International Trade and

Supply Chain Analysis of PepsiCo

Global Business Practice
List of Student Names and Student Numbers

Instructor:
Contents
1. Introduction................................................................................................................................4
2. About PepsiCo............................................................................................................................5
3. What is Supply Chain and Core Elements of Supply Chain..........................................................7
3.1 Definition of Supply Chain....................................................................................................7
3.1 Core Elements of Supply Chain.............................................................................................7
4. The Analysis of the Supply Chain Strategies of PepsiCo..............................................................8
4.1 Procurement.........................................................................................................................9
4.1.1 Raw Materials................................................................................................................9
4.1.2 Procurement Strategies...............................................................................................10
4.2 Production..........................................................................................................................13
4.3 Distribution.........................................................................................................................16
5. Analysis of Economic Strategies................................................................................................18
6. Analysis of Key Economic and Financial Data...........................................................................19
6.1 Company Performance.......................................................................................................19
6.2 Global Sales in Beverage Sector..........................................................................................25
7. Analysis Of Economic And Supply Management Issues............................................................27
8. Conclusion................................................................................................................................29
Bibliography..................................................................................................................................30
Appendix.......................................................................................................................................32
Table of Figures

Figure 1 Product Portfolio of PepsiCo.............................................................................................5

Figure 2 PepsiCo Product Diversity.................................................................................................5
Figure 3 Global Operating Divisions of PepsiCo..............................................................................6
Figure 4 Simple Supply Chain Illustration........................................................................................7
Figure 5 Generic Supply Chain Diagram..........................................................................................7
Figure 6 Supply Chain Diagram of PepsiCo.....................................................................................8
Figure 7 PepsiCo Product Raw Materials Categorization................................................................9
Figure 8 Code of Conduct PepsiCo (PepsiCo- Responsible and Sustainable Sourcing, 2015)........11
Figure 9 Distribution model of PepsiCo........................................................................................16
Figure 10 Performance Highlights of PepsiCo (PEPSICO, 2015)....................................................19
Figure 11 Net Revenue of PepsiCo from 2011-2015.....................................................................20
Figure 12 ROIC of PepsiCo from 2011-2015..................................................................................20
Figure 13 Revenue of Each Division..............................................................................................21
Figure 14 TheRevenue Content....................................................................................................21
Figure 15 ROE Comparison between PepsiCo and Coca-Cola.......................................................22
Figure 16 Total Operating Profit Margin 2013-2015 Comparison.................................................22
Figure 17 Operating Profits- Division wise....................................................................................23
Figure 18 Operation Profit Margin PepsiCo vs Coca-Cola.............................................................23
Figure 19 Markets Share of Coca-Cola, PepsiCo and Other..........................................................24
Figure 20 Global beverage sales share from 2011 to 2016, by beverage type.............................25
Figure 21 Brand value of Soft Drinks 2014-2015 (Soft Drinks, 2016)............................................26
1. Introduction
The report is a discussion about the global supply chain and trade strategies which are
implemented, delivered and nurtured at PepsiCo. Furthermore an analysis will be carried out
with respect to the economic and supply management issues faced by the company and
suggested solutions.
2. About PepsiCo
PepsiCo is one of the largest food and beverages companies in the world, with over $63 billion in
net revenue in 2015. It has a diverse portfolio of world's beloved brands.

PepsiCo has a portfolio of food and beverage that includes 22 brands; the flagship brand Pepsi
Refreshment, Frito-Lay snack brands, Gatorade's line of sports drinks, Quaker nourishing and
delicious meal and snacks and Tropicana Fruit Juices.

Figure 1 Product Portfolio of PepsiCo

PepsiCo

Beverage Food

Carbonated Drinking Energy Ready to Ready to Breakfast

Fruit Juices Snacks
Drinks Water Drinks drink Tea drink Coffee Cereal

Figure 2 PepsiCo Product Diversity

PepsiCo is a globally widespread company, has six global divisions operating in business.

North America
Beverages (NAB)

Asia, Middle Frito-Lay

East & North North
Africa America
(AMENA) (FLNA)

Pepsi
Co
Europe Sub-
Quaker
Saharan
Foods North
Africa
America
(ESSA)

Latin
America
(LA)

Figure 3 Global Operating Divisions of PepsiCo

PepsiCo’s competitors are also worldwide across the food and beverage arena.

