SWOT Analysis of PepsiCo (16 Key Factors in 2018)

Ovidijus Jurevicius | June 5, 2018

This PepsiCo SWOT analysis reveals how the second largest food company in the world uses its competitive advantages to dominate snack and beverage industries. It identifies all the key strengths, weaknesses, opportunities and threats that affect the company the most. If you want to find out more about the SWOT of PepsiCo, you’re in the right place.

Keep reading.

Company Background

Key Facts
Name PepsiCo Inc.
Founded August 28, 1898
Logo
Industries served Beverage (Pepsi, Mountain Dew, Gatorade, Sierra Mist)
Food (Quaker Oats, WBD, Rold Gold)
Snack (Lay’s, Doritos, Cheetos)
Geographic areas served Worldwide (more than 200 countries)
Headquarters Purchase, New York, U.S.
Current CEO Indra Nooyi
Revenue (US$) 63.525 billion (2017) 1.2% increase over 62.799 billion (2016)
Profit (US$) 4.857 billion (2017) 30.3% decrease over 6.329 billion (2016
Employees 263,000 (2017)
Main Competitors The Coca-Cola Company, DPSG, Mondelēz International, Monster Beverage Corporation, Hansen Natural Corporation, National Beverage Corp., Kraft Foods Group, The Kellogg Company, ConAgra Foods., Nestlé S.A., Snyder’s-Lance and other beverage, food and snack companies.

PepsiCo business overview from the company’s financial report:

“We are a leading global food and beverage company with a complementary portfolio of enjoyable brands, including Frito-Lay, Gatorade, Pepsi-Cola, Quaker and Tropicana. Through our operations, authorized bottlers, contract manufacturers and other third parties, we make, market, distribute and sell a wide variety of convenient and enjoyable beverages, foods and snacks, serving customers and consumers in more than 200 countries and territories.

Performance with Purpose is our goal to deliver sustained value by providing a wide range of beverages, foods and snacks, from treats to healthy eats; finding innovative ways to minimize our impact on the environment and lower our costs through energy and water conservation as well as reduce our use of packaging material; providing a safe and inclusive workplace for our employees globally; and respecting, supporting and investing in the local communities in which we operate.

In 2017, sales to Walmart Stores, Inc., including Sam’s Club (Sam’s), represented approximately 13% of our total net revenue. Our top five retail customers represented approximately 37% of our 2017 net revenue in North America, with Walmart (including Sam’s) representing approximately 19%.

In many countries in which our products are sold, including the United States, The Coca-Cola Company is our primary beverage competitor. Other beverage, food and snack competitors include, but are not limited to, DPSG, Kellogg Company, The Kraft Heinz Company, Mondelez International, Inc., Monster Beverage Corporation, Nestlé S.A., Red Bull GmbH and Snyder’s-Lance, Inc.

Many of our food and snack products hold significant leadership positions in the food and snack industry in the United States and worldwide. In 2017, we and The Coca-Cola Company represented approximately 23% and 20%, respectively, of the U.S. liquid refreshment beverage category by estimated retail sales in measured channels.”[1]

You can find more information about the business in PepsiCo's official website or Wikipedia’s article.

PepsiCo SWOT analysis

Strengths

1. Comprehensive product portfolio with 100 brands serving nearly every niche in the beverage, food and snack industries.

Commencing operations in 1965, PepsiCo has become the second largest food and beverage company in the world today. The company earned US$63.525 billion in 2017, second only to Nestlé S.A. PepsiCo was able to achieve this via strengthening its product portfolio and offering as many different beverages and foods as possible.

The company sells nearly 100 different brands, of which 22 have each generated more than US$1 billion dollars in 2017.[1] In addition, more than 10 brands have generated between US$500 million and US$1 billion in revenue.

Figure 1. Brand portfolio by world’s largest food and beverage companies

Brand portfolios of the largest beverage and food companies, including PepsiCo, Coca Cola, Nestle, Mondelez International and Kraft Foods.

Source: The respective companies’ official websites and financial reports [1][2][3][4][5]

Figure 2. PepsiCo’s top earning brands

22 PepsiCo brands earning more than $1 billion each. Those brands include (form highest earnign to lowest earning): Pepsi-Cola, Lay's, Mountain Dew, Gatorade, Tropicana, Diet Pepsi, 7UP, Doritos, Quaker Foods, Cheetos, Mirinda, Lipton RTD Tea, Ruffles, Tostitos, Aquafina, Pepsi Max, Brisk, Sierra Mist, Fritos, Diet Mountain Dew, Starbucks RTD beverages and Walkers.

Source: PepsiCo brands[6]

PepsiCo’s brand portfolio is highly diversified. No competitor has as many high earning brands as PepsiCo. They each rely on a few main products to earn the majority of their revenue. This makes them very vulnerable to any changes in their core products’ markets.

