INTRODUCTION On June 30, 1998, PepsiCo shocked the beverage industry with its introduction of a revolutionary new sugarfree cola with no aftertaste. Within one hour of FDA approval of acesulfame potassium (ace K), the main sweetening ingredient, the launch of Pepsi One was announced. Samples of the new drink were in the hands of reporters and bottlers within hours. How was PepsiCo able to formulate a new core brand so quickly? The answer is that Pepsi is no longer an American company but has become a truly global organization. Pepsi has proven that it is a truly global company by developing a new product to satisfy an overseas market segment. As the product was highly successful in foreign markets, PepsiCo brought it back to the U.S. market for a successful launch once ace K was approved. PEPSICO CORPORATE HISTORY pany with sales of $510 million. By 1970, PepsiCo had grown to annual sales of $1 billion and had transferred the corporate headquarters to Purchase, New York. Diversity and Focus Throughout the history of PepsiCo, there have been several purchases and sales of separate business entities (Appendix 1). In the late 1990s, PepsiCo experienced a period of rationalization and began to focus on the beverage and snack food markets. The most dramatic change during this period was the divestiture of the restaurant brands, Kentucky Fried Chicken, Taco Bell, and Pizza Hut into the new Tricon Global Restaurants. Tricon was spun off to shareholders on the basis of one share in the new company for every ten shares of PepsiCo held. Brand Development
with Early Growth the DEMO
PepsiCo has concentrated on the development of major VERSION of CAD-KAS PDF-Editor global brands. In 1997 it held nine different brands with (http://www.cadkas.com). over $1 billion in global sales (Lay’s, Doritos, Rufﬂes, In the 1890s the soda fountain was an integral part of the Cheetos, Pepsi, Diet Pepsi, Mountain Dew, 7-Up, and town drugstore. In New Bern, North Carolina, a pharma- Mirinda). cist named Caleb Bradham decided to develop a new beverage that was both delicious and healthful. This beverage would aid digestion and boost energy by elimi- International Operations nating many of the chemicals and narcotics in popular PepsiCo’s revenues are highly skewed toward the Amerfountain drinks. His new beverage was a huge success. ican marketplace and international revenues account for He started producing the ﬂavoring syrup in his basement a small portion of total revenues and an even smaller and shipping it out to other drugstores in the region. By proportion of proﬁts. During ﬁscal year 1997, PepsiCo 1902 the formula was so successful that he decided to ﬁle reported a strong balance between its snack foods and incorporation papers to expand into Virginia, Maryland, beverage divisions. Each accounted for approximately Pennsylvania, and New York. $10.5 billion in revenue, although proﬁts in the snack Now, more than a hundred years later, PepsiCo has food division were signiﬁcantly larger at $1.7 billion, developed into a global giant with sales in the range of opposed to $1.1 billion for beverages. $21 billion per year and a global sales force of 63,000 In the beverage market, $8 billion was realized people. The current corporate entity of PepsiCo truly in North America, while international operations acbegan in 1965 when Pepsi-Cola, under the leadership of counted for only $2.6 billion, with a net loss of $137 milDonald Kendall, and Frito-Lay, under the direction of lion. The snack food business was also skewed with $7 Herman W. Lay, merged their companies to create a com- billion in North American revenue; however, PepsiCo achieved $3.5 billion in international revenue, for an international proﬁt of $318 million. This case was prepared by Jason Blondé, Hemal Salot, Tanya Savio, and Florian Schmid of Temple University’s Fox School of...