FINANCIAL ANALYSIS APPLIED TO THE COMPANY PEPSICO

DANIEL MUÑOZ TORRES

CRISTIAN RUIZ QUINTERO
SEBASTIÁN VARGAS VIVAS

EAM University Institution

FACULTY OF ADMINISTRATIVE AND FINANCIAL SCIENCES
ARMENIA
2020
Content
MISSION.......................................................................................................................................................3
VISION.......................................................................................................................................................4
ASPIRATIONS5
VALUES AND PRINCIPLES......................................................................................................................6
Porter's 5 Forces Diagram8
Rivalry among existing competitors...........................................................................................8
Threat of new competitors entering8
Threat of substitute products......................................................................................................8
Bargaining power of suppliers........................................................................................8
Bargaining power of customers.................................................................................................9
SWOT Analysis Diagram.........................................................................................................................9
STRENGTHS.......................................................................................................................................9
OPPORTUNITIES..............................................................................................................................9
WEAKNESSES9
THREATS10
VALUE CHAIN DIAGRAM.......................................................................................................11
PESTEL ANALYSIS.................................................................12
Political factors affecting PepsiCo's business..................................................................12
Important economic factors for PepsiCo...........................................................................12
Social / sociocultural factors that influence the business environment of PepsiCo.........13
Technological factors in PepsiCo's business..........................................................................14
Ecological / environmental factors15
Legal factors in the PepsiCo industry...................................................................................16
BALANCE SHEET17
Sources and Uses19

BIBLIOGRAPHY20
 MISSION

CREATE MORE SMILES WITH EVERY SIP AND EVERY BITE

FOR OUR CONSUMERS: By creating joyful moments through our

delicious and nutritious products and unique brand experiences.

FOR OUR CLIENTS: Being the best possible partner, driving innovation

that changes the game and offers an unparalleled level of growth in our industry.

FOR OUR PARTNERS AND OUR COMMUNITIES: When creating

significant opportunities to work, acquire new skills, and develop

successful careers, and a diverse and inclusive workplace.

FOR OUR PLANET: By conserving the precious resources of nature and

to foster a more sustainable planet for our children and grandchildren.

FOR OUR SHAREHOLDERS: By offering a top-tier sustainable TSR and

adopt the best-in-class corporate governance. (PepsiCo, Inc. Official Website, 2020)
 VISION

BE THE WORLD LEADER IN CONVENIENT FOOD AND BEVERAGES BY WINNING

WITH A PURPOSE

This reflects our ambition to win sustainably in the market and accelerate.

the growth of our top line, maintaining our commitment to do the

good for the planet and our communities. It is based on decades of progress that

we have achieved since the founding of PepsiCo in 1965, while establishing a

solid foundation for a new era of growth and prosperity. To help us achieve

this vision, we have defined a new set of aspirations: to be faster, more

stronger and better. (PepsiCo, Inc. Official Website, 2020)

 ASPIRATIONS

FASTER
Focusing more on the consumer and accelerating investment to grow and win in

the market.

1. Expand our portfolios to win locally in food from

convenience and beverages

2. Strengthen our businesses

3. Accelerate international expansion, with a disciplined focus on the

markets

STRONGER
Operating as One PepsiCo, winning locally with global empowerment,

as well as transforming our capabilities and our culture

4. Promote savings through a holistic management of costs to reinvest and

win in the market

5. Develop and scale our core capabilities globally through

technology

6. Build a differentiated organization, talent, and culture

BEST
Integrating Purpose into our business strategy, doing even more for the

planet and for our people.

 Become leaders in building a more

sustainable, from the seed to the smile. (PepsiCo, Inc. Official Website, 2020)

VALUES AND PRINCIPLES

At PepsiCo, our Values and Principles reflect the company we aspire to be.

that these are the foundation of our business decisions, that is why

All PepsiCo companies globally adhere to the same standards.

VALORES

Sustained growth

It is essential for motivating and measuring our success. Seeking it stimulates innovation.

adds value to the results and helps us understand how the actions that today

we take impact on our future. We understand it as the growth of the

people and the company's performance. Prioritizes making a difference and

make things happen.

