brand awareness strategies.

Strengths.
Japans large population is centrally located and can be conveniently
marketed to without having to distribute information and/or products to smaller
communities.
Unlike Japan, almost all of the population lives in urban locations that would allow
PepsiCo products to be easily recognized amongst consumers. The close proximity
of the targeted market would also allow operations to easily deliver products to
retailers and other stores without traveling long distances. Japan is also known to
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keep its highways and expressways well maintained to support the growing
population and increased vehicle usage. Japan has an extensive and wellestablished sea transportation system that includes many ports that its merchant
marine fleet of 662 ships maintains Its air transportation system comprises of over
170 airports with well-established paved runways. The telecommunication system
in Japan is extremely advanced that delivers quality communication to the large
population. Finally, Japans multi faceted power generation industry provides
efficient electricity demands throughout the entire country.
Utilizing all of these infrastructure designs and technology would allow PepsiCo to
effectively enter into Japan while maintaining low operations costs.

Weaknesses/Threats.
Once PepsiCo has established an effective strategy to utilize
Japans infrastructure strengths, Central Players would also like to emphasize some
of the weaknesses and threats. According to Johansson (2009), the Japanese
[distribution] system features several layers of small, specialized units, each
handling small quantities of products This would mean that PepsiCo could
potentially have to go through various levels of distribution paying fees and
commissions along each level. This ineffective means of handling distribution
could be extremely costly to PepsiCo but points out a significant weakness of
Japans infrastructure. One of the largest threats that PepsiCo would have is
Japans emphasis on packaging. The Japanese are extremely particular and demand
zero defects in packaging that could once again be costly for PepsiCo. Johansson
(2009) explains Variations in label position, blemishes in the wrapping material,
and unappealing color combinations are taken as signs of a poor quality product
Central Players and PepsiCo will have to ensure that packaging
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procedures are handled with the utmost care and attention to detail.

Potential client size.


According to the CIA World FactbookB (2011), Japans estimated
population is 126,475,664 people in July of 2011. Central Players does not
characterize everyone in the population to be in the market so we need to compare
the target market to the population in our chosen market area. World FactbookB
(2011) indicates 64% of the population falls between the ages of 15-64 years old.
Being the strongest market for PepsiCo, the potential
client size would be approximately 80,944,244 (126,475,664 X 0.64 =
80,944,244). If Central Players estimate PepsiCo having ten percent of the market
share, the potential client size will be
approximately 8,094,424 (80,944,244 X 0.10 = 8,094,424).

Proposed entry mode.


PepsiCo has a couple available options as how to enter the Japan
market. The quickest way to gain a foothold in the Japanese market would be to
export directly to Japan. This would establish product availability in a short
timeframe. However, distribution could hinder the success of PepsiCo based on the
need of middleman in the Japanese distribution system Couple this with the
expenses of exporting make this less than ideal.
PepsiCo needs a brand presence in Japan to gain the affection of the loyal Japanese
consumer which exporting does not provide. A strategic alliance with a leading

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brand of carbonated beverages is a possibility but opens PepsiCo up to losing


proprietary information to a possible
Foreign direct investment is the best option for PepsiCo to enter the Japanese
market. This allows PepsiCo retain control over their distribution and how their
image is perceived in the Japan market. FDI also allows for PepsiCo to avoid
higher taxes as well as take advantage of the local workforce by having facilities
located in the Japan market Production located in Japan allows for qualities to be
monitored, which is important to the Japanese consumer as well as have a brand
presence and financial commitment in the Japan market. FDI in Japan allows
PepsiCo to be more flexible to the Japanese market and will increase speed to
market for new products.

Marketing strategy.
Coca Cola is synonymous with soda in the Japanese market.
PepsiCo will need to challenge Coca Cola and win over the Japanese consumers
with effective marketing campaigns tailored to their local culture. Through having
operations setup in Japan,
PepsiCo will be able to utilize local talent to ensure communication remains open
between PepsiCo and the needs of the local market Visibility of operations in
Japan will reiterate the commitment PepsiCo has to the Japanese market instilling
trust in the consumers that PepsiCo is committed to this market .In addition to
hiring local talent, PepsiCo will need to remain attentive to listening to the local
consumers needs and adjust the
marketing strategy accordingly this can be achieved through ongoing market
research As incomes continue to rise in Japan, brand names will continue to be
important to the Japanese consumer PepsiCo, although challenging Coca Cola,
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will need to retain their brand image through effective positioning and keep pricing
centralized to the Japanese market to ensure the products are adopted. PepsiCo
through educating the target consumer base in Japan will be able to avoid
uncertainty of the quality of their products through effective promotions. One way
for PepsiCo to remain innovative is redesigning packaging to accommodate the
less than optimal storage spaces within the average Japanese consumers home
(2009). This is an opportunity for PepsiCo to alter packaging to appeal to this
consumer while remaining innovative and not tarnishing their widely accepted
brand.

