PepsiCo Inc. was first established in 1965 when 2 companies, Pepsi Cola and Frito – Lay, were agreed to merge into one new company as the union between the salty snack icon and soft drink giant. The great men behind those companies were New Bern (founder of Pepsi Cola), Elmer Doolin (founder of fritos corn chip), Herman Lay (founder of Potato Chip Distribution).
Regarding to the merger strategy, PepsiCo Inc. was able to attained more than doubled of its revenue to reach $1 billion in 1971. Since then, PepsiCo Inc. became more aggressive to pursue its growth through acquisition strategy in snacks and beverages industry. Later on, PepsiCo Inc. had successfully acquired Pizza Hut, Taco Bell, Kentucky Fried Chicken, and its CEO, Wayne Calloway, believed that these companies would be PepsiCo Inc.’s balanced three legged stool. He also added on that in the future, this strategy would offer considerable cost sharing and skills transfer opportunities.
To support that, he routinely shifted managers between the company’s three divisions as part of the company’s management development efforts.
Despite of all the acquisition, Quaker Oats was PepsiCo’s largest acquisition and gave it the number one brand of oatmeal in the United States which worth for 60%++ category share. Well known brands from Quaker Oats were Cap’n Crunch, Rice A Roni, Aunt Jemima, and Gatorade.
In 2008, PepsiCo’s corporate strategy had diversified the company into salty and sweet snacks, soft drinks, orange juice, bottled water, ready to drink teas and coffees, purified and functional waters, isotonic beverages, hot and ready to eat breakfast cereals, grain based products, and breakfast condiments. Within each category, PepsiCo brand had achieved the top number one or two positions in the market, and it could be achieved through strategies keyed to product innovation, close relationships with distribution allies, international expansion, and strategic acquisitions. Other than that, the company believed that its efforts to develop “good for you” or “better for you” products would create growth opportunities from the intersection of business and public interests.
PepsiCo’s management team was dedicated to capturing strategic fit benefits within the business lineup throughout the value chain. PepsiCo also shared marketed research information to better enable each division to develop new products likely to be hits with consumers and coordinated its power of one activities across product lines.
In 2008, PepsiCo’s chief manager expected the company’s lineup for snack, beverage and grocery items to generate operating cash flows sufficient to reinvest in its core business, provide cash dividends to shareholders, fund an $8 billion share buyback plan, and pursue acquisitions that would provide attractive returns. Possible actions that might be needed are including a reprioritization of internal uses of cash, new acquisitions, further efforts to capture strategic fits existing between the company’s various businesses, or the divestiture of businesses with poor prospects of future growth and minimal strategic fit with PepsiCo’s other businesses.
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