Primary Question for PepsiCo

Primary Question for PepsiCo Can PepsiCo continue their strong performance in the North America market, and also strengthen their presence in developing markets, while at the same time responding to changes in consumers’ preferences?

Secondary Questions • What has enabled PepsiCo to grow to be the world's largest snack and beverage company? • How is the performance of PepsiCo's current product portfolio? • What does the success of PepsiCo's industries look like long term? • What actions could PepsiCo take to better position its portfolio? • How is Pepsi structured and what are the relative performances of those divisions? • What does the success of PepsiCo's divisions look like long term? • What actions could Pepsi take to better focus the structure of the organization towards high growth markets?

Keys to PepsiCo’s Success and Growth

PepsiCo Growth • PepsiCo’s growth strategy has been mainly external focused. • Several successful mergers and acquisitions over the years. • Adapting to changes in the external environment are critical to sustainable growth.

External Environment: PEST

US Liquid Refreshment Market Pepsi trailing Coke in large but negative growth carbonated soft drinks. Also little presence in high growth energy drinks. Possibly look to acquire Red Bull. Pepsi dominating in the rapidly growing non-carbonated beverage categories which position it well in North American market as consumers look for healthier drink options.

Salty Snack Food Industry – Key Trends • Due to these 3 key industry trends, PepsiCo started developing new flavors of salty snacks, using healthier oils in chips, & packaging snacks in smaller bags. • PepsiCo should differentiate its products while staying committed to the industry trends.

Frito Lay’s Commitment to Industry Trends • Eliminating trans fats & acquiring Flat Earth showed FLNA’s commitment to the publics growing awareness of nutritional content. • Introduction of new chip flavors was a commitment to the indulgent snacking trend. • Did these commitments to industry trends help or hurt PepsiCo’s market share of convenience food?

U.S. Convenience Food Market Share • PepsiCo is the leading manufacturer in the market due to its commitment to industry trends. • Their only close competition seem to be from Kraft Foods & Hershey. But you cannot count out the 37% of the market that “other” manufacturers currently have.

PepsiCo’s International Salty Snack Food Market Share by Country There is significant growth opportunity in international markets. PepsiCo will need focus on gaining more market share in the top 3 markets in 2010. They will also benefit from an increase in servings per month in both developed and developing international countries.

Cereals hold third largest market share in N.A. (14%) with projected growth Strong international sales results in both product lines 58% market share in N.A. Organic options and healthy alternative for breakfast – aligned with consumer preferences Sales are declining Business are not aligned with core business strategy Products are not aligned with healthy social trends Conclusion – Sell Aunt Jemima and PastaRoni/Rice-A-Roni product lines. Continue to customize Cereals, Oatmeal and Quaker Oats products to meet consumer preferences in each market.

PepsiCo Beverage Portfolio Carbonated Drinks Pepsi Mountain Dew Fruit Juices Bottled Water Energy drinks SoBe Energy Drinks – hold negligible market share Tropicana Aquifina Opp to acquire Red Bull Gatorade Isotonic Sports Drinks Analysis: Red Bull holds 40% market share for energy drinks. PepsiCo lacks a real player in this growing market.– Acquisition target

PepsiCo Organizational Structure 2007

PepsiCo International Markets Great opportunity for growth in both developed and developing international markets, especially Brazil and China. Strong market share in many today, with exception of China 2. Pepsi should be focused on growing market share in China Salty Snacks, predicted to be largest market by 2010. 3. Power of One strategy could play well in international markets.

Quaker Foods Brands With exception of Gatorade, Quaker brands have limited success internationally. Opportunity for growth in US and developed countries as consumers shift to eating healthier.

Quaker Foods North America Many Quaker Foods brands have strong market share, but not in the salty food or beverage markets. Majority of brands compete in Ready to Eat Cereal space, against well-established competitors Kellogg’s and General Mills.

PepsiCo after 2008 Realignment Appears goal of realignment of divisions was to put more focus on growth outside North America. Question we have is did PepsiCo go far enough? Does not appear to be much of a change.

Slides that follow still need to be placed

Question Facing PepsiCo DOES

Recommendations • Look to acquire an energy drink company (i.e. Red Bull) , stick with formula that has worked in the past… • Divest parts of Quaker Oats brand that do not fit into PepsiCo’s success formula (i.e. Pancake & Cereal Brands)

Primary Question for PepsiCo