INDUSTRIAL EXPOSURE PROJECT

ON
A STUDY OF FMCG PRODUCT
“PEPSICO”

SUBMITTED IN THE PARTIAL FULFILLMENT FOR

THE AWARD OF DEGREE OF BACHELOR IN

BUSINESS ADMINISTRATION 2016-2019

UNDER THE GUIDANCE OF:

MR. SHAKTI SHARMA

SUBMITTED BY:

SIMRAN RAJPUT

PRN NO. 1628100721

BHARATI VIDYAPEETH DEEMED UNIVERSITY

SCHOOL OF DISTANCE EDUCATION

Academic Study Center-BVIMR,New Delhi

An ISO 9001:2008 Certified Institute

NAAC Accredited Grade “A” University

1
 ACKNOWLEDGEMENT

This project is a result of dedicated effort. It gives us immense pleasure to

prepare this study of FMCG Product” Pepsi co.” We would like to thank our
project guide MR. SHAKTI SHARMA, for consultative help and constructive
suggestions on the matter on this project. We would like to thanks our
parents and colleagues who have helped us in making this project a
successful one.

2
 DECLARATION

This is to certify that I have completed a Project titled "To Study of FMCG
product “Pepsi co.” under the guidance of MR. SHAKTI SHARMA in the
partial fulfillment of the requirement for the award of Bachelors of Business
Administration of BharatiVidyapeeth University, New Delhi. This is an
original piece of work & I have not submitted it earlier elsewhere.

SIMRAN RAJPUT

3
 CONTENTS

Sr. No Particular
Certificate by the guide
Candidate’s statement
Preface
Acknowledgement
1 Introduction Of The Industry
1.1 Nature of Business
1.2 Type & Ownership pattern
1.3 Organisational structure
1.4 Production Layout
1.5 Organisational Policies
2 Industrial Analysis
2.1 Industry Overview
2.2 Current Issues
2.3 Key competitors
2.4 Environmental Scanning
2.5 Porter’s Five Forces Model of competition
3 Marketing Strategies
3.1 Products of company
3.2 4P’s
3.3 STP (Segmentation, Targeting and Positioning)
3.4 Distribution Channel
3.5 Promotion Strategies
4 Financial Analysis
4.1 Sources of Finance
4.2 Ratio Analysis
4.3 Financial Statement Analysis
5 Key Learnings from the company and recommendations
5.1 Performance Analysis of the Company
5.2 Reasons for diversification od Company
5.3 Market share/ growth rate of Company
5.4 SWOT Analysis of the Company
6 Findings
7 Conclusion
Bibliography

4
 Chapter-1
Introduction of the company

5
1.1 Nature of Business

PepsiCo, Inc. is an American multinational food, snack, and beverage corporation

headquartered in Purchase, New York. PepsiCo has interests in the manufacturing,
marketing, and distribution of grain-based snack foods, beverages, and other products.
PepsiCo was formed in 1965 with the merger of the Pepsi-Cola Company and Frito-Lay, Inc.
PepsiCo has since expanded from its namesake product Pepsi to a broader range of food and
beverage brands, the largest of which have included an acquisition of Tropicana Products in
1998 and the Quaker Oats Company in 2001, which added the Gatorade brand to its portfolio.

At the heart of PepsiCo is Performance with Purpose – its goal to deliver top-tier financial
performance while creating sustainable growth and shareholder value. In practice,
Performance with Purpose means providing a wide range of foods and beverages from treats
to healthy eats; finding innovative ways to minimize their impact on the environment and
reduce operating costs; providing a safe and inclusive workplace for employees globally; and
respecting, supporting and investing in the local communities where they operate.

1.2 Type and Ownership Pattern

The recipe for the soft drink Pepsi was first developed in the 1880s by Caleb Bradham, a
pharmacist and industrialist from New Bern, North Carolina. He coined the name "Pepsi-
Cola" in 1898. As the cola developed in popularity, he created the Pepsi-Cola Company in
1902 and registered a patent for his recipe in 1903. The Pepsi-Cola Company was first
incorporated in the state of Delaware in 1919. The company went bankrupt in 1931 and on
June 8 of that year, the trademark and syrup recipe were purchased by Charles Guth who
owned a syrup manufacturing business in Baltimore, Maryland. Guth was also the president
of Loft, Incorporated, a leading candy manufacturer, and he used the company's labs and
chemists to reformulate the syrup. He further contracted to stock the soda in Loft's large
chain of candy shops and restaurants, which were known for their soda fountains, used Loft
resources to promote Pepsi, and moved the soda company to a location close by Loft's own
facilities in New York City. In 1935, the shareholders of Loft sued Guth for his 91% stake of
Pepsi-Cola Company in the landmark case Guth v. Loft Inc. Loft won the suit and on May
29, 1941 formally absorbed Pepsi into Loft, which was then re-branded as Pepsi-Cola
Company that same year. Loft restaurants and candy stores were spun off at this time. In the
early 1960s, Pepsi-Cola's product lines expanded with the creation of Diet Pepsi and purchase
of Mountain Dew.

In 1965, the Pepsi-Cola Company merged with Frito-Lay, Inc. to become PepsiCo, Inc.. At
the time of its foundation, PepsiCo was incorporated in the state of Delaware and
headquartered in Manhattan, New York. The company's headquarters were relocated to their
present location of Purchase, New York in 1970, and in 1986 PepsiCo was reincorporated in
the state of North Carolina.

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1.3 Organisational Structure
PepsiCo’s organizational structure has been reformed several times to address changing global
market conditions. The company’s current corporate structure reflects the business aims of global
expansion and leadership. These aims highlight PepsiCo’s mission and visionstatements.
PepsiCo’s strategiesare also manifested in how its organizational structure supports international
growth. A firm’s organizational structure defines the system and design of business components,
and how these components interact to fulfill the firm’s mission and vision. In PepsiCo’s case, the
organizational structure enables control over the expansive reach of the company around the
world, considering significant differences among market conditions.

Features of PepsiCo’s Organizational Structure

PepsiCo originally had a hierarchical organizational structure in its early years. However, after a
number of key mergers and acquisitions, along with global expansion, the company has changed
its organizational structure accordingly. The following are the main characteristics of
PepsiCo’s organizational structure:
 Market Divisions.
The most prominent feature of PepsiCo’s organizational structure is its market divisions.
These divisions are based on two variables: business and geography. In terms of business,
PepsiCo’s maintains one global division for Frito-Lay and another global

7
 division for Quaker Foods. In terms of geography, the company has divisions for the
Americas, Europe, and other regions. The following are the market division in
PepsiCo’s organizational structure:
1. PepsiCo Americas Beverages
2. Frito-Lay
3. Quaker Foods
4. Latin America Foods
5. PepsiCo Europe
6. PepsiCo Asia, Middle East & Africa

 Functional Corporate Groups/Offices.

This characteristic of PepsiCo’s organizational structure refers to basic business
functions. The company has global or corporate offices for these functions. PepsiCo’s
objective in having functional groups is to ensure corporate control and rapid
implementation of policies and strategies. An Executive Vice President or Senior Vice
President heads each of these groups. The following are the main functional corporate
groups/offices at PepsiCo:
1. Global Categories and Operations
2. Global Research and Development
3. Human Resources
4. Finance
5. Government Affairs and Legal
6. Talent Management, Training and Development
7. Communications

 Global Hierarchy.
PepsiCo’s organizational structure also features a hierarchy that spans the global
organization. A hierarchy typically supports monitoring, control and governance at
the global/corporate level. PepsiCo has maintained considerable hierarchy for top-
down communications, monitoring and control. This characteristic of the
organizational structure also provides a means through which PepsiCo minimizes
deviations from its policies and strategies.