With respect to the beverage industry, The Coca-Cola Company closest opponent. Other rivals in
the beverage sector are Dr Pepper Snapple Group, Inc., Cott Corporation , Red Bull GmbH and
Monster Beverage Corporation (MNST)

With respect to the food industry In the food industry, the peers are ConAgra Foods, Inc.,
Kellogg Company, Kraft Foods Group Inc., Mondelez International, Inc. ,Snyder’s-Lance, Inc. and
Nestlé S.A. (Supply Chain Management of PepsiCo)
3. What is Supply Chain and Core Elements of Supply Chain

3.1 Definition of Supply Chain

A network of connected and interdependent organisations mutually and co-operatively working
together to control, manage and improve the flow of materials and information from suppliers
to end users. (Aitken, 1998)

Supply Chain Management is the continuous process of planning, implementing and executing
the core supply chain elements, in order to satisfy the customers to the maximum level.

Figure 4 Simple Supply Chain Illustration

3.1 Core Elements of Supply Chain

Supplier Manufacturer Distributor Retailer Customer

Procurement Cycle Manufacturing Cycle Replenishment Cycle Customer Order Cycle

Figure 5 Generic Supply Chain Diagram

 4. The Analysis of the Supply Chain Strategies of PepsiCo

Suppliers
Marketing Planning

Manufacturing
Marketing Strategy
Delivery
(Lean,6 sigma,
OEE)
Sales Order

Sales Strategy Order Fulfillment

Direct Store
Product Replenishment
Delivery

Customer
Warehouse

Third Party
Distribution
Networks

Distribution Methodology

Dispatch

Retailer

Consumer

Supply Chain Process

Figure 6 Supply Chain Diagram of PepsiCo

4.1 Procurement
4.1.1 Raw Materials
PepsoCo's raw materials can be segregated into three categories as below, of which many are
primary goods (such as vegetables and fruits) and others are processed(such as glass bottles).

Product Raw
Material

Finished
Transportation
Good Packaing
Material Material

Figure 7 PepsiCo Product Raw Materials Categorization

Product Raw Materials

The main raw material used in the main products such as beverage, food and snack products are
apple, orange and pineapple juice and other juice concentrates, aspartame, corn, corn
sweeteners, flavorings, flour, grapefruit and other fruits, oats, oranges, potatoes, raw milk, rice,
seasonings, sucralose, sugar, vegetable and essential oils, and wheat. Water is also a key
ingredient in production. (PEPSICO, 2015)

Packaging Materials

Packaging and casing materials include plastic resins, including polyethylene terephthalate (PET)
and polypropylene resins used for plastic beverage bottles and film packaging used for snack
foods, aluminum used for cans, glass bottles, closures, cardboard and paperboard cartons.
(PEPSICO, 2015)
Transportation Material

Other commodities used in the supply chain are fuel and natural gases in the plants and for
distribution of the products. (PEPSICO, 2015)

4.1.2 Procurement Strategies

With the global presence of PepsiCo , the procurement of raw materials takes place globally too.
PepsiCo states that use their relationships within their global supply chains to ensure that those
they work with operate ethically and responsibly. (PEPSICO, 2015)

Constant Finished Goods Price

Most of the raw material purchase take place in the open market, and the price fluctuations are
mitigated by fixed-price contracts and purchase orders, pricing agreements and derivative
instruments, including swaps and futures. (PEPSICO, 2015)

When the prices rise, PepsiCo do not pass on price increments to the customers. Keeping the
price consistency to the level best is one successful strategy.

Supplier Diversity

Suppliers are from many geographies and there are a number of suppliers for the same raw
material which abolish the risk of dominations of the prices.

Making investments to support the suppliers and communities is another strategy of PepsiCo. In
2013, approximately $1.3 billion was spent on suppliers that were minority- or women-owned
enterprises (MWBEs) in the United States. Also PepsiCo was investing to build advance
sustainable farming practices by suppliers reaching throughout globally.

