1. Ochoa-Llamas, Vanessa
Bus 491
PepsiCo Case
PepsiCo needs to continue to build shareholder value through strategic acquisitions.
• Product innovation
• Close relationships with distribution retailers
• International expansion
The case mentions three key trends that are shaping the industry; convenience, growing
awareness of nutritional content of snack foods, and indulgent snacking. PepsiCo’s new
reformulation of Good-For-You and Better-For-You products is a great opportunity in
which they need to increase research and development because more consumers are
focusing on health concerns. Also, it can manufacture more convenient packages, such as
smaller bags or containers for on-the-go consumers. Another opportunity is indulgent
snacking. It can be beneficial for PepsiCo to invest money on R&D to cater to evolving
palates. However, the downside is that there are a lot of small regional company’s that
already cater to these evolving palates. Another opportunity is continuing to expand the
product line up of snacks and beverages that cater to the growing Hispanic population.
Personally when I go shopping I look for the chips I used to buy as a kid in Mexico as well
as the beverages. For me the product line up of Gamesa and Sabritas is great because I
don’t have to bring these treats back from Mexico, I can find them at my local grocery
store.
Close relationships with distribution retailers is the only way to maintain its
competitive advantage over other rivals. PepsiCo’s Power of One strategy is important
because its goal is to have consumers purchase more PepsiCo products that are generally
consumed at the same time. PepsiCo’s is trying to build on this strength because when its
products are placed near each other they are most likely to be purchased together. The time

2. Ochoa-Llamas, Vanessa
Bus 491
PepsiCo Case
it has invested in studying consumer purchases within supermarket stores is paying off
because it lets supermarket owners understand the potential monetary value, such as the
possibility of increasing profit margins in super markets. The future opportunity and
strength that PepsiCo will have in 2011 is the end of the FTC stipulation of jointly
distributing Gatorade and PepsiCo soft drinks in convenience stores, which will bring in
more revenue for PepsiCo.
International expansion is a great opportunity for PepsiCo, especially during the
economic recession we are experiencing. Currently Frito Lay North America accounts for
31% of PepsiCo’s total revenues and about 69.5% of its total revenue came from Canada
and Mexico, which means it depends on North America for a lot of its revenue. According
to DataMonitor, “High dependence on a few consumers reduces the bargaining power of
the company.” However, the upside is that PepsiCo’s International sales have proven
valuable with a 14% increase in 2006 and 15% between 2004 and 2005. The opportunity
to expand abroad has proven successful and need to continue doing so. The best
opportunities with international expansion are made through strategic acquisitions such as
the PepsiCo’s acquisition of Mexico’s largest Pepsi bottler which was also the number one
producer of purified water.
In order for PepsiCo to remain the category leader for its many brands it will need
to continue product innovation, maintain close relationships with retailers, expand
internationally by means of diversification through strategic acquisitions in order to
increase shareholder value.