A

REPORT

ON

TOP FIVE BEAVERAGES INDUSTRIES PROFILE

AT

IIMT PROFESSIONAL COLLEGE, MEERUT

UNDER UNDER THE GUIDANCE THE GUIDANCE

OFOF

Miss. Swati Gupta

SUBMITTED BY;

PRAVEEN SHARMA

PGDM 2th

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STUDENT’S DECLARATION

I hereby declare that the project entitled “TOP FIVE BEVEARAGES

INDUSTRIES IN INDIA” and the information presented in this report has been

made by me . This is correct to the best of my knowledge and the report presented has

not been published anywhere else. I bonafide record of work done by us during the

course of project work and that it has not previously formed the basis for the award to

us, for any degree/diploma associate ship, fellowship or other similar title, any other

institute/society.

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ACKNOWLEDGEMENT

Its my pleasure to express my sincere gratitude to DR. P. K. Agarwal, Director

PGDM, IIMT PROFESSIONAL COLLEGE, who had wholeheartedly directed this

project.

I owe my deepest sense of gratitude to Mr.Kapil Garg, HOD, PGDM, IIMT

PROFESSIONAL COLLEGE, Ms. Swati Gupta, project head, for his valuable

suggestions, continuous encouragement, open discussion and his generosity in

allowing me the freedom to exercise thoughtfully and intelligently the program of

investigation and analysis so as to attain a successful culmination of the project.

And at the last but not the least, my heartfelt gratitude to my parents and family

members for their continuous inspiration.

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INTRODUCTION

BEVEARAGES INDUSTRY – AN OVERVIEW

Soft drinks can trace their history back to the mineral water found in natural

springs. Bathing in natural springs has long been considered a healthy thing to do;

and mineral water was said to have curative powers. Scientists soon discovered that

gas carbonium or carbon dioxide was behind the bubbles in natural mineral water.

The first marketed soft drinks (non-carbonated) appeared in the 17th century. They

were made from water and lemon juice sweetened with honey. In 1676, the

Compagnie de Limonadiers of Paris were granted a monopoly for the sale of

lemonade soft drinks. Vendors would carry tanks of lemonade on their backs and

dispensed cups of the soft drink to thirsty Parisians. Joseph Priestley

In 1767, the first drinkable man-made glass of carbonated water was created by

Englishmen Doctor Joseph Priestley. Three years later, Swedish chemist Torbern

Bergman invented a generating apparatus that made carbonated water from chalk

by the use of sulfuric acid. Bergman's apparatus allowed imitation mineral water to

be produced in large amounts.

John Mathews

In 1810, the first United States patent was issued for the "means of mass

manufacture of imitation mineral waters" to Simons and Rundell of Charleston,

South Carolina. However, carbonated beverages did not achieve great popularity in

America until 1832, when John Mathews invented his apparatus for the making

carbonated water. John Mathews then mass-manufactured his apparatus for sale to

soda fountain owners.

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Health Properties of Mineral Water

The drinking of either natural or artificial mineral water was considered a healthy

practice. The American pharmacists selling mineral waters began to add medicinal

and flavorful herbs to unflavored mineral water. They used birch bark, dandelion,

sarsaparilla, and fruit extracts. Some historians consider that the first flavored

carbonated soft drink was that made in 1807 by Doctor Philip Syng Physick of

Philadelphia. Early American pharmacies with soda fountains became a popular

part of culture. The customers soon wanted to take their "health" drinks home with

them and a soft drink bottling industry grew from consumer demand.

The Soft Drink Bottling Industry

Over 1,500 U.S. patents were filed for either a cork, cap, or lid for the carbonated

drink bottle tops during the early days of the bottling industry. Carbonated drink

bottles are under a lot of pressure from the gas. Inventors were trying to find the

best way to prevent the carbon dioxide or bubbles from escaping. In 1892, the

"Crown Cork Bottle Seal" was patented by William Painter, a Baltimore machine

shop operator. It was the first very successful method of keeping the bubbles in the

bottle.

Automatic Production of Glass Bottles

In 1899, the first patent was issued for a glass-blowing machine for the automatic

production of glass bottles. Earlier glass bottles had all been hand-blown. Four years

later, the new bottle-blowing machine was in operation. It was first operated by the

inventor, Michael Owens, an employee of Libby Glass Company. Within a few years,

glass bottle production increased from 1,500 bottles a day to 57,000 bottles a day.

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Hom-Paks and Vending Machines

During the 1920s, the first "Hom-Paks" were invented. "Hom-Paks" are the familiar

six-pack beverage carrying cartons made from cardboard. Automatic vending

machines also began to appear in the 1920s. The soft drink had become an American

mainstay. In the past half-century, the food and beverage industry has blossomed from

a collection of mom-and-pop operations to a trillion-dollar powerhouse led by huge

international corporations. Familiar names like Coca-Cola, Starbucks and McDonald's

can be found in every corner of the globe. The overarching theme dominating the

food and beverage industry is exploding global demand and rapidly rising food prices.

The breakneck economic growth of countries such as China, India, Brazil and

Vietnam gives billions of people the ability indulge in ways previously enjoyed only

by those in developed nations. A massive influx of consumers onto the global food

market has resulted in a rapid and sustained increase in food prices, stoking global

inflation.

The related shift to ethanol and other bio-diesels in the face of rapidly rising energy

prices has only exacerbated the world's food inflation headache. Although some

members of the food and beverage industry (primarily farmers and agribusinesses)

benefit from higher prices, most corporations in the industry have seen their cost of

doing business increase, biting into profit margins. These higher costs are passed, in

part, onto consumers, who find their discretionary spending restricted when they must

spend a larger chunk of their paycheck at restaurants and grocery stores. So, just as oil

prices are a key economic indicator, so too are the prices of key agricultural

commodities such as corn, wheat, and soybeans. The first marketed soft drinks (non-

carbonated) in the Western world appeared in the 17th century. They were made from

water and lemon juice sweetened with honey. In 1676, the Compagnie des

Limonadiers of Paris was granted a monopoly for the sale of lemonade soft drinks.

Vendors carried tanks of lemonade on their backs and dispensed cups of the soft drink

to thirsty Parisians.

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Carbonated drinks

Soft drinks displayed on supermarket shelves.

In late 18th century, scientists made important progress in replicating naturally

carbonated mineral waters. In 1767, Englishman Joseph Priestley first discovered a

method of infusing water with carbon dioxide to make carbonated water which has

3.4 mg in the drink [4] when he suspended a bowl of distilled water above a beer vat

at a local brewery in Leeds, England. His invention of carbonated water, (also known

as soda water), is the major and defining component of most soft drinks.

Priestley found water thus treated had a pleasant taste, and he offered it to friends as a

refreshing drink. In 1772, Priestley published a paper entitled Impregnating Water

with Fixed Air in which he describes dripping oil of vitriol (or sulfuric acid as it is

now called) onto chalk to produce carbon dioxide gas, and encouraging the gas to

dissolve into an agitated bowl of water.

Another Englishman, John Mervin Nooth, improved Priestley's design and sold his

apparatus for commercial use in pharmacies. Swedish chemist Torbern Bergman

invented a generating apparatus that made carbonated water from chalk by the use of

sulfuric acid. Bergman's apparatus allowed imitation mineral water to be produced in

large amounts. Swedish chemist Jöns Jacob Berzelius started to add flavors (spices,

juices and wine) to carbonated water in the late 18th century

Phosphate soda

A variant of soda in the United States called "phosphate soda" appeared in the late

1870s. It became one of the most popular soda fountain drinks from 1900 through the

1930s, with the lemon or orange phosphate being the most basic. The drink consists of

1 oz fruit syrup, 1/2 teaspoon of phosphoric acid, and enough carbonated water and

ice to fill a glass. This drink was commonly served in pharmacies.

7

Soda fountain pioneers

Main article: Soda fountain

Artificial mineral waters, usually called "soda water," and the soda fountain made the

biggest splash in the United States. Beginning in 1806, Yale chemistry professor

Benjamin Silliman sold soda waters in New Haven, Connecticut. He used a Nooth

apparatus to produce his waters. Businessmen in Philadelphia and New York City

also began selling soda water in the early 19th century. In the 1830s, John Matthews

of New York City and John Lippincott of Philadelphia began manufacturing soda

fountains. Both men were successful and built large factories for fabricating

fountains.

Soda fountains vs. bottled sodas

The drinking of either natural or artificial mineral water was considered a healthy

practice. The American pharmacists selling mineral waters began to add herbs and

chemicals to unflavored mineral water. They used birch bark (see birch beer),

dandelion, sarsaparilla, fruit extracts, and other substances. Flavorings were also

added to improve the taste. Pharmacies with soda fountains became a popular part of

American culture. Many Americans frequented the soda fountain on a daily basis.

Due to problems in the U.S. glass industry, bottled drinks were a small portion of the

market in the 19th century. (They were certainly known in England, though. In The

Tenant of Wildfell Hall, published in 1848, the caddish Huntingdon, recovering from

months of debauchery, wakes at noon and gulps a bottle of soda-water.[8]) In

America, most soft drinks were dispensed and consumed at a soda fountain, usually in

a drugstore or ice cream parlor. In the early 20th century, sales of bottled soda

increased exponentially. In the second half of the 20th century, canned soft drinks

became an important share of the market.

Soft drink bottling industry

Over 1,500 U.S. patents were filed for either a cork, cap, or lid for the carbonated

drink bottle tops during the early days of the bottling industry. Carbonated drink

bottles are under great pressure from the gas. Inventors were trying to find the best

8

way to prevent the carbon dioxide or bubbles from escaping. In 1892, the "Crown

Cork Bottle Seal" was patented by William Painter, a Baltimore, Maryland machine

shop operator. It was the first very successful method of keeping the bubbles in the

bottle.

Automatic production of glass bottles

In 1899, the first patent was issued for a glass-blowing machine for the automatic

production of glass bottles. Earlier glass bottles had all been hand-blown. Four years

later, the new bottle-blowing machine was in operation. It was first operated by the

inventor, Michael Owens, an employee of Libby Glass Company. Within a few years,

glass bottle production increased from 1,400 bottles a day to about 58,000 bottles a

day Production Soft drink production Soft drinks are made by mixing dry ingredients

and/or fresh ingredients (e.g. lemons, oranges, etc.) with water. Production of soft

drinks can be done at factories, or at home. Soft drinks can be made at home by

mixing either a syrup or dry ingredients with carbonated water. Carbonated water is

made using a home carbonation system or by dropping dry ice into water. Syrups are

commercially sold by companies such as Soda-Club.

Ingredient quality

Of most importance is that the ingredient meets the agreed specification on all major

parameters. This is not only the functional parameter, i.e. the level of the major

constituent, but the level of impurities, the microbiological status and physical

parameters such as color, particle size, etc

Soft drinks by definition are carbonated drinks that are non-alcoholic. Carbonated soft

drinks are also refereed to as soda, soda pop, pop, or tonic.

1798 The term "soda water" first coined.

1810 First U.S. patent issued for the manufacture of imitation mineral waters.

1819 The "soda fountain" patented by Samuel Fahnestock.

1835 The first bottled soda water in the U.S.

9

1850 A manual hand & foot operated filling & corking device, first used for bottling

soda water.

1851 Ginger ale created in Ireland.

1861 The term "pop" first coined.

1874 The first ice-cream soda sold.

1876 Root beer mass produced for public sale.

1881 The first cola-flavored beverage introduced.

1885 Charles Aderton invented "Dr Pepper" in Waco, Texas.

1886 Dr. John S. Pemberton invented "Coca-Cola" in Atlanta, Georgia.

1892 William Painter invented the crown bottle cap.

1898 "Pepsi-Cola" is invented by Caleb Bradham.

1899 The first patent issued for a glass blowing machine, used to produce glass

bottles.

1913 Gas motored trucks replaced horse drawn carriages as delivery vehicles.

1919 The American Bottlers of Carbonated Beverages formed.

1920 The U.S. Census reported that more than 5,000 bottlers now exist.

Early 1920's The first automatic vending machines dispensed sodas into cups.

1923 Six-pack soft drink cartons called "Hom-Paks" created.

1929 The Howdy Company debuted its new drink "Bib-Label Lithiated Lemon-Lime

Sodas" later called "7 Up". Invented by Charles Leiper Grigg.

1934 Applied color labels first used on soft drink bottles, the coloring was baked on

the face of the bottle.

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1952 The first diet soft drink sold called the "No-Cal Beverage" a gingerale sold by

Kirsch.

1957 The first aluminum cans used.

1959 The first diet cola sold.

1962 The pull-ring tab first marketed by the Pittsburgh Brewing Company of

Pittsburgh, PA. The pull-ring tab was invented by Alcoa.

1963 The Schlitz Brewing company introduced the "Pop Top" beer can to the nation

in March, invented by Ermal Fraze of Kettering, Ohio.

1965 Soft drinks in cans dispensed from vending machines.

1965 The resealable top invented.

1966 The American Bottlers of Carbonated Beverages renamed The National Soft

Drink Association.

1970 Plastic bottles are used for soft drinks.

1973 The PET (Polyethylene Terephthalate) bottle created.

1974 The stay-on tab invented. Introduced by the Falls City Brewing Company of

Louisville, KY.

1979 Mello Yello soft drink is introduced by the Coca Cola company as competition

against Mountain Dew.

1981 The "talking" vending machine invented.

TOP FIVE BEVEARAGES COMPANY NAME

11

1.COCA-COLA

2.PEPSICO INC.

3.NESTLE

4.CADBURY SCHWEPPES

5.NATIONAL BEVEARAGES

TABLE OF CONTENTS

12

1. DECLARATION II

2. ACKNOWLEDGEMENT III

3. INTRODUCTION IV-XI

4. TOP 5 BEVEARAGES COMPANY NAME XII

CHAPTER-1- COCA-COLA 15-53

ð COMPANY PROFILE

ð HISTORY

ð KEY EXECUTIVE

ð PRODUCT MIX

ð COMPETITORS

ð STP STRATEGIES

ð SWOT ANALYSIS

ð FINANCIAL ANALYSIS

CHAPTER-2- PEPSICO INC 54-99

ð COMPANY PROFILE

ð HISTORY

ð KEY EXECUTIVE

ð PRODUCT MIX

ð COMPETITORS

ð STP STRATEGIES

ð SWOT ANALYSIS

ð FINANCIAL ANALYSIS

CHAPTER-3- NESTLE 100-125

13

ð COMPANY PROFILE

ð HISTORY

ð KEY EXECUTIVE

ð PRODUCT MIX

ð COMPETITORS

ð STP STRATEGIES

ð SWOT ANALYSIS

ð BCG MATRIX

CHAPTER-4- CADBURY SCHWEPPES 126-146

ð COMPANY PROFILE

ð HISTORY

ð KEY EXECUTIVE

ð PRODUCT MIX

ð COMPETITORS

ð BCG MATRIX

ð SWOT ANALYSIS & PORTER’S FIVE FORCES MODEL & 3 C’S FOR AMUL

ð FINANCIAL ANALYSIS

CHAPTER-5- NATIONAL BEVEARAGES 147-167

ð COMPANY PROFILE

ð HISTORY

ð KEY EXECUTIVE

ð PRODUCT MIX

ð COMPETITORS

ð SWOT ANALYSIS

ð FINANCIAL ANALYSIS

5. CONCLUSION 168

6. BIBLIOGRAPHY 169

14

CHAPTER 1

COMPANY PROFILE

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COMPANY PROFILE

MISSION:

Our Roadmap starts with our mission, which is enduring. It declares our purpose as a

company and serves as the standard against which we weigh our actions and

decisions.

To refresh the world...

To inspire moments of optimism and happiness...

To create value and make a difference.

VISION:

Our vision serves as the framework for our Roadmap and guides every aspect of our

business by describing what we need to accomplish in order to continue achieving

sustainable, quality growth.

People: Be a great place to work where people are inspired to be the best they

can be.

Portfolio: Bring to the world a portfolio of quality beverage brands that

anticipate and satisfy people's desires and needs.

Partners: Nurture a winning network of customers and suppliers, together we

create mutual, enduring value.

Planet: Be a responsible citizen that makes a difference by helping build and

support sustainable communities.

Profit: Maximize long-term return to shareowners while being mindful of our

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overall responsibilities.

Productivity: Be a highly effective, lean and fast-moving organization.

WINNING CULTURE:

Our Winning Culture defines the attitudes and behaviours that will be required of us

to make our 2020 Vision a reality.

LIVE OUR VALUES:

Our values serve as a compass for our actions and describe how we behave in the

world.

Leadership: The courage to shape a better future.

Collaboration: Leverage collective genius.

Integrity: Be real.

Accountability: If it is to be, it's up to me.

Passion: Committed in heart and mind.

Diversity: As inclusive as our brands.

Quality: What we do, we do well.

FOCUS ON THE MARKET:

Focus on needs of our consumers, customers and franchise partners.

Get out into the market and listen, observe and learn.

Possess a world view.

Focus on execution in the marketplace every day.

Be insatiably curious.

WORK SMART:

Act with urgency.

Remain responsive to change.

Have the courage to change course when needed.

Remain constructively discontent.

Work efficiently.

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ACT LIKE OWNERS:

Be accountable for our actions and inactions.

Steward system assets and focus on building value.

Reward our people for taking risks and finding better ways to solve problems.

Learn from our outcomes -- what worked and what didn’t.

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HISTORY OF COCA-COLA

The prototype Coca-Cola recipe was formulated at the Eagle Drug and Chemical

Company, a drugstore in Columbus, Georgia by John Pemberton, originally as a coca

wine called Pemberton's French Wine Coca. He may have been inspired by the

formidable success of Vin Mariani, a European cocawine.

In 1886, when Atlanta and Fulton County passed prohibition legislation, Pemberton

responded by developing Coca-Cola, essentially a non-alcoholic version of French

Wine Coca. The first sales were at Jacob's Pharmacy in Atlanta, Georgia, on May 8,

1886. It was initially sold as a patent medicine for five cents a glass at soda fountains,

which were popular in the United States at the time due to the belief that carbonated

water was good for the health.[9] Pemberton claimed Coca-Cola cured many diseases,

including morphine addiction, dyspepsia, neurasthenia, headache, and impotence.

Pemberton ran the first advertisement for the beverage on May 29 of the same year in

the Atlanta Journal.

By 1888, three versions of Coca-Cola — sold by three separate businesses — were on

the market. Asa Griggs Candler acquired a stake in Pemberton's company in 1887 and

incorporated it as the Coca Cola Company in 1888. The same year, while suffering

from an ongoing addiction to morphine, Pemberton sold the rights a second time to

four more businessmen: J.C. Mayfield, A.O. Murphey, C.O. Mullahy and E.H.

Bloodworth. Meanwhile, Pemberton's alcoholic son Charley Pemberton began selling

his own version of the product.

John Pemberton declared that the name "Coca-Cola" belonged to Charley, but the

other two manufacturers could continue to use the formula. So, in the summer of

1888, Candler sold his beverage under the names Yum Yum and Koke. After both

failed to catch on, Candler set out to establish a legal claim to Coca-Cola in late 1888,

in order to force his two competitors out of the business. Candler purchased exclusive

rights to the formula from John Pemberton, Margaret Dozier and Woolfolk Walker.

However, in 1914, Dozier came forward to claim her signature on the bill of sale had

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been forged, and subsequent analysis has indicated John Pemberton's signature was

most likely a forgery as well.

In 1892 Candler incorporated a second company, The Coca-Cola Company (the

current corporation), and in 1910 Candler had the earliest records of the company

burned, further obscuring its legal origins. By the time of its 50th anniversary, the

drink had reached the status of a national icon in the USA. In 1935, it was certified

kosher by Rabbi Tobias Geffen, after the company made minor changes in the

sourcing of some ingredients.

Coca-Cola was sold in bottles for the first time on March 12, 1894. The first outdoor

wall advertisement was painted in the same year as well in Cartersville, Georgia. Cans

of Coke first appeared in 1955. The first bottling of Coca-Cola occurred in Vicksburg,

Mississippi, at the Biedenharn Candy Company in 1891. Its proprietor was Joseph A.

Biedenharn. The original bottles were Biedenharn bottles, very different from the

much later hobble-skirt design that is now so familiar. Asa Candler was tentative

about bottling the drink, but two entrepreneurs from Chattanooga, Tennessee,

Benjamin F. Thomas and Joseph B. Whitehead, proposed the idea and were so

persuasive that Candler signed a contract giving them control of the procedure for

only one dollar. Candler never collected his dollar, but in 1899 Chattanooga became

the site of the first Coca-Cola bottling company. The loosely termed contract proved

to be problematic for the company for decades to come. Legal matters were not

helped by the decision of the bottlers to subcontract to other companies, effectively

becoming parent bottlers. Coke concentrate, or Coke syrup, was and is sold separately

at pharmacies in small quantities, as an over-the-counter remedy for nausea or mildly

upset stomach.

On April 23, 1985, Coca-Cola, amid much publicity, attempted to change the formula

of the drink with "New Coke". Follow-up taste tests revealed that most consumers

preferred the taste of New Coke to both Coke and Pepsi, but Coca-Cola management

was unprepared for the public's nostalgia for the old drink, leading to a backlash. The

company gave in to protests and returned to a variation of the old formula, under the

name Coca-Cola Classic on July 10, 1985.

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On February 7, 2005, the Coca-Cola Company announced that in the second quarter

of 2005 they planned to launch a Diet Coke product sweetened with the artificial

sweetener sucralose, the same sweetener currently used in Pepsi One. On March 21,

2005, it announced another diet product, Coca-Cola Zero, sweetened partly with a

blend of aspartame and acesulfame potassium. In 2007, Coca-Cola began to sell a

new "healthy soda": Diet Coke with vitamins B6, B12, magnesium, niacin, and zinc,

marketed as "Diet Coke Plus”. On July 5, 2005, it was revealed that Coca-Cola would

resume operations in Iraq for the first time since the Arab League boycotted the

company in 1968.

In April 2007, in Canada, the name "Coca-Cola Classic" was changed back to "Coca-

Cola." The word "Classic" was truncated because "New Coke" was no longer in

production, eliminating the need to differentiate between the two. The formula

remained unchanged.

In January 2009, Coca-Cola stopped printing the word "Classic" on the labels of 16-

ounce bottles sold in parts of the southeastern United States. The change is part of a

larger strategy to rejuvenate the product's image. In November 2009, due to a dispute

over wholesale prices of Coca-Cola products, Costco stopped restocking its shelves

with Coke and Diet Coke.

