1.

0- INTRODUCTION
PepsiCo, Inc. is currently one of the most successful consumer products company in
the world with annual revenues exceeding $30 billion and has more than 480,000
employees. PepsiCo, Inc. began as a successor to a company incorporated in 1931,
known as Loft Inc. Once known as Pepsi-Cola, the company expanded its business
and adopted its current name, PepsiCo, after a merger with Frito-Lay in 1965.This
merger dramatically increased PepsiCo's market potential and set the foundation for
the company's tremendous growth.

PepsiCo's products are recognized and are most respected all around the globe.
Currently, PepsiCo divisions operates in three major US and international businesses:
beverages, snack foods, and restaurants. In each of these businesses, PepsiCo has
attained a leadership position as being the world leader in soft drink bottling, the
world largest snack chip producer, and the world largest franchised and company
operated restaurant system. The corporations increasing success has been based on
high standards of performance, marketing strategies, competitiveness, determination,
commitment, and the personal and professional integrity of their people, products and
business practices.

PepsiCo's overall mission is to increase the value of our shareholders' investments

through sales growth, investments and financial activities. PepsiCo believes their
success depends upon the quality and value of their products by providing a safe,
whole some, economically efficient and a healthy environment for their customers;
and by providing a fair return to their investors while maintaining the highest
standards of integrity.

2.0-PEPSI LEGACY
Adding to the star wattage this spring was
Mariah Carey, who took center stage with a
national Pepsi commercial in a unique
partnership. The Grammy Award-winning
artist wrote and recorded original ringtones,
available exclusively through the Pepsi Cool
Tones & Motorola Phones promotion. For the
first time ever in a large-scale national
promotion, music fans could download new
ringtones written and recorded by today's top
artists specifically for the ringtone format, a
length of 40 seconds or less.

The Pepsi Cool Tones & Motorola Phones

promotion offered access to an unprecedented
150 original music and voice ringtones by
Grammy Award-winning artists, including
Mary J. Blige and The All-American Rejects

Page 1 of 21 Mind Breaker

as well as renowned producers Scott Storch and Luny Tunes. With that combination,
ringtones will never be the same.

As America awaited the return of the Man of Steel in Warner Bros. Pictures’ highly
anticipated summer release of Superman Returns, PepsiCo, the film’s official food
and beverage partner, launched exclusive promotions, packaging and products tied to
the movie’s release. Through several interactive sweepstakes, participants from all
over the country were crowned winners. One lucky consumer hit it big with a $1
million cash prize! 2006 also saw several new additions to the beverage aisle.
January marked the introduction of FlavorSplash Grape, the latest addition in the
popular FlavorSplash line of waters from the makers of Aquafina. FlavorSplash
Grape joined three existing flavors: Citrus Blend, Wild Berry and Raspberry.
FlavorSplash by the makers of Aquafina is flavored with natural fruit flavors and
sweetened with Splenda brand sweetener, making it free of calories, free of carbs, free
of sugar and low in sodium.

In March, the Pepsi-Lipton Tea Partnership unveiled five new varieties within its
ready-to-drink tea portfolio on both the Lipton Original and Lipton Iced Tea lines.
Lipton Original Iced Tea added two great flavors:
White Tea with Tangerine and Green Tea with Orange
& Passion Fruit. Lipton Iced Tea welcomed three new
flavor varieties: Peach Iced Tea, Diet Peach Iced Tea and
Diet Green Tea with Mixed Berry. Both lineups deliver
great taste with the health benefits of antioxidants.

Also in March, for the first time in its fifteen year

history, Diet Mountain Dew was revamped with a new
taste featuring a blend of sweeteners including
Aspartame, Sucralose and ASK (Acesulfame
Potassium). The reformulation was met with
much fanfare, particularly in Times Square, where a 100-
foot snowboarding rail jam was constructed, featuring an
exhibition by some of the best young snowboarders
braving a snowy slope in the center of Manhattan. Snowboarding champs Shaun
White and Hannah Teter, who have been sponsored by Mountain Dew since 2003,
were on-hand to help spread the word and celebrate the brand that’s synonymous with
action sports.

This year, taking vitamins just got a whole lot tastier when SoBe Beverages
announced the launch of new SoBe Life Water, a line of refreshing vitamin-enhanced
water beverages that contain the powerful antioxidant vitamins C & E as well as
members of the vitamin B complex. Available in five delicious flavors- Pomegranate
Cherry, Blackberry Grape, Passionfruit Citrus, Orange Tangerine and Strawberry
Kiwi- the lineup is the newest addition to SoBe’s family of great-tasting “healthy
refreshment” beverages.