PepsiCo’s Organizational Structure Advantages & Disadvantages

The primary advantage of PepsiCo’s organizational structure is the ability to focus on regional
market needs. This is possible through market divisions. The organizational structure also has the
advantage of supporting PepsiCo’s global corporate control. However, PepsiCo experiences the
disadvantage of the limits of its organizational structure in terms of flexibility. For example, the
company has a single global division for Frito-Lay. This characteristic reduces PepsiCo’s ability
to respond to market variations and changes in its Frito-Lay business. Thus, a possible
improvement is to divide such single global divisions into regional market divisions, so that
PepsiCo could enhance its responses to market variations around the world.

8
1.4 Production Layout
Demand for their products is also dependent in part on product quality, product and
marketing innovation and production and distribution, including their ability to:
 maintain a robust pipeline of new products;
 improve the quality of existing products;
 extend our portfolio of products in growing markets and categories;
 respond to cultural differences and regional consumer preferences (whether through
developing or acquiring new products that are responsive to such preferences);
 monitor and adjust our use of ingredients (including to respond to applicable
regulations);
 develop a broader portfolio of product choices and continue to increase non-carbonated
beverage offerings and other alternatives to traditional carbonated beverage offerings;
 develop sweetener alternatives and innovation;
 improve the production, packaging and distribution of our products;
 respond to competitive product and pricing pressures and changes in distribution
channels, including in the growing e-commerce channel;
 implement effective advertising campaigns and marketing programs, including
successfully adapting to a rapidly changing media environment through the use of
social media and online advertising campaigns and marketing programs.

1.5 Organisational Policies

PepsiCo believe that business and society can thrive together. They are guided by
Performance with Purpose: delivering top-tier results in a way that sustains and respects
business, society and the planet.

Our Mission

As one of the largest food and beverage companies in the world, their mission is to provide
consumers around the world with delicious, affordable, convenient and complementary foods
and beverages from wholesome breakfasts to healthy and fun daytime snacks and beverages
to evening treats. They are committed to investing in people, company and the communities
where they operate to help position the company for long-term, sustainable growth.

Our Vision

PepsiCo is committed to achieving business and financial success while leaving a positive
imprint on society – delivering what we call Performance with Purpose.
In practice, Performance with Purpose means providing a wide range of foods and beverages
from treats to healthy eats; finding innovative ways to minimize impact on the environment and
reduce its operating costs; providing a safe and inclusive workplace for its employees globally;
and respecting, supporting and investing in the local communities where they operate.

9
Guiding Principles

To advance their mission and vision with honesty, fairness and integrity, they are committed
to six guiding principles. When conducting business around the world, they must always
strive to:
 Care for our customers, our consumers and the world we live in.
We are driven by the intense, competitive spirit of the marketplace, but we direct this spirit
toward solutions that benefit both our company and our constituents. We see our success as
inextricably linked to that of our customers, consumers and communities.
 Sell only products we can be proud of.
The true test of our standards is our own consumption and endorsement of the products we
sell. Without reservation. Our confidence helps ensure the quality of our products, from the
moment we purchase ingredients to the moment it reaches the consumer's hand.
 Speak with truth and candour.
We tell the whole story, not just what's convenient to our individual goals. In addition to being
clear, honest and accurate, we are responsible for ensuring our communications are understood.

 Win with diversity and inclusion.

We embrace people with diverse backgrounds, traits and ways of thinking. Our diversity
brings new perspectives into the workplace and encourages innovation, as well as the ability
to identify new market opportunities.
 Balance short-term and long-term.
In every decision, we weigh both short-term and long-term risks and benefits. Maintaining
this balance helps sustain our growth and ensures our ideas and solutions are relevant both
now and in the future.
 Respect others and succeed together.
Our mutual success depends on mutual respect, inside and outside the company. It requires
people who are capable of working together as part of a team or informal collaboration.While
our company is built on individual excellence, we also recognize the importance and value of
teamwork in turning our goals into accomplishments.

10
 Chapter-2
Industrial Analysis

11
2.1 Industry Overview
Even though traditional and homemade drinks will always remain popular, packaged beverages
are gaining traction with Indian consumers who are now frequently reaching for their more
convenient-to-consume counterparts—soft drinks. While consumption is on the rise, soft drink
manufacturers have some distance to go before they fully capitalise on the opportunity.

Over the past two years, the soft drink industry has seen a value growth of 11% compound
annual growth rate (CAGR) and a volume growth of 5% CAGR. In total, 1.25 billion people
in the country drink 5.9 billion litres of soft drinks in a year. This makes India’s per capita
soft drinks consumption large, but just 1/20th of that of the U.S., 1/10th of Kuwait, 1/8th of
Thailand and Philippines, and one-third of Malaysia’s.

Driving up per capita consumption of soft drinks in India, calls for decisive action by the
industry to catch up with the growth rate of other fast moving consumer goods (FMCG)
including the food basket, which currently outpace soft drinks (Food CAGR is 9%). Over
years, the soft drinks category has also been affected by issues related to health concerns and
pressure from government policies. However, there have been sporadic efforts to drive
growth in rural areas in recent years, which have received only a tepid response, as rural
consumption levels still stand at two-third of that of consumption in urban areas.

The challenge for this industry therefore, is to restore its pace of volume growth by increasing
the per capita consumption of soft drinks in India, catch up with international consumption
levels of soft drinks and perform at par with other FMCG categories in India, like salty
snacks, chocolates and biscuits.
THE THREE GROWTH DRIVERS FOR THE SOFT DRINK SEGMENT

Small evolving segments like energy drinks may not be sufficient to either drive the per
capita consumption or bring in the desired growth for this category. The first challenge that
this category faces is to outpace other impulse consumption and traditional options available
and clock high single-digit growth in volume. Moreover, the category is dependent on
soaring summer temperatures across the country, and a delayed onset of rain and winter can
affect demand.
We identified three winning strategies that give growth impetus to India’s soft drink category.

 Continuous and aggressive focus on innovations

 Making the category season-neutral
 Focus on execution

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2.2 Current Issues
The Indian soft drinks industry has witnessed a radical change in the last few years. In India,
after the exit of Coke in 1977, Parle and Pure drinks controlled the soft drinks market. By the
end of 1970s, Campa Cola was practically alone in the cola market. Parle introduced Thums
Up in the beginning of 1980s. Until 1991, the domestic market was ruled by Parle, with a
60% market share. Its 3 brands - namely Thumps Up, Gold Spot and Limca were the
undisputed leaders. The regional brands took up the remaining market. But the market
scenario changed drastically when in 1991, Pepsi Foods Limited (PFL) made an entry in
India. Since then, the face of Indian soft drinks industry has changed completely. Today, the
soft drinks industry in India is dominated by two major players - Pepsi and Coca Cola
Limited. Like each industry, this industry too has its own contours of strategies. In the current
research paper, effort has been made to identify and elaborate upon the strategies used by
these two major players in the Indian market.

Ravi Jaipuria keen to acquire PepsiCo's bottling operations 

Ravi Jaipuria, the promoter of RJ Corp, is keen to acquire PepsiCo's bottling
operations in India that his group doesn't already own. 

"Whether PepsiCo wants to give us more is a call they have to take. We are keen.
But it depends on them," Jaipuria, promoter of the $1.6-billion diversified RJ Corp,
said when asked if he would be interested in acquiring the bottling rights of the cola
company nationally. RJ Corp is PepsiCo's second-biggest bottler globally. 

13
DOMESTIC COMPANIES CONTRIBUTE TO THE MORE INTENSE
COMPETITION

2016 saw the emergence of many small and regional soft drinks companies such as
Manpasand Beverages and Hector Beverages, among others, all of which are fighting for
retail shelf space with global giants such as Coca-Cola India and PepsiCo India, among other
major multinational players, and these smaller players are performing well. This has led to
competition in soft drinks becoming even more intense. Nevertheless, Coca-Cola India
continued to lead soft drinks in 2016, mainly due to its wide portfolio of brands including
Thums Up, Sprite, Limca and Fanta.

