MODULE NAME - STRATEGIC MANAGEMENT

TOPIC – 7 STEP ANALYSIS OF ACQUISITION OF PEPSICO WITH QUAKER OATS

SUBMITTED TO :- SUBMITTED BY :-
PROF. GAURAV ASHESH ANCHAL GUPTA
(MODULE LEADER OF STRATEGIC MNG) MUSKAN SONI
RAJVI VIRANI
YASHVI BANSAL
(BBA 2018-21,SEC-B)

ABOUT THE COMPANY

 Pepsico company was established in 1898 and its headquarter is at New York. PepsiCo Inc.
manufactures, markets, and sells various foods, snacks, beverages in the whole world.
PepsiCo is a world head in beverages, food, snacks and home to hundreds of brands around
the world. Some of the most popular products are Pepsi, Gatorade, Quaker, Frito-Lay and
Tropicana.

 Pepsico is one of the world’s leading food and beverage companies serving more than 200
countries and territories around the world, with revenues of about 39.5 billion until 2007
revenues, and over 1,43,000 employees.

 The company’s portfolio of businesses in 2008 included Frito-Lay salty snacks, Quaker
Chewy granola bars, Pepsi soft drink products, Tropicana orange juice, Lipton Brisk tea,
Gatorade, Propel, SoBe, Quaker Oatmeal, and many other regularly consumed products.
Gatorade, Propel, Rice-A-Roni, Aunt Jemima, and Quaker Oats products were added to
PepsiCo’s arsenal of brands through the $13.9 billion acquisition of Quaker Oats in 2001.

REASONS BEHIND PEPSICO DIVERSIFICATION STRATEGY

 While making an announcement for the diversification portfolio launch in 2008, PEPSICO
CEO Indra Nooyi pointed out that Pepsi must address ‘’one of the world’s biggest public
health challenges, one which is fundamentally linked to the company’s industry - obesity.
 The company has on several occasions said that the diversification portfolio is in line with its
commitment to shifting resources from junk to healthier foods and improving general health
and wellness.
PEPSICO AQUISTION WITH QUAKER OATS

7 STEP ANALYSIS

1. DEFINING THE PROBLEM

There were lots of problems in the merger of Pepsico with Quaker Oats.

 This acquisition was strongly opposed by Federal Trade Commission (FTC), they were
against this change as they felt that this change will destroy the competition from the
market and create a monopolistic scenario in the market. As
 They believed that this merger will ruin the competition giving the whole power in the
hands of PepsiCo.
 Monopolistic scenario will give power to Pepsico, and they would misuse this power to
maximise their profits, by charging high prices from the cutomers for the same products.

2. LIST ANY OUTSIDE CONCEPT THAT CAN BE APPLIED

Concept of Synergy- The basic theory s that the interrelationships are what makes corporate
stratergy beneficial. If there is no synergy, then the sum of parts cannot be greater than the
parts themselves. The tw basic way of creating synergy is-
 Ability to transfer skills among similar value chains
 Ability to share activities in the value chains.

Also, transferring activities leads to the competitive advantage only if :

 Activities are similar enough to transfer skills meaningfully

 Transfer of skills is important for competitive advantage
 The receiving end has a good usage of skills transferred and are integral to its
growth.

3. LIST RELEVANT QUALITATIVE DATA

 PepsiCo is highly benefited from the merger and Quaker also being a mega brand in
itself but merging with a company like PepsiCo strengthens its position even more as
thirsty people will either go to the carbonated or non-carbonated drinks and now they
have the command to both sections and as a result to which the company will be
retaining both the customer bases.

 Gatorade has its monopoly in the sports drink segment so it will rather increase the
sales of PepsiCo’s other fast food since drinks and fast food complement each other
well. PepsiCo will be highly benefited by the advantage of being the major supplier
as it can control the prices and monopolize the market as well. (Amonkar, 2005)

 PepsiCo can expand its limits from just carbonated drinks to fruit drinks and Quaker
being a mega brand is good for the reputation of the company and at the same time it
reduced competition as Quaker being a part of PepsiCo will sell its products together.
4. LIST RELEVANT QUANTITATIVE DATA
 The merger of Pepsico with Quaker Oats continues to pay off for US based softdrinks
and snacks company Pepsico. The company last week repoted double – digit
operating profit growth for the year to December 2002, boosted by expanded margins
as a result of synergies from the Quaker deal
 The company has already realised $250 million in synergies from the merger and this
would rise to $400 million in the coming years.
 Volume of sales – snack sales and beverages, also rised by 4 percent.
 But it was at the operating profit level that the synergies with Quaker oats were most
clearly seen, rising 11 per cent for the year to $5.3 billion.

5. DESCRIBE THE RESULTS OF YOUR ANALYSIS

Both the companies are highly benefited as now they have command over both the markets,
carbonated and non-carbonated drinks. And hence have a bigger consumer base, since Quaker
is also a big brand in itself.

Gatorade has its monopoly in the sports drink segment, and it will increase PepsiCo’s other
fast food drinks along with fast food complement each other well.
Now it can monopolize the market as it has control over the price.

PepsiCo had huge profits by continuously increasing revenues since the acquisition.

6. DESCRIBE ALTERNATIVE ACTIONS

 Launch a new product which is meant for the consumers who prefer healthy food.
 Exercise better synergy
 Provide better alternatives to the products facing backlash because of more sugar
content in them

7. DESCIBE YOUR PREFERRED ACTION PLAN

 Hold image-building campaigns to inform people about the product line available.
 Ad campaigns to convey about the change.
 Cater to all the people of the new target market.