In April, just in time for the warm weather, Starbucks® Iced Coffee came in to cool
things off. The new premium line of ready-to-drink coffee drinks features
Starbucks® Italian Roast coffee with just a hint of milk and sweetness in a slim 11-

Page 2 of 21 Mind Breaker

ounce can. Available in both regular and light versions, the product is available in
Starbucks retail stores as well as convenience and grocery stores nationwide.

In addition to the launch of Starbucks Iced Coffee, we also saw the introduction of
two line extensions within the bottled Starbucks Frappuccino® and Starbucks
DoubleShot® brands. Starbucks Strawberries and Crème Frappuccino® crème drink,
a smooth blend of real strawberries and low-fat milk, is the first coffee-free bottled
Starbucks Frappuccino crème drink, inspired by the most popular non-coffee blended
beverage in Starbucks retail stores. Starbucks DoubleShot® Light espresso drink has
the same high-quality, great tasting blend of rich espresso and a touch of cream as the
original Starbucks DoubleShot, but with lower fat, calories and sugar.

Over the summer, Pepsi challenged consumers to think differently about indulgence
with the introduction of Jazz, a new line of zero-calorie colas available in rich flavors
like Black Cherry French Vanilla and Strawberries & Cream. Consumer research
leading up to the product’s launch revealed that the smooth nature of the cola coupled
with these aromatic flavors added up to a more indulgent experience than typical
zero-calorie sodas.

2006 also marked the beginning of a beautiful friendship when Ben & Jerry’s Ice
Cream, the funky & chunky ice cream company from Vermont, announced a multi-
year licensing agreement with PepsiCo. This summer, the two companies worked
together to bring milkshakes to the masses with the launch Ben & Jerry’s MilkShakes-
a rich, creamy drinkable treat in three classic flavors from the Vermont ice cream
maker. The euphoric milk beverages are currently available in Cherry Garcia,
Chunky Monkey and Chocolate Fudge Brownie.

3.0-PRODUCT

3.1-PRODUCT LINE
Pepsi (8 fl. oz)

Contains: CARBONATED WATER, HIGH FRUCTOSE

CORN SYRUP, CARAMEL COLOR, SUGAR,
PHOSPHORIC ACID, CAFFEINE, CITRIC ACID,
NATURAL FLAVORS

Calories 100
Total Fat (g) 0
Sodium (mg) 20
Potassium (mg) 10
Total Carbohydrates (g) 28
Sugars (g) 28
Protein (g) 0
Caffeine (mg) 25

Page 3 of 21 Mind Breaker

 Diet Pepsi and Caffeine Free Diet Pepsi have a light,
crisp and refreshing taste with zero calories and fat.
Check out the nutritional information below.

Diet Pepsi (8 fl. oz)

Contains: CARBONATED WATER, CARAMEL
COLOR, ASPARTAME, PHOSPHORIC ACID,
POTASSIUM BENZOATE (PRESERVES
FRESHNESS), CAFFEINE, CITRIC ACID,
NATURAL FLAVORS

Calories 0
Total Fat (g) 0
Sodium (mg) 25
Potassium (mg) 20
Total Carbohydrates (g) 0
Sugars (g) 0
Protein (g) 0
Caffeine (mg) 24

Diet Caffeine Free Pepsi (8 fl. oz)

Contains: CARBONATED WATER, CARAMEL

COLOR, ASPARTAME, PHOSPHORIC ACID,
POTASSIUM BENZOATE (PRESERVES
FRESHNESS), CITRIC ACID, NATURAL FLAVORS

Calories 0
Total Fat (g) 0
Sodium (mg) 25
Potassium (mg) 20
Total Carbohydrates (g) 0
Sugars (g) 0
Protein (g) 0
Caffeine (mg) 0

Page 4 of 21 Mind Breaker

 Regular Caffeine Free Pepsi (8 fl. oz)

Contains: CARBONATED WATER, HIGH

FRUCTOSE CORN SYRUP, CARAMEL COLOR,
SUGAR, PHOSPHORIC ACID, CITRIC ACID,
NATURAL FLAVORS

Calories 100
Total Fat (g) 0
Sodium (mg) 20
Potassium (mg) 10
Total Carbohydrates (g) 28
Sugars (g) 28
Protein (g) 0
Caffeine (mg) 0

