MGB310 Assessment Item 2 - Case study

Change Management Report

Sustainable development at PepsiCo.
Student Name: Sunjae Hwang (Sun)

Student Number: N8972231

Tutorial Time: Friday 05:30~07:30

Submission Date: 28th of October, 2016

Word Count: 2364 words

MGB310 (Change Management Report)Sunjae Hwang(n8972231)

Table of Contents
1. Executive Summary........................................................................................................................2

2. Introduction...................................................................................................................................3

2.1 Background..............................................................................................................................3

2.1.1 Product profile..............................................................................................................3

3. Identity issues................................................................................................................................4

3.1 Obesity rate (Dilemma between profitable product and healthy product)..............................4

3.2 Environmental issue of PepsiCo in India..................................................................................5

3.2.1 Industrial water use......................................................................................................5

3.2.2 Industrial plastic waste management............................................................................5

4. Apply & Demonstrate Knowledge..................................................................................................6

4.1 Perspective in change (Contingency Perspective)..............................................................6

4.2 Change tool (Total Quality Management)..........................................................................7

5. Recommendations.........................................................................................................................7

5.1 Responsibility to prevent Obesity of Customers................................................................7

5.2 Less plastic uses in bottling the beverage products...........................................................8

6. Conclusion.....................................................................................................................................9

References...........................................................................................................................................10

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MGB310 (Change Management Report)Sunjae Hwang(n8972231)

1. Executive Summary
This report focus to analyse key sustainable changes within PepsiCo, by
identifying the sustainable issues that PepsiCo faced, applying and
demonstrating the knowledge of perspective and change tool which are
Contingency Perspective and Total Quality management. Contingency
perspective is that the behavioural view controlled by situation. Also, total
Quality Management is a method by that management and employees can
become involved in the sustainable improvement of production of services and
goods. Also, recommendations will be suggested in recommendation part to deal
with the issues that this report mentions. Therefore, the recommendation will be
take responsibilities for customers obesity and use less industrial plastic on
bottle such as glass bottle which has higher recycle rate than PET bottle to
bottling the beverages.

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2. Introduction

2.1 Background
Since the PepsiCo was founded in 1965 by the president of the company
Frito-Lay, PepsiCo became a leading food and beverage company that
manufactures and distributes its products in more than 200 countries.
Food products that PepsiCo manufactures include chips, flavored snacks,
cereals, rice, pasta, and dairy-based products. The companys beverage
product portfolio includes carbonated soft drinks, juices, ready-to-drink tea
and coffee, sports drinks, and bottled water. Headquartered in Purchase,
New York, the company employs around 274,000 people worldwide. In
2009, PepsiCo started a new sustainable development program which
named 'Performance with Purpose'. The goals of the program are directed
toward creating a healthier relationship between customer and food during
continuing to increase sales of PepsiCo (PepsiCo, n.d.). Also, as part of
2025 agenda of PepsiCo, it is redoubling its commitment to Performance
with Purpose and renewing its goals in its focus areas of product, planet
and people (PepsiCo, n.d.).

2.1.1 Product profile

PepsiCo has not only beverage but also complementary food
portfolio that allow PepsiCo offer various choices for its customers
within low cost, productivity enhancement and new capabilities. The
portfolio of PepsiCo includes 22 different brands are available
around the world (PepsiCo, n.d.). Also, PepsiCo separate its product
into three main categories which are;

Fun for you

These Products are core products of PepsiCo include food and
beverages such as Pepsi cola, Miranda, Doritos, Cheetos and 7UP.
This line included many added sugar for sensational flavours of
beverage and food.
Better for you
These products are foods and beverages which have levels of fat,
saturated fat, sodium, and sugar that are in line dietary intake
recommendations. This product line includes Lay's Baked Potato
Chips, Pepsi Max, and Diet Mug Root Beer. In this product line, they
contained less added sugar to build a better nutrition system.
Good for you
These Products focus on offering not only positive nutrition through
inclusion of whole grain fruits, vegetables, low-fat dairy, nuts and
seeds but also significant amount of important nutrient, while
moderating total fat, saturated fat, sodium and sugar. These
Product line includes Quaker Instant Oatmeal, G series, Tropicana,
Nut Harvest, and Naked Juice.

