Pepsico Inc – Background Analysis Using Porters Five Forces

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PepsiCo Inc – Background analysis using Porters five forces

Introduction
PepsiCo Inc (NYSE:PEP) is the second largest food and beverage (F&B) company globally, with revenues of US$58bn in 2010 trailing only Nestle of Switzerland. About half of PEP’s revenues are generated from its beverage business, with the balance primarily from snack foods. In this report, we review PEP’s history, global footprint, key strategies and business drivers then evaluate its two core divisions’ competitive positions separately using Porter’s five forces analysis (Porter 1997). Given the split nature of PEP’s core businesses, we believe it is more appropriate to contrast the beverage division with The Coca-Cola Company (KO) and the food division with the likes of Kraft (KFT), Heinz (HNZ) and General Mills (GIS). History, global footprint and breakdowns

PEP evolved from a 1965 merger between Pepsi-Cola Company and Frito-Lay, a manufacturer of potato and corn chips (PepsiCo 2011a). From the late 1970s through to mid-1990s, PEP expanded rapidly via acquiring numerous businesses outside its core focus including Pizza Hut, Taco Bell, Wilson Sporting Goods and North American Van Lines. In 1997, PEP changed its strategy and exited many non-core businesses by selling outright or spinning them off (one grouping is now listed Yum! Brands). Since then, PEP has continued to grow via acquiring businesses such as Tropicana, Quaker Oats and Gatorade which are more in line with PEP’s core focus (beverages/snack foods). PEP is functionally divided into four main operating divisions: PepsiCo Americas Foods (PAF), Beverages (PAB), PepsiCo Europe (Europe) and PepsiCo Asia, Middle East and Africa (AMEA). From a management and reporting standpoint PAF is further divided into Frito-Lay North America (FLNA), Quaker Foods North America (QFNA), Latin America Foods (LAF). Thus, PEP comprises six reporting segments: FLNA, QFNA, LAF, PAB, Europe and AMEA (Figure 1).

Figure 1. The six reporting segments...
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