![Position Paper: PepsiCoâs Restaurants<br /> Ănder BARLAS<br /> Executive MBA Student<br /> BoÄaziçi University, Istanbul<br />Abstract: <br />This position paper aims to evaluate âPepsiCoâs Restaurantsâ case study by the Harvard Business School. First a short summary, including the facts standing out from the rest will be given followed by a SWOT analysis. An initial due diligence will be conducted to investigate the advantages/disadvantages of an acquisition with Carts of Colorado and California Pizza Kitchen. <br />3483416700500<br />,[object Object],In 1965, believing that snacks sales well with soda (complimentary products), Pepsi-Cola, which had sales of about $450 million, merged with Frito-Lay Company, a $184 million snack foods concern,. Afterwards the combined company was named PepsiCo. Its organization had eight major parts: Pepsi-Cola North America, Pepsi-Cola International, Frito-Lay, Inc., PepsiCo Foods International, Pizza Hut Worldwide, Taco Bell Worldwide, Kentucky Fried Chicken Corporation, and PepsiCo Food Systems Worldwide.<br />,[object Object],Soft Drinks:<br />Soft drinks represented 35% of PepsiCo's sales and 39% of its operating profits in 1991. With four of the top-selling U.S. soft drinks (Pepsi, Diet Pepsi, Caffeine Free Diet Pepsi, and Mountain Dew), the company held nearly a third of the $47 billion U.S. soft drink market. Internationally, PepsiCo's share of the $11 billion market was about 15%:<br />,[object Object],With top-selling brands, such as Doritos, Lay's, Fritos, and Ruffles, Frito-Lay's share of the $10 billion U.S. snack chips market was nearly half, and PepsiCo Foods International (PFI)'s share of the $13 billion international snack chips market was about one-quarter.<br /> <br />Restaurants:<br />The U.S. foodservice industry had sales of about $250 billion in 1991, and industry experts expected sales to double in the following 10 years. PepsiCo's strategy is based on this forecast assuming that quick service restaurants would remain the largest segment. They identified several major trends:<br />âąSimplicity and Convenience.<br />âąValue rather than prestige and status<br />âąGrowth in ethnic product categories<br />âąGrowth in health and nutrition <br />After that analysis PepsiCoâs decision was to invest in quick service-, casual dining and- take-out âsegments.<br />In 1986, PepsiCo purchased Kentucky Fried Chicken. Combined with Pizza Hut and Taco Bell, the purchase made PepsiCo the international leader in number of restaurant units. In 1991, PepsiCo's restaurant segment attained the highest revenue of the company's three segments, surpassing soft drinks for the First time. That year, restaurant sales and operating profits were 36% and 26% of the total, respectively. <br />,[object Object],First a short SWOT analysis of PepsiCo will be conducted:<br />Strengths:<br />,[object Object]](https://image.slidesharecdn.com/pepsicosrestaurantspositionpaper-12982398866026-phpapp02/85/PepsiCo-Restaurants-Position-Paper-1-320.jpg)
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PepsiCo Restaurants Position Paper
- 2. Continuous double digit grow through aggressive strategies
- 3. Strong innovative spirit within the company
- 4. Well segmented restaurant brands
- 5. Tacho Bell: The discount leader in the fast-food industry serves ethnic (Mexican) food.
- 6. Pizza Hut: Italian style pizza for average income level
- 7. KFC: A dinner operation, selling freshly-prepared fried chicken for average income level
- 8. Internal movement of manager allows good experience sharing
- 10. Lack of casual dining segment competence. The Salsa Rio Grill & Salsa Bar, a 115-seat restaurant serving Mexican and Southeastern foods, was Taco Bellâs, whereas Pizza Hut CafĂ© was Pizza Hutsâ casual dining trial. Both were unsuccessful and have been closed in a year. The reason could be that casual dining restaurants are more expensive than quick service restaurants. The brand images of Pizza Hut and Tacho Bell were not just enough to convince the customer to pay more
- 11. Bargaining power of B2B customers (franchises) are high, because in terms of new methods, franchises act concerned as they main interest is their own revenue, not PepsiCoâs
- 13. As there is %33 and %31 increases in operating profits between 1991-1989, PepsiCo could focus more in international restaurant market rather than local.