GOVERNMENT AND CONSUMERS SHIFT TOWARDS JUICE-BASED

CARBONATES

Juice and juice-based carbonates remained among the most important priorities for India’s
leading soft drinks companies in 2016, especially in light of the emphasis of India’s central
government on the manufacture of fresh fruit-based drinks and the slowing growth seen in
non-fruit based carbonates categories over the review period. For example, Coca-Cola India
launched Fanta Green Mango in 2016, which was quite popular among consumers. This
product was launched after Prime Minister Narendra Modi asked the country’s major soft
drinks companies to add at least 5% fruit-based content to their products and it became
popular primarily because of its refreshing taste.

Varun Beverages rallies 9% on strategic deal with PepsiCo 

Shares of Varun Beverages shot up 9 per cent in Friday's trade after the company entered into
strategic partnership with PepsiCo for the larger Tropicana portfolio along with Gatorade and Quaker
Value-Added Dairy in territories across North and East India. 

This is part of VBL's strategy to expand its product portfolio through its valued relationship with
PepsiCo. 

Following the development, the counter witnessed block deals in opening trade, ET Now reported.

2.3 Key Competitors

Pepsico beverage, food and snack products are in highly competitive categories and markets
and compete against products of international beverage, food and snack companies that, like
them, operate in multiple geographies, as well as regional, local and private label
manufacturers, economy brands and other competitors. In many countries in which their
products are sold, including the United States, The Coca-Cola Company is its primary
beverage competitor. Other beverage, food and snack competitors include, but are not limited
to, DPSG, Kellogg Company, The Kraft Heinz Company, International, Inc., Monster
Beverage Corporation, Nestlé S.A., Red Bull GmbH and Snyder’s-Lance, Inc.

Many of their food and snack products hold significant leadership positions in the food and
snack industry in the United States and worldwide. In 2016, Pepsico and The Coca-Cola

14
Company represented approximately 24% and 20%, respectively, of the U.S. liquid
refreshment beverage category by estimated retail sales in measured channels, according to
Information Resources, Inc. However, The Coca-Cola Company has significant carbonated
soft drink (CSD) share advantage in many markets outside the United States.

Their beverage, food and snack products compete primarily on the basis of brand recognition
and loyalty, taste, price, value, quality, product variety, innovation, distribution, advertising,
marketing and promotional activity, packaging, convenience, service and the ability to
anticipate and effectively respond to consumer preferences and trends, including increased
consumer focus on health and wellness. Success in this competitive environment is dependent
on effective promotion of existing products, effective introduction of new products and the
effectiveness of our advertising campaigns, marketing programs, product packaging, pricing,
increased efficiency in production techniques, new vending and dispensing equipment and
brand and trademark development and protection. Pepsico believe that the strength of brands,
innovation and marketing, coupled with the quality of products and flexibility of its
distribution network, allows them to compete effectively.

2.4 Environmental Scanning

Conversely, the energy drink companies were experiencing a positive growth. Hansen
Natural, which has both soft drinks and energy drinks in its portfolio of products, witnessed a
+3.3% CSD growth. Additionally, Red Bull's volume also increased +5.2%. Although
Hansen Natural and Red Bull make up a small portion of the total market share pie, the
increase in their growth rates indicates that PepsiCo has to pay attention to them.

15
Political Factors:
There are several political factors that influence the soft drinks industry:

Obey food, Drug and cosmetic acts: the process of producing and distributing the soft drinks in
the market is subjects to many federal laws such as the food, drug and cosmetics acts. It is also
subject to American with disabilities acts. The presence of these laws helps create a healthy
environment for the consumers. This will limit the potentials of new entrants in this industry.

Environmental laws & regulations: these laws enforce packaging, recycling, water and
energy policies to make sure the CSD industry operates in a healthy environment. This leads
to making the soft drink industry more attractive for consumers.

Double Taxation: Another political factor is that companies operating in the industry are
obligated to tax payments for the products they offer and distribute in each country they
operate within. Hence, this leads to making the industry less attractive because operating
firms are subject to double taxation policies.

Economical Factors:
Inflation in diesel prices: it is an important factor affecting the CSD industry. Since, the CSD
relies on trucks to distribute its diverse end line products; trucks are subject to inflation in
fuel prices. Since the consumption of fuel is the core activity, diesel prices are subject to
inflation depending on the market conditions. Yet, the possibility of a market crisis rises.

Foreign exchange rates fluctuations: Carbonated soft drinks firm's revenues are affected by
exchange rates fluctuations as well as profits and the cost of raw materials. Due to the weak
economic growth the industry will suffer heavily by changes in exchange rates. Thus, profits
and cost are going to be lower and higher respectively.

Socio cultural Factors:

Obesity: Dr. Gabe Mirkin says: "A study from Harvard shows that of soft drinks may be
responsible for the doubling of obesity in children over the last 15 years." (Gabe Mirkin, 2004)

Recently, as the people are becoming more and more educated, the level of their health awareness
is increasing. Obesity is becoming more and more apparent, leading to people taking good care of
their health. Soft drinks are full with empty calories which cause obesity. The trend of obesity in
children is rising since the soft drinks consumers are young and between the range of 14 and 30.
In fact, studies done by the UCLA Center for Health Policy Research shows that "Adults who do
drink one or more sodas or other sugar-sweetened beverages each day are 27% more likely to be
overweight or obese." (16 Facts About Soft Drinks and Obesity, 2009)

Change in life style & consumer tastes: Nowadays the consumer of the carbonated soft drink
industry are shifting their tastes toward drinking more healthier drinks such as water and
fresh juices instead of carbonated soft drink full with sugar that will have a negative effect on
the consumer health in the long run.

People have become more health conscious for instance they are moving toward the
consumption of healthier beverages such as water and fresh juices. It's estimated that the
consumption of juices will increase up to 20 % within the coming three years. (Health
Conscious Chileans Switching to Non-carbonated Drinks, 2009)

16
Technological Factors:
Introducing new technologies in the soft drink industry has helped in developing the process
of manufacturing. For example:

PDX technology:

It is a shockwave technology that helps in mixing the ingredients in an efficient way. Pursuit
Dynamics, the supplier, said that this technology is most useful for the soft drinks industry.
This technology is believed to help in cutting the cleaning time up to 80%. Also, it will also
increase the processing speed and save power.

2.5 Porter’s Five Forces Model of Competition

Porter’s Five Forces Model is one of the most popular frameworks in management. This
framework is widely used across management disciplines specially so in case of Strategy and
Marketing. This is one model that has brought strategic management in the heart of
management agenda. Porter’s Five Forces Model helps analyze competitive scenario in an
industry. This framework helps determine industry profitability and can be used as one of the
inputs while deciding to enter an industry. This famous framework was contributed by
Michael E. Porter. The basic framework is as shown in the diagram below.

So, the five forces that determine the industry profitability as per this framework are: Threat
of New Entry, Buyer Power, Supplier Power, Threat of Substitution and Competitive Rivalry.
There are various parameters which can be used to determine the nature of these forces. Each
of the force is classified as low, medium or high depending on the nature of those parameters.
The parameters used to measure nature of the forces are described in below diagram.

17
The soft drink industry is very competitive for all corporations involved, with the greatest
competition being that from rival sellers within the industry. All soft drink companies have to
think about the pressures; that from rival sellers within the industry, new entrants to the
industry, substitute products, suppliers, and buyers.

The competitive pressure from rival sellers is the greatest competition that Coca-Cola faces
inthe soft drink industry. Coca-Cola, Pepsi Co., and Cadbury Schweppes are the largest
competitors in this industry, and they are all globally established which creates a great
amount of competition. Though Coca-Cola owns four of the top five soft drink brands (Coca-
Cola, Diet Coke, Fanta, and Sprite), it had lower sales in 2005 than did PepsiCo.