Capable and empowered individuals

We have the freedom to act and think in ways that make us feel that we have

carrying out our activities, being consistent with corporate processes and

considering the needs of the company.

Responsibility and trust

They are the foundations of healthy growth that respond to gaining the trust that others

people grant us as individuals and as a company. We are committed to

in a personal way and as members of the corporation in every action we take to

head, always taking care of the resources assigned to us. We build credibility

between ourselves and with others, operating with the highest congruence and with the

objective of succeeding together.

PRINCIPLES:

To take care of our customers, consumers, and the world in which we live.

2. Sell only products that we can be proud of.

3. Speak with honesty and openness.

4. Balance short and long term.

5. Winning with diversity and inclusion.

6. Respect for our employees, consumers, customers, suppliers, and advisors

externals to achieve success together. (PepsiCo, Inc. Official Website, 2020)

Porter's 5 Forces Diagram

Rivalry among existing competitors

The soft drink industry is almost dominated by Coca-Cola; likewise, this industry is

well known as a duopoly between Coca-Cola and Pepsi as the leading companies

competitive. These two competitors hold most of the market share.

Threat of new competitors

The threat of a new entry is relatively low, Coca-Cola and Pepsi compete.

mainly in advertising and differentiation and not in prices. The possible

new competitors are of unequal size, especially in local markets.

Threat of substitute products

There are many types of substitutes for Pepsi products, including water.

bottled, sports drinks, coffee, he you, juice. The threat of Pepsi for

substitute products are, respectively, high because consumers also

They are concerned about consuming cheaper and much healthier drinks.

Bargaining power of suppliers

The suppliers for a beverage company are quite important as

they provide the supplies, that is, the raw materials such as flavorings, caffeine, the

sugar and packaging, so that they are transformed into a certain product, are

very few manage to meet the standards required by the company.

 Bargaining power of customers

As it is a mass product, the general need must be met, which is

satisfy thirst and be suitable for all ages. Pepsi buyers are

mainly food stores, service stores, restaurants, as well as cafeterias

university students. The profitability in each of these segments demonstrates the power of

the buyers' bargaining power is high because buyers pay differently

prices.

SWOT Analysis Diagram

STRENGTHS

. New product presentations

. More accessible price for customers

. Product number two of beverages

. Direct distribution to its customers

. Recognized brand

OPPORTUNITIES

. Global growth

. Opening of new market

. Accelerated innovation

. International expansion

. Growing population

WEAKNESSES

. Misunderstood market
. Need for the product

. Strong purchasing power

. Regulation in favor of the national supplier

THREATS

. Decline of buyers in stores

. Intense competition (Coca-Cola)

. Slow growth due to health awareness

. Constant changes in market tastes and preferences. (QUINTANILLA,

2017).
 VALUE CHAIN DIAGRAM

INFRASTRUCTURE
The firm went bankrupt in 1923, but later revived thanks to the candy company Loft Candy. Today it is present in nearly 200
countries.
Pepsi Co is currently among the most successful consumer products companies in the world with revenues
annual revenues of over 30 billion dollars and more than 480,000 employees.
In the United States, the largest soft drink market in the world with retail sales of fifty-two billion
dollars, which is why Pepsi brands occupy almost a third of the world.
Pepsi's strategy is to concentrate resources on business growth through both internal growth and
carefully selected acquisitions within those same businesses.
In 2007, PepsiCo Inc. announced a corporate reorganization that eliminated the previous operational structure of America.
North and international, focusing on the food and beverage activities of the firm.
Starting this year, the company has three large operational subsidiaries: combined divisions of North and South America.
for food, another for beverages and the Pepsi companies in the rest of the world. (Madrigal, 2010)
HUMAN RESOURCES
The company has more than 480,000 employees around the world.
One of the levers of corporate responsibility or sustainability is human talent:
Taking care of people taking care of PepsiCo.