GLOBAL MARKET SHARE OF COCA-COLA

Sales and

Income

Data in

Millions

2004 2005 2006 2007 2008

Net Sales $21,742 $23,104 $24,088 $28,857 $31,944

Net Income

(Profits)

$4,847 $4,872 $5,080 $5,981 $5,807

Units sold

in Billions

19.8 20.6 21.4 22.7 23.7

21

In 2009, the company generated revenues of $31 billion with $6.8 billion net income.

An increased consumer preference for healthier drinks has resulted in slowing growth

rates for sales of carbonated soft drinks (abbreviated as CSD), which constitutes 78%

of KO’s sales. KO’s profits are also vulnerable to the volatile costs for the raw

materials used to make drinks - such as the corn syrup used as a sweetener, the

aluminium used in cans, and the plastic used in bottles. Furthermore, slowing

consumer spending in Coke's large North American market compounds the challenge

of increasing costs and a weak economic

environment. Finally, Coca-Cola earns approximately 75% of revenue from

international sales, exposing it to currency fluctuations, which are particularly adverse

with a stronger U.S. Dollar (USD).

Despite these challenges, Coca-Cola has remained profitable. Though the non-CSD

market is growing quickly, the traditional CSD market is still large in terms of both

revenues and volume and highly lucrative. The size and variety of KO’s offerings in

the CSD category, coupled with the unparalleled brand equity of the Coca-Cola

trademark, has allowed KO to maintain its share of this important market. KO has

also responded to consumers’ changing tastes with new, non-CSD product launches

and acquisitions such as that of Glaceau in 2007. Strong international growth has also

more than offset a weak domestic market.

On February 25, Coca-Cola Company announced its plan to buy Coca-Cola

Enterprises (CCE) for $12.3 million.[7] Since spinning of Coca-Cola Enterprises

(CCE) 24 years ago, the soft drink market has changed dramatically with consumers

buying fewer soft drinks and more non-carbonated beverages, such as Powerade and

Dasani water. Under the new deal, Coca-Cola Company will take control of the

bottler's North America operations, giving the company control over 90% of the total

North America volume. In return, Coca-Cola Enterprises will take over Coke's

bottling operations in Norway and Sweden, becoming a European-focused producer

and distributor.

In March 2010, Coca-Cola Company entered into discussions to buy the Russian juice

company, OAO Nidan Juices. The company is 75% owned by a private equity firm in

London and 25% by its Russian founders and controls 14.5% of the Russian juice

22

market. If successful, the purchase would add to Coca-Cola's 20.5% market share,

passing Pepsi's 30% market share. The Russian juice market is estimated to be $3.2

billion dollars, and estimates of Nidan's purchase price are between $560-$620

million.

In April 2010, Coca-Cola Company purchased a majority share of Innocent, the

British fruit smoothie maker. Last year the company bought an 18% share of the

company for more than $45 million, and recent purchases of additional shares

increased Coke's stake to 58%.

In June 2010, Coca-Cola Company agreed to pay Dr Pepper Snapple Group (DPS)

$715 million for the continued right to sell their products following the company's

acquisition of Coca-Cola Enterprises (CCE). The deal covers the next 20 years with

an option to renew for an additional 20 years.

Type Soft Drink (Cola)

Manufacturer The Coca- Cola Company

Founder(s) John S. Pemberton

Country of Origin United States

Introduced 1886

Area served Over 200 countries

Color Caramel E-150d

Flavors Cola, Cola Green Tea, Cola Lemon, Cola

Lemon Lime, Cola Lime, Cola Orange

and Cola Raspberry.

Related Products Pepsi, Irn Bru, RC Cola, Cola Turka,

Zam Zam Cola, Mecca Cola, Virgin

Cola, Parsi Cola, Qibla Cola, Evoca Cola,

Corsica Cola, Breizh Cola, Afri Cola

Employees 92,400

Servings per Day 1.6 Billion

23

ORGANIZATIONAL HIERARCHY OF COCA COLA

24

Managing Director

Chief Operating Officer (Sales)

Director Operations Director OperationsQuality

Control

Manager

Assisstant ManagerExe

cutive Manager

Senior Officer

Sales

and Marketing

Manager

Regional

Sales ManagerSales Manager

Marketing

Development

Officer

Sales

and Marketing

OfficerDriver

HR Manager

Distribution

and Logistics Manager

Accounts Manager

Production

Manager

Coke executives

Coke executives have historically been awarded incredibly high levels of

compensation through salaries, bonuses and stock options. For example, former CEO

Douglas Daft and former COO Steven Heyer made $11,026,237 and $9,762,588

respectively in 2003 when bonuses and stock options are included.

Name Title

Muhtar Kent

Chairman, Chief Executive Officer,

President, Chairman of Executive

Committee and Chairman of North

America Business Integration Team

Steering Committee

Gary P. Fayard

Chief Financial Officer, Executive Vice

President and Member of North America

Business Integration Team Steering

Committee

John F. Brock III

Chairman of Coca-Cola Enterprises and

Chief Executive Officer of Coca-Cola

Enterprises

Martin JansenChief Executive Officer of Coca-Cola

China Industries Limited

Vineet Kapila Chief Executive Officer of Retail Division

25

BOARD MEMBERS - COCA-COLA

Name Primary Company

Muhtar Kent The Coca-Cola Company

Ingrid Saunders

JonesThe Coca-Cola Company

Masahiko Uotani The Coca-Cola Company

K. W. Chan The Coca-Cola Company

Zahi W. Khouri Paltel Corporation

EXECUTIVE COMMITTEES* - COCA-COLA

Committee Name Chairperson

Audit Committee Peter V. Ueberroth

Compensation Committee Maria Elena Lagomasino

Corporate Governance

CommitteeJames D. Robinson III

Executive Committee Muhtar Kent

Finance Committee James B. Williams

Management/Organization

Development CommitteeDonald R. Keough

26

PRODUCTMIX

BRANDS OF

COCA COLA

Coca-Cola Zero® has been one of the most successful product launch

hes in Coca Cola’s history. In 2007, Coca Cola’s sold nearly 450 million

cases globally. Put into perspective, that's roughly the same size as Coca

Cola’s total business in the Philippines, one of our top 15 markets. As of September

2008, Coca-Cola Zero is available in more than 100 countries.

ENERGY DRI NKS

27

For those with a high-intensity approach to life, Coca Cola’s brands of Energy Drinks

contain ingredients such as ginseng extract, guarana extract, caffeine and B vitamins.

JUICES/JUICE DRINKS

We bring innovation to the goodness of juice

in Coca Cola’s more than 20 juice and juice

drink brands, offering both adults and children

nutritious, refreshing and flavorful beverages.

SOFT DRINKS

Coca Cola’s dozens of soft drink brands provide flavor and refreshment in a variety of

choices. From the original Coca-Cola to most

recent introductions, soft drinks from The

Coca-Cola Company are both icons and

innovators in the beverage industry.

SPORTS DRINKS

28

Carbohydrates, fluids, and electrolytes team together in Coca Cola’s Sports Drinks,

providing rapid hydration and terrific taste for fitness-seekers at any level

TEA AND COFFEE

Bottled and canned teas and coffees provide

consumers' favorite drinks in convenient

take-anywhere packaging, satisfying both

traditional tea drinkers and today's growing

coffee culture.

WATER

Smooth and essential, our Waters and Water

Beverages offer hydration in its purest form.

OTHER DRINKS

So much more than soft drinks. Coca Cola’s brands also include milk products, soup,

and more so you can choose a Coca Cola

Company product anytime, anywhere for

nutrition, refreshment or other needs.

29

COMPETITORS OF COCA COLA

The competitors to the products of the company mainly lie in the non-alcoholic

beverage industry consisting of juices and soft drinks.

The key competitors in the industry are as follows:

PepsiCo

Nestle

Cadbury Schweppes

PEPSI

Caleb Brandhum, a North Caroline Pharmacist, structure Pepsi Cola In2 the 1890’s as

cure of dyspepsia (indigestion). In 1902, Bradhum applied for a trade mark, issued

ninety seven share of stock and began selling Pepsi syrup in earnest. In his first year

of business he spends $1900 on advertising a huge sum that he sold only

8000 gallons of syrup. In 1905 Bradhum built Pepsi’s bottling plant. By

1907 he was selling 10,000 gallons a year, two years later; he hired a New

York advertising agency. After passing through many troubles for some

period now Pepsi is a market leader in international arence and is available

in 187 Nations throughout the world.

30

COCA COLA V/S PEPSI PRODUCTS

Both the companies Coca Cola and Pepsi have a number of products. Many of these

products are innovations but there are also many products which are brought out just

as a competitive product for other companies. Some of these products that are brought

in the market by both the companies to compete against each other are as follows:

COCA COLA PEPSI

The main dark cola drink of the company

which started the rivalry between these

Companies.

Pepsi version of dark cola which is the

major primary competitor to Coke.

Full Throttle is an energy drink produced

by the Coca Cola Company. It deputed in

late 2004 in North America.

AMP is and energy drink produced and

distributed by Pepsi CO. under the

Mountain Dew soft drink brand.

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Vault is a carbonated beverage that was

released by the Coca Cola Company in

June 2005.

Mountain Dew MDX is an energy drink

manufactured distributed by PepsiCo.

Under Mountain Dew brand in 2005.

PowerAde is a sports drink by Coca Cola

Company and currently number two in the

sports drink market worldwide.

Gatorade is a non carbonated sports

drink marketed by Quaker Oats

Company, a division of Pepsi Co.

originally made for athletes but now

often consumed as a snack beverage.

Sprite is a clear, lemon lime flavored, non 7 up is a brand of a lemon-lime flavored

32

caffeinated soft drink, produced by Coca

Cola Company.It was introduced in the

U.S in 1961.

soft drink.

Minute Maid is a product line of

beverages usually associated with orange

juice, but now extends to soft drinks of

many kinds. The Minute Maid company is

now owned by Coca Cola and is world’

largest marketers of fruit juices and

drinks.

Tropicana products are an American

company based in Bradenton, Florida,

USA, which is one of the world’s largest

producers and marketers of orange juice.

It has been owned by Pepsi Co. Inc.

since 1998

Nestea is brand of iced tea manufactured

and distributed by the Nestle company’s

beverage department in the U.S. and by

Coca Cola in several European countries,

Brazil and Venezuela.

Lipton Original iced tea is a ready to

drink iced tea brand sold by Lipton

through a worldwide partnership with

Pepsi.

33

Barq’s is a brand of root beer notable for

being the only major North American root

bear to contain caffeine. It has been

bottled start of 20th century and is

currently sold by Coca Cola Company.

Mug root beer is a brand name of root

beer made by the Pepsi Company.

Diet Coke or Diet Coca Cola is a sugar-

free soft drink produced and distributed by

Coca Cola Company, was introduced in

U.S. in 1982

Diet Pepsi is a low calorie carbonated

cola. It was introduced in 1964 as a

variant of Pepsi Cola with no sugar.

34

Kinley is a brand of still or carbonated

water owned by The Coca Cola Company.

Aquafina is non carbonated bottled water

produced by PepsiCo.

Aquarius is a mineral sports drink

manufactured by Coca Cola Company. It

was first introduced in 1983.

All Sport was a sports drink. It is

produced by Pepsi Co.

Fanta is a soft drink brand owned by The

Coca Cola Company. It is produced and

distributed by Coca Cola Company’s

bottlers.

Mirinda is a brand of soft drink. Mirinda

is owned by Pepsi Co.

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Sprite Ice was the first flavor extension for

Coca Cola Company’s Sprite brand soft

drink.

Pepsi Blue is a soft drink made by Pepsi

Co. and launched in mid 2002.

Coca Cola Blak is a coffee flavored soft

drink introduced by Coca Cola in 2006.

Pepsi Cappuccino is a cappuccino

flavored carbonated soft drink produced

by Pepsi Co.

Maaza is a Coca Cola fruit drink brand

marketed in India and Bangladesh.

Slice is a line of fruit flavored soft drink

manufactured by PepsiCo and

introduced in 1984.

Limca is a lemon and lime flavored carbonated soft drink made in India by Coca Cola.

Teem; a lemon lime flavored soft drink produced by the Pepsi Cola Company.

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NESTLE

Nestle does not give that tough a competition to Coca-Cola as it mainly deals with

milk products, Baby foods and Chocolates. But the iced tea that is Nestea which has

been introduced into the market by Nestle provides a

considerable amount of competition to the products of the

Company. Iced tea is one of the closest substitutes to the

Colas as it is a thirst quencher and it is healthier when

compared to fizz drinks. The flavoured milk products also

have become substitutes to the products of the company due

to growing health awareness among people.

CADBURY SCHWEPPES

Cadbury Schweppes are joined force of Cadbury found in 1824 of U.K.

and Schweppes of Ireland founded in 1783. Cadbury Schweppes is unified

bussing which manages the relations his with over 240 franchised bottling operation

on Zambia and Zimbabwe. Cadbury Schweppes has fottlery ands partnership

operations in 14 countries around the world.

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OTHER COMPETITORS

Mecca Cola

Amrat Cola

RC Cola

Shandy Cola

Qibla Cola

Future Cola

Unilever

Kraft Foods, Inc.

38

MARKET SEGMENTATION

Dividing a market into distinct groups with distinct needs, characteristics, or behavior

who might require separate products or marketing mixes.

In evaluating different market segments, a firm must look at three factors:

Segment size

Segment growth

Segment structural attractiveness and company objectives and resources.

There is no single way to segment a market. The market has to try different

segmentation variables, alone and in combination, to find the best way to view the

market structure.

TARGET MARKETING :

This is the process of evaluating each market segment’s attractiveness and selecting

one or more segments to enter.

After evaluating different segments, the company must now decide which and how

many segments it will target, because buyers have unique needs and wants, a seller

could potentially view each buyer as a separate target market. Ideally, then, a seller

might design a separate marketing program for each buyer. There are three types of

market segments.

Undifferentiated marketing. (Mass Marketing)

Differentiated marketing. (Segmented Marketing)

Concentrated marketing. (Segmented Marketing, small segment)

39

SEGMENTATION STRATEGY COCA COLA

Coca cola serves its products using mass marketing technique, which obviously falls

in undifferentiated marketing, and undifferentiated marketing means no segmentation,

but there are minor factors on which we can say that the coke segments its products

and then targets the customers somehow. These factors are as follows.

GEOGRAPHIC SEGMENTATION

INTERNATIONALLY

Coke segments its products country wise and region wise, here the most important

thing is the taste and the quality, it varies according to the taste and the income level

of the people in that country, and i.e. Third world counties are given low quality taste.

Coca Cola Company tries to satisfy the needs of a whole line of different people. 

They have drinks that target different, age groups, ethnic groups, sexes, lifestyles, etc.

There are some of the different brands:

Oasis

This is a juice made for the younger working adults, 20-30. It is available in berry,

lemon and orange tangerine.  This drink is most popular in Britain and Ireland.

Minute Maid

Minute Maid targets kids and adults, ages 1-10 and 40+.  This drink is conveniently

packaged to take with you on the go anywhere. The health check is part of the reason

for the wide target market, parents want their kids to be healthy and so knowing that

this product is accepted by such a well known respected company pleases the parents

and gives them a sense of relief.

Coca Cola

40

The Coca Cola drink is by far there most successful drink.  It is very popular among

many different nations.  It is a soft drink.  Because of the huge demand for the coca

cola drink, and the trend towards healthier lifestyles coca and begun to produce spin-

offs of the coca cola product.  They have made drinks such as coca cola zero, coca

cola diet, coca cola C2, coca cola with lime etc.  By having all these different drinks

with the same basic taste they are able to target a much bigger market.   Due to the

large success of the drinks coca cola is in demand worldwide.  As such the Coca Cola

brand is sold in most countries in the world.

Coca Coal Zero

This drink is specifically targeted at teens that don’t want the calories that come with

coke but want to same great taste.  This Product is sweetened with aspartame.

Coca Cola Diet

The diet drinks are targeted at adults of ages 30-50, who are health conscious but still

love the great taste of coke.  This drink is sugar less.

Coca Cola with lime

The drink is sold in both regular and diet.  It is for a wide range a coke lovers who are

looking for an extra little punch.

Sprite

This is a soft drink that has many different target markets.  This product has a

different taste then coke all together and is not as popular but it is still a very popular

drink.  Like coke it also has a whole other line of drinks associated with it, such as

diet sprite, sprite zero, sprite with a hint of lime.  This drink is also sold in many

places worldwide.

Powerade

Powerade is a sports drink.  It is designed with a great taste and is also thirst

quenching.  It is made for athletes of all ages, sexes and sports, but they would target

this drink at teens and young adults, age’s 13- 27.  This drink is sold in many places

but mostly over North America.

Aquarius

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Aquarius is a sports drink, enjoyed by people who have healthy lifestyles.  It is made

for athletes of all ages, sexes and sports, but they would target this drink at teens and

young adults, age’s 13- 27.  This produce is very well known in Europe.  Particularly

in France, Norway, Spain.  But it is still known all over.  It became even more

successful when it became the official drink of the Olympic games in Barcelona in

1992.

Full Throttle

This is an energy drink.  It is designed for athletes both male and female but

particularly males, of ages 14-25. As we can see by looking at a select few of coca

colas drinks they have a wide variety of drinks to satisfy everyone’s needs.

CLIMATIC

Weather is the third major factor in effecting the Coke’s selling. In coke marketing,

main idea is to serve it cold, so we can say that, they focus more on hot areas of the

world, i.e. middle east etc and there sale increase in summer. This is underdeveloped

market so the coke’s consumption in summers is 60% and in winters is 40%.. It is a

source of refreshment when a person is thirsty due to the hot weather.

LOCALLY

In Pakistan the coke segments more in urban and suburban areas as compare to rural.

35 % population resides in urban areas and 65% population lives in rural areas in

Pakistan. Coca Cola is focusing on urban areas as people there are more inclined

towards such beverage while people in rural areas are more inclined drinking lassi and

desi drinks.

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DEMOGRAPHIC SEGMENTATION

AGE

Internationally coke has segments the small children introducing tastes like vanilla,

lime and cherry, they focus children from 4-12. Coke specifically target more young

people than older.

Pakistan is considered to be a young country i.e. average age of Pakistani population

is less than 38 years. Thus targeting young generation can be a beneficial marketing

strategy for soft drink companies. In fact this is the case, all the major brands like

Coca Cola, Pepsi mainly target younger generation in Pakistan.

GENDER

Coca Cola targets both genders with its wide variety of drinks. This market is

relatively large and is open to both genders, thereby allowing greater product

diversification.

FAMILY TYPE

Coca Cola introduces its economy pack, and that’s how they focus family and groups.

INCOME

Coca Cola segments different income levels by packaging. Like for small income

people it has small returnable glass bottle, for middle people it has non returnable

bottle and for higher income people it has coke tin.

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PSYCHOGRAPHICS SEGMENTATION

All psychographics variables the social class, lifestyle, occupation, level of education

and personality, Coca Cola segments everyone, but again it is their packaging which

is different for different consumers.

SOCIAL CLASS

Coca Cola is a well known brand. People who are brand conscious will not drink

beverages of less known brands and quality such as Amrat cola. They will try to show

their status by drinking Coca Cola which is known to all as a quality drink.

LEVEL OF EDUCATION

A company has to make promotional strategies keeping in view the customer level. If

the percentage of education is high in a country then through advertisements people

can be made well aware of their product and can convey their message easily.

Promotion and education has a direct relationship.

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BEHAVIORAL SEGMENTATION

It is how people perceive a specific product, in short psychological analysis of a

product. Coca Cola all over the world is recognized as a quality drink and therefore

people drink it without any hesitation whenever they are thirsty or otherwise. So

marketers of Coca Cola have made it a drink for all people and for diabetic people

they introduced diet Coke.

OCCASIONS

A very special occasion for the people of Pakistan Ramzan, people emphasis on

enjoying Coca-Cola at “Iftar” and then on Eid with friends & family with super price

off promotion.

BENEFITS SOUGHT

Sometimes, for the promotion strategy of coke, Coca Cola Company introduce prizes

in the top cover. So they segment people by benefit sought, i.e. by giving them prizes.

45

SWOT ANALYSIS

SWOT Analysis is a strategic planning tool used to evaluate the Strengths,

Weaknesses, Opportunities, and Threats inside a company, project, or a business

venture. It involves identifying the internal and external factors that are favorable/

unfavorable for business to succeed.

INDUSTRIAL SWOT ANALYSIS

STRENGTHS

The soft drinks market in Pakistan enjoyed dynamic growth over the review period in

both volume and current value terms. Carbonates dominate the market in both the on-

trade and off-trade with the lion’s share of sales. Carbonates have become part of the

culture in Pakistan and multinational companies have maintained their standards over

the years to provide consumers with high quality carbonated drinks. Off-trade sales of

carbonates are higher than those of the on-trade but both achieved strong growth over

the review period.

WEAKNESSES

Liquid concentrates and power concentrates are both seasonal categories in the market

and their sales peak in the summer in Pakistan. Both Rooh Afza and Jam-e-Shirin are

traditional sandalwood drinks in Pakistan which are highly regarded by consumers.

These drinks can be found in every home in Pakistan, especially in rural areas

throughout the summer and are the mainstay of liquid concentrates.

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OPPORTUNITIES

The Government of Pakistan has reduced excise taxes to encourage soft drinks

manufacturers and importers. The Government also reduced other applicable taxes to

promise more profit not only for soft drink manufacturers already in the market but

also to attract potential soft drinks manufacturers to invest in Pakistan. Tax reductions

proved extremely beneficial to the soft drinks market in Pakistan and certainly

encouraged and attracted multinational companies to invest in the country’s soft

drinks industry. The government also decided to tax the beverage industry on capacity

of production rather than on actual production and that brave move encouraged soft

drinks manufacturers to maximize production and reduce prices.

THREATS

Increasing health and hygiene awareness among Pakistanis has greatly increased sales

of fruit/vegetable juice products. Both the government and the media have started

health awareness campaigns to make Pakistanis realize that consumption of

fruit/vegetable juice is as essential as eating food. Fruit/vegetable juices are doing

very well in both urban and rural areas. On the other hand, health and hygiene

awareness has also led to increased sales of bottled water in Pakistan. Previously

bottled water was targeted on at major cities where consumers are more health-

conscious and aware of the difference between bottled water and tap water.

Nowadays, health conscious rural inhabitants also drink bottled water due to health

concerns.