PepsiCo is better equipped to satisfy the needs of its customers with its wide variety of successful products. The company offers nearly every type beverage or snack and its brands can often be substituted for each other. For example, Lays can be replaced with Doritos, Cheetos, Ruffles, Tostitos or Fritos, so if one product doesn’t satisfy a consumer’s needs, PepsiCo can offer many more choices. Therefore, changes in customer tastes do not affect the company as severely as they would other companies.

2. Brand recognition and reputation

PepsiCo owns and markets some of the most recognizable global brands, including Pepsi, Tropicana, Gatorade, Mountain Dew, Aquafina, Lay’s, Doritos, Cheetos and many other popular brands. According to Interbrand[7] and Forbes[8], the Pepsi brand is the 22nd and 30th most valuable brand in the world, worth US$20.491 billion and US$18.2 billion, respectively. Forbes also identified Frito-Lay as the 40th most valuable brand in the world, worth US$13.6 billion. Except for Coca-Cola and Sprite, no other non-alcoholic beverage brand besides Pepsi has been recognized as being one of the top 100 most valuable brands in the world.

According to IRI data, which measured the most popular U.S. snack brands in the first half of 2017, 8 of the 10 most popular snack brands were owned by PepsiCo.[9]

Figure 3. Top 10 best-selling U.S. snack brands
Ranking Brand Owner
1. Lay's owned by PepsiCo
2. Doritos owned by PepsiCo
3. Cheetos owned by PepsiCo
4. Ruffles owned by PepsiCo
5. Pringles
6. Tostitos owned by PepsiCo
7. Wavy Lays owned by PepsiCo
8. Fritos owned by PepsiCo
9. Tostitos Scoops owned by PepsiCo
10. Snyder's of Hanover

Source: Bakery and Snacks [9]

The company sells its products in more than 200 countries, so consumers are aware of PepsiCo’s brands all over the world. Owning and selling popular brands also helps PepsiCo to cross-sell its other brands or introduce new products to the market much more easily.

3. Focus on innovation and customer-oriented products

PepsiCo has been operating for 117 years. A company can only survive for so long if it focuses on innovation and its customers. Innovation has helped PepsiCo to introduce many popular brands to create its strong product portfolio. Usually, the more a company spends on innovation the faster it grows.

Research and development (R&D) spending by PepsiCo is one of the highest among all the food and beverage companies. The company has spent US$737 million or 1.2% of its revenue on R&D in 2017, a growth of over 40% since 2011.[1]

Figure 4. R&D spending by the largest food and beverage companies (R&D and revenue in US$ billions)
Company 2015 2016 2017 Revenue % of revenue
PepsiCo 0.754 0.760 0.737 63.525 1.2
Nestlé S.A.* 1.678 1.736 1.724 89.791 1.9
Mondelēz 0.409 0.376 0.366 25.896 1.4
Coca-Cola - - - 35.410 -

Source: The respective companies’ financial reports [1][10][11][12] (Nestlé S.A R&D expenditure and revenue are in euros)

To strengthen its innovation capabilities, PepsiCo currently runs research centers in 9 countries, including Brazil, China, Germany, India, Mexico, Russia, the United Arab Emirates, the United States and the United Kingdom. The company’s research centers use their knowledge of nutrition science, food science and engineering, as well as consumer insights to develop new nutritious products that meet market trends.[1]

Over the past few years, the company introduced many new products to the market, including Trop 50, LIFEWTR, Probiotics, Propel Electrolyte Water, Lipton Sparkling Tea (in partnership with Unilever), Naked Juice smoothies, new varieties of Tropicana Farmstand juice, Pepsi Limón and Bubbly.[13] These were just for the beverage market.

PepsiCo also made many new additions to its snack portfolio. Most of the products were introduced as a result of consumer requests for healthier, lower calorie and less sugar-containing beverages and snacks.

PepsiCo’s R&D spending and the insights it has gathered from consumers is paying off. The company’s 2017 results show 2% revenue growth in its Frito-Lay North America division, 6% revenue growth in its Latin America division and 8% growth in ESSA (European Sub-Saharan Africa) division.

In 2006, only 38% of PepsiCo brands belonged to ‘Better For You’ and ‘Good For You’ brand categories, which included healthier food and beverage options offered by the company. PepsiCo’s continuous expenditure in R&D and a few successful acquisitions helped the company to increase its ‘Better For You & Good For You’ brand portfolio to 50% in 2017.

Few of PepsiCo’s competitors are able to invest in R&D so successfully.

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Published: June 5, 2018
Format: PDF + PowerPoint
Pages: 26
Words: 5,100
Charts/tables: 11
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Table of contents

  • Company Overview
  • SWOT Analysis
  • Strengths
  • Weaknesses
  • Opportunities
  • Threats
  • Sources

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About Ovidijus Jurevicius

Ovidijus is the founder of SM Insight and the lead writer since 2013. His interest and studies in strategic management turned into SM Insight project, the No.1 source on the subject online. His work is published in many publications, including two books: ‘The Art of Opportunity: How to Build Growth and Ventures Through Strategic Innovation and Visual Thinking’ and ‘Introduction to Human Resource Management’.