SWOT Analysis of Pepsico 2021



NamePepsiCo (PEP.O)
IndustryFood, drink, and tobacco 
Founded1965
HeadofficePurchase, NY, US
CEORamon L. Laguarta
Revenues$ 70.3 Billion, 2020
Net income$ 7 Billion, 2020
CompetitorsCoca-Cola, ConAgra Foods, Kellogg Company, Kraft Foods, Heinz and Nestle,  Dr Pepper, Red Bull GmbH, Monster Beverage, Utz Brands



Company overview 

As a multinational corporation, PepsiCo manufactures and distributes food and beverage products in more than 200 countries. In 1919, it was incorporated in Delaware as Pepsi-Cola, and in 1965, reincorporated in North Carolina as PepsiCo Inc. through the merger of Pepsi-Cola and Frito-Lay. In 2021, PepsiCo has a brand value of $19 billion, revenues of $70.3 Billion, and a market capitalization of $213 Billion. PepsiCo beverages include carbonated soft drinks, sports drinks, juices, and bottled water, and food products include flavored snacks, rice, chips, and dairy-based products. PepsiCo acquired Tropicana in 1999 and Quaker Oats in 2001 (Bloomberg, 2021; Reuters, 2021). 

 

Pepsico Strengths 2021:

  • Recognisable global brands portfolio.

    In the food and beverage segment, PepsiCo has strong brand recognition and its brand portfolio includes 23 recognisable global brands such as Doritos tortilla chips, Fritos corn chips, Lay’s potato chips, Quaker oatmeal, Aquafina, Diet Mountain Dew, Diet Pepsi, Gatorade, 7UP, Pepsi Max and Doritos. Brands such as Frito-Lay, Pepsi-Cola, Gatorade, Tropicana and Quaker are generating more than $1 billion each in annual retail sales and thus making it a globally recognised brand (PepsiCo, 2021). 
  • Global distribution network.

    With operations in more than 200 countries, PepsiCo strong distribution network that makes its products available throughout the world. Nunes (2021) discussed that PepsiCo extensive production and distribution network support the company’s growth and expansion strategies. With retailers, PepsiCo market dominance allows negotiating favourable relationships and shelf space. On the other hand, the authorized bottlers, contract manufacturers and third parties production allow making, marketing and distributing beverages, foods and snacks. 

  • Diversified international revenues streams.

    The global revenues streams of PepsiCo from seven divisions are Frito-Lay North America: 26%, Quaker Foods North America 4%, PepsiCo beverage North America 32%, Latin America 10%, Europe 17%, Africa, Middle-East and South Asia 6% and the Asia Pacific, Australia and China 5%. Overall, Pepsi generates 58% of revenues from the US and 42% of revenues from outside the US (PepsiCo, 2021). 

Pepsico Weaknesses 2021:

  • Unhealthy Product image.

    PepsiCo carbonated drinks have high sugar concentrates and snacks have chemical additives, salt and artificial flavours. Dresden (2021) stated that due to increasing health concerns such as obesity and heart attack, the consumers are health conscious and inclined towards non-carbonated drinks. 

  • Market saturation and global market presence.

    PepsiCo generates 70%+ of revenues from South and North American markets. The company has yet to realise the potential revenues from outside America such as Middle East, Asia Pacific and China and these markets account for 11% of total revenues only. 

  • Sustainability challenges.

    Grylls (2020) stated that PepsiCo has greenhouse emission challenges and there is a need to manage the palm oil issue, convert trucks and vans to alternative fuels and water usage in production processes. This includes the entire value chain for GHG emission, resource utilisation, water management and packaging materials.  

  • 55% income from complementary products:

    PepsiCo food and snacks segment account for 55% of its business and beverages revenues are 45% as shown in the diagram below. Over the years, there has been a continuous increase in revenues from non-beverage items and less focus on core beverage products. In contrast, Coca-Cola generates revenues from 100-plus beverage products only (Gelski, 2021).  

Pepsico Opportunities 2021:

  • New business from the developed and emerging markets.