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SWOT ANALYSIS OF COCA COLA

  Strengths Weaknesses

Internal -Popularity

-well known

-branding obvious and easily

recognized

-A lot of finance

-customer loyalty

-International Trade

-Word of mouth

-lack of popularity of many Coca

Cola’s brands

-Most unknown and rarely seen

-result of low profile or non-existent

advertising

-health issues

 

  Threats Opportunities

Externa

l

-changing health-consciousness

attitude

-legal issues

-Health ministers

-competition (Pepsi)

-many successful brands to pursue

-advertise its less popular products

-buy out competition.

-More Brand recognition

 

 

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STRENGTHS

Coca Cola is an extremely recognizable company. Popularity is one of its superior

strengths that are virtually incomparable. Coca Cola is known very well

worldwide. It's branding is obvious and easily recognized. Things like, logos and

promos shown on t-shirts, hats, and collectible memorabilia. Without a doubt, no

beverage company compares to Coca Cola's social popularity status. Some people buy

coke, not only because of its taste, but because it is widely accepted and they feel like

they are part of something so big and unifying. At the other end of the spectrum,

certain individuals choose not to drink coke, based solely on rebelling from the world's

idea that coke is something of such great power. Overwhelming is the best word to

describe Coca Cola's popularity. It is scary to think that its popularity has been

constantly growing over the years and the possibility that there is still room to grow. If

you speak the words “Coca Cola”, it would definitely be recognized all around the

world. Money is another thing that is strength of the company. Coca Cola deals with

massive amounts of money all year. Like all businesses, they have had their ups and

downs financially, but they have done well in this compartment and will continue to

do well and improve. The money they are earning is substantially better than most

beverage companies, and with that money, they put back into their own company so

that they can improve. Another strength that is very important to Coca Cola is

customer loyalty. The 80/20 rule comes into effect in this situation. Eighty percent of

their profit comes from 20% of their loyal customers. Many people/families are

extremely loyal to Coca Cola. It would not be rare to constantly find bottles and cases

of a product such as coke in a house. It seems that some people would drink coke

religiously like some people would drink water and milk. This is an improbable feat.

Customers will continually purchase these products, and will probably do so for a very

long time. If two parents were avid Coca Cola drinkers, this will be passed down do

their children as they grow loyal to the company. With Coca Cola’s ability to sell their

product all over the world, customers will continue to buy what they know and what

they like…Coca Cola products.

WEAKNESSES

49

 

Coca Cola is a very successful company, with limited weaknesses. However they do

have a variety of weaknesses that need to be addressed if they want to rise to the next

level. Word of mouth is probably a strength and weakness of every company. While

many people have good things to say, there are many individuals who are against Coca

Cola as a company, and the products in which they produce. Word of mouth

unfortunately is something that is very hard to control. While people will have their

opinions, you have to try to sway their negative views. If bad comments and views are

put out to people who have yet to try Coca Cola products, then that could produce a

lost customer which shows why word of mouth is a weakness. Another aspect that

could be viewed as a weakness is the lack of popularity of many of Coca Cola’s

drinks. Many drinks that they produce are extremely popular such as Coke and Sprite

but this company has approximately 400 different drink types. Most are unknown and

rarely seen for available purchase. These drinks do not probably taste bad, but are

rather a result of low profile or nonexistent advertising. This is a weakness that needs

to be looked at when analyzing their company. Another weakness that has been greatly

publicized is the health issues that surround some of their products. It is known that a

popular product like coke is not very beneficial to your body and your health. With

today’s constant shift to health products, some products could possibly loose

customers. This new focus on weight and health could be a problem for the product

that is labelled detrimental to your health.

OPPORTUNITIES

Coca Cola has a few opportunities in its business. It has many successful brands that it

should continue to exploit and pursue. Coca Cola also has the opportunity to advertise

its less popular products. With a large income it has the available money to put some

of these other beverages on the market. This could be very beneficial to the company

if they could start selling these other products to the same extent that they do with their

main products. Another opportunity that we have seen being put to use before is the

ability for Coca Cola to buy out their competition. This opportunity rarely presents

itself in the world of business. However, with Coca Cola’s power and success, such a

task is not impossible. Coca Cola has bought out a countless number of drink brands.

An easy way to turn their profit into your profit is too buy out their company. Even

50

though this may cost a vast amount of money initially, in the long run, if all goes to

plan, it results in a large profit. Also, the company will no longer need to worry about

this product being part of the competition. Brand recognition is the significant factor

affecting Cokes competitive position. Coca Cola is known well throughout 90% of the

world population today. Now Coca Cola wants to get there brand name known even

better and possibly get closer and closer to 100%. It is an opportunity that most

companies will ever dream of, and would be a supreme accomplishment. Coca Cola

has an opportunity to continue to widen the gap between them and their competitors.

THREATS

Despite the fact that Coca Cola dominates its market, it still has to deal with many

threats. Even though Coca Cola and Pepsi control nearly 40% of the entire beverage

market, the changing health-consciousness attitude of the market could have a serious

effect on Coca Cola. This definitely needs to be viewed as a dominant threat. In

today’s world, people are constantly trying to change their eating and drinking habits.

This could directly affect the sale of Coca Cola’s products. Another possible issue is

the legal side of things. There are always issues with a company of such supreme

wealth and popularity. Somebody is always trying to find fault with the best and take

them down. Coca Cola has to be careful with lawsuits. Health minister could also be

looked at as a threat. Again, some people may try to exploit the unhealthy side of Coca

Cola’s products and could threaten the status and success of sales. Other threats are of

course the competition. Coca Cola’s main competition being Pepsi, sells a very similar

drink. Coca Cola needs to be careful that Pepsi does not grow to be a more successful

drink. Other product such as juices, coffee, and milk are threats. These other beverage

options could take precedent in some people’s minds over Coca Cola’s beverages and

this could threaten the potential success it presents again.  

 

FINANCIAL ANALYSIS OF COCA-COLA

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Balance Sheet

31-Dec

(In millions except par value)

2009 2010

Assets

Current Assets

Cash and cash equivalents $4,701 $4,093

Marketable securities 278 215

Trade accounts receivable, less allowances of $51 and $56, respectively 3,090 3,317

Inventories 2,187 2,220

Prepaid expenses and other assets 1,920 2,260

Total Current Assets 12,176 12,105

INVESTMENTS

Equity method investments:

Coca-Cola Hellenic Bottling Company S.A. 1,487 1,549

Coca-Cola FEMSA, S.A.B. de C.V. 877 996

Coca-Cola Amatil Limited 638 806

Coca-Cola Enterprises Inc. 463 1,637

Other, principally bottling companies and joint ventures 2,314 2,301

Other investments, principally bottling companies 463 488

TOTAL INVESTMENTS 5,779 7,777

OTHER ASSETS 1,733 2,675

PROPERTY, PLANT AND EQUIPMENT — net 8,326 8,493

TRADEMARKS WITH INDEFINITE

LIVES 6,059 5,153

GOODWILL 4,029 4,256

OTHER INTANGIBLE ASSETS 2,417 2,810

TOTAL ASSETS $40,519 $43,269

LIABILITIES AND SHAREOWNERS’ EQUITY

Current Liabilities

Accounts payable and accrued expenses $6,205 $6,915

Loans and notes payable 6,066 5,919

Current maturities of long-term debt 465 133

Accrued income taxes 252 258

Total Current Liabilities 12,988 13,225

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LONG-TERM

DEBT 2,781 3,277

OTHER

LIABILITIES 3,401 3,133

DEFERRED INCOME TAXES 877 1,890

SHAREOWNERS’ EQUITY

Common stock, $0.25 par value; Authorized — 5,600 shares;

Issued — 3,519 and 3,519 shares, respectively 880 880

Capital surplus 7,966 7,378

Reinvested earnings 38,513 36,235

Accumulated other comprehensive income (loss) -2,674 626

Treasury stock, at cost — 1,207 and 1,201 shares, respectively -24,213 -23,375

TOTAL SHAREOWNERS’

EQUITY 20,472 21,744

TOTAL LIABILITIES AND SHAREOWNERS’

EQUITY $40,519 $43,269

53

CHAPTER 2

COMPANY PROFILE

54

2.Company Profile: Pepsico

Pepsico is one of the largest companies there is that is engaged in the food, beverage,

and snack industries. Their address is 700 Anderson Hill Road, Purchase, N.Y.

10577. Their phone number is 914-253-2000 and their fax number is 914-253-2070.

Their stock symbol is PEP and they are listed on the NYSE. The company URL is

http://www.pepsico.com/. Business Summary: PepsiCo, Inc. is engaged in the snack

food, soft drink, juice, and fast food franchise businesses. The Company, through its

subsidiaries, markets, sells and distributes various snacks in the United States and

internationally, manufactures concentrates of Pepsi, Mountain Dew and other brands

for sale to franchised bottlers in the United States and international markets and

55

produces, markets, sells and distributes juices under several Tropicana trademarks in

the United States and internationally. Pepsico’s domestic snack food business is

conducted by Frito-Lay North America, and its international snack food business is

conducted through Frito-Lay International. The Company's soft drink business

operates as the Pepsi-Cola Company and is comprised of two business units, Pepsi-

Cola North America (PCNA) and Pepsi-Cola International (PCI). In December 2000,

the Company announced an agreement under which a subsidiary of PepsiCo will

merge with The Quaker Oats Company, and Quaker will become a wholly owned

subsidiary of PepsiCo. Quaker is a large worldwide marketer of foods and beverages.

It manufactures and markets Gatorade thirst quencher, along with hot cereals,

pancake syrups, grain-based snacks, cornmeal, hominy grits and value-added rice

products. The proposed merger is subject to certain closing conditions, including

approval by shareholders of both companies and regulatory approvals. The

transaction is expected to close in the first half of 2001. Pepsico also operates several

food franchises including Pizza Hut, KFC, and Taco Bell.

Financial Summary: PepsiCo, Inc. manufactures, markets and sells soft drinks

and concentrates (Pepsi-Cola, Mountain Dew, Slice, etc.), snack foods (Frito-

Lay) and Tropicana branded juices. For the 12 weeks ended 3/24/01, net sales

increased 8% to $4.54 billion. Net income increased 18% to $498 million.

Revenues benefitted from volume gains across all divisions. Net income also

reflects an increased gross profit due to higher effective net pricing. (See

above for other operations).

56

Company History:

PepsiCo, Inc. is one of the world's top consumer product companies with many of the

world's most important and valuable trademarks. Its Pepsi-Cola Company division is

the second largest soft drink business in the world, with a 21 percent share of the

carbonated soft drink market worldwide and 29 percent in the United States. Three of

its brands--Pepsi-Cola, Mountain Dew, and Diet Pepsi&mdashe among the top ten

soft drinks in the U.S. market. The Frito-Lay Company division is by far the world

leader in salty snacks, holding a 40 percent market share and an even more staggering

56 percent share of the U.S. market. In the United States, Frito-Lay is nine times the

size of its nearest competitor and sells nine of the top ten snack chip brands in the

supermarket channel, including Lay's, Doritos, Tostitos, Ruffles, Fritos, and Chee-tos.

Frito-Lay generates more than 60 percent of PepsiCo's net sales and more than two-

thirds of the parent company's operating profits. The company's third division,

Tropicana Products, Inc., is the world leader in juice sales and holds a dominant 41

percent of the U.S. chilled orange juice market. On a worldwide basis, PepsiCo's

product portfolio includes 16 brands that generate more than $500 million in sales

each year, ten of which generate more than $1 billion annually. Overall, PepsiCo

garners about 35 percent of its retail sales outside the United States, with Pepsi-Cola

brands marketed in about 160 countries, Frito-Lay in more than 40, and Tropicana in

approximately 50. As 2001 began, PepsiCo was on the verge of adding to its food and

drink empire the brands of the Quaker Oats Company, which include Gatorade sports

drink, Quaker oatmeal, and Cap'n Crunch, Life, and other ready-to-eat cereals.

When Caleb D. Bradham concocted a new cola drink in the 1890s, his friends'

enthusiastic response convinced him that he had created a commercially viable

product. For 20 years, 'Doc' Bradham prospered from his Pepsi-Cola sales.

Eventually, he was faced with a dilemma; the crucial decision he made turned out to

be the wrong one and he was forced to sell. But his successors fared no better and it

was not until the end of the 1930s that Pepsi-Cola again became profitable. Seventy

years later, PepsiCo, Inc. was a mammoth multinational supplier of soft drinks, juices,

and snack food. PepsiCo's advance to that level was almost entirely the result of its

management style and the phenomenal success of its television advertising.

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Ups and Downs in the Early Years

Doc Bradham, like countless other entrepreneurs across the United States, was trying

to create a cola drink similar in taste to Coca-Cola, which by 1895 was selling well in

every state of the union. On August 28, 1898, at his pharmacy in New Bern, North

Carolina, Bradham gave the name Pepsi-Cola to his most popular flavored soda.

Formerly known as Brad's Drink, the new cola beverage was a syrup of sugar, vanilla,

oils, cola nuts, and other flavorings diluted in carbonated water. The enterprising

pharmacist followed Coca-Cola's method of selling the concentrate to soda fountains;

he mixed the syrup in his drugstore, then shipped it in barrels to the contracted

fountain operators who added the soda water. He also bottled and sold the drink

himself.

In 1902 Doc Bradham closed his drugstore to devote his attention to the thriving new

business. The next year, he patented the Pepsi-Cola trademark, ran his first

advertisement in a local paper, and moved the bottling and syrup-making operations

to a custom-built factory. Almost 20,000 gallons of Pepsi-Cola syrup were produced

in 1904.

Again following the successful methods of the Coca-Cola Company, Bradham began

to establish a network of bottling franchises. Entrepreneurs anxious to enter the

increasingly popular soft drink business set themselves up as bottlers and contracted

with Bradham to buy his syrup and sell nothing but Pepsi. With little cash outlay,

Pepsi-Cola reached a much wider market. Bradham's first two bottling franchises,

both in North Carolina, commenced operation in 1905. By 1907, Pepsi-Cola had

signed agreements with 40 bottlers; over the next three years, the number grew to 250

and annual production of the syrup exceeded one million gallons.

Pepsi-Cola's growth continued until World War I, when sugar, then the main

ingredient of all flavored sodas, was rationed. Soft drink producers were forced to cut

back until sugar rationing ended. The wartime set price of sugar--5.5 cents per

pound--rocketed after controls were lifted to as much as 26.5 cents per pound in 1920.

Bradham, like his rivals, had to decide whether to halt production and sit tight in the

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hope that prices would soon drop, or stockpile the precious commodity as a

precaution against even higher prices; he chose the latter course. But unfortunately for

him the market was saturated by the end of 1920 and sugar prices plunged to a low of

two cents per pound.

Bradham never recovered. After several abortive attempts to reorganize, only two of

the bottling plants remained open. In a last ditch effort, he enlisted the help of Roy C.

Megargel, a Wall Street investment banker. Very few people, however, were willing

to invest in the business and it went bankrupt in 1923. The assets were sold and

Megargel purchased the company trademark, giving him the rights to the Pepsi-Cola

formula. Doc Bradham went back to his drug dispensary and died 11 years later.

Megargel reorganized the firm as the National Pepsi-Cola Company in 1928, but after

three years of continuous losses he had to declare bankruptcy. That same year, 1931,

Megargel met Charles G. Guth, a somewhat autocratic businessman who had recently

taken over as president of Loft Inc., a New York-based candy and fountain store

concern. Guth had fallen out with Coca-Cola for refusing the company a wholesaler

discount and he was on the lookout for a new soft drink. He signed an agreement with

Megargel to resurrect the Pepsi-Cola company, and acquired 80 percent of the new

shares, ostensibly for himself. Then, having modified the syrup formula, he canceled

Loft's contract with Coca-Cola and introduced Pepsi-Cola, whose name was often

shortened to Pepsi.

Loft's customers were wary of the brand switch and in the first year of Pepsi sales the

company's soft drink turnover was down by a third. By the end of 1933, Guth bought

out Megargel and owned 91 percent of the insolvent company. Resistance to Pepsi in

the Loft stores tailed off in 1934, and Guth decided to further improve sales by

offering 12-ounce bottles of Pepsi for a nickel--the same price as six ounces of Coke.

The Depression-weary people of Baltimore--where the 12-ounce bottles were first

introduced--were ready for a bargain and Pepsi-Cola sales increased dramatically.

Guth soon took steps to internationalize Pepsi-Cola, establishing the Pepsi-Cola

Company of Canada in 1934 and in the following year forming Compania Pepsi-Cola

de Cuba. He also moved the entire American operation to Long Island City, New

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York, and set up national territorial boundaries for the bottling franchises. In 1936,

Pepsi-Cola Ltd. of London commenced business.

Guth's ownership of the Pepsi-Cola Company was challenged that same year by Loft

Inc. In a complex arrangement, Guth had organized Pepsi-Cola as an independent

corporation, but he had run it with Loft's employees and money. After three years of

litigation, the court upheld Loft's contention and Guth had to step down, although he

was retained as an adviser. James W. Carkner was elected president of the company,

now a subsidiary of Loft Inc., but Carkner was soon replaced by Walter S. Mack, Jr.,

an executive from the Phoenix Securities Corporation.

Mack established a board of directors with real voting powers to ensure that no one

person would be able to wield control as Guth had done. From the start, Mack's aim

was to promote Pepsi to the hilt so that it might replace Coca-Cola as the world's best-

selling soft drink. The advertising agency Mack hired worked wonders. In 1939, a

Pepsi radio jingle--the first one to be aired nationally--caught the public's attention:

'Pepsi-Cola hits the spot. Twelve full ounces, that's a lot. Twice as much for a nickel,

too. Pepsi-Cola is the drink for you.' The jingle, sung to the tune of the old British

hunting song 'D'Ye Ken John Peel,' became an advertising hallmark; no one was more

impressed, or concerned, than the executives at Coca-Cola.

In 1940, with foreign expansion continuing strongly, Loft Inc. made plans to merge

with its Pepsi-Cola subsidiary. The new firm, formed in 1941, used the name Pepsi-

Cola Company since it was so well-known. Pepsi's stock was listed on the New York

Stock Exchange for the first time.

Sugar rationing was even more severe during World War II, but this time the

company fared better; indeed, the sugar plantation Pepsi-Cola acquired in Cuba

became a most successful investment. But as inflation spiraled in the postwar U.S.

economy, sales of soft drinks fell. The public needed time to get used to paying six or

seven cents for a bottle of Pepsi which, as they remembered from the jingle, had

always been a nickel. Profits in 1948 were down $3.6 million from the year before.

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In other respects, 1948 was a notable year. Pepsi moved its corporate headquarters

across the East River to midtown Manhattan, and for the first time the drink was sold

in cans. The decision to start canning, while absolutely right for Pepsi-Cola and other

soft drink companies, upset the franchised bottlers, who had invested heavily in

equipment. However, another decision at Pepsi-Cola&mdashø ignore the burgeoning

vending machine market because of the necessarily large capital outlay&mdash′oved

to be a costly mistake. The company had to learn the hard way that as canned drinks

gained a larger share of the market, vending machine sales would become

increasingly important.

1950s: The Steele and Crawford Era

Walter Mack was appointed company chairman in 1950, and a former Coca-Cola

vice-president of sales, Alfred N. Steele, took over as president and chief executive

officer, bringing 15 other Coke executives with him. Steele continued the policy of

management decentralization by giving broader powers to regional vice-presidents,

and he placed Herbert Barnet in charge of Pepsi's financial operations. Steele's

outstanding contribution, however, was in marketing. He launched an extensive

advertising campaign with the slogan 'Be Sociable, Have a Pepsi.' The new television

medium provided a perfect forum; Pepsi advertisements presented young Americans

drinking 'The Light Refreshment' and having fun.

By the time Alfred Steele married movie star Joan Crawford in 1954, a transformation

of the company was well underway. Crawford's adopted daughter, Christina, noted in

her best-seller Mommie Dearest: '[Steele had] driven Pepsi into national prominence

and distribution, second only to his former employer, Coca-Cola. Pepsi was giving

Coke a run for its money in every nook and hamlet of America. Al Steele welded a

national network of bottlers together, standardized the syrup formula ..., brought the

distinctive logo into mass consciousness, and was on the brink of going international.'

In fact, Pepsi-Cola International Ltd. was formed shortly after Steele's marriage.

Joan Crawford became the personification of Pepsi's new and glamorous image. She

invariably kept a bottle of Pepsi at hand during press conferences and mentioned the

product at interviews and on talk shows; on occasion she even arranged for Pepsi

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trucks and vending machines to feature in background shots of her movies. The

actress also worked hard to spread the Pepsi word overseas and accompanied her

husband, now chairman of the board, on his 1957 tour of Europe and Africa, where

bottling plants were being established.

Steele died suddenly of a heart attack in the spring of 1959. Herbert Barnet succeeded

him as chairman and Joan Crawford was elected a board member. Pepsi-Cola profits

had fallen to a postwar low of $1.3 million in 1950 when Steele joined the company,

but with the proliferation of supermarkets during the decade and the developments in

overseas business, profits reached $14.2 million in 1960. By that time, young adults

had become a major target of soft drink manufacturers and Pepsi's advertisements

were aimed at 'Those who think young.'

Al Steele and Joan Crawford had been superb cheerleaders, but a stunt pulled in 1959

by Donald M. Kendall, head of Pepsi-Cola International, is still regarded as one of the

great coups in the annals of advertising. Kendall attended the Moscow Trade Fair that

year and persuaded U.S. Vice-President Richard Nixon to stop by the Pepsi booth

with Nikita Khrushchev, the Soviet premier. As the cameras flashed, Khrushchev

quenched his thirst with Pepsi and the grinning U.S. Vice-President stood in

attendance. The next day, newspapers around the world featured photographs of the

happy couple, complete with Pepsi bottle.

1960s and 1970s: The Pepsi Generation, Diversification

By 1963, Kendall was presiding over the Pepsi empire. His rise to the top of the

company was legendary. He had been an amateur boxing champion in his youth and

joined the company as a production line worker in 1947 after a stint in the U.S. Navy.

He was later promoted to syrup sales where it quickly became apparent that he was

destined for higher office. Ever pugnacious, Kendall has been described as abrasive

and ruthlessly ambitious; beleaguered Pepsi executives secretly referred to him as

White Fang. Under his long reign, the company's fortunes skyrocketed.