However, Coca-Cola has higher sales in the global market than PepsiCo. In 2004, PepsiCo
dominated North America with sales of $22 billion, whereas Coca-Cola only had about $6.6
billion, with more of their sales coming from overseas. PepsiCo is the main competitor for
Coca-Cola and these two brands have been in a power struggle for years.
Brand name loyalty is another competitive pressure. The Brand Keys’ Customer Loyalty
Leaders Survey (2004) shows the brands with the greatest customer loyalty in all industries.
Diet Pepsi ranked 17th and Diet Coke ranked 36th as having the most loyal customers to their
brands. The new competition between rival sellers is to create new varieties of soft drinks,
such as vanilla and cherry, in order to keep increasing sales and enticing new customers.

New entrants are not a strong competitive pressure for the soft drink industry. Coca-Cola
andPepsi Co dominate the industry with their strong brand name and great distribution
channels. In addition, the soft-drink industry is fully saturated and growth is small. This
makes it very difficult for new, unknown entrants to start competing against the existing
firms. Another barrier to entry is the high fixed costs for warehouses, trucks, and labour, and
economies of

18
scale. New entrants cannot compete in price without economies of scale. These high capital
requirements and market saturation make it extremely difficult for companies to enter the soft
drink industry; therefore, new entrants are not a strong competitive force.

Substitute products are those competitors that are not in the soft drink industry.
Suchsubstitutes for Coca-Cola products are bottled water, sports drinks, coffee, and tea.
Bottled water and sports drinks are increasingly popular with the trend to be a more health
conscious consumer. There are progressively more varieties in the water and sports drinks
that appeal to different consumers’ tastes, but also appear healthier than soft drinks. In
addition, coffee and tea are competitive substitutes because they provide caffeine. The
consumers who purchase a lots of soft drinks may substitute coffee if they want to keep the
caffeine and lose the sugar and carbonation. Specialty blend coffees are also becoming more
popular with the increasing number of Starbucks stores that offer many different flavours to
appeal to all consumer markets. It is also very cheap for consumers to switch to these
substitutes making the threat of substitute products very strong.

Suppliers for the soft drink industry do not hold much competitive pressure. Suppliers
toCoca-Cola are bottling equipment manufacturers and secondary packaging suppliers.
Although Coca-Cola does not do any bottling, the company owns about 36% of Coca-Cola
Enterprises, which is the largest Coke bottler in the world (Murray, 2006a). Since Coca-Cola
owns the majority of the bottler, that particular supplier does not hold much bargaining
power. In terms of equipment manufacturers, the suppliers are generally providing the same
products. The number of equipment suppliers is not in short supply, so it is fairly easy for a
company to switch suppliers. This takes away much of suppliers’ bargaining power.

The buyers of the Coca-Cola and other soft drinks are mainly large grocers, discount
stores,and restaurants. The soft drink companies distribute the beverages to these stores, for
resale to the consumer. The bargaining power of the buyers is very evident and strong. Large
grocers and discount stores buy large volumes of the soft drinks, allowing them to buy at
lower prices. Restaurants have less bargaining power because they do not order a large
volume. However, with the number of people are drinking less soft drinks, the bargaining
power of buyers could start increasing due to decreasing buyer demand.

Porter’s Five Forces Model identifies the five forces of competition for any company. The
recognition of the strength of these forces helps to see where Coca-Cola stands in the
industry. Of the five forces, rivalry within the soft drink industry, especially from PepsiCo, is
the greatest source of competition for Coca-Cola.

19
 Chapter-3
Marketing Strategies

20
 3.1 Products of the Company
PepsiCo nourishes consumers with a range of products from tasty treats to healthy eats that
deliver enjoyment, nutrition, convenience as well as affordability. Our brands stand for
quality and are respected household names.
Beverages
PepsiCo India’s expansive beverage portfolio includes:
 Iconic refreshment beverages: Pepsi, 7UP, Nimbooz, Mirinda, Mountain Dew,
 Low-calorie options: Diet Pepsi
 Hydrating and nutritional beverages: Aquafina (drinking water), Gatorade (isotonic
sportsdrink)
 Fruit juices: Tropicana100%
 Juice-based drinks: Tropicana Nectars, Tropicana Twister, Slice
 Local brands: Lehar Evervess Soda, Dukes Lemonade, Mangola

Foods

PepsiCo’s food division, Frito-Lay, is the leader in the branded salty snack market. All Frito-
Lay products are free of trans-fat and MSG. Frito-Lay’s core products are:
 Lay's potato chips
 Kurkure
 Kurkure Desi Beats
 Uncle Chipps
 Cheetos extruded snacks (including Cheetos Whoosh made of whole grain and vegetables)

Other products:
 Quaker Oats (high-fibre breakfast cereal)
 Traditional snacks under the Kurkure and Lehar brands
 Low fat and roasted snack options

21
3.2 Marketing Mix- 4P’s
The second largest soft drink player in the world, Pepsi has implemented several smart
strategies in the last decade to improve its turnover and profits. Pepsico’s expansion in snacks
like Lays, Quaker oats, Cheetos and Kurkure have given them an edge over Coca cola.
Although Coca cola is still the number one selling brand, Pepsi has reduced their dependency
on Soft drinks by expanding their product mix.

We are discussing the marketing mix of Pepsi. We know that the marketing mix is a dynamic
process and is always changing with respect to price and promotions. Thus, kudos to Pepsi,
which has always kept changing their marketing mix with the changing environment. Here is
the Pepsi marketing mix or the 4P’s of Pepsi.

3.2.1 PepsiCo’s Products (Product Mix)

This element of the marketing mix identifies the organizational outputs made available to
customers. PepsiCo started as the Pepsi-Cola Company, with all original products under the
Pepsi brand. The following are the current product lines of PepsiCo:
 Soft drinks
 Energy drinks
 Cereal
 Rice snacks
 Snacks
 Side dishes
 Breakfast bars
 Sports nutrition
 Bottled water
 Other merchandise

Many of PepsiCo’s current brands and products were added to the product mix through
acquisitions. For example, snack products were added after PepsiCo acquired Frito-Lay. Other
merchandise includes tumblers and t-shirts, which are manufactured by other companies with
license from PepsiCo. This element of the marketing mix is linked to PepsiCo’s generic strategy
and intensive growth strategies, which highlight international expansion.

3.2.2 Place/Distribution in PepsiCo’s Marketing Mix

PepsiCo uses a global network for distributing its products to consumers. Venues for
distribution and sale are considered in this element of the marketing mix. PepsiCo’s places
for distribution are as follows:
 Retailers
 Online merchandisers

Most PepsiCo products are available at retailers, such as supermarkets, grocery stores, and
convenience stores. However, customers can access PepsiCo-licensed merchandise like

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tumblers and t-shirts through retailers and their websites. Based on this element of the
marketing mix, PepsiCo’s places for distributing its products are mostly non-online retailers.

3.2.3 PepsiCo’s Promotion (Promotional Mix)

PepsiCo promotes its products to attract target customers. This element of the marketing mix
covers the marketing communications strategies and tactics that the company uses to reach its
customers. The following are the tactics in PepsiCo’s promotional mix, arranged according to
significance:
 Advertising
 Sales promotion
 Direct marketing
 Public relations

Advertising is PepsiCo’s primary tactic for marketing communications. For example, the
company is popularly known for using celebrity endorsers to promote its products on TV,
radio, print media, and online media. The firm also advertises through business signs it
sponsors or gives to stores and other establishments. PepsiCo occasionally applies sales
promotions, such as package deals or discounts. Also, the company’s local offices sometimes
implement direct marketing through agreements to provide products to organizations at
wholesale prices. Furthermore, PepsiCo uses public relations through financial assistance and
sponsorships, such as in sports events. This element of the marketing mix indicates that
advertisements are the main determinant of PepsiCo’s ability to communicate with target
customers and promote its products.

