The world economy is represented by many transnational corporations. Multinational companies usually hold the leading market shares in their industries and are able to set the rules for the rest of the companies. Thus, the main aim of this paper is to analyze the business performance of PepsiCo, one of the largest international corporations, explore the range of its products and make some conclusions about the company’s success in the market.
History of the Company
PepsiCo is a transnational corporation represented all over the world. The Pepsi-Cola Company was created in 1902 by Kendall and Lay, which after the merge with Frito-Lay in 1965, started a new company called PepsiCo. It headquarters are located in Purchase, New York. Since the year of its creation, the company has developed into one of the largest food and beverage corporation in the world.
The company is well-know for the long history of acquisitions and divestments, which were the factors for its fast growth and expansion in the market. Through acquisitions, PepsiCo bought the orange juice producer Tropicana Products in 1998. Moreover, PepsiCo merged with Quaker Oats Company in 2001, acquired PepsiAmericas and Pepsi Bottling Group in 2009, and purchased a majority stake of a Russian company Wimm-Bill-Dann in 2011 (PepsiCo, 2012).
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Short Overview of the Company
The company generated more than $1 billion worth retail sales for each product line in more than 200 countries on every continent in 2012. Annual net revenues of the company amounted to $43.3 billion per year in 2011 which makes the company the second largest business in food and beverage industry in the world market. In the previous year, the company was an employer of 297 thousand people worldwide (PepsiCo, 2012).
The company’s product mix consists of 63% foods and 37% beverages. The current products lines of PepsiCo include few hundred brands each of which generated approximately $108 billion annual retail sales in 2009. Starting from 1970, PepsiCo expanded its core business focus and now owns the following brands: Pizza Hut, KFC, Hot’n Now, Chevys Fresh Mex, D’Angelo Sandwich Shops, Taco Bell, California Pizza Kitchen, Stolichnaya, East Side Mario’s, North American Van Lines, and Wilson Sporting Goods. The main modern brands owned by the company are: Pepsi-Cola, Tropicana, Mountain Dew, 7Up, Lay’s, Gatorade, Lipton Teas, Quaker Foods, Cheetos, Mirinda, Pepsi Max, Ruffles, Aquafina, Doritos, Tostitos, Sierra Mist, Walker’s, and Fritos (PepsiCo, 2012).
PepsiCo consists of four main international divisions: PepsiCo American Foods, PepsiCo Europe, PepsiCo Americas Beverages, and also PepsiCo Asia, Middle East, and Africa. The main region of operations for the company is North and South America; in 2009, the region accumulated 71 percent of the net revenues of PepsiCo. Europe and Asia, the Middle East and Africa accumulated 16 percent and 13 percent of the company’s net revenues respectively (PepsiCo, 2012).
Until the early 1990s, most product lines of PepsiCo consisted of carbonated drinks and snacks. However, starting from 1990, the company made a decision about widening the product range to increase the amount of healthy products through an acquisition of Quaker Oats, Tropicana, and Naked Juice. The segment of healthy snacks appeared to be particularly profitable for the company; it increased the total revenue of the company by 18 percent in 2009. Moreover, in order to make its product healthier, PepsiCo reviewed food ingredients. The company eliminated trans-fats, reduced fat and sugar content, started to produce products in serving sizes with a smaller level of calories. This way, the company increased the number of its customers on the dietetic products segment. Moreover, PepsiCo changed its policy about selling soft drinks with high sugar content to children. Hence, it substituted such drinks by lower-calories alternatives in schools worldwide. The changes in the company’s policy described above show the company’s responsible approach (PepsiCo, 2012).
The competition in the food and beverage sector is quite tough in the USA and the international market. There are many companies presented in this business segment, however, the main competitor of PepsiCo is The Coca-Cola Company. The Cola-Cola Company has been a market leader for 112 years, and only in 2005 PepsiCo managed to reach the leading positions by market value. The companies have been in the state of a strong competition since 2005, although PepsiCo has shifted its business into foods and snacks segment decreasing the importance of the carbonated soft drinks sales. Starting from 2009, PepsiCo’s total revenues are formed by only 50 percent beverages, the majority of which are represented by non-carbonated brands Gatorade and Tropicana. Furthermore, the company held 39% of the US snack food market in 2009; its main competitor in the snack food market – Kraft Foods – held only 11% of the market in the same year (Pyke, 2010).
Thus, the analysis of PepsiCo’s business performance showed that it is a successful and profitable company, which operates in all regions of the world. The company has a wide range of products and brands. After focusing on a market segment of carbonated soft drinks, PepsiCo has recently switched to the food segment. Moving from the segment of tough competition with The Coca Cola Company increased the profits of the company and increased its market share in the world food market. Moreover, being represented by various product brands helps the company to diversify the risk of its business activity and make its positions in the market more stable.