Pepsi-Cola's remarkable successes in the 1960s and 1970s were the result of five

distinct policies, all of which Kendall and his crew pursued diligently: advertising on

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a massive, unprecedented scale; introducing new brands of soft drinks; leading the

industry in packaging innovations; expanding overseas; and, through acquisitions,

diversifying their product line.

The postwar baby-boomers were in their mid- to late teens by the time Kendall came

to power. 'Pepsi was there,' states a recent company flyer, 'to claim these kids for our

own.' These 'kids' became the 'Pepsi Generation.' In the late 1960s Pepsi was the

'Taste that beats the others cold.' Viewers were advised 'You've got a lot to live.

Pepsi's got a lot to give.' By the early 1970s, the appeal was to 'Join the Pepsi people,

feelin' free.' In mid-decade an American catchphrase was given a company twist with

'Have a Pepsi Day,' and the 1970s ended on the note 'Catch the Pepsi Spirit!'

The Pepsi Generation wanted variety and Pepsi was happy to oblige. Company brands

introduced in the 1960s included Patio soft drinks, Teem, Tropic Surf, Diet Pepsi--the

first nationally distributed diet soda, introduced in 1964--and Mountain Dew, acquired

from the Tip Corporation, also in 1964. Pepsi Light, a diet cola with a hint of lemon,

made its debut in 1975, and a few years later Pepsi tested the market with Aspen

apple soda and On-Tap root beer. The company also introduced greater variety into

the packaging of its products. Soon after Kendall's accession, the 12-ounce bottle was

phased out in favor of the 16-ounce size, and in the 1970s Pepsi-Cola became the first

American company to introduce one-and-a-half and two-liter bottles; it also began to

package its sodas in sturdy, lightweight plastic bottles. By the end of the decade,

Pepsi had added 12-pack cans to its growing array of packaging options.

The company's expansion beyond the soft drink market began in 1965 when Kendall

met Herman Lay, the owner of Frito-Lay, at a grocer's convention. Kendall arranged a

merger with this Dallas-based snack food manufacturer and formed PepsiCo, Inc.

Herman Lay retired soon thereafter but retained his substantial PepsiCo shareholding.

The value of this stock increased dramatically as Frito-Lay products were introduced

to Pepsi's nationwide market. At the time of the merger, key Frito-Lay brands

included Fritos corn chips (created in 1932), Lay's potato chips (1938), Chee-tos

cheese-flavored snacks (1948), Ruffles potato chips (1958), and Rold Gold pretzels

(acquired by Frito-Lay in 1961). Doritos tortilla chips were introduced nationally in

1967. The addition of Frito-Lay helped PepsiCo achieve $1 billion in sales for the

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first time in 1970. That same year, the corporation moved into its new world

headquarters in Purchase, New York.

During the 1970s, Kendall acquired two well-known fast-food restaurant chains, Taco

Bell, in 1977, and Pizza Hut, in 1978; naturally, these new subsidiaries became major

outlets for Pepsi products. But Kendall also diversified outside the food and drink

industry, bringing North American Van Lines (acquired in 1968), Lee Way Motor

Freight, and Wilson Sporting Goods into the PepsiCo empire.

Overseas developments continued apace throughout Kendall's tenure. Building on his

famous Soviet achievement, he negotiated a trade agreement with the U.S.S.R. in

1972; the first Pepsi plant opened there two years later. Gains were also made in the

Middle East and Latin America, but Coca-Cola, the major rival, retained its dominant

position in Europe and throughout much of Asia.

1980s Highlighted by the Cola Wars

By the time PepsiCo greeted the 1980s with the slogan 'Pepsi's got your taste for life!,'

Kendall was busy arranging for China to get that taste too; production began there in

1983. Kendall put his seal of approval on several other major developments in the

early 1980s, including the introduction of Pepsi Free, a non-caffeine cola, and Slice,

the first widely distributed soft drink to contain real fruit juice (lemon and lime). The

latter drink was aimed at the growing 7-Up and Sprite market. Additionally, Diet

Pepsi was reformulated using a blend of saccharin and aspartame (NutraSweet). 'Pepsi

Now!' was the cry of company commercials, and this was interspersed with 'Taste,

Improved by Diet Pepsi.' On the Frito-Lay side, meantime, the Tostitos brand of

crispy round tortilla chips was introduced in 1981.

In 1983 the company claimed a significant share of the fast-food soft drink market

when Burger King began selling Pepsi products. A year later, mindful of the industry

axiom that there is virtually no limit to the amount a consumer will buy once the

decision to buy has been made, PepsiCo introduced the 3-liter container.

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By the mid-1980s, the Pepsi Generation was over the hill. Kendall's ad agency spared

no expense in heralding Pepsi as 'The Choice of a New Generation,' using the talents

of superstar Michael Jackson, singer Lionel Richie, and the Puerto Rican teenage

group Menudo. Michael Jackson's ads were smash hits and enjoyed the highest

exposure of any American television commercial to date. The company's high profile

and powerful presence in all of the soft drink markets--direct results of Kendall's

strategies--helped it to weather the somewhat uncertain economic situation of the

time.

On only one front had Kendall's efforts failed to produce satisfactory results.

Experience showed that for all its expertise, PepsiCo simply did not have the

managerial experience required to run its subsidiaries outside the food and drink

industries. A van line, a motor freight concern, and a sporting goods firm were indeed

odd companies for a soft drink enterprise; and Kendall auctioned off these strange and

ailing bedfellows, vowing never again to go courting in unfamiliar territories.

With his house in excellent order, the PepsiCo mogul began to prepare for his

retirement. He had bullied and cajoled a generation of Pepsi executives and guided

them ever upward on the steep slopes of Pepsi profits. But he had one last task: to lead

PepsiCo to victory in the Cola Wars.

Hostilities commenced soon after the Coca-Cola Company changed its syrup recipe in

the summer of 1985 and with much fanfare introduced New Coke. Pepsi, caught

napping, claimed that Coca-Cola's reformulated drink failed to meet with consumer

approval and pointed to their own flourishing sales. But serious fans of the original

Coke were not about to switch to Pepsi and demanded that their favorite refreshment

be restored. When blindfolded, however, it became manifestly apparent that these

diehards could rarely tell the difference between Old Coke, New Coke, and Pepsi;

indeed, more often than not, they got it wrong. In any event, the Coca-Cola Company

acceded to the public clamor for the original Coke and remarketed it as Coca-Cola

Classic alongside its new cola.

Some advertising analysts believed that the entire 'conflict' was a clever publicity ploy

on the part of Coca-Cola to demonstrate the preeminence of its original concoction

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('It's the Real Thing!'), while introducing a new cola--allegedly a Pepsi taste-

alike&mdashø win the hearts of waverers. More interesting perhaps than the possible

differences between the colas were the very real differences in people's reactions.

Four discrete fields were identified by Roger Enrico and Jesse Kornbluth in their

book, The Other Guy Blinked: How Pepsi Won the Cola Wars: the totally wowed

(possibly caffeine-induced); the rather amused; the slightly irritated; and the distinctly

bored.

The latter group must have nodded off in front of their television sets when Pepsi took

the Cola Wars beyond the firmament. 'One Giant Sip for Mankind,' proclaimed the

ads as a Pepsi 'space can' was opened up aboard the U.S. space shuttle Challenger in

1985. Presumably, had a regular can been used, Pepsi-Cola would have sloshed

aimlessly around the gravity-free cabin. This scientific breakthrough, together with

the almost obligatory hype and hoopla, and more mundane factors such as the

continued expansion in PepsiCo's outlets, boosted sales to new heights, and Pepsi's ad

agency glittered with accolades. The debate persisted, at least within Coke and Pepsi

corporate offices, as to who won the Cola Wars. The answer appeared to be that there

were no losers, only winners; but skirmishes would inevitably continue.

Late 1980s and Early 1990s: Focusing on International Growth and Diversification

D. Wayne Calloway replaced Donald M. Kendall as chairman and chief executive

officer in 1986. Calloway had been instrumental in the success of Frito-Lay, helping it

to become PepsiCo's most profitable division. The new chairman realized that his

flagship Pepsi brand was not likely to win additional market share from Coca-Cola,

and focused his efforts on international growth and diversification.

Calloway hoped to build on the phenomenal success of the Slice line of fruit juice

beverages, which achieved $1 billion in sales and created a new beverage category

within just two years of its 1984 introduction. From 1985 to 1993, PepsiCo

introduced, acquired, or formed joint ventures to distribute nine beverages, including

Lipton Original Iced Teas, Ocean Spray juices, All Sport drink, H2Oh! sparkling

water, Avalon bottled water, and Mug root beer. Many of these products had a 'New

Age' light and healthy positioning, in line with consumer tastes, and higher net prices.

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In 1992, PepsiCo introduced Crystal Pepsi, a clear cola that, while still a traditional

soda, also tried to capture the momentum of the 'New Age' beverage trend.

In the restaurant segment, PepsiCo's 1986 purchase of Kentucky Fried Chicken (KFC)

and 1990 acquisition of the Hot 'n Now hamburger chain continued its emphasis on

value-priced fast foods. But the company strayed slightly from that formula with the

1992 and 1993 purchases of such full-service restaurants as California Pizza Kitchen,

which specialized in creative wood-fired pizzas, Chevys, a Mexican-style chain, East

Side Mario's Italian-style offerings, and D'Angelo Sandwich Shops.

Pepsi lost a powerful marketing tool in 1992, when Michael Jackson was accused of

child molestation. Although the case was settled out of court, Pepsi dropped its

contract with the entertainer. The firm launched its largest promotion ever in May

1992 with the 'Gotta Have It' card, which offered discounts on the products of

marketing partners Reebok sporting goods, Continental Airlines, and the MCI

telephone long distance company. The company also launched a new marketing (or,

as the company phrased it, 'product quality') initiative early in 1994, when it

announced that packaged carbonated soft drink products sold in the United States

would voluntarily be marked with a 'Best if Consumed By' date.

Although Pepsi had commenced international expansion during the 1950s, it had long

trailed Coca-Cola's dramatic and overwhelming conquest of international markets. In

1990, CEO Calloway pledged up to $1 billion for overseas development, with the

goal of increasing international volume 150 percent by 1995. At that time, Coke held

50 percent of the European soft drink market, while Pepsi claimed a meager ten

percent. But Pepsi's advantage was that it could compete in other, less saturated

segments. The company's biggest challenge to expanding its restaurant division was

affordability. PepsiCo noted that, while it took the average U.S. worker just 15

minutes to earn enough to enjoy a meal in one of the firm's restaurants, it would take

an Australian 25 minutes to achieve a similar goal. Pepsi still had other options,

however. In 1992, for example, the company forged a joint venture with General

Mills called Snack Ventures Europe which emerged as the largest firm in the $17

billion market. By 1993, PepsiCo had invested over $5 billion in international

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businesses, and its international sales comprised 27 percent, or $6.71 billion, of total

annual sales.

In January 1992, Calloway was credited by Business Week magazine with emerging

from the long shadow cast by his predecessor 'to put together five impressive years of

20 percent compound earnings growth, doubling sales and nearly tripling the

company's value on the stock market.' Calloway also worked to reshape PepsiCo's

corporate culture by fostering personal responsibility and a decentralized, flexible

management style.

Mid-to-Late 1990s: The Enrico Restructuring

Calloway, who was battling prostate cancer, retired as CEO in April 1996 and was

replaced by Roger A. Enrico, who became chairman as well later in the year

(Calloway died in July 1998). Since joining Frito-Lay's marketing department in

1971, Enrico had stints heading up both Pepsi-Cola and Frito-Lay before becoming

head of the restaurants division in 1994. He engineered a quick turnaround of the

struggling chains by changing the overall strategy, for example adopting more

franchising of units rather than company ownership. Under Enrico, the marketing of

new concepts was also emphasized, with one notable success being the introduction

of stuffed-crust pizza at Pizza Hut.

After taking over leadership of PepsiCo, Enrico quickly faced major problems in the

overseas beverages operations, including big losses that were posted by its large Latin

American bottler and the defection of its Venezuelan partner to Coca-Cola. PepsiCo

ended up taking $576 million in special charges related to international writeoffs and

restructuring, and its international arm posted a huge operating loss of $846 million,

depressing 1996 profits. Among the moves initiated to turn around the international

beverage operations, which faced brutal competition from the entrenched and better

organized Coca-Cola, was to increase emphasis on emerging markets, such as India,

China, Eastern Europe, and Russia, where Coke had a less formidable presence, and

to rely less on bottling joint ventures and more on Pepsi- or franchise-owned bottling

operations.

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Another area of concern was the restaurant division, which had consistently been the

PepsiCo laggard in terms of performance. Enrico concluded that in order to revitalize

the beverage division and to take advantage of the surging Frito-Lay, which already

accounted for 43 percent of PepsiCo's operating profits, the restaurants had to go. Hot

'n Now and the casual dining chains were soon sold off, and in January 1997 PepsiCo

announced that it would spin off its three fast-food chains into a separate publicly

traded company. The spinoff was completed in October 1997 with the formation of

Tricon Global Restaurants, Inc., consisting of the Taco Bell, Pizza Hut, and KFC

chains. The exit from restaurants removed one obstacle facing Pepsi in its battle with

Coke: that most large fast-food chains had been reluctant to carry Pepsi beverages, not

wanting to support the parent of a major competitor. Consequently, Coke held a huge

market share advantage over Pepsi in the fast-food channel. Pepsi subsequently made

some inroads, for example, in 1999 sealing a ten-year deal with the 11,500-plus-outlet

Subway chain.

Enrico placed more emphasis, however, on building sales of Pepsi in its core

supermarket channel. In this regard, he launched an initiative called 'Power of One'

that aimed to take advantage of the synergies between Frito-Lay's salty snacks and the

beverages of Pepsi-Cola. This strategy involved persuading grocery retailers to move

soft drinks next to snacks, the pitch being that such a placement would increase

supermarket sales. In the process, PepsiCo would gain sales of both snacks and

beverages while Coca-Cola could only benefit in the latter area. Power of One

harkened back to the original rationale for the merger of Pepsi-Cola and Frito-Lay. At

the time, the head of Pepsi, Kendall, had told Frito-Lay's leader, Herman W. Lay:

'You make them thirsty, and I'll give them something to drink.' The promise of this

seemingly ideal marriage had never really been achieved, however, until the Power of

One campaign, which in 1999 helped increase Frito-Lay's market share by two

percentage points and boosted Pepsi's volume by 0.6 percent.

In the meantime, Enrico was active on a number of other fronts. The company in 1997

nationally launched the Aquafina bottled water brand, which quickly gained the

number one position in a fast-growing sector. In a move into the nonsalty snack

category, Frito-Lay acquired the venerable Cracker Jack brand that year, and

subsequently bolstered the brand through renewed advertising, a new four-ounce-bag

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package, the addition of more peanuts, the inclusion of better prizes, and the strength

of Frito-Lay's vast distribution network. In August 1998 PepsiCo opened up another

front in its ongoing war with Coca-Cola by acquiring juice-maker Tropicana Products,

Inc. from the Seagram Company, Ltd. for $3.3 billion in cash--the largest acquisition

in PepsiCo history. Coca-Cola had been the owner of Tropicana's arch-rival, Minute

Maid, since 1960, but Tropicana was the clear world juice leader, led by the flagship

Tropicana Pure Premium brand. Tropicana had a dominating 41 percent share of the

fast-growing chilled orange juice market in the United States. The brand was also

attractive for its growth potential; not only were sales of juice growing at a much

faster rate than the stagnating carbonated beverage sector, there was also great

potential for brand growth overseas. Psychologically, the acquisition also provided

PepsiCo with something it very much needed: it could boast of holding at least

dominant position over Coca-Cola.

In 1999 PepsiCo divested itself of another low-margin, capital-intensive business

when it spun off Pepsi Bottling Group, the largest Pepsi bottler in the world, to the

public in a $2.3 billion IPO. PepsiCo retained a 35 percent stake. PepsiCo was now

focused exclusively on the less capital-intensive businesses of beverages and snack

foods.

On the beverage side, Enrico, who had gained a reputation as a master marketer,

spearheaded a bolder advertising strategy for the flagship Pepsi brand. In 1999, Pepsi-

Cola was the exclusive global beverage partner for the movie blockbuster Star Wars,

Episode 1: The Phantom Menace. The company also revived the old 'Pepsi Challenge'

campaign of the 1970s with the new Pepsi One diet drink facing off against Diet

Coke. Pepsi's 'Joy of Cola' advertising campaign was gaining accolades and in 2000

captured renewed attention following the signing of a string of celebrities to

endorsement deals, including singer Faith Hill and baseball stars Sammy Sosa and

Ken Griffey, Jr. Pepsi also greatly increased the number of vending machines it had

planted around the United States, making a renewed push to gain on Coke in another

area where the arch-enemy had long dominated.

By the end of 1999, after three and one-half years at the helm, Enrico had clearly

turned PepsiCo into a stronger, much more focused, and better performing firm.

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Although revenues were more than one-third lower due to the divestments, earnings

were higher by more than $100 million. Operating margins had increased from ten

percent to 15 percent, while return on invested capital grew from 15 percent to 20

percent. Net debt had been slashed from $8 billion to $2 billion. During 1999, Steve

Reinemund was named president and COO of PepsiCo. Reinemund had headed up

Pizza Hut from 1986 to 1992 then was placed in charge of Frito-Lay. In the latter

position, he oversaw a division whose sales increased ten percent per year on average

and whose profits doubled. During his tenure, Frito-Lay's share of the U.S. salty snack

sector jumped from 40 to 60 percent.

Turning Acquisitive in the Early 21st Century

In October 2000 Enrico announced that he intended to vacate his position as CEO by

the end of 2001 and his position as chairman by year-end 2002. Reinemund was

named the heir apparent. Also that month, PepsiCo reached an agreement to acquire a

majority stake in South Beach Beverage Company, maker of the SoBe brand. Popular

with young consumers, the SoBe drink line featured herbal ingredients and was the

fastest growing brand in the burgeoning noncarbonated alternative beverage sector.

An even more tempting target soon attracted PepsiCo's attention: the powerhouse

Gatorade brand owned by the Quaker Oats Company. Gatorade held an astounding

83.6 percent of the U.S. retail market for sports drinks and was the world leader in

that segment with annual sales of about $2 billion. PepsiCo entered into talks with

Quaker about acquiring the company for about $14 billion in stock, but by early

November the two sides had failed to reach an agreement. Coca-Cola and Groupe

Danone quickly came forward to discuss acquiring Quaker. Coke came exceedingly

close to signing a $15.75 billion takeover agreement, but the company's board pulled

the plug on the deal at the last minute. Danone soon bowed out as well. At that point,

PepsiCo reentered the picture, and in early December the firm announced that it

agreed to acquire Quaker Oats for $13.4 billion in stock. This appeared to be quite a

coup for PepsiCo as it would not only bring on board the valuable Gatorade brand and

make PepsiCo the clear leader in the fast-growing noncarbonated beverage category,

it would also add Quaker's small but growing snack business, which included granola

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and other bars as well as rice cakes. Quaker's non-snack food brands--which included

the flagship Quaker oatmeal, Life and Cap'n Crunch cereals, Rice a Roni, and Aunt

Jemima syrup--did not fit as neatly into the PepsiCo portfolio but were highly

profitable and could eventually be divested if desired. In conjunction with the

acquisition announcement, Enrico said that upon completion of the merger, he and the

head of Quaker,

Robert S. Morrison, would become vice-chairmen of PepsiCo, Morrison would also

remain chairman, president, and CEO of Quaker, and Reinemund would become

chairman and CEO of PepsiCo, thereby accelerating the management transition. At

that same time, PepsiCo's CFO, Indra Nooyi, who was the highest ranking Indian-

born woman in corporate America, would become president and CFO. It seemed

likely that this new management team would take PepsiCo to new heights in the early

21st century and that the company would continue to be a more and more formidable

challenger to arch-rival Coca-Cola.

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KEY EXECUTIVES OF PEPSICO

PepsiCo is a company full of strong, talented individuals starting with the company

leadership. Get to know the inspiring people helping lead PepsiCo on its 'Performance

with Purpose' journey.

1.

Indra K. Nooyi

Chairman and CEO, PepsiCo

2.

John Compton

CEO, PepsiCo Americas Foods

3.

Massimo d'Amore

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CEO, PepsiCo Beverages Americas

4.

CEO, Pepsi Beverages Company

5.

Zein Abdalla

ChiefExecutiveOfficer,

PepsiCo Europe

6.

Saad Abdul-Latif

CEO, PepsiCo Asia, Middle East, Africa

1.

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Salman Amin

Executive Vice President Sales and Marketing, PepsiCo

2.

Jill Beraud

Chief Marketing Officer and President, Joint Ventures, PepsiCo Beverages

Americas

3.

Rich Beck

Senior Vice President, Global Supply Chain Operations, PepsiCo

4.

Neil Campbell

President, Tropicana Beverages North America

5.

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Albert P. Carey

President and Chief Executive Officer, Frito-Lay North America

6.

Timothy P. Cost

ExecutiveVicePresident,

Global Corporate Affairs, PepsiCo

7.

Pamela Culpepper

Senior Vice President, Global Diversity and Inclusion Officer, PepsiCo

8.

Robert Dixon

Senior Vice President and Chief Information Officer, PepsiCo

9.

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Richard Goodman

Executive Vice President, PepsiCo Global Operations

10.

Tom Greco

Executive Vice President and Chief Commercial Officer, Pepsi Beverages

Company

11.

Julie Hamp

Senior Vice President, Chief Communications Officer, PepsiCo

12.

Hugh F. Johnston

Chief Financial Officer, PepsiCo

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13.

Mehmood Khan

Chief Executive Officer, Global Nutrition Group and Chief Scientific Officer,

PepsiCo

14. Jaya Kumar

President, Global Nutrition Platforms, PepsiCo Global Nutrition Group

15.

Luis Montoya

President, Latin America Beverages, PepsiCo

16.

Tim Minges

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Chairman, PepsiCo China

17. Sarah Robb O’Hagan

Gatorade President North America and Global Chief Marketing Officer,

Sports Nutrition

18.

Pedro Padierna

President, PepsiCo Foods Mexico, Central America & Caribbean

19.

Jose Luis Prado

President, Quaker Foods and Snacks North America, PepsiCo

20.

Grace Puma

Senior Vice President and Chief Procurement Officer

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21.

Maura Abeln Smith

Executive Vice President, Government Affairs, General Counsel and

Corporate Secretary, PepsiCo

22.

