The PepsiCo challenge (to keep up with archrival The Coca-Cola Company) never ends for the world's #2 carbonated soft-drink maker. Its soft drink brands include Pepsi, Mountain Dew, and Mug. Cola is not the company's only beverage: Pepsi sells Tropicana orange juice brands, Gatorade sports drink, SoBe tea, and Aquafina water. The company also owns Frito-Lay, the world's #1 snack maker with offerings such as Lay's, Ruffles, Doritos, and Fritos. Its Quaker Foods unit offers breakfast cereals (Life, Quaker Oats), rice (Rice-A-Roni), and side dishes (Near East). Pepsi's products are available in more than 200 countries. In 2010 the company acquired its two largest bottlers: Pepsi Bottling Group and PepsiAmericas.
The takeover of Pepsi Bottling Group (PBG) and PepsiAmericas (PAS) gave PepsiCo control over the majority of its North American bottling and distribution volume. The move enables the beverage giant to cut significant costs and rapidly respond to changes in the supply chain. The takeover also created one of the largest food and beverages businesses in the world.
Financially, the $7.8 billion twin-bottling purchases propelled PepsiCo's 2010 revenue to just shy of $58 billion, a 34% spike over 2009. Net revenue in the company's PepsiCo American Beverages business segment increased 102%, attributable to PepsiCo's takeover of its bottling operations. Also contributing to the rise in 2010, overseas demand, including double-digit increases in snack volumes in China, India, and the Middle East, picked up. However, the Frito-Lay North America division suffered a flat year and the Quaker Foods business posted a small dip in revenue.
Key to PepsiCo's growth strategy is to sell existing snack brands to new markets, in addition to bolting on new categories, such as crackers, bread bites, and baked snacks, through small acquisitions and alliances. In late 2011, PepsiCo extended its snack business in Brazil by acquiring Mabel, a maker of cookies, crackers, and other between-meal treats. The deal strengthens PepsiCo's position in a rapidly expanding region with a large appetite for snacks, particularly biscuits. Counting Mabel's operations, PepsiCo runs 19 food and beverage manufacturing plants across the country.
To complement its portfolio of nutrition-oriented brands, such as Tropicana and Quaker Oats, PepsiCo formed a joint venture with GNC to develop and sell fortified coconut water products under the Phenom brand. The products debuted in GNC stores in mid-2011, ahead of a wider release. PepsiCo also controls a majority stake in O.N.E., a California-based producer of coconut water. Along with private equity firm Catterton Partners, Pepsi increased its holding in the coconut water maker in 2010, following an initially investment a year earlier. PepsiCo plans to broaden distribution of O.N.E.-branded beverages in 2011 through its PBC bottling unit.
With an eye on Russia, in 2011 PepsiCo purchased Russia's Wimm-Bill-Dann Foods, maker of juice, value-added dairy products, and baby food. The expansion into Russia makes PepsiCo the largest food and beverage company in the country and gives it a platform from which to further strengthen its hold on consumption in Eastern Europe and Central Asia. It also boosts PepsiCo's annual global revenues from nutritious and functional foods from about $10 billion to nearly $13 billion.
The beverage and snack maker targeted India in 2010 by forming a joint venture with Tata Global Beverages. The venture -- called PepsiCo-Tata Tea -- makes noncarbonated drinks aimed at health-conscious consumers. It is anticipated to boost revenues in PepsiCo's international beverage division. A previous joint venture, formed in 2009, called International Dairy and Juice Limited (IDJ), purchased a 75% stake in top Jordanian dairy and juice company, Teeba Investment for Developed Food Processing Company (or Teeba). PepsiCo owns 52% of IDJ, and Almarai owns 48%.
Meanwhile, in a move designed to bring new products to market faster and increase its soda brand presence in China, PepsiCo has agreed to sell both its bottling operations and its beverage joint venture with Asahi Group Holdings (part of Asahi Breweries) to Tingyi (Cayman Islands) Holding Corp. As part of the deal, PepsiCo will take a 5% stake in Tingyi-Asahi Beverages Holding with an option to raise its stake in Tingyi-Asahi to 20% by 2015.
PepsiCo's success is founded upon 19 mega brands, each of which generates more than $1 billion in annual sales. Business is supported by nearly 700 manufacturing facilities worldwide. Operations are organized into four business units: PepsiCo Americas Foods (PAF), which includes Frito-Lay North America (FLNA), Quaker Foods North America (QFNA), and all of its Latin American food and snack businesses (LAF), including the Sabritas and Gamesa businesses in Mexico; PepsiCo Americas Beverages (PAB), which includes PepsiCo Beverages Americas and Pepsi Beverages Company; PepsiCo Europe, which houses all the beverage, food and snack businesses in Europe; and, finally, PepsiCo Asia, Middle East and Africa, which includes all the beverage, food and snack businesses in that region.
Customers of PepsiCo include wholesale distributors, as well as grocery and convenience stores, mass merchandisers, membership stores, authorized independent bottlers, and food service distributors, including hotels and restaurants. Wal-Mart is its largest customer accounting for 12% of its 2010 sales; the retail giant accounts for about 18% of PepsiCo's North American business.