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PepsiCo provides a range of food and beverage products, across multiple high-profile brands, targeted at the mass general consumer market.

PepsiCo was established through the merger of Pepsi-Cola and Frito-Lay in 1965. Pepsi-Cola was founded in the late 1890s by pharmacist Caleb Bradham, while Frito-Lay, was established in 1961 by way of a merger between the Frito Company, founded by Elmer Doolin in 1932, and the H W Lay Company, founded by Herman Lay, also in 1932.

Both Pepsi-Cola and Frito-Lay became established consumer goods companies in the 20th Century, Pepsi-Cola on the back of its popular cola recipe, and Frito-Lay as a result of its brand of corn chips and potato chips. In the 1990s, PepsiCo divested a number of assets, with a view to focusing more on its core snack and beverage product range. This was followed by acquisitions of the Quaker Oats Company, Gatorade, and Tropicana, which continue to comprise significant parts of the PepsiCo product portfolio.

PepsiCo is today one of the largest consumer food and beverage groups in the world, serving a global customer base and producing numerous mainstream branded products. PepsiCo is ranked 90th on the Forbes Global 2000 list and is placed 44th on the Fortune 500 list. The Company trades shares on the New York Stock Exchange and has a current market capitalisation of $151.51 billion.

Business model of PepsiCo

Customer Segments

PepsiCo produces, markets and sells a broad portfolio of consumer-focused food and drink products. The Company, however, is not directly consumer-facing, instead serving a range of commercial customers. PepsiCo’s customers include:

  • Food and Beverage Distributors, including independent distributors and wholesalers
  • Foodservice Businesses, including restaurant chains, cafes and coffee houses, and eateries;
  • Retailers, including grocery stores, drug stores, convenience stores, discount stores, mass merchandisers, online retailers, and membership stores; and
  • Independent Bottlers, to which the Company sells branded beverages.

PepsiCo serves a global customer base. While the Company’s principal market is its native US, it also serves customers across Europe, Asia Pacific, the Middle East, Latin America, and Africa.

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Value Propositions

PepsiCo provides value to its customers in the following ways:

  • Its industry standing and reputation, with the Company established as one of the largest and most recognisable names in the consumer goods industry, with a track record for providing efficient and reliable services;
  • The efficiency and sustainability of its production and distribution infrastructure, with the Company utilising state-of-the-art facilities to make and deliver products for customers in a sustainable way;
  • The size and quality of its brand portfolio, with the Company producing and marketing a broad range of brands, including some of the world’s most popular food and beverage products, including Pepsi, Mountain Dew, Doritos, and Lay’s; and
  • Its international sales and marketing reach, with the Company providing consumer goods to a global customer base, and operating dedicated geographically focused units for operations across Latin America, Europe Sub-Saharan Africa, and Asia, Middle East and North Africa.

Channels

PepsiCo operates a website at www.pepsico.com – as well as a number of regional and branded websites – through which it provides information on its various brands, services, and operating locations. The Company does not operate an online sales channel for its core business. It does, however, operate an online store at www.shop.pepsi.com, through which it sells Pepsi-branded merchandise.

PepsiCo serves its customers directly through its in-house sales and marketing teams, which are organised by operating segment and geographic regions. The Company’s products are brought to market through direct-store-delivery, customer warehouse, and distributor networks. Some of PepsiCo’s products are delivered directly from its our manufacturing plants and warehouses to customer warehouses, with some beverages being distributed by the Company’s independent bottlers customers through their own direct distribution channels to retail stores.

In some jurisdictions PepsiCo collaborates with third-party vending and foodservice distributors and sales agents. The Company also markets products through joint ventures, including Lipton tea products in partnership with Unilever, and co-branded juice products in partnership with China’s Tingyi.

Customer Relationships

PepsiCo makes some sales of merchandise on a self-service basis, with customers able to purchase and organise delivery of certain Pepsi-branded products without interacting with members of PepsiCo’s sales personnel.

