10. Strategic Conclusions
Current strategies are working
Areas of concern
• Growth rates (domestic and abroad)
• High competition
• Over diversified
13. Research and Development
Be innovator
• Develop unique brand extensions
• Lead development of unique preservatives,
additives, and packaging technology
14. Acquisition
Jones Soda
• Growing specialty, premium soda market
niche
• Fits with PepsiCo’s core competency
• Can possibly be acquired for $10M
• NPV of $19M, with potential for nearly
$50M
15. Recommended Alternative
Acquire Interstate Bakeries
Corporation
• Portfolio of bread, bakery goods, and
sugary snack foods,which uses many of the
same distribution channels
• Recognizable, segment leading brands with
Hostess and Dolly Madison
16. Recommended Alternative—Financials
IBC Present Value Calculations
Realistic Assumptions
amounts in $ millions
Actual <--------------------------Estimated--------------------------->
12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06
Sales 3,496 3,531 3,566 3,602 3,638 3,674
Cost of Goods Sold (1,653) (1,670) (1,686) (1,703) (1,720) (1,737)
Selling, Delivery and Administrative(1,586) (1,190) (892) (901) (910) (919)
Depreciation & Amortization (111) (112) (113) (114) (116) (117)
Interest Expense (47) (47) (47) (47) (47) (47)
Net Income Before Taxes 99 513 828 836 845 854
Taxes (39) (179) (290) (293) (296) (299)
Net Income Before Taxes 60 333 538 544 549 555
12/31/05 Terminal Value 3,938
Total Cash Flows 333 538 544 4,487
Discounted Cash Flows 290 406 357 2,557
Present Value of Cash Flows 3,609
Quaker acquired in 2001. Include the Gatorade sports drink brand. Analyzed only two of the 3 divisions. Pepsi in the non-dairy, non-alcoholic beverage industry and Frito-Lay in the salty grain-based snack food industry.
Examples such as coating both sides of the potato chip, special potato etc.
Resources include brand equity, celebrity endorsements, institutional knowledge, propretiary knowledge Capablities special manufacturing process, keep and build brands.
Ready-to-eat meal industry is competitive and PepsiCo does not have experience in it Recall experience with TriCon Need to monitor whether Quaker Oats meets financial performance metrics
Olestra as a possible disruptive technology. Pouring cans for doritos etc.
Growing specialty, premium soda market niche Existing brand recognition in select markets with loyal customer base Product development and branding fits with PepsiCo’s core competency Can be acquired for $10M NPV of $19M, with potential for nearly $50M