PepsiCo spent nearly $855 million in direct business with MWBEs through Tier 1 program
(involving direct suppliers) and continued to build on strong Tier 2 program (which reaches out
to indirect suppliers).Through Tier 2 program, PepsiCo engage their prime (non-diverse)
suppliers by requesting that they incorporate diverse suppliers in their business with PepsiCo.
This Tier 2 effort resulted in nearly $468 million spent in business with MWBEs in 2013.
(PepsiCo- Responsible and Sustainable Sourcing, 2015)

Supplier Code of Conduct (Quality and Standards)

Supplier Code of Conduct of PepsiCo strengthen the idea "do business the right way" to protect
the brand image and it supports sustainability in long term as in business, environment and the
social arenas.

PepsiCo's Supplier Code of Conduct comprises of following adherence with respect to the
suppliers of the standards.
Figure 8 Code of Conduct PepsiCo (PepsiCo- Responsible and Sustainable Sourcing, 2015)

Resource Conservation Programs

PepsiCo runs programs for resource conservation and it sets measurable goals for energy,
greenhouse gas, water, agriculture and forestry source preservation across the extensive supply
chain.

Eg:

 ReCon - a capability development program to key suppliers in North America

 Supplier Outreach program - for strategic suppliers and franchise operations in the
United States, Mexico, Latin America, South America and Western Europe
 Sustainability Supplier’s Trophy in France - for co-packers, transporters and raw
packaging material suppliers to encourage "Performance with Purpose" Rewards.

(PepsiCo- Responsible and Sustainable Sourcing, 2015)

Sustainable Certification for Raw Materials

PepsiCo Works with nonprofit organization, Bonsucro to ensure the raw materials are
sustainable with Rainforest Alliance- and Fairtrade-certified sources.

Eg:

 In Chile, 100% of PepsiCo's potato growers and seed growers are certified to the
Rainforest Alliance standard.
 The affiliation with Unilever on Lipton has sourcing 100% Rainforest Alliance-certified
tea.
 Bananas and pineapples used for Naked juices holds the Rainforest Alliance certification.
 Fairtrade (USA)-certified supply chain for Near East Quinoa Blends
  Agreement of using 100% sustainable sourcing for RSPO(Roundtable on Sustainable
Palm Oil) certified palm oil in 2010 through RSPO

Dissolving Centralized Marketing Procurement and Shift to Each Brand

PepsiCo dissolved its centralized marketing procurement team and shifted the work to the
brand managers. “We continue to evolve our operating model to be more efficient and
effective,” Pepsi said in a statement to Ad Age magazine." (AdAge)

The new model is to be efficient and effective and also to improve speed and flexibility in this
arena. Therefore the marketing procurement decisions can be taken more real time and the
responsibilities lie within the brand teams.
4.2 Production

Production Strategies

PepsiCo uses Lean & Six Sigma principles in their production strategies. Pepsi Bottling Ventures
in Nampa, Idaho achieved drastic high results by applying overall equipment effectiveness (OEE)
improvements. OEE produces a cumulative index of availability, performance rates and quality
to provide uptime and productivity comparisons. Six sigma uses statistical tools to eradicate
causes of defects and inconsistency. Lean Manufacturing has its own highly management tools
and processes by which companies eliminate waste in all its forms. (Pepsi Bottler Shares Secrets
of OEE, Six Sigma, Lean, 2012)

PepsiCo's operations management measures the productivity from following indicators.

 Batches per facility per day (PepsiCo production facility productivity)

 New product ideas per year (product R&D productivity, such as for Pepsi)
 New accounts per year (marketing productivity)

(PepsiCo’s Operations Management, 10 Decisions, Productivity, 2015)

Quality Management

PepsiCo’s production always intend to provide the highest quality products according to the
“Human Sustainability".