3.2.4 PepsiCo’s Prices and Pricing Strategy

PepsiCo’s prices are considerably varied because the company has a wide product mix, which
means that it has a large number of product lines and brands. Approaches used to set prices are
analyzed in this element of the marketing mix. PepsiCo’s main pricing strategies are as follows:

 Market-oriented pricing strategy

 Hybrid Everyday Value pricing strategy

Most of PepsiCo’s products are priced based on the market-oriented pricing strategy. The
company’s objective in using this strategy is to ensure that its prices are competitive, based
on other firms’ prices and prevailing market conditions. On the other hand, Hybrid Everyday
Value is PepsiCo’s pricing strategy for some of its products, especially soft drinks. The
company’s objective in using this pricing strategy is to close the gap between
regular/everyday prices and discounted holiday prices. In this way, PepsiCo expects
consumers to buy more of its soft drinks everyday and not just during the holidays.

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3.3 Segmentation Targeting and Positioning
PepsiCo segmentation, targeting and positioning decisions can be specified as the essence of
overall marketing efforts. Segmentation involves dividing population into groups according
to certain characteristics, whereas targeting implies choosing specific groups identified as a
result of segmentation to sell products. Positioning refers to the selection of the marketing
mix the most suitable for the target customer segment.

PepsiCo uses multi-segment type of positioning and accordingly, it targets more than one
customer segment at the same time with different products or service packages. For example,
Pepsi-Cola is positioned as soft drink that tastes good and has a pleasantly refreshing impact.
However, Pepsi-Cola contains a high amount of sugar and it is not positioned for customers
that are concerned about health implications of consuming carbonated soft drinks. For this
specific customer segment PepsiCo offers Diet Pepsi, which is positioned as a soft carbonated
drink that contains less among of sugar compared to Pepsi-Cola and other soft drinks. The
following table illustrates PepsiCo segmentation, targeting and positioning:
Type of segmentation Segmentation criteria PepsiCo target segment

Geographic Region Domestic/international

Density Urban/rural

Demographic Age 15-45

Gender Males & Females

Life-cycle stage Bachelor Stage young, single people not living at

Home

Newly Married Couples young, no children

Full Nest I youngest child under six

Full Nest II youngest child six or over

Income Average, above average and high earners
Occupation Students, employees, professionals
Behavioral Degree of loyalty ‘Hard core loyals’ and ‘Soft core loyals’
Benefits sought Refreshment, enjoying good taste, satisfaction of a
habit, spending time
Personality Easygoing/determined/ambitious
User status Regular users
Psychographic Social class Working class, middle class and upper class
Lifestyle[1] Aspirer, Succeeder, Explorer

PepsiCo segmentation, targeting and positioning

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It is important to specify that PepsiCo portfolio comprises 22 brands including Pepsi-Cola,
Lay’s, Mountain Dew, Gatorade, Tropicana and others[2], andthe Table 2 above specifies
PepsiCo target customer segment in general by focusing on the common characteristics of
positioning of brands within PepsiCo portfolio. There are some differences among brands
within PepsiCo portfolio in terms of their nutritional value, pricing, packaging etc. and these
differences impact the position of each individual brand.

3.4 Distribution Channels

PepsiCo Inc. (PEP) is a leading food and beverage company with an impressive global
presence. The company’s products reach the market through the following three channels:
direct store delivery (or DSD), customer warehouse, and third-party distributor networks.
PepsiCo chooses the relevant distribution channel based on customer needs, product
characteristics, and local trade practices.

 Direct store delivery

Under the DSD system, PepsiCo delivers products directly to retail stores. Of the three
channels, DSD enables PepsiCo to merchandise with maximum visibility. It’s more suitable
for products that are restocked often and are sensitive to promotions and marketing.
 Customer warehouse

The customer warehouse system is a less expensive distribution channel. It’s ideal for products
that are less fragile and perishable, have lower turnover, and are not purchased impulsively.

 Third-party distributor networks

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PepsiCo distributes food and beverage products to restaurants, businesses, schools, and
stadiums through third-party food service and vending distributors and operators.
 Leveraging its dominant position

PepsiCo is the second-largest nonalcoholic beverage maker in the United States with a large
scale of operations. The company’s dominant position helps it enjoy favorable relationships
with its retailers, who allow the company to have major shelf space. This helps PepsiCo
influence consumer shopping patterns and increases the coincidence of purchase of its
complementary food and beverage products.

3.5 Promotion strategy

Promotion
Promotion is one of the four aspects of marketing. Promotion comprisesfour sub categories:
1. Advertising
2. Sales promotion
3. Publicity and public relations
4. personal selling
The specification of these four variables creates a promotional mix or promotional plan. A
promotional mix specifies how much attention to payto each of the four sub categories, and
how much money to budget for each. A promotional plan can have a wide range of
objectives, including:sales increases, new product acceptance, and creation of brand equity
,Positioning, competitive retaliations, or creation of a corporate image
Promotional Strategies for PEPSI
The two basis objective for carrying out such various promotional activitiesby Pepsi is to
generate more sales as well as to create and maintain animage of its product. It carries out
promotional activities as controlled andintegrated programmer of communication land,
material design presentsits soft drink to perspective customers, and it also helps in
communicatingthe need of soft drink to facilitate the sale eventually to contribute towardthe
profit in long range.The tools used by Pepsi for fulfilling various purposes of its
promotionalactivities are the following
1. Advertising
The main motive behind the purpose of advertising of Pepsi Food Pvt ltd isto maintain the
brand loyalty. All the bottles of India has to advertise the product Pepsi, 7up, Mirinda,Slice,
Team and Soda as per the norms and guidance of the Pepsi FoodPvt Ltd. India. On national
basis the Pepsi Food Pvt Ltd does theadvertisement on an extensive basis using a number of
media.
Media
1. Painting wall of visible site
2. Aerial signage –Glow signage board
3. Boards
4. Poster
 5. Banner
 6. Striker 
2. Sales Promotion
The sale promotion is one area of 
“Promotion
 
Mix”
where every companyconcentrates most to promote its brands. Although sell promotion
hasshort life period yet it is very effective in promoting sale to the greater extent. Sale
promotional activities adopted by Pepsi are:
 
Premiums (Gifts):
The Company gives different types gifts to hisown consumer with either every bottle or some
bottles in itscrown. The gifts often comprise cash money, rebates free softdrinks, openers,
crown scheme, goods etc.
 

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POP display and demonstration:
The Pepsi Company involvesPOP (Point purchase display and demonstration) to promote
itsbrands. Here, the company supplies different kinds of attractiveand good posters, calendars,
caps tee to wholesalers and retailersto promote its brand through POP display and
demonstration.
 
Discount:
Time to Time and is peak season (ie; March-September) company announces discount for
wholesalers,retailers and consumers also.
 
Scratch Card:
Scratch is one of the very effective and importantmethods of the sale promotion adopted by
the Pepsi. Thecompany offers scratch card offer at every retail outlet to promotesale. Here,
with every bottle of Pepsi brands, a scratch card isgiven to buyer. Every card ha some hidden
prizes. The prize isappeared after rubbing. The consumers are given the prizeassociated with
appeared prize.