Caffeine Free Diet Pepsi (8 fl. oz)

Contains: CARBONATED WATER, CARAMEL

COLOR, ASPARTAME, PHOSPHORIC ACID,
POTASSIUM BENZOATE (PRESERVES
FRESHNESS), CITRIC ACID, NATURAL FLAVORS

Calories 0
Total Fat (g) 0
Sodium (mg) 25
Potassium (mg) 20
Total Carbohydrates (g) 0
Sugars (g) 0
Protein (g) 0
Caffeine (mg) 0

After years of being kept apart on separate shelves of the

refrigerator, Full Flavor and One Calorie are now living
in complete harmony inside Pepsi ONE - the drink that
unites the taste of regular cola with all the things you like
about diet cola. Togetherness is better than apartness.
Oneify.

Pepsi ONE (8 fl. oz)

Page 5 of 21 Mind Breaker

 Contains: CARBONATED WATER, CARAMEL
COLOR, NATURAL & ARTIFICIAL FLAVORS,
PHOSPHORIC ACID, POTASSIUM BENZOATE
(PRESERVES FRESHNESS), SUCRALOSE
(SPLENDA(R)), CAFFEINE, CITRIC ACID,
ACESULFAME POTASSIUM

Calories 1
Total Fats (g) 0
Sodium (mg) 25
Potassium (mg) 35
Total Carbohydrates (g) 0
Sugars (g) 0
Protein (g) 0
Caffeine (mg) 36

Only Wild Cherry Pepsi has the thrilling burst of unique

cherry flavor and a sweet, crisp taste that gives you
"more to go wild for"!

Pepsi Wild Cherry (8 fl. oz)

Contains: CARBONATED WATER, HIGH

FRUCTOSE CORN SYRUP, CARAMEL COLOR,
SUGAR, PHOSPHORIC ACID, NATURAL
FLAVORS, CAFFEINE, CITRIC ACID

Calories 100
Total Fat (g) 0
Sodium (mg) 20
Potassium (mg) 10
Total Carbohydrates (g) 28
Sugars (g) 28
Protein (g) 0
Caffeine (mg) 25

Page 6 of 21 Mind Breaker

 Diet Pepsi Wild Cherry (8 fl. oz)

Contains: CARBONATED WATER, CARAMEL

COLOR, PHOSPHORIC ACID, NATURAL
FLAVORS, ASPARTAME, POTASSIUM BENZOATE
(PRESERVES FRESHNESS), POTASSIUM
CITRATE, CITRIC ACID, CAFFEINE,
ACESULFAME POTASSIUM, CALCIUM
DISODIUM EDTA (TO PROTECT FLAVOR)

Calories 0
Total Fat (g) 0
Sodium (mg) 25
Potassium (mg) 45
Total Carbohydrates (g) 0
Sugars (g) 0
Protein (g) 0
Caffeine (mg) 25

It's the great taste of Pepsi with a splash of vanilla, for a

taste that's smooth yet not too sweet.

Diet Pepsi Vanilla (8 fl. oz)

Contains: CARBONATED WATER, CARAMEL

COLOR, NATURAL AND ARTIFICIAL FLAVORS,
PHOSPHORIC ACID, ASPARTAME, POTASSIUM
BENZOATE (PRESERVES FRESHNESS),
POTASSIUM CITRATE, CAFFEINE, ACESULFAME
POTASSIUM, VANILLA EXTRACT, CITRIC ACID,
CALCIUM DISODIUM EDTA (TO PROTECT
FLAVOR)

Calories 0
Total Fat (g) 0
Sodium (mg) 25
Potassium (mg) 0
Total Carbohydrates (g) 0
Sugars (g) 0
Protein (g) 0
Caffeine (mg) 25

Page 7 of 21 Mind Breaker

 Indulge your senses when rich flavors meet zero calorie
colas.