Consider human talent as a competitive advantage

Mechanisms to recruit, develop, and retain the best people.
Talent has no race, religion, sex, or lifestyle. (Madrigal, 2010)
TECHNOLOGICAL DEVELOPMENT
Collaboration on technological development initiatives and innovations to reduce environmental impact and conserve resources.
Resource Conservation Program, EMS Environmental Management System, Environmental Management System (ISO 14000).
Location filters for plants, biodiesel.
Associations/Societies, Joint Projects. (Madrigal, 2010)
SUPPLY
The Pepsi-Cola Company produces and markets a wide range of soft drinks to retail customers, restaurants, and service.
of food in more than one hundred ninety countries and territories around the world and generates annual revenues of ten billion dollars.
LOGISTICS PROCESS OUTBOUND LOGISTICS MARKETING Y SERVICE
ENTRY SALES
The ingredients It is worth noting that in PEPSI-GEMEX is the second In 1963 arrives a the Other of the of the
of Venezuela, the largest bottling companies at the presidential level Pepsi levers of the
products for the Polar has the global products of PEPSICO outside of Donald M. Kendall and with him responsibility
general are from franchise Uncle of the United States and the only corporate advertising agency o
public domain production of its exclusive bottler anchor of BBDO (initials of sustainability are
(no Tienebebidas, and the PEPSICO license for Mexico. last names Batten, Baston, the products:
exclusive of production of the Within its beverage division Durstime and Osborn) who
formulas bottled brand products produced and marketed to date continue to be "Nurturing the
secret Quaker Oats (oats, the following brands: Pepsi, Pepsi the creative head of body y the
furthermore cereals and derivatives), Light, Pepsi Max, Mirinda, Seven-Up, the image of Pepsi. spirit of
subsidiaries y for Venezuela Diet ySeven-Up, Kas, Manzanita Sol, Between the years of 1963 our
licensees Colombia. Mountain Dew, Power Punch, water (when Kendall took the consumers)
they can produce For this, Mineral Companies Garci Crespo, Squirt, Squirt company) and 1986 (when
directly the Polar acquired Light, Sangría Casera, the one who retired left a • Make the
drinks of the company Mixer products Seagram's water y corporation that occupies the products that they
PepsiCo conqueror (Colombia), purified from the brand Electropura. place 41 among the 500 enchant atheir
ingredients of who Pepsico owned it, announced in August 2009, the most important consumer companies.
origin manufacturing license for the purchase of its two main ones in the United States. make them feel even more
(PepsiCo Distribution of bottlers, Pepsi Bottling Group In 2009, PepsiCo changes for the better.
produce products of the brand (PBG) and PepsiAmericas, for a total of their image worldwide • The healthy
concentrated for the Andean region. of 7.8 billion dollars, with the purpose for the beverage line also being
base). to control 80% of its Pepsi network. pleasant.
distribution in North America.
 PESTEL ANALYSIS

Political factors affecting PepsiCo's business

Governments are external factors that impose requirements on PepsiCo. This element

the PESTEL / PESTLE analysis considers the effects of governmental action on the

remote or macro environmental environment of companies. PepsiCo must address the

following political factors:

1. Political stability in the major economies (opportunity)

2. Enhanced intergovernmental cooperation (opportunity)

3. Government initiatives against soft drinks (threat)

The major economies like the United States and Canada are politically stable,

therefore present growth opportunities for PepsiCo. In addition, the

the trend of intergovernmental cooperation improves opportunities for

global expansion. However, government initiatives against beverages

Sugary carbonated drinks are a threat that could reduce revenue from

PepsiCo of the affected segments. In this element of the PESTEL analysis /

PESTLE, PepsiCo must consider changing its products to overcome the threat

identified about carbonated beverages.

Important economic factors for PepsiCo

PepsiCo's performance is directly related to the economy.

influence of economic conditions in the remote or macro environment of

 companies are covered in this element of the PESTEL / PESTLE analysis. The factors

The political externals related to PepsiCo are as follows:

1. Economic stability of most major markets (opportunity)

2. Rapid growth of developing economies (opportunity)

3. Deceleration of the Chinese economy (threat)

PepsiCo has growth and expansion opportunities based on stability.

economy of developed countries like the United States, as well as in the high rates

growth of developing economies, such as those in Asia. However, the

The current deceleration of the Chinese economy threatens potential growth.

