INSTITUTE OF PROFESSIONAL EDUCATION AND RESEARCH (IPER) ASSIGNMENT OF INTERNATIONAL BUSINESS ENVIRONEMENT ON PEPSI CO.SUBMITTED TO- SUBMITTED BY-PROF. UDDEEPAN CHATTERJEE MBA SEC-1, GROUP-6 RAHUL GUPTA RANJIT RAGHUWANSHI RENU SAINI SANDEEP PATEL
What is FMCG ???? Fast Moving Consumer Goods (FMCG) goods are all consumable items (other than groceries/pulses) that one needs to buy at regular intervals. These are items which are used daily, and so have a quick rate of consumption, and a high return. FMCG can broadly be categorized into three segments which are:1. Household items as soaps, detergents, household accessories, etc,2. Personal care items as shampoos, toothpaste, shaving products, etc and finally3. Food and Beverages as snacks, processed foods, tea, coffee, edible oils, soft drinks etc. Global leaders in the FMCG segment are Nestlé, ITC, Hindustan Unilever Limited, Reckitt Benckiser, Unilever, Procter & Gamble, Coca-Cola, Carlsberg, Kleenex, General Mills, Pepsi, Gillette etc. FMCG, otherwise known as CPG, is one of the biggest industries in the world and there are a lot of facts that stand the FMCG industry apart as a career choice: FMCG companies are behind the biggest brands in the world. FMCG is all about names, the products which everyone recognises from trips to the supermarket or from ads on television. The brands that make up this sector are the high profile ones, the ones everybody knows and loves. Think Coca-Cola, Dettoland Dove. This is an industry that puts you in living rooms,kitchens and bathrooms across the globe. The FMCG industry changes fast and is constantly evolving. Its fair to say there is never a dull moment in FMCG. From the pace at which goods leave the shelves to the rate of product innovation and career progression, things move quickly. And it doesnt end there. The brands themselves are changing just as quickly. 40% of brands on the top 100 list twenty years ago have already been replaced by new names today.
FMCG firms thrive on employee and customer retention. Employee investment is a big partof the ethos of the FMCG world. Perhaps its because we understand the importance of loyalty.Customer loyalty can make or break a brand. Take Twinings, for example – a century after theyentered the top 100 brand list, they are still there and going strong. So it makes sense for FMCGcompanies to encourage the loyalty of their employees too.FMCG companies can beat the recession.This is an industry that has proved itself veryresilient to recession – with the majority of companies in the sector weathering the financialstorm in a way that very few others have managed. Why? Well, consumers will always need tobuy the products created by FMCG companies. They may not buy big items like refrigerators orcars in a recession, but floors still need to be cleaned, clothes need to be laundered and aches andpains still need to be soothed.The FMCG industry thinks bigger – and better. This is an industry that offers things on awhole new scale. Where else could you find yourself handling $150 million accounts? Workingin FMCG gives you the chance to be a part of some global success stories and influence the wayconsumers shop for products. FMCG firms are always thinking of the next great discovery orinnovation – always developing and ever-changing to meet consumers needs.
CPMPANY PROFILEPepsiCo Inc. is an American multinational corporation headquartered in Purchase, New York,United States, with interests in the manufacturing, marketing and distribution of grain-basedsnack foods, beverages, and other products. PepsiCo was formed in 1965 with the merger ofthe Pepsi-Cola Company and Frito-Lay, Inc. PepsiCo has since expanded from its namesakeproduct Pepsi to a broader range of food and beverage brands, the largest of which include anacquisition of Tropicana in 1998 and a merger with Quaker Oats in 2001—which addedthe Gatorade brand to its portfolio.As of January 2012, 22 of PepsiCos product lines generated retail sales of more than $1 billioneach, and the companys products were distributed across more than 200 countries, resulting inannual net revenues of $43.3 billion. Based on net revenue, PepsiCo is the second largest food &beverage business in the world. Within North America, PepsiCo is ranked (by net revenue) as thelargest food and beverage business.Indra Krishnamurthy Nooyi has been the chief executive of PepsiCo since 2006, and thecompany employed approximately 297,000 people worldwide as of 2011. The companysbeverage distribution and bottling is conducted by PepsiCo as well as by licensed bottlers incertain regions. PepsiCo is a SIC 2080 (beverage) companyDivisionsReport of operations results as follows, by six segments:PepsiCo Americas Beverages (PAB)Frito-Lay North America (FLNA)Quaker Foods North America (QFNA)Latin America Foods (LAF)EuropeAsia, Middle East &Africa
PEPSICO LOGO OVER THE YEARSPEPSICO BRANDSPepsiCos product mix as of 2012 (based on worldwide net revenue) consists of 63 percent foods,and 37 percent beveragesOn a worldwide basis, the companys current products lines includeseveral hundred brands that in 2009 were estimated to have generated approximately $108billion in cumulative annual retail sales.The primary identifier of a food and beverage industry main brand is annual sales over $1billion. As of 2009, 19 PepsiCo brands met that mark: Pepsi-Cola, Mountain Dew, Lays,Gatorade, Tropicana, 7Up, Doritos, Lipton Teas, Quaker Foods, Cheetos, Mirinda, Ruffles,Aquafina, Pepsi Max, Tostitos, Sierra Mist, Fritos, andWalkers.
