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Pepsi co. tr 12 2pm


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Pepsi co. tr 12 2pm

  1. 1. Pepsi Company- An Analysis of Corporate Strategy- Presented by:Danny Fehrenbach, Derek Chestnut, Kaitlyn Rawson, Kelsey Lushenko, Tim Mahoney 1
  2. 2. Background of Pepsi. Co• Started as a syrup production company• Kendal took leadership and built up the Pepsi brand image and pushed for aggressive tactics• Complimentary interest allowed expansion into snack food industry• Leadership was grounded around high employee expectation and the 3 P’s – People, People, People! 2
  3. 3. Organizational Structure of Pepsi• Strong management, high expectations• Managers move to different positions within company• Emphasis on people, not products, in resource allocation decision-making• “We take eagles and teach them how to fly in formation” –Wayne Calloway 3
  4. 4. Market Segmentation Pepsi breakdown of industry sales Restaurants are the plurality of Pepsi’s sales 36% 35% Soft Drinks With a relationship with Snack Foods CPK, there could be expansion and more growth within the 29% Restaurants restaurant segment Calloway believed in investing where there were the highest returns The entirety of sales in 1991 accounted for $20 billion. With the Food service revenue the greatest market potential Greatest rests within quick service Market restaurant, family, and Potential institutional 4
  5. 5. Current Restaurants• Consumers want variety in their food purchasing opportunities.• The U.S. population is growing towards health and nutritional trends that began in 1980’s.• Pizza Hut- shifted focus from casual dining to quick-serve and delivery, leaving opportunity to develop a mid-scale restaurant segment.• No coordination in purchasing costs between restaurants. (potential $100 million in annual savings) 5
  7. 7. California Pizza Kitchen Financials Carts of Colorado Financials 7
  8. 8. Threats of Acquiring COC With Restaurants holding the most capital spending, partnering with a backwards integrated company might increase expenditures drastically In manufacturing the physical carts, Pepsi runs the risk of increased sunk costs and depreciation As a larger firm, CPK offers greater financial incentives in relation to an acquisition or alliance 8
  9. 9. Interpreting the Numbers…• Consistent sales growth in both firms• Larger total sales in CPK, showing less liability• More market reach and revenue potential from California Pizza Kitchen• Past mishaps in manufacturing and management restrictions with COC might cause inconsistent growth• Pepsi’s past attempts at dine-in establishments have shown great potential, and CPK provides strong resources for the target segment’s needs 9
  11. 11. Choosing modes of change for Carts of Colorado Change in Food Pepsi hold high brandService consumers Lack of equity and coherence manufacturing Manufacturing Internal Experience? Development COC produce a Resource Specialized product Markets And service Alliance Mkt Failures are Extensive? Acquisition 11
  12. 12. Carts of Colorado• In 1980 brothers Stanley and Daniel Gallery became the first creators of NSF-approved food carts.• Designer, manufacturer and merchandiser of mobile food carts and kiosks.• 30% of business owned by venture capital firm• Management problems: Company almost went bankrupt 12
  13. 13. Current Strategy of COC• Sell carts to companies for use of sales of their products• Ability to make large profits and to serve customers without the high costs of a restaurant. 13
  14. 14. Pepsi’s Interest in COC• Large customer list – Burger King, Coca-Cola, Dunkin Donuts• Low cost with returns of a typical restaurant – Returns as high as 1.2 million annually• Accounted for 20% of COC’s sales in 1990 14
  15. 15. Changing Competitive Environment and Firms Capabilities• Changing from a central knowledge in restaurants to manufacturing• Changing their capacity to accommodate a smaller growing company (as in La Petite Boulangerie) 15
  16. 16. Gap• Backwards integration – Pepsi is not in the business of manufacturing• No internal development available• Moving into a whole different industry 16
  17. 17. Alliance or AcquisitionWe would advise against either an alliance or an acquisition• May lose customers: Major companies COC currently supplies to are competitors (Burger King, Coca-Cola)• Not specialized in backwards integration therefore no economies of scales would exist.• Not used to expanding small businesses, most successful ventures are acquiring established businesses. 17
  19. 19. California Pizza Kitchen• Started and owned by Larry Flax and Rick Rosenfield• Best known for individual-sized pizza with unique healthy toppings• Located in affluent, urban and suburban shopping centers• High level of service with intense staff training 19
  20. 20. CPK Current Strategy• Moderately priced, yet comparable- quality alternative to a fine dining restaurant• Targeting young, upscale singles and couples, families and retired people• Select cities with the potential to support more than one CPK• Limited advertising 20
  21. 21. Failed and Successful Ventures• 1965- Merged with Frito-Lay Company• 1970- Acquired Wilson Sporting Goods Co.• 1976- Acquired Lee Way Motor Freight• 1977- Acquired Pizza Hut• 1978- Acquired Taco Bell• 1984- Sold Lee Way Motor Freight• 1985- Sold Wilson Sporting Goods• 1986- Acquired Seven-UP and KFC• 1987- Sold La Petite Boulangerie 21
  22. 22. Pepsi’s Interest• Casual dining segment• Table turnover was nearly double that of a typical fine dining restaurant• Growth rate of 42% net income• 25 restaurants in 8 states 22
  23. 23. Changing Comp Environment/ firm capabilities• Pepsi would change from: – A fast food industry to a higher end service restaurant – Less advertising and more unique products – Pre-made frozen food to fresh ingredients• Firm Capabilities: – Experience in running chains – Already have experience in pizza industry – Money to invest and grow CPK 23
  24. 24. The Gap• Level of customer service• Environment designed to draw customers in• Value chain in getting fresh ingredients• Location strategy for restaurants• Innovative ideas for continually building the menu with unique items• Pepsi is moving further away from homogenous products 24
  25. 25. Alliance or Acquisition• Flax and Rosenfield want to remain apart of their company• The training and quality management of servers must be closely maintained• Limited Liability• Merging point with going public and aligning with Pepsi 25
  27. 27. Follow up Plan for Pepsi• We would want the alliance of CPK with Pepsi to operate as an equity alliance that could possibly lead to an acquisition.• Create detailed contracts partnering with current owners and build a Pepsi team to join with the current CPK management team. AlliancesArms-Length Long-Term Non-Equity Equity AllianceContracting Contract Alliances / Joint Venture Acquisition Administrative Controls In the Incentive Alignment In the Firm 27 (Hierarchy) Market Low High
  28. 28. QUESTIONS? 28