    With a lack of market development, PepsiCo has opportunities for growth and expansion in developed and emerging markets such as Asia, China and the Middle East. Neo (2020) pointed out that the company can capitalise on invaluable opportunities to increase its revenues through expanding its customer base in new markets. 

  • Reduce sodium, sugar and saturated fat.

    PepsiCo carbonated drinks and snacks are viewed as unhealthy and there is an opportunity for improvement. Upshall (2021) pointed out that the company need to adapt to customer tastes and preferences by offering healthy products. PepsiCo has resources to invest in research and development and develop products having low-sugar and low-fat, and free from artificial flavours for changing customers. 

  • Alliance and partnership.

    Globally, there is an opportunity for PepsiCo to develop strong partnerships and alliances for business development and growth. For example, it can develop partnership cafes and restaurants to harness all benefits of partners’ resources (Britt, 2020). 

Pepsico Threats 2021:

  • Plastic waste and pollution.

    PepsiCo has been accused of zero progress in reducing plastic waste and is named among the world’s top plastic polluters. It is estimated that PepsiCo produces 23 metric tonnes annually as shown in the diagram below (McVeigh, 2020)

  • Government laws and regulations.

    In recent times, the governments in developed markets are increasingly inclined towards pro-health regulations to reduce the burden on the health system. For example, the levy of a sugar tax of 24p in the UK aims to reduce illnesses and diseases attributed to saturated fat, salt, concentrate sugar and junk products. PepsiCo product portfolio contains unhealthy drinks and snacks with high amounts of salt and sugar and i.e. criticised by multiple health organisations (Ali, 2019). 

  • Strong market competition.

    PepsiCo market share and profitability are threatened by strong market competition from Nestle, Coca-Cola, Dr Pepper, Red Bull, Britvic and DANONE and so on. Doering (2021) analysed that the competition has threatened profitability and sustainability because of the increased cost of promotion, advertisement and discount. 

  • Changing lifestyle and demographics.

    The changes in lifestyle and demographics transform the target market for Pepsi in developed markets. For example, the demographic in Europe has changed with the increase in ageing population and decrease in youth population, the key target market for the company. The changes in attitude towards healthier options amid concerns about artificial sweeteners and obesity promote demand for low-sugar, less saturated fats and preservative-free beverages (Tesseras, 2019). 

Pepsico SWOT Analysis Conclusion:

Despite the weaknesses such as sustainability challenges, unhealthy product image and focus on complimentary products, PepsiCo possesses financial resources, brand equity, and market knowledge to tackle market threats and exploit new markets opportunities. There is an opportunity to exploit health-conscious customers through broadening beverage products and capitalize on new opportunities need to outperform its competitors. 




References

Ali, Hamza (2019). Sugar Taxes Are Changing Tastes, Even If Coke Classic Is the Same. Bloombergtax

Bloomberg (2021). PepsiCo Inc. Bloomberg.

Britt, Hugo (2020). How the PepsiCo Supply Chain Uses Cooperation, Integration, and Innovation to Streamline Operations.

Doering, Christopher (2021). PepsiCo says it’s grabbing market share from Coca-Cola, smaller players.

Dresden, Danielle (2021). Is soda bad for your health, and what are the options?.

Gelski, Jeff (2021). PepsiCo raises guidance after 21% revenue increase.

Grylls, Bethan (2020). PepsiCo makes strides towards sustainability targets.

McVeigh, Karen (2020). Coca-Cola, Pepsi and Nestlé named top plastic polluters for third year in a row.

Neo, Pearly (2020). PepsiCo Asian: MNC highlights key trends in emerging markets.

Nunes, Keith (2021). PepsiCo overcomes COVID comps, supply disruptions.

PepsiCo (2021). 2020 Annual Report. PepsiCo.

PepsiCo (2021). Product Information. PepsiCo.

Reuters (2021). PepsiCo, Inc. Reuters.

Tesseras, L ucy (2019). Faster, stronger, better: How PepsiCo is reinventing insight.

Upshall, Emma (2021). PepsiCo vows to cut sugar levels in sodas and launch healthier snacks in EU.

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