Cynthia M. Trudell

Executive Vice President, Human Resources and Chief Personnel Officer,

PepsiCo

23. Olivier Weber

President, South America Foods

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PRODUCT MIX OF PEPSICO

Pepsi - Product

The Pepsi-Cola drink contains basic ingredients found in most other similar drinks including carbonated water, high fructose corn syrup, sugar, colorings, phosphoric acid, caffeine, citric acid and natural flavors. The caffeine free Pepsi-Cola contains the same ingredients but no caffeine.

Some of the different and varied brands of Pepsi are as follows:

1 . A l l S p o r t

2 . A q u a f i n a

3 . C a f f e i n e - F r e e P e p s i

4 . C r y s t a l P e p s i

5 . D i e t P e p s i

6 . G a t o r a d e

7 . I z z e

8 . J a z z

9 . J o s t a

1 0 . K a s

1 1 . M a n z a n i t a S o l

1 2 . M i r i n d a

1 3 . M o u n t a i n D e w

1 4 . M o u n t a i n D e w A M P

1 5 . M o u n t a i n D e w L i v e W i r e

1 6 . M o u n t a i n D e w M D X

1 7 . M u g R o o t B e e r

1 8 . P e p s i

1 9 . P e p s i B l u e

2 0 . P e p s i C a p p u c c i n o

2 1 . P e p s i M a x

2 2 . P e p s i O N E

2 3 . P e p s i S a m b a

2 4 . P e p s i T a r i k

2 5 . P e p s i T w i s t

2 6 . P r o p e l F i t n e s s W a t e r

2 7 . S i e r r a M i s t

2 8 . S l i c e

2 9 . S o B e

3 0 . S t o r m

3 1 . T e e m

3 2 . T r o p i c a n a P r o d u c t s

3 3 . T r o p i c a n a T w i s t e r

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82

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Pepsi

Pepsi version of dark cola which is the major

primary competitor to Coke.

A M P i s a n e n e r g y d r i n k p r o d u c e d a n d

d i s t r i b u t e d b y P e p s i C o u n d e r t h e

M o u n t a i n D e w s o f t d r i n k b r a n d .

M o u n t a i n D e w M D X i s a n e n e r g y

d r i n k m a n u f a c t u r e d a n d d i s t r i b u t e d b y

P e p s i C o u n d e r t h e M o u n t a i n D e w

b r a n d . I t w a s i n t r o d u c e d i n 2 0 0 5 .

G a t o r a d e i s a n o n - c a r b o n a t e d s p o r t s

d r i n k m a r k e t e d b y Q u a k e r O a t s

C o m p a n y , a d i v i s i o n o f P e p s i C o .

O r i g i n a l l y m a d e f o r a t h l e t e s , i t i s n o w

o f t e n c o n s u m e d a s a s n a c k b e v e r a g e .

7 Up is a brand of a lemon-lime flavored soft drink.

P e p s i C a p p u c c i n o i s a c a p p u c c i n o -

f l a v o r e d c a r b o n a t e d s o f t d r i n k

p r o d u c e d b y P e p s i c o .

S l i c e i s a l i n e o f f r u i t - f l a v o r e d s o f t

d r i n k s m a n u f a c t u r e d b y P e p s i C o a n d

i n t r o d u c e d i n 1 9 8 4 .

T e e m w a s a l e m o n - l i m e - f l a v o r e d s o f t

d r i n k p r o d u c e d b y T h e P e p s i - C o l a

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C o m p a n y .

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PRODUCT RANGE

COMPITETIORS

Principal Competitors:

Borden, Inc.;

Cadbury Schweppes plc;

Campbell Soup Company;

Chiquita Brands International, Inc.;

The Coca-Cola Company;

ConAgra Foods, Inc.;

Cott Corporation;

Groupe Danone;

General Mills, Inc.;

Golden Enterprises, Inc.;

Keebler Foods Company

; Kraft Foods, Inc.;

Nestlé S.A.;

Ocean Spray Cranberries, Inc.;

The Procter & Gamble Company.

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STP-STRATEGY

Market Segmentation

As we know that PepsiCo provides varieties of beverages such as carbonated soft drinks,

sport drinks, dairy-based drinks, energy drinks, fruit flavored beverages, ready-to-drink

coffees, ready-to-drink tea, mineral water and frozen beverage. These products are

marketed under brand as Pepsi, Mountain Dew, Gatorade, Lipton, Starbucks, Tropicana,

and so on. With these products, PepsiCo aims to attract different groups of consumers.

There are two levels in which Pepsi segments its market: •

Demographic

Niche marketing

Concentrated Marketing

Despite the large customer base in the Soft Drink industry, Pepsi prefers to segment itself

as the beverage choice of the “New Generation”, Generation Next, or just as the “Pepsi

Generation”. These terms adopted in Pepsi’s advertising campaigns are what marketers

refer to as Generation X, which are profiled to be between the ages of 18 to 29. In

addition, Pepsi shifted its focus to the growing American teenage market in the 1990s by

forming exclusive contracts with American schools and developing advertising

campaigns such as “The Next Generation” and the “Joy of Pepsi”, featuring Britney

Spears. Pepsi believes that if they can get this market to adopt their product, they could

establish a loyal customer in a long run.

Niche Marketing

Pepsi focused on varietal differentiation since 1990 by introducing a string of niche

products. To increase volume in order to counter flat coca sales, Pepsi introduced Sierra

Mist in 2002-2003 to take the place of 7-up and go head-to-head with Sprite. Pepsi has

also tried to boost volume by introducing products that appeal to specific target markets

that it currently is not reaching. Pepsi has introduced Code Red and Live Wire, extensions

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of Mountain Dew, Pepsi One, and Pepsi Blue. Finally, Pepsi is countering declining sales

of carbonated drinks through the marketing and distribution of Starbucks ready to drink

products, and the acquisition of SOBE and Gatorade. The success of Pepsi’s Mountain

Dew Code Red launched in 2001 was the most successful soft drink innovation in 20

years and has spurred even more niche product introductions for PepsiCo as well as other

competitors.

Bases of Segmentation:

Demographic

In focusing on the Pepsi-Cola beverage product, PepsiCo has retained a long history of

concentrating on youth as its main target market – “Generation Next!” It has spent

billions of dollars in trying to woo the young and nearly young, implying that Coca-Cola

is for the older generation. The reason why Pepsi-Cola has fiercely targeted this market is

because it is the largest amongst its users. Market segment profiles have shown that the

majority of carbonated beverage drinkers are youth and middle age people. Also, Pepsi

continually targets the college market in which they spend huge amounts of money to

compete with Coca Cola in acquiring contracts with universities (ie: CSUF) to have sold

representation of their product distribution. Pepsi’s use this behaviorist segmentation has

been a key to the company’s success.

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Market Targeting

Pepsi customers are mostly Teenagers and Young Adults between the ages of 14 to 30. It

also targets at Schools, Colleges, Universities, Homes, Restaurants, Hotels, and Stores.

Market Positioning

PepsiCo plans to further create positions that will give products the greatest advantage in

their target markets. Pepsi has been positioned based on the process of positioning by

direct comparison and have positioned their products to benefit their target marke

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Market positioning

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SWOT Analysis PepsiCo

Strengths

Branding - One of PepsiCo’s top brands is of course Pepsi, one of the most

recognized brands of the world, ranked according to Interbrand. As of 2008 it ranked

26th amongst top 100 global brands. Pepsi generates more than $15,000 million of

annual sales. Pepsi is joined in broad recognition by such PepsiCo brands as Diet

Pepsi, Gatorade Mountain Dew, Thirst Quencher, Lay’s Potato Chips, Lipton Teas

(PepsiCo/Unilever Partnership), Tropicana Beverages, Fritos Corn, Tostitos Tortilla

Chips, Doritos Tortilla Chips, Aquafina Bottled Water, Cheetos Cheese Flavored

Snacks, Quaker Foods and Snacks, Ruffles Potato Chips, Mirinda, Tostitos Tortilla

Chips, and Sierra Mist. The strength of these brands is evident in PepsiCo’s presence

in over 200 countries. The company has the largest market share in the US beverage

at 39%, and snack food market at 25%. Such brand dominance insures loyalty and

repetitive sales which contributes to over $15 million in annual sales for the company

Diversification - PepsiCo’s diversification is obvious in that the fact that each of its

top 18 brands generates annual sales of over $1,000 million. PepsiCo’s arsenal also

includes ready-to-drink teas, juice drinks, bottled water, as well as breakfast cereals,

cakes and cake mixes.This broad product base plus a multi-channel distribution

system serve to help insulate PepsiCo from shifting business climates.

Distribution - The company delivers its products directly from manufacturing plants

and warehouses to customer warehouses and retail stores. This is part of a three

pronged approach which also includes employees making direct store deliveries of

snacks and beverages and the use of third party distribution services.

Weaknesses

Overdependence on Wal-Mart - Sales to Wal-Mart represent approximately 12% of

PepsiCo’s total net revenue. Wal-Mart is PepsiCo’s largest customer. As a result

PepsiCo’s fortunes are influenced by the business strategy of Wal-Mart specifically

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its emphasis on private-label sales which produce a higher profit margin than national

brands. Wal-Mart’s low price themes put pressure on PepsiCo to hold down prices.

Overdependence on US Markets - Despite its international presence, 52% of its

revenues originate in the US. This concentration does leave PepsiCo somewhat

vulnerable to the impact of changing economic conditions, and labor strikes. Large

US customers could exploit PepsiCo’s lack of bargaining power and negatively

impact its revenues.

Low Productivity - In 2008 PepsiCo had approximately 198,000 employees. Its

revenue per employee was $219,439, which was lower that its competitors. This may

indicate comparatively low productivity on the part of PepsiCo employees.

Image Damage Due to Product Recall - Recently (2008) salmonella contamination

forced PepsiCo to pull Aunt Jemima pancake and waffle mix from retail shelves. This

followed incidents of exploding Diet Pepsi cans in 2007. Such occurrences damage

company image and reduce consumer confidence in PepsiCo products.

Opportunities

Broadening of Product Base - PepsiCo is seeking to address one of its potential

weaknesses; dependency on US markets by acquiring Russia’s leading Juice

Company, Lebedyansky, and V Wwater in the United Kingdom. It continues to

broaden its product base by introducing TrueNorth Nut Snacks and increasing its

Lipton Tea venture with Unilever. These recent initiatives will enable PepsiCo to

adjust to the changing lifestyles of its consumers.

International Expansion - PepsiCo is in the midst of making a $1, 000 million

investment in China, and a $500 million investment in India. Both initiatives are part

of its expansion into international markets and a lessening of its dependence on US

sales. In addition the company plans on major capital initiatives in Brazil and Mexico.

Growing Savory Snack and Bottled Water market in US - PepsiCo is positioned well

to capitalize on the growing bottle water market which is projected to be worth over

$24 million by 2012. Products such as Aquafina, and Propel are well established

products and in a position to ride the upward crest.PepsiCo products such as, Doritos

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tortilla chips, Cheetos cheese flavored snacks, Tostitos tortilla chips, Fritos corn

chips, Ruffles potato chips, Sun Chips multigrain snacks, Rold Gold pretzels, Santitas

are also benefiting from a growing savory snack market which is projected to grow as

much as 27% by 2013, representing an increase of $28 million.

Threats

Decline in Carbonated Drink Sales - Soft drink sales are projected to decline by as

much as 2.7% by 2012, down $ 63,459 million in value. PepsiCo is in the process of

diversification, but is likely to feel the impact of the projected decline.

Potential Negative Impact of Government Regulations - It is anticipated that

government initiatives related to environmental, health and safety may have the

potential to negatively impact PepsiCo. For example, manufacturing, marketing, and

distribution of food products may be altered as a result of state, federal or local

dictates. Preliminary studies on acrylamide seem to suggest that it may cause cancer

in laboratory animals when consumed in significant amounts. If the company has to

comply with a related regulation and add warning labels or place warnings in certain

locations where its products are sold, a negative impact may result for PepsiCo.

Intense Competition - The Coca-Cola Company is PepsiCo’s primary competitors.

But others include Nestlé, Groupe Danone and Kraft Foods. Intense competition may

influence pricing, advertising, sales promotion initiatives undertaken by PepsiCo.

Resently Coca-Cola passed PepsiCo in Juice sales.

Potential Disruption Due to Labor Unrest - Based upon recent history, PepsiCo may

be vulnerable to strikes and other labor disputes. In 2008 a strike in India shut down

production for nearly an entire month. This disrupted both manufacturing and

distribution.

Conclusion

Pepsi has been successful in generating profits in this extremely rivalrous industry. What

the company should do now is employ a strategy that now only addresses its own

deficiencies in an effort to grow market share, but one that will increase the overall size

of the pie. This strategy, in the end, will allow Pepsi to grow and sustain above-average

returns.

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Balance Sheet for PEPSICO INC. (PEP)

Assets [+] in Millions of Dollars

12/2010 12/2009 12/2008 12/2007 12/2006

Cash and Equivalents 5,943 3,943 2,064 910 1,651

Restrictable Cash - - - - -

Marketable Securities 426 192 213 1,571 1,171

Receivables 6,323 4,624 4,683 4,389 3,725

Inventories 3,372 2,618 2,522 2,290 1,926

Prepaid Expenses 1,505 1,194 1,324 991 657

Current Deferred Income Taxes - - - - -

Other Current Assets - - - - -

Total Current Assets 17,569 12,571 10,806 10,151 9,130

Gross Fixed Assets 33,041 24,912 22,552 21,896 19,058

Accumulated Depreciation(13,983) (12,241) (10,889) (10,668) (9,371)

Net Fixed Assets 19,058 12,671 11,663 11,228 9,687

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Intangibles 13,808 2,623 1,128 2,044 1,849

Cost in Excess 14,661 6,534 5,124 5,169 4,594

Non-Current Deferred Income Taxes - - - - -

Other Non-Current Assets 3,057 5,449 7,273 6,036 4,670

Total Non-Current Assets 50,584 27,277 25,188 24,477 20,800

Total Assets 68,153 39,848 35,994 34,628 29,930

Liabilities [+] in Millions of Dollars

12/2010 12/2009 12/2008 12/200712/2006

Accounts Payable 10,923 8,127 8,273 2,5622,102

Short Term Debt 4,898 464 369 - 274

Notes Payable - - - - -

Accrued Expenses - - - - -

Accrued Liabilities - - - 2,894 2,587

Deferred Revenues - - - - -

Current Deferred Income Taxes - - - - -

Other Current Liabilities71 165 145 2,297 1,897

Total Current Liabilities 15,892 8,756 8,787 7,753 6,860

Long Term Debt 19,999 7,400 7,858 4,203 2,550

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Deferred Income Tax 4,057 659 226 646 528

Other Non-Current Liabilities 6,620 5,487 6,541 4,792 4,624

Minority Interest 312 638 476 - -

Capital Lease Obligations- - - - -

Preferred Securities of Subsidiary Trust - - - -

Preferred Equity Outside Shareholders' Equity - - - (91) (79)

Total Non-Current Liabilities 30,988 14,184 15,101 9,550 7,623

Total Liabilities 46,880 22,940 23,888 17,30314,483

Preferred Shareholder's Equity 41 41 41 - -

Common Shareholder's Equity 21,232 16,867 12,065 17,32515,447

Total Equity 21,273 16,908 12,106 17,32515,447 Total Liabilities & Shareholder's Equity68,153 39,84835,994

34,628 29,930

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CHAPTER 3

COMPANY PROFILE

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3. NESTLE COMPANY

PROFILE OF THE COMPANY

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Nestlé with headquarters in Vevey, Switzerland was founded in 1866 by Henri

Nestlé and is today the world's biggest food and beverage company. Sales at the

end of 2004 were CHF 87 bn, with a net profit of CHF 6.7 bn. We employ around

247,000 people and have factories or operations in almost every country in the

world.

The Company's strategy is guided by several fundamental principles. Nestlé's

existing products grow through innovation and renovation while maintaining a

balance in geographic activities and product lines. Long-term potential is never

sacrificed for short-term performance. The Company's priority is to bring the best

and most relevant products to people, wherever they are, whatever their needs,

throughout their lives.

BACKGROUND

Nestle was promoted by Nestle Alimentana, Switzerland, a wholly owned subsidiary

of Nestle Holdings Ltd., Nassau, Bahama Islands. Nestle is one of the oldest food

MNC operating in India, with a presence of over a century. For a long time, Nestle

India’s operations were restricted to importing and trading of condensed milk and

infant food. Over the years, the Company expanded its

product range with new products in instant coffee, noodles, sauces, pickles, culinary

aids, chocolates and confectionery, dairy products and mineral water. Nestle was

incorporated as a limited company in 1959. In 1978, the Company issued shares to the

Indian public to reduce its foreign holdings to 40%. Its name was changed from Foods

Specialties Ltd. to the current name in 1981.The parent

held 51% stake in the company as at 2000 end. It has FIPB approval to hike stake by

10% and has been gradually acquiring shares from the open market. Parent stake in

the company as at 2001 end stood at 53.8%. The parent plans to continue hiking stake

through open market purchases. Nestle SA , the world’s leading food manufacturer

and the market leader in both coffee and mineral water, produces a wind range of

products including prepared dishes and cooking aids, milk-based products, cereals,

instant coffee, pharmaceuticals and baby foods. Nestle SA is a publicly owned

100

company, with subsidiaries across the world. It website addresses in 104 countries. It

is also the world largest food and beverage company with $71 billion in annual sales

and almost 230,000 employees around the world. It markets some 8000 brands that

include instant coffee.

Remarkably, its products are sold in every country in the world, including in North

Korea.

Nestle coat of arms, the bird’s nest, which refers to his name, has become a symbol

for the products being a safe care for their consumer product safety and quality.

Research and development based innovation capacity and strong brands are priority

for nestle Nestle India Ltd, 51% subsidiary of Nestle SA, is among the leading

branded food player in the country. It has a broad based presence in the foods sector

with leading market shares in instant coffee, infant foods, milk products and noodles.

It has also strengthened its presence in chocolates, confectioneries and other

semi processed food products during the last few years. The company has launched

Dairy Products like UHT Milk, Butter and Curd and also ventured into the mineral

water segment in 2001. Nestle’s leading brands include Cerelac, Nestum, Nescafe,

Maggie, Kitkat, Munch and Pure Life.

HISTORY OF NESTLE

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Nestlé began in Switzerland in the mid 1860s when founder Henri Nestlé created one

of the first baby formulas. Henri realized the need for a healthy and economical

product to serve as an alternative for mothers who could not breastfeed their babies.

Mothers who were unable to breastfeed often lost their infants to malnutrition. Henri’s

product was a carefully formulated mixture of cow’s milk, flour and sugar. Nestlé’s

first product was called Farine Lactée (“cornflour gruel” in French) Henri Nestlé. The

product was first used on a premature baby who could not tolerate his mother’s milk

or other alternative products of that time. Doctors gave up on treating the infant.

Miraculously the baby tolerated Henri’s new formula and it provided the nourishment

that saved his life. Within a few years the first Nestlé product was marketed in

Europe.

In 1874 the Nestlé Company was purchased by Jules Monnerat. Nestlé developed its

own condensed milk to contend with its competitor, the Anglo-Swiss Condensed Milk

Company. The Anglo-Swiss Condensed Milk Company made products like cheese

and instant formulas. The two companies merged in 1905, the year after Nestlé added

chocolate to its line of foods. The newly formed Nestlé and Anglo-Swiss Milk

Company had factories in the United States, Britain, Spain and Germany. Soon the

company was full-scale manufacturing in Australia with warehouses in Singapore,

Hong Kong and Bombay. Most production still took place in Europe.

The start of World War I made it difficult for Nestlé to buy raw ingredients and

distribute products. Fresh milk was scarce in Europe, and factories had to sell milk for

the public need instead of using it as an ingredient in foods. Nestlé purchased several

factories in the U.S. to keep up with the increasing demand for condensed milk and

dairy products via government contracts. The company’s production doubled by the

end of the war. When fresh milk became available again after the war, Nestlé suffered

and slipped into debt. The price of ingredients was increasing, the economy has

slowed and exchange rates deteriorated because of the war.

An expert banker helped Nestlé find ways to reduce its debt. By the 1920s Nestlé was

creating new chocolate and powdered beverage products. Adding to the product line

once again, Nestlé developed Nescafé in the 1930s and Nestea followed. Nescafé, a

soluble powder, revolutionized coffee drinking and became an instant hit.

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With the onset of the Second World War, profits plummeted. Switzerland was neutral

in the war and became increasingly isolated in Europe. Many of Nestlé’s executive

officers were transferred to offices in the U.S. Because of distribution problems in

Europe and Asia, Nestlé opened factories in developing countries in Latin America.

Production increased dramatically after America entered the war. Nescafé became a

main beverage for the American servicemen in Europe and Asia. Total sales increased

by $125 million from 1938 to 1945.

Nestlé continued to prosper, merging with Alimentana S.A., a company that

manufactured soups and seasonings, in 1947. In the coming years, Nestlé acquired

Crosse & Blackwell, Findus frozen foods, Libby’s fruit juices, and Stouffer’s frozen

foods. Nescafé instant coffee sales quadrupled from 1960 to 1974, and the new

technology of freeze-drying allowed the company to create a new kind of instant

coffee, which they named Taster’s Choice.

Expanding its product line outside of the food market, Nestlé became a major

stockholder in L’Oréal cosmetics in 1974. Soon after the company suffered with

increasing oil prices and the slowing growth in industrialized countries. Foreign

exchange rates decreased, in turn reducing the value of sterling, the pound, dollar and

franc. Prices of coffee beans and cocoa rose radically, presenting further problems for

Nestlé. The company decided to venture into the pharmaceutical industry by acquiring

Alcon Laboratories, Inc. While trying to deal with unstable economic conditions and

exploring its new ventures, Nestlé faced the crisis of an international boycott.

Many organized groups began boycotting all of Nestlé’s products because they

disapproved of Nestlé marketing its baby formula in developing countries. Problems

like illiteracy and poverty caused some mothers to use less formula than

recommended. In a watered down formula, vital nutrients are lessoned. Contaminated

water presented another problem, since the formulas had to be mixed with water. The

organizations argued that the misuse of formula resulted in the malnutrition or death

of many infants in developing countries.