Diet Pepsi Jazz Black Cherry French Vanilla (8 fl.

oz)

Contains: CARBONATED WATER, CARAMEL

COLOR, NATURAL & ARTIFICIAL FLAVORS,
PHOSPHORIC ACID, ASPARTAME, POTASSIUM
BENZOATE (PRESERVES FRESHNESS), CITRIC
ACID, POTASSIUM CITRATE, CAFFEINE,
ACESULFAME POTASSIUM, CALCIUM
DISODIUM EDTA (TO PROTECT FLAVOR)

Calories 0
Total Fat (g) 0
Sodium (mg) 25
Total Carbohydrates (g) 0
Sugars (g) 0
Protein (g) 0
Caffeine (mg) 25

Diet Pepsi Jazz Strawberries & Cream (8 fl. oz)

Contains: CARBONATED WATER, CARAMEL

COLOR, PHOSPHORIC ACID, NATURAL &
ARTIFICIAL FLAVORS, ASPARTAME, POTASSIUM
BENZOATE (PRESERVES FRESHNESS), CITRIC
ACID, POTASSIUM CITRATE, CAFFEINE,
ACESULFAME POTASSIUM, CALCIUM
DISODIUM EDTA (TO PROTECT FLAVOR)

Calories 0
Total Fat (g) 0
Sodium (mg) 25
Total Carbohydrates (g) 0
Sugars (g) 0
Protein (g) 0
Caffeine (mg) 25

Page 8 of 21 Mind Breaker

 New Pepsi Lime and Diet Pepsi Lime have a cool, fresh
flavor, perfect to add some zing to your summer days.
Check out nutritional information below.

Pepsi Lime (8 fl. oz)

Contains: CARBONATED WATER, HIGH

FRUCTOSE CORN SYRUP, CARAMEL COLOR,
NATURAL FLAVORS, PHOSPHORIC ACID,
POTASSIUM BENZOATE (PRESERVES
FRESHNESS), POTASSIUM CITRATE, CITRIC
ACID, CAFFEINE

Calories 100
Total Fats (g) 0
Sodium (mg) 20
Total Carbohydrates (g) 27
Sugars (g) 27
Protein (g) 0
Caffeine (mg) 25

Diet Pepsi Lime (8 fl. oz)

Contains: CARBONATED WATER, CARAMEL

COLOR, NATURAL FLAVORS, PHOSPHORIC
ACID, ASPARTAME, POTASSIUM BENZOATE
(PRESERVES FRESHNESS), CITRIC ACID,
POTASSIUM CITRATE, CAFFEINE, ACESULFAME
POTASSIUM

Calories 0
Total Fats (g) 0
Sodium (mg) 25
Total Carbohydrates (g) 0
Sugars (g) 0
Protein (g) 0
Caffeine (mg) 25

Page 9 of 21 Mind Breaker

3.2-PEPSI BRAND’S

Aquafina

Make your body happy!

Dole Juice

Healthy juices on the go

Gatorade

Is it in you?

Lipton Brisk

It’s bold. It’s refreshing.

It’s Lipton Brisk.

Page 10 of 21 Mind Breaker

Lipton Teas

Refreshment comes in
many flavors

Milk Chillers

Milk it for all it’s worth

Mountain Dew

Do the Dew

Diet Mountain Dew

How Dew does diet

Page 11 of 21 Mind Breaker

Mountain Dew Code Red

Do a kick of cherry

AMP Energy by Mountain Dew

AMP your world

MDX by Mountain Dew

Soda . Fully loaded.

Mug Root Beer

The taste you crave

Page 12 of 21 Mind Breaker

Pepsi

It’s the cola

Diet Pepsi

0 carbs. 0 calories.
It’s the diet cola.

Jazz by Diet Pepsi

Jazz, the new sound

of cola

Pepsi ONE

Bring together great taste

with one calorie. Oneify.

Page 13 of 21 Mind Breaker

Propel

Made for bodies in motion

Sierra Mist

It’s that refreshing

SoBe

Healthy refreshment

Starbucks Coffee Drinks

A new way to refresh

4.0-PRICING
The ASIA CSD market is mature. The industry sales growth is largely driven by

Page 14 of 21 Mind Breaker

population growth as well as the amount of advertising and product innovation taking
place in the industry. Given the mature nature of the market, both Pepsi and Coca
Cola have resorted to pricing discrimination strategies to maximize the value of
consumer demand.