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3. Identity issues
There are not only issues of an ethical dilemma while PepsiCo produce high sugar
product as core products which can cause obesity of customers, but also, two
main environmental sustainability issues which are use of quality, quantity of
water and resulting pollution on water and another issues that PepsiCo faced is
the plastic waste to generate package of product.

3.1 Obesity rate (Dilemma between profitable product and healthy product)
As the core products of PepsiCo are in the product line which named Fun
for you that include high sugar rate, it might be related with obesity of
customers. Especially, as the obesity of youth stressed as a big issues,
PepsiCo faced dilemma between profitable high sugar rate product and
healthy food but it less satisfy the taste of customers. United States spend
190 billion U.S dollar to treat obesity related health problems, since two on
third of adult and one on third children in United States are suffered from
obesity and overweight (Ogden et al., 2012). Cawley and Meyerhoefer
(2012) stressed that rising consumption of drink that contain high sugar
rate has been a major contributor to the obesity rate. Jhonson et al (2009)
of American Heart Association highlight the maximum amount of sugar
intake per day as 9 teaspoons (37.5 grams) and 6 teaspoons (25 grams)
each for male and female. According to Malik et al. (2006), one can
(350ml) of Pepsi cola contains 41 grams of sugar which is already over
amount of daily recommended sugar for both male and female. It is not
only the issues of can of soft drink but also, many of the products of
PepsiCo in Fun for you category contain high sugar. However, compare
with these core products with products in Good for you line, customer
prefer high sugar products. Therefore, PepsiCo needs to concentrate on
high sugar products if it wants to increase its sales. Instead of increasing
revenue, PepsiCo might concentrate on healthy products to reduce the
opportunities of overweight and obesity of customers.

3.2 Environmental issue of PepsiCo in India

3.2.1 Industrial water use
Brady (2007), mentioned soft drink and bottled water account for
only 0.04 per cent of the total use of industrial water in India.
However, according to lack of drinkable water in India, this amount
of use has huge influence on the population who cannot access to
innocent drinkable water. Moreover 10 litters of water is used per
one litter production of soft drink. Shiva (2006) stressed the
beverage company uses 30 million litters of water per annual.
Follow the Down to Earth (2007), Kerala Groundwater department
reported that the PepsiCo over extracted 366,000 litters than
permissible limits. Not only for use of water, but also, according to
Shiva (2006), manufacture of PepsiCo caused water pollution as it
has process toxic sludge while it produced its product. CSE (Centre
for Science and the Environment)s study in 2003, an environmental

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NGO in India released reports confirming that Pepsi and Coca-Colas

soft drink contained pesticides. InfoChange (2006) highlight that
there were 24 times over the general standard in the samples.
Therefore, in 2006, PepsiCo and Coca-Cola were banned in not only
government own school but also, seven states out of 24 in India
(Kaye, 2014)

3.2.2 Industrial plastic waste management

A progress of bottling the drink of PepsiCo India, criticized by
consumers and environmental NGO for the amount to waste
created. PepsiCo experienced animosity in India over its alleged
pollution of Indian environment through the plastic waste dump in
1994. Also in 2992, a study found that, out of 10000 metric tons of
plastic generated which imported by beverage company include
PepsiCo, only 60 ~ 70% could be processed. Which means there
was huge amount of unrecyclable plastic garbage (Leonard, 1994).
Even though, India suffered from same problem by lack of a
recycling system. In a level of India policy, Municipal Solid Waste
Management rules was updated by the Ministry of Environment and
Forest of India in 2000. However, Gupta (2004), stressed that the
policy has failed to manage waste as a cyclic process, instead
treating waste as a linear system of collection and disposal and
thereby creating environmental and even health harm. There is a
lack for current regulations to access the environmental influence of
waste generated at the industrial level. In New York, the
headquarter of PepsiCo has been criticized for waste created by
packaging a bottle that people can get from the tap, especially
because only 24.6% of PET bottles used for soft drink, water and
other beverages are recycled in United States. Therefore, PepsiCo
has launched new eco-friendly bottle which made with half less
plastic of ordinary bottle (Bauerlein, 2009).