3. Public relation and Publicity

 As public relation is a management tool designed to favourably influenceattitudes towards an
organization, its products and policies, whereaspublicity is any communication about an
organization, its products and policies through the media which is not paid by the
organizationBut beyond this, Pepsi goes for “Marketing Public Relation(MPR)”
wherethe company directly support corporate product promotion and image making. This is
the responsibility make for marketing division rather than public relation department.
To promote its products through Marketing Public Relation, Pepsi has various tools,
 
Organizing events:
Pepsi organises, sponsors and co-sponsors variousgames and sport events to get publicity,
through electronic and printmedia. These games may be played at local, national and
internationallevel. Besides this the company also sponsors various functions andindoor games
at local levels.
Music and Dance Programme:
Time to time, Pepsi sponsors variousmusic and dance programs in different cities across the
country. This typeof events organized by Pepsi has become very helpful ini. Building the
corporate image favourable in publicii. Boosting the sales force and dealer enthusiasm.
They feelproud to speak about its productsiii. Influencing
specific target market and bringing interest inproduct category
4. Personal selling
Conceptually there is not any place for personal selling in soft drinkindustry. It falls into
illegal trade. However Pepsi adopts surrogate natureof personal selling. 
As soft drink allows the company to communicate frequently and directlywith wholesalers
and retailers than consumers. For clear and reliablecommunication, the company
appoints“Territory sales executive” in every market segments. The main work of territory
sales executives is tocommunicate with wholesalers and retailers of their concerned
marketsegments on regular basis.
Besides they also play the watchdog in the market. They observe thebrand position in the
market and compare it withcompetitor’sbrand andplace the report to area sales manager. They
also see that there is nomuch fluctuation in the supply of Pepsi’s products in the market and
theproducts are available to consumers with ease especially in the peakseason (March to
September). The distributors are also involved in thepersonal selling. For this they appoint
salesman as per the instructionsand guidance given by the company. The company provides
the trainingfacilities to salesman when required by the distributors
For good and effective merchandising a salesman performs followingfunction such as:
i. The salesmen are one of the best chains to cultivate thegoodwill to all the selling
work
ii. He checks the stocks, maintains a plan and fulfils thedemand through the
requirement.
iii. He educates the dealers about the method of refrigerationof soft drinks
 
 

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 Chapter-4
Financial Analysis

29
 4.1 Sources of Finance

4.2 Ratio Analysis

Ratio analysis involves establishing a relevant financial relationship between components of
financial statement. Two companies may have earned the same amount of profit in a year, but
unless the profit is related to sales or total assets, it is not possible to conclude which of them
is more profitable. Ratio analysis helps in identifying significant relationship between
financial statement items for further investigation. If used with understanding of industry
factor and general economic conditions, it can be powerful tool for recognizing a company’s
strengths as well as its potential trouble spots.

Ratio analysis is a process of comparison of one figure against another and the interpretation
of the ratio to know the strengths and weaknesses of the firm’s operation and of its financial
position. Ratio analysis helps various interested parties like prospective investor, creditors,
banks, etc. to draw useful conclusions to serve their purpose
.
 Quick ratio 
Quick ratio is a vital financial ratio that provides managers with the number of dollars of liquid
assets on hand to cover each dollar of existing debt. It is important in determining solvency.
The ratio reveals the safety afforded short term creditors in cash or near cash assets. It shows
the number of dollars of liquid assets on hand to cover each dollar of current debt. Any time
this ratio is as much as 1 to 1, (1.0) the business is said to be in liquid condition. The larger the
ratio, the better the liquidity.

 Current ratio 

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 Current ratio measures the degree to which current assets cover current liabilities. The higher
the ratio the more assurance exists that the sequestration of current liabilities can be made. The
current ratio measures the margin of safety available to cover any possible shrinkage in the
value of current assets. By and large, a ratio of 2:1 is good.

 Current liabilities to net worth

Current liabilities to net worth compares the funds that creditor provisionally are risking with
the funds permanently invested by the owners. The lesser the net worth, and the larger the
liabilities means less security for the creditors. Be careful when selling any firm with current
liabilities greater than 66.6% (or ⅔) versus net worth.

Current liabilities to inventory 

Current liabilities to inventory combines with net sales to inventory to indicate how
management controls inventory. According to D&B, large increases in sales with resultant
increases in inventory levels can cause an unsuitable rise in current liabilities if growth isn’t
managed prudently.

 Total liabilities versus net worth

The effect of long term obligations on a business can be computed by comparing this
proportion of current liabilities to net worth. The difference will focus on the relative size of
long term debt, which can encumber a firm with significant interest charges. This shouldn’t
exceed net worth at all, because then creditors would have a greater stake than the firms
owners would.

 Fixed assets to net worth 

A low ratio is preferred, with a high ratio being adverse, because with heavy investment in
fixed assets indicates a low net working capital and is overtrading or has utilized large funded
debt to harmonize working capital. Normally fixed assets above 75% of net worth indicate
likely over investment, and should be checked.

 Gross profit ratio

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 It expresses the relationship of gross profit to net sales. It is expressed in percentage. It is
computed as
Gross profit ratio = Gross profit/Net sales×100

 Net profit ratio

A ratio of net profit to sales is called Net profit ratio. It indicates sales margin on sales. This is
expressed as a percentage. The main objective of calculating this ratio is to determine the
overall profitability. The ratio is calculated as
Net profit ratio =Net profit/Net sales×100

 Operating ratio

Operating profit is an indicator of operational efficiencies. It reveals only overall efficiency. It

establishes relationship between operating profit and net sales. This ratio is expressed as a
percentage. It is calculated as:
Operating profit =Operating profit /Net sales×100
Operating Profit = Gross Profit – (Administration expenses + selling expenses)

Ratios Mar '16 Mar '15 Mar '14 Mar '13 Mar’12

Current Ratio 1.28 1.31 1.14 1.24 1.1

Net Profit Margin (%) 10.07 8.65 9.75 10.14 9.42

Return on Equity % 54.68 37.24 31.24 28.96 28.84
Fixed Assets Turnover
3.82 3.76 3.72 3.52 3.37
Inventory Turnover
10.37 9.68 9.43 8.94 8.45

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The Current ratio for the company is ratio of current liabilities. In this case it is little lower
than the industry standard ratio of 2:1 which means the company is strong if they have
problems meeting its short term obligations.

The Net Profit Ratio of the firm has been considerably consistent and growinf over the years
which means that the company’s operations have been fairly good at converting the Profits.

Return on equity measures a corporation's profitability by revealing how much profit a company
generates with the money shareholders have invested, which favourably reflecting in
Company’s case.

Fixed Assets Turnover Ratio is also consistent over the years which specifically measures the
company is able to generate net sales from fixed-asset investments, namely property, plant
and equipment (PP&E), net of depreciation.

Inventory turnover ratio of the company has been considerably consistent over the years which
measures how many times a company sold its total average inventory amount during the year.

4.3 Financial Statement Analysis

The accompanying financial statements have been prepared in accordance with U.S. GAAP
and include the consolidated accounts of PepsiCo, Inc. and the affiliates that it control. In
addition, they include share of the results of certain other affiliates using the equity method
based on economic ownership interest, ability to exercise significant influence over the
operating or financial decisions of these affiliates or ability to direct their economic resources.
They do not control these other affiliates, as our ownership in these other affiliates is
generally 50% or less. Intercompany balances and transactions are eliminated. Raw materials,
direct labor and plant overhead, as well as purchasing and receiving costs, costs directly
related to production planning, inspection costs and raw materials handling facilities, are
included in cost of sales. The costs of moving, storing and delivering finished product are
included in selling, general and administrative expenses.

The preparation of consolidated financial statements requires to make estimates and assumptions
that affect reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent
assets and liabilities. Estimates are used in determining, among other items, sales incentives
accruals, tax reserves, share-based compensation, pension and retiree medical accruals, amounts
and useful lives for intangible assets and future cash flows associated with impairment testing for
perpetual brands, goodwill and other long-lived assets. They evaluate estimates on an ongoing
basis using historical experience, as well as other factors they believe appropriate under the
circumstances, such as current economic conditions, and adjust or revise estimates as
circumstances change. As future events and their effect cannot be determined with precision,
actual results could differ significantly from these estimates.