Direct Price Discrimination

The simplest form of extracting customer surplus is charging customers with different
prices based on their location and purchasing power. This is evident in the
international operations of both Pepsi and Coca Cola. Cola prices in Mexico, Brazil
and Eastern Europe are lower than prices in the ASIA, even though the cost of the
concentrate is practically the same. Domestically, direct price discrimination is based
on distribution channel segmentation. Restaurant fountain drinks, single drinks at gas
stations and take-home packs at supermarkets have all different prices on a per-unit
basis even though their costs adjusted for packaging and distribution would not
warrant such a discrepancy. Obviously, such segmentation helps situational-based
pricing differences: the most price insensitive consumers seem to be restaurant
customers who need a drink to go with their meal. Also, single-drink buyers at gas
stations are more likely to be impulse buyers and therefore have less price sensitivity
than weekend family shoppers at supermarkets who purchase 12-packs for home
consumption.

Indirect Price Discrimination

Quantity discounts along with price coupons used in supermarkets are obvious
indirect price discrimination tools Pepsi can use. However, the most effective indirect
price discrimination tool Pepsi has is in fact its brand name. The Pepsi brand equity
actually allows the company to maintain its pricing power. Its product image
translates into perception for higher quality vis-à-vis private labels and other
substitute drinks. Also, for both supermarkets and convenience stores the CSDs
represent the number one and number three top-selling items 5. Retailers use this
product category to induce store traffic and create additional sales, which in turn
reduces their power relative to Pepsi. Given the 80% margin on concentrate, it is easy
to see why Wal-Mart and other discount retailers can undercut Pepsi’s pricing with
private labels, but still they will be ineffective in ‘stealing’ Pepsi customers as long as
Pepsi’s brand (and Coke’s for that sake) maintains high customer loyalty.
Pepsi may enhance its price discrimination capability though creating bundle offers to
restaurants and convenience stores. The Frito Lay brand, controlled by PepsiCo
through Frito Lay North America, is the undisputed leader in the salty snack segment.
If Pepsi bundles snacks with soft drinks as part of its pricing strategy aimed at fast
food restaurants and cstores it may be able to increase sales and obtain better shelf
space from retailers. This may prove a very important tactic in trying to re-claim share
in the fountain drink segment, a large 5 Deutsche Bank Securities Inc., equity
research, 10 February 2003.Part of which was lost after Pepsi’s exit from the
restaurant business in 1997. Currently, Coca Cola holds approximately 67%6 share of
the total fountain cola sales.

5.0-MARKETING STRATEGY

Page 15 of 21 Mind Breaker

Pepsi is known in the marketing world as a convenience product, one that is
purchased without much consideration. So how is it decided which brand of soft-drink
to buy? Annually, soft-drinks are a $5 billion business, that is why the techniques for
marketing and ensuring Pepsi's purchase are so important.

In response to last year's success of

the Pepsi Stuff Campaign, on
May 13, 1997 they unveiled "Pepsi
Stuff '97." This is a promotion in
which you buy Pepsi products,
receive points on the boxes and
cans, and then redeem them for
items in their catalogue. Pepsi
was very successful last
year with this campaign,
attracting over 30 million
participants. One major problem
though was 21 year old John
Leonard taking serious a television commercial that jokingly offered a military j et as
a prize for 1 billion Pepsi points. Pepsi points were also purchasable, so Leonard
rounded up five investors to purchase enough points to acquire the jet. Pepsi is now
involve in a legal battle over this matter, even though the Pentagon has stated it is not
possible to buy one of the jets. Taking into account the controversy of the jet, Pepsi
has taken consideration to offer prizes in "Pepsi Stuff '97" that are legally attainable.
They include "Fantasy Stuff" prizes, such as throwing out the first pitch at a World
Series game or feeding the ball to Shaquille O'neal for a $25,000 slam-dunk.

Success in the soft-drink market also involves forming strategic alliances with
companies to capture market
share. Pepsi has secured two
major deals this year, one with
Warner Brother's International
Theaters, and the other with
Major League Baseball. The
Warner Brother's alliance gives
Pepsi exclusive pouring rights
at all existing and projected
Warner Brother's International
Theaters. This includes 358
movie screens at 43 theaters in
6 countries, including:
Great Britain, Spain,
Germany, Portugal, Italy , and Japan. The significance of this deal according to Vince
Gennaro, President of the Fountain Beverage Division at Pepsi, "Nearly half on the
world's movie fans are between the ages of 15 and 24. Together with Warner
Brother's, we intent to inject a wh ole new dimension of excitement into their regular
trip to the multiplex."