MissionOur mission is to be the worlds premier consumer products company focused on convenientfoods and beverages. We seek to produce financial rewards to investors as we provideopportunities for growth and enrichment to our employees, our business partners and thecommunities in which we operate. And in everything we do, we strive for honesty, fairness andintegrity.Vision"PepsiCos responsibility is to continually improve all aspects of the world in which we operate -environment, social, economic - creating a better tomorrow than today."Our vision is put into action through programs and a focus on environmental stewardship,activities to benefit society, and a commitment to build shareholder value by making PepsiCo atruly sustainable company.Performance with PurposeAt PepsiCo, were committed to achieving business and financial success while leaving apositive imprint on society - delivering what we call Performance with Purpose.Our approach to superior financial performance is straightforward - drive shareholder value. Byaddressing social and environmental issues, we also deliver on our purpose agenda, whichconsists of human, environmental, and talent sustainability.
FINANCIAL STATUS OF THE PEPSICOOperating and Marketplace HighlightsGrew net revenue in three of our four business units on a reported basis and grew net revenue inall four business units on an organic basis.Achieved 5.5 points of effective net pricing globally.Grew both global snacks and global beverage revenue. Grew global nutrition revenue 10 percent.Grew net revenue 9 percent in emerging markets. Emerging market net revenue grew 13 percenton a constant currency basis.Held LRB value share to maintain our leadership in measured channels relative to primarycompetitor in the U.S., the largest global beverage market.Increased media spending in the U.S. by 25 percent in the first quarter.Ranked No. 1for contribution to revenue growth in U.S. convenience stores.Gained Family Dollar, a leading retailer with more than 7,000 outlets in North America, as a newbeverage customer.Net capital spending declined by $122 million in the quarter and was 4.7 percent of net salesover the last four quarters, an improvement of 80 basis points over the comparable prior fourquarters.Summary of First Quarter Financial PerformanceReported net revenue increased 4 percent and constant currency net revenue increased 5 percent,led by double-digit growth in the Europe and AMEA divisions and mid-single-digit growth inPepsiCo Americas Foods.Net revenue benefited from 5.5 percentage points of effective net pricing, offset by negativeforeign currency translation of 1 percentage point. Acquisitions contributed less than 1percentage point to net revenue growth.
Reported operating profit was flat and core operating profit declined 6 percent. Operating profitperformance was in line with managements expectations and reflected the impact of divisionoperating profit performance and higher corporate unallocated expenses. Reported operatingprofit included $84 million in mark-to-market gains on commodity hedges and $35 million ofrestructuring, impairment and integration charges.Reported EPS of $0.71 was even with the prior year quarter and core EPS was $0.69, a decline of7 percent, in line with managements expectations. Reported EPS includes a $0.04 per sharebenefit from mark-to-market net gains on commodity hedges, and a negative $0.01 per shareimpact of restructuring, impairment and integration charges.Summary First Quarter 2012 Performance (Percent Growth) Core(a) Constant Currency(a) Net Operating Operating Operating Net Volume(b) Revenue Revenue Profit(d) Profit ProfitPAF 2 5 (1) 6 2 1FLNA (2) 4 1 4 2 2LAF 15 11 7 17 18 10QFNA (5) (3) (12) (2) (10) (10)PAB (1) (2) (6) (2) (9) (9)Europe 17/10(c) 13 29 18 4 2.5AMEA 16/2(c) 12 2 12 6 7Total Divisions 5/1(c) 4 (1) 5 (1) (2)Total PepsiCo - (6)
PAST PERFORMANCE OF COMPANYPepsico (PEP) is a leading international beverage and snack-food company.-Seven Year Revenue Growth Rate: 12.5%-Seven Year EPS Growth Rate: 7.4%-Seven Year Dividend Growth Rate: 13.2%-Current Dividend Yield: 3.05%-Balance Sheet: leveraged but solidRatiosPrice to Earnings: 17.4Price to Free Cash Flow: 23Price to Book: 4.8Return on Equity: 28%Revenue(Chart Source: DividendMonk.com)
Revenue growth was almost 12.5% per year over this period, which is quite high for a largecompany. That’s not the whole story, though. In 2009 the company announced that it wouldacquire its two largest North American bottlers. These were rather large operations with ratherlow profit margins, meaning they were buying quite a bit of revenue compared to how much theywere buying in terms of income. So as the chart shows, while Pepsico has indeed had decent―normal‖ revenue growth, the large 2010 and 2011 bump is due to the bottler acquisitions.Revenue for Pepsico jumped 34% in 2010 compared to 2009, while net income only jumped6.3% over the same period.Coca Cola went onto copy the same move, and bought their own North American bottler aswell.EPS and Dividends(Chart Source: DividendMonk.com)