PepsiCo's international, considering that China is among the economies

the largest in the world. This element of the PESTEL / PESTLE analysis shows that

PepsiCo must ensure market diversification to achieve growth.

stable international

Social / sociocultural factors that influence the business environment of PepsiCo

Many PepsiCo consumers follow sociocultural trends. This

PESTEL / PESTLE analysis element identifies the impact of the conditions

social and changes in the remote environment or microenvironment of companies. The

the following are notable sociocultural external factors relevant to the business of

PepsiCo:

1. Greater health awareness (threat and opportunity)

2. Increase in busy lifestyle (opportunity)

3. More discriminatory attitudes about product quality (opportunity)

Increased health awareness is a threat to PepsiCo due to the

concerns about the sugar, salt, and fat content of their products. Without

embargo, this external factor also presents the opportunity for the company

improve its products to address such concerns. PepsiCo can also

take advantage of the busy lifestyles of consumers, especially in

urbanized and industrialized markets around the world. People with these

lifestyles are more likely to buy ready-to-eat food products

eat like those from PepsiCo. The company has the opportunity to continue improving

the quality of the product to maximize revenue, regarding attitudes each

increasingly discriminatory by consumers regarding product quality. Based on

this element of the PESTEL / PESTLE analysis, PepsiCo must align its products and

marketing strategies to changes in consumer behaviors.

Technological factors in the PepsiCo business

PepsiCo's business partially depends on technology. The link between change

the technological and remote/macro environment of companies is examined in this element

from the PESTEL / PESTLE analysis. The significant external technological factors for

PepsiCo are the following:

Moderate investments in R&D in the food and beverage industry

opportunity

2. Improvement of knowledge management systems (opportunity)

3. Increase in automation in businesses (opportunity)

 Based on moderate investments in research and development (R&D) in the industry,

PepsiCo can boost its own investments in R&D to improve its competitiveness.

in this commercial aspect. Furthermore, PepsiCo can take advantage of the benefits of the

knowledge management systems to support their various processes

commercials, such as product innovation and decision making

strategic. In addition, an increase in the number of automated processes in the

the company can improve business performance. This element of the PESTEL analysis

PESTLE indicates that PepsiCo should include new technologies as tools

to improve business competitiveness.

Ecological / environmental factors

PepsiCo's supply chain and brand image are linked to

environmental concerns. This element of the PESTEL / PESTLE analysis

consider the ecological trends and the problems affecting consumers,

employees and the remote or macro environment of companies. The following

Ecological external factors are significant for PepsiCo:

1. High focus on business sustainability (opportunity)

2. More complex expectations and standards on waste disposal

opportunity

3. Climate change (threat and opportunity)

Consumers are now pushing companies like PepsiCo to improve.

its sustainability stance. In relation, PepsiCo can improve its strategies of

waste removal, such as recycling, to gain more support from customers. For
 On the other hand, climate change poses a threat to the supply chain of

PepsiCo. However, the company can further diversify its chain of

global supply to minimize exposure to climate change risk. Based on

this element of the PESTEL / PESTLE analysis, PepsiCo must improve its impact

environmental to attract and retain customers, and stabilize their supply chain.

Legal factors in the PepsiCo industry

PepsiCo and its competitors are subject to legal requirements. Such requirements and

regulations are evaluated in this element of the PESTEL / PESTLE analysis in terms

of its effect on the remote environment or microenvironment of the industry. The factors

Relevant legal externals for PepsiCo's business are as follows:

1. Regulation on GMO ingredients (opportunity)

2. Health and product safety regulations (opportunity)

3. Moderate rate of regulatory change (opportunity)

Genetically modified organisms (GMOs) are now increasingly

regulated worldwide, particularly in Europe. PepsiCo has the opportunity

to reduce the use of GM ingredients to comply with these regulations. Likewise

In this way, the company can improve products to address the regulations on

product safety and health effects. The moderate rate of change

regulatory gives PepsiCo the opportunity to grow with the expectation that its

current strategic decisions meet long-term regulatory requirements.

this element of the PESTEL / PESTLE analysis shows that PepsiCo can
focus on product innovation to comply with regulations.