Eg:

 New PepsiCo products are usually improved variants, such as low-calorie Pepsi products
and less-salt Frito-Lay products. (PepsiCo’s Operations Management, 10 Decisions,
Productivity, 2015)
 Quality & Food Safety Programs at PepsiCo
 Global Policy on Bioengineered Food and Ingredients
 PepsiCo Statement on Use of Genetically Modified Ingredients in the U.S.
 FDA guidelines for Caramel Colouring

(PepsiCo - Human Sustainability Policies - Ingredients & Research, 2016)

Process and Capacity Design

Capacity utilization and process efficiency are key-areas of PepsiCo operations management
which maximize productivity-cost ratio. PepsiCo manufacturing facilities are designed with high-
output assembly lines. PepsiCo’s production processes are automated for optimal efficiency.

PepsiCo has won the prestigious Improved Production Efficiency award at the 2013
Manufacturing Forum and Awards hosted by Brammer. (BRAMMER, 2013)
Reduce Packaging and Recycling

According to Pepsi Bottling Ventures, PepsiCo continues to reduce packing their products, in
order to cut costs, reduce wastage as well as help the stability of the environment.

PepsiCo has reduced the material in their beverage containers.

Eg: .5 l Aquafina bottle's the overall gram weight reduction is over 50% by 2008 from the time it
was introduced.

PepsiCo bottle manufacturing process is called as "Blow-molding" which produce hollow but
stronger containers. This is implemented in "Raleigh", building a production line of blow-
molding eliminating the ordering, shipping, storing, handling, cleaning, and sterilizing of pre-
made P.E.T. bottles. (ENVIRONMENTAL SUSTAINABILITY, 2016)

Design of Goods and Services ( Research and Development)

PepsiCo's strategic decisions lies on the market reaches done by the company. As the product
undergo through high customer trends and life styles , it is used to determine future directions
for product development and innovation. (PepsiCo’s Operations Management, 10 Decisions,
Productivity, 2015)

Layout Design and Strategy

The spaces and work areas are designed for efficiency and productivity. layout design in PepsiCo
production facilities is centred on the principles of assembly line production and total quality
management (TQM). (PepsiCo’s Operations Management, 10 Decisions, Productivity, 2015)

Location Strategy

PepsiCo has company owned facilities and partner owned facilities located strategically with the
objective of maximum reach to the target markets. The production plants are located in low cost
regions such as China and India to reach each market. Even the material growth for organic
products are located in low cost areas such as potatoes farms in India. (PepsiCo’s Operations
Management, 10 Decisions, Productivity, 2015)

Energy efficiency

PepsiCo's manufacturing processes requires energy for washing, sterilizing, and operating
production lines and also for heating, lighting, and ventilation. PepsiCo uses energy efficient
equipment in the production processes. Alternative energy sources are used where its
acquirable, produced from renewable resources such as solar, wind, geothermal, biogas,
biomass, and low-impact hydro. (ENVIRONMENTAL SUSTAINABILITY, 2016)
Pepsi Bottling Group, Inc., PepsiAmericas, Inc. and Pepsi Bottling Ventures has purchased
renewable energy certificates (RECs) to match 100% of the electricity used for PepsiCo U.S.
operations. (ENVIRONMENTAL SUSTAINABILITY, 2016)
4.3 Distribution

Figure 9 Distribution model of PepsiCo

PepsiCo who has a extensive global customer base, follows three channels of distribution as
shown above. And it selects the relevant distribution channel based on customer needs, product
characteristics, local trade practices and geographies.

 Direct Store Delivery (DSD)

This model is to deliver the finished good directly to the retails stores. DSD gives PepsiCo and
advantage of maximum visibility of the customer needs which leads to sensitive marketing
strategies. PepsiCo was the pioneer in implementing DSD model which made them win the
Supply Chain Innovation Award in 2010. (PEPSICO, 2015)

 Customer Warehouse

Some of the PepsiCo products are delivered directly to the customer warehouses from the
manufacturing plants and warehouses. This methodology works its wonders for less fragile and
perishable items. Also it reduces storage costs for PepsiCo. (PEPSICO, 2015)

 Third-party Distributor Networks

PepsiCo uses third party distributors or outsourced distribution methodologies for many of their
products. This can achieve a high turnover and much cost reduction when the distribution sector
is large with a large the product variety. For an example PepsiCo food services and vending
business of beverage distribution takes place through the above methodology. (PEPSICO, 2015)