4. Apply & Demonstrate Knowledge

To identify the sustainability of PepsiCo, the issues that this report mentioned on
last section should be considered which phase PepsiCo actually in. According to
Dunphy et al. (2007), there are three waves in phases on the path to
sustainability model which are;

First wave: Resection, Non-responsiveness

Second Wave: Compliance, Efficiency, Strategic Pro-activity
Third wave: The sustaining corporation.

PepsiCo, as well as it has some progress such as minimizing plastic waste by

inventing new bottle and reducing added sugar through chemical sugar in its
products which has much less calorie to deal with the issues that the company
has faced, PepsiCo is in a second wave of the model.

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4.1 Perspective in change (Contingency Perspective)

Contingency perspective is that the behavioural view controlled by
situation. The decisions of change must account for technology, size and
structure. The strength of this perspective is that awareness of the
environment while the weakness is lack of system and best way.
Therefore, in case of PepsiCo, contingency perspective might help to
identify what change could be helpful to deal with the issues. However, as
the PepsiCo is not a small business, the change should be consultative.
There are three main factors (technology, size and structure) which is base
of the change within a contingency perspectives. Yet, as PepsiCo is one of
leading beverage and food Company, it has enough technology, size and
structure. The change can be any form and is not limited by any further
perspective approaches and theoretical conditions, while the limitations
are that contingency perspective does not help to determine what issues
or events are the most important or the what action should be done after
they are identified. In this result, contingency supporters are natural
adversaries of rational change supporters who tend to see change from
linear view where the same set of most efficient practise can be applied to
any organization in any situation.

4.2 Change tool (Total Quality Management)

Total Quality Management (TQM) is the management has steadily become
popular since the early 1980s. TQM is a method by that management and
employees can become involved in the sustainable improvement of
production of services and goods. It is a collaboration of quality and
management tools focused on growing business and declining losses
because of wasteful practices. Total Quality refers to culture, attitude and
organization of the company that strives to offer customers with services
and products which satisfy customers needs. The culture requires quality
in all aspects of the operations of the company with processes being done
right the first time and defects and waste eradicated from operations. I the
case of PepsiCo India, the company should focus on not only the
production but also customers satisfaction which PepsiCo loose in the
case study. It is not about taste of beverage but pollution caused by
industrial plastic when PepsiCo producing beverages.

5. Recommendations
It is difficult to solve the issues clearly. However, the recommendation might
help to minimize the issues of the company. Therefore, to deal with the issues
that the report mentioned, there will be one recommendation will be
suggested for each issue.

5.1 Responsibility to prevent Obesity of Customers

As there are many people who suffered from overweight and obesity,
there is responsibility to beverage companies to treat customers. It is not
only caused by beverages however, beverages contain critical amount of

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recommended sugar taken per day. Some of beverage over contain added
sugar per day compare with recommended amount of sugar. Therefore,
PepsiCo should have responsibilities to prevent obesity of customers. For
example, PepsiCo can provide activities like marathon or diet program for
customers who suffered from overweight. Diet program can be that
participants who get most healthy, can get a rewards such as one year
free gym use or some free product which in good for you line. Therefore,
customers can be motivate to exercise more and after they experience
healthier products, they can be potential customers to consume PepsiCos
healthier products. This cannot be a clear solution of obesity however,
since PepsiCo response customers health, it can be a good promotion for
potential customers in the market. Therefore, PepsiCo can have
differentiation factor to increase its name value and sales.

5.2 Less plastic uses in bottling the beverage products

Before the PET bottle, most of beverages were contained in glass.
However, because of the price, after PET material was invented,
beverages are started to be contained in PET bottle. As a result, customers
can take beverage with cheaper price and also production cost also get
cheaper. Recently, PepsiCo invented new type of bottle which contained
less plastic but still it has industrial plastic waste when they are produced.
Therefore, in this section, the recommendation will be use the glass bottle
as glass can be more recyclable compare with PET. Even if the price get
higher for the customer, company can apply reward system for example, if
customer bring glass bottle to market, they can received the amount of
money and company can collect the bottle from market with paying
amount of money when they set new products. With this system, recycle
rate will be higher and as customers can save amount of money per
bottle. Also, as customer should revisit store, company and store increase
the chance to resale the products. Therefore, this can be benefit not only
to customer, store and company but also, environment as it reduce waste
of plastic which is critical issue nowadays. Therefore, to satisfy needs of
customers, which is part of TQM, it is important to reduce the amount of
the industrial plastic waste. Through use of glass bottle, PepsiCo can
reduce the amount of waste and it will be one of way to promote
environmental sustainability.