According to Nestlé the World Health Organization never made statements tying

infant death or malnutrition with baby formulas. The company didn’t deny the

superiority of breastfeeding and agreed that substituting breast milk for other

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substances could be very dangerous. Nestlé explained that breastfeeding and non-

breastfeeding mothers in developing countries often gave their babies whole cow’s

milk, tea, cornstarch, rice water or a mix of flour and water. These alternatives were

very unhealthy and a nutritional baby formula was a better choice. Nestlé says that it

has never discouraged breastfeeding when it was possible. Nestlé agreed to follow the

International Code in developing countries in 1984, and the boycott was suspended. It

resumed several years later when the organizations believed Nestlé was sending free

or low cost baby formulas to developing countries. Nestlé said it only sent formula to

countries that allow donations for orphans, multiple births, and babies with no access

to breast milk. The company has stopped all public advertising for formula in

developing countries for almost 20 years. The boycott continues to some extent to this

day without satisfactory resolution.

By the 1980s Nestlé had a new Chief Executive Officer. The company focused on

improving its financial situation and continuing to expand. In the one of the largest

takeovers at that time, Nestlé bought Carnation for $3 billion and parted with any

unprofitable businesses. International trade barriers diminished in the 1990s, opening

trade with parts of Europe and China. In the 1990s Nestlé acquired San Pellegrino,

and Spillers Petfoods of the UK. With the acquisition of Ralston Purina in 2002, the

Nestlé-owned pet care businesses joined to form the industry leader Nestlé Purina

PetCare. The leading in the food industry, Nestlé brings in $81 billion in overall sales

and has 470 factories around the world. Nestlé will continue to grow, introduce new

products and renovate existing ones. The company’s mission is to focus on long-term

potential over short-term performance

KEY EXECUTIVES OF NESTLE

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Board Members

Name

(Connections)

Type of Board

MembersPrimary Company

William Stiritz -- Agribrands International, Inc.

Franklin Krum -- Nestle Purina PetCare Company

Richard Liddy -- MetLife, Inc.

Katherine Ortega -- The Kroger Co.

Ronald

Thompson --

Teachers Insurance and Annuity

Association College Retirement

Equities Fund

David Banks --Beverly Enterprises-Michigan,

Inc

John Biggs -- Boeing Co.

Donald Danforth

Jr.-- Nestle Purina PetCare Company

David Farrell -- Emerson Electric Co.

M. Ingram -- Ralcorp Holdings Inc.

John McDonnell -- Boeing Co.

Name Title

W. Patrick

McGinnis Chief Executive Officer, President and Director

James R.

Elsesser

Chief Financial Officer, Vice President and

Treasurer

Terence E. Block

President of Nestlé Purina Pet Food-North America

and Chief Operating Officer of North American Pet

Foods

Joseph R.

Sivewright

President of Nestle Purina PetCare-Latin America &

Caribbean

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Name Title

Robert C. Watt President - Golden Products Division and executive

officer

Luis Cantarell Executive Vice President

PRODUCT MIX

Product Line width

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Nestle product consist of 6 main aspect which is beverage, milk, prepared food, ice

cream, cereals and chocolates. There are varieties of each product lines for each type

of products. They also will upgrade their product lines through the changing of the

lifestyle form time to time.

Brands of Nestle

Kit Kat

Nescafe

Nestle Milo

Maggi

Nestle water

Nido

Nestle milk pack

Nestle cerelac

Friskies

Nestle yogurt

Nestle pudina raita

Nestle zeera raita

Nestle flavors cream

Nestle rice

Nestle frost

Polo

Breakfast cereals

Lactogen

Milkpack desi ghee

Coffee:

Nescafe, Gold Blend, Blend 37, Alta Rica, Cap Colombie, Cappuccino, Decaff, Fine Blend.

Dairy Products:

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Carnation, Chambourcy, Coffee-Mate, Fussells, Ideal, Milkmaid, Tip-Top, Bonjour, Chamby,

Crème Vienna, Darlky, Flanby, Fulcreem Custard, Hippopota, Jacky, Kremly, Le Grande,

Nouvelle, Robot.

Confectionery & Snacks: KitKat, Rowntree, Aero, After Eights, Lyons Maid Ice-Cream,

Polo, Smarties, Animal Bar, Baci Chocolate, Black Magic, Blue Riband, Breakaway, Cabana,

Caramac, Caramel Wafer, Cello, Creamola, Dairy Crunch, Drifter, Eclipse, Good News,

Festival, Fizzy Jerkz, Fruit Pastilles, Fox’s Glacier Mints, Henri Nestle Collection, Jellytots,

Karima, Lion bar, Matchmakers, Milky bar, Montego, Munchies, Novo, Quality Street, Rolo,

RPC, Savana, Secret, Toffee Crisp, Toffo, Tooty Frooties, Walnut Whip, Weekend, Willy

Wonka, Yorkie.

Seasonings:

British Shoyu, British Vinegars, Cook-in-the-Pot, Dufrais, Sarsons.

Mineral Water: Perrier, Ashbourne, Contrexeville, Buxton, Vittel, Vittelloise.

Other drinks:

Milo, Build-up, Caro, Elevenses, Flo-Mix, Libby’s juices, Mix-O-Choc, Moonshine, Nescore,

Nesfit, Nesquick, .

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Processed Meals:

Findus, Buitoni Pasta, Crosse & Blackwell, Maggi, Alphabetti, Bonne Cuisine, Dish-of-the-

Day, Eskimo, Four Seasons, Healthy Balance, Lean Cuisine, Pasta Choice, Rice & Things,

Scrunchies, Waistline.

Spreads & Pickles:

Branston Pickle, Gales Honey, Holgates Honey, Pan Yan, Sun-Pat, Tartex Vegetable Pate.

Cereals:

Shredded Wheat, Shreddies, Cheerios, Cinnamon Toast Crunch, Cocoa Puffs, Crisp Rice,

Energen Wheatflakes, Force, Golden Grahams, Honey Nut Cheerios, Lucky Charm, Team,

Roberston’s cornflakes, Sunny Jimj Wheatflakes.

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COMPITETIORS

Principal Competitors:

Borden, Inc.;

Cadbury Schweppes plc;

Campbell Soup Company;

Chiquita Brands International, Inc.;

The Coca-Cola Company;

ConAgra Foods, Inc.;

Cott Corporation;

Groupe Danone;

General Mills, Inc.;

Golden Enterprises, Inc.;

Keebler Foods Company

; Kraft Foods, Inc.

Ocean Spray Cranberries, Inc.;

The Procter & Gamble Company.

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STP STRATEGY

Segmented and Target Market

A market segment consists of a group of customers who share a similar set ofwants.

The marketer does not create the segments; the marketer’s task is to identify the

segments and decide which one (s) to target. Segment marketing offers several benefits over

mass marketing. The company can create a more fine-tuned product or service offering and

price it appropriately for the target segment. The company can more easily

select the best distribution and communications channels, and it will also have a clearer

picture of its competitors, which are the companies going after the same segment. Our market

segment is based on our observation; analysis as well as we is in Nestle shoes. The customers

can be classified according to the following variables:

1. Geographic Segmentation:

Regions: Commonly people prefer to drink Milo throughout the year. But Nestle can segment

the market on the basis of season. The consumption of cold Milo goes down during the rainy

season as people prefer to have hot Milo. In hotter regions the consumption pattern doesn’t

change much.

Cities: Consumption of Milo is more in the cities as compared to the villages due to various

factors such as income and education level. Nestle should focus more on making Milo

available in the every places where people are willing and able to buy.

2. Demographic Segmentation:

Age: Nestle can easily target various age groups. The most important of these groups are

children and old people. For children it can introduce Milo with additional nutritional

contents such as vitamins and minerals. For older people it already has clinical nutrition. It

just needs to get its product known among these people.

Gender : It will be very beneficial to target women as they usually shop for their family. If

they are convinced that the Milo will be good for their families, they will purchase.

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Income and occupation: People will buy Milo when they have enough monetary resources.

Nestle should target people in the higher income groups. People with blue collar jobs can be

targeted by telling them that the Milo will help them in their daily routine. Life cycle stage

can also be important because families with younger kids will want to buy nestle

3. Psychographic segmentation:

Social class and life style: People belonging to the higher social classes tend to spend more

on luxuries as compared to people in the lower classes. Such people can be easily targeted as

they are very health conscious. Nestle can urge these people to buy Milo which is rich in

nutrition.

Personality: People who are outdoorsy and are involved in sports can also be targeted by

tagging the brand with some sport celebrity.

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Product positioning

Having decided its corporate objectives and strategy, Nestlé can set marketing

objectives for each of its product, in this case an individual product which is Milo.

The primary objective for Milo is to maintain its position as the Malaysia’s number

one selling chocolate malt drink brand. In order to achieve this, Nestlé has to develop

a marketing strategy that will take into account all the elements of the marketing mix.

This will involve individual strategies for pricing, product development, promotion

and distribution. Since Nestle Milo is an established brand name, these strategies must

be flexible and relevant to each new generation of consumers, but at the same time,

great care must be taken not to damage the perceptions of the product built up over

decades of marketing. Having decided its corporate objectives and strategy, Nestlé

can set marketing objectives for each of its product, in this case an individual product

which is Milo. The primary objective for Nestle is to maintain its position as the

number one selling chocolate drink brand. In order to achieve this, Nestlé has to

develop a marketing strategy that will take into account all the elements of the

marketing mix. This will involve individual strategies for pricing, product

development, promotion and distribution. Since Nestle Milo is an established brand

name, these strategies must be flexible

and relevant to each new generation of consumers, but at the same time, great carem

must be taken not to damage the perceptions of the product built up over decades of

marketing.

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PEST Analysis

We are going to produce a PEST analysis to find out what external influences may be

affecting the Nestle product and to what extent to which customers decide to buy

them. The purpose of the PEST analysis is to analyze the organization (Nestle )

operates and to identify how it may influence marketing decisions. A PEST analysis

analyses the external environment in which an organization operates and identifies

how it should influence marketing decisions.

The initials P.E.S.T stand for:

Political

Economical

Strengths

Threats

Political Factors

The actions of governments can have major effects on business and markets,

including creating or reducing demand for particular products and services.

Economical Factors

Consumer spending may be controlled by a range of economic factors such as income

levels, inflation, taxes,

unemployment, exchange rates and mortgage rates.

Socia l Factors

Social trends are important because they have a direct influence on the demand for

particular types of product

.

Technological Factors

Development in technology gives rise to new products and market opportunities, e.g.

the rapid growing use of computerized reservations systems.

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Nestle SWOT Analysis

Nestle, headquarters in Switzerland, was founded by Henri Nestle in 1866. It is

renowned as the world’s leading nutrition and health based company. Nestle grows is

product line through innovation as well as renovation and maintains a balance on its

geo-environmental activities and product lines. They opt for long term performance

rather than short term goals. The Company prioritizes in bringing the most relevant

products to the consumers according to their needs that will prove valuable

throughout their life.

Strengths:

• Globally recognized as one of the largest and powerful food producers, covering

almost every country (factories and plants).

• Employs approximately 280,000 people globally.

• Powerful brand positioning in the consumers mind.

• It has a vastly diversified product portfolio containing approximately 6000 brands

(beverages, ice creams, frozen food items, chocolates and biscuits, pet care nutrition

items, etc.)

• It has established joint ventures with giants like Coca Cola, General Mills and

L’Oreal that are helpful in providing knowledge on different technological aspects.

• Consistently ranked as largest bottled water corporation that operates in an

environmental friendly manner.

• Top 50 list of Fortune’s ‘America’s Most Admired Food Companies’, and ranked on

top on Consumer Food Products.

• Strong internal growth and emphasis on innovation internally.

• Strong cultural environment, that acts as a loyalty carrier for the employees.

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• Nestle has taken a visionary step as being one of the many companies that represent

and encourage globalization that has also become an identity for its logo.

• Quality is a vital element regarding nestle products.

• Largest consumer products organization that operates globally.

• It also sells professional brands to different customers such as colleges, hotels,

restaurants etc.

• Powerful marketer, and never seizes any opportunity to embed the brand image in

the mind of the consumer. The quality of the Nestle products embeds an element of

trust in the mind of the consumer that makes Nestle one of the powerful brands to be

followed.

• Produces low cost products that give them an edge to their competitors. It also has

low operating costs.

• Globally, biggest ice-cream producer, having a market share of approximately

17.5% (2006).

• The name Nestle also visualizes the high standard and quality of the product.

• Customer base loyalty for Nestle is very vast and powerful.

• The decentralized culture in the organization encourages employees.

• It has a dynamic and innovative approach when it comes to new trends regarding the

technology.

Weaknesses:

• Hovering over the stats of 2008, the food industry grew 8.9% but Nestle lacked the

potential to raise their sales in the organic food division that lay flat.

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• Regulators like FDA and AMA (American Medical Association) are pressing on the

firm for removing tags that hold no ground such as ‘low cholesterol’ or ‘heart

healthy’. Parents have also reported diabetic epidemic due to the consumption of such

goods, in children especially. Promoting infant milk products comparing to

breastfeeding. Slaves in African countries that are working under it. It holds up a

negative effect regarding the whole brand.

• Retailers do not get to set high margins to indulge more in sales.

• Logistics cost is quite high.

• Many products are not understandable in different countries. It did not make much

of an impact in France with their LC-1 (food commodity).

• Coordination between country specific plants with the Center, due to which some

plants are running exceptionally smooth while operations in other countries lack

effectiveness.

• Transportation as well as storage (proper warehousing) problems.

• Supply Chain having a complex stature (India plant transitional traceability).

• The immense diversification portfolio of the firm makes it impossible to run every

division smoothly.

• Russia being an unstable market for Nestle which cuts a big chunk from Nestle’s

bite.

• It is also perceived that Nestle puts profit first.

Opportunities:

• Due to the high intensity of the health conscious awareness in the society, more

health based products are required especially with incompromisable quality.

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• Can go into the anti-allergy products that are very common, such as peanut free or

gluten free products.

• They can also invest in snacks that would further diversify its product portfolio.

• Provide incentives to the retailers to increase sales volume.

• Open cafes that would exclusively provide Nestle products.

• LC-1 having the opportunity of having a greater impact in Germany (2 years had

them go for 60% of the market share), and being the established market leader, they

can establish more brands in the market.

• Middle class share in most of the economies are growing much larger.

• Nestle India may hold the position of being the export hub due to the low cost of

labour comparatively to developed countries.

• In Asian countries like India, Pakistan, Bangladesh; consumers are mostly price

conscious rather than health conscious. Nestle has an opportunity to have extensive

strategies implemented to gain the market in such countries.

• Developing countries have a higher rate of GDP than those of developing countries,

Nestle should enter in such markets as well.

• Recession has created such an impact that the market is struggling and has almost

got out of that recession that will surely increase the cycle of cash flow which will be

profitable for Nestle to cash in on such a time.

Threats:

• Contamination of products should be regarded strictly (Cookie Dough, March 2009).

• The company has a not so pretty history with the FDA. Pet Food contamination

2007 (imported from China, the vegetables contained rat poison).

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• Inflation rise is giving birth to high prices. Raw chocolate prices are jumping, along

with the Dairy costs; which leaves heavy cuts in the margin in order to make the

customers brand loyal. They have also shrink the packaging which is not really

noticeable, so the customers are paying the same amount for a lesser product.

• Competitors like Cadbury Schweppes, Hershey’s, Quaker, Heinz, Del Monte,

Kellogg’s, and Kraft Foods are also well established. It’s a tough market with a

tougher competition for gaining market share.

• Market is quite mature and the competitors specialize in a certain product that can

hit hard on Nestle. (Yogurt Market US: General Mills)

• In the Indian market, fresh food is preferred than ready-to-eat meals.

• In still developing countries as well as underdeveloped countries, Nestle will face a

large competition in market both domestic and unorganized sectors.

• Poverty sector in developing countries is also a lacking that must be watched over

for.

• Malnutrition and obesity are yet another burden faced by the developing countries.

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FINANCIAL ANALYSIS

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CHAPTER 4

COMPANY PROFILE

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Cadbury Schweppes plc:

Company Profile

This company profile offers a comprehensive analysis of the organization, its business

segments, and competitors. It analyzes the business and marketing strategies adopted

by the company, to gain a competitive edge in the industry. The profile also evaluates

the strengths of the company and the opportunities present in the market. This profile

is of immense help to management consultants, analysts, market research

organizations and corporate advisors.

Company Analysis-It involves analysis of the company at three levels – segments,

organizational structure and ownership composition. Both business and geographic

segments are analyzed alongwith their recent financial performance. It further

discusses the major subsidiaries of the company and the recent merger & acquisitions.

Business Developments-This section examines the significant developments that have

taken place in the company. It is a form of news analysis where the most critical

company news is discussed.Cadbury plc is a British confectionery company, the industry's

second-largest globally after the combined Mars-Wrigley. Headquartered in Cadbury House

in the Uxbridge Business Park in Uxbridge, London Borough of Hillingdon, England and

formerly listed on the London Stock Exchange, Cadbury was controversially acquired by Kraft

Foods in February 2010. After integration the combined Cadbury and Kraft companies

became the largest confectionery company in the world. The company was a constant

constituent of the FTSE 100 from the index's 1984 inception until its 2010 takeover.

Dr Pepper Snapple Group

Dr Pepper Snapple Group Inc. (formerly Cadbury Schweppes Americas

Beverages) is an American soft drink company, based in Plano, Texas.It was spun off

from Britain's Cadbury Schweppes, on May 5, 2008, with trading in its shares starting

on May 7, 2008. Cadbury Schweppes plc became Cadbury plc on May 5, 2008

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EARLY HISTORY

In 1824, John Cadbury began selling tea, coffee, and drinking chocolate, which he

produced himself, at Bull Street in Birmingham, England. John Cadbury later moved

into the production of a variety of Cocoas and Drinking Chocolates being

manufactured from a factory in Bridge Street, supplying mainly to the wealthy due to

the high cost of manufacture at this time. During this time a partnership was struck

between John Cadbury and his brother Benjamin. At this time the company was

known as 'Cadbury Brothers of Birmingham'.

The two brothers opened an office in London and in 1854 received the Royal Warrant

as manufacturers of chocolate and cocoa to Queen Victoria. Around this time in the

1850s the industry received a much needed boost with the reduction in high import

taxes on cocoa; this allowed chocolate to become more affordable to everyone.

Due to the popularity of a new expanded product line, including the very popular

Cadbury's Cocoa Essence, the company's success led to the decision in 1873 to cease

the trading of tea. Around this time, master confectioner Frederic Kinchelman was

appointed to share his recipe and production secrets with Cadbury, which led to an

assortment of various chocolate covered items.

Having taken over the business in 1861, John Cadbury's sons Richard and George

decided in 1878 that they needed to find new premises. Requiring better transport

access for milk that was inward shipped by canal, and cocoa that was brought in by

rail from London, Southampton and Liverpool docks, the Cadburys started looking

for a new greenfield site. Noticing the development of the Birmingham West

Suburban Railway south along the path of the Worcester and Birmingham Canal, in

1878 they acquired the Bournbrook estate, comprising 14.5 acres (5.9 ha) of

countryside 5 miles (8.0 km) south of the outskirts of Birmingham. Located right next

to the new Stirchley Road railway station, itself directly opposite the canal, they

renamed the Bournbrook estate to Bournville and opened the Bournville factory in

1879.

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In 1893, George Cadbury bought 120 acres (49 ha) of land close to the works and

planned, at his own expense, a model village which would 'alleviate the evils of

modern more cramped living conditions'. By 1900 the estate included 313 cottages

and houses set on 330 acres (130 ha) of land. As the Cadbury family were Quakers

there were no pubs in the estate; in fact, it was their Quaker beliefs that first led them

to sell tea, coffee and cocoa as alternatives to alcohol.

1900 to 1950

In 1905, Cadbury's launched its Dairy Milk bar, with a higher proportion of milk than

previous chocolate bars, and it became the company's best selling product by 1913.

Fruit and Nut was introduced as part of the Dairy Milk line in 1928, soon followed by

Whole Nut in 1933. By this point, Cadbury's was the brand leader in the United

Kingdom. These were accompanied by several other products: Flake (1920), Cream-

filled eggs (1923), Crunchie (1929) and Roses (1938).[9] Cadbury's Milk Tray was

first produced in 1915 and continued in production throughout the remainder of the

First World War. More than 2,000 of Cadbury's male employees joined the Armed

Forces and to support the war effort, Cadbury provided clothing, books and chocolate

to soldiers. After the war, the Bournville factory was redeveloped and mass

production began in earnest. In 1918, Cadbury opened their first overseas factory in

Hobart, Tasmania and in 1919 undertook a merger with J. S. Fry & Sons, another

chocolate manufacturer, resulting in the integration of well-known brands such as

Fry's Chocolate Cream and Fry's Turkish Delight.[6] During World War II, parts of the

Bournville factory were turned over to war work, producing milling machines and

seats for fighter aircraft. Workers ploughed football fields to plant crops. As chocolate

was regarded as an essential food, it was placed under government supervision for the

entire war. The wartime rationing of chocolate ended in 1949, and normal production

resumed. Cadbury subsequently built new factories and had an increasing demand for

their products.

Merger with Schweppes

The Cadbury Schweppes logo used until the demerger in 2008

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Cadbury merged with drinks company Schweppes to form Cadbury Schweppes in

1969.

Cadbury Schweppes went on to acquire Sunkist, Canada Dry, Typhoo Tea and more.

In the US, Schweppes Beverages was created and the manufacture of Cadbury

confectionery brands were licensed to Hershey's.

Snapple, Mistic and Stewart's (formerly Cable Car Beverage) were sold by Triarc to

Cadbury Schweppes in 2000 for $1.45 billion. In October of that same year, Cadbury

Schweppes purchased Royal Crown from Triarc.

Demerger

In March 2007, it was revealed that Cadbury Schweppes was planning to split its

business into two separate entities: one focusing on its main chocolate and

confectionery market; the other on its US drinks business. The demerger took effect

on 2 May 2008, with the drinks business becoming Dr. Pepper Snapple Group Inc. In

December 2008 it was announced that Cadbury was to sell its Australian beverage

unit to Asahi Breweries.

Recent developments

In October 2007, Cadbury announced the closure of the Somerdale Factory,

Keynsham, formerly part of Fry's. Between 500 and 700 jobs were affected by this

change. Production transferred to other plants in England and Poland.

In 2008 Monkhill Confectionery, the Own Label trading division of Cadbury Trebor

Bassett was sold to Tangerine Confectionery for £58million cash. This sale included

factories at Pontefract, Cleckheaton and York and a distribution centre near

Chesterfield, and the transfer of around 800 employees.

