Primary Question for PepsiCo Can PepsiCo continue their strong performance in the North America market, and also strengthen their presence in developing markets, while at the same time responding to changes in consumers’ preferences?

What has enabled PepsiCo to grow to be the world's largest snack and beverage company? How is the performance of PepsiCo's current product portfolio? What does the success of PepsiCo's industries look like long term? What actions could PepsiCo take to better position its portfolio? How is Pepsi structured and what are the relative performances of those divisions? What does the success of PepsiCo's divisions look like long term? What actions could Pepsi take to better focus the structure of the organization towards high growth markets? Secondary Questions

Keys to PepsiCo’s Success and Growth Soft DrinksSalty Snacks Complementary Goods Strategic Acquisition Ability to Build Strong Brands Strong Relationships with Retail Partners Growth

PepsiCo Growth PepsiCo’s growth strategy has been mainly external focused. – Several successful mergers and acquisitions over the years. Adapting to changes in the external environment are critical to sustainable growth.

External Environment: PEST

What has enabled PepsiCo to grow to be the world's largest snack and beverage company? How is the performance of PepsiCo's current product portfolio? What does the success of PepsiCo's industries look like long term? What actions could PepsiCo take to better position its portfolio? How is Pepsi structured and what are the relative performances of those divisions? What does the success of PepsiCo's divisions look like long term? What actions could Pepsi take to better focus the structure of the organization towards high growth markets? Secondary Questions

US Liquid Refreshment Market BeverageShare of Total US Beverages Volume Growth Rate Pepsi BrandPepsi Market Share Pepsi Market Position Carbonated Soft Drinks 48%-2.6%Several31.1%#2 behind Coke (41.6%) Bottled Water29%6.9%Aquafina15%#1 Fruit Beverages13%-3.3%Tropicana30%#1, Coke Brand Minute Maid #2 at 25% Sports Drinks4.4%2.5%Gatorade76%#1 RTD Tea/Coffee3%14.3%Lipton and Frappuccino 39.5%#1, 4x Coke’s Nestea Enhanced Water 1.7%30.5%Propel40%#1 Energy Drinks1%24.6%SoBeNegligibleNegligible (Red Bull #1 at 40%) Pepsi trailing Coke in large but negative growth carbonated soft drinks. Also little presence in high growth energy drinks. Possibly look to acquire Red Bull. Pepsi dominating in the rapidly growing non-carbonated beverage categories which position it well in North American market as consumers look for healthier drink options.

Salty Snack Food Industry – Key Trends Convenience Growing Awareness of nutritional content Indulgent Snacking Due to these 3 key industry trends, Pepsico started developing new flavors of salty snacks, using healthier oils in chips, & packaging snacks in smaller bags. Pepsico should differentiate its products while staying committed to the industry trends.

Frito Lay’s Commitment to Industry Trends Eliminated Trans Fats from popular chips (Lays, Fritos, Cheetos, Doritos, etc.) Introduced indulgent Doritos & Sun Chips flavors. Acquired Flat Earth (fruit & vegetable snacks) Eliminating trans fats & acquiring Flat Earth showed FLNA’s commitment to the publics growing awareness of nutritional content. Introduction of new chip flavors was a commitment to the indulgent snacking trend. Did these commitments to industry trends help or hurt Pepsico’s market share of convenience food?

U.S. Convenience Food Market Share Pepsico is the leading manufacturer in the market due to its commitment to industry trends. Their only close competition seem to be from Kraft Foods & Hershey. But you cannot count out the 37% of the market that “other” manufacturers currently have.

Pepsico’s International Salty Snack Food Market Share by Country Country2006 % of Market Share 2010 Market Sizes (projected) Mexico75#4 Holland59 South Africa57 Australia55 Brazil46#1 or #2 India46 United Kingdom44#3 Russia43#5 Spain41 China16#1 or #2 There is significant growth opportunity in international markets. Pepsico will need focus on gaining more market share in the top 3 markets in They will also benefit from an increase in servings per month in both developed and developing international countries.