FUTURE PLANS OF THE PEPSICOPepsiCo to cut 8,700 jobs globally, eyes $1.5 bn saving by 2014NEW YORK: Global food and beverages giant PepsiCo will cut 8,700 jobs across 30 countriesas part of a programme to save up to USD 1.5 billion by 2014 to offset high commodity costsand increased spending on advertising and marketing.The firm plans to increase advertising and marketing support behind its global brands by USD500-600 million in 2012, with particular focus on North America.PepsiCo plans snacking future around chickpea-based productswith billion dollar investmentPepsiCo is betting the farm on the chickpea.While potato and corn tortilla-based snack foods have long dominated supermarket snackshelves, the food giant is hoping to transform the industry with a new, billion-dollar investmentthat may produce a raft of foods from the legume.The underlying message is buried in a feel-good announcement touting the three-way partnershipbetween PepsiCos Foundation, the United Nations World Food Programme and the UnitedStates for International Development USAID, a project the partners say will "addressmalnutrition in Ethiopia."PepsiCo to Invest $2.5 Billion in China Over Next Three YearsThe new investment will be allocated to a variety of projects, including new manufacturingfacilities, a significant scaling up of the companys research and development operations,expanded agricultural development and brand-building initiatives.PepsiCo plans to open 10-12 new plants in China to manufacture soft drinks, non-carbonatedbeverages and snacks and will install additional production lines in existing facilities. Consistentwith the companys strategy to expand in interior and western China, PepsiCo will open plants inthe provinces of Fujian, Gansu, Henan and Yunnan in the next two years. All new plants willmeet LEED standards for environmental design, following the model of the companysChongqing beverage plant, which opened last year. That plant - the first "green" beverage plantever built in China and the first of its kind to receive LEED certification - uses 22% less waterand 23% less energy than the average PepsiCo plant in China.
FUTURE OF FMCG SECTORFast moving consumer goods will become aRs 400,000-crore industry by 2020. A Booz &Company study finds out the trends that will shape its future.The report estimates the FMCG sector witnessed robust year-on-year growth of approximately11 per cent in the last decade, almost tripling in size from Rs 47,000 crore in 2000-01 to Rs130,000 crore now (it accounts for 2.2 per cent of the country’s GDP). Growth was even faster inthe past five years — almost 17 per cent annually since 2005. It identifies robust GDP growth,opening up of rural markets, increased income in rural areas, growing urbanization along withevolving consumer lifestyle.As modern life accelerates and technology continues to advance, people expect everydayproducts to keep up too. Thats why FMCG companies are always on the lookout for the nextgreat innovation.New product launches, new schemes, new brands, new brand extensions, and new marketingactivity are springing up across the sector. But that doesnt automatically mean that theyll allsurvive. Its innovative thinking and smart working that will ensure individual companies inFMCG succeed. As Andrew Grove, founder of Intel Corporation, says, "Success breedscomplacency. Complacency breeds failure. Only the paranoid survive."The thinking behind new products is becoming increasingly innovative and the productsthemselves are being marketed to highlight the value they offer. Top companies are beginning tochange the way they work already. As RakeshKapoor, CEO at Reckitt Benckiser (one of theleading names in world health and personal care products) says, "At RB, its all about lettingpeople have ownership of the idea and delivery and not putting too many decision layers in theirway. Its attitude, not process, that drives our innovation."Theyre adapting their traditional customer relationships as well, with a move away from largescale surveys to focus groups and social media research - bringing the business closer to theircustomers. Rakesh Kapoor points out that "being close to the consumer doesnt only mean beingreactive. It means listening, watching and then creating ways to meet a need that the consumerhas, but may not have articulated yet. If youre in touch with consumers lives, youre very awareof the life changes they experience over time."les and buying be,"you have to focus on the basicrelationship with the consumer." This kind of thinking means that blogs, social media and other digital. The Indian consumermarket will remain buoyant, given favorable demographics, rising disposable income and rapidurbanization.
The sector is seeing rapid change in customer tastes and preferences- be it food & beveragesector or personal durables.The coming year will see specialized and niche products driven by product innovation. More andmore brands will be seen adopting strategy of globalization. THANK YOU !