In mid-2009 Cadbury replaced some of the cocoa butter in their non-UK chocolate

products with palm oil. Despite stating this was a response to consumer demand to

improve taste and texture, there was no "new improved recipe" claim placed on New

Zealand labels. Consumer backlash was significant from environmentalists and

chocolate lovers. By August 2009, the company announced that it was reverting to the

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use of cocoa butter in New Zealand. In addition, they would source cocoa beans

through Fair Trade channels. In January 2010 prospective buyer Kraft pledged to

honour Cadbury's commitment.

Kraft Foods takeover

On 7 September 2009 Kraft Foods made a £10.2 billion (US$16.2 billion) indicative

takeover bid for Cadbury. The offer was rejected, with Cadbury stating that it

undervalued the company. Kraft launched a formal, hostile bid for Cadbury valuing

the firm at £9.8 billion on 9 November 2009. Business Secretary Peter Mandelson

warned Kraft not to try to "make a quick buck" from the acquisition of Cadbury. On

19 January 2010, it was announced that Cadbury and Kraft Foods had reached a deal

and that Kraft would purchase Cadbury for £8.40 per share, valuing Cadbury at

£11.5bn (US$18.9bn). Kraft, which issued a statement stating that the deal will create

a "global confectionery leader", had to borrow £7 billion (US$11.5bn) in order to

finance the takeover.

The Hershey Company, based in Pennsylvania, manufactures and distributes

Cadbury-branded chocolate (but not its other confectionery) in the United States and

has been reported to share Cadbury's "ethos". Hershey had expressed an interest in

buying Cadbury because it would broaden its access to faster-growing international

markets. But on 22 January 2010, Hershey announced that it would not counter

Kraft's final offer.

The acquisition of Cadbury faced widespread disapproval from the British public, as

well as groups and organisations including trade union Unite, who fought against the

acquisition of the company which, according to Prime Minister Gordon Brown, was

very important to the British economy. Unite estimated that a takeover by Kraft could

put 30,000 jobs "at risk", and UK shareholders protested over the Mergers and

Acquisitions advisory fees charged by banks. Cadbury's M&A advisers were UBS,

Goldman Sachs and Morgan Stanley. Controversially, RBS, a bank 84% owned by

the United Kingdom Government, funded the Kraft takeover.

On 2 February 2010, Kraft secured over 71% of Cadbury's shares thus finalising the

deal. Kraft had needed to reach 75% of the shares in order to be able to delist Cadbury

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from the stock market and fully integrate it as part of Kraft. This was achieved on 5

February 2010, and the company announced that Cadbury shares would be de-listed

on 8 March 2010.

On 3 February 2010, the Chairman Roger Carr, chief executive Todd Stitzer and chief

financial officer Andrew Bonfield all announced their resignations. Stitzer had

worked at the company for 27 years.

On 9 February 2010, Kraft announced that they were planning to close the Somerdale

Factory, Keynsham, with the loss of 400 jobs. The management explained that

existing plans to move production to Poland were too advanced to be realistically

reversed, though assurances had been given regarding sustaining the plant. Staff at

Keynsham criticised this move, suggesting that they felt betrayed and as if they have

been "sacked twice". On 22 April 2010, Phil Rumbol, the man behind the famous

Gorilla advertisement, announced his plans to leave the Cadbury company in July

following Kraft's takeover.

In June 2010 the Polish division, Cadbury-Wedel, was sold to Lotte of Japan. The

European Commission made the sale a condition of the Kraft takeover. As part of the

deal Kraft will keep the Cadbury, Hall's and other brands along with two plants in

Skarbimierz. Lotte will take over the plant in Warsaw along with the E Wedel brand.

The firm was known as "Cadbury Schweppes plc" from 1969 until a May 2008

demerger, in which its global confectionery business was separated from its U.S.

beverage unit, which has been renamed Dr Pepper Snapple Group. Type Subsidiary of

Kraft Foods Industry Confectionery Founded 1824 Headquarters Uxbridge, London,

United Kingdom Products See list of Cadbury products Revenue GB£5,384 million

(2008) Operating income GB£388 million (2008) Net income GB£364 million (2008)

Employees 71,657 (2008) Parent Kraft Foods Website Cadbury.co.uk

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KEY EXECUTIVES

Cadbury India Ltd

Board Of Directors

Chairman C Y Pal

Managing Director Anand Kripalu

Harsh Mariwala

Radhakrishnan Meno

Director Suresh Talwar

Atul Bhatia

V Chandramouli

Director (Finance & Commer.) Rajesh Garg

Director Jaiboy Phillips

Executive Director Rajesh Ramanathan

Sunil Sethi

NarayanSundararaman

Company Secretary

Barkha Bordia

Chairman: Wayne R.

Sanders

President, CEO, and Director: Larry D. Young

EVP and CFO: Martin M. (Marty) Ellen

131

PRODUCT MIX

Cool Ridge Spring Water (Australia)

Coolah Energy

Country Time

Cream Soda (Hong Kong, Macau, South Africa)

Crush

Deja Blue

Diet RC Cola--sold in a few markets, this is a completely separate line from

Diet Rite, in that it is more related to RC Cola in taste.

Diet Rite

dnL

Dr Pepper

Ginger ale

Gini'

Grapefruit Soda (Hong Kong)

Granadilla Twist (South Africa)

Hawaiian Punch

Hires Root Beer

IBC Root Beer

Lemon Twist; mineral water and mineral soft drink in Mexico

Quinine Tonic water

Raging Cow

Red Fusion (discontinued)

R.C. Cola

Ricql 竪 s

Russchian

Schweppes

132

Slush Puppie

Snapple

Solo

Sparberry (South Africa)

Squirt

Stewart's Soda

Sundrop

Sunkist

Tahiti Treat

TriNa, soft drinks and ice-teas in Spain

Vernor's ? ginger ale

Welch's

Wink

Yoo-Hoo

Other products

Bournville Cocoa

Drinking Chocolate powder

See also Cadbury Adams products: this subsidiary produces several brands of

gum, breath mints, and cough drops.

Dr Pepper/Seven Up

Nantucket Nectars

133

COMPETITORS

Principal Competitors:

The Coca-Cola Company (U.S.A.)

Mars, Incorporated (U.S.A.)

PepsiCo, Inc. (U.S.A.)

Hansen Natural Corporation (hans)

Kraft Foods, Inc.;

Nestlé S.A.;

Ocean Spray Cranberries, Inc.;

The Procter & Gamble Company.

134

STP STRATEGY

Product Segmentation Strategy:

A mass market product targets the entire world as one segment.

A market segmentation strategy is a method of creating products specifically for

target markets. Product segmentation strategy refers to the design of the product itself.

A company performs a product differentiation strategy to distinguish a product in one

market segment from competitors' products, as well as its own products available in

other market segments. According to the University of North Carolina, product

differentiation includes emphasizing product differences as well as designing product

differences.

Mass Market

A mass market strategy is one type of product segmentation strategy. Soft drinks,

such as Coca Cola, Pepsi and Dr. Pepper, are sold to a global market. There is no

difference between the soda cans and bottles available in different geographic

locations, or very little. The benefit of this strategy is that the company receives great

135

economy of scale advantages since its factories are manufacturing the same product

with the same materials.

Large Segment

Large segment strategies are slightly more specific. These require a significant

investment to compete successfully in every available market at the same time. A

company can specialize in making one type of product, such as compact cars, sedans,

motorcycles or trucks. This can also allow a company to eliminate an unprofitable

segment or target the segment where it has the greatest advantage.

Adjacent Segment

An adjacent segmentation strategy allows the company to consistently grow its

market. Toyota initially targeted subcompact cars as these vehicles are small and

cheaper to make. Using an adjacent segmentation strategy, Toyota could then switch

to a slightly larger car, such as a station wagon. Following the example, it is easier for

Toyota to make products that are slightly different rather than making subcompacts

then picking large luxury sedans as its second expansion market.

Multi-segment

A multi-segment strategy applies when a company targets more than one segment. A

manufacturer, such as Dow Chemical, can make many brands of detergent, changing

the concentration and ingredients for each specific market. The company runs a

separate advertising campaign for each product, and customers may not even know

that products in different sectors are made by the same company. Some companies

intentionally use this method to protect the reputation of their higher end brands.

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Niche

Niche marketing is another strategy. According to the City University of New York,

this is one of the most effective methods for a smaller firm, such as Snapple, to

compete with larger competitors, such as Coca Cola. The niche contains a small

fraction of the market although a niche where the company can sell high end products

compensates for this factor. Sub Zero refrigerators have 70 percent of the high end

market even though they only have 2 percent of the overall refrigerator market,

according to Duke University.

STP Of Cadbury

The STP strategy:

In Indian markets, Cadbury India has managed its markets very well and is constantly

improvising on the product offerings to different market segments.

First step in the STP strategy would be to see how product is perceived in the markets.

it clearly shows how Cadbury is successfully eliminating the doubts and myths of

eating chocolates. A history about chocolates and related information about the

product is also presented in the website.

Next step will be segmenting the markets based on the gender, income, zones or

areas, consumer attitude and buying process and any other basis that is feasible in the

chocolate market. After the segments are recognized, provide such product offerings

to these markets that benefit the consumer groups as well as helps to frame and design

the marketing strategies.

Cadbury‟s product offerings are mostly based on the production capacity, pricing of

the various packs, packaging designs, storage facilities at the outlets, occasional and

situational demands, celebrity endorsements and many other factors.

Targeting the market segments, will be considered as the next important step. Unless

markets are targeted with the product offerings, very few will buy the product.

Therefore, Cadbury India has distinguished its product offerings to specific class of

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consumer groups. For example, Cadbury Temptations and Bourneville are meant for

higher end consumer groups who are willing to pay more for the dark chocolates.

More recently, Cadbury has introduced SILK as a product offering and targets anyone

who can‟t resist chocolate. Cadbury SILK is only another product item in the CDM

product line.The immediate step that would follow Targeting is Positioning the

product offerings in the minds of

consumers. After the Worm Controversy in October 2003, Cadbury faced lot of

consumer grievances, enquiries, questions were raised on production quality,

packaging, storage and even resulted into low sales with a halt in the production.

However, Cadbury slowly emerged victorious and overcame the Worm issue by

proving to be more committed towards consumers. The Management invested time,

energy and money into packaging process, technology and even distribution. The

company website even displays a false rumour alert to notify people about any

wrongly given publicity or unreliable news. Consumer Service cell is also in place for

consumer to address their queries, experiences and doubts over the products. Several

ad campaigns were lined up consisting of many wonderful themes and taglines.

Amitabh Bachchan undoubtedly raised the consumer's confidence and their chocolate

eating habits. Some of the successful promotional methods are as below:

Sponsoring the Quiz contests such as Bournvita Quiz contests hosted by Derek

O‟Brien and Bournvita Confidence Academy shows.

Advertising with themes such as “Kuchh Khaas Hai,” “Pappu Pass Ho Gaya,”

“Meetha Hai Khana, Aaj Pehli tarik hai,” “ARREY” ad for Five Star Crunchy, “Pet

Puja” ad for Perk, and Boonville's classic ad, Colourful Pandas for Gems ads and

many others on the list.

Offering several variants in the existing product lines such as Silk, Fruit & Nuts in

Dairy Milk and Five Star, Fruity Gems in Gems, Glucose energy Perk; Bournvita

little champs for children and such other versions in the products Launching new

product ranges such as Bubbaloo bubble gum. Offering festival packs for Diwali,

Raksha Bandhan and other special occasions; Offering different packs at different

prices for different purchase situations and distributing them evenly. Constantly

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assuring consumers about the quality aspects in the products and anything associated

with it.

Cadbury Company with its effective marketing and an accurate STP strategy has ruled

over consumer's taste buds and as for the company, it was always A Sweet Success

Story that continues.

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SWOT ANALYSIS

Strengths:

Strong brand names like Cadbury Dairy Milk, Five star and Eclairs.

Rich product mix.

Support from the parent Cadbury Schweppes.

Weaknesses:

Lack of launch of new brands in Chocolates segment

.

Opportunities:

The Indian market and more specifically the urban areas where the penetration of Chocolates

is low can be developed as a future market through affordability and availability.

Using information and technology to bring efficiency in logistics and distribution.

Threats:

Stiff competition in Confectionery segment.

The company has large exposure to foreign currency exchange rate risk, mainly on account

of imported cocoa beans and cocoa butter in US Dollar and Pound Sterling.

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Dr Pepper Snapple Group Inc. (formerly Cadbury Schweppes Americas Beverages) is

an American soft drink company, which was spun off from Britain's Cadbury

Schweppes, on May 5, 2008, with trading in its shares starting on May 7, 2008.

Cadbury Schweppes plc became Cadbury plc on May 5, 2008.

Strengths

Lack of capital constraints (availability of large free cash flow)

Strong market position

Solid brand portfolio

Strong revenue growth

Economies of scale

Broader product line

Popular brand of p0p

Weaknesses

Concentrated in North America (US, Canada, Mexico), where almost 70% of

revenues come from

Health Craze will hurt soft drink sales

Opportunities

Acquisitions & alliances

Bottled water growth

Hispanic growth in the US and Pepsi's ability to meet their tastes with current product

lines (i.e., Sabritas chips)

Growth in emerging markets

Growing consumer health consciousness will help Pepsi as it is already a leader in

non-carbonated drinks with brands Gatorade, Aquafina, Lipton; and also with healthy

food brands such as Quaker oats.

141

Threats

Declining economy/recession

Sluggish growth of carbonated drinks

Coca-Cola & other smaller, more nimble operators

Commodity price increases, fluctuating oil prices effect production and distribution

(gas, plastic)

142

FINANCIAL ANALYS

BALANCE SHEET

Dr Pepper Snapple Group, Inc. Income

Statement 10-Dec 9-Dec 8-Dec

Revenue 5,636.00 5,531.00 5,710.00

Cost of Goods Sold 2,243.00 2,234.00 2,590.00

Gross Profit 3,393.00 3,297.00 3,120.00

Gross Profit Margin 60.20% 59.60% 54.60%

SG&A Expense 2,233.00 2,135.00 2,075.00

Depreciation & Amortization 127 117 113

Operating Income 1,025.00 1,085.00 -168

Operating Margin 18.20% 19.60% -2.90%

Nonoperating Income -79 22

-

1,023.00

Nonoperating Expenses -125 -239 --

Income Before Taxes 821 868 -375

Income Taxes 294 315 -61

Net Income After Taxes 527 553 -314

Continuing Operations 528 555 -312

Discontinued Operations -- -- --

Total Operations 528 555 -312

Total Net Income 528 555 -312

Net Profit Margin 9.40% 10% -5.50%

Diluted EPS from Total Net Income 2.17 2.17 -1.23

Dividends per Share 0.9 -- --

All amounts in millions of US Dollars except per share amounts.

Dr Pepper Snapple Group, Inc. Balance

SheetAssets 10-Dec 9-Dec 8-Dec

Current Assets

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Cash 315 280 214

Net Receivables 571 572 583

Inventories 244 262 263

Other Current Assets 179 165 177

Total Current Assets 1,309.00 1,279.00 1,237.00

Net Fixed Assets 1,168.00 1,109.00 990

Other Noncurrent Assets 6,382.00 6,388.00 6,411.00

Total Assets 8,859.00 8,776.00 8,638.00

Liabilities 10-Dec 9-Dec 8-Dec

Current Liabilities

Accounts Payable -- 252 234

Short-Term Debt 404 -- 5

Other Current Liabilities 934 602 562

Total Current Liabilities 1,338.00 854 801

Long-Term Debt 1,687.00 2,960.00 3,522.00

Other Noncurrent Liabilities 3,375.00 1,775.00 1,708.00

Total Liabilities 6,400.00 5,589.00 6,031.00

Shareholder's Equity

Preferred Stock Equity 0 0 --

Common Stock Equity 2,459.00 3,187.00 2,607.00

Total Equity 2,459.00 3,187.00 2,607.00

Shares Outstanding (thou.)

#######

#

#######

#

#######

#

All amounts in millions of US Dollars except per share amount

144

CHAPTER 5

COMPANY PROFILE

NATIONAL BEVEARAGES

145

COMPANY PROFILE:

O V E R V I E W

National Beverage Corp. develops, manufactures, markets and distributes a complete

portfolio of quality beverage products throughout the United States. Incorporated in

Delaware in 1985,

National Beverage Corp. is a holding company for various operating subsidiaries.

When used in this report, the terms “we, “us,” “our,” “Company” and “National

Beverage” mean National Beverage Corp. and its subsidiaries. Our lines of multi-

flavored soft drinks, including those of our flagship brands, Shasta® and Faygo®,

emphasize distinctive flavor variety. In addition, we offer an assortment of premium

beverages geared to the health-conscious consumer, including Everfresh®, Home

Juice®, and Mr. Pure® 100% juice and juice-based products; and LaCroix®, Mt.

Shasta™, Crystal Bay® and ClearFruit® flavored

and spring water products. We also produce specialty products, including Rip It™, an

energy drink geared toward young consumers, Ohana® fruit-flavored drinks and St.

Nick’s® holiday soft drinks.

Substantially all of our brands are produced in 14 manufacturing facilities that are

strategically located in major metropolitan markets throughout the continental United

States. To a lesser extent,

we develop and produce soft drinks for retail grocery chains, warehouse clubs, mass-

merchandisers and wholesalers (“allied brands”) as well as soft drinks for other

beverage companies.

Our strategy emphasizes the growth of our products by offering a branded beverage

portfolio of proprietary flavors; by supporting the franchise value of regional brands

and expanding

those brands with new packaging and broader demographic emphasis; by developing

and acquiring innovative products tailored toward healthy lifestyles; and by appealing

to the “qualityprice” expectations of the family consumer. We believe that the

146

“regional share dynamics” of our brands perpetuate consumer loyalty within local

regional markets, resulting in more retailersponsored promotional activities.

Over the last several years, we have focused on increasing penetration of our brands

in the convenience channel through Company-owned and independent distributors.

The convenience channel is composed of convenience stores, gas stations and other

smaller “up-and-down-the-street” accounts. Because of the higher retail prices and

margins that typically prevail, we have undertaken specific measures to expand

distribution in this channel. These include development of products specifically

targeted to this market, such as ClearFruit, Everfresh, Mr. Pure, Crystal Bay, and Rip

It. Additionally, we have created proprietary and specialized packaging for these

products with distinctive graphics. We intend to continue our focus on enhancing

growth in the convenience channel through both specialized packaging and innovative

product development. Beverage industry sales are seasonal with the highest volume

typically realized during the summer months. Additionally, our operating results are

subject to numerous factors, including fluctuations in the costs of raw materials,

changes in consumer preference for beverage products and competitive pricing in

the marketplace. National Beverage Corp. (National Beverage), incorporated in 1985,

develops, manufactures, markets and distributes a portfolio of beverage products

throughout the United States. The Company develops and sells flavored beverage

products, which includes a range of flavored soft drinks, juices, waters and energy

drinks. Its brands include Shasta and Faygo, each of which has over 50 flavor

varieties. The Company also offers a range of flavored beverage products for the

health-conscious consumers, which includes Everfresh, Home Juice and Mr. Pure

100% juice and juice-based products; LaCroix, Crystal Bay and ClearFruit flavored,

sparkling and spring water products, and ASante waters. In addition, the Company

produces and markets Rip It energy drinks, Ohana fruit-flavored drinks and St. Nick’s

holiday soft drinks, as well as powder beverage enhancers sold under the NutraFizz

brand name. Substantially all of its brands are produced in 12 manufacturing facilities

that are located in metropolitan markets throughout the continental United States. It

also develops and produces soft drinks for certain retailers and beverage companies.

Shasta and Faygo, the Company’s soft drink brands, are manufactured and marketed

throughout the United States. Its Shasta brand includes a range of flavors of

carbonated soft drinks, as well as various water products. Faygo products are

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primarily distributed east of the Mississippi River and include a multi-flavored

product line. National Beverage also produces and markets other brands of soft

drinks, juices, waters and other beverages, including Ritz, Big Shot, Everfresh, Mr.

Pure, LaCroix, Crystal Bay, Ohana, Rip It , Mega Sport and ASante.

The Company delivers its products through three distribution channels: take-home,

convenience and food-service. The take-home distribution channel consists of

national and regional grocery stores, warehouse clubs, mass-merchandisers,

wholesalers and dollar stores. It distributes its products to this channel through the

warehouse distribution system and the direct-store delivery system. Under the

warehouse distribution system, products are shipped from the Company’s

manufacturing facilities to the retailer’s centralized distribution centers and then

distributed by the retailer to each of its outlet locations with other goods. Products

sold through the direct-store delivery system are distributed directly to the customer’s

retail outlets by its direct-store delivery fleet and by independent distributors. The

Company also distributes its products to the convenience channel through its own

direct-store delivery fleet and those of independent distributors. Its Company-owned

direct-store distribution systems service certain schools and other institutions. The

Company’s take-home, convenience and food-service operations use vending

machines and glass-door coolers as marketing and promotional tools for its brands.

The Company competes with PepsiCo, Inc. and The Coca-Cola Company

/

History of National Beverage Corp.

Company History:

148

A leading second-tier beverage company, National Beverage Corp. develops,

produces, and sells branded soft drinks, juice products, and bottled water, distributing

its products nationwide from 14 manufacturing facilities scattered throughout the

United States. National Beverage acquired its first branded soft drink, Shasta, in 1985

and added Faygo, a regional brand, in 1987. With these two brands, the company

began developing a diversity of flavored beverages, supplying its products to retail

grocery chains, warehouse clubs, food service outlets, convenience stores, and

vending machines. Other branded beverage products were added in later years,

including Big Shot, a regional soft drink, Everfresh juice products, LaCROIX

carbonated and still water, à Santé sparkling mineral water, Body Works, an isotonic

sports drink, and Spree, an all-natural, carbonated soft drink. Unlike many of its

competitors, National Beverage manufactures its own beverage products instead of

contracting production to other bottlers. The operation of its own bottling plants

allows the company to perform bottling services for private label brands, giving it an

important secondary source of income. During the late 1990s, National Beverage was

77 percent-owned by its founder and chief executive officer, Nick A. Caporella.

Origins

Few companies in the history of business were created for the reasons that gave birth

to National Beverage. At its founding, the company served as a mechanism to resolve

an acrimonious struggle between two corporate barons, beginning as a hollow

corporate shell whose sole purpose was to rid another company of an unwanted suitor.

