The paper "Back to Basics: Marketing Strategies for Pepsi-Cola" is a brilliant example of a case study on marketing. Pepsi-Cola was first formulated by Caleb Bradham, a pharmacist from New Bern, North Carolina in 1898, and the company in its present form, PepsiCo Inc. , was formed in 1965 by the merger of Pepsi-Cola with the Frito-Lay Company. In its first year, the company recorded sales of $510 million with its modest product line, which included Pepsi, Diet Pepsi, and Mountain Dew soft drinks, and four snack-food products from the Frito-Lay side of the operation.
(PepsiCo Corporate Site, 2008) PepsiCo’ s portfolio has grown considerably; the company now produces hundreds of food and beverage products and can boast of 18 individual brands with annual sales of over $1 billion, led by Pepsi, which has sales approaching $20 billion. Table 1 – PepsiCo Mega-Brands (Source: PepsiCo 2008 Annual Report, 2009: 3) Company Organization PepsiCo is organized into three major business units, which are further divided into six reporting divisions, as illustrated by Table 2: Table 2 – Business Units and Divisions of PepsiCo (Source: PepsiCo 2008 Annual Report, 2009: 43) Until 1997, PepsiCo Americas Foods (PAF) included Pizza Hut, Taco Bell, and KFC restaurants, but those operations were divested to become a separate company – now known as Yum!
Brands – by the beginning of 1998. PepsiCo still maintains a modest ownership stake in Yum! , however, and the restaurant group is an important outlet for PepsiCo products. (Steinriede, 1997) Recent Financial Performance Highlights PepsiCo posted a total net revenue of $43.251 billion in 2008, a 10% increase from 2007, but a modestly slower growth rate than the 12% recorded from 2006 to 2007. Restructuring costs and unfavorable performance of commodity hedges accounted for nearly $1 billion in expenses against the company’ s bottom line in 2008.
PepsiCo American Beverages (PAB) saw its operating profit declined by 18.5% in 2008, earning $460 million less than 2007, circumstances which could most likely be largely blamed on the economic recession. On the positive side, all other divisions of the company posted at least modest revenue growth, with very strong performance coming from the Latin America Foods (LAF) and the Middle East, Asia & Africa divisions, posting 26% and 25% increases, respectively.
(2008 Annual Report, 2009: 56-57) Competition PepsiCo’ s most significant competitor is, as always, the Coca-Cola Company, although there are noteworthy competitive threats from a number of smaller producers and store-brand products. Coca-Cola again held a larger market share in carbonated soft drinks than PepsiCo in 2008, 42.7% versus 30.8%, and while both companies lost fractional percentages of market share to competitors such as Dr. Pepper/Snapple and Red Bull, PepsiCo’ s loss was slightly higher. In terms of brands, Coke is still number one at 17.3% versus Pepsi-Cola at 10.3%, which is followed very closely by Diet Coke at an even 10%.