Eg : In 2011 PepsiCo sold it's bottling operations in China to Chinese Company named Tingy
Holding. Earlier distribution network was so narrow but after the sale, the national distribution
was broadened using Chinese Tingy Company well established distribution channels.
(PriceWaterhouseCoopers-China, 2012)
Dynamic Routing

Pepsi Bottling Ventures has a dynamic routing for delivery. Some of the customers require daily
delivery where as others require once in a week or two. PepsiCo uses its routing system that
optimizes the efficiency of all of the routes by minimizing the miles driven by each
driver/vehicle. (ENVIRONMENTAL SUSTAINABILITY, 2016)

Alternative Fuel Vehicles

Three years ago Pepsi Bottling Ventures invested in Hybrid vehicles. There are over 30 vehicles
now in operations. (ENVIRONMENTAL SUSTAINABILITY, 2016)

Inventory Management

Inventory management at PepsiCo comprises of following key objectives.

 Adequacy
 Scheduling
 Cost minimization

PepsiCo inventory operates with computerized monitoring of stock. (PepsiCo’s Operations

Management, 10 Decisions, Productivity, 2015)
5. Analysis of Economic Strategies

Seasonality

PepsiCo businesses revolve around seasonality. In the warm seasons and months around the
globe, the beverage industry sales are higher. In the cool seasons and months certain food and
dairy sales are high. In the first quarter of the year overall revenue is lesser but in the third
quarter its high due to the holidays. (PEPSICO, 2015)
6. Analysis of Key Economic and Financial Data

6.1 Company Performance

Figure 10 Performance Highlights of PepsiCo (PEPSICO, 2015)

The organic revenue growth of PepsiCo has been 5% during the last fiscal year. Over the past
three years PepsiCo's revenue growth has been consistent which shows a steady growth as a
company.

The core gross margin perked up by 140 basis points in 2015, whereas core operating margin
perked up by 30 basis points. Therefore there had been an increase of the return of sales which
implies company's pricing strategy and operating efficiency has taken higher grades. When
analyzing the past three years, core gross margin has increased by 285 basis points and core
operating margin up 100 basis points. (PEPSICO, 2015)

The core constant currency earnings per share (EPS) has had a 10% increment during the last
year. During the past three years core constant currency earnings per share has had a minimum
of 9% increment. (PEPSICO, 2015)

Even though the highlight results from the annual report is positive in all elements, there are
some elements which have been excluded from the calculations.

Below is an analysis on calculations from the raw financial data directly.

 Net Revenue ($mn)
67,000

66,000

65,000

64,000
Net Revenue ($mn)

63,000

62,000

61,000
2011 2012 2013 2014 2015

Figure 11 Net Revenue of PepsiCo from 2011-2015

As depicted above, the Net revenue specially during the last year have been dropped from more
than 3000 mn dollars.

ROIC
14.4
14.2
14
13.8
13.6
13.4
ROIC
13.2
13
12.8
12.6
12.4
2011 2012 2013 2014 2015

Figure 12 ROIC of PepsiCo from 2011-2015

Return on Invested Capital(ROIC) has been showing a decrement except in the year 2013.
Therefore when considering the profitability of PepsiCo, the return has been lesser
comparatively in 2014 and 2015. The usage of capital to make profits has reduced.

Figure 13 Revenue of Each Division

The biggest revenue generation for PepsiCo has been contributed by North America Beverages
which is the biggest soft drinks division of PepsiCo. Also Frito-Lay snacks has contributed nearly
one fifth of the revenue to the company which gives the competitive advantage for the
company comparing with its biggest rival CocaCola.

Figure 14 TheRevenue Content

The company sales are half in half in the beverage sector and the snacks sector. Also still the US
is generating the biggest revenue, where the company has most potential of growing across the
globe.
 ROE Comparison between PepsiCo
and Coca-Cola
70
60
50
40
ROE of PepsiCo
30
ROE of Coca-Cola
20
10
0
12345

Figure 15 ROE Comparison between PepsiCo and Coca-Cola

When comparing the Return on Equity PepsiCo has showed a significant lead with respect to
Coca-Cola.

