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Pepsi strategy

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Pepsi strategy

  1. 1. Strategic Analysis of PepsiCo Dominant LogicDavid Bright, Terra Christensen, Nicholas Papas, Arc Sims, Derrick Smith
  2. 2. Introduction Methods Areas of concern • Growth opportunities and competition Recommendations • Acquisition
  3. 3. Company Overview2001 Total Revenue $27 Billion Net Income $2.7 Billion ROS 9.8% ROE 32.8%
  4. 4. Company Overview Quaker Three Oats 7% divisions Pepsi • Pepsi 39% • Frito-Lay • Quaker Oats Frito- Lay 54%
  5. 5. Beverages Industry Overview Non-Dairy, Non-Alcoholic Pressures from • Buyers • Competitors Other information • Entrants
  6. 6. Snack Food Industry Overview Salty, Grain-Based Pressures from • Buyers • Substitutes • Competitors Other information • Entrants
  7. 7. Competitive Positioning Differentiation Strategy • Product packaging • Product manufacturing • Product innovations • Marketing
  8. 8. Core Competency Branding/Marketing Product Innovation
  9. 9. Diversification Strategy Recent efforts • Acquisitions • Divestitures • Joint Ventures
  10. 10. Strategic Conclusions Current strategies are working Areas of concern • Growth rates (domestic and abroad) • High competition • Over diversified
  11. 11. Alternatives Divestiture Acquisition R&D
  12. 12. Divestiture Quaker Oats • Appears to be poor fit • Acquired for Gatorade
  13. 13. Research and Development Be innovator • Develop unique brand extensions • Lead development of unique preservatives, additives, and packaging technology
  14. 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. 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. 16. Recommended Alternative—FinancialsIBC Present Value CalculationsRealistic Assumptionsamounts in $ millions Actual <--------------------------Estimated---------------------------> 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06Sales 3,496 3,531 3,566 3,602 3,638 3,674Cost 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 854Taxes (39) (179) (290) (293) (296) (299)Net Income Before Taxes 60 333 538 544 549 55512/31/05 Terminal Value 3,938Total Cash Flows 333 538 544 4,487Discounted Cash Flows 290 406 357 2,557Present Value of Cash Flows 3,609
  17. 17. Thank you

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