Their fiscal year ends on the last Saturday of each December, resulting in an additional week
of results every five or six years. Fiscal 2016 results include an extra week. While our North
America results are reported on a weekly calendar basis, most of our international operations
report on a monthly calendar basis. Certain operations in our ESSA segment report on a
weekly calendar basis.

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35
 Chapter-5
Key Learning’s from Company
and Recommendations

36
5.1 Performance Analysis
As of January 26, 2012, 22 of PepsiCo's brands generated retail sales of more than $1 billion
apiece, and the company's products were distributed across more than 200 countries, resulting
in annual net revenues of $43.3 billion. Based on net revenue, PepsiCo is the second largest
food and beverage business in the world. Within North America, PepsiCo is the largest food
and beverage business by net revenue. Indra Krishnamurthy Nooyi has been the chief
executive of PepsiCo since 2006. The company's beverage distribution and bottling is
conducted by PepsiCo as well as by licensed bottlers in certain regions. Approximately
274,000 employees generated $66.415 billion in revenue as of 2013.

37
38
5.2 Reasons for Diversification and expansion of company
Between the late-1970s and the mid-1990s, PepsiCo expanded via acquisition of businesses
outside of its core focus of packaged food and beverage brands; however it exited these non-core
business lines largely in 1997, selling some, and spinning off others into a new company named
Tricon Global Restaurants, which later became known as Yum! Brands, Inc. PepsiCo also
previously owned several other brands that it later sold so it could focus on its primary snack
food and beverage lines, according to investment analysts reporting on the divestments in 1997.
Brands formerly owned by PepsiCo include: Pizza Hut, Taco Bell, KFC, Hot 'n Now, East Side
Mario's, D'Angelo Sandwich Shops, Chevys Fresh Mex, California Pizza Kitchen, Stolichnaya
(via licensed agreement), Wilson Sporting Goods, and North American Van Lines.

The divestments concluding in 1997 were followed by multiple large-scale acquisitions, as

PepsiCo began to extend its operations beyond soft drinks and snack foods into other lines of
foods and beverages. PepsiCo purchased the orange juice company Tropicana Products in
1998, and merged with Quaker Oats Company in 2001, adding with it the Gatorade sports
drink line and other Quaker Oats brands such as Chewy Granola Bars and Aunt Jemima,
among others.

In August 2009, PepsiCo made a $7 billion offer to acquire the two largest bottlers of its
products in North America: Pepsi Bottling Group and PepsiAmericas. In 2010 this
acquisition was completed, resulting in the formation of a new wholly owned subsidiary of
PepsiCo, Pepsi Beverages Company. In February 2011, the company made its largest
international acquisition by purchasing a two-thirds (majority) stake in Wimm-Bill-Dann
Foods, a Russian food company that produces milk, yogurt, fruit juices, and dairy products.
When it acquired the remaining 23% stake of Wimm-Bill-Dann Foods in October 2011,
PepsiCo became the largest food and beverage company in Russia.

In July 2012, PepsiCo announced a joint venture with the Theo Muller Group which was
named Muller Quaker Dairy. This marked PepsiCo's first entry into the dairy space in the
U.S. The joint venture was dissolved in December 2015.

5.3 Market Share and Growth Rate

Revenues for one of the world’s largest food and beverage conglomerates might be split half
between drinks and snacks, but the latter is shouldering more responsibility than it is typically
assumed. The foods business, comprising the likes of Frito-Lay and Quaker Foods, formed 53%
of the net revenues last year for PepsiCo. While sales for the snacks division have risen at a
CAGR of 3.5% over the last three years, sales for the drinks division have declined at a CAGR of
3.2%. We estimate a $98 price for PepsiCo, which is above the current market price.

39
Drink segments such as carbonated soft drinks and juices have fallen out of favor with
customers over the last few years, due to the growing health concerns regarding the high
amounts of sugar and other preservatives in these drinks. For example, CSDs and juices
together form approximately half the net volumes in the U.S. liquid refreshment beverages
market, and with continually waning demand for these segments, drinks such as Pepsi, Diet
Pepsi, Mountain Dew, and Tropicana have suffered declining volume sales. According to our
estimates, CSDs and juices combined form 21.6% of PepsiCo’s valuation.

On the other hand, even while health concerns have impacted soft drink sales in most developed
nations, snacks, even the salty snacks with high cholesterol levels, continue to command a solid
fan following. Case in point — the strengthening Frito-Lay North America division.

What works for PepsiCo is that the overall demand for snacks remains strong, and the
company is the dominant player in this market. According to research by Nielsen, 63% of
North Americans said that they ate chips/crisps as a snack in the last 30 days, a segment
which is dominated by PepsiCo’s brands such as Lays, Doritos, and Cheetos. PepsiCo, which
holds around 25.4% volume share in the U.S. liquid refreshment beverage market, second
behind Coca-Cola’s 33.6% share, dominates the savory snacks market in the country with a
36.4% market share. The next biggest manufacturers in this sector are Kellogg’s and
Mondelez with much smaller 6.8% and 5.3% shares, respectively. Americans have a large
snacking habit, which is expected to continue to bolster growth in the salty snacks market for
PepsiCo going forward.

What also makes growth in the Frito-Lay North America division crucial for the overall
group is the increased volatility in international markets. Despite the strong organic growth,
the company reported a 6% fall in its top line in the last quarter, due to a 10% negative effect
of currency translations. Considering that markets outside the U.S. form ~50% of PepsiCo’s
top line, the continually strengthening U.S. dollar has dented the reported earnings this year.
Performing well in the domestic market will bode well for PepsiCo, which is losing money to
unfavorable currency translations. In foreign markets too, the core performance of snacks
remains stronger than that of drinks. In Europe, while PepsiCo’s drinks have witnessed a 6%
organic volume decline in the first half, snacks volume has remained even. On the other hand,
while drinks volume has grown 1% in Asia, Middle East, and Africa, snacks volume has
increased 6%.

40
5.4 SWOT Analysis
Strengths in the SWOT Analysis of PepsiCo :
 Brand equity: it is one of the most prominent and famous brands in the world in the
food and beverage sector. It is also known as the brand of youth. It has a high brand
recognition and reputation. It has a brand valuation of $19.4 billion and it is ranked 29
in the Forbes most valuable brands list.
 Product portfolio performance: 2015 saw a decrease in the sale of soft drinks. India
as a country is evolving and becoming more health conscious. This can be noted from
the 2015 analysis of top selling brands (in India) that the top 5 beverages are only
juices and sweet syrups. There is no soft drink in the top 5.Pepsi has two products in
the top 5 beverages sold in the country.The top 5 beverages are in order:
Brand: Owned by: Market Share:
Real Dabur 8%
Tang Mondelez 6%
Slice PepsiCo 6%
Roohafza Hamdard 6%
Tropicana PepsiCo 6%
 So, even if Pepsi is second to Coca cola in terms of distribution of its Cola, there are
other footprints which Pepsi has because of its product portfolio.
 Strong Leadership: Under the leadership of Indra Nooyi PepsiCo has been doing
really well. It has managed to stay at number two position in the complete food and
beverage sector only behind Nestle in that field.
 Customer Loyalty: PepsiCo has an extremely loyal customer base. In its beverage
category all its soft drinks have an iconic taste and that’s why their customers do not
prefer to shift brands. They have emerged as a very strong brand when it comes to
juices and bottled water category. Frito-Lay has been one of the top-selling brands in
the world with brands under it such as Doritos, Lay’s, Funyuns, Uncle Chips, Cheetos,
Tostitos and Walkers. They had managed to grab 6 slots in the top 10 global snack
brands with topping the charts (all 3 spots) as well.
 Strong distribution: Pepsi has a global presence in more than 200 countries
providing them with a very good distribution network.
 Supply Chain: It has one of the best supply chain networks in the world, making the
products available throughout the world. Apart from this they also have a very
efficient reverse logistics associated with it.
 Tie-Ups: They have tie-ups with sports events and music concerts which keeps them
in the lime light and thereby increasing the brand recall. They have sponsorships to
major sports teams thereby standing with what the brand is known for, youth and
energy.
 Clear target audience: Pepsi, unline Coca Cola has always had a clear target audience
– the young crowd. It always targets youngsters through its ads and generally the
youngsters are shown to be smarter then the old ones. The message is clear – Pepsi is
the in thing.
Weaknesses in the SWOT analysis of Pepsi :
 Competition: It has heavy competition from Coca-Cola in their soft drinks category.
They are always neck to neck with each other. This competition thereby provides a
room for not so loyal customer base to switch brands quickly.

