Pepsi Co Case Study
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%
12.4%