Page 16 of 21 Mind Breaker

Pepsi's five year deal with Major League Baseball gives them exclusive rights to use
baseball's trademarks and team logos in al advertising, packaging, merchandising, and
promotions. Pepsi has forged a reputation as appealing to the teenage audience, which
is why Major League Baseball believes its deal with Pepsi will attract a younger
audience, which was partially lost due to aggressive marketing campaigns by pro
football and basketball, as well as the 1994 strike.

"Project Blue" is an
international venture the
Pepsi hopes will
transform its international
marketplace presence. It
represents a $500 million
investment, including the
system-wide conversion
of bottles and cans,
coolers and vending
machines, as well as
trucks and other
transports. The new
design features a striking
blue "grid" background;
bold vertical typography;
and a three dimensional globe that evokes the company's "ball" icon. Currently Coca-
Cola is associated with red, which is why Pepsi is attempting to create brand
association and awareness with the color blue. According to John Swanhaus , Pepsi-
Cola Company's Senior
Vice President of
International Sales and
Marketing, "Blue is modern
and cool, exciting and
dynamic, and most
importantly it's a color that
powerfully communicates
refreshment. Ultimately, we
believe that owning blue
will give us a significant
competitive advantage in
the marketplace.

Pepsi, with their aggressive

marketing, also engage in
creative ventures. Three such case include an innovative web site, the world's first
commercial in space, and buying screensaver ad space in schools. The web site, called
Pepsi World, combines breakthrough technology with powerful content. If features
movie previews, origin al interactive games, first-run articles, new music, digital art,
national Net-Promotions and more. This site allows Pepsi to aggressively market their
brand name in a revolutionary way. The site is constantly being re-invented to remain
at the forefront of the Cyberculture.

Page 17 of 21 Mind Breaker

Pepsi is also breaking ground by filming the world's first commercial in space. It is
part of Pepsi's partnership with the Russian Mir Space Station. For the ad, two
cosmonauts film the deployment of a large-scale replica of Pepsi's new blue can,
which w as described in the "Project Blue" section. The can itself is actually a fully
orbital spacecraft built by International Space Enterprises. It was built to withstand
temperature swings of -100 F to + 200 F.

A Canadian school board, faced with the problem of large-scale funding cutbacks ,
have sold to Pepsi, McDonald's, and Trident advertising rights to a screensaver
program that mixes educational messages, motivational words, and corporate
advertising. This subject is controversial, but all advertisements must agree to include
an educationally motivating message. The Pepsi ad will have a slogan that encourages
children to "develop a thirst for knowledge."

6.0-Distribution

E
thi
cal

issues aside, clearly both Pepsi and Coke share a common interest in
generating revenues through distribution of their products through vending machines
on primary and high school campuses across the country. Unfortunately, both
companies have been ineffective in responding to outspoken critics such as the Center
for Science in the Public Interest (CSPI). The CSPI is leading a campaign of public

Page 18 of 21 Mind Breaker

health experts to raise awareness of the adverse health consequences of increased soda
consumption.

However, Pepsi and Coke would benefit through a concerted marketing effort to
encourage distribution of soft drinks in schools. For example, no direct connection has
been made between soda consumption and increased obesity.17 Moreover, school
officials across the country view soda vending machine contracts as a boon to ailing
school district budgets.

One official in the Washington D.C. school district calls its contract with Coca-Cola a
“godsend,” because it
provides money for
proms, bus tokens for
needy students, and
extra school books.18
Finally, both
companies distribute
more than carbonated
beverages through
vending machines –
they also distribute
bottled water, juices, and sports drinks.

Pepsi and Coke would stand to benefit from shifting their focus from competitive
actions to obtain exclusive school district contracts to creating a unified marketing
approach that educates consumers about their community involvement and eliminates
negative “Fighting the Cola Wars in Schools.” The Washington Post.
http://www.washingtonpost.com/wpsrv/national/colawars032399.htm
18 Ibid.misperceptions. As a result, both companies would benefit from potential
widespread acceptance of soft drink distribution in schools.

6.1-RESTAURANTS

PepsiCo is the largest restaurant system in the world. The restaurant segment is
engaged in the operation, development, franchising, and licensing of Pizza Hut, Taco
Bell and KFC concepts. In 1977, Pizza Hut became a part of PepsiCo and is currently
the leader among the pizza restaurant chain in the United States. Taco Bell, the largest
Mexican-style restaurant in the United States, became a part of PepsiCo's restaurant
system in 1978. Today, Taco Bell operates in 4,800 restaurants in the US and in 94
countries and territories worldwide. In 1986, KFC joined PepsiCo and is the leading
fast-food chicken restaurant in the US T here are more than 5,000 company operated,
franchised, and licensed KFC restaurants in the US.

