The PepsiCo challenge (to archrival Coca-Cola) never loses its fizz for the world's #2-carbonated soft-drink maker. Its soft drink brands include Pepsi, Mountain Dew, and their diet alternatives. Cola is not the company's only beverage: Pepsi sells Tropicana orange juice, Gatorade sports drink, SoBe tea, and Aquafina water. The company also owns Frito-Lay, the world's #1 snack maker with offerings such as Lay's, Ruffles, Doritos, and Cheetos. The Quaker Foods unit makes breakfast cereals (Life, Quaker oatmeal), Rice-A-Roni rice, and Near East side dishes. Pepsi products are available in 200-plus countries; the US generates 50% of sales. The company operates its own bottling plants and distribution facilities.
PepsiCo's success is founded upon a broad portfolio of mega brands, each of which generates more than $1 billion in annual sales. Business is supported by nearly 700 manufacturing facilities worldwide. Operations are organized into four business units: PepsiCo Americas Foods (PAF), consisting of Frito-Lay North America (FLNA), Quaker Foods North America (QFNA), and all of its Latin American food and snack businesses (LAF), including the Sabritas and Gamesa businesses in Mexico, and snacks maker Mabel in Brazil; PepsiCo Americas Beverages (PAB), which includes bottling and distribution in North America, and the Gatorade and Tropicana brands, as well as bottling and distribution in Latin America; PepsiCo Europe, which houses all the beverage, food and snack businesses in Europe; and, finally, PepsiCo Asia, Middle East and Africa, which includes all the beverage, food, and snack businesses in that region.
Customers of PepsiCo include wholesale distributors, as well as grocery and convenience stores, mass merchandisers, membership stores, authorized independent bottlers, and food service distributors, including hotels and restaurants. Wal-Mart is its largest customer accounting for 11% of its 2011 sales; the retail giant accounts for about 18% of PepsiCo's North American business.
In a transformational move, Pepsi took over its two largest bottlers, Pepsi Bottling Group (PBG) and Pepsi Americas (PAS), in 2010. The $7.8 billion twin-bottling purchases propelled PepsiCo's 2010 revenue to just shy of $58 billion, a 34% spike over 2009. Sales continued to rise in 2011, growing 15% year-over-year, fueled primarily by pricing and volume increases in Latin America, Asia, and the Middle East and Africa, as well as the incremental contribution from its PBG and PAS acquisitions. European business spiked more than 30% due to PepsiCo's takeover of Russia's Wimm-Bill-Dann Foods, a maker of juice, value-added dairy products, and baby food. The Frito-Lay North America division generated a modest uptick in revenue, but the Quaker Foods business was flat. Bottom line earnings gained little momentum, increasing about 2% over 2010, diluted by hefty restructuring and impairment charges and merger costs.
Key to PepsiCo's growth strategy is to drive snack brands to new markets as it bolts on new and more nutritious foods categories through small acquisitions and alliances. In mid-2012, PepsiCo and Germany's privately held dairy holding company Theo Müller Group formed a joint venture to tap US dairy demand for the first time. Muller Quaker Dairy herds a premium lineup of Muller brand yogurts toward the dairy aisle of supermarket and club retailers.
In the same vein, PepsiCo in 2011 purchased Wimm-Bill-Dann Foods. The deal gave PepsiCo a leadership position in Eastern Europe's food and beverage market. Through International Dairy and Juice Limited (IDJ), a joint venture with Almarai, PepsiCo also holds a share of Egyptian dairy and juice producer Beyti. Other health-conscious beverage ventures include PepsiCo-Tata Tea held with Tata Global Beverages.
To complement its portfolio of nutrition-oriented brands at home, PepsiCo formed a JV with GNC to develop and sell fortified coconut water products under the Phenom brand. The products debuted in GNC stores in mid-2011, ahead of a wider release. PepsiCo also controls a majority stake in O.N.E., a California-based producer of coconut water. Along with private equity firm Catterton Partners, Pepsi increased its holding in the coconut water maker in 2010, following an initially investment a year earlier. PepsiCo is able to broaden distribution of O.N.E.-branded beverages through its PBC bottling unit.
Meanwhile, in a move designed to drive new products to market faster and increase its soda brand presence in China, PepsiCo has agreed to sell both its bottling operations and its beverage joint venture with Asahi Group Holdings (part of Asahi Breweries) to Tingyi (Cayman Islands) Holding Corp. As part of the deal, PepsiCo will take a 5% stake in Tingyi-Asahi Beverages Holding with an option to raise its stake in Tingyi-Asahi to 20% by 2015. In fall 2012 Tingyi and PepsiCo opened a new beverage plant in Zhengzhou. – less
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