6. Conclusion
In this report, issues of PepsiCo in India which was responsibility of customers
obesity and use of industrial water was considered to be changed. Through the
identifying the issues of sustainability, PepsiCo is in second wave of path to
sustainability model (Dunphy et al., 2007). Therefore, to develop the
sustainability of the company, one of perspectives in change and change tool
was applied which were contingency perspective and Total quality management.
Through these changes, the recommendation that given in this report which
were providing responsibilities that help customers prevent obesity and glass

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bottle for the beverage products. If PepsiCo achieve these recommendations, not
only in a short term, it increase brand name value as an Eco-friendly company to
be attractive for the potential customers but also for a long term, as the one of
critical pollution is decreasing, environmental sustainability can be achieved as
well.

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References
Bauerlein, V. (2009). Pepsi to cut back on plastic used for bottled water.
Retrieved from http://www.indiaenvironmentportal.org.in/content/pepsi-
cut-back-plastic-used-bottled-water
Brady, D. (2007). Pepsi: repairing a poisoned reputation in India. Business Week,
June 11. Retrieved from
http://www.businessweek.com/globalbiz/content/may2007/gb20070531_8
68198.htm
Cawley, J., Meyerhoefer, C. (2012). The medical care costs of obesity: an
instrumental variables approach. J Health Econ.
Center for Science and Environment. (2003). Hard truths about soft drinks. Down
to Earth, Retrieved from http://www.cseindia.org/node/507
Down to Earth. (2007). Pepsi plant indicted for polluting groundwater in Kerala.
Retrieved from http://www.indiaenvironmentportal.org.in/node/39680
Dunphy, D., Griffiths, A., Benn, S. (2007). Organisational Change for Corporate
Sustainability (2nd ed.). NY: Routledge Publishing.
Gupta, S. (2004). Rethinking waste management. India Together. Retrieved from
http://www.indiatogether.org/2004/apr/env-rethink.htm
InfoChange. (2006). Pesticide content in Indian soft drinks higher than before:
CSE. Retrieved from
http://infochangeindia.org/200609085108/Health/News/Pesticide-content-
in-Indian-soft-drinks-higher-than-before-CSE.html
Johnson, R.K., Appel, L.J., Brands, M., Howard, B.V., Lefevre, M., Lustig, R.H.,
Sacks, F., Steffen, L.M., Wylie-Rosett, J. (2009). Dietary sugars intake and
cardiovascular health: a scientific statement from the American Heart
Association.
Kaye, T. (2004). Coca-Cola India. Dartmouth College, Truck School of Business.
Leonard, A. (1994). Dumping Pepsis Plastic. Retrieved from
http://www.mindfully.org/Pesticide/Dumping-Pepsi-Plastic-India94.htm.
Malik, V. S., Schulze, M. B., & Hu, F. B. (2006). Intake of sugar-sweetened
beverages and weight gain: a systematic review. The American journal of
clinical nutrition, 84(2), 274-288.
Ogden, C.L., Carroll, M.D., Kit, B.K., Flegal, K.M. (2012). Prevalence of obesity and
trends in body mass index among US children and adolescents, 1999-
2010.

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PepsiCo. (n.d). Who We Are: Our History. Retrieved from

http://www.pepsico.com/Company/Our-History
PepsiCo. (n.d). Who We Are: Global Brand. Retrieved from
http://www.pepsico.com/Company/Global-Brands
PepsiCo. (n.d). What We Believe: Planet. Retrieved from
http://www.pepsico.com/Purpose/Performance-with-Purpose/Planet
Shiva, V. (2006). Coke Pepsi and the politics of food safety. Retrieved from
http://www.zmag.org/zspace/commentaries/2690.

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