PepsiCo is a Food and Beverage Empire that, in 2021, made over $79.5 billion in revenues and over $7.6 billion in profits. The company distributes its brands via direct-store delivery, customer warehouses, and other distribution networks.
Diverse Product Portfolio: PepsiCo offers a wide range of food and beverage products, including iconic brands like Pepsi, Lay’s, Gatorade, Tropicana, Quaker, and Doritos. Its diverse portfolio caters to various consumer preferences and occasions, providing options for refreshment, snacking, and nutrition.
Innovation and Product Development: PepsiCo is committed to innovation and continuous product development, introducing new flavors, packaging formats, and healthier options to meet evolving consumer trends and preferences. It invests in research and development to create innovative products that resonate with consumers and drive growth.
Brand Recognition and Trust: PepsiCo’s brands enjoy high levels of recognition and trust globally, thanks to decades of marketing efforts, brand building, and quality assurance. Consumers associate PepsiCo’s brands with quality, taste, and reliability, fostering brand loyalty and repeat purchases.
Commitment to Sustainability: PepsiCo prioritizes sustainability across its operations, focusing on reducing its environmental footprint, conserving natural resources, and promoting social responsibility. It implements initiatives to improve water efficiency, reduce greenhouse gas emissions, and minimize packaging waste, demonstrating its commitment to environmental stewardship.
PepsiCo key segments
With a multi-billion dollar empire, PepsiCo has refined its business model to make it as agile as possible. With reduced management layers and by leveraging on digitalization the food and beverage empire has managed its logic costs to capture as much growth from the world’s market.
The company offers a vast range of products in food and beverage. In addition to that PepsiCo, through licensing agreements manufactures and distributes an even broader set of products by organizing joint ventures with other brands.
PepsiCo is organized in six main operating segments:
Frito-Lay North America (FLNA)
Ccomprising branded food and snack businesses in the United States and Canada. This segment distributes and sells branded snack foods including Cheetos, Doritos, Fritos, Lay, Ruffles
Quaker Foods North America (QFNA)
It includes cereal, rice, pasta and other branded food in the United States and Canada. QFNA makes, markets, distributes and sells cereals, rice, pasta, and other branded products. This segment comprises Aunt Jemima, Cap’n Crunch, Life, Quaker Chewy, Quaker grits, Quaker oat squares, Quaker oatmeal, Quaker rice cakes, Quaker simply granola and Rice-A-Roni side dishes.
North America Beverages (NAB)
It comprises beverage businesses in the United States and Canada such as Aquafina, Diet Mountain Dew, Diet Pepsi, Gatorade, Mist Twst, Mountain Dew, Pepsi, Propel and Tropicana. Other products (such as Lipton from Unilever) are offered via joint ventures.
Latin America
It includes all of the beverage, food and snack businesses in Latin America. This comprises the manufacturing and distribution of Cheetos, Doritos, Emperador, Lay’s, Marias Gamesa, Rosquinhas Mabel, Ruffles, Sabritas, Saladitas and Tostitos, and many Quaker-branded bowls of cereal and snacks.
Europe Sub-Saharan Africa (ESSA)
Which includes all of beverage, food and snack businesses in Europe and Sub-Saharan Africa included in the other segments.
Asia, the Middle East and North Africa (AMENA)
It comprises includes beverages, food and snack businesses in Asia, the Middle East and North Africa.
It comprises independent bottlers and distributors operating direct-store-delivery systems for beverages, foods, and snacks to retail stores. This distributionstrategy works well with products where in-store promotion and merchandising affect their commercial success.
Customer Warehouse
Other products are delivered to customer warehouses. This system works with products that are less fragile and have a longer life, compared to perishable items.
Distributor Networks
Through third-party distributors, a wide range of products can have a broader reach on the delivery vehicles. Those distribution networks are particularly effective as they serve restaurants, schools, stadiums and all the places where consumers hang out. Part of this distribution also goes through e-commerce websites.
Incentives and discounts through various programs to customers and consumers which comprise sales incentives, rebates, advertising, and other marketing activities played a key role. Advertising and other marketing activities amounted to $4.1 billion.
PepsiCo key financial metrics
Source: PepsiCo Annual Report 2017
With 53% of revenues coming from food, and the remaining 47% coming from the beverage, PepsiCo is an empire that in 2017 made over $63 billion in revenues. North America Beverage segment represented 33% of those revenues. While 58% of its revenues were in the US.
Source: PepsiCo Annual Report 2017
The company also generated over $10.5 billion in 2017, which represented a 16.5% operating margin.
Marketing Strategy:
Advertising and Brand Promotion: PepsiCo invests heavily in advertising and brand promotion to build brand awareness, drive consumer engagement, and increase market share. It utilizes various marketing channels, including television, digital media, print, outdoor, and sponsorships, to reach target audiences and reinforce brand messaging.