Total Operating profit

15 margin
14.5

14
Total Operating profit
margin
13.5

13

12.5
2013 2014 2015

Figure 16 Total Operating Profit Margin 2013-2015 Comparison

The Total Operating Profit Margin has been also decreased over the last three years and during
2014-2015 it shows high decrement than 2013-2014. Also the total operating profit has reduced
by 1228 mn dollors in 2014-2015. Therefore the profits of the company withrespect to the
revenue has been showing a decline.
Figure 17 Operating Profits- Division wise

When analyzing the operating profits of each division, Frito-Lay quick snacks steal the show
which again is the biggest competitive advantage PepsiCo has over Coca-Cola. PepsiCo's
complimentary product strategy is the key reason for these operating profit results. (PEPSICO,
2015)

Figure 18 Operation Profit Margin PepsiCo vs Coca-Cola

PepsiCo's Operating profit margin is lesser than the market it's market giant Coca-Cola. (Market
share of carbonated beverages worldwide as of 2015, by company, 2015)

Figure 19 Markets Share of Coca-Cola, PepsiCo and Other

Market share of the carbonated beverages as of 2015 is shows that PepsiCo is only 20.5% in the
beverage sector. The sector leader is Coca-Cola which accounts for a market share of 48.6%. The
global market was estimated at 341.6 billion U.S.D. (Market share of carbonated beverages
worldwide as of 2015, by company, 2015)
6.2 Global Sales in Beverage Sector

Figure 20 Global beverage sales share from 2011 to 2016, by beverage type

(Statistica.com, 2016)

According to Statistica Website, the carbonated drinks market is only 6% among beverage
consuming. But PepsiCo's diverse product portfolio has caught the beverage market with Juice
and juice based drinks with Tropicana and Naked Juice, Aquafina bottled waters , Lipton ready-
to-drink teas and Starbucks ready-to-drink coffees. (PepsiCo Beverage Facts, 2016)

According to Reuters global soft drinks markets have grown by 2.1% in 2014. And in 2013 it has
grown by 4%. (Global Soft Drink Market Grows 2.1% Despite Rising Health Concerns, 2014).
Therefore PepsiCo's main business of Carbonated drinks has it's stability in the market.
Figure 21 Brand value of Soft Drinks 2014-2015 (Soft Drinks, 2016)

Eventhough according to the Millward Brown website, the Coca-cola has the best brand value,
PepsiCo comes takes the fourth place. Also Tropicana takes up the sixth place which is also a
PepsiCo brand. Also Gatorade and Mountain Dew and Lipton (partnership with Unileaver) are
PepsiCo products.

Note: Please find the financial data in the appendix

7. Analysis Of Economic And Supply Management Issues

Product Demand Dependency of Customer Preferences

PepsiCo's products are consumer goods which highly depend on changes in consumer
preferences. Any noteworthy reduction in demand can harmfully affect business, financial
condition or results of operations. Consumer preferences keep on evolving which makes
PepsiCo to evolve as well with the market to keep up with the market share and grow. (PEPSICO,
2015)

Complying with Global and Regional Rules and Regulations

And a multinational company, PepsiCo need to be in compliance with law in general and
regionally (U.S. Federal law and other national government laws in each country PepsiCo
operates) relating to the production, content, quality, safety, storage, distribution, sale, display,
advertising, marketing, labelling, transportation and use of products, as well as our occupational
health and safety practices. (PEPSICO, 2015)

Imposition of New Taxes and Adhering Global and Regional Tax Policies

PepsiCo products are produced, distributed and sold in more than 200 countries and territories.
Therefore PepsiCo is subjected to taxes in each region or country they operate in. The
imposition of new taxes or increment of current taxes limits the sales and effect the revenue of
PepsiCo. (PEPSICO, 2015)

High Competitive Markets

PepsiCo's market sectors, beverage, food and snack, are highly competitive in the international
context with the other global giant brands. Therefore always new innovation, cost reduction and
brand image is key to the success. (PEPSICO, 2015)

Growing Business in Developing Markets and Politically Unstable Territories

PepsiCo's operations particularly in Mexico, Russia, Canada, the United Kingdom, Brazil, China
and India generates a considerable amount of revenue out of U.S. In emerging markets there is
always a risk of acceptance of the products with respect to competition, product price, cultural
differences, consumer preferences.