What has enabled PepsiCo to grow to be the world's largest snack and beverage company? How is the performance of PepsiCo's current product portfolio? What does the success of PepsiCo's industries look like long term? What actions could PepsiCo take to better position its portfolio? How is Pepsi structured and what are the relative performances of those divisions? What does the success of PepsiCo's divisions look like long term? What actions could Pepsi take to better focus the structure of the organization towards high growth markets? Secondary Questions

What has enabled PepsiCo to grow to be the world's largest snack and beverage company? How is the performance of PepsiCo's current product portfolio? What does the success of PepsiCo's industries look like long term? What actions could PepsiCo take to better position its portfolio? How is Pepsi structured and what are the relative performances of those divisions? What does the success of PepsiCo's divisions look like long term? What actions could Pepsi take to better focus the structure of the organization towards high growth markets? Secondary Questions

What has enabled PepsiCo to grow to be the world's largest snack and beverage company? How is the performance of PepsiCo's current product portfolio? What does the success of PepsiCo's industries look like long term? What actions could PepsiCo take to better position its portfolio? How is Pepsi structured and what are the relative performances of those divisions? What does the success of PepsiCo's divisions look like long term? What actions could Pepsi take to better focus the structure of the organization towards high growth markets? Secondary Questions

PepsiCo Organizational Structure 2007 PepsiCo Inc. Frito Lay North America (FLNA) 29% Net Revenue 36% Operating Income 28% Capital Expenditures 22% Total Assets PepsiCo Beverages North America (PBNA) 26% Net Revenue 28% Operating Income 20% Capital Expenditures 24% Total Assets Quaker Foods North America (QFNA) 5% Net Revenue 7% Operating Income 2% Capital Expenditures 3% Total Assets PepsiCo International (PI) 40% Net Revenue 29% Operating Income 50% Capital Expenditures 50% Total Assets

Secondary Questions What has enabled PepsiCo to grow to be the world's largest snack and beverage company? How is the performance of PepsiCo's current product portfolio? What does the success of PepsiCo's industries look like long term? What actions could PepsiCo take to better position its portfolio? How is Pepsi structured and what are the relative performances of those divisions? What does the success of PepsiCo's divisions look like long term? What actions could Pepsi take to better focus the structure of the organization towards high growth markets?

PepsiCo International Markets Country/RegionCarbonated Market Share Salty Snack Market Share India49%46% Russia24%43% China36%16% BrazilN/A46% MexicoN/A75% CountryCarbonated Soft Drinks per month Salty Snacks per month United States60 servings6.6 servings Other Developed 23 servings4.0 servings Developing6 servings0.4 servings 1.Great opportunity for growth in both developed and developing international markets, especially Brazil and China. Strong market share in many today, with exception of China 2. Pepsi should be focused on growing market share in China Salty Snacks, predicted to be largest market by Power of One strategy could play well in international markets.

Quaker Foods Brands Weak International Sales ($500 million total, 75% from 6 countries) Strong sales (over ½) in better-for-you and good-for-you products With exception of Gatorade, Quaker brands have limited success internationally. Opportunity for growth in US and developed countries as consumers shift to eating healthier.

Quaker Foods North America ProductVolume Growth Rate Market ShareMarket Position Quaker OatsN/A58%#1 Quaker Ready to Eat Cereal Mid single digits 14%#3 behind Kellogg’s (30%) and General Mills (26%) Aunt JemimaSlight declineN/A#1 Rice-A-RoniDouble digit decline 33%N/A Many Quaker Foods brands have strong market share, but not in the salty food or beverage markets. Majority of brands compete in Ready to Eat Cereal space, against well- established competitors Kellogg’s and General Mills.

What has enabled PepsiCo to grow to be the world's largest snack and beverage company? How is the performance of PepsiCo's current product portfolio? What does the success of PepsiCo's industries look like long term? What actions could PepsiCo take to better position its portfolio? How is Pepsi structured and what are the relative performances of those divisions? What does the success of PepsiCo's divisions look like long term? What actions could Pepsi take to better focus the structure of the organization towards high growth markets? Secondary Questions

PepsiCo after 2008 Realignment PepsiCo Inc. PepsiCo Americas Beverages PepsiCo Americas Foods Frito Lay North America Quaker Foods North America Latin America Foods PepsiCo International UK and Europe Middle East Africa and Asia Appears goal of realignment of divisions was to put more focus on growth outside North America. Question we have is did PepsiCo go far enough? Does not appear to be much of a change.

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Question Facing PepsiCo Non- Carbonated Drinks Healthy Snacks Complementary Goods DOES