Name of the Company: PepsiCo
Business Sector: FMCG, Food and Beverages
Operating Geography: North America, United States, Global
About the Company: PepsiCo is one of the world’s top companies in the food and beverage segment, with a total of 22 brands and a global presence in more than 200 companies. The company is headquartered in New York, United States of America.
Revenue: $63,053 million– FY ending December, 2015
SWOT & PESTLE Analysis
|1. Healthy balance sheet with strong financials|
2. Large and diversified portfolio
3. Innovative marketing campaigns
4. Numerous initiatives for environmental sustainability
|1. Largely dependent on US markets
2. “Unhealthy” perception of consumers
|1. Venezuela impairment charges|
2. Pursue inorganic growth
|1. Intense competition
2. Impact of Brexit
3. Penalty from lawsuits
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1) Healthy Balance Sheet with Strong Financials: PepsiCo has a healthy balance sheet with strong financials. Its FY15 revenues stood at $63,053 million; down 5% from FY14, which can be attributed to the Venezuala impairment charges. Its FY15 operating profit stood at $ 9,937 million, 4% lower than FY14, mainly because of the same reason. It has $2,311 million as investments in non-controlled affiliates and has a huge amount of goodwill in the market.
2) Large and diversified Portfolio: It has a huge and diversified portfolio of foods and beverages, consisting of 22 billion dollar brands. It consists of brands like Mountain Dew, Mirinda, Lays, Cheetos, to brands that are targeted at the health conscious segment like Tropicana, Quaker Oats, Gatorade, and Naked Juice, amongst others.
3) Innovative marketing campaigns: On June 8, 2015, PepsiCo celebrated its 50th anniversary. Throughout the week, restaurants across US offered PepsiCo inspired specials as a part of the celebrations. Some lucky fans also got the chance to watch star athletes like the Kansas City Royals’ Eric Hosmer and J.D. Martinez of the Detroit Tigers play live. Apart from these, there were other campaigns like “Crash the Super Bowl” of Doritos, Pepsi Max transforming the local pitch of a group of footballers in Barcelona into an interactive football arena, amongst others.
4) Numerous initiatives for Environmental Sustainability: PepsiCo has taken many initiatives for environmental sustainability as a part of its CSR initiatives. In 2015, they formed partnerships to provide clean drinking water to around 6 million people around the world, focusing hugely on recycling, which can be judged by the fact that 93% of the company’s total waste was recycled in 2015 at its operations. Apart from these, the company has numerous other initiatives that aim at environmental sustainability of its operations.
1) Largely Dependent on US Markets: PepsiCo is largely dependant on US Markets with 56% of its revenues being generated from there, despite having a global presence. It operates in more than 200 countries, but garners only 44% of its revenues from outside the US. This dependence on US is a weakness of this conglomerate.
2) “Unhealthy” perception of consumers: Despite PepsiCo having a huge diversified portfolio of brands, including juices like Tropicana and Naked, energy drinks like Gatorade, and Healthy snacks like Quaker Oats, the perception of many consumers about the brand persists that it is unhealthy and not for the health conscious.
1) Venezuela Impairment charges: In 2015, due to high economic instability, restrictive foreign exchange regulations and a fluctuating exchange rate in Venezuela, PepsiCo deconsolidated its wholly owned subsidiaries in Venezuela, thereby eliminating all of their assets and liabilities from its balance sheet. In the process, it reported losses for that year, with a negative change in both revenues and operating profits. However, this could be an opportunity for investors as PepsiCo will continue to operate in that country, but will not have to deal with the economic fluctuations and uncertainty that currently plague Venezuela. The country generated 2% of the revenues and net operating profit of PepsiCo from January through August 2015, till the time it was deconsolidated.
2) Pursue Inorganic Growth: PepsiCo has liquid funds of around US$ 11,900 million as of December, 2015. It can pursue inorganic growth strategy in markets with slowing growth or those in which it does not have a strong presence. Acquiring local competitors will also give it an added advantage of eliminating some of the competition from that particular market and help in acquiring a large market share.
1) Intense Competition: PepsiCo faces intense competition from Coca-Cola, which has an comparably diversified portfolio of food and beverages with similar number of brands. Like PepsiCo, Coca-Cola also has a global presence. Coca Cola competes with PepsiCo in almost all the market segments, be it health drinks or cold drinks. Apart from these, PepsiCo also faces competition from local players in the each of their markets.
2) Impact of Brexit: PepsiCo operates in markets outside of USA, with Mexico, Canada, the United Kingdom, Russia, and Brazil comprising approximately 20% of their net revenue in 2015. Due to the impact of Brexit, it might affect the revenues of PepsiCo from that segment. Also, fluctuations in the currency and the prevailing uncertainty due to the same might hurt its topline and bottomline till there is more certainty on the effects of the same.
3) Penalty from Lawsuits: Since 2013, when the the Polish environmental control authority completed an audit of a subsidiary of PepsiCo, Pepsi-Cola General Bottlers Poland SP, z.o.o. (PCGB), in Michrow, Poland, PepsiCo has been embroiled in a legal case for the same. In December 2015, PepsiCo filed an appeal for the same, but could have to pay $6,50,000 in fines for non-compliance with applicable regulations if the appeal is rejected. Apart from these, it is involved in a variety of other legal and administrative matters as well.PepsiCo SWOT analysis has been conducted by Aditi Chaturvedi and reviewed by senior analysts from Barakaat Consulting.
1) PepsiCo Annual Report, 2015: http://www.pepsico.com/docs/album/annual-reports/pepsico-2015-annual-report_final_s57dqszgmy22ggn.pdf?sfvrsn=0
2) PepsiCo, Inc Website: http://www.pepsico.com/
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