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PepsiCo sales are principally made through its direct sales teams, which work closely with customers to establish the details of sales agreements. The Company seeks to establish longstanding relationships with its customers, providing financial incentives to assist in the distribution and promotion of its products, including incentives include volume-based rebates, product placement fees, promotions, and displays. PepsiCo typically grants independent bottlers exclusive contracts to sell and manufacture certain beverage products within a specific geographic area.

Customers can contact PepsiCo – as well as specific PepsiCo brands – with support queries, over the phone or via online contact forms. The Company also operates social media accounts with Facebook, Twitter, Pinterest, Instagram, and LinkedIn, through which it can interact directly with customers.

Key Activities

PepsiCo is a food and beverage consumer goods company. The Company, through its operations, bottlers, contract manufacturers and other third parties, is engaged in producing, marketing, distributing and selling a range of beverages, foods and snacks, across more than 200 countries worldwide. PepsiCo is organised into six divisions: Frito-Lay North America; Quaker Foods North America; North America Beverages; Latin America; Europe Sub-Saharan Africa; and Asia, Middle East and North Africa.

The Company’s brands portfolio includes a number of high-profile brands, such as Agusha, Amp Energy, Aquafina, Aquafina Flavorsplash, Aunt Jemima, Cap’n Crunch, Cheetos, Chester’s, Chipsy, Chudo, Cracker Jack, Diet Pepsi, Diet Sierra Mist, and Domik v Derevne.

Key Partners

PepsiCo collaborates with a range of partners throughout the production and distribution of its products, and across its six operating divisions. These partners include:

  • Supplier and Vendor Partners, including suppliers of materials, ingredients, tools, and services, which support the Company’s production, marketing, and distribution operations;
  • Channel Partners, including a range of independent sales agents and foodservice distributors that assist in extending the Company’s marketing and sales reach in certain jurisdictions;
  • Strategic and Alliance Partners, including companies and organisations across multiple sectors with which the Company shares tools and resources and collaborates on joint projects; and
  • Joint Venture Partners, comprising a range of companies with which the Company jointly markets products through mutually-owned entities.

As noted above, PepsiCo has joint venture distribution partnerships with Unilever and Tingyi. The Company has recently launched a partnership with Senomyx to identify and develop additional sweet taste ingredients, and has a distribution partnership with home-carbonation company SodaStream International.

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Key Resources

PepsiCo’s key resources are its intellectual properties and brands, its manufacturing and logistics infrastructure, its sales and marketing channels, its partnerships, and its personnel.

PepsiCo owns numerous trademarks which it considers to be essential to its worldwide operations, including various brand names, such as Pepsi, 7UP, Mountain Dew, Quaker, and Tropicana. The Company also holds a number of patents. Searches of records published by the US Patent and Trademark Office identified a number of patent applications filed in PepsiCo’s name, including applications entitled ‘Display screen portion with icon’, ‘Multi-flavor valve’ and ‘Beverage dispense valve controlled by wireless technology’.

Cost Structure

PepsiCo incurs costs in relation to the development of its products, manufacture and transport of its products, the operation of its sales and distribution channels, the implementation of marketing and advertising campaigns across its multiple brands, the management of its partnerships, and the retention of its personnel.

PepsiCo’s largest costs in 2015 were its cost of sales, which totaled $28.38 billion, and its selling, general and administrative expenses, which amounted to $24.89 billion. These costs included the payment of salaries and benefits to the Company’s global workforce of 263,000 employees. In 2015 PepsiCo also accrued research and development costs in the amount of $754 million.

Revenue Streams

PepsiCo generates revenue through the sale of various consumer food and beverage products. The Company’s product portfolio includes a range of high-profile brand name products, including Pepsi, Diet Pepsi, 7UP, Gatorade, Mirinda, Doritos, Lay’s, Cheetos, and Ruffles.

In 2015 PepsiCo generated $63.06 billion in revenue, down on the $66.83 billion recorded by the Company in 2014. The Company’s largest revenue generator was its North America Beverages segment, which generated revenue totalling $20.62 billion. This was followed by the Company’s Frito-Lay North America segment, which generated $14.78 billion, and the Europe Sub-Saharan Africa segment, which generated $10.51 billion. None of the Company’s other operating segments accounted for more than $10 billion in revenue.

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