Product Innovation and Differentiation: PepsiCo focuses on productinnovation and differentiation to stay competitive in the market and meet changing consumer preferences. It continuously introduces new flavors, formulations, and packaging designs to appeal to diverse tastes and lifestyles, leveraging consumer insights and market trends.
Consumer Engagement and Social Media: PepsiCo engages consumers through social media platforms, interactive campaigns, and experiential marketing initiatives to foster brand loyalty and advocacy. It encourages user-generated content, brand challenges, and influencer partnerships to create authentic connections with consumers and drive brand affinity.
Health and Wellness Initiatives: PepsiCo promotes health and wellness initiatives through marketing campaigns, product reformulations, and labeling transparency efforts. It emphasizes the nutritional value of its products, highlights ingredient sourcing and quality standards, and communicates its commitment to providing healthier options for consumers.
Distribution Channels:
Retail Distribution: PepsiCo distributes its products through a vast network of retail channels, including supermarkets, hypermarkets, convenience stores, drugstores, and mass merchandisers. It collaborates with retail partners to secure shelf space, optimize product placement, and implement promotional activities to drive sales and visibility.
Foodservice and On-Premise: PepsiCo supplies beverages and snacks to the foodservice industry, including restaurants, cafes, cinemas, stadiums, and hospitality venues. It offers a range of fountain drinks, bottled beverages, and snack options tailored to the specific needs and preferences of foodservice operators and consumers in these establishments.
E-Commerce and Direct-to-Consumer: PepsiCo leverages e-commerce channels and direct-to-consumer platforms to reach consumers directly and facilitate online purchases and deliveries. It partners with online retailers, grocery delivery services, and its own e-commerce platforms to offer convenient access to its products and capitalize on the growing trend of online shopping.
Key Highlights
PepsiCo Overview: PepsiCo is a prominent food and beverage company that reported over $79.5 billion in revenues and $7.6 billion in profits in 2021. The company operates in various segments within the food and beverage industry.
Business Segments: PepsiCo is organized into six main operating segments:
Frito-Lay North America (FLNA): Deals with branded food and snack businesses in the United States and Canada.
Quaker Foods North America (QFNA): Focuses on cereal, rice, pasta, and other branded food in the United States and Canada.
North America Beverages (NAB): Includes beverage businesses in the United States and Canada.
Latin America: Encompasses beverage, food, and snack businesses in Latin America.
Europe Sub-Saharan Africa (ESSA): Encompasses businesses in Europe and Sub-Saharan Africa.
Asia, the Middle East, and North Africa (AMENA): Includes businesses in Asia, the Middle East, and North Africa.
Direct-Store-Delivery: Utilized for beverages, foods, and snacks, especially for in-store promotion and merchandising.
Customer Warehouse: Used for products that are less fragile and have a longer shelf life.
Distributor Networks: Involves third-party distributors to reach a wide range of products, including e-commerce distribution.
Key Customers: PepsiCo’s key customers include wholesale and other distributors, foodservice customers, grocery stores, drugstores, convenience stores, discount/dollar stores, mass merchandisers, membership stores, hard discounters, e-commerce retailers, and authorized independent bottlers.
Marketing Campaigns: PepsiCo engages in marketing campaigns and incentives to customers and consumers, including sales incentives, rebates, and advertising. Advertising and marketing activities play a significant role in the company’s operations.
Financial Metrics: PepsiCo’s financial metrics showcase its revenue breakdown, with 53% of revenues coming from food and 47% from beverages. The North America Beverage segment accounts for a significant portion of revenues, and the company generated over $10.5 billion in profits in 2017.
Empire Evolution: PepsiCo has evolved over the years, starting as the Pepsi-Cola Company in 1902. Through acquisitions like Frito-Lay, it transformed into a global food and beverage empire. It operates in over 200 countries, with diverse divisions and successful brands.
Competition with Coca-Cola: PepsiCo is a major competitor of The Coca-Cola Company. Both companies have a wide range of beverages and operate on a global scale, competing for market dominance and consumer preferences.
Business Model Recap
Element
Description
Value Proposition
PepsiCo offers a range of value propositions for its customers: – Diverse Product Portfolio: PepsiCo provides a wide variety of beverages, snacks, and food products, catering to different tastes and preferences. – Iconic Brands: PepsiCo’s portfolio includes iconic brands like Pepsi, Lay’s, Gatorade, Tropicana, and Quaker, known for quality and taste. – Convenience: PepsiCo’s products are available in various formats, including bottles, cans, single-serve packs, and bulk packages, offering convenience to consumers. – Taste and Quality: PepsiCo emphasizes taste and product quality, ensuring a positive consumer experience. – Innovation: The company continually introduces new products and flavors, keeping its offerings fresh and exciting. – Sustainability: PepsiCo is committed to sustainability, aiming to reduce its environmental impact and promote responsible sourcing.