Adaptation strategy.
FDI, as mentioned above, allows for PepsiCo flexibility in
adapting to the local consumers needs in a more timely fashion. PepsiCo will able
to localize products based on specific cultures throughout Japan while adaptation
can include different formulas for products to adapt to local taste or product
preferences in specific regions Regulatory committees will differ compared to
domestically and having a
presence through FDI will allow PepsiCo to alter packaging, verbiage and or
ingredients to abide
by the regulations set forth.
It is paramount that the proper market research is prepared on the Japan market as
well as micro research conducted on specific regional markets prior to expansion.
This research allows for proper adaptation to specific local tastes and will ensure
the success of PepsiCo being adopted as a brand by the highly sensitive Japanese
consumer and not shunned as a global brand with ulterior motives
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CHINA
Overview.
Chinas overall score fell only 2 points below Japans and is probably the
most competitive market. It has a higher per capita income than Japan, which
indicates substantial spending power. Although its population is the largest in the
world, China has more than half the density rates of India and Japan. This could
pose a threat for PepsiCo if it wishes to enter smaller communities in the region.
China scored the same with the GDP indicator but has a higher inflation rate. By
having the second highest score on import tariffs, PepsiCo will spend
less on taxes and regulation fees. As mentioned previously, a significant amount of
the population resides in rural parts of the country limiting PepsiCo from utilizing
an efficient infrastructure. Political risks and government involvement in China is
probably the biggest challenge that PepsiCo would face when entering the market.
Similar to Japan, Chinas level of foreign competition and tax rate scores would
accommodate PepsiCos ability to enter the market successfully.
Strengths.
China became a member of the World Trade Organization in 2001. Since
then, China has relaxed its tariffs and has its export based growth has grown
substantially. China
has the largest population in the world, with 1.3 billion people. According to
Johansson (2009),
The size and potential of the Chinese market, coupled with its fast-growing
purchasing power,
make China a very attractive market Experts believe China is the next super power
in the world because Chinas foreign exchange reserves, low debt levels, high
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savings rate, strong work ethic and growing domestic consumption make it a rising
star among other nations. Those who feel this way see Chinas economy as the
strongest in the world with the best investment opportunities of all nations.
Weaknesses/Threats.
A large risk associated with doing business in China is the role
the government plays. China is still a Communist nation and a main concern for
most businesses is corruption of Chinese officials and a lack of integrity in the
judicial system (Letcher, 2011).
Additionally, Chinas economic growth is unsustainable and that real estate prices
are greatly over inflated, which will likely cause a real estate bust in the near future
which will affect foreign investors Other challenges of doing business in China
include problems with rural infrastructure, product positioning, inflated tariffs,
miscommunication due to language barriers and differences in customs, and
counterfeiting or piracy of products
Potential client size.
According to the CIA World FactbookC (2011), China has the
largest population in the world, estimated as 1,336,718,015 people in July of 2011.
Because not everyone in the defined market area will be a customer, we need to
compare the target market to the population in our chosen market area. World
FactbookC (2011) indicates 73.6% of the population falls between the ages of 1564 years old. This is most likely the strongest market for Pepsi Products, placing
our client size in the area of 983,824,459. (1,336,718,015 X 0.736 =
983,824,459). If we estimate having ten percent of the market share, the size of our
client will be approximately 98,400,000. (983,824,459 X 0.10 = 98,392,445.90).
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Proposed entry mode.


Preparation is a key factor success and as with any international
business venture, we must be open to differences and aware of our limitations in
order to expand.
Expansion into China would indeed be a great opportunity for growth, but only if
done cautiously and armed with knowledge about the risk factors to the business
prior to entering the
market.
According to Johansson (2009), the best way to enter China would likely be to
follow the WTO suggestion and develop a joint venture with a Chinese partner to
assist in ease of market access and to help in overcoming cultural and language
barriers. Additionally, obtaining a Chinese partner would likely help the business
understand inside business information necessary for success in the country. This
would include insight on areas with the strongest infrastructure,
most receptive customer base, and most welcoming political environment
Most of all, I would take extreme caution when dealing with the local government
and investing money and assets, while always having a conservative business plan
in place

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Marketing strategy.
Experts believe China is the next super power in the world because
Chinas foreign exchange reserves, low debt levels, high savings rate, strong work
ethic and growing domestic consumption make it a rising star among other nations.
Those who feel this way see Chinas economy as the strongest in the world with
the best investment opportunities of all nations (Saxena, 2011). Thus, leading the
Central Players to implement a marketing strategy of standardizing the products
and centralizing the decision making process. Utilizing the macro segmentation
will help PepsiCo decipher the appropriate demographics in advertising its goods,
such as, population, disposable income, and even education. Coordinating the
global marketing campaign will begin with the planning process as discussed by
Using a planning guide for any marketing strategy whether domestic or
international, mentions it is best used in conjunction with other planning tools in
corporate and marketing strategy and focuses primarily on the systematic
assessment of a globally coordinated marketing
strategy for a specified product or service

Adaptation strategy.
The importance of designing clear and effective branding in
foreign markets has shown globalization has trended all commodities of the world.
The strategies of companies operating in international markets, such as, PepsiCo,
focuses on the value associated with a brand name, but extending other products in
the objective. PepsiCo have traditionally adopted county centered strategies,
building or acquiring a mix of domestic and international brands. The
organizations strategy has been to acquire local companies in order to form a
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group of autonomous regional managers who know more about the culture of the
local
markets worldwide. Adaptation is a powerful strategy if implemented and
marketed effectively.
As the Central Players suggests innovative techniques to produce visibility and
positive foreign reception there will be an increase in investment opportunities and
global adaptation of international brands. Using effective marketing and
advertising will enforce the organization to
adapt to foreign culture tastes, visual concepts, and needed messages. For example,
PepsiCo will
have Chinese consumers, preferred tasting venues, and colors/slogans that the
culture will adhere
to for a new generation.