Also the unstable political and economic conditions are a huge market risk for PepsiCo. such as
in Russia, Ukraine, Brazil and the Middle East. (PEPSICO, 2015)
Unfavourable economic conditions in Operating Regions

The unfavourable economic conditions such as tax fluctuations, exchange rate fluctuations, tax
laws, changes in interest rates, contraction in the availability of credit in the marketplace effect
the business of PepsiCo with a high impact. (PEPSICO, 2015)

Increased Cost of Raw Materials and Disruption of Supply

With the wide range of products of PepsiCo, the range of raw materials used for production and
distribution is even higher. Some of the raw materials are imported from countries that are
politically and economically unstable. Also these raw materials are highly subjective to price
fluctuations. (PEPSICO, 2015)

Business Disruption in PepsiCo or Any Join Venture

Any discontinuation of the production, distribution or sales have a huge impact on the brand
image globally, even if its PepsiCo related or Joint Venture related. Many factor of risk could
have a impact on the above.

 Adverse weather conditions

 Natural disasters
 Government actions
 Terrorism
 Health epidemics
 Industrial accidents or breakdowns
 Telecommunication failures
 Cyber incidents
 Power or water shortages

(PEPSICO, 2015)

Issues Related to Product Quality, safety and Integrity

Since the PepsiCo products are consumables they require high standards of quality. Product
contamination, law quality raw material usage, mislabelling, misbranding, spoilage, allergens are
key risk factors which effects the revenue and profits of PepsiCo. (PEPSICO, 2015)
8. Conclusion
PepsiCo is a business which has its wings spread all over the globe. Also it owns a widespread
global supply chain which had been analysed in this report.

According to the analysis, there are three main strategies of PepsiCo identified, from
procurement, production and distribution areas of the supply chain.

Minimizing the cost variant in procurement is one of the key aspects. Since PepsiCo is into a
variant of FMCG business, constant sales prices are a key to success. PepsiCo looks into long
term price contracts/agreements with suppliers, diversity of suppliers and PepsiCo Supplier
Code of Conduct to gain superiority in procurement.

PepsiCo follows lean and six sigma strategies along with OEE strategies for high quality end
products. These pave the way to reduce waste, cost reduction and efficiency in the production
plants.

Speak to the market is another strategy followed by PepsiCo operations. Making the Right
product available in Right Place, at Right Price, for the Right Customer, in Right Condition, at
Right Time, in the Right Quantity are the seven Rs of logistics. PepsiCo achieves these by their
three delivery methods, Direct Store Delivery (DSD) , Customer Warehouse and Third-party
Distributor Networks. Also PepsiCo follows a very efficient Dynamic routing system which
enables seven Rs in logistics in a very efficient way.

PepsiCo is very concerned about sustainability aspect throughout the supply chain. With
sustainable sourcing, production and delivery company can achieve high quality finished goods
and also will be gaining brand value for ethical business.

PepsiCo should look more into 100% water neutrality as the competitor Coca-Cola company
since its main business's main raw material is water. By now PepsiCo has achieved five billion
litres of water in making of water harvesting.
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www.PepsiCo.com

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from Panmore Institute: http://panmore.com/pepsico-operations-management-10-decisions-
areas-productivity

PriceWaterhouseCoopers-China. (2012). Supply Chain Stragergies.

Soft Drinks. (2016). Retrieved from Millward Brown:
http://www.millwardbrown.com/brandz/top-global-brands/2015/brand-categories/soft-drinks

Statistica.com. (2016). Global beverage sales share from 2011 to 2016, by beverage type.
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Supply Chain Management of PepsiCo. (n.d.). Retrieved from ICMR India -Case Studies:
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%20of%20PepsiCo-Excerpts1.htm#Supply_Chain_Management_at_Pepsico
Appendix
1. Consolidated Balance Sheet of PepsiCo ( Annual Report 2015)
2. Consolidated Statement of Equity
3. Consolidated Statement of Equity

4. Five Year Summary

5. Two Years Summary Comparison PepsiCo

6. Comparison to Competitors