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 Product Dependence: They are only present in the food and beverage industry which
may be harmful in the longer run. They need to diversify their business to other
product segments to become a global leader.
 Failed Products: Many failed products such as ‘Crystal Pepsi’ which hurts the brand
image of the PepsiCo and thereby giving room to the competitors to grow.
 Brand Ambassadors: Wrong remarks or ill performance by the famous
personalities/celebrities, in turn, might damage the brand image of PepsiCo as they are
the face of the organisation. Over dependence on celebrities for endorsements is a
huge risk.
 Value addition: Pepsi is known to have advertisements which are targeted towards
youngsters. However, it is not known to display Value advertising which is a
characteristic of Coca cola. Coca cola has time and again focused on the
positive values of life, something which Pepsi can learn from them.
Opportunities in the SWOT analysis of Pepsi :
 Healthy Options: It should work more on improving the health implications of their
products and make the customer aware of the same. Diet Pepsi is a positive move
towards that direction.
 Diversification: Business diversification into different market segments is a
huge opportunity. They have the talent, resources and financial backing to do the
same. This can also be done by acquisitions.
 CSR: They can do more CSR activities to tackle the negative remarks that hurt the
brand image of the organisation and benefit the local people.
 R&D: Recently PepsiCo came out with healthier options in a soft drink. To make 7Up
by using the substitute of sugar called Stevia. This can prove to be a game changer.
More such research needs to be done. Focus more on the diet drinks category. They
have recently released a variant of their cola sweetened with Stevia and sugar called
Pepsi Next.
 Flavors: A brand which has risen strongly in the recent years is Paperboat. Paperboat
is known for its various flavors such as watermelon, raw mango etc. Bringing in such
flavors even in carbonated beverage form can help Pepsi attract a larger market.
Threats in the SWOT analysis of PepsiCo :
 Competitors: PepsiCo’s main competitors are Coca-Cola, Kraft foods, Nestle, Dr
Peppers Snapple Group and Mondelez.
 Health Factor: The unhealthy factor associated with its products can take a toll on the
health conscious customers and might lose them. This can be clearly seen by the fall
of soft drinks sale.
 Economic Slowdown: With the recent reforms in the country PepsiCo might see a
drop in its sales due to a cash crunch in the economy. Other factors such as recession
and inflation may also impact sales of the company.
 Government Norms: Different norms of different countries might prove difficult to
handle and compliance with it as well.

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Chapter-6
Findings

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 The most popular flavor in the market is Pepsi.
 Pepsi is market leader and coca-cola is the market challenger in the whole market where I
have surveyed.
 From the PepsiCo product Pepsi and from the coca-cola product thumbs up is the highest
selling in the market.
 Pepsi is the market leader in the overall market.
 In case of mineral kinley is selling more than aquafina.
 I have found that retailer gives more preference to PepsiCo products like Pepsi, mountain
dew, slice, mirinda, tropicana, 7up.
 Sales have increased after locating visible cooler outside of outlets.
 The company new concept pre sale got the good response means the concept of pre sale
prefer by the retailers.
 According to the survey n 80% outlets pre sale responded well while 20% responded low.
 The new product of PepsiCo minute maid was the big flop in surveyed city.
 The company has introduced 1.25 LTR pack for lower class family.
 The store is categorized on the basis of their it means diamond, gold, silver.
 In case of scheme coca-cola is providing more scheme then Pepsi.
 Retailers do not get the company actual scheme.
 Some agencies make fake bills to make profit which is illegal.
 Products are sold out of areas by distributor to save scheme.
 If retailers complaint regarding discounts and trade scheme then he is not responded
properly.
 Distributors have not maintained proper stock so retailers do not get all the products by
which trade discounting and trade schemes are affected.
 There is a communication gap between distribution channels so retailers are not getting
advantages of discount and trading schemes

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 Chapter-7
CONCLUSIONS & SUGGESTIONS

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CONCLUSIONS
PepsiCo products are enjoyed by consumers one billion times a day in more than 200
countries and territories around the world. PepsiCo generated more than US $63 billion
dollars in net revenue in 2015, driven by a complementary food and beverage portfolio that
includes Frito-Lay, Gatorade, Pepsi-Cola, Quaker and Tropicana. PepsiCo's product
portfolio includes a wide range of enjoyable foods and beverages, including 22 brands that
generate more than US $1 billion dollars each in estimated annual retail sales.

As of January 26, 2012, 22 of PepsiCo's brands generated retail sales of more than $1
billion apiece, and the company's products were distributed across more than 200 countries,
resulting in annual net revenues of $43.3 billion. Based on net revenue, PepsiCo is the
second largest food and beverage business in the world. Within North America, PepsiCo is
the largest food and beverage business by net revenue. Indra Krishnamurthy Nooyi has
been the chief executive of PepsiCo since 2006. The company's beverage distribution and
bottling is conducted by PepsiCo as well as by licensed bottlers in certain regions.
Approximately 274,000 employees generated $66.415 billion in revenue as of 2013.

SUGGESTIONS
1. According to one study, it takes an Indian 50 minutes of work to beable to buy a bottle in
other countries, the norm is five minutes. Thusto increase the total market of soft drinks,
manufactures should tryand decrease the prices, so as to increase sales.
2.Availability is a major factor, which makes the consumer buy a
softdrink. Soft drinks should be made available more readily thanpresent.
3.Soft drink cans which are very convenient, as the consumer cantake them anywhere,
unlike a bottle, are very expensive retailing from Rs. 20-Rs. 25. To increase sale of cans,
this price should bebrought down.
4.If proper attention is given then many of the shops in these areas havethe capacity & will
to become the exclusive Pepsi outlets. In my View thoseshops which have a good regular
sale of 5 to 10 cases per day should betargeted to convert them in exclusive outlets.
5.Consumer preference change according to availability, thereforethe company should
provide their brands at maximum outlets at possible.
6.Company should take care of cleanliness of the bottles rustedcrown and maintain the
quality of the product especially at thetime of packaging.
7.Company should get the schemes printed on the labels of
the bottles/products as well as on the free items provided with softdrink so that consumer
gets aware about the schemes and notcheated by the retailers
8.Company should inform each and every outlet about the
schemes before time or on time and check them. Weather they are providing them to consu
mer in the proper manner.

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 BIBLIOGRAPHY
LINK
 https://en.wikipedia.org/wiki/PepsiCo
 http://www.pepsicoindia.co.in

WEB SITE

 www.capitaline.com
 https://markets.ft.com
 www.moneycontrol.com
 http://www.marketwatch.com
 http://www.morningstar.com/

BOOKS NAME
 Arthur A. Thompson, A. J. Strickland, John E Gamble, Arun K. Jain (2009). Crafting
And Executing Strategy. New Dehli: Prentice – Tata McGraw-Hill Publishing
Company Limited.

 Aswathapa 9th Edition.Business environment.New Dehli: Prentice- McGraw-Hill

Publication.

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