The PepsiCo challenge (to archrival Coca-Cola) never loses its fizz for the world's #2 carbonated soft drink maker. Its soft drink brands include Pepsi, Mountain Dew, and their diet alternatives. Cola is not the company's only beverage: Pepsi sells Tropicana orange juice, 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 Cheetos. The Quaker Foods unit makes breakfast cereals (Life, Quaker oatmeal), Rice-A-Roni rice, and Near East side dishes. Pepsi products are available in 200-plus countries; the US generates 50% of sales. The company operates its own bottling plants and distribution facilities.
PepsiCo rang up 50% of its sales in the US in 2013. Important international markets for the company include Russia, Mexico, Canada, and the UK. PepsiCo is also active in emerging and developing markets, particularly Brazil, China, India, Africa, and the Middle East.
PepsiCo's success is founded upon a broad portfolio of 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), consisting of 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, and snacks maker Mabel in Brazil; PepsiCo Americas Beverages (PAB), which includes bottling and distribution in North America, and the Gatorade and Tropicana brands, as well as bottling and distribution in Latin America; 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.
Sales and Marketing
To promote its products, PepsiCo uses a combination of sales incentives, discounts, advertising, and other marketing activities. Advertising and other marketing activities totaled $3.9 billion in 2013, up from $3.7 billion in 2012 and $3.5 billion in 2011.
PepsiCo's customers 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. The company's snacks, beverages, and other products are brought to market through direct-store-delivery (DSD), customer warehouse, and distributor networks. Wal-Mart is its largest customer, accounting for 11% of its 2013 sales; the retail giant accounts for about 30% of PepsiCo's North American business.
Although company’s revenues slightly decreased from 2011 to 2012, it grew by 1% in 2013, driven by a 4% rise in Frito-Lay North America revenues due to higher volumes growth and prices coupled with Latin America Foods revenues (up 7% on favorable effective net pricing) and 2% increased revenues from Europe (for the same reason). These were partially were offset by a 1% decline in Quaker Foods North America revenues, while PepsiCo Americas Beverages and Asia, Middle East and Africa revenues both decreased by 2%.
PepsiCo's net income grew by 9% in 2013 driven by increased sales and higher interest income and other, offset by a rise in selling, general, and administrative expenses and an increase in the provision for income taxes.
The company’s cash provided by operating activities was $9.7 billion in 2013 (up from $8.5 billion in 2012) due to higher net income, lower cash payments for restructuring charges, and a decrease in restructuring and impairment charges. These were offset by an increase in deferred income taxes and other tax charges and credits expenses and a growth in accounts payable and other current liabilities.
Key to PepsiCo's growth strategy is to drive snack brands to new markets as it bolts on new and more nutritious foods categories through small acquisitions and alliances.
In 2013, Muller Quaker Dairy, a joint venture between PepsiCo and Theo Muller Group (a Germany-based privately held dairy holding company) opened of its new yogurt manufacturing facility in Batavia, New York. It serves as the national production and distribution center for a premium lineup of Müller brand yogurts to US supermarket and club retailers.
That year leading global football (soccer) club Manchester United Football Club and PepsiCo agreed to work together in a multi-year regional sponsorship agreement in Asia-Pacific.
To further expand it global coverage, in 2013 PepsiCo announced plans to invest $5.5 billion in India by 2020 and $5 billion in Mexico.