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Being in such a tense competition (just like the brand Coca-Cola), Pepsi-Cola
should not take the direct and tough attack upon it. There is no good to either side.
The best wad is to keep a peaceful relationship with it and always compare with
others; we should find their disadvantages and show our advantages on this aspect.
Then by and by, the people would think ours is betted Of course the most
important rule is to improve ourselves to meet the consumers

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PepsiCo is an organization that strives to be the worlds premier consumer products


company. It seeks to produce healthy financial rewards for investors and provide
opportunities for growth and enrichment to employees, business partners and the
communities in which they
operate (Annual Report, 17). In order to remain competitive in the global market,
PepsiCo and its subsidiaries must be aware of new trends and preferences that
arise, as well as the variety of costs that go into their products. This can be
accomplished through investment in health conscious markets and continued
innovation in new products. Acquiring companies with
healthy reputations as well as participation in the Green Movement will have a
positive effect on their reputation as a consumer friendly corporation. Finally,
monitoring current and potential consumers, as well as constantly reviewing the
effectiveness of their marketing program, will allow PepsiCo to detect arising
trends and new taste preferences within their target markets.
First, it is clear that carbonated soft drinks are suffering a decline in North
America.
Experts say the soft drink market is expected to fall one percent in 2008. In fact,
both Coke and Pepsi, the number one and number two beverage makers, have
seen their share of the North American soda market fall for two straight years, as
more health conscious consumers switch to vitamin-infused energy drinks and
bottled water (Kavilanz). The carbonated soft-drink market, more specifically
PBNA, is a major portion of revenue for PepsiCo.
In order to avoid substantial losses due to changes in consumers purchasing habits,

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PepsiCo must continue to invest in health conscious markets. For example, the
2001 acquisition of the Quaker Oats Company was a timely acquirement for
PepsiCo. With programs such as the
Smart Heart Challenge, as well as the idea that oatmeal gives Brain Power,
PepsiCo captured a large portion of the shift toward future healthier living.
PepsiCo must either focus its
efforts on reinventing its current soft drinks, or focus on marketing itself as a more
health conscious product. This can be done by highlighting the benefits one
receives while drinking Pepsi in addition to the wonderful and refreshing taste it
has. This requires a greater emphasis on the older generation and continued appeal
to the individuals 13 to 34 years of age. Next, it is evident through the media that
the issue of global climate change is important
to worldwide society. This issue has created an opportunity for PepsiCo to appeal
to new, environmentally friendly consumers. In order to accomplish this, PepsiCo
must invest in green technologies, promote changes in their production techniques,
and advertise to the world that
they are doing their part to promote environmental sustainability. This can be done
through mass recycling projects and engineering containers from less harmful,
organic products. In addition,
large amounts of money can be publicly donated to foundations that research
possible solutions to Global Warming. By aligning themselves with a good cause
and by giving back to the community PepsiCo is sure to win the approval of a new
and loyal customer base.
Finally, customer research is critical to any prolonged success. The information
discovered can lead to the release of new products and the termination of those that
were unsuccessful. In order to continue to be successful, PepsiCo must maintain
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their investment in new groundbreaking technology. This will allow them to


capture the sentiment of current customers and find new ways of convincing others
that Pepsi is the best brand available.
Continued investment in technology will allow PepsiCo and its subsidiaries to
monitor the effectiveness of their marketing program. According to Devon Leonard
of Fortune Magazine,
the price of a thirty second commercial is continuing to rise at a time when the
broadcast networks are steadily losing their audience (Leonard). If Pepsi
continues to pour money into traditional advertising they will see their share of the
beverage market begin to decline. Also,
by 2008 twenty percent of the nations households will have personal video
recorders this enables viewers to skip ads altogether (Leonard). It is evident that
by monitoring their customer base and continuing to invest in the latest technology,
PepsiCo and its subsidiaries will notice new and rising trends within the
marketplace. PepsiCo has produced quality products while simultaneously creating
healthy financial rewards for investors. These rewards are the result of a tireless
effort to be the worlds premiere
consumer products company. However, in a competitive market, PepsiCo and its
subsidiaries
must be aware of new trends and preferences that arise, as well as the variety of
costs that go into their products. Together with these recommendations and
continued focus on satisfying not only
their customers, but shareholders and employees as well, PepsiCo is sure to capture
more market share, earn greater returns, and become a source of refreshment and
nourishment for an even
larger portion of the global market.

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