Institute, 2020).
 BALANCE SHEET

PepsiCo Inc.
Consolidated balance sheet, assets

US $ in millions

December 28, 2019 December 29, 2018

Cash and cash equivalents 5.509 8.721

Short-term investments 229 272

Restricted effect — 1.997

Accounts and receivable, net 7.822 7.142

Inventories 3.338 3.128

Prepaid expenses and other current assets 747 633

Current assets 17.645 21.893

Property, plant and equipment, net 19.305 17.589

Goodwill 15.501 14.808

Net amortizable intangible assets 1.433 1.644

 Indefinite life intangible assets 14.610 14.181

Intangible assets 16.043 15.825

Investments in non-controlled subsidiaries 2.683 2.409

Deferred income taxes 4.359 4.364

Non-current notes and receivables 85 86

Deferred expense in the market 147 112

Pension plans 846 269

Assets for the right of use 1.548 —

Another 385 293

Other assets 3.011 760

Non-current assets 60.902 55.755

The total activities 78.547 77.648

Source: Stock Analysis on Net (https://es.stock-analysis.net)

Short-term debt obligations 2.920 4.026

Accounts payable 8.013 7.213

Accumulated spending in the market 2.765 2.541

 Accumulated compensation and benefits 1.835 1.755

Payable dividends 1.351 1.329

Payment consideration for SodaStream 58 1.997

Current lease liabilities 442 —

Other current liabilities 3.077 3.277

Accounts payable and other current liabilities 17.541 18.112

Current liabilities 20.461 22.138

Long-term debt obligations 29.148 28.295

Deferred income tax 4.091 3.499

Other liabilities 9.979 9.114

Non-current liabilities 43.218 40.908

Total Responsibility 63.679 63.046

Preferred shares, without par value — —

Redeemed preferred shares — —

Ordinary shares, par value 1⅔ cents per share 23 23

Capital greater than the nominal value 3.886 3.953

 Retained earnings 61.946 59.947

Another accumulated comprehensive loss 14.300 (15.119)

Common shares repurchased, exceeding the nominal value (36.769) (34.286)

Total equity of PepsiCo 14.786 14.518

Without interference of interests 82 84

Total equity 14.868 14.602

Total liabilities and equity 78.547 77.648

Sources and Uses

US $ in millions

SOURCE USES

REDUCTION OF ASSETS INCREASE OF ASSETS

Accounts and documents receivable, net 680

Cash and cash equivalents $ 3.212 Inventories 210

Short-term investments $ 43 Prepaid expenses and other current assets 114

Restricted effect $ 1.997 Property, plant and equipment, net 1.716

Amortizable intangible assets, net $ 211 Goodwill 693

Deferred income taxes $ 5 Indefinite life intangible assets 429

Non-current notes and accounts receivable $ 1 Investments in uncontrolled subsidiaries 274

Deferred expense in the market 35

Pension plans 577

Assets for use rights 1.548

Another 92

INCREASE IN LIABILITIES REDUCTION OF LIABILITIES

Accounts payable $ 800 Short-term debt obligations $ 1.106

Accumulated spending in the market $ 224 Compensation from SodaStream payable $ 1.939

Accrued compensation and benefits $ 80 Other current liabilities $ 200

Payable dividends $ 22 Capital greater than the nominal value $ 67

Current lease liabilities $ 442 Common shares repurchased in excess of par value $ 2.483

Long-term debt obligations $ 853 Without control of interests $ 2

Deferred income tax $ 592

Other liabilities $ 865

Retained Earnings $ 1.999

Another accumulated comprehensive loss $ 819

TOTAL $ 12.165 TOTAL $ 12.165

 BIBLIOGRAPHY

Panmore Institute. (2020). PepsiCo PESTEL/PESTLE Analysis & Recommendations -

Panmore Institute. [online] Available at: http://panmore.com/pepsico-pestel-pestle-

analysis-recommendations.

PEPSI

Available at: https://intcompgeoem17.wordpress.com/2017/03/27/pepsi/.

Madrigal, E. (2010). Pepsi Co. Value Chain | Pepsi Co | Beverages. [online] Scribd.

Available at: https://es.scribd.com/doc/32182544/Pepsi-Co-Value-Chain.

PepsiCo, Inc. Official Website. (2020). Mission and Vision. [online] Available at:

Unable to access the provided URL.