The dispute that eventually spawned National Beverage had its roots in the late 1970s,

when a Fort Lauderdale company named Burnup & Sims Inc. was thriving as an

installer of cable television and telecommunications systems. Headed by a

Pennsylvania coal miner's son named Nick Caporella, the company was performing

phenomenally well, demonstrating a level of profitability that delighted Wall Street

and one investor, Miami financier Victor Posner, in particular. Posner watched

Burnup & Sims's earnings nearly triple between 1978 and 1981 and decided to secure

a piece of the rising profits. Posner began buying shares in Burnup & Sims,

accumulating a sufficiently sized stake in the company to suggest to Caporella that a

hostile takeover was imminent. Caporella was adamantly opposed to any interference

149

or involvement on Posner's part and, as events unfolded, he displayed remarkable

perseverance and ingenuity in parrying what he perceived as an assault by Posner.

At first, as Posner's holding in Burnup & Sims gradually increased, it appeared

Caporella was unwilling to fight. In 1982, when Posner's stake eclipsed 29 percent,

Caporella quit in disgust, vacating his chief executive position at Burnup & Sims and

taking 17 executives with him. The cable television and telecommunications company

kept its doors open with no one inside to run the company, but, at the urging of

Burnup & Sims's board of directors, Caporella returned after a month and obtained a

temporary federal restraining order to bar Posner from interfering with the company's

business. The restraining order, however, was only a temporary measure. Caporella

wanted to achieve more than keeping Posner at arm's distance; he wanted to eliminate

all of Posner's influence. From Caporella's perspective, Burnup & Sims's survival

depended on Posner's removal from any association with the company. When Burnup

& Sims's earnings collapsed in 1982, Caporella complained, "Our operating

subsidiary presidents stopped working. They felt humiliated." At fault, according to

Caporella, was Posner, a "dark cloud" that threateningly loomed over Burnup &

Sims's headquarters.

For the solution to his problem, Caporella searched for a white knight--a company

willing to buy Burnup & Sims and thereby thwart Posner's threatening advances. He

found no company willing to take on the role of Burnup & Sims's savior, but his

search did lead to an effective, if somewhat confusing, solution. As Posner's

percentage crept up to 43 percent, Caporella decided to create his own white knight

and use his newly formed company to dilute Posner's ownership percentage in Burnup

& Sims. National Beverage Corp. would be Caporella's white knight.

Through a partnership controlled by Caporella, National Beverage Corp. was formed

in 1985. The partnership retained 55 percent ownership of the new company and sold

40 percent to Burnup & Sims for $38.2 million plus 1.8 million in new Burnup &

Sims shares. The shuffle of stock put the new Burnup & Sims stock under Caporella's

personal control and consequently watered down Posner's Burnup & Sims holding

from 43 percent to roughly 35 percent. The strategy worked, but its execution also

created the need to put National Beverage into business. To fulfill the second part of

his plan, Caporella had his new corporate shell acquire Shasta Beverages from Sara

150

Lee Corporation. National Beverage paid $40 million for the soda subsidiary plus the

1.8 million Burnup & Sims shares.

After this second flurry of transactions, National Beverage was a going enterprise, its

existence tied to Burnup & Sims in what outside observers described as a sister-to-

sister relationship. Caporella, now with two companies under his control, was pleased

by the results, but Posner still controlled 35 percent of Burnup & Sims&mdashøo

much in Caporella's view. He performed another securities trick, selling another 5.2

million new Burnup & Sims shares to National Beverage in June 1986, which further

diluted Posner's stake to 23 percent. Caporella was overjoyed by the accomplishment,

declaring, "It's like being reborn." Posner, however, did not make his full retreat until

1988 when Cincinnati financier Carl Lindner purchased Posner's shares and

transferred them to Burnup & Sims. Caporella by this point had already turned his

attention to National Beverage, deciding to rethink his operating strategy for Burnup

& Sims while he worked to expand his new company. Intending to use Shasta as a

foundation, Caporella aimed for a lofty objective, vowing to develop National

Beverage into a $1 billion beverage company.

1987 Acquisition of Faygo

Caporella's bid to develop a billion-dollar beverage company began with Shasta, a

national brand that was first sold in 1889. To broaden National Beverage's distribution

coverage, Caporella next added Faygo, a popular carbonated beverage in the Midwest,

acquiring the regional brand in 1987 from Tree Sweet Products Corp. The acquisition

of Faygo, which first appeared in 1907, and Shasta also gave National Beverage 12

bottling plants scattered throughout the United States, each located near major

markets. As the company moved forward, it used its bottling facilities to bottle its

own drinks and to bottle private-label brands. The use of its own bottling plants--a

luxury not all beverage companies enjoyed&mdash′ovided National Beverage with an

important secondary source of income, as grocery chains turned to National Beverage

for the production of their private-label brands and smaller, regional beverage

companies contracted National Beverage to bottle their brands.

151

With Shasta and Faygo, Caporella controlled a beverage company with annual

revenues in excess of $300 million, a total far below the billions collected by National

Beverage's giant rivals, The Coca-Cola Company and Pepsi-Cola Company. The

presence of these two conglomerates, whose corporate reach extended around the

globe, dictated to a large degree the strategy employed by Caporella. Coca-Cola and

Pepsi controlled an overwhelming share of the U.S. market, each holding such a

dominant and entrenched position that they were, in effect, only in competition with

one another. Second tier beverage companies like National Beverage could not

realistically hope to usurp either of the two giants, which Caporella realized. He was

determined to avoid a direct battle for national market share against either of the

beverage industry's behemoths, and instead sought to carve a niche for National

Beverage as a producer of flavored sodas

By the end of the 1980s, National Beverage was filling and labeling 1.5 million cans

of soft drinks in its packaging plants and marketing these beverages in a rainbow of

flavors. Financially the company was doing well, particularly in light of the weakened

state both Shasta and Faygo were in prior to their purchase. Financial health, however,

was not the only concern National Beverage faced during the late 1980s. A nagging

issue, and one that drained National Beverage's financial strength, was the company's

relationship with Burnup & Sims. In the aftermath of the struggle between Posner and

Caporella, Burnup & Sims and National Beverage emerged as two companies woven

tightly together. The transfer of stock from both Caporella-managed companies left

Burnup & Sims owning 42.1 percent of National Beverage and made National

Beverage a 55.6 percent owner of Burnup & Sims. Shareholders and outside

observers had expected the two companies to be disentangled shortly after Posner sold

the last of his shares in 1988, but it was not until April 1990 that a plan was

announced for the separation of the companies. Although the unusually close

relationship between the two companies had certain advantages for National

Beverage, such as the use of Burnup & Sims's capital for expansion, the union created

its own particular problems. Cross-management of the two companies had proven

costly and intercompany debt also hobbled National Beverage's progress, making

some resolution to the situation a necessity.

National Beverage a Separate Company for the 1990s

152

According to the plan first revealed in April 1990, National Beverage was to be spun

off as a separate company and its stock offered for sale to the public. The long-

awaited deal occurred in September 1991, but its completion only added fuel to yet

another nagging issue. In the September 1991 attempt to separate the companies,

National Beverage's ownership in Burnup & Sims was only reduced from 55 percent

to 36 percent and only 23 percent of National Beverage was sold to the public, which

prompted most institutional investors to shun the beverage company's stock. When

the dust had settled, Caporella ended up owning 77 percent of National Beverage,

making his original $1.6 million investment in National Beverage worth $38 million.

Additionally, Caporella's $900,000-a-year salary was paid by Burnup & Sims, by the

company some believed had been weakened in order to strengthen National Beverage.

To make the situation more distasteful to some, Caporella received one percent of

National Beverage's revenues to run the company, a salary that amounted to $3

million following the 1991 public offering. One Burnup & Sims shareholder had had

enough, and filed a lawsuit against Caporella, charging that Burnup & Sims

shareholders had suffered financially from Caporella's dealings. "He's Victor Posner's

twin," railed the disgruntled shareholder, a Miami insurance agent named Albert Hahn

who held 50,000 shares of Burnup & Sims stock. Caporella fought back, explaining,

"If it wasn't for me, my cash, and my idea, we [Burnup & Sims shareholders] would

have been left to the ruin and rape of Victor Posner. I took the gamble and bought a

losing company [Shasta] with a dying brand. I would like to have the recognition of a

doctor who performed an operation and saved a patient."

As had been the case since National Beverage's formation, publicly waged disputes

attracted the bulk of attention, diverting it away from the day-to-day operations of the

beverage company. Although the company's stock was not performing well because

of the contentious squabbles punctuating its history, the company itself was making

some headway. Amid the rancor surrounding him, Caporella was still intent on

fashioning National Beverage into an industry heavyweight, declaring in 1992, "I am

going to have a humongous big beverage company some day." At the time, National

Beverage ranked as the sixth largest beverage company in the United States, but

because of the enormous power wielded by Pepsi and Coca-Cola, sixth largest in the

United States translated to a mere 1.7 percent national market share. Nevertheless, the

company had flowered into a flavored-soda maker and added several brands to its

153

portfolio since the 1987 acquisition of Faygo. Spree, an all-natural, carbonated soft

drink, joined the company's fold by the beginning of the 1990s, and was followed by

the acquisition of Big Shot, a regional, multiflavored soft drink line established in

1935. By 1992, the company was producing 108 flavors and 34 product lines,

marketing more beverage flavors than any other beverage company in the world.

Meanwhile, National Beverage's private-label bottling business had received a

tremendous boost in 1991 when the U.S. Navy contracted the company to produce the

Navy's own private-label brand of soft drinks called "Sea."

By the mid-1990s, National Beverage had increased its stature within the U.S.

beverage industry, becoming the nation's fifth largest producer in 1996. By this point,

the company had diversified into the production and sale of teas, bottled water, and

juice products, adding to the scores of soft drink flavors it produced. The company's

diversification into non-carbonated beverages gained its greatest momentum from two

acquisitions completed in the mid-1990s, the purchase of WinterBrook Corp. and

Everfresh Beverages Inc. WinterBrook, a Bellevue, Washington-based company,

operated as the holding company for three brands, Cascadia, WinterBrook Clear, and

LaCROIX, a brand of carbonated and still water. LaCROIX was the most important

addition to National Beverage, giving the company a branded water beverage that

ranked as a top seller in several Midwestern markets and enjoyed a noticeable

presence on airline beverage carts. The acquisition of Everfresh moved the company

solidly into the juice production business, helping Caporella to shape National

Beverage into what he described as "a total beverage company."

By 1998, sales had surpassed $400 million, far below the $1 billion goal Caporella

had been aiming for during the previous decade. Although the late 1990s did not see

Caporella sitting atop the "humongous big beverage company" he was hoping to

create some day, National Beverage was enjoying annual sales growth of roughly 10

percent as it prepared for the 21st century. With this encouraging growth propelling it

forward, and a consistent record of profitability supporting it, National Beverage and

its growing roster of brands appeared solidly positioned for the years ahead.

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Principal Subsidiaries: BevCo Sales, Inc.; Big Shot Beverage Co.; Everfresh

Beverages, Inc.; Faygo Beverages, Inc.; LaCROIX Beverages, Inc.; National BevPak;

National Retail Brands, Inc.; PACO, Inc.; PETCO, Inc.; Shasta West, Inc.; Shasta

Beverages, Inc.; Shasta Beverages International, Inc.; Shasta Food Services; Shasta

Military Sales; Shasta Midwest, Inc.; Shasta Northwest, Inc.; Shasta Sales, Inc.;

Shasta Sweetener Corp.; Shasta USA; Shasta Vending; Winnsboro Beverage Packers,

Inc.

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KEY EXECUTIVES

Name Title

Nick A. Caporella Chairman, Chief Executive Officer, Chairman of Strategic Planning

Committee and Member of Nominating Committee

Joseph G. Caporella President, Director and Member of Compensation &

Stock Option Committee

George R. Bracken Principal Financial Officer and Senior Vice

President of Finance

Edward F. Knecht Executive Vice President of Procurement

Dean A. McCoy Chief Accounting Officer and Senior Vice

President

Board Members - NATIONAL BEVERAGE CORP (FIZZ)

Name Primary Company

Nick A. Caporella National Beverage Corp.

Joseph G. Caporella National Beverage Corp.

Joseph P. Klock Jr. National Beverage Corp.

Samuel C. Hathorn Jr. National Beverage Corp.

Cecil D. Conlee Oxford Industries Inc.

EXECUTIVE COMMITTEES* - NATIONAL BEVERAGE CORP (FIZZ)

Committee Name Chairperson

Audit Committee Samuel C. Hathorn Jr.

Compensation Committee Cecil D. Conlee

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PRODUCT MIX

157

TOP COMPETITORS

Company:

The Coca-Cola Company

Pepsico, Inc.

Dr Pepper Snapple Group, In

Groupe Danone Water Divisio

Nestlé Waters Private -

ITO EN, LTD.Private

Red Bull GmbH

Cott Corporation

Britvic Plc

Ocean Spray Cranberries, Inc.

Nestl

Diageo plc

Heineken

SABMiller plc

Anheuser-Busch InBev

Suntory International Corp.

Kraft Foods Inc.

Pernod Ricard SA

Molson Coors Brewing Company

Grupo Modelo,

Constellation Brands Inc

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STP STRATEGY

SEGMENTATION STRATEGY NATIONAL BEVEARAGES

NATIONAL BEVERAGE CORP serves its products using mass marketing technique,

which obviously falls in undifferentiated marketing, and undifferentiated marketing

means no segmentation, but there are minor factors on which we can say that the

NATIONAL BEVERAGE CORP segments its products and then targets the

customers somehow. These factors are as follows.

GEOGRAPHIC SEGMENTATION

INTERNATIONALLY

NATIONAL BEVERAGE CORP segments its products country wise and region

wise, here the most important thing is the taste and the quality, it varies according to

the taste and the income level of the people in that country, and i.e. Third world

counties are given low quality taste.

NATIONAL BEVERAGE CORP Company tries to satisfy the needs of a whole line

of different people.  They have drinks that target different, age groups, ethnic groups,

sexes, lifestyles, etc.

There are some of the different brands:

Oasis

This is a juice made for the younger working adults, 20-30. It is available in berry,

lemon and orange tangerine.  This drink is most popular in Britain and Ireland.

Minute Maid

Minute Maid targets kids and adults, ages 1-10 and 40+.  This drink is conveniently

packaged to take with you on the go anywhere. The health check is part of the reason

for the wide target market, parents want their kids to be healthy and so knowing that

this product is accepted by such a well known respected company pleases the parents

and gives them a sense of relief.

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Powerade

Powerade is a sports drink.  It is designed with a great taste and is also thirst

quenching.  It is made for athletes of all ages, sexes and sports, but they would target

this drink at teens and young adults, age’s 13- 27.  This drink is sold in many places

but mostly over North America.

Aquarius

Aquarius is a sports drink, enjoyed by people who have healthy lifestyles.  It is made

for athletes of all ages, sexes and sports, but they would target this drink at teens and

young adults, age’s 13- 27.  This produce is very well known in Europe.  Particularly

in France, Norway, Spain.  But it is still known all over.  It became even more

successful when it became the official drink of the Olympic games in Barcelona in

1992.

Full Throttle

This is an energy drink.  It is designed for athletes both male and female but

particularly males, of ages 14-25.

As we can see by looking at a select few of NATIONAL BEVERAGE CORP drinks

they have a wide variety of drinks to satisfy everyone’s needs.

CLIMATIC

Weather is the third major factor in effecting the NATIONAL BEVERAGE CORP

selling. In NATIONAL BEVERAGE CORP marketing, main idea is to serve it cold,

so we can say that, they focus more on hot areas of the world, i.e. middle east etc and

there sale increase in summer. This is underdeveloped market so the NATIONAL

BEVERAGE CORP consumption in summers is 60% and in winters is 40%.. It is a

source of refreshment when a person is thirsty due to the hot weather.

LOCALLY

In Pakistan the NATIONAL BEVERAGE CORP segments more in urban and

suburban areas as compare to rural. 35 % population resides in urban areas and 65%

population lives in rural areas in Pakistan. NATIONAL BEVERAGE CORP is

focusing on urban areas as people there are more inclined towards such beverage

while people in rural areas are more inclined drinking lassi and desi drinks.

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DEMOGRAPHIC SEGMENTATION

AGE

Internationally NATIONAL BEVERAGE CORP has segments the small children

introducing tastes like vanilla, lime and cherry, they focus children from 4-12.

specifically target more young people than older.

GENDER

NATIONAL BEVERAGE CORP targets both genders with its wide variety of drinks.

This market is relatively large and is open to both genders, thereby allowing greater

product diversification.

FAMILY TYPE

NATIONAL BEVERAGE CORP introduces its economy pack, and that’s how they

focus family and groups.

INCOME

NATIONAL BEVERAGE CORP segments different income levels by packaging.

Like for small income people it has small returnable glass bottle, for middle people it

has non returnable bottle and for higher income people it has NATIONAL

BEVERAGE CORP tin.

PSYCHOGRAPHICS SEGMENTATION

All psychographics variables the social class, lifestyle, occupation, level of education

and personality, NATIONAL BEVERAGE CORP segments everyone, but again it is

their packaging which is different for different consumers.

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LEVEL OF EDUCATION

A company has to make promotional strategies keeping in view the customer level. If

the percentage of education is high in a country then through advertisements people

can be made well aware of their product and can convey their message easily.

Promotion and education has a direct relationship.

BEHAVIORAL SEGMENTATION

It is how people perceive a specific product, in short psychological analysis of

a product. NATIONAL BEVERAGE CORP all over the world is recognized as a

quality drink and therefore people drink it without any hesitation whenever they are

thirsty or otherwise. So marketers of NATIONAL BEVERAGE CORP have made it a

drink for all people and for diabetic people they introduced .

OCCASIONS

A very special occasion for the people of Pakistan Ramzan, people emphasis on

enjoying NATIONAL BEVERAGE CORP at “Iftar” and then on Eid with friends &

family with super price off promotion.

BENEFITS SOUGHT

Sometimes, for the promotion strategy of , NATIONAL BEVERAGE CORP

Company introduce prizes in the top cover. So they segment people by benefit sought,

i.e. by giving them prizes.

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PEST ANALYSIS

We are going to produce a PEST analysis to find out what external influences may be

affecting the National bevearages product and to what extent to which customers

decide to buy them. The purpose of the PEST analysis is to analyze the organization

(National bevearages ) operates and to identify how it may influence marketing

decisions. A PEST analysis analyses the external environment in which an

organization operates and identifies how it should influence marketing decisions.

The initials P.E.S.T stand for:

Political

Economical

Strengths

Threats

Political Factors

The actions of governments can have major effects on business and markets,

including creating or reducing demand for particular products and services.

Economical Factors

Consumer spending may be controlled by a range of economic factors such as income

levels, inflation, taxes,

unemployment, exchange rates and mortgage rates.

Socia l Factors

Social trends are important because they have a direct influence on the demand for

particular types of product

.

Technological Factors

Development in technology gives rise to new products and market opportunities, e.g.

the rapid growing use of

computerized reservations systems.

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FINANCIAL ANALYSIS

BALANCE SHEET

NATIONAL BEVERAGE CORP Balance Sheet

View: Annual Data | Quarterly Data Period Ending FY2010 FY2009 FY2008 FY2007

Assets

Cash and Short Term Investments 72.57 M 84.14 M 54.50 M 65.58 M

Net Receivables 53.83 M 53.74 M 49.19 M 51.98 M

Total Inventories 34.67 M 39.61 M 38.75 M 44.06 M

Progress Payments & Others 0 0 0 0

Prepaid Expenses — — — —

Other Current Assets 3.55 M 8.81 M 14.90 M 11.89 M

Current Assets Total 164.62 M 186.30 M 157.34 M 173.51 M

Long Term Receivables — — — —

Investment in Unconsolidated Subsidiaries 0 0 0 0

Other Investments 0 0 0 0

Property, Plant & Equipment Net 53.40 M 56.14 M 57.64 M 57.37 M

Property, Plant & Equipment Gross 182.22 M 177.91 M 175.45 M 171.37 M

Accumulated Depreciation 128.82 M 121.77 M 117.81 M 114.00 M

Other Assets 22.34 M 23.24 M 24.14 M 26.76 M

Deferred Charges — — — —

Tangible Other Assets 7.58 M 8.23 M 9.10 M 11.71 M

Intangible Other Assets 14.76 M 15.01 M 15.04 M 15.04 M

Total Assets 240.36 M 265.68 M 239.12 M 257.63 M

Liabilities

Short Term Debt & Current Portion of Long

Term Debt 0 0 0 0

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Accrued Payroll 8.19 M 6.65 M 5.06 M 4.43 M

Income Taxes Payable ########

#######

# ######## 2.22 M

Dividends Payable 0 0 0 0

Other Current Liabilities 17.80 M 16.30 M 15.60 M 17.34 M

Current Liabilities Total 71.72 M 68.46 M 67.94 M 75.82 M

Long Term Debt 0 0 0 0

Provision for Risks & Charges 0 3.17 M 0 —

Deferred Taxes 15.60 M 16.52 M 16.62 M 15.22 M

Deferred Income — — — —

Deferred Tax Liability in Untaxed Reserves — — — —

Other Liabilities 11.46 M 10.69 M 6.76 M 9.23 M

Total Liabilities 98.79 M 95.67 M 94.50 M 100.27 M

Shareholders Equity

Non-Equity Reserves 0 0 0 0

Minority Interest 0 0 0 0

Preferred Stock 15.00 M 15.00 M 15.00 M 15.00 M

Common Equity 126.57 M 155.01 M 129.62 M 142.36 M

Common Stock ########

#######

# ######## ########

Capital Surplus 13.30 M 12.30 M 11.66 M 10.00 M

Revaluation Reserves 0 0 0 0

Other Appropriated Reserves 3,000.00 — — —

Unappropriated (Free) Reserves — — — —

Retained Earnings 130.77 M 160.21 M 135.47 M 149.87 M

Equity in Untaxed Reserves — — — —

ESOP Guarantees 0 0 0 0

Unrealized Foreign Exchange Gain (Loss) 0 0 0 0

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Unrealized Gain (Loss) on Marketable

Securities 0 0 0 0

Treasury Stock 18.00 M 18.00 M 18.00 M 18.00 M

Total Liabilities & Shareholders Equity 240.36 M 265.68 M 239.12 M 257.63 M

Common Shares Outstanding 46.16 M 46.01 M 45.95 M 45.51 M

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