PurposePepsiCo Inc. is a leading global snack and beverage company. We manufacture, market, and sell a variety of salty, convenient, sweet grain-based, snacks, carbonated and non-carbonated beverages and foods.
Historical AnalysisFounder Caleb BradhamCurrent CEO is Indra NooyiPepsi Co Inc. established in 1965 in North CarolinaCeo of PepsiCo Inc. Donald M. KendallDuring first five years introduced new products such as Doritos and FunyunsEntered Japan and Eastern Europe marketsIn 1992, expanded beyond carbonated beverages via a agreement with Ocean Spray to distribute single-serving juicesTropicana was acquired in 1998 and PepsiCo merged with the Quaker Oats Company, including Gatorade, in 2001.Implemented a number of acquisitions with Taco Bell in 1978, Kentucky Fried Chicken in 1986 and Pizza Hut in 1977
MissionTo be the worlds premier consumer products company focused on convenient foods and beverages. We seek to produce healthy financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity.”
ValuesPepsiCo Inc. reflects their values by their commitmentsTheir committed to Sustained Growth Empowered people Responsibility and TrustPepsiCo Inc. commitment is to deliver sustained growth, through empowered people, acting with responsibility and trust.
Strategic ObjectivesStrategic acquisitions Achieve SynergiesProduct Reformations Close Relationships with To make snack foods and distribution allies beverages less unhealthy International expansion By producing (GFY) good- Maintain Efficient for-you or (BFY) better-for distribution system you products, that would Direct Store Delivery create growth opportunities Broker Warehouse Related Diversification
StrategiesRealignment of their organization into three new business units; PepsiCo America Foods Includes FLNA ,QFNA and all of their Latin American food and snack business LAF. PepsiCo America Beverages Includes PBNA and all of our Latin American beverage business PepsiCo International Includes all PepsiCo business in the United Kingdom, Europe, Asia, Middle East and Africa.
Financial Objectives Increase our investment in developing markets, make selective investments to continue growing our global snacks business and accelerate our global R&D initiatives to help secure our future innovation pipeline. Produce $1.2 billion in pre-tax savings over the next three years (Productivity for Growth Initiative) Investing to drive additional growth in key developing markets across the world in both Snacks and Beverages. Targeted marketplace investments to further secure our competitive position in developed Snack markets. Increase our investments in R&D, with particular focus on long-term bets and innovation to sustain our long-term growth. Sustainable Growth
SWOT Analysis Strengths Lays Chips Broad Product line Quaker Oat granola bars Great reputation for their products 40% of company income from Increasing market share international companies 3 different sectors to improve Emerging markets contribute to efficiency 60% of growth of international US food business India - will invested over 500 US drinks mil over next 3 years food and drinks abroad Russia - acquired Lebedyansky #1 company in snacks juice company for 1.4 billion Doritos (800 mil in sales for 2007)
SWOT Analysis contin… Weaknesses Lack brand awareness with all products PepsiCo doesnt have all the products under one brand Frito Lay accounts for 1/3 of company sales Threats Weakened economy Pepsi blamed for pesticide residues in their products India 1/3 of sales from Frito Lay US moving towards consumption of more healthier products Lawsuits Several competitors due to broad product line
SWOT Analysis contin… Opportunity Invest in healthier products Devote more focus to non carbonated healthy drinks Focus on international presence and recognition Invest in going green
Gross Profit Margin = Sales – Cost of Goods Sold = 39,474,000 – 18,038,000 = 54.3% Sales 39,474,000 Industry Average = 30.10%Pepsi has 54.3 % of its revenue available to cover its total cost of goods sold expenses and still have the ability to yield a profit. Compare to the industry’s average that is excellent because Pepsi is 24.2% more than the industry’s average.Net Profit Margin = Profit after taxes = 5,658,000= $.1433 Sales 39,474,000 Industry Average = $.028Pepsi makes .1433 cents in profit after taxes are deducted for every $1 it generates in sales. Compared to the industry’s average, Pepsi is doing pretty well.
Current Ratio = Current Assets = 10,151,000= $1.31 Current Liabilities 7,753,000 Industry Average = $1.53Pepsi has $1.31 in current assets available to pay off $1 in current liabilities it owes. Compare to the industry’s average, Pepsi has to improve its current ratio because its .22 cents less than the industry. Pepsi only has .31 after paying off its current liabilities.Quick Ratio = Current Assets – Inventory = 10,151,000 - 2,290,000 = $1.01 Current Liabilities 7,753,000 Industry Average = $0.9Pepsi has $1.01 in current assets without the use of inventory to pay off $1 in current liabilities it owes. Compare to the industry’s average, Pepsi is doing kind of okay since it is only .11 ahead of the industry average.
Debt-to-assets Ratio = Total Debt = 17,394,000 = 50.2% (Hovers 20%) Total Assets 34,628,000 Industry Average = 29%(Hovers)Based on my calculation Pepsi has $.50 in debt to finance $1 in total assets or one can say that Pepsi has 50.2% in debt. In my research, Hovers came up with a leverage ratio of .20 (Pepsi) and .29 (Industry’s Average). In using Hovers’ results, compare to the industry average Pepsi uses less debt to buy its assets.Debt-to-Equity Ratio = Total Debt = 17,394,000 = 1.004 (Hovers . 48) Total Shareholder’s Equity 17,325,000 Industry Average = .59 (Hovers)Based on my calculation, Pepsi has $1.00 of debt for every dollar in equity to meets it financial goals. After researching the industry’s average on Hovers online, the industry’s average is .59 and Pepsi is .48. Comparing Hovers’ results among Industry’s average and Pepsi, Pepsi debt-to-equity ratio is looking good and I see no need for improvements.
Inventory Ratio = Cost of Goods Sold = 18,038,000 = 7.88 times Inventory 2,290,000 Industry Average = 6.5Pepsi has the ability to turnover its inventory in sales by 7.88 times in one year. Pepsi has a really good inventory turnover it’s able to turnover its inventory 1.38 times faster than the industry’s norm.Total Asset Turnover = Sales = 39,474,000 = 1.14% Total Assets 34,628,000 Industry Average = 1.1Pepsi’s total asset turnover is 1.14, which basically means that for every dollar in total assets, Pepsi has generated about $1.14 in sales. Compare to the industry’s average, Pepsi has a reasonable asset turnover.
RecommendationsLay-off about 3300 positions Savings from Productivity for Growth Initiative is going to go into North America BeveragesSelected investments will be allocated into key developing markets, and then Snacks in developed markets from marketplace investments and then R&D.Introduce a wide-variety of Non-carbonated beverages