Pepsi Case Study

Pepsi Co

In the early 1890s, a pharmacist named Caleb Bradham concocted a recipe dubbed “Brad’s Drink” consisting of sugars, carbonated water, rare oils, and a caffeine containing nut called kola. In 1898 the drink was named Pepsi-Cola, incorporated in North Carolina by 1902 and the formula patented by 1903. After two decades of expanding business, Pepsi-Cola declared for bankruptcy and was sold to Roy Megargel forming the Pepsi-Cola Corporation. Less than a decade later Pepsi-Cola declared bankruptcy for a second time. By 1931 this allowed for Charles Guth, a businessman who supplied the syrup used by Pepsi, to purchase the company from Roy Megargel. Initially, Guth did not have success with Pepsi and even offered to sell the trademark and recipe to the Coca-Cola Company. "Coke" refused to purchase the twice bankrupt and struggling Pepsi. This prompted Guth to used the labs, the chemists, and the resources of the Loft Candy Company, his employer, to finely tune the Pepsi-Cola recipe to hopefully improve sales. After some clever price promotions, Pepsi had profits of over two million dollars and was the second largest cola company in the United States. Meanwhile, Loft Candy Company was in a legal battle with Charles Guth for using company resources for his personal benefit thus breaching his duty of loyalty. Loft Candy Company won the legal battle and took ownership of Pepsi-Cola Corporation. The faith of the company now rested in the hands of many savvy corporate leaders.

Pepsi shifted its focus from a beverage company into a food and beverage company when it merged with Frito-Lay in the mid 1960s. Frito-Lay was also a product of a merger between two dominant snack food companies, the Frito Company and the H.W. Lay Company. In...

... middle of paper ...

...ried to be as successful as his older brother but always fell short. I was completely wrong. Pepsi is not just a soft drink company as I initially thought. Even though Coca-Cola soft drink has a market share of 17% while Pepsi soft drink has a market share of 9%, Pepsi’s stock trades in the mid 80s while Coke’s stock trades in the low 40s. Additionally, Pepsi does well in balancing its mix of net revenue. 49% of its net revenue is generated by its beverage industry and 51% is generated by its food industry. Globally, 49% of its net revenue mix is generated outside the United States. The remaining 51% is generated in the States. Pepsi is the largest food and beverage business in Russia, India, the Middle East, and the United States. They are the second largest in Mexico and gaining ground in Brazil. They have 22 billion dollar brands in estimated annual retail sales.