Core Products/Services
PepsiCo’s core products and services include: – Beverages: PepsiCo offers a wide range of beverages, including carbonated soft drinks (e.g., Pepsi, Mountain Dew), non-carbonated drinks (e.g., Gatorade, Tropicana), and bottled water (e.g., Aquafina). – Snacks: The company produces snacks like potato chips (e.g., Lay’s), corn chips (e.g., Doritos), and healthier options (e.g., Smartfood), appealing to different snacking preferences. – Food Products: PepsiCo manufactures food products such as breakfast cereals (e.g., Quaker), oatmeal, pasta (e.g., Barilla), and ready-to-eat meals (e.g., Sabra hummus). – Brand Licensing: PepsiCo licenses its brands to various food and beverage products, generating royalties. – Innovation: The company invests in research and development to create new products and flavors, meeting evolving consumer demands. – Sustainability Initiatives: PepsiCo’s sustainability efforts include eco-friendly packaging and responsible sourcing of ingredients.
Customer Segments
PepsiCo’s customer segments include: – Consumers: Individuals of all ages and demographics who purchase PepsiCo’s products for personal consumption. – Retailers: PepsiCo sells its products to various retailers, including grocery stores, convenience stores, restaurants, and vending machine operators. – Foodservice Providers: Restaurants, cafes, and foodservice establishments use PepsiCo’s beverages and snacks in their menus and vending machines. – Wholesalers and Distributors: PepsiCo partners with wholesalers and distributors to reach a broader customer base. – Brands and Licensees: Companies that license PepsiCo’s brands for use in their own products. – Environmental and Sustainability Partners: Organizations and stakeholders collaborating with PepsiCo on sustainability and environmental initiatives.
Revenue Streams
PepsiCo generates revenue through several revenue streams: – Product Sales: The primary source of revenue comes from the sale of beverages, snacks, and food products through various retail channels. – Brand Licensing: PepsiCo earns revenue from licensing its brands to other manufacturers and companies, receiving royalties. – Foodservice Sales: Revenue is generated through sales to restaurants, cafes, and foodservice providers. – International Sales: PepsiCo’s global presence contributes to revenue through international sales and market expansion. – Innovation and New Product Launches: Sales increase with the introduction of new products and flavors that attract consumers. – Sustainability Initiatives: PepsiCo’s sustainability efforts may lead to cost savings and revenue growth through eco-friendly practices.
Distribution Strategy
PepsiCo’s distribution strategy focuses on extensive reach and accessibility: – Global Distribution Network: PepsiCo has a vast global distribution network, ensuring its products are available in numerous countries and regions. – Retail Partnerships: The company collaborates with a wide range of retail partners, from large supermarket chains to small convenience stores. – Foodservice Providers: PepsiCo supplies beverages and snacks to restaurants, cafes, and foodservice establishments. – Vending Machines: PepsiCo products are available in vending machines located in various public spaces. – Direct Store Delivery (DSD): PepsiCo utilizes DSD operations to maintain control over product delivery and merchandising in stores. – Innovation and Sustainability: The company explores innovative distribution methods and sustainable packaging to enhance its distribution strategy.
Pepsi Connected Business Facts
PepsiCo was founded in 1902 by American pharmacist and businessman Caleb Bradham as the Pepsi-Cola Company. Bradham, who hoped to emulate the success of Coca-Cola, marketed the beverage from his pharmacy and registered a patent for its recipe the following year. Today, Pepsi is a global company with a portfolio of 23 billion-dollar brands, or brands earning more than $1 billion in annual revenue. Sixteen of these brands are beverage-related, while the remaining seven are associated with snacks and other food products.In 1965, PepsiCo acquired Frito-Lay in what the chairmen of both companies called a “marriage made in heaven”. The resultant company transformed PepsiCo from a soft drinkorganizationand set it on a path to becoming one of the world’s leading food and beverage companies. Today, PepsiCo claims to operate in more than 200 countries and territories around the world with seven distinct divisions and many successful brands.Coca-Cola is the market leader of the soft drink industry. It is also the most widely recognizedbrand, with a Business Insider study revealing that a staggering 94% of the world population recognizes the red and white logo. However, Coca-Cola faces significant challenges with increasingly health-conscious consumers and less access to water resources.The Coca-Cola Company is an American multinational beverage corporation founded in 1892 by pharmacist Asa Griggs Candler. Many consumers associate the company with its signature soda in a red can or bottle. In truth, however, The Coca-Cola Company owns a plethora of soft drink, juice, tea, coffee, and other beverage brands. The Coca-Cola Company has 21 different billion-dollar brands or brands that generate more than $1 billion or more inrevenueeach year. The company also sells its products in nearly every country in the world, with Cuba and North Korea the only two countries where it is not sold officially. What’s more, the Coca-Colabrandis worth $87.6 billion, making it one of the most valuable among all companies. Though these figures allow Coca-Cola to enjoy market dominance in many countries, the company is nevertheless subject to intense competition.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