PepsiCo's restaurants have a record for growth and have produced more than $5
billion in revenues. PepsiCo restaurant system has more than 8,000 units outside the
US and is operated in more than 90 countries.

Page 19 of 21 Mind Breaker

PepsiCo's Food System (PFS) is the corporation's restaurant supply company and is
responsible for the consolidation of many restaurant activities. PFS distributes to
Pizza Hut, Taco Bell and KFC, more than $3 billion worth of restaurant equipment
and supplies each year. However, in January of 1997, PepsiCo announced it would be
splitting from its restaurant business after being in it for nearly two decades. PepsiCo
is planing to concentrate on its faster growing Frito-Lay and Pepsi businesses.

7.0-COLA WARS
Pepsi versus Coke has been one
of the highest-profile, highest-
stakes marketing confrontations
witnessed in any industry: "the
cola-wars"- the only war where
no one gets hurt. Coke has been
winning the overall battle, but
Pepsi does have its victories.

Internationally Coke's market

share increased to 49.2% last
year compared to Pepsi's rate, flat
at 15.7%. Coke sold $12.7 billion
worth of products internationally, while Pepsi's totaled $3.2 billion. From this Coke
pockets $.30 for every dollar, compared to Pepsi of less than $.07 per dollar.

Pepsi targeted the teen

market by forming
exclusive contracts with
American schools and
developing advertising
campaigns such as “The
Next Generation” and
“Joy of Pepsi”,
featuring Britney Spears
and also using different
models,celebrities.

Another disaster
occurred in Venezuela
last year for Pepsi.
Without notice Pepsi's
independent bottler,
Embotelladras Hit de Venezuela, headed by CEO Oswaldo Cisneros, switched 18
plants and 2500 trucks to Coca-Cola for $300 million. Analysts feel that th is move
will cost Pepsi $400 million in sales and $10 million in profit. All this comes despite
the friendship between PepsiCo CEO Roger Enrico and Albert Uribe, Pepsi's
Regional President.

Page 20 of 21 Mind Breaker

In Russia, Coke has overtaken Pepsi, which has a huge market size of 150 million.
Pepsi had a ten year lead on Coke but all is lost as Coke opened its twelfth plant in
Russia in 1996, which is staffed by locals trained in Coke's bottling university in
Moscow.

Despite Coke's sponsorship of the Olympics, Pepsi has had victories in the domestic
market. Consider that Pepsi has been chosen as the exclusive soda for Radio City
Music Hall's Christmas Spectacular, as well as other shows. Pepsi also sponsors the
Great Western Forum, where the Los Angeles Lakers play, and they sponsor the
Seattle Mariners.

As stated before, Pepsi has cast off Pizza Hut, Taco Bell, and Kentucky Fried Chicken
in an attempt to create a focused company to beat Coke. This will allow Pepsi to now
battle for fountain rights in places such as Burger King, Wendy's, and McDonalds. Th
is is not an easy task, though, considering Coke is three times Pepsi's size in fountain
sales and has ten times more salespeople. Also, Coca-Cola's Sprite has knocked Diet
Pepsi out as the fourth largest US soft drink to number seven. Currently Coke, Pep si,
and Diet Coke rank as the top three.

8.0-CONCLUSION
Pepsi has built a reputation around the world as a major player in the soft drink
market as well as the leader in the snack food industry. This has been done by creating
a wholesome environment for their customers all the while maintaining its integrity.
Currently they are facing stiff competition from Coca-Cola, but with their various
marketing ventures as well as the selling of their restaurant franchises, Pepsi is poised
to give Coke a definite battle in the future as to which cola consumers want.

9.0-REFERENCES
1. By visiting authorized marketing channel by our self.

2. Internet search

http://www.pepsico.com/web_pages/corp_structuresf.html

http://cnn.com/US/9608/09/fringe/pepsi.pentagon/index.html

http://www2.mostnewyork.com/most/archive/97_03/032097/metro_sp/16068.hta

http://www.ddbniac.com/portfolio/cases/pepsi.html

http://www.wired.com/news/news/culture/story/2910.html

Page 21 of 21 Mind Breaker