Pepsi Co Case Study

1. Should PepsiCo acquire Carts of Colorado (CoC) or California Pizza Kitchens (CPK), or both? Why? (40 points)

Diagnosis of PepsiCo

PepsiCo started from Pepsi-Cola and then moved into a more diversified business with soft drinks as the core, snack foods and restaurants. In early 1990s, PepsiCo’s restaurant business is composed of Pizza Hut, Taco Bell and KFC, all of them are business leaders in their segment.

Strength:

• Diversified food business stemmed from soft drinks to snack foods and restaurants, and the later two are good complements to the core soft drink business in terms of distribution.

• Strong in quick service segment, the largest segment of food service industry

• Good brand equity in restaurant business, with all three chain brands as the leaders in their segment

• Decentralized structure allows quick response to market

• Emphasis on entrepreneurial management encourages management efficiency and high growth of the three chain restaurant brands

Weakness:

• High autonomy of each restaurant brand restrains synergy from cooperation

• Decentralized organization weakens the power from the headquarter

• High coverage in food business hinders potential partners so that they may cooperate with Pepsi’s competitors

Opportunities:

• More coordination within the different brands to explore more synergies

• Better leverage shared service to reduce duplicated cost

• Potential investment in other food service segment to capture the growth trend

Threats:

• Market demand shrinks

• Franchise restaurants may not follow the corporate strategy

Impact of the acquisition

Carts of Colorado

₊ The acquisition would enable PepsiCo to enter new market and new customers and help to accelerate the sales growth besides of organic growth

₊ COC is profitable compared with the average profitability of Pepsi

Year 1991 Operating profits (unusual items adjusted)

$million Net sales

$million Profit rate

PepsiCo 2,396.5 19,607.9 12.2%

COC 0.9 7.7 12.4%